Author Archives: Rob Moreno

NVIDIA – Update On Unusual Intraday Action

NVIDIA (NVDA) shares gapped lower at the open on June 25th, taking the stock price back below the 50 day moving average. It traded under the average but above a nearly one year uptrend line for the next nine days.

On Monday NVIDIA shares gapped higher at the open, leaving behind the nine day consolidation channel and recapturing the 50 day moving average. It looked like the price action had formed a bullish island reversal on the daily chart.

As it turned out, the downside gap was closed in the first hour of trading and the stock continued to weaken into mid-session.

In the second half of the session NVIDIA shares strengthened and closed near their highs, and just above the 50 day moving average. So, while the gap higher did not hold and the island reversal was negated, today’s price action did form a small bullish hammer candle.

The nine day consolidation above the long term uptrend line should be a base for an upside move that could retest the rising triangle on the daily chart.

That said, there was something unusual about the behavior of the semiconductors and technology shares in general in the first half of the session, and consequently when they did an about face and strengthened in the second half of trading.

On the ten minute NVIDIA chart volume can be seen spiking on the gap open. But the enthusiasm quickly faded and the accumulation/distribution line suggests the opening buying then turned to selling. Volume was heavy in the first hour of trading but that moderated, along with money flow. Even as the stock price began to strengthen volume remained muted and didn’t pick up until the last half hour of the session.

Clearly the price action as reflected on the NVIDIA daily chart remains bullish. A long term trend line was successfully retested and a major moving average recaptured in the process. The internals of one half-session should not distract from the bigger picture.

But should the technical dynamics shift, the well-defined levels of chart support afford comfortable levels at which to place stops.

NVIDIA – Potential Bullish Island Reversal

The price action on the NVDIA (NVDA) chart over the last several weeks has been very constructive. The stock has been consolidating above a nearly one year uptrend line, and now it looks like it is breaking out.

The first chart shows the consolidation in the form of a small channel pattern, situated between 50 day moving average resistance and the uptrend line support. NVDIA became oversold after its early June drop and now the stochastic oscillator is making a bullish crossover and moving out of its oversold zone.

One concern, however, is volume. The weekly chart shows the steady decline in volume and positive money flow this year. But there have been similar periods of volume and money declines that have had little effect of the trajectory of the stock price.

NVIDA gapped open this morning above its 50 day moving average. If this remains the low for the session it will have established an island bottom at support. The island is the recent consolidation period delineated by the gap lower and below the 50 day average, and the gap higher and above the 50 day average.

This would suggest higher prices and a retest of rising triangle resistance.

Two Stocks On Today’s Watch List

Terex (TEX) is an industrial and farm equipment manufacturer. It’s stock price dropped sharply in the first quarter of the year, but for the last three months it has been recovering. The process of decline and recovery looks like a large cup and handle pattern. Rim line resistance is situated at the 50% retracement level of this year’s range and the flat 50 day moving average.

Since making a May low, Hologic (HOLX) has carved out a series of higher highs and higher lows. With well defined levels of support and resistance, it looks like a good risk/reward trade.

Four Potential Long Stock Plays

Here are four potential long trades going into a trading day that is following a decidedly down pre-market session.

First up is the semiconductor company Oclaro (OCLR). It has held support above the $8.50 level and looks like it wants to break above the downtrend line drawn off the highs of the last four months.

Next is Pan American Silver (PAAS) which has formed a rising triangle on its daily chart. Last week the stock successfully retested its 50 day moving average and the three month uptrend line. Now its is testing triangle resistance.

A rounded base formed on the chart of Viavi Solutions (VIAV), a telecom equipment supplier. Resistance is clearly defined at the $10.30 level.

Finally, a coal miner made the list. Warrior Met Coal (HCC) made a decisive break above resistance in the Friday session. Old resistance becomes new support.

Short Stock Candidates – Bearish Candle Clusters

These charts all have a similar price pattern: a rally move off the May low and consolidation of those gains over the last two weeks.

A period of consolidation after a move higher is usually a constructive continuation process that leads to a resumption of the trend. That might not be the case with the four stocks presented on the chart.

While these stocks, Mendelez International (MDLZ), Dunkin’ Brands (DNKN), Career Education (CECO), and Discovery (DISCK) have all been under consolidation, in the process they have also formed a series of high wick or long upper shadow candles.

High wick candles, like shooting stars or gravestone dojis, represent an inability of the stock to hold in its upper range. Repeated and failed attempts to advance form high wick clusters. The implication is that either more consolidation is needed before an continuation of the primary trend or the stock needs to pullback.

Facebook Shares – At A Key Fibonacci Point In Both Time And Price

A simple Fibonacci analysis of the daily Facebook (FB) chart going back to January 2017 reveals a interesting technical intersection in both time and price.

Facebook shares have been in rally mode for most of the look-back period, except for the February to March broader market pullback period. Since that pullback the technology sector has rallied to new highs, while the S&P 500 Index has failed to make a new high.

The Facebookdaily chart is overlaid with a Fibonacci time series indicator (green vertical lines) using January 2017 as the start point. The lines are marked along the date axis following the Fibonacci number sequence. It shows the Friday session was the start of the 12th Fibonacci zone or more simply, it was the 144th day since the start of the measurement.

These time zones can be used to anticipate potential price reversals.

The blue horizontal lines are Fibonacci retracement levels measured off the same January 2017 low and the June high this year. This is an arbitrary range because the June high has not yet been definitively confirmed as the long term high level.

But when we apply this range to the Facebook chart the retracements fit very well. The March low is a 62% retracement and key support-turned-resistance in the $170 area would be the 38% retracement level. The take away from this conjecture is that the June high may turn out to be an important high and a key technical level.

The chart then reflects an intersection of Fibonacci measurements and it suggests that Facebook is at a critical point in both time and price.

The Dissimilarities Between The S&P 500 Index In The First Half Of 2016 &The First Half Of 2018

It was a volatile first half of this year. The S&P 500 Index moved in a 12% range similar on a percentage basis to its opening range in 2016.

But while the price ranges were similar the direction of price movement was not. The monthly and daily charts show several dissimilarities between the opening halves of 2016 and 2018 and what they could mean for the market over the next six months.

In January 2016 the S&P index dropped sharply and then spent the next five months moving higher. It finished the first half of that year at the upper end of its six month range and formed a bullish hammer candle. The index went on to rally another 36% over the next 18 months.

The S&P rallied sharply in January of this year and then dropped in February to the low end of its six month range. It has moved off that low but is nowhere near the high end of its six month range.

In fact, just as the price action in January 2018 was the inverse of the price action in January 2016, the price action to finish out the month of June was too.

Instead of the bullish hammer candle that formed in June 2016, a bearish “gravestone-like” doji candle formed at the end of trading in June this year. A gravestone doji or inverse hammer is a candle with a long upper wick and a narrow opening and closing range, situated at the lower end of its overall range. It suggests an inability to hold higher levels and is considered a bearish reversal indication.

The S&P monthly chart also includes a long term uptrend line. Support is currently situated in the 2650 area. The long term trend remains intact until that trend line is breached, but at a minimum it looks like it will be retested.

Support and resistance levels on the weekly and daily timeframes are identical and are highlighted on the daily chart.

A triangle pattern formed in the first five months of trading on the S&P chart this year. It is defined by a series of lower highs above static horizontal support in the 2580 to 2560 area, around the 200 day moving average.

The index broke above the triangle downtrend line in May and has since made a series of higher highs and higher lows. It recently moved lower to retest the three month trend line just above the 200 day average, and those two key support levels now define an important zone of support.

The daily candle that formed in Friday’s session just above the 50 day moving average is also similar to the monthly candle, but it is not quite a gravestone doji. It does have a high upper wick but a wider opening and closing range situated at the bottom of the overall trading range. It resembles a shooting star candle and again, reflects an inability to hold its upper range.

Moving average convergence/divergence made a bearish crossover in June and the Chaikin money flow indicator crossed under its 21 period signal average.

The price action in the S&P 500 index in the first six months of 2018 is not as impressive as it was in the first half of 2016, but it is still very constructive. The long and short term bullish trends are likely to be retested but at this point in time, they remain intact.

The Micron Technology Triangle Projects A 12% Move

A technical pattern has formed on the Micron Technology (MU) chart that projects a potential 12% move in the share price.

The stock rallied over 40% in May and this month it has been digesting those gains and consolidating in triangle pattern. The downtrend resistance line of the triangle was tested in Wednesday’s session and support is situated in the $57 area, which is also a 38% Fibonacci retracement of the May rally range.

Micron closed near its session low today and on strong volume. The accumulation/distribution line reflects this selling pressure. Moving average convergence/divergence has made a bearish crossover and the oscillator is in slight negative divergence to the stock price.

Shares could be headed for a retest of triangle support but that remains to be seen. They could just as easily reverse, breakout and continue on trend, leaving the technical indicators to catch up. In fact, the latter is more likely, considering the inertia of the May move.

Breakout or breakdown, the pattern does project both an upside and downside target price. The measured move is calculated by taking the height of the triangle and either adding it to the breakout/resistance point or subtracting it from the breakdown/support line. In either case, it represents about a 12% move.

The integrity of the triangle pattern support and resistance lines should determine whether Micron makes a new multiyear high or a has a downside rendezvous with the 200 day moving average.