Don't Ignore This Chart

Weekly Candle Argues For Further Weakness Ahead For Oclaro

Oclaro Inc (OCLR) is printing several warning signals as it appears to be topping after a stellar advance.  OCLR has nearly quadrupled since the beginning of 2016, but it's difficult to ignore the heavy volume reversal last week - especially when you consider that a negative divergence has been in place on the weekly chart since highs printed in November.

That bearish engulfing candle was accompanied by over 60 million shares, suggesting a near- to intermediate-term top is in place.  To the downside, the October low near 7.00 and the rising 50 week SMA at 7.19 - a likely target given the negative divergence - could be the target now for the bears.

Happy trading!

Tom

The Transports ETF (IYT) Struggles To Hold A Breakout

The Transportation ETF (IYT) is struggling to hold the recent breakout.

The new three-month lows in Relative Strength in purple suggest being very careful with the Transportation stocks here after failing to hold the breakout above December highs. In this roaring bull market, Transports have traded sideways since Commodities spiked on December 8th.

For newcomers to StockCharts.com, Intermarket Analysis through charts is one of the bigger advantages for looking at the stock market differently than Price Earnings ratios. I spent a considerable amount of time on the Commodities Countdown weekly video article 2017-02-23 laying out some of the interesting Intermarket signals that have shown up in the last two weeks. You can read more about these signals on the Commodities Countdown blog titled Commodities: The Moment Of Truth Has Arrived.

If you would like to learn more about Intermarket Analysis, members have access to 'Members Content' from Martin Pring, John Murphy, Arthur Hill. Erin Heim also hosts a wide variety of Member's Access Content through Decision Point analysis methodology. Click here to take a one-month free trial

Have a great weekend!

Good trading,
Greg Schnell, CMT, MFTA. 

 
 

Eli Lilly Breaks 18 Month Downtrend

Eli Lilly (LLY) printed an exhaustion gap in November on massive volume, marking a significant bottom and over recent trading days broke a downtrend line that spanned 18 months of action.  Based on this combination and improving momentum, it certainly appears that LLY has seen its worst and has begun to experience much better technical action.  Check out the exhaustion gap on the daily chart:

The short-term picture has certainly improved, but more importantly it appears as if the longer-term downtrend on the weekly chart has broken.  Take a look....

The only downside at this point is that LLY is overbought in the very near-term.  So we can expect a little profit taking.  Outside of that, however, LLY appears poised to sustain a run to the upside.

Happy trading!

Tom

 

The Noose Tightness as T-Bond ETF Prepares for Next Move

The 20+ YR T-Bond ETF (TLT) is consolidating within a long-term downtrend and this favors a bearish resolution to the current pattern. TLT fell sharply from July to November and broke through its 40-week EMA. The ETF is currently consolidating below the falling EMA and a consolidation within a downtrend is a bearish continuation pattern. The blue trend lines mark a triangle formation and chartists can watch this pattern for a break. A weekly close below 118.5 would break triangle support and signal a continuation lower. Another leg down in TLT would imply another leg up in long-term Treasury yields. 

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Mondelez Takes Big Hit, But Remains in Bullish Triangle Pattern

Mondelez International (MDLZ) had a rough week, tumbling over 5.5% after Kraft Heinz (KHC) made a bid for Unilever (UL).  That suggested to many investors that the likelihood of a MDLZ acquisition was significantly reduced and the stock was priced lower accordingly.  The technical pattern on MDLZ remains quite bullish, however, so I'd argue that last week's weakness is opening a door for entry.  There are two bullish possibilities here so let's look at the chart:

While last week's losses were obvious, the overall uptrend here is just as obvious.  Weekly RSI in the 40-50 range has generally been a solid entry point into MDLZ and we closed at 46 last week.  Furthermore, MDLZ is currently approaching its key trendline support within a bullish ascending triangle pattern.  I'd respect this trendline because failure to hold it could send MDLZ down to its early 2016 reaction low (black dotted line above).  A trip there could establish a test of price support within a bullish rectangular consolidation pattern.  Either way, MDLZ looks bullish to me in the longer-term.  It's just a question of whether the short-term produces additional weakness.  Last week, MDLZ printed a low of 41.30.  That level down to 40.00 would represent solid short-term entry with a closing stop beneath 40.00.

Happy trading!

Tom

Cypress Semi (CY) Tries To Join The Party

Cypress Semiconductor (CY) rallied 2 weeks ago to new 52 week highs. It is still consolidating the breakout but looks well positioned. The volume last week was very low on a pullback compared to the volume on the breakout. That is a really nice bullish sign. This semiconductor stock also kicks out a yield of 3.44% which is a nice value for tech stocks.

Some of the leadership in the Semiconductors have recently started to perform in line with the S&P 500 after outperforming for almost a year. Watch closely, but with a nice tight stop around $12, CY appears to be setting up to move higher if the overall market can continue the run.

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SRCL Wastes No Time Breaking To Six Month Highs

Stericycle (SRCL) has been under rather intense selling pressure over the past 16 months, losing half its market cap.  The waste management company disappointed Wall Street on several occasions and we've seen major gap downs on heavy volume three times over those 16 months.  The stock seems to have put in at least a near-term bottom with its latest quarterly earnings, which were released Wednesday after the closing bell.  SRCL beat on both its top and bottom lines and it's gapped up on heavy volume today, closing above key six month price resistance.  Check out the chart:

With any strength at all tomorrow, we should see its SCTR clear 30 for the first time in the past 10 months.  One negative was that SRCL closed well off its intraday high of the day, but the close did still manage a breakout and volume was strong, indicative of accumulation.  For those willing to take on a little extra risk in an effort to drum up higher returns, SRCL may have just confirmed that its bottom is in place.

Happy trading!

Tom

WBA Turns Up after Deep Correction

Walgreens Boots Alliance (WBA) has traded quite choppy over the last 12 months, but I think the bigger trend is up and the recent wedge breakout is bullish. First, notice that WBA broke above a major resistance zone with the November-December surge. This move forged a 52-week high and set the bullish tone for the long-term uptrend. Second, note that the 200-day slope turned positive in late August. This indicator measures the slope of a 200-day linear regression, which is the line of best fit for 200 data points (closing prices). See our ChartSchool article for more details. 

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Bank Of America (BAC) Ends Consolidation Pattern With A Big Bull Push - SCTR

Bank of America (BAC) has been consolidating recently. Today that consolidation ended as BAC made a big bull push out of the consolidation pattern. With a strong SCTR, this was on the radar anyway. Click on this link to understand more about what the SCTR is. However, today BAC broke out to new highs in Relative Strength in purple, price broke to a new high and the volume was well above a high average. The MACD made a nice bullish cross after resetting down near zero. Nice.

Continue reading "Bank Of America (BAC) Ends Consolidation Pattern With A Big Bull Push - SCTR" »