Author Archives: Rob Moreno

Bitcoin’s Inevitable Rendezvous With Its “Flash Crash” Low

It seemed like Bitcoin had a rendezvous with its “flash crash” low.

It began to feel inevitable as the series of lower highs on the 30 minute chart persisted. There were short term bounces at what technicians would call appropriate support levels along the way, but they continued to fail.

Late yesterday afternoon a waterfall decline began that took the price of Bitcoin back to its low of the year. Earlier in the month it looked like a double bottom had formed at this $12,800 level, and there was a slight pause in the drop and some consolidation there. But a bear flag formed and the subsequent breakdown from that pattern propelled price back down to $11,181.

It was done.

There has been a sharp bounce back up to the $12,500 level followed by a higher low, but there is a large amount of technical work to be done if Bitcoin were to stabilize here and begin to reverse its downtrend. A break below the crash low brings into play levels of support that go back a long way and require the use of the daily chart.

Facebook Wants More Cat Pics And Less Ads

Facebook (FB) opened in the regular trading session this morning by moving sharply lower. Shares began the day right about the same level they began trading at beginning of the year.

The reason for the drop in price was the company’s announcement of changes to its news-feed. These changes they say, are designed to encourage more meaningful personal interactions. Translation: fewer ads and more cat pictures from your second cousin. This attempt to encourage more meaningful social interaction between people was not appreciated by the machines that trade Facebook stock.

The gap lower this morning, broke through the rising 50 day moving average before finding support just above a horizontal trend line at the $177 level. The move was powered by a surge in negative volume. At this point in the trading day Facebook has recaptured its 50 day average and is near its highs.

It remains to be seen how this new strategy will affect the company’s bottom line, but the levels of support and resistance are well-defined on the daily chart.

Let’s see how those technical levels interact with the stock price.

Bitcoin Price Is Preparing To Make A Big Move – Watch This Pattern

The horizontal support line and the downtrend line we highlighted earlier today, continue to contain the price action on the 30 minute Bitcoin chart. (follow @rightviewrob on Twitter for updates)

As a result a declining triangle pattern has formed above the support line. Price range is compressing and periods of diminishing volatility like this, are often followed by volatile moves.

If this particular consolidation resolves with a breakout, then the pattern’s projected measured move would take the price of a Bitcoin back up to the $15,500 area.

On the other hand, if there is a triangle breakdown the downside measured move could potentially penetrate the “flash crash” low.

Consumer Staple Stocks Stalling – Setting Up Short Shot?

Many of the consumer staples sector stocks have not participated in the strength in the broader market this week. In fact, in today’s trading several moved below key levels of technical trend line support, closing near their lows of the session.

These well-defined early breakdowns offer good risk/reward entry points.

But short positions are particularly speculative and always require a disciplined trailing buy-to-cover stop.

Jim Cramer Goes “Off The Charts” With The Gaming Stocks

It is always a great experience to work with Jim Cramer and his team on an “Off the Charts” segment of Mad Money. On last last night’s show the big three gaming stock, Activision Blizzard (ATVI), Take-Two Interactive (TTWO), and Electronic Arts (EA) were featured and it looks like they have much more upside in 2018.

Video game stocks have more room to run from CNBC.

Here’s the CNBC recap and the TheStreet.com recap.

Apple Shares – Trapped In A Channel And Can’t Breakout

Apple (AAPL) is having trouble breaking above the $176 level and as a result, it is the worst performer in the extended FAANG group (Facebook, Amazon, Apple, Netflix, and Alphabet) over the last thirty days.

While the other stocks in the acronym have moved above their November or December highs this month, Apple has remained locked in a horizontal channel pattern for the last two months.

Over the last two weeks, they moved higher along with their rising 50 day moving average, returning to the upper end of the sideways channel and closing a small downside gap.

While this is positive price action, the moving average convergence/divergence momentum oscillator has been in bearish divergence over the two month consolidation period. The Chaikin money flow indicator has been declining, confirming the underlying weakness in the stock price and suggesting that buyin interest is also waning.

The integrity of the very clearly defined zones of support and resistance (red areas on the chart) should determine the intermediate term direction of Apple stock.

Bitcoin – Following Fibonacci Retracement Road Map

Since its late December low, the rally in the price of Bitcoin has been impressive. It moved up from a nadir of nearly $12,000 to a recent high of $17,200. That’s a 43% rally which, of course in crypto-currency terms, is a mild bounce.

The run has seen a series of advances followed by periods of lateral channel consolidations. Despite the unusual percentage gain for such a short time, the moves higher and then the digestion of those gains is a normal and healthy procedure.

A very interesting development in this process has been the the fact that the support and resistance levels that the channel consolidation periods have defined, coordinate very well with the Fibonacci retracements levels measured off December’s historic high and its “flash crash” low. These retracement levels are based on the “golden ratio” and the famous Fibonacci number series, popular with Mother Nature and stock technicians and chartists.

The asterisks on the 30 minute Bitcoin chart mark the Fibonacci levels of the December range, and they also delineate the borders of the three major channel consolidations during the period. Also, the height of these individual channels has measured the move that followed that particular channel breakout.

A breakout from Bitcoin’s most recent horizontal channel consolidation projects a target price objective in the $18,000 area, and a return to the final Fibonacci retracement level. This was a key December support and resistance zone.

That level might well be a psychological barrier where, if penetrated, the attractive properties of an old all-time high and a large round number takes over. Then the well-defined Bitcoin advance may be replaced by more customary manic volatility.

McDonalds Preparing for a Pullback or More?

Shares of McDonalds are up 50% over the last year. There are sound fundamental reasons for a rise in the stock price, from wider company profit margins to the change in the California marijuana laws. But McDonalds strong move in is in contradiction to millennial eating habits and the general public’s shift towards healthier lifestyle choices.

Nonetheless, the long term trend is higher.

Pullbacks and consolidations, of course, are a part of the trending process and it looks like McDonalds’ shares are preparing for a pause in their progression higher.

The first daily chart shows the steady advance in the stock price over the last 52 weeks. It has tracked from the lower left of the chart to the upper right, just above its rising 50 day moving average.

This month the trajectory of the rise has leveled off and Chaikin money flow has dropped into negative territory. Daily moving average convergence/divergence is overlaid on a weekly histogram of the momentum oscillator, and has made a bearish crossover on both timeframes. There has been this combination of moderating momentum and negative money flow in the past, and each time it has only signaled a small percentage pullback or short period of consolidation.

Taking a closer look at this chart, we can see that shares of McDonalds have been moving higher in a rising wedge or triangle pattern that began forming last October. The sideways consolidation, while still a lateral move, has broken the pattern uptrend line.

Also, this month a rudimentary head and shoulders pattern has formed on the daily chart. There have been similarly constructed consolidation formations as the stock has rallied higher, so it is way too early to suggest a top.

It simply looks like McDonalds’ shares are ready to consolidate gains and posiibly pullback modestly in the process. Watch the $171 neckline support level and the strength of the 50 day moving average, should it be tested.

NVIDIA – The First Week of The New Year Could Determine The Intermediate Term Trend

I’m not sure what happened to the market on Friday particularly in the final 30 minutes of trading. A large number of stocks finished right on their lows, and many across a variety of sectors just below their 50 day moving averages.

It was, of course, the final day of trading in a very profitable year and volume was light, but it was curious. It will likely be an interesting start to the New Year next week.

One stock worth watching next week is NVIDIA (NVDA), whose shares were powered higher this year by the company’s gaming graphics chips. Cryptocurrency miners also use these graphics cards to power their mining operations.

Year-to-date, NIVIDIA has outperformed the S&P Technology Select Sector SPDR ETF (XLK) by over 35%, but it is under-performing the fund by 2.8% this month. Shares of the semiconductor manufacturer dropped 16% in the last two session of November and the first two sessions of December, breaking through a six month uptrend line and the 50 day moving average.

They have since made a small series of higher lows but under horizontal resistance in the $200 area. That resistance level has not even been penetrated on an intra-day basis. This lack of momentum has taken the relative strength index (RSI) lower and below its center line, and the Chaikin money flow indicator suggests that the stock has been under distribution.

In Friday’s session shares closed on their low forming a large bearish dark candle that has cracked the short-term uptrend line drawn off the higher lows this month. The pattern on the daily chart of the early month drop in price, followed by consolidation resembles a bear flag, and further downside price action would confirm a pattern breakdown. The measured move projected by the pattern targets a return to the current area of the rising 200 day moving average.

NVIDIA has been a powerhouse stock and the primary trend is still higher, so a quick reversal and a break back above the $200 level, is also a distinct possibility next week. The potential for a new bull phase would be quickly bought and a new high for the stock would likely follow.

The takeaway here is to be patient and let next week’s price action dictate the trade.

The S&P 500 Chart In Review – And Speculation On Its Future

Here is a year-to-date daily chart of the S&P 500 index. It is a thing of beauty.

From January to August, the index oscillated in a very narrow range around its rising 50 day moving average, and under a well-defined uptrend line. In August, the upward momentum accelerated and price pulled away from the average, and formed a second and steeper uptrend line.

This month, as in past periods, there are technical indications that the S&P 500 may be ready for a brief pause. This should not be considered bearish for the index, but rather as an opportunity to consolidate recent gains and prepare for the next leg higher.

The 50 day moving average is currently about 5.3% higher than the 200 day average, which is the widest differential in over a year. This suggests the potential for some level of mean reversion.

Moving average convergence/divergence (MacD) is making a bearish crossover and Chaikin money flow, a measure of buying interest, is in negative territory. There have been similar coordinated periods of waning momentum and declining money flow on this chart. In every case except the one in May, they have been accompanied by triangular price contractions, ending with breakouts to the upside and resumption of the primary trend.

This week an interior up trend line was broken to the downside and, in Friday’s session the index closed on the low of the day. Volume, however, was very light during the holiday week.

The technical indications are, once again, pointing towards another period of consolidation before the S&P continues higher. The question is: where will the index find support and build its next base? That’s not clear yet but the previous pullbacks have not been very deep on a percentage basis.

A 2% pullback this time would retest the uptrend line drawn off the August and November lows, which would be a good place for a bounce.