Post by TradingForGod on Sept 15, 2004 14:00:05 GMT -5
From last time: “…there is the issue of the Dow. It is already AT its trendline. It’s hard to see the S&P or the Nasdaq push higher if the Dow stalls here…This is how I would play it: If you are fully invested, I suggest you take 1/3 of your position off the table right now. If the Dow closes decisively above yesterday’s close you can put it back on. Until that happens, a bit of caution is warranted right here…”
That is exactly what happened, however. The Dow stalled out right at major downtrend resistance and has pulled back today after failing to break higher for more than a week. In the meantime, the S&P and Nasdaq continued to advance with the S&P just about hitting it’s downtrend resistance line two days ago. It too has stalled out and today has pulled back. See the updated daily chart below.
Does that mean that the rally is over? We can’t say that yet. The pull-back from key resistance is a necessary, but not sufficient, condition for the market to top. For now, MA structure is still very positive. Momentum is positive as well, though it has fallen off substantially over the last few days. There was a big momentum divergence on the new highs too. Daily stochastics turned lower on the Dow several days ago, and unless we get a big rally later today will do so on both the S&P and Nasdaq today. All this strongly suggests that we’ll be seeing at least a minor pull-back over the next several days. It could amount to much more than that, but it is too early to tell. Hopefully, you scaled back on length into key resistance. If not, it is probably not too late. We’ll see how the market performs down at better support at the 20 and 40-day MAs at 1110 and 1097 respectively. If the sell-off stalls in this range, we’ll rebuy length looking for another go at key resistance soon. If the 40-day MA fails, however, we’ll really need to strongly consider reducing length more.
I have received some requests for a quick technical read on some stocks, so I thought I would take a look at them all in one post.
WWJDthrume asked about Lifeline Biotechnologies (LBTT) and United States Crude International (USCI). LBTT has been in a steady downtrend since early April. With the exception of four days around the first of July it has been below the 40-day MA since that time. It has been below the 20-day MA since mid-July. LBTT has traded sideways out of the down channel connecting the April and July highs, but has gotten no lift from that. That’s pretty surprising considering the long-term nature of the downtrend. Technically, this stock is not in very good shape right now. It is below all MA resistance and has flattened out completely. However, stochastics are VERY oversold, so oversold in fact that both components of the indicator are pegged at zero, the lowest possible reading. If this stock could manage to close above the 40-day MA at about .007 (I can’t tell the exact number) it would open the way for a quick rally back to the June and July double top just under 2 cents. Until MA resistance is bested, however, this stock remains on the defensive.
USCI has fell steadily from the minor peak in late March until early July. Since then it has traded in a very tight range between .0001 and .0003 with very little activity at the higher number. Obviously there is no short term trend or momentum with the stock flat-lined. The 40-day MA is now at .0002 and the 100-day MA is at .0003. A close above these resistance points opens the way for a rally back to the March high at .0010, but until that happens this stock remains confined to the micro-range that it is currently enduring.
Mina-Multiplier asked about Avant Immunotherapeutics Inc. (AVAN) and Petroquest Energy Inc. (PQUE). AVAN has been in a downtrend since the major peak in Jan’04. The sell-off has so far proceeded in a very orderly way. The first leg dropped 1.79 to 2.11. This was followed by a correction to 3.22, or EXACTLY 62% of the sell off. Fibonacci strikes again! The next sell off has fallen to 1.54 so far, almost exactly the length of the initial drop. The recent rally has pushed up to a high of 2.25, which is a 42% retracement of the sell off from the April peak and a 56% retracement of the sell off from mid-July. AVAN is above both the 20 and 40-day MAs and momentum is currently positive. The ADX trend indicator shows a healthy uptrend off the 1.54 low is in place. The key resistance to watch right now is 2.30-2.40. This area contains the 100-day MA, the downtrend line off the Jan and July peaks, and the bottom of “work area” of price activity in June. A close above 2.40ish should be enough to trigger a rally back to at least the April peak at 3.22. However, failing to break this major resistance could cause another sell off down to about 1.35. I actually think this would be a positive thing over the long term because it would complete the “structure” of the sell off in Elliott Wave terms. If you are currently long, look to take at least partial profits HERE resetting on a close over 2.4.
PQUE has been in a multi-year uptrend from down at 1.20, peaking in July at 5.85. This rally looks to be a complete “5-wave” affair, suggesting a prolonged corrective phase is now possible. Maybe even likely. The initial sell off to 4.09 in late July challenged the 20-day MA, which held for a very decent bounce. That rally to 5.50 almost went back to the highs, but stalled out at the upper BB. This is a great example of how to use the ADX in concert with the BBs to trade. During the explosive rally, the BBs didn’t act as good resistance because of the strong trend. On the secondary rally to 5.50, the ADX showed that PQUE had detrended and was a good candidate for a sale into the upper band. Since that time PQUE has fallen back to near the July low, breaking the 20 day MA in the process. It is flirting with the 40-day MA at this time. Key uptrend support off the lows in Nov, Feb, and May comes in at about 3.90. As long as this trend support holds, PQUE has the potential to turn sharply higher again. However, if this support fails, the likely target is down at the May low around 3.00. This should be an excellent buying opportunity, if seen, because it is the last “low before the high” and exactly the 62% retracement of the whole rally. I know that longs would NOT want that to happen, but in a macro sense it would be very healthy for this stock. Reduce length on a close below the 40-day MA, and definitely be flat on a close below the trendline.
God’s richest blessings,
TFG
That is exactly what happened, however. The Dow stalled out right at major downtrend resistance and has pulled back today after failing to break higher for more than a week. In the meantime, the S&P and Nasdaq continued to advance with the S&P just about hitting it’s downtrend resistance line two days ago. It too has stalled out and today has pulled back. See the updated daily chart below.
Does that mean that the rally is over? We can’t say that yet. The pull-back from key resistance is a necessary, but not sufficient, condition for the market to top. For now, MA structure is still very positive. Momentum is positive as well, though it has fallen off substantially over the last few days. There was a big momentum divergence on the new highs too. Daily stochastics turned lower on the Dow several days ago, and unless we get a big rally later today will do so on both the S&P and Nasdaq today. All this strongly suggests that we’ll be seeing at least a minor pull-back over the next several days. It could amount to much more than that, but it is too early to tell. Hopefully, you scaled back on length into key resistance. If not, it is probably not too late. We’ll see how the market performs down at better support at the 20 and 40-day MAs at 1110 and 1097 respectively. If the sell-off stalls in this range, we’ll rebuy length looking for another go at key resistance soon. If the 40-day MA fails, however, we’ll really need to strongly consider reducing length more.
I have received some requests for a quick technical read on some stocks, so I thought I would take a look at them all in one post.
WWJDthrume asked about Lifeline Biotechnologies (LBTT) and United States Crude International (USCI). LBTT has been in a steady downtrend since early April. With the exception of four days around the first of July it has been below the 40-day MA since that time. It has been below the 20-day MA since mid-July. LBTT has traded sideways out of the down channel connecting the April and July highs, but has gotten no lift from that. That’s pretty surprising considering the long-term nature of the downtrend. Technically, this stock is not in very good shape right now. It is below all MA resistance and has flattened out completely. However, stochastics are VERY oversold, so oversold in fact that both components of the indicator are pegged at zero, the lowest possible reading. If this stock could manage to close above the 40-day MA at about .007 (I can’t tell the exact number) it would open the way for a quick rally back to the June and July double top just under 2 cents. Until MA resistance is bested, however, this stock remains on the defensive.
USCI has fell steadily from the minor peak in late March until early July. Since then it has traded in a very tight range between .0001 and .0003 with very little activity at the higher number. Obviously there is no short term trend or momentum with the stock flat-lined. The 40-day MA is now at .0002 and the 100-day MA is at .0003. A close above these resistance points opens the way for a rally back to the March high at .0010, but until that happens this stock remains confined to the micro-range that it is currently enduring.
Mina-Multiplier asked about Avant Immunotherapeutics Inc. (AVAN) and Petroquest Energy Inc. (PQUE). AVAN has been in a downtrend since the major peak in Jan’04. The sell-off has so far proceeded in a very orderly way. The first leg dropped 1.79 to 2.11. This was followed by a correction to 3.22, or EXACTLY 62% of the sell off. Fibonacci strikes again! The next sell off has fallen to 1.54 so far, almost exactly the length of the initial drop. The recent rally has pushed up to a high of 2.25, which is a 42% retracement of the sell off from the April peak and a 56% retracement of the sell off from mid-July. AVAN is above both the 20 and 40-day MAs and momentum is currently positive. The ADX trend indicator shows a healthy uptrend off the 1.54 low is in place. The key resistance to watch right now is 2.30-2.40. This area contains the 100-day MA, the downtrend line off the Jan and July peaks, and the bottom of “work area” of price activity in June. A close above 2.40ish should be enough to trigger a rally back to at least the April peak at 3.22. However, failing to break this major resistance could cause another sell off down to about 1.35. I actually think this would be a positive thing over the long term because it would complete the “structure” of the sell off in Elliott Wave terms. If you are currently long, look to take at least partial profits HERE resetting on a close over 2.4.
PQUE has been in a multi-year uptrend from down at 1.20, peaking in July at 5.85. This rally looks to be a complete “5-wave” affair, suggesting a prolonged corrective phase is now possible. Maybe even likely. The initial sell off to 4.09 in late July challenged the 20-day MA, which held for a very decent bounce. That rally to 5.50 almost went back to the highs, but stalled out at the upper BB. This is a great example of how to use the ADX in concert with the BBs to trade. During the explosive rally, the BBs didn’t act as good resistance because of the strong trend. On the secondary rally to 5.50, the ADX showed that PQUE had detrended and was a good candidate for a sale into the upper band. Since that time PQUE has fallen back to near the July low, breaking the 20 day MA in the process. It is flirting with the 40-day MA at this time. Key uptrend support off the lows in Nov, Feb, and May comes in at about 3.90. As long as this trend support holds, PQUE has the potential to turn sharply higher again. However, if this support fails, the likely target is down at the May low around 3.00. This should be an excellent buying opportunity, if seen, because it is the last “low before the high” and exactly the 62% retracement of the whole rally. I know that longs would NOT want that to happen, but in a macro sense it would be very healthy for this stock. Reduce length on a close below the 40-day MA, and definitely be flat on a close below the trendline.
God’s richest blessings,
TFG
