Normally the price of Square (SQ) has been very positively correlated to the price action of the Technology Select Sector SPDR FUND (XLK).
But that relationship has broken down since early last month. Even as the broader technology sector has continued to rally, Square shares have been either flat or lower. This week was a good example of the disconnect, while the XLK was up only a modest 1%, Square was down 6%.
The daily Square chart is overlaid with the Technology SPDR chart. Simple trend lines show the inverse trajectories and the correlation coefficient graph in the lower panel shows the statistical difference.
Of note is today’s volume bar which moved over the 50 day moving average of volume for the first time since early last month. This is a 2.7% move lower and on relatively strong volume.
Chaikin money flow which represents accumulation and distribution has been in negative territory all month. The chart looks weak and the interpretation is that Square shares are headed lower.
Since their sharp decline in March, shares of Boeing (BA) shares have been buffeted by fundamental wake turbulence.
But despite the continuing developments in the Boeing 737 Max investigation, the stock has been moving in well-defined ranges.
For example, the lower end of the unfilled March gap lower is acting as resistance. It is also, intersecting with the flattening 50 day moving average. While the lower end of the January gap higher is acting as support, and has been successfully retested several times. It is intersecting with the 200 day moving average.
Within this large channel is the April gap lower and its lower end in the $380 area is also acting as resistance. It is being tested in today’s session.
Workday (WDAY) rallied over 65% from its November 2018 lows to its March 2019 high. Since then it has been consolidating in a lateral triangle pattern.
Support is situated in a zone between $177 and $175, and resistance is being supplied by a downtrend line drawn off the 2018 highs.
Last week Workday shares tested the support zone and a large bullish hammer candle formed. This week shares have advanced past the rising 50 day moving average, and are currently retesting the upper end of the triangle.
However, despite today’s market strength Workday is having difficulty breaking through resistance. The stock will have to make a wider range upper candle close to confirm a true breakout.
In January this year, the price of West Texas Intermediate Crude and the oil services sector stocks, as represented by the VanEck Vector Oil Services ETF (OIH), both jumped higher.
In February their upside trajectories flattened out. Then in March crude prices began to rise again but the services sector lagged behind. This month the OIH has continued to move sideways forming a horizontal channel pattern.
But that consolidation dynamic may be about to change, as the OIH looks poised to breakout of the channel pattern.
If the OIH does breakout and move higher it could attempt to close the price gap between it and crude oil. Normally, there is a strong correlation between the price of crude and the services space. But that relationship has faded this year, with the under performance of the services stocks. It may be time for them to catch-up and normalize the correlation.
The OIH daily chart highlights the three month horizontal channel consolidation. Within its $2.00 range is a one month uptrend line. It has been tracking above the interior uptrend line to its current test of channel resistance, in the $18 area.
A successful channel breakout projects an initial upside price target in the $20 area which, at that point in time, would likely intersect with the declining 200 day moving average.
Tesla (TSLA) shares took a tumble today after a strong day on Wednesday. This is not what I expected when I outlined my technical take on Tesla, which was featured on the “Off the Charts” segment of Mad Money. It should be noted that Jim Cramer had an opposing viewpoint on Tesla.
Technical analysts scan charts and recognize patterns in the price action. Some patterns have the propensity to repeat, because of the underlying dynamic of the fear and greed impulses of market participants.
When analysts present there ideas about the technical condition of a stock, what they are saying is: there is a similarity of price action that, in the past, has resulted in this future reaction. Nothing more.
Obviously, neither fundamental or technical analysts are perfect. But, their value does not rest with one great call or one bad call. It rests in the quality the reader associates with their analysis over a period of time.
I write this not in defense of my position on Tesla, in fact the support lines of the large horizontal channel have yet to be tested, but for other technical analysts. Those who work hard at trying to pull some order out of the disorder that is the stock market, and have those who follow them benefit.
Watch the $250 level on the Tesla chart. If the court case does not go well for Elon and he has to step down, it could be broken, and my bullish thesis on the stock voided. If he remains, there could be a bounce. But that is not a technical opinion.
Once again, we were pleased to be invited to contribute to the “Off the Charts” segment of Mad Money on Tuesday night. Jim Cramer and his “Mad Money” team do an excellent job of presenting the charts and our interpretation of the price action.
Thanks to Jim and his staff.
Here is our take on Tesla using multiple time frame analysis.
How Tesla’s stock could be set to rebound: Cramer from CNBC.
Lately, Twitter (TWTR) seems to have fallen off the trader radar screens. There has just been less chatter about the stock on Twitter (irony not lost) or in the financial media. No doubt due to the fact the price action in the stock has been muted.
This year Twitter has moved in about a $4.00 trading range. Bollinger bandwidth which can be used as a measure of volatility, has contracted to the level seen just before the start of the 2017 rally. Periods of very low volatility are often followed by periods of high volatility.
The weekly Twitter chart shows the compressed price action over the last nine months. It has been contained to roughly within the Fibonacci retracements levels of its 2017 low and 2018 high.
The 68% retracement level provided support last year and the 38% retracement level, around $34, is acting as resistance. Volume reflects the disinterest of traders but Chaikin money flow is in positive territory, and above its 21 period signal average.
On the daily time frame, we see Twitter shares closing on Tuesday above the 200 day moving average, and the downtrend line drawn off the December 2018 and February 2019 highs. The relative strength index is tracking higher and well above its centerline, and Chaikin money flow is in positive territory. These readings suggest improving price momentum and buying interest.
Continued positive price action will get get the attention of traders. If the March trend continues, a test of the $37 gap bottom would be the first upside target. Vacuums offer no resistance or support once they are entered, and the intermediate term objective would be to fill the gap.
Facebook (FB) shares closed today above the 50% Fibonacci retracement level of the 2018 high and low range. That is a significant technical level but the price action was equally as important.
The stock opened near its low of the day and closed near the high of the day – also the high for the year. Volume was above the 50 day moving average of volume and the Chaikin money flow reading is well into positive territory.
The Facebook chart includes two technical momentum indicators. Moving average convergence/divergence is making a bullish crossover above its center line. The stochastic oscillator has made a bullish crossover and has tracked back above its center line. These readings reflect improving positive price momentum.
A golden crossover is underway with the rising 50 day moving average about to move above the declining 200 day average.
Currently, there is little in the way of overhead resistance for Facebook shares. In fact, the large overhead gap has created a technical vacuum. The charts abhor a vacuum and normally price does everything it can to fill gaps. This is notwithstanding the fact, that the $160 level which has been supplying Facebook shares support for the last two months, is also the upper end of a smaller gap.
The continuous contract Light Crude Oil (WTIC) weekly chart has reached an inflection point in price. The intermediate term direction of the energy sector could be determined by the way it reacts at this critical juncture.
Crude oil arrived here by price action that, in retrospect, created a series of well-defined technical patterns. Beginning in 2015 and continuing through 2016, a large inverse head and shoulders pattern formed on the chart.
A false breakout from the head and shoulders pattern in early 2017 resulted in a retest of the pattern’s right shoulder support level. This support held and the price of crude oil reversed direction and started heading higher. Over the next year it rallied up to the $75 area, which was the original measured move price target of the head and shoulder pattern. The retest of right shoulder support also created a data point that defined an uptrend line originating at the 2016 low.
In October last year that uptrend line was retested and it failed the test. The price of crude continued to slide before finally holding at the $42 level. This level is also where it bounced in 2017 and is the head and shoulder’s right shoulder support level.
The bullish reversal off the $42 level has taken the price of crude oil back to the uptrend line which is now acting as resistance. At this point in time, trend line resistance is being reinforced by the intersecting 40 week (~200 day) moving average.
If the price of crude oil breaks through this multiple layer of resistance it is officially back on trend. The implication would be that it ultimately returns to the old highs. If, however, it fails to break through resistance and price fades back down, the result could be a return to right shoulder support in the $42 area.
Facebook (FB) shares dropped over 40% in the last half of 2018. They bounced back by about the same percentage so far this year. But as most traders know, it takes twice the return to make up for an initial loss.
So, the pop in Facebook’s stock price in 2019 only returned the stock to the 50% retracement level of the 2018 decline. And it’s traded under that level for the last two months.
Facebook shares continue to consolidate in a horizontal channel defined by the 38% and 50% Fibonacci levels of the 2018 decline. The 50 day moving average and t 200 day moving average are converging. The question is: What are the probable outcomes for Facebook going forward?
The two most probable are, of course, breakout or breakdown from the consolidation range. If Facebook was to make a confirmed move above the $170-$175 area, the inference would be that the stock will attempt to close the wide open gap between the $215 and $186 levels.
The two month sideways action would have been simply a pause in Facebook’s upside price action that began in January. That is, a normal period of absorption and refresh in a primary bullish trend.
If, on the other hand, the $160 support level gave way, the two month consolidation period might be interpreted as a head and shoulders top. That pattern’s target price projection easily takes the stock price back down to fill the lower gap. At that point, as when any time an initial price objective is reached, the chart would have to be reevaluated.
It is impossible to say with certainty what the future holds for Facebook but the integrity of the clearly defined levels of Fibonacci support and resistance, will be an early tell.