Technical Analysis of Financial Markets

Sunday, August 31, 2008

STMicroelectronics NV (STM) - Double-Bottom

Having halved in value within a 12-month period, semiconductor manufacturer STMicroelectronics is consolidating into a Double-Bottom formation. A recent 5-wave impulse Elliott formation has seen price action find resistance at the second peak of the Double-Bottom formation at $13.50 approx. The 5-wave Elliott formation may complete with a usual a-b-c correction forming a Head & Shoulders pattern before resuming the Double-Bottom formation. A price target can be calculated by appending the distance from the trough lows to the resistance peaks projected beyond the peaks.

J. Crew Group, Inc. (JCG)

Having declined 100% within the last 4-month period, US apparel and accessories retailer is seemingly finding support at the $25 level; a level last seen since July-September 2006 during the IPO. An entrance into a buy position with stop on close below $25 may serve as low-risk trade. Cramer Likes J. Crew

Friday, August 29, 2008

QQQQ Bull Flag ?

The Nasdaq 100 Trust ETF is listed on the Nasdaq providing broad exposure to the technology sector by tracking the Nasdaq 100 Index. Current price action is consolidating into a Bull Flag formation. The Bull Flag is continuation pattern and usually a price objective can be derived by projecting the magnitude of the previous motive wave (i.e. Flagpole) using an a-b-c corrective measured move. Exit buy position on close below the 50-day moving average.

Predicting the Market

Inherently, it is challenging to forecast the direction of the market purely based on Technical Analysis. Even more complex is predicting market timing. Rarely do both attributes of direction and timing develop as anticipated. However, on this occasion, using classical analysis of trendlines, Fibonacci projections and basic Elliot Wave analysis, occasionally the probable scenario transpires; an infrequent example below:
Original post 19th April 2008:
According to the projected path, price action of the Dow may be completing the fourth wave of a 5-wave Elliot decline beginning 19th May. The fourth wave of rising equity prices may complete by the second week of September. At which point, the final fifth wave of declining prices may ensue towards the year end in time for a possible trend-reversal driven by an Election Rally and the seasonal Santa Claus rally into 2009.

Thursday, August 28, 2008

Diminishing Volume; Upside Resistance?

At second attempt, the Dow has again found resistance at the underside of the broken trendline of the rally that began on July 15th. The previous attempt 3 trading sessions ago saw a sell-off of over 200 points. Resistance at this level coincides with the 38.2% Fibonacci extension level from the May 19th to July 15th sell-off low. Diminishing volume over the summer months tends to favour upside price action; however the divergence may result in a trend reversal. A short position with stop on a weekly close above 38.2% Fibonacci extension level may serve as a low-risk trade.

Conversely, the S&P500 has broken and closed above the 38.2% Fibonacci extension level from the May 19th to July 15th sell-off low. An upside target at approx 1310 at a gain of 0.77% will bring price action toward the underside of the of the broken trendline of the rally that began on July 15th.

Tuesday, August 26, 2008

Microsoft Corp. (MSFT)

Microsoft forming a possible bullish Bull Flag pattern. Enter long with a stop on close below $27; price target approx $30.

Big Lots, Inc (BIG)

Having rallied 190% within an 8-month period since Jan 2008, US retailer Big Lots, is currently consolidating into a bearish Double-Top formation with a negative volume and RSI divergence against price action. An entrance into a short position with stop on close above $35 may serve as a low risk trade for an initial price target towards the 38.2% Fibonacci retracement level of the rally.

Friday, August 22, 2008

Dow - Weakening Trend ?

The Dow has rallied 6.6% since the year's low on July 15th. During this rally, a price/volume divergence has developed in terms of rising prices on diminishing volume. The ADX (Average Directional Index) oscillator, a measure of a trend's strength, has been declining against the rising price action signalling a weakening trend. Today's price action saw resistance beneath the underside of the broken trendline of the rally; support has become resistance. An entrance into a short position with stop on close above the 38.2% Fibonacci extension level of the previous sell-off (from May 19th to July 15th) at 11,709 may serve as a low-risk trade.

Wednesday, August 20, 2008

American International Group, Inc. (AIG) - Double-Bottom ?

AIG possible Double-Bottom formation; enter buy position with a stop-loss on close below July 15 low.

Sunday, August 17, 2008

Oil oversold at $110 ?

Having rallied 188% to all-time highs since Jan 2007; oil has retraced a third in value within the last month and is currently finding support at the 38.2% Fibonacci retracement level, coinciding with the 200-day moving average. With stochastics and RSI indicating oversold conditions, an entrance into a buy position may serve as a low-risk trade with a stop-loss on close below $110.

The UltraShort Oil & Gas ETF (DUG) is equivalent to twice the inverse performance of the Dow Jones U.S. Oil & Gas Index. An entrance into a short postion with a stop-loss on close above $40 may serve as a low-risk trade on speculation of rising oil prices.

Tuesday, August 05, 2008

Dow - Symmetrical Triangle

After a 21% decline between May 19 and July 14, the Dow is consolidating into a Symmetrical Triangle formation. An Elliot Wave a-b-c-d-e triangle forming in a prior downtrend with a base range of approx 900 favours a downside break targetting 10,600 approx. Trade in the direction of the breakout from the triangle apex for a low-risk position.