I highlighted the potential for a technical breakdown in Under Armour (UA) in an “Off the Charts” segment of Mad Money on 10/12/16. A large symmetrical triangle pattern had formed on the weekly chart and the pattern uptrend line was being retested. A breakdown projected a targeted the $20.50 area and the breakdown quickly followed and now the price objective has been met. The $21.00 area is also a 62% retracement of the stock’s rally off its 2009 low to 2015 high. It was an incredible rally and unfortunately the decline has been equally as remarkable.
So with the pattern objective met is it a time to buy Under Armour? A long term investor who has a fundamental belief in the company could start to build a position at these levels, but for a technical trader there needs to be more evidence in the way of basing price action to substantiate the target projection.
Alphabet (GOOGL) is up 8% over the past 52 weeks, but has underperformed all its FANG counterparts by a considerable margin in that time on multiple time frames. That trend looks likely to continue at least in the short term. Here is a strategy to take profits in Alphabet into a tech bounce.
The DJIA held above the 20,000 level in Friday’s flat session and the S&P 500 didn’t form an eveningstar pattern. There was some speculation among (bearish) traders that an eveningstar was under construction on the S&P 500 daily chart, with Thursday’s narrow range doji candle forming after a larger white candle, and Friday’s weak open. The Friday close, however, was near the mid-range of the session and the resulting candle did not fit the three-day pattern of strong up day, followed by narrow opening and closing range doji, and completed by a strong down day. A pullback to the 2280 to 2270 area is certainly possible over the short term but with the RSI below its oversold level and Chaikin money flow well into positive territory, there are no signs of a significant reversal on this chart.
The correlation between Dunkin’ Brands (DNKN) and Starbucks (SBUX) has been relatively high in the past and while that relationship has shifted over the last several weeks, it may be ready to realign. The disappointing Starbucks earnings report after Thursday’s close comes as Dunkin’ is testing resistance at its 50 day moving average and after it has formed three high wick lower close candles. If DNKN were to move lower and close below the $51.75 level it would suggest further downside, potentially to a retest of support at the 200 day moving average.
DOW 20,000 is more than just a psychological level; it may help to define the character of the weekly candle, which could have bullish or bearish implications, particularly at new highs. At this point in the trading week the incomplete price action has formed a white marubozu or a large white candle with little or no upper and lower shadows, which is considered to be a bullish candle. But the weekly candle still has another day to mature.
If the index were to see a pullback of 100.92 points from its close on Thursday, it would move back below the 20,000 level and form a moderately high wick candle. This high wick or long upper shadow would not qualify as a shooting star or doji candle but would reflect some level of rejection. A shooting star or a doji would require a close approximately 200 points or more lower, and that would clearly be a bearish candle.
So, the 20,000 level has more than just a psychological implication. The ability to hold above it will color the weekly candle and, perhaps reveal a little about investor conviction.
These three stocks have been undergoing a squeeze, or a period of price compression that is usually resolved by a volatile move. The technical indicators suggest they will rise. Here are the charts of Cognizant Technology Solutions (CTSH), Donaldson Company (DCI), and Trinity Industries (TRN) published on TheStreet.com this morning.
Microsoft (MSFT) For the last two years, Microsoft (MSFT) shares have been moving in a repeating pattern of horizontal channel consolidations followed by measured moves higher. The recent highs have established another channel top, and should be followed by a retest of the channel low.
If the pattern repeats, it would be a pullback of approximately 16% (or about a $78 billion hit to Microsoft’s market cap) and return shares to the $55 level. Here’s the link to my article published on TheStreet.com this morning.