Here are several stocks on my watch list today:
The Health Care Select Sector SPDR Fund (XLV) has been trading in a horizontal channel for the last two months. Resistance is situated in the $84 area and the February low around $79.50 has supplied well-tested support.
The channel pattern price projection is measured by taking the height of the channel and adding it to the channel top. It targets to the $88.50 area.
Home Depot (HD) shares have broken above the rim line of a four month cup and handle pattern.
The relative strength index is above its center line and 21 period average, and the accumulation distribution line is tracking higher and above its signal average.
Memory chip manufacturer Smart Global Holdings (SGH) is breaking out of a cup and handle pattern on its daily chart.
The Nasdaq Composite is an index of over 3,300 common equities listed on the Nasdaq stock exchange. It is up 10% since its April low this year. An impressive two month gain.
The index is a market-value-weighted index. That means its components are weighted according to the total market value of their outstanding shares. Currently, the FANG stocks account for about 38% of the NASDAQ Composite weighting. By comparison the FANG stocks account for 12% of the also market-cap weighted S&P 500 Index. The S&P index is up 6% since April this year and the price-weighted Dow Jones Industrial Average is only up 4% in that time.
This mean that Facebook(FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL) together have a powerful influence on the movement of the NASDAQ index. When they outperform the NASDAQ generally outperforms.
But the reverse correlation is also true and if the FANG stocks are sold off the NASDAQ Composite, which is leading the S&P 500 and the DJIA indices, will take a hit. And if the leading index fades it could weigh on the other major indices.
This progression as outlined, suggests the course of four stocks has an inordinate influence the entire broader market.
Doctor Copper finished a strong 2017 with a sharp rally into year end.
Since then, however, it has lost its upward momentum and made a series of lower highs on the chart. The price action this year looks like a symmetrical triangle or wedge. These are consolidation patterns which after completion often lead to a resumption of the trend.
This may be the case with copper but one cautionary indication is the 50 day moving average crossing below the 200 day average in early May. This is called a “death cross” and is considered to be an intermediate to long-term bearish indication.
Of course, a death cross is not a sure thing. A confirmed triangle breakout or breakdown will likely determine the future direction of price, but in either case the move could be volatile.
Note the compression of the Bollinger bands. The reading on the Bollinger bandwidth indicator is the lowest or the tightest it has been since October 2016. It was followed by the 50 day moving average crossing above the 200 day average. This “gold cross” marked the start of the copper rally.
It is unclear at this point in time, which direction the triangle break will take. When that decision is made, however, the preliminary price compression on the chart suggests subsequent move will be highly volatile.
Bitcoin is nearing an intersection of key resistance. The integrity of this level could determine the intermediate term direction of the cryptocurrency.
The trend for the last month has been lower. A steady series of lower highs and lower lows can be seen on the daily chart. They have delineated a well-defined downtrend line that was tested and held in mid-May. The downtrend line which is situated in the 7600 area was retested again in Friday’s session.
This downtrend line is being currently reinforced by an intersecting horizontal line of resistance. On the 30 minute timeframe, the horizontal resistance line can be seen as the neckline of an inverse head and shoulders pattern.
An inverse head and shoulders pattern is a basing pattern that normally precedes bullish reversals in price. The left shoulder low formed on May 24th, the head on May29th, and the right shoulder has been under construction for the last several days.
The inverse H&S pattern formation has an upside price objective measured by taking the height of the pattern and adding it to the neckline. This targets the 8151 area.
It is not much in the way of a measured move but it is the penetration of this key intersection of resistance that is technically significant.
Of course, the basing could continue below the neckline and extend past this intersection in time and price. A sustained breakout above this key level of resistance, however, would suggest a positive shift in the intermediate term trend.