Author Archives: Rob Moreno

Alphabet Closes Below Its 200 Day Moving Average – Is The $1000 Level Next!

Shares of Alphabet (GOOGL) are up over 30% since January 2017, even with this year’s 13% pullback off their January highs.

An impressive run but still the stock underperformed the Technology Select Sector SPDR Fund (XLK) by 7% in that time. It is also, the FANG component whose share price is under the most pressure this year.

In Friday’s session Alphabet closed under its 200 day moving average. This is not the first time it has closed below this key technical average this year. It was retested over multiple days just last month. But by comparison, in 2017 it never tested the average, in fact, it never touched it or even came close.

Actually, last month it was not the 200 day moving average that ultimately supplied support. It was the $1000 level. As most technicians know, large round numbers have psychological properties that often attract or repel price moves.

If there is a post earnings sell-off next week and the big technology names that have powered this market for so long, start to fade, Alphabet will retest its $1000 level.

Will it hold again or give way to further downside is problematic. The trajectory of the accumulation/distribution line suggests that the stock is under distribution.

Potential Short-Covering Rally Trades – $BBY $FET $PZZA

Shares of Best Buy (BBY), Forum Energy Technologies (FET), and Papa Johns (PZZA) have been consolidating in tight patterns recently, and are retesting pattern resistance levels. Price momentum and money flow indications have been improving on both the daily and weekly time frames.

Short interest in these stocks is high and breakouts could initiate short-covering rallies.

The daily charts below are annotated with support and resistance levels and quick commentary.

(Be aware of when these companies report earnings that will affect how they trade.)

Forum Energy Technologies: (FET)

Papa Johns (PZZA):

Best Buy (BBY):

Graphing Jeff Gundlach’s “Exciting” Gold Prediction

At this year’s Ira Sohn Conference, Doubleline CEO, Jeffrey Gundlach announced that the next big move for the markets will be in gold, stating, “It’s getting almost exciting…something big is happening.”

Specifically, he cited the five year inverse head and shoulders base that has been forming on the chart, noting “Gold is maintaining an upward pattern above its rising 200-day moving average, which is extremely good.”

According to Gundlach, the base breakout has “explosive, potential energy,” and “bond king’s” upside pattern price objective targets a $1,000 move in the precious metal.

This inverse head and shoulders base has not gone unnoticed by market technicians.

On the weekly chart of the Continuous Spot Gold Contract, the left shoulder of the pattern formed between 2013 and 2014, and the “head” low was made at the end of 2015, with the right shoulder developing in 2017. The 40 week moving average (approximate 200 day moving average) is included on the chart.

Neckline resistance is located at the 38% Fibonacci retracement level of the 2011 high and the 2105 low. We highlighted a similar long-term consolidation pattern on the SPDR Gold Shares ETF (GLD) as recently as last month here.

The pattern’s bullish target price is determined by taking the height of the pattern and then adding that measurement to the breakout point on the neckline. By our calculations this projects to the $1700 area or about a $350 move.

Mr. Gundlach may be taking the five year width of the pattern and adding it to the neckline. This projection seems a little on the high side.

Either way, a break above the head and shoulder neckline will be an important technical event. But like many technical events, it could be triggered by an external market event. That may have greater implications.

Historically, gold has been considered a safe haven in times of turmoil. So, while a breakout on the gold chart might be “exciting” and “explosive” in terms of a rally in the price of the precious metal, it may also have a darker side.

Home Depot A Good Risk-Reward Trade

Home Depot (HD) shares are bouncing off weekly long-term support and breaking out of a short-term consolidation on the daily chart. This is a very bullish combination of multiple timeframe indications.

We noted this potential upside move earlier in the month here, but we did expect a bit more volatility when it did occur. That has not happened yet, but it still may.

To recap: the stock has bounced off an uptrend line this month that has paralleled the rising 40 week moving average, since late 2016. Chaikin money flow on this weekly time frame is in positive territory.

While Home Depot did pull back off its January high, creating a two month downtrend line on the daily chart, it found support just above its 200 day moving average. Then it began moving sideways.

This horizontal price action has penetrated the daily downtrend line and managed to move above the 50 day moving average. Today shares are up 2.4% at this point in the session and making a new breakout high.

Momentum is obviously improving and the Chaikin money flow indictor is tracking higher.

Home Depot looks like a good risk-reward long candidate at its current level.

Dunkin’ Brands Poised To Breakout and Jim Chanos Announces A Short Position In The Stock

Jim Chanos on why he’s short Dunkin’ Brands from CNBC.

The famed short-seller Jim Chanos told CNBC this morning, that he has been short Dunkin’ Brands (DNKN) and a number of other restaurant brands “for about a year.”

On that news, Dunkin’ shares saw an initial 5% drop in pre-market trading, then managed to move back into the green, and as this is being written, are back down again by about 2%. So they are experiencing volatility and that should continue in the regular session.

If Chanos took a short position in Dunkin’ this time last year he is down about 13% on the trade. That’s even with the over 15% drop in the stock price off its January high this year.

And today might be a good day to make your bear case on the stock because it is poised to break out of nearly three month horizontal channel. A successful breakout could power higher prices and another retest of those January highs.

The moving average convergence/divergence indicator is tracking higher and above its centerline, reflecting improving price momentum. While the Chaikin money flow indicator, while still in negative territory, is back above its signal average and moving higher. This reading suggests an increase in buying interest.

Bearish “Gravestone” Candles On The S&P 500, DJIA, And NASDAQ Charts

This afternoon we tweeted out that: The bulls need to see strength into the close. Don’t want to finish the week with “gravestone” doji candles on the index charts.

The bulls were disappointed.

Gravestone dojis formed on the S&P 500 Index, NASDAQ Composite, and Dow Jones Industrial Average weekly charts.

A gravestone doji is a bearish reversal candle characterized by a very narrow opening and closing range situated near the bottom of its overall range. It has a long upper “wick” or shadow and little or no lower “tail” or shadow. The candle is commonly seen at the end of an uptrend, and it suggests that the bulls were in control early in the day (or in this case, the week), but the bears took control away by the end of the session.

Volume picked up today, which is another bad sign for the bull case. The S&P daily daily volume bar shows it reaching the 50 day moving average of volume for the first time since the beginning of the month. In addition, positive money flow, as represented on the accumulation/distribution graph, has been declining.

The index is retesting the 2660 level. This is the 38% Fibonacci retracement level of this year’s high/low range, and it has acted as both support and resistance in the past.

Unless this level holds next week, it looks like the S&P is headed back down to another retest of its 200 day moving average, or potentially a 5% decline from its current level, to the lows of the year.

Bitcoin Breakout? Let’s Go To The Video Tape

Bitcoin Video from CNBC”s Fast Money:

Bitcoin is flashing a rare buy signal, crypto hedge fund manager says:

Pantera Capital CEO says $6,500 is the bottom for bitcoin’s bear market, and he sees the cryptocurrency going to $20,000 by the end of the year.

Hedge fund CEO says bitcoin’s flashing a rare buy signal from CNBC.

Bitcoin testing a key technical level

Trader Brian Kelly discusses whether a bitcoin breakout is coming, and how to make money in bitcoin cash.

Bitcoin testing a key technical level from CNBC.

L3 Technologies Triangle Breakout Targets A 10% Move Higher

Shares of L3 Technologies (LLL) rallied over 65% from their February 2017 low to their February 2018 high.

After making the high this year, they immediately began consolidating in a series of lower highs and higher lows. This price action formed a large symmetrical triangle pattern.

L3 broke above triangle resistance this week and is currently testing its all-time high.

The relative strength index moved back above its center line and 21 period average in March, and has continued to track higher. Chaikin money flow entered positive territory as the price momentum was accelerating and is now well into positive territory and above its signal average.

A pattern price projection can be made by taking the base measurement of the triangle and adding it to a breakout level or subtracting it from the breakdown point.

This week’s breakout projects a price objective that targets to the $234 area or about a 10% move higher.