Friday, January 25, 2013

Above 1,500

SPX it's in its way to touch the all time high, 1,550! This January month was unusually bullish, a continuous rally without any hesitation. Price stayed above both EMAs (two hours chart) for the whole month and also 40-50 points above rising SMA 120. This is very bullish but at the same time a little bit scary.

Right now SPX is slightly above the trading channel. A push above this channel will be very bullish in short and intermediate time frames but at the same time is going to signal the arrival of a major top. 

Weekly chart shows a clear higher high and a positive DMI.

Daily chart doesn't bring too much information, the same clear higher high observed on weekly chart.

AAPL got hammered after earnings, even more than I expected. I am not going to talk about this stock anymore since is now clear for even the most enthusiastic bulls that the stock is in a pretty deep downtrend. The 4 years uptrend line did not hold at all, and the next support levels are around 430 and 360. Coincidently, as I mentioned in the past, 360 is the level predicted by the "head and shoulder" pattern. However, don't get too enthusiastic about shorting AAPL to the last dollar. For every crime there is a punishment, so don't get in the "AAPL will drop to $5/share" crowd since is unlikely this will happen soon. Watch carefully how it behaves and if you see signs that is rebounding cover your shorts. I will let you know when the trend is going to change.

This is the forth week on the upside in the row and as expected market is bullish on all time frames. If you want to ride this rally you can still do it either by buying ETFs or with individual stocks. Talking about individual stocks I have a few in mind.

First, the very bullish and relatively safe bets (nothing is safe in stock market).

Then two stocks not as safe but with a great potential, JNPR and HPQ (maybe too early to buy this one).

Plenty other stocks with great potential, ROST, EXPD, D, SBAC, LOW, XLP, PFE, FLR, BMY.
I am interested in these stocks since they are also optionable.

All the best!


Monday, January 21, 2013

Third week in a row on the upside

Good week for bulls who managed to push SPX 14 points up this week. The pullback I expected never materialized. With this advance SPX managed to climb above September's high. This is very bullish for the long term trend.

How much more is SPX going to climb? This is not a question I often adress because I don't like to make predictions. However, certain pattern has developed in the last few years and I think I can make a "guesstimate".

Looking at the 2009-2013 rally you can notice that each new high on long term timeframe was 50-70 points above the previous high. Since the last major high was around 1,470 (September 2012) the next one will probably be in the 1,520 - 1,540 area. This is assuming the long term uptrend will continue at the same pace. Either a new major high bellow 1,520 or one above 1,540 will be significative for the long term.

Another pattern I noticed is that once the weekly DMI turns positive roughly half of the rally is done. Since the last time the weekly DMI has turned positive was around 1,440, and if that that was the middle of the current rally (which started at 1,360) then the peak should be around 1,520. 

The two hours chart shows a bullish intermediate time frame pattern with a bullish EMAs crossing and SPX over 40 points above rising SMA 120. Despite this past week advance SPX did not climb above the upper edge of the trading channel maintaining the rally at a more or less constant pace. 

The best way of action at the moment is to buy any dip and hold at least for another 40-50 points on SPX.  

Finally, please notice one of the hottest stocks at the moment, RIMM. I don't know how familiar are you with "cup and handle" pattern, but this is one of the patterns I noticed at the moment for RIMM, a pattern that is bullish. The pattern got completed around 14, now the stock is around 15.8 so this could be a pretty good entry. Also notice the "golden cross" and a positive weekly DMI.

Have a nice trading week!


Tuesday, January 15, 2013

Apple's moment of truth

It looks like almost everybody's enjoying AAPL's misery. I remember many people predicting a fantastic downslide when APPL crossed 200, then at 300, then at 500, 600 and finally at 700. Now the guys who were wrong for so many years and burnt their fingers by shorting AAPL are coming with "I told you so" mantra. Unfortunately (for them), this is not the way to make money in stock market, by trying to guess tops and bottoms. 

As you remember from previous posts I "predicted" AAPL's fall when I saw clear technical signs that the stock is in difficulty. More exactly when stock crossed SMA 200 and weekly DMI turned negative.  
I told you at that time that "I don't remember when I saw AAPL so bearish". This is not about bragging about being right it's only about showing a very good example how to call a long term uptrend or  downtrend and refraining from guessing tops and bottoms which are most of the time wrong.

I am writing an article today about AAPL because is around a level I mentioned many times in the past,  the four years uptrend line, 470. This is a very solid support level. 

If it's going to be broke the next stop is probably going to be around 360, the level predicted by "head and shoulder" pattern. I usually don't put too much weight on "HS" pattern since many times is wrong but this time looks "textbook", a clear "neckline", a right leg shorter than the left one and a failed attempt to go above the neckline.

I think 470, the four years uptrend line is very important. Most of the time stocks jump up after touching such levels. This may be a very good entry point. If your even more pessimistic about AAPL then 360 is the entry level for you. I don't think is going bellow 360, at least not on this first leg down. Other potential support levels (but not that important) are previous highs and bottoms, 430 and 370.

AAPL is also a textbook example of a stock in a bubble. Remember the nice three years old uptrend channel? I've got suspicious about AAPL when broke the trading channel on the upside at 500 in the fall of 2011. While breaking the trading channel on the upside is a bullish signal and one can make a nice profit in a matter of months, at the same time it's a sign that the top is nearby. 

I have two other textbook examples of stocks at the "beginning of the end", SLV and SPX.

Otherwise, the market remains flat this week with two failed attempts to move it down. I am still waiting for decent pullback before climbing towards 1,500. 

All the best!


Friday, January 11, 2013

Slightly up

SPX managed to gain a few points this week and climbed to the highest level in 5 years. I don't consider the break on the upside significant. Five points it's nothing, SPX can gain or lose 5 points in a matter of minutes. I need to see a clear break on the upside in order to make a big deal out of it. 

For now market remains bullish on all time frames. However, a small pullback is not only possible but welcomed in order to get the ammunition to climb even higher, towards 1,500. 

On daily and two hours charts you can notice the formation of a nice trading channel. The problem is that now SPX is almost touching the upper edge that is somewhere around 1,480 so a pullback is very likely. Obviously a break above the upper edge it will be extremely bullish but on short term I favor a pullback rather than a break on the upside. Another reason I favor a pullback is because SPX is 40 points above the rising SMA 120 on two hours chart. Usually, this is about the maximum SPX can get in an uptrend. 

Weekly chart also shows a slightly higher high that is bullish, of course, for the long term.

Let's have a look now at the dollar since we know that bulls like to see a weaker dollar. there isn't a perfect correlation between the dollar strength and the bullishness or bearishness of the market but a weak dollar favor the bulls while a strong one favor the bears. Dollar is an in a downtrend, notice the negative weekly DMI. However, it has reached now a pretty solid support line so I won't be too surprised if dollar is going to up from here at list for a while. 

In conclusion, market remains bullish on all time frames especially on the long term but a short pullback on a short term is likely at this point. Another scenario is that market could remain flat in the next few weeks allowing the price to get in touch with EMA 25 or EMA 50 on two hours chart. 

All the best!


Sunday, January 6, 2013

Exceptionally bullish week

Very bullish week, indeed with SPX gaining no less than 64 points. Some people called it "a relief rally" bulls being happy that the fiscal cliff drama is over. Well, at least for now.

Needless to say that market is bullish on all time frames. Market is now close to its highest level in four years. It pretty much touched the level seen in September (1,467). Obviously, for the long term sake SPX needs to go over the September high but for now I think bulls are happy and I don't seem eager to repeat the last week scenario. For now they are in a very good position.

The second reason I say the next week is not going to be too dramatic is that market is way above rising SMA 120 on two hours chart and as you probably noticed in the past price tends to stay slightly above the two EMAs in an uptrend.

The following weeks are probably going to be exciting since once again is the earning season. Obviously, there are going to be up days and down days but overall I expect the market to climb a little bit almost each week.

Have a nice trading week!


P.S. The earnings season is starting tomorrow not next week as I said above