Technical Analysis of Financial Markets

Thursday, March 29, 2007

Micron Technology, Inc (MU)

Micron engages in the manufacture and marketing of semiconductor devices worldwide. From NAND flash memory for consumer electronics, products include memory for medical devices and image/temperature sensory components for industrial, commercial and military application. Potentially bottomed out, stock price seems to be breaking out of a 7-month downtrend which saw a decline of 63%. Micron announces second quarter 2007 earnings on 4th April.

Monday, March 19, 2007

Research In Motion Ltd. (RIMM)

Wireless mobile communications solution developer and BlackBerry handset manufacturer, Research In Motion, is possibly forming a bearish Diamond top formation. Confirmation of the pattern occurs on breakout of volume. Price target towards gap support just under $100, some 35% away from current levels.

Sunday, March 18, 2007

Hewlett-Packard Co. (HPQ)

Believing its stock price remains undervalued in spite of doubling in price over the past two years, Hewlett-Packard announced on Friday it is to spend $8bn on a share buy-back programme; Price action could be forming a very speculative bearish Head & Shoulders pattern. Confirmation of the pattern occurs on break of the $38 neckline with a price target of $34. Stop-loss close above $40.50 invalidating the formation.

ACE Ltd. (ACE)

Global property and casualty insurance and reinsurance organization, ACE, is currently retracing towards the $56 level which has served as a pivot defining bull vs. bear price action. A bearish trading strategy would entail entering a short position towards $56 as near as possible with price target of $51; stop-loss close above $56.

Bed Bath & Beyond, Inc. (BBBY)

Bed Bath & Beyond operates a national chain of home furnishing stores across the US. Price action has formed a broadening pattern consisting of a horizontal base with higher highs following an ascending trend line; such a formation usually predicts a short-term bearish reversal. A price target can be derived by computing the difference between the highest high and horizontal base and then projected downwards; i.e. $43-$38=$5; $38-$5=$33. Stop-loss close above $40.50.

Sunday, March 04, 2007

10% Correction ?

In a period of just 7 months from 18 July 2006 to 20 February 2007, the Dow staged a powerful rally achieving a gain of 20% in that period; so a correction of some sort was overdue and expected. A drop of 10% is considered a full-fledged correction, which is an interruption of a general healthy bull market trend. If a 10% correction is on the cards, then the Dow is currently half-way through. A further drop of around 600 points from current levels towards 11500 will mark a 10% correction for Dow coinciding with the 61.8% Fibonacci retracement level of the 7-month rally.

Across the Atlantic, the situation seems more threatening. A 10% correction for the FTSE 100 will take the UK’s blue-chip index of the 100 largest companies towards 5800 which would clearly break the 4-year bull market uptrend support. A broken trendline of this nature would indicate a bearish trend-reversal where the uptrend “support becomes resistance”.