Showing posts from February, 2011

Daily Market Commentary: Bear Traps or Shorting Opportunity?

It was another eventful day for some key markets. Large Caps were relatively quiet; the S&P added 0.5% which was enough to regain the 20-day MA but volume was light. Technicals improved with a bullish cross between +DI/-DI. ($SPX) via The Nasdaq managed a clear bear trap after last week's successful test of its 50-day MA. Monday's black candlestick is typically viewed as bearish, but the small decline back to 20-day MA support offers an opportunity for bulls to push on. ($COMPQ) via The premise for a bullish reversal in the Nasdaq is helped by a larger bear trap in the Percentage of Nasdaq Stocks above its 50-day MA. ($NAA50R) via But the picture for the Nasdaq 100 is not so optimistic. Monday's bearish black candlestick sat on resistance (former channel support) and offers a better shorting opportunity as part of the gap breakdown. ($NDX) via The semiconductor index is caught in the middle

Weekly Market Commentary: Nasdaq Bull Trap

Interesting week ahead for the indices. The index which has the most at stake is the Nasdaq. Having popped over 2,818 the previous week it quickly reversed to close below 2,781 last Friday. This is a potential bull trap which will offer supply on future advances if it's not taken care of quickly. Nasdaq via The Nasdaq 100 also declined, but because it's well above 2,217 the losses are not so problematic. ($NDX) via The Russell 2000 fell between both scenarios. It pushed strongly from its bull flag but was unable to break above 850. However, last week's low held support as offered by the bull flag. So it has something to work from for a challenge of 850 resistance. ($RUT) via The S&P has been more modest given it is well down on 2007 highs. It's primary achievement has been to hold 1,300 support with 1,400 the next challenge. It closed Friday at 1,319. ($SPX) via Breadth weakened from ri

Daily Market Commentary: 50-day MAs Defended

It was a bit of a mixed bag today. The S&P didn't drop far enough to test its 50-day MA, but it was able to defend channel support. It is still a reasonable low risk long play here, although it could still bear trap below support (i.e. close below support then close above support soon after) ($SPX) via The Nasdaq offered the flip side scenario to the S&P. Bulls defended the Nasdaq 50-day MA, but did so from outside channel. A bullish set up requires a bear trap, which means former channel support has to be regained, something of a tall order. The 20-day MA overhead might play a roll in the recovery too. ($COMPQ) via The Russell 2000 was another index to defend its 50-day MA, but it's not near any natural resistance level to challenge (maybe 20-day MA), so there is room for immediate upside. ($RUT) via The best index to offer bear trap potential is the semiconductor index. Today's action closed near the high

Daily Market Commentary: Bears Turn The Screw But 50-day MAs Hold

Interesting times - each index told a different story. The S&P made a brief defense of its 20-day MA but it quickly gave up that to push down to channel support. Here it did managed to dig in, but given action in the Nasdaq and Nasdaq 100 it might take a test of the 50-day MA, just below channel support, before a bounce emerges. ($SPX) via Buyers of Nasdaq support would have quickly been caught on the wrong side of the trade, although the 50-day MA has helped to offer support. Volume climbed substantially to register a firm distribution day. Bulls may look for a relief bounce off the 50-day MA, but given the channel break was an extension of a previous channel break, the resulting bounce may not last long. ($COMPQ) via Losses in the Nasdaq 100 accelerated. But like many indices today it was able to find support at the 50-day MA. Despite this, there is a marked slowing in the trend. ($NDX) via The semiconductor index fai

Daily Market Commentary: No Shortage of Action

It was a busy day after what seemed to be an eternal period of small gains. No index escaped the selling, but the outlook for each is different going forward. The S&P took a sizable 2% loss, bringing it down to its 20-day MA on heavier volume distribution. The selling was accompanied with a MACD and ADX 'sell'. However, the S&P is holding inside its channel and has yet to test trend support, so bulls keep control. ($SPX) via The Nasdaq took a bigger hit, gapping and falling to channel support which undercut the 20-day MA. Volume climbed to register a distribution day also with a MACD and 'sell'. The Nasdaq is offering a support 'buy' ($COMPQ) via But the buy opportunity in the Nasdaq is weakened by the higher volume channel break in the Nasdaq 100. It undercut its 20-day MA with a MACD and CCI 'sell'. It's still possible another bear trap will emerge, but it appears unlikely. Will shorts pile in tomo

Weekly Review of Stockcharters: Views on the Rally

Has the 'endless' rally an end? Have the Stockcharters anything to add? Robert New of TheInformedTrader looks for pullbacks when the RSI hits 70. When such pullbacks do occur they find support when the RSI reaches 50. But when the rally is strong, RSI's can remain extended for weeks (and months). The Russell 2000 will soon be at its 2007 highs. No Index charts from David Colletti , but lovers of stock breakouts will find something of interest in his chart list ( ). Grupo Financiero Gallicia (S.A.) is enjoying a very nice consolidation above $14. Yong Pan of Cobrasmarketview shows most breadth is decidely neutral (and certainly not overboguht or toppish) Yong's mechanical trading model has struggled on recent dips. Treasury yields playing off the Symmetrical Triangle breakout; measured move target still a possibility and a test of 40 a likely short term test. Richard Lehman of The Channelist offers his words of wisdom/cauti

Weekly Market Commentary: Nasdaq Breakout

It was another good week for bulls. The Nasdaq was finally able to break above 2,818 resistance - turning it into new support. Nasdaq via The Nasdaq 100 continued to add to its breakout. It has gone well beyond nearest support and is some 300 points off a measured move target. Can it make it to 2,700? ($NDX) via However, the Nasdaq Bullish Percents are struggling at overbought levels; not many new stocks are available to support the rally. ($BPCOMPQ) via With the bearish divergence more evident in the Percentage of Nasdaq Stocks above the 50-day MA. Since the peak in the 80s from the 2009 low the percentage of Nasdaq Stocks above the 50-day MA is down at 63%. When it drops below 50% rapid declines in the market frequently result. ($NAA50R) via Small Caps added a second week of gains. The push off the bull flag continues to gather bullish momentum. ($RUT) via The S&P was good enough

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Daily Market Commentary: Small Caps Squeeze

More of the same. Small gains on small volume for the S&P and Nasdaq. Both indices are trading well inside their channels so there is little to add. ($SPX) via Action in Small Caps was of some interest as it continued to ride resistance higher. While shorts were able to take advantage on Tuesday, there was no such luck today as Tuesday's shorts were squeezed by the buying. ($RUT) via Semiconductors offered some interest with a larger than normal gain for the day. While not yet challenging resistance it did reverse 'sell' triggers in the MACD and CCI. ($SOX) via Bulls maintain control and it will take an extended down phase to reverse this trend. Follow Me on Twitter Dr. Declan Fallon is the Senior Market Technician and Community Director for . I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 b

Readers Questions: $AHD Breakout

My question is on $AHD. I see you have a stop of 12.94 I understand this- but since it went up 1.80 today is it to late to get in and also what gains do you look for? I also did not understand what six sub- $1 and two $1-2 means when you tweet it. Thanks for the questions - I'll start with the first one. The scans I run pick up stocks which have broken out on volume, so the $1.80 move was the qualifying action in this scan. Volume action has strongly favoured buyers, so while a 13% gain is hefty, the stock has broken into 'fresh air' and has the potential to offer much more. So is the $1.80 move too late to be getting in? The stock closed at $15.60, so assuming you were able to buy at $15.60 next open with a stop at $12.94, your risk becomes 17% - not particularly attractive (my stops factor in the Average True Range). Can this risk be reduced? One can take a second look at the chart and see where the stock has broken from. Using the Open/Close range there is a for

Daily Market Commentary: Modest Gains on Higher Volume

What the market took yesterday was given back today. Higher volume swung things in favour of bullish accumulation. The S&P continued to advance neatly between support and resistance of its channel. ($SPX) via Likewise for the Nasdaq ($COMPQ) via The Russell 2000 returned to former channel support - now resistance. Yesterday's attempt to initiate a downward move was out done by today's rally. The rally likely triggered fresh short covering as new highs solidified. Can shorts provide pressure tomorrow? ($RUT) via For Thursday, again look to the Russell 2000 to provide bear side pressure. Other indices only have the trend to look too and a period of indecision is a worst case scenario. Whatever happens, there isn't going to be a significant change on Thursday's action. Follow Me on Twitter Dr. Declan Fallon is the Senior Market Technician and Community Director for . I offer a range of stock tr


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