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StockCharts Blogs - Don't Ignore This Chart! |
While the S&P 500 sports a small gain for the month of August, the Hong Kong Hang Seng Index ($HSI) is actually down and lagging. The S&P 500 (black) moved above its early August high last week, but the Hang Seng Index (red) formed a lower high. Continued relative weakness in China could be negative for US stocks.
Once the SOX broke below the March and July lows of 2008, a new low close of 312 was established in mid-Sept 2008. After a move higher to quickly retest the earlier breakdown area, the SOX fell precipitously into late 2008. After months of trending higher, the SOX had climbed within a whisker of the 312 resistance area. On Friday morning, Intel (INTC) provided the catalyst to test this key area. The SOX opened at 311, just beneath support, then rallied to an intraday breakout at 316. At mid-day Friday, the breakout attempt had failed. The SOX had fallen back to 310. We'll need to see where the SOX finishes, but clearly a move above 312 on heavy volume would be bullish - the further above 312 the better. A failure at 312 is significant for a couple of reasons. First, heavy volume reversals generally put a halt to trends, especially in the short-term. Second, the long-term negative divergence on the MACD is evident. As prices have risen to new highs on the SOX, the MACD has barely budged higher. This is an indication of waning momentum on the part of the longs. Again, a close above 312 and we've got a totally different ballgame. Until then, however, you might consider lightening the load when it comes to semiconductors - at least until the breakout is confirmed.
Nokia is a $49 billion company that trades on the NYSE - as an ADS (American Depository Shares). Nokia also happens to trade on the Nasdaq OMX Helsinki. Yes, Nasdaq bought the Helsinki exchange. Anyhow, this means Nokia starts trading long before the NYSE opens. Because prices have already moved in Helsinki, there is usually a gap on the open in New York. Note: This is an educational post featuring a technical analysis technique.
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Candlesticks are more powerful when combined with other aspects of technical analysis. Noble Energy (NE) gapped down and formed a hammer in early July. Over the next two days, a piercing pattern formed to further affirm support around 28. The catalyst came when the stock surged above 29 with good volume to confirm support and the piercing pattern. Note: This is an educational post featuring a technical analysis technique.
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There are bullish engulfing patterns and then there are BULLISH ENGULFING patterns. Kohls (KSS) successfully tested support from its May lows with a bullish engulfing on high volume. Three items came together for this bullish signal: support, a bullish candlestick reversal and high upside volume. The more, the merrier. Note: This is an educational post featuring a technical analysis technique.
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The bearish engulfing pattern is a short-term candlestick reversal, but it can also mark future resistance. Jabil Circuit (JBL) formed a bearish engulfing in early May and this area marked resistance a month later. The stock formed a rising wedge that peaked just below the early May high and then gapped down. Note: This is an educational post featuring a technical analysis technique.
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Volatility contractions often precede volatility expansions. This is the rational behind Bollinger Bands. After surging above 5.5, Ford (F) formed a long consolidation and Bollinger Bands contracted as the range narrowed. The subsequent move above resistance and the upper Bollinger Band triggered the volatility expansion (breakout). Note: This is an educational post featuring a technical analysis technique.
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To find stocks with narrowing Bollinger Bands, use the Market Carpet tool and select Bollinger Band width.
The price relative can be used to show relative strength or relative weakness. While the S&P 500 moved to new lows in March, Broadcom (BRCM) held support around 16 from mid January to early March. As a result of relative strength, the price relative (BRCM:$SPX ratio) surged higher in February and March. Relative strength preceded absolute strength as BRCM surged from 16 to 24. Note: This is an educational post featuring a technical analysis technique.
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Positive divergences in MACD show waning downside momentum that can lead to a breakout. DR Horton (DHI) forged a lower low in early July, but MACD held above its June low for a positive divergence. Despite a lower low in the stock, downside momentum was fading. MACD’s subsequent move above its signal line preceded a resistance breakout in DHI. Note: This is an educational post featuring a technical analysis technique.
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The volume-by-price bars for Bank of America were the longest between 11 and 13. Even though the red and green portions were relatively equal, it is clear that many positions were established in this range. Remember, there is a buyer for every seller. With so much volume, the 11-13 area becomes support after the July breakout. Note: This is an sensitive educational post featuring a technical analysis technique.
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