Monthly Archives: November 2017

Tesla Truck Enthusiasm Fades

The good news is that Tesla (TSLA) shares are up a percent at this point in the session; the bad news is they had been as high as 4.5% shortly after the open.

They could reverse once again and close higher on the day, but it is a familiar pattern. The initial enthusiasm about a new product associated with a story stock evaporates quickly and the price fades.

Tesla has been particularly susceptible to this dynamic.

The dark candle that is currently in place on the daily chart suggests some level of failure and the stock price is back below its 200 day moving average. A move next week back below the $305 support level would be particularly bearish.

Apple — Setting-Up as a Good Risk/Reward Short Trade

Shares of Apple (AAPL) have been losing their post-earnings positive momentum this week, and are fading back below the top end of their rising channel uptrend line. There is little in the way of visible support within the channel parameters at this point, until the 50 day moving average near the lower end of the channel.

Chaikin money flow is still in positive territory but the MacD momentum oscillator has made a bearish crossover.

The Volume by Price bars identify previous levels of volume and is designed to identify future areas of support and resistance. They show that much of the volume over the seven month charted period occurred between the $160 and $152 levels. This confirms the visual evidence that suggests the stock could continue lower before it finds support near the channel bottom.

At its current price, Apple offers a good risk/reward short entry point, using an initial percentage buy-to-cover stop above the top end of the channel. Shorting by its nature is speculative and more so when the stock is a powerhouse like Apple. It requires a disciplined trading strategy that limits any losses and takes a quick profit.

Emerging Markets Leaning Lower

The iShares MSCI Emerging Markets ETF (EEM) is up over 30% this year. It has been a straightforward run higher above a rising 50 day moving average.

That average is being tested again, along with horizontal support in the $45.50 area, and this time the test may be more severe. The MacD momentum oscillator has been making lower highs in bearish divergence to the stock price, and Chaikin money flow has entered negative territory.

A breakdown projects a pattern target price objective to the first level of support in the $44 area.

How to Diversify From Hot Tech Stocks: Cramer’s ‘Off the Charts’

5 ways to diversify away from tech from CNBC.

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The following is a synopsis of Tuesday’s “Off the Charts” segment on Mad Money, by Tom Bemis of TheStreet.com:

With the market’s remarkable run over the past year, Jim Cramer told his Mad Money viewers Tuesday, it’s time to start asking if any of the groups leading the gains are less attractive.

To find out more, Cramer invited to his Off the Charts segment Bob Moreno, publisher of RightViewTrading.com and a contributor to RealMoney.com.

Starting with red-hot tech stocks, Moreno told Cramer that a shrinking number of stocks are accounting for the group’s gains.

Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT) and Intel (INTC), all reported excellent numbers a few weeks ago. The problem is, they account for almost 40% of the weighting in the Technology Select Sector SPDR Fund (XLK). So their strength has driven the bulk of recent gains.

In addition, the number of stocks in the NASDAQ 100 trading above their 50-day moving average is falling. Together it adds up to a case of bad breadth, and a bad sign for the rally.

The solution, as always, is diversification, according to Cramer and Moreno.

With oil holding its recent gains in the mid $50 range, Moreno pointed to the the VanEck vectors Oil Services ETF (OIH) . It’s been trading sideways in a triangle pattern below $26. A rally above that should lead to a break-out move. The vortex indicator, a technical tool to spot early trend changes, recently signaled a bullish crossover (Where the green crosses above the red on the chart.) In addition the Chaikin money flow indicator, which measures buying and selling pressure, is in positive territory.

In the consumer discretionary space, Moreno likes the daily chart of Starbucks (SBUX), a holding in Cramer’s charitable trust. (You can follow his moves before he makes them by joining the ActionAlertsPlus.com club.) Starbucks has been consolidating in a triangle pattern since August, with the stock stuck below some key levels, including its 200-day moving average.

Moreno notes that last week Starbucks briefly broke out above its ceiling of resistance and started to fill in the big gap down that it made when the stock sold off hard in July. While shares have pulled back a bit since then, Moreno likes that the Moving Average Convergence Divergence, or MACD, indicator, a momentum tool that detects changes in a stock’s trajectory before they happen, has been trending higher and the Chaikin money flow is moving into positive territory. Moreno thinks that Starbucks’ consolidation phase may be over, with the stock finally ready to make a sustained move higher.

Another place to diversify is healthcare. Moreno likes Abbott Labs (ABT) . Moreno says Abbott has a picture perfect uptrend, with the stock steadily rising above its 50-day moving average. In recent weeks Abbott has been trading sideways. Plus, the Chaikin Money flow has been stuck around zero, although it’s now started to turn positive again.

On the other hand, the Relative Strength Indicator, an important momentum gauge, is giving some bullish readings. Moreno notes Abbott has made two successful retests of its floor of support this month. He thinks it’s poised to break out above its $55.50 ceiling then resume its long march higher.

In the financials space, Moreno likes Wells Fargo (WFC). This bank has had more than its share of troubles, which is why the stock is flat for the year while the broader sector has rallied 14% over the same period. Moreno sees some technical signs that Wells might be getting ready to normalize and start trading more like the other big money center banks.

The stock has drifted back over its 40-week moving average and held there, at least so far this week. The Moving Average Convergence Divergence has made a bullish crossover, and the Chaikin money flow’s been rising steadily, recently entering positive territory. Moreno thinks that Wells Fargo could be a good catchup play with the Fed widely expected to raise interest rates next month.

Within retail Moreno likes the daily chart of Costco (COST) , which has recently soared after a breakout above its 200-day moving average earlier this month. The rally’s been powered by strength in the Chaikin Money Flow oscillator and Moreno believes the stock has more upside.

And among industrials, Moreno still likes Honeywell (HON), up 8% since July. The Relative Strength Index is strong, tracking above its centerline. The Chaikin money flow is in positive territory, indicating that big investors continue to load up on this stock. Moreno thinks there’s simply no reason for Honeywell’s uptrend to change any time soon.

Electronic Arts “Star Wars” Showdown

On Monday, CNBC reported that Electronic Art’s (EA) new ‘Star Wars’ game is so unpopular a developer is apparently getting death threats.

EA has come off its August high and moved lower over the last three months. The loss of momentum is reflected in the bearish crossover on the moving average convergence/divergence oscillator, and Chaikin money flow reflects distribution over that pullback period.

Despite the recent vitriol on the internet regarding the release of the “Star Wars” game, the stock has held up well this week. The continued integrity of the zone of support between the $105 and $110 level, which contains the rising 40 week moving average, could be a major factor in determining the intermediate term direction of the stock price.

A bounce from this area could set the stock back on trend while a breakdown could accelerate the downturn.

Russell Rollover at an Inflection Point

The Russell 2000 Small Cap Index continues the roll over that began last month. It’s moved back into the widening top triangle range but more recently it managed to make a series of small long-tail hammer-like candles.

This cluster of neutral-to-slightly bullish candles suggests that there could be a pause in the downturn and a brief period of consolidation.

If the consolidation takes place below the extended upper trend line of the triangle and below the 50 day moving average, the end result would most likely be a continuation of the downturn. .

If the index was able to consolidate back above the trend line and the moving average, it would constitute much more constructive action, and could result in a bullish reversal.