Monthly Archives: June 2017

Twitter (TWTR) may be about to get hot.

Twitter shares were up over 5% in trading on Wednesday, retesting a downtrend line drawn off the 2013 and 2015 highs. This trend line has defined the long-term decline that began two months after the stock became publicly traded, and it is currently intersecting with an 18-month horizontal support line. The merging of these two trend lines could be a strong influence on the intermediate-term direction of the stock price. At this time, resolution looks like it will be to the upside, making Twitter a profitable buying opportunity.

The longer timeframe chart shows the decline that began in early 2014 that delineates the downtrend line, and the 18-month horizontal support line which could be acting as a base. In April, support was successfully tested and the subsequent bounce took the stock price back up to the downtrend line. It has made several attempts since that time to break through resistance. This current attempt is being supported by positive momentum indications and improving money flow readings.

The stochastic oscillator is moving out of an oversold condition and made a positive crossover, and moving average convergence/divergence is in the process of making a bullish crossover. Chaikin money flow has moved above its center line and its base component accumulation/distribution is crossing above its signal average. The stock has a lot to prove, but having arrived at this nexus of support and resistance, it may be prepared to make a decision.

Twitter is a speculative long candidate after an upper-candle close above the $18.00 level, using a tight and disciplined trailing stop.

Twitter shares rose 2.6% to $18.25 early Thursday afternoon.

(This article was published on TheStreet.com this morning.)

Cisco Systems (CSCO) is undergoing a process of consolidation on its daily chart that could result in a volatile move higher.

Shares have been trading in a narrow horizontal channel pattern, which has compressed the price range to a near-breaking point. Last month’s large gap lower created an upside resistance vacuum, and the momentum and money flow indicators suggest the stock is prepared to fill the void.

Here’s the current technical condition of Cisco and the breakout level that could trigger an initial 5.5% rally.

The daily chart shows Cisco shares bouncing off their 200-day moving average in December last year, and then going through a period of lateral consolidation. Bollinger bandwidth contracted to a very low level during this time, reflecting the lack of volatility. But, periods of low volatility are often resolved by periods of high volatility.

The subsequent break above channel resistance was followed by a sharp move higher, and in the process a small gap formed between the $33.00 and the $32.50 levels. A second period of consolidation began, again compressing Bollinger bandwidth, and this time the subsequent breakdown, took the price lower and closed the gap.

The stock has, once again, been trading in a tight horizontal channel, just above a long-term uptrend line, its 200-day moving average, and the 2016 high levels. Channel resistance is located in the $32.00 area, with little in a way of further resistance until a large downside gap that formed last month is filled just below multiple year highs. The stochastic oscillator is moving above its center line and the moving average convergence/divergence is making a bullish crossover. Chaikin money flow is in positive territory and the Bollinger bandwidth indicator is reflecting another level of tight compression, and the potential for a volatile move.

Cisco is a long candidate after a break above current channel resistance using an initial stop under the intersection of support in the $31.00 area.

Shares of Starbucks (SBUX) began forming a rising triangle pattern in November last year, oscillating around their flat 200 day moving average, and making a series of lower highs and higher lows. Pattern resistance was broken in March this year and over the following three months the stock rallied to a perfect measured move in the $65.00 area. This pattern price objective is arrived at by taking the height of the triangle and adding it to the breakout level, and in this case, it represented a 12.5% gain.

In Monday’s session the stock opened higher but immediately began pulling back, closing near its low and forming a dark cloud cover candle. A dark cloud candle is a bearish reversal sign but like all candles or patterns requires confirmation. That confirmation came in the form of Wednesday’s large dark candle, suggesting there is more downside to come. The first level of potential support is the April high in the $61.70 area, also the 38% retracement level of the breakout rally range.
There are two technical indications on the chart that provide additional confirmation and suggest the stock price may be overextended. It has diverged above its 200 day moving average by its widest percentage margin in over a year, and the relative strength index is moving out of an overbought zone. Chaikin money flow is still well into positive territory but has dropped sharply this week and is below its 21 period signal average.
Starbucks is a speculative short at its current level using a position signs that accommodates a buy-to-cover stop above its recent high. Short positions are by their nature speculative and require a disciplined trading strategy.

(This article was published on TheStreet.com this morning.)

Shares of American Express (AXP) have been trading in a horizontal price channel for the past four months and are, once again, bouncing off pattern support and turning higher.

Price momentum and money flow indications reflect the bullish reversal, and the stock has moved back above its 50-day moving average, and center channel line resistance. It looks like it is headed for another test of upper channel resistance and a break above this level projects a retest of its all-time highs.

The stock spent the greater part of 2016 basing below resistance supplied by the 38% retracement level of its 2014 high and 2016 low. It broke above this resistance in October of last year and made a perfect measured pattern move higher, reaching its price objective in February. That high near $81.50 has acted as channel resistance and the 62% retracement level of the 2014 and 2016 range, while the $75.50 area has supplied channel support.

The channel center line at $78.50 has also been acting as internal pattern support and resistance, and the stock moved above it in Monday’s session. Last week, the relative strength index crossed above its 21 period moving average and center-line, and the vortex indicator, designed to identify early shifts in trend direction, made a bullish crossover.

Chaikin money flow is in positive territory, and the accumulation/distribution line is above its 21 period signal average. The renewed positive momentum in the stock price is being supported by renewed buying interest.

American Express is a buy at its current level using a position size that accommodates a stop-loss under the channel support line.

(This article was published on TheStreet.com this morning.)