Australian shares have fallen for the third day in a row. The technical’s show that the index fell straight through the support level of 5420 and closed at it’s low today of 5352. This level was the support low seen in April to June. If the price falls through this price level then it is likely to signal further weakness and the index could then begin to fall all the way down to the low’s seen in mid October.
In contrast the US markets are continuing it’s bullish run with the S&P500 index making a new high overnight. It is clear that the Australian market is trading independently of the larger US market and is failing to follow it’s lead. This may signal that investors and traders are bearish about Australian market conditions and see better value in other markets. A pull back in the S&P500 index is likely to be supported at the resistance level of 2020 points.
I am neutral at present and not entering any long trades on the Australian market until I see evidence of the support level at 5350 holding and retracing above 5420.
Shares in the social media giant Facebook (FB) increased 4.6% at the close of trading on Tuesday. This increase was on the back of the announcement a PayPal head will join the company to head it’s messaging products division.
The share price below shows the recent price action with a strong breakout from recent congestion. The breakout occurred on relative strong volume which adds to the bulls conviction to rise the share price.
Traders can look at entering a long position with a target price close to the March high of $72.00. Stops can be placed under the most recent congestion low of $62.00.
It was all positive on Wall Street overnight with the Dow Jones Industrial Average hitting an intra-day all time high of 16,704 points. At the close of trading the Dow Jones had increased 0.68% (112 points) to close at 16,695 and breakout above December resistance which it had attempted to surpass over the past few months without success. Momentum could now continue to push the index forward to resume it’s up-trend so traders can look for opportunities in stocks that make up the Dow Jones Index. I was able to identify two such shares in Catepillar Inc and General Electric that show positive technical setup’s for long position trades.
Catepillar Inc (CAT)
Caterpillar Inc. (Caterpillar) is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The stock price is in an up-trend with yesterday’s trading showing a triangle breakout. I will wait for confirmation of the breakout today and look to place an order to buy if the price can open above yesterdays low. The up-sloping trend line should offer support and seems a logical place for a stop-loss.
General Electric (GE)
General Electric Company (GE) is a diversified technology and financial services company. The products and services of the Company range from aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing and industrial products.
After a sell off in January the price has steadied and risen in an orderly up-trend. Recent price activity has resulted in some consolidation with a pending up-side breakout a possibility. If this does occur then the price could continue up-wards with a target of $28.00. At this stage I will wait for the box breakout to occur before committing to any long position trade.
It’s been several weeks since my last blog post as I decided to take 2 weeks off from trading the markets. In that time I have been able to take a step back and analyse the broader market sentiment without the pressure of finding new trading opportunities. This article will focus solely on the three main US financial indexes of the Dow Jones, S&P500 and the Nasdaq 100.
Dow Jones Index
In early April the Dow Jones tested the December 31st resistance level of 16,600 but failed to clear this level and subsequently fell and held at the support level of 16,050. The rally has headed back up towards the 16,600 level but appears to be losing momentum. The current chart looks to be forming the right shoulder of a top reversal head and shoulders pattern. If the index continues to fall and then breakdown below the 16,050 support then this would signal a valid head and shoulders reversal formation. At that point further declines towards the next support level of 15,350 would be possible.
S&P 500 Index
The broader S&P500 index has been slightly less volatile than the Dow Jones index above. It is currently range trading in a longer term up trend. The price appears to be having trouble clearing the 1,900 resistance level and it would not surprise me to see the price head back towards the up-trend line and find support there before it pushes higher.
Nasdaq 100 Index
The Nasdaq is currently trading in a downward trend channel and making a series of lower highs and lower lows. The bigger picture shows the possible formation of a head an shoulders reversal pattern as I have illustrated with the three black circles. I see the index pushing back towards the support level of 3,420 in the coming weeks and if this level is broken then it would validate the reversal pattern. At this stage I will be staying on the sidelines for any long position trades for shares in the top 100 Nasdaq Index.
The technical’s for the Dow Jones Index show signs of reaching support levels and perhaps falling slightly further before it’s able to resume it’s up-trend.The Index has retraced after touching it’s resistance level of 16,600 and I expect it to keep falling towards the support level of 16,050.
In comparison to the Dow Jones Index above the S&P500 index has already reached it’s short term support level of 1,840. Prices should hold here in the short term before the index is able to resume it’s up-trend. A break below this support region could see prices drop further all the way towards 1,815 points.
Senior Housing Properties Trust
The chart shows the formation of a bullish reversal inverse head and shoulders pattern. The price was able to break through the $23.00 neckline resistance two days ago.
Jabil Circuit has an interesting chart setup with the formation of an early up trend with a series of higher highs and lows. The stock price was able to breakout from its downtrend a few weeks ago and is nearing it’s next resistance at $18.90. Prices tried to breakout above this level yesterday with a close at the resistance price.
Traders can watch this setup for a bullish candle close above $19.00 to trigger a buy signal.
This chart shows a very good example of support and resistance in action as illustrated by the S/R horizontal lines. During the down trend the pivot lows which acted as supported turned into resistance with the resultant continuation of the downtrend. This technical knowledge can be used in a similar fashion during the up trend with resistance levels now expected to act as support on any price weakness.
Pioneer Natural Resources Company (PXD)
Pioneer Resources (PXD) has formed a bullish reversal pattern called an inverse head and shoulders. This pattern is made up of a central pivot low called the head and smaller lows on either side which make up the shoulders. A bit of imagination is needed to see this pattern as it doesn’t always form perfect text book examples in real life. The pattern below has the appearance of two heads which could also be considered a double bottom.
On Monday the price broke upwards and closed above the neckline which provided our trigger signal to go long. Confirmation of this setup was provided by the bullish cross of the 20 and 50 day exponential moving averages and the reversal pattern taking place at a previous support level.
Traders can look to go long with stops placed under the neckline and a target close to the next resistance of $220.
The US markets were closed yesterday for the President’s Day national public holiday. The Dow Jones Index has made strong gains over the past week and is currently trading at the 16,200 resistance level. After such a strong bullish run there may be a retracement back towards support before it makes it’s next thrust higher.
Allied Nevada Gold (ANV)
Allied Nevada Gold has been consolidating over the past 6 months with a horizontal resistance level at $5.34 which was cleared on Friday with a breakout candle.
In this situation I would normally wait for the market to open the day after the breakout before I placed a market order. If the price can open above the resistance level of $5.34 and hold for the first hour of the trading session then I would look to enter. If this occurs then my preference would be to enter within the range of the real body of Friday’s breakout candle. An appropriate stop loss would be a few cents under the $5.00 round number value.
Seabridge Gold (SA)
Seabridge Gold has a similar chart setup to Allied Nevada above. It has consolidated and formed a base over the past three months with the formation of an ascending triangle. Friday saw a bullish candle breakout from the resistance level of $9.00. Traders should wait till today’s open to ensure it opens above the $9.00 level before going long. I will place my stops below the red line as indicated ($8.44).
The website pages section has been updated and contains my NYSE chart of the day for Boston Scientificwhich has a more thorough trading analysis.
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Friday February 7th is an important day for the US sharemarkets with the announcement of the January Non Farm Payrolls figure. This is the barometer of the US economy and will determine the short term direction of the US and world sharemarkets. The December figure of 74,000 new jobs came in well under estimates and it’s important for this months figure to be above 150,000 jobs created for the month of January for investors and traders to regain confidence in the market.
Dow Jones Index
The Dow Jones Index rallied 188 points (1.22%) on Thursday to close in on the support level of 15,720. A weak jobs figure will see this level act as resistance and lead to further declines. A positive number could see a rally close above the 15,720 level.
S&P 500 Index
Like the Dow Jones Index the S&P500 index rallied 21.7 points (1.2%) on Thursday. It’s price chart shows a similar appearance to the one above with yesterday’s rally closing under the December support level of 1,775. Again today’s job’s figure will determine the future direction of the index.
Stocks to Watch February 7th
Adobe Systems Inc (ADBE)
Adobe is trading in a sideways range bound by resistance and support. Traders can watch for a breakout close above the resistance level of $62.00 to trigger a buy (long) signal.
Brinker International (EAT)
Broke out from a bullish flag yesterday to trigger a buy (long) signal. There is a clear support level at $46.50 which could be used to place an appropriate stop loss level.
Equifax is moving in an up trend with the recent formation of a bullish flag. Be on the lookout for a breakout from the upper trend line to trigger a buy (long) signal. The up trend line is acting as a support level which could be used to place a stop loss.
Both the Dow Jones Index and the S&P500 Index suffered significant falls on Monday and broke through the support levels I have been mentioning in my previous blogs. The charts below show this breakdown of the respective support levels. I see further declines on the horizon and any rally in the these indices is likely to be held up by the support levels now turning into overhead resistance.
Dow Jones Index
S&P 500 Index
Scanning my watch lists I was able to find the following potential chart setups.
Radisys Corp (RSYS)
After a long down trend Radisy’s Corp traded sideways and formed an ascending triangle. Yesterday saw a bullish candle which provides confidence in the setup and likely further increases in price.
Royal Gold (RGLD)
Royal Gold broke out from $54.00 resistance and has consolidated to form a small flag. watch for a breakout to trigger a buy signal.
Solar Winds (SWI)
Bullish Flag breakout. stops can be placed under $39.00.
U.S. stocks rebounded on Thursday as investors welcomed data showing a robust pace of growth in the economy in the final quarter of last year, while upbeat earnings from Facebook gave confidence to the tech sector. The Dow Jones Industrial Average increased 109.82 points, or 0.7%, higher at 15,848.61 rejecting the support level I have identified on the daily chart. This is an important technical level with any breach below 15,720 signalling weakness and may precipitate further declines towards 14,765.
Duke Realty Corp (DRE)
Duke Realty Corp reported a better than expected fourth quarter revenue increase of 7.9% on the corresponding period last year. The share price has been consolidating sideways over the past several months. I have highlighted the cup and handle pattern formation on the price chart below. This pattern occurred at a support level and a breakout of the resistance level yesterday on a good earnings report gives the appropriate signal to trade this share on the long side.
I would look to enter somewhere just above the resistance level with a stop loss just under yesterday’s candle low.
Zebra Technologies (ZBRA)
ZBRA brokeout from a trading range overnight on increased volume. This is a bullish trading signal and is likely to signal further price increases.