All Entries in the "Technical Analysis" Category
Taking It to the Bank(s)
July 12, 2011 at 7:49 am
Banks stink. Since February they have stunk. (Stank? Stunken? I’ll figure that out later.)
What’s interesting though, is the overall health of the S&P 500 without the participation of the banks. Generally the banks lead the market, yet they’ve been sliding for months and this market has stayed afloat rather well.
So are the banks no longer important, or is this a signal waiting to be recognized?
Either this market is going to turn and follow the banks, or the banks will at some point turn and add another layer of strength to this market. What’s your take? I’ll give you mine down below. Let’s look at a few of the majors…
BAC – It’s difficult to locate a more methodical downtrend anywhere in the market than this.
C – One-for-ten reverse split included, this one has gone nowhere but south. See that downtrend line? Yeah, so does everyone else. But why isn’t anyone talking about it?
WFC – This one has had glimmers of hope and potential stabilization a few times, but in every case it has failed to do anything but produce new lows. Lower highs: check. Broken rising trend lines: check.
JPM – Bounces continue to get sold here as well. Why even think about getting long until that changes?
GS – The money-making machine continues to work its way toward lower levels with lower highs and a downtrend line currently driving it steadily lower. Great company, perhaps, but hideous stock.
MS – Another picture-perfect downtrend which will perhaps at some point end, but not yet. New lows were made yesterday, and while it’s getting ‘cheaper’ it clearly isn’t done yet.
Other brokers like SCHW, AMTD, ETFC and the like are suffering similarly, as are major asset management firms (JNS), other banks, etc. The technical damage in the financial sector is widespread, and while there will be bounces, I don’t think the market will be out of the woods until we see participation from this group.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Strong Coffee
July 11, 2011 at 9:39 am
Truth be told, a Slurpee is the beverage that’s actually on my mind (happy birthday 7-Eleven), but if you’re looking at the charts of anything drinkable right now, it’s all about coffee.
Granted, it doesn’t quite have the same ring to it as the 1999 Bubble or the Crash of 1929 (or ’87), but the Great Coffee Rally of 2011 is on.
Names like CBOU, JVA, PEET, GMCR and SBUX have been ramping in recent weeks, putting them squarely on the radar of momentum players far and wide. This isn’t your typical grind (no pun intended) higher. These things are hotter than a car hood in the Texas summer.
Like quite a few other stocks, most of these could certainly stand to put in some rest here in the short term, but once that’s done, these are among the strongest (no pun intended) stocks in the market. Let’s take a closer look at each one.
CBOU – Nice pick up in not only activity, but of course in price as well since the higher low was established in early-June. Next levels are $14.30 then $14.50 to set this one free for higher prices.
JVA – The July run alone has been more like a quintuple shot of espresso than your average cup of coffee. We’ve also seen a 323% gain since June 6th – how’s that for a wake-up? Incredible short squeeze action here and way too extended at the moment to consider an entry, but certainly deserves a spot on the watch list for one of these days when it has settled down and created a new pattern.
PEET – More of a steady grinder, this one has actually built a couple of bases along the way up. It’s not in a place where I’d be getting long, but once it puts in some rest, it’s certainly one to revisit. Lighter volume than the others.
GMCR – At $95 per share, it’s a little rich (no pun intended) for some, but the uptrend is steady and this one continues to run. This year alone, we’ve seen 3 breakaway gaps which never saw attempts to get filled, serving as reminders that this one is very strong.
SBUX – The grandfather of them all might be kinda old, but he’s still got it! SBUX left a multi-month channel with a solid push higher a few weeks ago, tacking on nearly 15% over the past month. Currently it’s trying to put in a little rest, which is healthy to see. Once that’s done, don’t be surprised if another leg higher begins.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Stretched is an Understatement
July 8, 2011 at 9:19 am
To say the run of the past two weeks has made the market stretched to the upside is clearly a major understatement. It’s been a face-ripping rally for anyone caught on the short side, while underinvested bulls gnash their teeth in nearly equal frustration.
It’s been a tricky environment in recent weeks, yes, but there is still opportunity if you search for it. The momentum run has offered some nice day trades, even if it has left many stocks overbought on the daily charts. Even a few days of rest would do wonders for those charts.
Speaking of rest, this market is poised for it, but will we get it?
The reaction to the jobs number this morning offered the perfect sell-the-news scenario as extremely overbought readings (no matter how you gauge it) left the market badly in need of some profit-taking, some lateral price action, or both. While the result of the turn lower this morning remains to be seen, we do know this: the buyers are finally standing aside to take a breather at the very least.
Thankfully, as short-term traders we don’t have to predict what’s going to come of this market in the next few days. What matters is that we continue to work the charts and trade what’s right in front of us.
With that said, a pullback here for a few days or even some short-term trading range price action would help to establish some new patterns and bases from which to take multi-day plays, one way or the other. That may not mean excitement for a few days (if we do get a rest), but it would certainly mean greater opportunity on the other side of it. I, for one, am excited about that possibility.
Those who have walked away for the summer have already missed considerable movement, and yet the market promises more going forward. Are you ready for it?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
FCX 7% in 3.5 Days, Time to Lighten Up
July 4, 2011 at 12:56 pm
Last Tuesday I pointed out FCX as not only a potential market tell (since copper has proven to be a leading indicator many times), but also as a breakout play through a trend line after holding key support. That post was published as the stock threatened to break $50.
Fast-forward 3 1/2 trading sessions, and FCX now sits at $53.50, or 7% higher. That’s a quick pop (which I hope you caught a piece of at the very least), so the fast money has been made. While the stock looks great for an intermediate-term position play, for short-term traders it’s time to lighten up.
A pullback is going to come, so for those only interested in grabbing the initial move, this is it. Ring the register and move on to the next play.
Here’s a look at FCX, showing the push through the descending trend line and a rally past the previous high from May 31. Not bad for a freebie:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
RVBD at Key Resistance
June 30, 2011 at 9:32 am
Trading ranges or channels tend to stay in effect until, well, they’re no longer in effect. One name right now caught between support and resistance is RVBD.
This computer hardware maker rallied huge from last summer into the first part of 2011, and has since then been basing in a high channel. Rallies to resistance have predominantly been sold, while pullbacks to support have consistently been bought during this time. That’s the routine for a channeling stock.
With the stock currently at the top end of this range, you have to wonder if this is an opportunity for a downside reversal (particularly with the broad market short-term overbought), or perhaps a breakout failure and a subsequent pullback into the lower end of the range. No predictions, just an observation.
Here’s a look at RVBD, showing the trading range it has spent essentially 6 of the past 7 months inside of, with the only time outside the range between mid-Feb to mid-March:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
FCX On the Move
June 28, 2011 at 1:05 pm
Copper is an important market tell for many, so it’s certainly worth noting that the copper poster child FCX is getting going here as it threatens $50. The stock has repeatedly found support in the $46’s in recent months, and in recent weeks has pulled back quietly beneath a descending trend line.
Today, that trend line is getting crossed, indicating this stock may be ready to leave this congestion pattern behind. There’s room to climb higher, not only for this stock, but potentially for the broader market. We have yet to know if the market pullback has ended, but if copper proves a leading indicator, this could be a bullish sign to pay attention to.
Here’s a look at FCX, showing both lateral support around $46 as well as today’s attempt to push beyond the descending trend line:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Caught In A Trap
June 16, 2011 at 5:44 am
Anytime the market tanks like it has lately, astute traders realize that shorting after a decline of this magnitude and momentum is a real potential bear trap. A sharp rebound could come at any time, leaving late shorts in a world of hurt.
I can’t and won’t argue with that – in the short term.
But the further this market declines in the intermediate term, the growing group of trapped traders are the bulls. Keep in mind that the past few weeks have been a big shift of character for this market, with the prevailing mantra moving from buy-all-dips to sell-all-rallies. Technically, that’s very important to recognize.
And while a sizeable bounce will eventually arrive, the important issue for most bulls is “from what level?”
Head Games
That brings into play the psychological aspect of this change of character, whereby not only do bulls become fearful, but the bears gain confidence. Bulls who bought virtually anytime over the past few months are now underwater, and the deeper this correction goes, the more that late-to-the-rally-party group wants out.
That could quite easily play out with bulls selling on the way back up – just the opposite of a few weeks ago when trapped bears covered on every little dip. By the same token, just as a few weeks ago we were still seeing underinvested or aggressive bulls put more cash to work on even minor pullbacks, the deeper this correction goes, the more the bears will be using bounces to remount short positions. That means what used to be buying by both camps is quickly morphing into selling by both camps.
A spring back up will at some point arrive, so fear not – this market is still a 2-way street. But for now, respect for the tape should remain very high, because anything is still possible. Whenever the inevitable recoil of this selloff kicks in, keep in mind that it too could get faded, and therefore will have to earn your trust.
Here’s a look at the S&P right now with the March lows coming quickly into view at 1249 (which may need to get broken before a real bounce happens):
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
