Page menu

Tuesday, September 8, 2015

Major breakthough in the charts

Over the labor day weekend; while the hedge fund managers - who attempted to shake us out on light  Summer volume - were out on their yachts; I spent several hours reviewing the charts and had a major break-though Sunday morning.

As a former chartoholic I can tell you that binge charting can lead to errors in judgment. When you're already short on sleep, and the market is swinging wildly during regular trading hours, the more you continue to push the limits of human endurance, the more all the charts start to look the same, so it's always important to take a fresh look at the charts.

If you follow my twitter feed, you'll often see me posting individual stock charts, and underling sectors, even ones we don't trade ($TRAN for instance) because: 1. The market is made up of stocks, and to get a good handle on the market you need to have a handle on the entire market. 2. Unless the market is in free-fall there's always a bull market somewhere. 3. $TRAN and $SOX lead the broader market. 4. Certain sectors like tech are more heavily weighted to an index like the NASDAQ, and certain stocks called "market movers" have a greater impact on an index. For example $XOM, not only leads energy, but drives the $SPX.

This brings us to our first chart $XOM in our continuing broadening top pattern. These are complicated patterns, which take on many forms. The only hard and fast rules on these patterns is that the bottom, and the top, of the pattern shouldn't be flat, but they may be ascending as the chart below illustrates, or broadening in which the target might look like $53, but considering that we already caught the bottom in Oil, and $XOM is trading back above $70 (support), and money is about to flow back into this market (as MM's return from vacation), and energy is the only sector on sale, and that we're already in window dressing season, and the $XOM is "fairly valued" (with a PE-15), and every Money Manager is going to be forced to chase performance when they return from summer vacation, and every MM wants to own $XOM, and that the larger pattern on the $SPX seems to also be trading into a classic broadening top pattern.... I want to own all of it right here!

Transports bullish - and this chart explains the panic we saw in August. Support broke - taking out traders stops - only to trade into a violent wave E reversal.

Watch for a breakout on the S&P back above the 1992 level as soon as this week.

This final reason (#5) you'll see me posting individual charts is bottom picking beaten up stocks.
Stocks like FOSSIL $FOSL - trading with a PE of only 11, and 25% short interest; $BAS - this one saw a major reversal last month, so wait for a pullback; $AVP which never should've traded below $2 - huge short interest; $ARO... But I'll be updating the hot stocks page shortly and I have plenty of stocks to choose from.

Oil will probably get clobbered again this week (in futures markets), before the pullback is complete, and we saw the oil bulls run for the exits going into Friday's close. This may coincide with a little pullback in energy stocks. Follow my twitter for the latest.


No comments:

Post a Comment