Monthly Archives: February 2019

Activision – Before Earnings -The Charts On Multiple Time Frames

Activision Blizzard (ATVI) shares have collapsed since the October 2018 high. They retraced more than half of their incredible rally off the 2015 low.

The weekly chart shows Activision’s heroic rise and its sudden reversal.

The company is reporting earnings after the close today and may announce plans to layoff workers because of slowing sales.

The good news is that the stock price has dropped to just above a wide zone of support situated between $39 and the $34.75 levels. The bad news is that even in the unlikely event that Activision rallies off the report, all the support levels broken on the way down become resistance on the way back up.

Any recovery process will likely be long and arduous.

The daily chart shows several of the initial upside resistance levels. One positive takeaway from this chart is the very wide open November 2018 downside gap. Gaps are eventually filled is the old technical adage. If there is some potentially good news out of the call today, shorts may begin to cover and that vacuum of price action between $62.50 and the $55 levels could be quickly filled. Quickly, in this case, being a relative term.

The bottom line is that no one knows how Activision will trade after their earnings report today. The charts are a guideline and show levels of previous conflict between buyers and sellers. Those levels usually remain relevant when retested.

Tesla – Technical Test Coming Up This Week

Here is a quote from a Zero Hedge article posted on Sunday morning citing a Reuters report of further job cuts at Tesla:

Following the latest round of job cuts that Tesla announced to start off 2019, the North America delivery division is seeing the most drastic impact. Reuters reports that the most recent jobs cuts reduced the company’s North American delivery division by more than half of its current staff, citing two workers who lost their jobs. 150 employees out of a delivery team of about 230 were let go from the company’s Las Vegas facility, according to the report. These employees were responsible for delivering Model 3s to eager US and Canadian buyers.

Link to the full article.

If true, it does not bode well for Tesla’s stock price this week. Let’s take a look at the daily Tesla chart and review where the important levels of support are located.

As most traders know Tesla shares have been trading in a wide horizontal channel pattern for nearly a year. More recently, they bounced off their January 24th low and traded higher. Last week shares turned back down and moved below the 50% Fibonacci retracement level of the channel range, and their 200 day moving average.

The zone of support delineated by Friday’s $298.50 low and the December lows at $294.75 would be the first support area to be tested if the stock decides to continue lower this week. Next is the $279.28 January low of several weeks ago.

It would be best for Tesla bulls if the initial support zone held. A failure in that area and the stock price would gain downside momentum as it headed back towards the January low. This $279.28 January level is not a well tested level of support. It is not likely to repel strong downside momentum. If it were to be taken out, the long term channel bottom would be next up and a defensive line in the sand. That’s about 18% lower from where Tesla closed on Friday.

Of course, if someone comes in next week and starts buying and can get the share price back above the 200 day moving average, and the 50% channel retracement level, it would be a very bullish development. That would have to be someone with a large amount of money and a strong personal interest in Tesla the company.

Weekly Doji Candles Form On The Index Charts

Doji candles formed on the weekly charts of the major market averages last week.

A doji candle has a very narrow opening and closing range, often with a a high wick or long lower shadow. They are often seen at market tops but can reflect uncertainty and as such can be continuation candles.

Now take a look at the ten minute chart. There seems to have been a concerted effort to support the SPDR S&P 500 ETF (SPY) late in the day last Thursday and Friday.

If the market had faded into the close of last week a doji would not have formed on the weekly chart. More likely, the opening and closing range would have been situated in the lower end of the candle’s range with a high upper wick. This is called a shooting star candle and has more bearish reversal implications than the doji.

The markets have bounced sharply off their December lows and a pause would be in order, but no individual candle or clearly defined pattern is a guarantee of future market direction. Monitor follow-through price action next week and remember, at this point in price, a limited pullback or period of consolidation would be healthy for the market.

Snap, Earnings, and Pop!

Snap (SNAP), the nine billion dollar emoji application company, reported in-line earnings after the bell on Tuesday and shares soared over 21% in after-hours trading.

February has been a great month for Snap since the it became a publicly traded company two Februarys ago. Shares soared about 60% in the IPO week of trading in February 2017, and they jumped over 50% in the first two weeks of trading in February 2018.

In what what turned out to be a platform for this month’s earnings pop, Snap shares began forming a rudimentary base in October last year. The technical indicators on the weekly timeframe began moving higher two months later.

On the daily timeframe the basing process resembles a saucer or rounded bottom. Initially, resistance was situated at $6.50, but that level was broken at the end of last week. The next level of resistance was positioned at $7.50, but it will be left in the dust when the stock opens this morning.

The opening gap higher should take shares to around $8.50, but any near term follow through will meet resistance at the intersection of the horizontal trendline located at $9.50 and the 200 day moving average.

It is easy to dismiss Snap’s nearly 21% earnings pop as a market over-reaction. But the technicals have been improving as the base was forming and recent volume levels have spiked. Aggressive short sellers should be cautious.

McDonalds – Potential Double Top On The Chart

Over the last 52 weeks McDonalds (MCD) shares outperformed the S&P 500 index by about 8%, but year-to-date they have underperformed by that same percentage. The stock is not participating in the current broader market rally and a double top may have formed on the daily chart.

McDonalds high in November touched the $190 level but then the stock price quickly reversed direction, dropping $20 to the December low. Shares began to rally at this point along with the broader market, but about two weeks ago after returning to the $190 level, a large bearish engulfing candle formed. That signaled another top and and the stock price began to fade.

This reversal was presaged by the bearish divergence in the moving average convergence/divergence oscillator (MacD) which made a lower low as the stock was returning to the $190 level.

Since the engulfing candle formed and the stock price started to reverse to the downside, two high wick shooting star candles and a several red or dark body candles have formed on the daily chart. High wick candles after strong upside moves are a warning sign, as is a bearish large body candle.

McDonalds shares are back below their 50 day moving average and Chaikin money flow has moved into negative territory. All this as the broader market continues to rally.

Further downside that takes out last week’s $176 low, would likely be the catalyst for another test of the December low and the 200 day moving average.

Apple Shares Are Approaching Resistance In Fibonacci Time And Price

In 2017 and through the first half of 2018, Apple (AAPL) shares found support and resistance in areas that, after the October 2018 high was established, turned out to be future Fibonacci retracement levels. These levels on the weekly chart are measured off the 2016 low and the 2018 high range.

In the months that have followed the October top in the stock price, those levels have continued to act as temporary support and resistance.

After making its December 2018 low, Apple’s stock price found support at the 62% retracement level of the range, and then began consolidating below the 50% retracement level.

Last week’s earnings pop took shares up and through $159 and the 50% retracement level. Further gains this week have the stock approaching the 38% retracement at the $176 level. This is where it would be expected to find some resistance, for two reasons.

First, the $176 level did act as multiple month resistance in early 2018. Additionally, $176 is now established as a Fibonacci retracement level, and should temporarily impede upside progress, as the 50% level did earlier this year.

A second but related technical negative are the red vertical lines on the chart. These are Fibonacci time zone lines, measured at Fibonacci time intervals starting at the 2016 low. In the recent past when one of these time cycles was reached it signaled a temporary top in the share price.

Apple is now at an intersection in Fibonacci time and price which should limit upside over the short term or initiate a small pullback.