Monthly Archives: June 2015

Index Charts – Within and Without Trendlines

The hammers that formed on Monday held, despite very weak futures action going into yesterday’s open, and the indices were able to close on Tuesday near their highs of the day. As the manic/depressive short term action continues, the intermediate term trendlines continue to contract on an intersecting course which, at some point will be interrupted by a breakout or a breakdown.

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IBM – “Technically” Improved

International Business Machines (IBM) has struggled for the last two and a half years, with the stock price coming off over 27% peak-to-trough in that time, and underperforming by 38% relative to the S&P 500 index. It has not been a pleasant experience for shareholders, as the old school technology company scrambles to carve a foothold in the newer cloud technology and data analytics spaces.
The weekly chart outlines the decline off the 2013 highs and highlights the key levels of support and resistance along the way. Multiple long tailed candle bottoms made in late 2014 and early this year, seem to have established a floor between the $147.50 and $148.00 levels.

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On the daily chart the basing action looks like an inverse head and shoulders bottom, with the left shoulder forming in December, the head in January, and the right shoulder in March. This pattern develops under a “neckline” which acts as a breakout level. The stock broke above the neckline in April, ran up to close the October 2014 gap, and then just as quickly retreated back to the former resistance-now turned-support neckline. Trend line retests can be very healthy from a technical perspective because they reinforce the validity of the level, in this case, as a base from which to launch the second phase of this year’s stock advance. Last month, the 50 day moving average crossed over the 200 day average, a bullish signal called a golden cross. IBM has does everything right from a chartists “technical” perspective, and while a recovery is not likely to be parabolic in nature, it does look sustainable over the intermediate term.

Silver Miner Breakout?

The iShares Silver trust (SLV) fund was up about a percent in yesterday’s trading, but the silver mining company, First Majestic Silver (AG) was up over 7% in the session. It closed above its 50 day moving average and is testing the downtrend line of a large triangle pattern. Yesterday’s move came on a surge in volume relative to the 50 day moving average of volume, and recent similar spikes have been harbingers of higher prices.

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Hammer Holds?

The market indices moved sharply lower on the open yesterday, but managed to quickly stabilize, and close above or near their midranges and form hammer candles. They will be put to the test, once again, at the open this morning. Yesterday’s early downdraft was exhausted in the first half hour of trading, let’s see how it does in the early going today.

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Biotech Index Stalking Resistance

The Biotech iShares (IBB) fund has been trading in a small channel for the last month, which is situated in the upper range of a larger three month channel. It managed to hold above its 50 day moving average and close in upper candle range yesterday, forming a bullish hammer candle. The RSI remains above its centerline and accumulation/distribution continues to track higher. It looks like a chart that wants to break out.

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Bullish Hammer Time on the Index Charts

Today’s close in or near midrange on the index charts was encouraging, coming after the lows retested key levels of either trend line or moving average support. These resulting hammer candles reinforce the validity of the previous support levels, and are potential points of stabilization that could act as market pivot points.

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Rare Blended Morningstar and Eveningstar Patterns on Index Charts

The narrow opening and closing ranges on the weekly S&P 500 index and the DJIA charts seem passive in nature, but they mask manic/depressive behavior on the daily charts. A mirror image sequence of overlapping morningstar and eveningstar candle formations can be seen on the daily timeframes. A morningstar is a three-day bullish reversal pattern that consists of a large dark candle, followed by a narrow opening and closing range candle, and completed by a large white candle. It suggests a transition from bearishness to bullishness. In these cases, however, the final candles of the bullish morningstars were the first candles in bearishness eveningstar formations. Eveningstars are mirror images of morningstars and reflect transition from bullishness to bearishness. The manic/depressive nature of these indices makes anticipating moves, even within the context of their larger and clearly defined multi-month consolidation patterns next to impossible.

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Cokes Late Day Fizzles

Shares of Coca Cola (KO) have traded higher four of the last five days, but notice the smaller range high wick candles. This reflects an inability to hold session gains, and because most momentum indicators do not take into account closing price relative to range, it can skew these readings.

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The 60 minute charts shows the late day sell-offs on large volume, and make the advance in the stock price suspect, and holding this stock into a Friday close problematic.