Monthly Archives: September 2017

The NYSE Tulip Bitcoin Index Chart and the Volatility Index

It’s been widely reported that hedge funds are holding large short positions in the VIX, and the Bitcoin phenomenon has received even greater attention.

The chart of the NYSE Bitcoin Index ($NYXBT) is overlaid with a chart of the Volatility Index, and includes a graph of their relative performance. It shows the incredible rise in Bitcoin this year and the deep drop in volatility.

Could it be that hedge funds are, as Dennis Gartman might say, short of the VIX in Bitcoin terms? Not likely, of course, that would require enormous positions in Bitcoin, but it would have been a profitable pair trade this year.

Apple Needs to Hold This Level or It’s Headed Much Lower

Apple (APPL) has been underperforming the broader technology space for the past six months, and that underperformance could accelerate if a key level of support is broken on the daily chart. The Technology Select Sector SPDR ETF (XLK) is up 11.5% since last April, while Apple shares are up 7.3% in that time, and over the past month the XLK is up 2% and Apple is down 5.6%. Apple needs to hold above recent support long enough to regain some upside momentum. A break below this important technical level is likely to trigger an intermediate-term decline.

The strong advance in Apple off the November 2016 low up to the May 2017 high was followed by three months of sideway-to-lower price action. In August, it was able to advance above May resistance to new highs in a rising triangle pattern. That move was short lived, and the stock reversed direction this month. That reversal took it back below the May high level and through the uptrend line that delineated the long-term rally. This week, it bounced off a support zone between $148 and $150 and is retesting former support-turned-resistance in the $153 to $155 area. There is the possibility that Apple shares can hold their current level long enough for them to gain some momentum and pierce through the multiple layers of resistance overhead, but the technical indicators suggest this will not be the case.

The TRIX indicator is a triple-smoothed momentum indicator similar to the moving average convergence/divergence oscillator, and it has made a bearish crossover. The Chandre Trend Meter assigns a numerical value to a trend using several moving average of six different time frames, and it has weakened significantly this month. A spike in overall negative volume and declining Chaikin money flow supports the bearish momentum and price trend indications.

The longer Apple shares are able to hold above the green zone of support which would allow indicators time to realign more positively, the more likely a return to the primary uptrend. If that level of support fails, however, it could accelerate the distribution reflected in the money flow reading and the stock would see an intermediate-term decline.

Small Caps Trading in a Broadening Top – But Don’t Let The Word “Top” Fool You

The iShares Russell 2000 ETF (IWM) has been trending higher in a wide broadening top, but don’t let the word “top” fool you. It may have more upside.

Small caps spent most of the first half half of this year making higher highs after which they returned to support at the $132 level. Following the May high, the same pattern of higher highs continued but the support level was raised two dollars to the $134 level. This week the fund returned to the well-tested uptrend line of the “top” pattern and instead of beginning another descent back to support, it broke through to new all-time highs. There has been speculation this is a blow-off “top” but there’s that word again. Let’s look at the chart.

The stochastic oscillator states the obvious which is the IWM is overbought. On the slope graph, which is the rise-over-run of a straight line that defines a 20-day look-back period, the reading is above the previous 0.30 level which marked the deviations at the previous highs.There was a surge in volume this week that prompted the blow-off top speculation and money flow suggests the small caps remain under accumulation.

What logical inferences can be made at this point?

• Any stock or fund can stay overbought for an extended period.
• Patterns and cycles end.
• Volume powers moves.
• The IWM could go higher.
• The IWM may be topping out.

But only one conclusion can be drawn: When in doubt do nothing.

This Pawn Stock Is Breaking Out – Bad Sign For The Economy?

EZCORP (EZPW) operates a chain of pawn shops in the U.S., Canada and Mexico, providing loans collateralized by personal property and selling forfeited and used merchandise. It is a small-cap company in a business that makes it the perfect contrarian indicator for the market and the economy. It has underperformed the S&P 500 index by 336% since its 2011 high. If this inverse correlation continues, however, it might not be good news for the broader market, because EZPW shares look ready to break out of a major consolidation pattern.

The weekly chart shows the stock pulling back from the 2016 rally high in November and retracing nearly 50% of the move. This year it has traded in a $2 range between $9.50 resistance and $7.50 support, forming a W basing pattern. Last week, it broke above the upper boundary of the pattern and the stock is seeing follow-through price action this week. The “W” patter projects a large-percentage move higher.

The relative strength index has crossed above it 21-period average and centerline and moving average convergence/divergence has made a bullish crossover. These are indications of improving intermediate-term price and short-term trend direction. The July bottom marked the second channel low and the bounce off that level was powered by an increase in positive money flow.

Chaikin money flow moved above its center line and has continued to track higher and the accumulation/distribution line jumped above its 21-period signal average. The price consolidation this year has flattened the Bollinger bandwidth reading and periods of low volatility like this are often followed by periods of high volatility. This means the potential breakout move could be sudden and strong.

The W pattern projects an upside price target measured by taking the height of the channel and adding it to the resistance level. It targets the area of the 2016 high or about a 20% move.

Costco is the Way to Go in Faltering Consumer Staples Sector

The consumer staple sector, as represented by the Consumer Staples Select Sector SPDR Fund (XLP) is testing an important support level on its daily chart. It is a potential level for a bounce but a breakdown would indicate the poor performing components of the ETF have lower to go.

The XLP made three attempts to break above the $55.50 level and failed and has pulled back off that level. On Thursday it retested a zone of support delineated by the rising 200 day moving average and a horizontal support line drawn off the July low and the 38% retracement level of the December 2016 low and this year’s high. A hammer candle formed which is a bullish sign when it forms at previous support levels.

Here is a chart of some of the components of the XLP, and a majority look like they have previously pierced resistance levels of their own.

The sector is under pressure and even if the XLP does catch a bounce there is much ground to make up on some of the individual charts. The one notable exception is Costco (COST) which has a fairly positive looking chart. Look to the best performer in a pullback to be the best performer in a recovery.

Facebook’s Social Media Storm Could Sink It and the Tech Sector Could Follow

There may be a deeper aspect to the decline in the broader technology sector than its overbought condition or valuation, and it goes directly to the engine that drives the space. Social media algorithms are as deeply entwined with the technology sector as they are with our personal lives.

The distinguishing marks of a tech company and a social media company have become blurred. Is Facebook (FB – Get Report) a social media company or a tech company; is Apple (AAPL – Get Report) a technology company or a social media platform; for that matter is Amazon (AMZN – Get Report) a tech company or a traditional mail-order retailer? Of course, in each case, they are both.

Information broadly gathered from social media is key to the amalgam of business and technology. Now social media companies are coming under increasing pressure from government agencies and special interest groups, and it is reverberating through the entire technology sector.

Facebook and Twitter (TWTR – Get Report) are under fire from the left for their role in the perceived Russian hacking of our presidential election, and from the right for being platforms for what it believes is “fake news.” Alphabet (GOOGL – Get Report) is facing anti-trust scrutiny for European authorities and China is seeking more control over the internet, specifically, the Facebook WhatsApp messaging service.

Facebook is at the center of the social media space and, if the thesis is correct, it could be used as a proxy for the entire technology sector. Let’s take a look at the Facebook chart and we may gain an insight into where it, and the social media and technology sectors in general might be headed.

The stock saw a sharp decline in Monday’s session, which took it back below its 50-day moving average and its August low, and retested the long-term uptrend line that has delineated the rally this year. At this point in Wednesday’s session, it is trading back above its $165 August low and near the high of the day. The stock closed at $167.68 Wednesday.

The technical momentum indicators, however, are still decidedly bearish. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and has been tracking lower on both time frames. The Chandre Trend Meter, which uses multiple moving averages over six time frames to assign a number to the strength of a trend, is below its center line.

On the money-flow side, Chaikin is in positive territory but has moved below its signal average, and the Chaikin oscillator, a faster average of Chaikin money flow, has crossed below its center line.

The intermediate-term future of Facebook and potentially the broader technology sector depends on the short-term integrity of the red support zone. If the stock price is able to hold that level and move back above its 50-day moving average, the focus becomes the $175 level and potentially new highs. If support is retested and fails, the first downside target is the former June high at the $155 level, and then the 200-day moving average.

Eli Lilly – “Off the Charts” Analysis On Mad Money by Stirling Investments’ Tim Collins

Here is the video of Jim Cramer’s “Off the Charts” segment on Mad Money last night. Tim Collins of Stirling Strategic Investor provided technical analysis of the Eli Lilly (LLY) chart on multiple time frames.

Cramer’s charts diagnose a potential breakout for shares of Eli Lilly from CNBC.

Follow this link for a synopsis of the segment published on this morning.

Miss the First Phase of the NVIDIA Rally? – Read This Before You Miss the Next One

Nvidia (NVDA) has its chips in all the right places. Its processors are in gaming consoles, autonomous driving components, blockchain technologies, and it was announced Tuesday it’s into local logistics or the drone delivery space. These are exciting growth areas that easily capture investor interest, and that is why the stock is up more than 60% year to date.

Last week, it looked like the stock was breaking out of a rising triangle pattern, but it quickly reversed and dropped back down. This pullback is healthy and should provide an entry point for those who missed the initial rally.

The daily chart shows the stock trading and in a horizontal triangle at the beginning of the year before breaking out of that pattern in May. It then began making a series of higher highs and higher lows forming the second rising triangle pattern. The breakout last week came after the stock gapped higher but failed after three sessions. It gapped back down into the triangle borders and back to the $170 level, which constituted a 10% pullback.

The $170 to the $167 area is an important confluence of horizontal support, triangle trend line support, and moving average support. It should deflect downside retests and act as a platform for further advances in the stock price.

Nvidia shares, however, were overbought and due for a pullback. The stochastic oscillator has been moving lower and is now below its center line, and weekly moving average convergence/divergence has been tracking a bearish divergence to price and has slipped below its signal line. These readings reflect the recent loss in price momentum. There has also been some slight deterioration in positive money flow. The Chaikin oscillator, an average of 3- and 10- day Chaikin money flow, is crossing below its center line, and the On Balance Volume indicator is crossing below its 21-period moving average.

The stock bounced strongly at the open on Tuesday but the momentum faded and it closed up only a half of a percent (still not bad). It may require several trading days to regroup before it mounts another charge toward all-time highs, and a pullback to the reinforced support zone directly above the $167 level should be viewed as a low-risk entry point, using a tight percentage stop-loss level.

Harley Davidson – Born to Breakout

It has been a bumpy ride for holders of Harley-Davidson (HOG) shares this year. The stock is down of 20% from its March high, but a cup-and-handle pattern has formed on the daily chart and it may be signaling a reversal is right down the road.

After hitting its March high the stock starting making a series of lower highs and lower lows alongside its declining 50-day moving average and below a well-defined downtrend line. It has pulled back to the 62% retracement level of its 2016 low and 2017 rally high.

For the last several months the move has moderated, forming a cup-and-handle base under horizontal rim line resistance in the $49.00 area. Today it is retesting both the long-term down-trend line and the pattern neckline.

As the pattern was under construction, the relative strength indicator began moving above its rising signal line, and daily moving average convergence/divergence, which is overlaid on a weekly histogram of the oscillator, started tracking higher on both timeframes. These readings suggest improving short- and intermediate-term price momentum.

The accumulation/distribution line crossed above its signal average as the bottom of the cup was forming, and Chaikin money flow is now securely in positive territory. These are signs of buying interest and improving investor confidence.

The cup-and-handle pattern identifies a price objective measured by taking the depth of the cup and adding it to the rim line. It targets the intersection of the 200-day moving average and the 50% retracement level of this year’s decline. An upper candle close above the rim line is a long entry point using a disciplined trailing percentage stop.

(This article appeared on RealMoneyPro earlier today.)