The major market indices closed on their lows, but on levels of technical support. The DJIA and the S&P 500 index settled just above their 50 day moving averages, while the NASDAQ Composite held at a minor November support level, and the Russell 2000 managed to close above the lower end of the horizontal channel it has been trading in since early November. The price action today, particularly in the final hour of trading was not encouraging, but if there is a positive takeaway, it’s that these levels did hold.
A large multi-year ascending triangle had been forming on the weekly chart of spot Light Crude Oil (WTIC), and when that pattern support line was broken in October, the price of the commodity moved rapidly lower. The pattern breakdown projects a target price into the $53.00 area, about $5.00 from its current level. It is interesting to note that the RSI and the volume-weighted Money Flow Index are both deeply oversold. These oscillators can stay overbought or oversold for extended periods, but this is the first time since the 2008 low that both indicators have been in simultaneously oversold conditions. The pattern price projection and the price and money flow momentum indicators together suggest crude may be nearing a support level.
The trading this month in Starbucks (SBUX) has been erratic. The first week saw a long tail ”hanging man” candle followed by a narrow opening and closing range “doji star”, and, finally, last week and at this point in the current trading week, the formation of large wick “shooting star” candles. These high wave and narrow opening and closing range candles reflect indecision and are often seen at tops.
The DOW decline held at the 24% retracement level of its 2014 range and lower Bollinger band. After today’s strong sell-off and in light of the weak technical indications, it is not particularly firm looking footing, but on a slightly more positive note, the bullish “flag” pattern on the Russell 2000 chart remains intact.
GoPro (GPRO) shares broke below an uptrend line drawn off the October/November lows last week, but bounced in today’s session at the October $65.00 support level. It looks like the price action over the last two months may be forming a large horizontal channel.
The Russell 2000 (RUT) bull flag on the daily chart is still flying. The lower end of the pattern was tested at the open and it held and the index rallied into the close, finishing at the upper border of the formation. As I said in my Sunday post: Small caps usually lead the broader market higher, so the implications of the pattern and the manner in which it resolves, could be important for stocks in general over the near term.
Shares of Alibaba (BABA) opened lower today, touching the current intersection of their 50 day moving average and the 50% retracement level of the short historic trading range. At that point, they bounced back up over 4.6% off their lows and are currently trading near the highs of the session.
Freeport-McMoRan ($FCX) shares are testing a five year support line. At the same time, the RSI and volume-weighted Money Flow Index are simultaneously oversold. The last time they were in this coordinated condition was at the 2008 low. These oscillators can stay overextended for long periods, so price action at this key inflection point will determine the intermediate-to-longer term direction of the stock.
Ciena (CIEN) shares were up over 2% today and may be preparing to continue higher. The weekly chart shows a bullish MacD crossover, with the RSI and Chaikin Money Flow tracking above the 21 period moving averages of the indicators, that I use as signal lines. There is a higher low in place and the stock looks like it is making a run at long term resistance in the $18.00 area.
The technical indicators on the daily timeframe are also positive and the last higher low can be seen holding above the 50 day moving average. The intersection of the $18.00 horizontal resistance level and the downtrend line drawn off the 2014 highs will be the next upside hurdle. There is a 26% short interest in the stock, so if it is able to penetrate this level it could spark a covering rally.
Tesla (TSLA) shares are taking out their October lows and trading through the zone of support that I highlighted last week.