The action in the DOW today was the reverse of what we saw yesterday in the index. The rally off the lows in the Monday session formed a hammer-like candle, or possibly a hanging man candle, and the reversal off the highs today formed a shooting star candle. This candle suggests rejection and is considered a bearish signal. The juxtaposition of these candles illustrates the literal day to day oscillations seen recently in the market.
The S&P 500 is back below its 50 day moving average, with the NASDAQ finishing right on that average, and the Russell 2000 closing on its low for the day, and back below its August lows.
This is not constructive action as these indices struggle to hold current levels, stabilize, and eventually return to trend.
Last week shares of Hertz Global Holdings (HTZ) broke below a trend line that had been supporting the stock price since the beginning of the year. Positive money flow has been trending lower and the RSI and MacD have moved below their centerlines. The stock offers a good risk/reward short entry point at its current price, with a position size that accommodates a buy-to-cover stop above the 10 week moving average.
A rounded top has formed on the weekly chart of Corning (GLW) with horizontal support at the $19.47 July low. The momentum indicators have rolled over, as has the 10 week (50 day) moving average, which is nearing a “death cross” with the 40 week (200 day) average. Volume dropped off during this potential topping process and Chaikin money flow is negative. The technical conditions are similar on the daily chart. A close below horizontal support is a short entry point with a position size that accommodates an initial buy-to-cover stop above the $21.00 level.
Linda requested I take a look at the Twitter chart.
On the weekly timeframe the stock can be seen breaking above its 10 week (50 day) moving average in June this year, and then moving back up to a 50% Fibonacci retracement of its range since coming public. The current 10 week average is making a “golden” cross above the 40 week (200 day) average, the price momentum indicators are trending higher, and Chaikin money flow is solidly positive.
The action on the daily chart is a little less positive. In this case, the RSI is above its centerline but trending flat, and the MacD is above its centerline but has made a bearish crossover. Chaikin money flow moved down into negative territory and the money flow index, a volume-weighted measure of relative strength, has crossed below the 21 period average of the indicator, which I use as a signal line. Note the reading on the Bollinger bandwidth indicator at the bottom of the chart, reflecting tight band contraction and the potential for a volatile move. It is hard to say in which direction the stock price will break, but support is clearly defined by the same uptrend line we saw on the weekly chart and resistance by the highs made this month. Trade around a confirmed break in either direction.
The DJIA, S&P 500 index, and the NASDAQ were all able to recapture their 50 day moving averages on Friday and move back above trend line support levels, while the Russell remains well below the intersection of the recent “death cross.” On Thursday, 39% of the stocks in the S&P 500 index were below their 50 day moving averages, and that number was 44% after Friday’s session.
On a weekly timeframe, however, the Russell, formed a hammer-like candle off an area that has supplied support this year, and the other indices bounced off rising trend lines. It is likely these levels will be tested again next week, considering the large range shifts in the market last week.
It could be argued that the European markets have been leading the US market since July of this year. On Thursday, the Germany iShares (EWG) and the France iShares (EWQ) returned to their August lows, and bounced off those levels in the Friday session. The ability or inability of the European markets to hold above this key support should translate over to our market.
Shares of Polaris Industries (PII) are breaking out of a tight horizontal channel consolidation. Money flow is strongly positive on the daily and weekly timeframe and the momentum indicators are turning up and above their centerlines.
Tesla (TSLA) is having trouble recapturing its 50 day moving average. The next level of support is the long term uptrend line on the weekly chart, just above the 200 day moving average.
Shares of Amazon have been consolidating in a large wedge or symmetrical triangle pattern for the last six months. I highlighted a test of an internal support line earlier this month which was subsequently broken, setting up the current technical scenario.
The March low touched the 50% retracement level of the 2012 low and the 2014 high, and this week the stock is testing the intersection of the 38% retracement level and the pattern support line. This is obviously a key support level and its integrity will have short-to-intermediate term implications for the direction of the stock price.
Yesterday, I posted another look at the major Europe iShares charts. It could be argued they have led the US markets lower in July and again this month, perhaps if they bounce near these lows it will translate to a bounce in our market. That is a lot to speculate at this point in time.
Shares of Visa (V) have been trading in a “V” or “>” wedge on their weekly chart for the entire year. The stock has been getting squeezed by any definition of the term and today looks like it is breaking below pattern support. The momentum and money flow indicators are flat, along with the 50 and 200 day moving averages, as would be expected during this type of consolidation. Visa is a short candidate after a weekly close in lower candle range below wedge support. A confirmed directional move could see volatility related to the range compression.