Monthly Archives: March 2018

CommVault Systems – Up 1.4% Forming Bullish Hammer Candle

Shares of CommVault Systems (CVLT) bucked the broader market weakness in Wednesday’s session. The enterprise data back-up and recovery services software company was up 1.4%, forming a strong bullish hammer candle on its daily chart.

But it was more than a one day event. The price momentum and money flow indicators have been sending bullish signals for some time.

Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and it has made bullish crossovers on both time frames. The aroon indicator and the vortex indicator are each used to identify shifts in trend direction. Aroon measures new highs relative to time and the vortex indicator measure new highs relative to price. Both indicators have made bullish crossovers.

Over the last month the money flow indicators have soared above their signal averages. This is a reflection of positive investor sentiment.

Tuesday’s hammer candle formed just below the 200 day moving average which has been acting as resistance for the last four months. This barrier has prevented the October 2017 gap from being filled.

CommVault’s strong performance against the back drop of a 248 point drop in the Dow, however, suggests that further resistance will be futile.

Silver: More Precious Than Gold Right Now

Tom McClellan, formulator of the McClellan Oscillaotr and McClellan Summation Index, and publisher of mcoscillator.com, posted this on Twitter today:

“Here is an extremely simple but useful indicator, which I featured last week in my Daily Edition. It says gold prices are making a meaningful bottom.”

The technical picture on the gold chart is improving and Tom’s indicator does suggest a potentially meaningful bottom, but it will need more time to mature. One particular silver chart, on the other hand, looks ready to breakout right now.

A double bottom has formed on the daily First Majestic Silver (AG) chart. The $6.00 level is acting as resistance and it provided support back in August last year. An upper candle close above this level would be bullish. The relative strength index is tracking higher and is above its center line; Chaikin money flow is doing the same.

Bob Lang’s FANG Call Was “Off the Charts”

Cramer’s charts show FANG stocks can stabilize amid market volatility from CNBC.

On the “Off the Charts” segment of Tuesday’s Mad Money show, Bob Lang of ExplosiveOptions.net defended the Four Horsemen stocks that go by the FANG acronym he coined and Jim Cramer made famous.

Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL) were all hit hard last week, but Bob had the confidence of his convictions. On Wednesday morning it looked the group would see a little more downside, but as it turned out the FANG stocks led a late day turn around in the broader market. Netflix was lower but rallied about 2% off its session low.

Jim summarizes:

“For five years, Facebook, Amazon, Netflix and Alphabet survived everything that the bears had to throw at them, and each time they came out stronger than before,” Cramer said. “The charts, as interpreted by the incredible Bob Lang, suggest that this time may be no different. He does expect Alphabet to pull back some more before it can find its footing. But as for Facebook, Amazon and Netflix, he’s optimistic. Me? I remain a FANG stalwart.”

BlackBerry Chart – Classic Bullish Price Action

The daily chart of BlackBerry (BB) is a good example of positive technical price action. Shares are currently consolidating under resistance in the $12.60 area, which is being reinforced by the 50 day moving average. But all indications are the stock will break above this resistance and continue higher.

Let’s take a look at the chart.

BlackBerry shares began moving higher after breaking above a multi-year downtrend line in early 2017. They made a series of higher lows under resistance in the $11.70 area. This price action created a large rising triangle pattern on the chart.

At the beginning of this year, BlackBerry shares gapped above the triangle’s horizontal resistance level and rallied up to a $14.50 high.

A small two-day double top formed there and shares began pulling back. The January decline that followed took price back down to fill the previous upside gap, in the process retesting the triangle resistance-turned-support line.

The stock is now consolidating above the $11.70 triangle resistance level and below the $12.60 and the 50 day moving average.

Moving average convergence/divergence reflects the recent upside momentum this month, and is attempting to cross above its center line. Chaikin money flow has turned positive but overall volume is still weak.

A successful retest of a former long-term resistance level, like the triangle trend line, is considered very bullish. An upper candle close above the $12.60 level would confirm the triangle breakout retest and re-establish BlackBerry’s longer term uptrend.

Possible Triple Bottom On The Caterpillar Chart

Just last week it looked like Caterpillar (CAT) had broken above the rim line of a bullish cup and handle pattern. The pattern projected an upside price objective that targeted a new all-time high.

It was a very strong looking chart and all the technical indicators were tracking higher.

The MacD momentum indicator had made a bullish crossover and the accumulation/distribution line was tracking higher and above its signal average. A double bottom was in place and the stock had moved over its 50 day moving average.

But it was a false breakout.

Instead of heading to new highs, Caterpillar shares quickly reversed direction and dropped back down to their double bottom low in the $145 area.

Early in Monday’s session, CAT first tested the double bottom low and then reversed direction with the broadly stronger market. Shares finished the day up 3.25%, closing near the highs, and forming a large bullish engulfing candle. Now there is a potential triple bottom on the chart.

It will take a few days to sort this volatile price action out. First the triple bottom will have to be confirmed, and ultimately, for Caterpillar to return to trend, that zone of resistance between the $164.50 and $160 levels will have to be taken out.

Caterpillar is currently up one percent in the pre-market at $152.75

Time To Buy Home Depot – There’s a Bullish Reversal Pattern On The Daily Chart

The decline in Home Depot (HD) shares this month has been dramatic, but the sell-off may have reached an inflection point. The $175 level has been tested three times this month, the last being the central candle in a morningstar bullish reversal pattern.

A morningstar pattern is a three-period formation that consists of a large up-day candle, followed by a narrow opening and closing range “doji” candle, and completed by a large down-day candle. It reflects a transition from bearishness to bullishness.

The $175 level is of particular technical importance because it is also the 50% retracement level of last year’s important July low and this year’s high. Monday’s close was also near the high of the session and just below the 38% retracement level.

Confirmation of the pattern requires an upper candle close above the upper $182.50 retracement level. Ultimately a move back above the 50 day moving average would confirm a return to the previous uptrend.

Bitcoin’s Base Breakout Projects A Price Target In The $16,000 Area.

Bitcoin has broken above the downtrend line drawn off the lower highs that followed last year’s $20,000 high. It is currently being skewered by the 38% Fibonacci retracement level of that memorable 2017 high and this year’s reaction low.

This is a big breakout from a technical perspective but there have bee a lot of lines drawn on this chart over the last several months, and a number of false breakouts from potential basing patterns. So the question is: is this the real thing or is it just fantasy.

There are an infinite number of outcomes over time, of course, but let’s consider the shorter term higher probability moves.

The optimal price action, in my opinion, would be for the current intermediate term trend to remain in place and for Bitcoin to continue to make higher highs and higher lows above an extension of the one month uptrend line. Repetitive and constructive price action that defines a well-tested tend line gives investors confidence and attracts new money.

Another possible scenario, is that the uptrend line is broken and fails. This would probably take the price of Bitcoin back down to the $9100 level. If this happens sooner than later, it would create a channel with the 38% retracement level acting as resistance and the 24% retracement level as support.

A third guess, is that Bitcoin moves above the 11,200 level but meets resistance at the 50% retracement level and tracks along horizontally between those two levels of support and resistance. Channel price action with intermittent false breaks along the way.

The final scenario, is that Bitcoin gains even more traction over the weekend. The move picks up steam and breaks through the 50% retacement level. This is not the optimal outcome from my perspective. It would encourage profit taking and accelerate volatility.

So these are four of the more highly probable outcomes in an infinite set of outcomes. Two are positive and two less constructive. Again, anything can happen, and my simple analysis gives a 50%/50% probablity that Bitcoin will move higher or lower. Not helpful. But from a subjective perspective the chart has taken on a more bullish tone to my eye.

This is what I’m seeing.

The price action this year has formed a rudimentary inverse head and shoulders base with neckline resistance at the 38% retracement level in the 11,221 area. Recent price action could also be seen as a cup and handle formation that shares its rim line resistance level with the cup and handle neckline. Now if you measure the depth of the cup and add that amount to the rim line, the pattern projects a potential target price in the $16,569 area or just below the 79% retracement level.

The stock market had a bad week but Bitcoin had a good week. I would have expected Bitcoin to drop as investors liquidated speculative positions in Bitcoin to cover margin calls in the stock market. That did not happen, in fact Bitcoin may have replaced gold as a safe haven play, because the SPDR Gold Shares ETF (GLD) was down 0.59% last week, while Bitcoin was up 15%.

Bitcoin is a speculative play and erratic price action can take trend lines and price patterns and turn them to rubble. But the obvious noted, the recent price action on the chart is constructive and encouraging. The next big milestone will be recapturing and holding the 50% retracment level in the $12,883 area.

That level of recovery will get the market’s attention.

S&P 500 Index – What Would It Take To Turn The Weekly Candle Positive?

There is a particular importance to the appearance of the weekly candle.

It is “blended” candle or an amalgam of price action over the week, and as such, it contains more information.

A candle reversal pattern on the weekly chart is more significant than a similar pattern on the daily chart because it implies a change in the intermediate term trend, as opposed to a short term change.

The current weekly candle will not be fully matured until the close of trading today. If the S&P index were to close at the same level it closed at on Thursday, it would form a large dark bearish engulfing marubozu candle.

A marubozu candle is a large dark candle which opens opened near its high and closes near its low. In this hypothetical example, its range would encompass the entire range of the previous week’s candle. This would qualify it as bearish engulfing candle which could a signal an end to the bounce off the February low and a reversal of the intermediate term trend.

So what would be required for this week’s S&P 500 index candle to turn technically positive?

One option would be for a weekly hammer candle to form. The hammer candle has an opening and closing range in the top half of its overall range, and a long tail or lower shadow. It is considered a bullish reversal candle and sometimes marks a “hammer bottom.”

In order to form a rudimentary hammer candle at this point in the week the S&P 500 index would have to return to its weekly mid-range, which is back near 2725.

This would require a 46.73 point gain in the Friday session or about a 1.6% move above the Thursday close. It would tighten the range between this week’s open and this week’s close, above the candle center line, and form a rudimentary weekly hammer candle.

If the index could accomplish this amazing feat of strength, it would change the complexion of the weekly chart and suggest that the bounce off the February low (also a hammer candle) has more room to run.