Shares of Amazon (AMZN) are trading within the borders of a short term uptrend line and a intermediate term downtrend line. The price momentum indicators had been trending higher, but now they’re turning over, and money flow while still positive, is crossing below its 21 day moving average. Ultimately, the integrity of the trend lines will determine the future direction of the stock.
The chart of Facebook (FB) needs little explanation, as the stock is testing the top end of a channel defined by the April/May highs. The 50 day moving average and the long time uptrend line drawn off the lows since August 2013 are nearby, but a close below the channel top will take me out of my long position.
An extremely large engulfing candle formed on the daily chart of the iShares Barclays 20+ Year Treasury Bond Fund (TLT) that encompasses this entire month’s trading range. In addition, it closed below its 50 day moving average and on very strong volume. A successful breakdown from the horizontal channel projects down to the 109.50 area.
Eighty eight percent of stocks in the S&P 500 index are above their 50 day moving average, a level that many consider an overbought condition that should precede a pullback. This, however, is not usually the case, but by incorporating the relative strength index (RSI) in the analysis, the likelihood of determining a pullback increases.
Specifically, when more than 85% of the stocks in the index are above their 50 day moving average and the RSI is above its 70 level, over the charted look-back period, there have been six out of eight instances where the market has seen pullbacks of differing magnitudes.
While the RSI is currently at 69.59, this is a weekly chart and the true value will not be determined until the Friday close. Keep a close eye on these two metrics and I’ll check back in on this chart over the weekend.
I’ve been writing regularly about the movement of Google (GOOGL) shares within the parameters of its 2014 high/low range. On Monday the stock formed a large dark candle but held above its 50 day moving average and the 62% retracement level, it held those levels again on Tuesday but formed a small hammer or doji-like candle, and today it formed a large white candle. This transition from negative-to neutral-to positive is called a morningstar pattern and is considered a bullish reversal at important levels of support.
The price action in Regeneron Pharmaceuticals (REGN) over the last nine months could be forming a large head and shoulders topping pattern on the weekly chart. During this time the MacD indicator has been in bearish divergence and positive money flow has been declining. The neckline is defined by an intersection of long and short term uptrend lines in the $290.00 area.
Here’s a look at the Amazon (AMZN) chart ahead of today’s 3-D smart phone announcement.
The daily chart shows the pullback in the stock this year and the subsequent bounce in May, which took it back to a downtrend line drawn off the January and March highs. At that point it formed a high wick doji reversal candle, followed that with a large dark candle, and yesterday formed another doji-like shooting star candle. It now sits in a technically neutral area.
It is impossible to say if the news today will move the stock in one direction or another, or at all, but there are clearly defined support and resistance levels to monitor for trading opportunities.
Berkshire Hathaway (BRK/B) is trading below its 50 day moving average for the first time since breaking out of an inverse head and shoulders continuation pattern in March. It made a lower high this month and moved below an uptrend line drawn off the April/May lows. The RSI and the MacD, which has been in bearish divergence to price, are moving below their centerlines, as is the volume weighted MFI indicator. The daily MacD is overlaid on a weekly histogram, and there is a bearish crossover on that timeframe. The price action over the last four months is taking on the ominous look of a head and shoulders topping pattern.
Shares of Exxon Mobil (XOM) gapped down at the open and continued lower into the noon hour. Then they started to reverse, forming a cup and handle pattern on the ten minute chart and breaking above neckline resistance on strong volume later in the session. Energy related stocks could continue to see intraday volatility, but it is less likely they will see any significant pullbacks over the near term.
Transocean (RIG) formed a bottoming pattern of its own on the daily and could be a way to put on exposure to the space. Since early February it has gone through the process of forming an inverse head and shoulders reversal pattern. It broke through neckline resistance in the $43.00 area and its 200 day moving average last week. The formation of the right shoulder and the breakout came on solid volume and positive money flow.