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Post by TradingForGod on Sept 22, 2004 18:35:05 GMT -5
Greetings from Tulsa, OK. I am up here working at my new job with an oil company. I am just here for the week and then will be back in beautiful Houston, TX. Because I don’t have access to all my charts at home I can’t produce a graph to attach to the discussion, but I did want to talk about the recent sell-off we have seen in equities. Remember from the last several global discussions, that I have been focused on the downtrend line off the Feb and Jun highs. The Dow was the first to test that line early this month and I thought it would be hard or impossible for the S&P and Nasdaq to do the same. But sure enough, the Dow stalled out at resistance and the S&P caught up and tested its trendline as well. BOTH TRENDLINES HELD. Thus this decent sell off. Today, the Dow closed below its 40-day MA for the first time in a month. The S&P and Nasdaq are still above this key benchmark. Momentum is negative and stochastics are pointed lower and not nearly oversold. That’s pretty negative. On the other hand, MA structure remains positive, though not as much as it has been recently. In addition, the Dow is nearing the bottom of the BB range and the ADX trend indicator shows no trend at all (no surprise there). Putting it all together, I think that equities have a decent chance for some additional weakness in the short term. The S&P could fall back to 1100ish and the Nasdaq to 1840-1825. But I think that should stop the decline. If it doesn’t, something more bearish is going on here. If you were smart enough to follow my advice (just kidding, I am not THAT conceited : and liquidated length into trendline resistance a couple of weeks ago, the areas listed above should be good support to try and buy back in. Good luck to us all. God bless, TFG
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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
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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
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Post by TradingForGod on Sept 13, 2004 19:55:50 GMT -5
I got replies back from Grambo and MinaMultiplier asking that we look at some Canadian royalty oil and gas trusts. There are several out there, but I am going to focus on Primewest Energy (PWI). The chart below shows PWI’s trading activity so far this year. You can see that it bottomed out in early May and has rallied well since then. The rally has a very characteristic “wave pattern” to it. While there are many possible interpretations of the wave pattern, I think the most likely one is as follows: The initial rally from the spike low at 15.35 to 17.825 (2.475) completed “Wave 1”. This wave is probably bigger than it really should be because it looks to me like the sell off on May 10th overshot the market by about 65 cents. The correction back down to 16.70 (1.125) completed “Wave 2” and corrected 45% of the initial rally. This is not a Fibonacci ratio, but they aren’t always perfect. From early June through mid-August, PWI rallied in five clear waves (3 up and 2 down). I think this entire rally was actually “Wave 3” of the large advance and it sub-divided into smaller “wavelets”. Remember from our discussion of Elliott Wave that wave patterns can be imbedded within wave patterns…they have fractal characteristics. The sell off into the end of August was “Wave 4” and we are now working a “Wave 5”. The target of this wave is somewhere between 20.25 and 21.50 depending on whether the rally extends or not. That’s a long drawn out explanation to say that the rally is just about over…I think. There is a decided cyclical pattern to the advance as well. It was not as apparent during the sell off, but on the way back up there are relative lows around the 29th of each month. The pattern is VERY strong. So we should be nearing the mid-cycle high over the next few days here. This is another reason to think prices may be topping out. In addition, the stochastics are extremely overbought and prices are up against the daily Bollinger band. That is not a big issue because of the relatively strong daily uptrend. HOWEVER, PWI is also at the WEEKLY BB and there is no trend on the weekly chart. I think this is potentially a very powerful sell signal. Putting it all together, it looks to me like the uptrend in PWI should be coming to an end pretty soon…perhaps NOW. If that’s true, we could see this issue slip back to the August low at 18.425 pretty easily with further weakness down to near 17.00 a possibility. Given the daily uptrend that is all I can call for at this point. If you are long this stock, I would look to take profits right now anticipating an opportunity to reset near the end of this month at lower numbers. How much lower is not yet clear. One final thing…I have included the chart of the Canadian dollar. Look familiar. It should. It looks just like PWI. Much of the sell-off and following rally in this issue is due to the fluctuation in the exchange rate. If you are trading this issue, you really need to have a point of view on currencies as well. Otherwise, you can have great fundamentals in the stock completely overwhelmed by a currency move that goes against you. Just something to think about. God’s richest blessings to you all, TFG p.s. PGH and PTF are variations on this same theme. BPT, however, looks completely different. It looks just like a crude oil chart, bottoming in 1999 and peaking just a few weeks ago with a corrective dip since then. If you think WTI is going higher, own this. If not, then sell it. It's that simple...I think.
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Post by TradingForGod on Sept 13, 2004 19:55:50 GMT -5
I got replies back from Grambo and MinaMultiplier asking that we look at some Canadian royalty oil and gas trusts. There are several out there, but I am going to focus on Primewest Energy (PWI). The chart below shows PWI’s trading activity so far this year. You can see that it bottomed out in early May and has rallied well since then. The rally has a very characteristic “wave pattern” to it. While there are many possible interpretations of the wave pattern, I think the most likely one is as follows: The initial rally from the spike low at 15.35 to 17.825 (2.475) completed “Wave 1”. This wave is probably bigger than it really should be because it looks to me like the sell off on May 10th overshot the market by about 65 cents. The correction back down to 16.70 (1.125) completed “Wave 2” and corrected 45% of the initial rally. This is not a Fibonacci ratio, but they aren’t always perfect. From early June through mid-August, PWI rallied in five clear waves (3 up and 2 down). I think this entire rally was actually “Wave 3” of the large advance and it sub-divided into smaller “wavelets”. Remember from our discussion of Elliott Wave that wave patterns can be imbedded within wave patterns…they have fractal characteristics. The sell off into the end of August was “Wave 4” and we are now working a “Wave 5”. The target of this wave is somewhere between 20.25 and 21.50 depending on whether the rally extends or not. That’s a long drawn out explanation to say that the rally is just about over…I think. There is a decided cyclical pattern to the advance as well. It was not as apparent during the sell off, but on the way back up there are relative lows around the 29th of each month. The pattern is VERY strong. So we should be nearing the mid-cycle high over the next few days here. This is another reason to think prices may be topping out. In addition, the stochastics are extremely overbought and prices are up against the daily Bollinger band. That is not a big issue because of the relatively strong daily uptrend. HOWEVER, PWI is also at the WEEKLY BB and there is no trend on the weekly chart. I think this is potentially a very powerful sell signal. Putting it all together, it looks to me like the uptrend in PWI should be coming to an end pretty soon…perhaps NOW. If that’s true, we could see this issue slip back to the August low at 18.425 pretty easily with further weakness down to near 17.00 a possibility. Given the daily uptrend that is all I can call for at this point. If you are long this stock, I would look to take profits right now anticipating an opportunity to reset near the end of this month at lower numbers. How much lower is not yet clear. One final thing…I have included the chart of the Canadian dollar. Look familiar. It should. It looks just like PWI. Much of the sell-off and following rally in this issue is due to the fluctuation in the exchange rate. If you are trading this issue, you really need to have a point of view on currencies as well. Otherwise, you can have great fundamentals in the stock completely overwhelmed by a currency move that goes against you. Just something to think about. God’s richest blessings to you all, TFG p.s. PGH and PTF are variations on this same theme. BPT, however, looks completely different. It looks just like a crude oil chart, bottoming in 1999 and peaking just a few weeks ago with a corrective dip since then. If you think WTI is going higher, own this. If not, then sell it. It's that simple...I think.
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Post by TradingForGod on Sept 11, 2004 18:27:00 GMT -5
From last time: “…This stock could slip below {trendline support at 20 cents} for a minor dip back toward the break-out point at 16. I am not saying that will happen, but if it does I think that will be a great buying opportunity…maybe the last one for a while…”It took exactly two days for this to happen. AZMN broke below trendline support on 9/7 and on 9/8 it fell all the way back to 15.5, right at the break-out of the long consolidation. As expected, this retest of very key support held. It was challenged each of the last three sessions and was VERY well bid. The look at the litany of technical reasons 15.5 is important: 1) Range break-out retest (red line on chart below) 2) 20-day moving average 3) 62% (Fibonacci) retracement of rally from 11.5 to 22 cents 4) 50% retracement of entire rally from 9 cents That’s a LOT of support. The volume on the initial down move was quite heavy, probably because of some weak length getting out on the minor reversal, but volume at the lows was pretty meager. This is a sign that there aren’t really a lot of willing sellers out there right now. I thought I would take a look at the AZMN chart for a review of our Elliott Wave and Fibonacci analysis basics. I have highlighted the swings from the low at 9 cents in purple. The first leg of the rally went from 9 to 15.25, or 6.25 cents. The pull back from there went to 11.5, or 3.75 cents. That made the pull back 60% of the original rally, VERY near the Fibonacci retracement objective of 62%. It couldn’t be exactly 62% because the stock doesn’t trade in increments that small. The next rally went to 22 cents for a total run of 10.5 cents. 10.5/6.26 = 1.68. So the second rally “extended” almost perfectly to 1.618 of the initial rally. Pretty cool, huh? As I said earlier, the sell off to 15.5 was both EXACTLY a 50% retracement of the whole rally AND EXACTLY a 62% retracement of the rally from 11.5 to 22 cents. You just can’t get a more technically perfect performance than we have had so far. So what happens next? My guess is that the sell off is very likely over. That’s not a sure thing because the stochastics are not yet close to oversold, but I am heavily influenced by the fact that 15.5 was such an important number. A move back over 20 cents now probably seals the deal for the sell-off. Assuming that happens, the SHORT-TERM targets for the upside depend a lot on what the Elliott Wave count is so far. Remember I said that there are always at least two ways to evaluate a wave count. Because we are so early in the upside move there are actually several possible counts right now. The most likely one is as follows: The rally to 22 cents completed a three-wave initial rally and the pull back to 15.5 corrected that rally. If this is the right count we should now see a 5-wave advance that at least equals the first rally, and probably extends. The “normal” target is 28.5 cents (15.5 + {22-9}). This is pretty close to the 30 cent target we’ve talked about already. If the rally extends to 1.618 of the initial rally, the target is (drum roll please) 36.5. Yep, that’s right. That’s close to the OTHER target we’ve highlighted at 37 cents. There are several other possible upside scenarios still in play, and only time and price action will tell which of them is actually right. I’ll know I am wrong about all of this if we get a settlement back below 15.5. If that happens, it doesn’t mean that AZMN is bearish, but it will mean that it has a bit more work to do before mounting a serious rally. I REALLY don’t expect to see that though. FWIW, I added another 20% to my initial position on this dip. I didn’t do as well as I would have liked on my fill level because, truthfully, I really didn’t expect to see key support hit so quickly. Oh well. Good idea, bad timing. If the fundamentals of Azco are as good as CT and Savant suggest, it isn’t going to matter much whether I bought the bottom of the dip or not. I still haven’t gotten any suggestions for stocks to look at in future reports. CMKX is really tough to do because there hasn’t been a lot of wiggle in the 18 months save the blip back in June. But I’ll try to work up an analysis on other stocks you are interested in. Just let me know. God bless, TFG
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Post by TradingForGod on Sept 11, 2004 18:27:00 GMT -5
From last time: “…This stock could slip below {trendline support at 20 cents} for a minor dip back toward the break-out point at 16. I am not saying that will happen, but if it does I think that will be a great buying opportunity…maybe the last one for a while…”It took exactly two days for this to happen. AZMN broke below trendline support on 9/7 and on 9/8 it fell all the way back to 15.5, right at the break-out of the long consolidation. As expected, this retest of very key support held. It was challenged each of the last three sessions and was VERY well bid. The look at the litany of technical reasons 15.5 is important: 1) Range break-out retest (red line on chart below) 2) 20-day moving average 3) 62% (Fibonacci) retracement of rally from 11.5 to 22 cents 4) 50% retracement of entire rally from 9 cents That’s a LOT of support. The volume on the initial down move was quite heavy, probably because of some weak length getting out on the minor reversal, but volume at the lows was pretty meager. This is a sign that there aren’t really a lot of willing sellers out there right now. I thought I would take a look at the AZMN chart for a review of our Elliott Wave and Fibonacci analysis basics. I have highlighted the swings from the low at 9 cents in purple. The first leg of the rally went from 9 to 15.25, or 6.25 cents. The pull back from there went to 11.5, or 3.75 cents. That made the pull back 60% of the original rally, VERY near the Fibonacci retracement objective of 62%. It couldn’t be exactly 62% because the stock doesn’t trade in increments that small. The next rally went to 22 cents for a total run of 10.5 cents. 10.5/6.26 = 1.68. So the second rally “extended” almost perfectly to 1.618 of the initial rally. Pretty cool, huh? As I said earlier, the sell off to 15.5 was both EXACTLY a 50% retracement of the whole rally AND EXACTLY a 62% retracement of the rally from 11.5 to 22 cents. You just can’t get a more technically perfect performance than we have had so far. So what happens next? My guess is that the sell off is very likely over. That’s not a sure thing because the stochastics are not yet close to oversold, but I am heavily influenced by the fact that 15.5 was such an important number. A move back over 20 cents now probably seals the deal for the sell-off. Assuming that happens, the SHORT-TERM targets for the upside depend a lot on what the Elliott Wave count is so far. Remember I said that there are always at least two ways to evaluate a wave count. Because we are so early in the upside move there are actually several possible counts right now. The most likely one is as follows: The rally to 22 cents completed a three-wave initial rally and the pull back to 15.5 corrected that rally. If this is the right count we should now see a 5-wave advance that at least equals the first rally, and probably extends. The “normal” target is 28.5 cents (15.5 + {22-9}). This is pretty close to the 30 cent target we’ve talked about already. If the rally extends to 1.618 of the initial rally, the target is (drum roll please) 36.5. Yep, that’s right. That’s close to the OTHER target we’ve highlighted at 37 cents. There are several other possible upside scenarios still in play, and only time and price action will tell which of them is actually right. I’ll know I am wrong about all of this if we get a settlement back below 15.5. If that happens, it doesn’t mean that AZMN is bearish, but it will mean that it has a bit more work to do before mounting a serious rally. I REALLY don’t expect to see that though. FWIW, I added another 20% to my initial position on this dip. I didn’t do as well as I would have liked on my fill level because, truthfully, I really didn’t expect to see key support hit so quickly. Oh well. Good idea, bad timing. If the fundamentals of Azco are as good as CT and Savant suggest, it isn’t going to matter much whether I bought the bottom of the dip or not. I still haven’t gotten any suggestions for stocks to look at in future reports. CMKX is really tough to do because there hasn’t been a lot of wiggle in the 18 months save the blip back in June. But I’ll try to work up an analysis on other stocks you are interested in. Just let me know. God bless, TFG
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Post by TradingForGod on Sept 8, 2004 9:52:05 GMT -5
In our previous discussions about the Nasdaq I mentioned that the S&P and Dow were more bullish looking than the tech-heavy index. Given that, I wanted to take a look at the S&P 500 today so that you can see the differences. The chart below shows the characteristic down channel we have seen before in the Nasdaq, but the channel is not as steep and the bounce has brought the S&P much closer to the top end. As a matter of fact, the Dow is RIGHT AT its down channel resistance line already. It’s already at a very key decision point. The daily moving averages are in a bullish configuration with the 7-day MA above the 20-day which just crossed above the 40-day MA two sessions ago. This is the first time the MAs have been set up this way since late June. Daily momentum is strong right now too, with only a hint of the dreaded “momentum divergence” that might suggest a top. In addition, the ADX trend indicator is turning higher and is now at a reading of 23, indicating a trend (an UP trend) is strengthening. About the only real concern I have with the chart right now is the stochastics which are very overbought and suggest the need for some kind of pull-back. All in all, this chart suggests continued upside potential to at least the trendline at 1135ish. HOWEVER, 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. Likewise, if the Dow breaks out, it suggests that the S&P should eventually break its channel as well. I don’t really like the Dow as an indicator since it is so narrowly focused (30 stocks), but a lot of people watch it so we need to as well. That means that the equity market is at a really important juncture 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. God bless! TFG
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Post by TradingForGod on Sept 8, 2004 9:52:05 GMT -5
In our previous discussions about the Nasdaq I mentioned that the S&P and Dow were more bullish looking than the tech-heavy index. Given that, I wanted to take a look at the S&P 500 today so that you can see the differences. The chart below shows the characteristic down channel we have seen before in the Nasdaq, but the channel is not as steep and the bounce has brought the S&P much closer to the top end. As a matter of fact, the Dow is RIGHT AT its down channel resistance line already. It’s already at a very key decision point. The daily moving averages are in a bullish configuration with the 7-day MA above the 20-day which just crossed above the 40-day MA two sessions ago. This is the first time the MAs have been set up this way since late June. Daily momentum is strong right now too, with only a hint of the dreaded “momentum divergence” that might suggest a top. In addition, the ADX trend indicator is turning higher and is now at a reading of 23, indicating a trend (an UP trend) is strengthening. About the only real concern I have with the chart right now is the stochastics which are very overbought and suggest the need for some kind of pull-back. All in all, this chart suggests continued upside potential to at least the trendline at 1135ish. HOWEVER, 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. Likewise, if the Dow breaks out, it suggests that the S&P should eventually break its channel as well. I don’t really like the Dow as an indicator since it is so narrowly focused (30 stocks), but a lot of people watch it so we need to as well. That means that the equity market is at a really important juncture 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. God bless! TFG
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Post by TradingForGod on Sept 6, 2004 18:15:28 GMT -5
I’ve been watching AZMN over the last few days since the big break higher on 8/27. Azco had several days of low-volume consolidation right around the 18 cent level. Over that time it was clear that someone (a market maker?) was trying to hold down the settlements with low priced sales in the last few minutes. But on Thursday, AZMN blasted sharply higher, peaking at 22. Volume got very heavy again with almost 500K shares trading. When you look at the short term (hourly) chart below you can clearly see the uptrend that AZMN has been in since it touched 11.5 cents less than two weeks ago. Wow, what a buy that was! The trendline is now at just about 20 cent. This stock could slip below there for a minor dip back toward the break-out point at 16. I am not saying that will happen, but if it does I think that will be a great buying opportunity…maybe the last one for a while. If trend support holds, a break of 22 now should be sufficient to get AZMN up to the short-term target range between 30-37 cents. That’s when things get very interesting. Because there has been no price action in that area for two years it is possible, if not likely, that if 37 is bested prices will rally very quickly to major downtrend resistance at about 75 cent. It only took two month for Azco to fall from a buck to 30 cents. I don’t know why it would take longer for it to rally if thinks really get cooking. I know that we all want AZMN to go to the moon immediately, but I actually would not mind a brief pull-back to 16ish. Holding there would confirm the break-out, build a good base from which to rally further, and give us one last buying opportunity at better value. We’ll see what this week holds. Quote of the day: In this game the market has to keep pitching, but you don’t have to swing. You can stand there with the bat on your shoulder for six months until you get a fat pitch. Warren Buffett (Hopefully AZMN is a pitch to take a bit cut at!) Thought for the day: A bird was getting ready to fly south for the winter but waited to long to leave. A major storm snow storm came through and stranded the bird on the ground. Cold and without the ability to fly away, the bird began to freeze to death. A cow walked by and accidentally dumped a steaming pile of manure on the bird lying on the ground. At first the bird was repulsed at the indignity and the smell, but it soon realized that the manure was warming it up. The bird was overjoyed. It was saved! It was so happy that it began to sing. It’s beautiful song attracted a stray cat that was walking around in the field. The cat walked over to the manure pile, saw the bird singing in the middle of it, and gently lifted the bird out of the smelly mess. The bird could not believe its luck…right up to the point when that cat ate the bird in one quick gulp. The moral to the story: Sometimes life seems like a big stinking pile of manure. When that happens remember that it’s not always a bad thing. It’s frequently best to keep your mouth shut, because not everyone that offers to help you out of the mess is your friend. Blessings to you all, TFG A final thought: I read with sadness CT’s “good-bye” post. I have not even met DeWayne yet. We live almost 2000 miles from each other. But in the short time I have been exposed to him and the Christian Traders community, I have grown attached to you all. I don’t know what all the reasons are for CT’s decision to pull back a bit, but I know in my heart that he is doing exactly what God wants him to do. Please join me in praying for God’s wisdom, guidance, and strength as he pursues his MANY paths of ministry.
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Post by TradingForGod on Sept 6, 2004 18:15:28 GMT -5
I’ve been watching AZMN over the last few days since the big break higher on 8/27. Azco had several days of low-volume consolidation right around the 18 cent level. Over that time it was clear that someone (a market maker?) was trying to hold down the settlements with low priced sales in the last few minutes. But on Thursday, AZMN blasted sharply higher, peaking at 22. Volume got very heavy again with almost 500K shares trading. When you look at the short term (hourly) chart below you can clearly see the uptrend that AZMN has been in since it touched 11.5 cents less than two weeks ago. Wow, what a buy that was! The trendline is now at just about 20 cent. This stock could slip below there for a minor dip back toward the break-out point at 16. I am not saying that will happen, but if it does I think that will be a great buying opportunity…maybe the last one for a while. If trend support holds, a break of 22 now should be sufficient to get AZMN up to the short-term target range between 30-37 cents. That’s when things get very interesting. Because there has been no price action in that area for two years it is possible, if not likely, that if 37 is bested prices will rally very quickly to major downtrend resistance at about 75 cent. It only took two month for Azco to fall from a buck to 30 cents. I don’t know why it would take longer for it to rally if thinks really get cooking. I know that we all want AZMN to go to the moon immediately, but I actually would not mind a brief pull-back to 16ish. Holding there would confirm the break-out, build a good base from which to rally further, and give us one last buying opportunity at better value. We’ll see what this week holds. Quote of the day: In this game the market has to keep pitching, but you don’t have to swing. You can stand there with the bat on your shoulder for six months until you get a fat pitch. Warren Buffett (Hopefully AZMN is a pitch to take a bit cut at!) Thought for the day: A bird was getting ready to fly south for the winter but waited to long to leave. A major storm snow storm came through and stranded the bird on the ground. Cold and without the ability to fly away, the bird began to freeze to death. A cow walked by and accidentally dumped a steaming pile of manure on the bird lying on the ground. At first the bird was repulsed at the indignity and the smell, but it soon realized that the manure was warming it up. The bird was overjoyed. It was saved! It was so happy that it began to sing. It’s beautiful song attracted a stray cat that was walking around in the field. The cat walked over to the manure pile, saw the bird singing in the middle of it, and gently lifted the bird out of the smelly mess. The bird could not believe its luck…right up to the point when that cat ate the bird in one quick gulp. The moral to the story: Sometimes life seems like a big stinking pile of manure. When that happens remember that it’s not always a bad thing. It’s frequently best to keep your mouth shut, because not everyone that offers to help you out of the mess is your friend. Blessings to you all, TFG A final thought: I read with sadness CT’s “good-bye” post. I have not even met DeWayne yet. We live almost 2000 miles from each other. But in the short time I have been exposed to him and the Christian Traders community, I have grown attached to you all. I don’t know what all the reasons are for CT’s decision to pull back a bit, but I know in my heart that he is doing exactly what God wants him to do. Please join me in praying for God’s wisdom, guidance, and strength as he pursues his MANY paths of ministry.
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Post by TradingForGod on Sept 2, 2004 9:14:00 GMT -5
The Nasdaq was unable to break above the 40-day MA on the last rally and backed off a bit Monday and early Tuesday. The 30-minute chart (meaning that each bar represents 30 minutes of trading action) below shows that the correction lower was a nice, even a-b-c patterm where the "a" wave early Monday and the "c" wave early Tuesday were about equal in length. See "The Basics" series for more discussion about Elliott Wave patterns. The sell-off went right to the 38% (Fibonacci) retracement of the recent rally. The low was 1820 while the retracement target was 1822. That's pretty close! From there, equities pushed sharply higher and the Nasdaq is once again banging its head into the declining 40-day MA, now at 1853. Yesterday's close at 1850 was very close. Just about any additional strength today should be enough to push the Nasdaq back to last week's high at 1866. Breaking above there opens the way for another rally that should be about the same length as the rally we just had. That puts the target just under 1935 which is right at the 62% retracement of the sell off that began on July 1st. That's as high as this rally should go IF it is corrective. A move above there is bullish. Okay that's the upside. What about the downside. Well, obviously the 40-day MA has been working as decent resistance here. In addition, as pointed out last time 1867 is also the 38% retracement of the July sell-off. So practically speaking, the Nasdaq has not broken any significant resistance on this rally yet. The S&P and Dow are in better shape, but even they are not really in the "bull camp" yet. If prices stall out right here and begin to fall back, it is critical that the Nasdaq stay above 1795 now. If this support, the 62% retracement of the recent rally, fails it probably means that this rally WAS corrective and that it is OVER. Watch out for that. FUN FACT OF THE DAY(from the Stock Traders AlmanacIn presidential election years, the direction of the equity market between the national party conventions and the election is an excellent indicator of which party will win. Since 1900, the incumbent party has won 16 presidential elections. In 14 of those contests the stock market was up an average of almost 9% between the conventions and election day. Only two incumbents won when the stock market was down, Dwight Eisenhower in 1956 and Ronald Reagan in 1984. On the other hand, the incumbent party has lost the election 10 times since 1900, and in seven of those elections the stock market was down heading into election day. One of the up years doesn't really count, because that was 1932 when the Great Depression was in full force, and FDR was going to win no matter what. So watch the equity markets over the next two months, and you'll have a great idea who is going to win in November. THOUGHT FOR THE DAY (from Luke 24:13-27):Now that same day two of them were going to a village called Emmaus, about seven miles from Jerusalem. They were talking with each other about everything that had happened. As they talked and discussed these things with each other, Jesus himself came up and walked along with them; but they were kept from recognizing him. He asked them, "What are you discussing together as you walk along?" They stood still, their faces downcast. One of them, named Cleopas, asked him, "Are you only a visitor to Jerusalem and do not know the things that have happened there in these days?" "What things?" he asked. "About Jesus of Nazareth," they replied. "He was a prophet, powerful in word and deed before God and all the people. The chief priests and our rulers handed him over to be sentenced to death, and they crucified him; but we had hoped that he was the one who was going to redeem Israel. And what is more, it is the third day since all this took place. In addition, some of our women amazed us. They went to the tomb early this morning but didn't find his body. They came and told us that they had seen a vision of angels, who said he was alive. Then some of our companions went to the tomb and found it just as the women had said, but him they did not see." He said to them, "How foolish you are, and how slow of heart to believe all that the prophets have spoken! Did not the Christ have to suffer these things and then enter his glory?" And beginning with Moses and all the Prophets, he explained to them what was said in all the Scriptures concerning himself. (NIV)These two followers of Jesus were headed to Emmaus after Jesus' crucifixion. They were disllusioned. The text says their faces were downcast. Why? Because they had LOST HOPE. They had "hope that he (Jesus) was the one who was going to redeem Israel", but he had been killed before their eyes. Their master was dead. The movement was crushed. There was...no hope. But there was Jesus. Right there with them. Right beside them. They didn't recognize him. Why? Because they had lost hope. They were "slow of heart to believe all that the prophets had spoken." But that didn't mean that Jesus wasn't there. They just couldn't SEE him there. Sometimes life deals us a tough blow. Who among us HASN'T had a tough blow. In my case, I have had to come to grips with the fact that my idea of "Trading for God" is not going to work out, at least not the way I had envisioned it. I tried for a long time. I prayed and prayed. Why Lord? Why have you called me out to this "ministry" only to have it collapse around my head? Why Lord did you ask for a leap of faith only to let me fall to the canyon floor below. WHERE ARE YOU GOD? These are the difficult questions that I have wrestled with over the past year. I'm sure each of you have your own. In the midst of this trial, I must confess, I LOST HOPE. And as a result, I lost sight of God. I knew he was there. I just couldn't see him. And because I couldn't see him, I got scared. I was like Peter when he looked at the waves around him and began to sink into the water. If he, if I, had only kept looking at Jesus. But praise His name, he was walking with me the entire time and my eyes have once again been opened. I still don't understand what his plan is. I still don't know why things have happened the way they have. But I do know this...Jesus is on the road with me. He is faithful, even in the midst of our trials. He does have a plan, even if we are "slow of heart" to believe it. He is walking with each of us every day. My prayer for each of us is that God will richly bless us in a way that is real and tangible to us. But MORE THAN THAT, my prayer is that we will continue to have faith, continue to hope, even when things don't go our way. Jesus is there on the road with us then too. God's Blessings, TFG
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Post by TradingForGod on Sept 2, 2004 9:14:00 GMT -5
The Nasdaq was unable to break above the 40-day MA on the last rally and backed off a bit Monday and early Tuesday. The 30-minute chart (meaning that each bar represents 30 minutes of trading action) below shows that the correction lower was a nice, even a-b-c patterm where the "a" wave early Monday and the "c" wave early Tuesday were about equal in length. See "The Basics" series for more discussion about Elliott Wave patterns. The sell-off went right to the 38% (Fibonacci) retracement of the recent rally. The low was 1820 while the retracement target was 1822. That's pretty close! From there, equities pushed sharply higher and the Nasdaq is once again banging its head into the declining 40-day MA, now at 1853. Yesterday's close at 1850 was very close. Just about any additional strength today should be enough to push the Nasdaq back to last week's high at 1866. Breaking above there opens the way for another rally that should be about the same length as the rally we just had. That puts the target just under 1935 which is right at the 62% retracement of the sell off that began on July 1st. That's as high as this rally should go IF it is corrective. A move above there is bullish. Okay that's the upside. What about the downside. Well, obviously the 40-day MA has been working as decent resistance here. In addition, as pointed out last time 1867 is also the 38% retracement of the July sell-off. So practically speaking, the Nasdaq has not broken any significant resistance on this rally yet. The S&P and Dow are in better shape, but even they are not really in the "bull camp" yet. If prices stall out right here and begin to fall back, it is critical that the Nasdaq stay above 1795 now. If this support, the 62% retracement of the recent rally, fails it probably means that this rally WAS corrective and that it is OVER. Watch out for that. FUN FACT OF THE DAY(from the Stock Traders AlmanacIn presidential election years, the direction of the equity market between the national party conventions and the election is an excellent indicator of which party will win. Since 1900, the incumbent party has won 16 presidential elections. In 14 of those contests the stock market was up an average of almost 9% between the conventions and election day. Only two incumbents won when the stock market was down, Dwight Eisenhower in 1956 and Ronald Reagan in 1984. On the other hand, the incumbent party has lost the election 10 times since 1900, and in seven of those elections the stock market was down heading into election day. One of the up years doesn't really count, because that was 1932 when the Great Depression was in full force, and FDR was going to win no matter what. So watch the equity markets over the next two months, and you'll have a great idea who is going to win in November. THOUGHT FOR THE DAY (from Luke 24:13-27):Now that same day two of them were going to a village called Emmaus, about seven miles from Jerusalem. They were talking with each other about everything that had happened. As they talked and discussed these things with each other, Jesus himself came up and walked along with them; but they were kept from recognizing him. He asked them, "What are you discussing together as you walk along?" They stood still, their faces downcast. One of them, named Cleopas, asked him, "Are you only a visitor to Jerusalem and do not know the things that have happened there in these days?" "What things?" he asked. "About Jesus of Nazareth," they replied. "He was a prophet, powerful in word and deed before God and all the people. The chief priests and our rulers handed him over to be sentenced to death, and they crucified him; but we had hoped that he was the one who was going to redeem Israel. And what is more, it is the third day since all this took place. In addition, some of our women amazed us. They went to the tomb early this morning but didn't find his body. They came and told us that they had seen a vision of angels, who said he was alive. Then some of our companions went to the tomb and found it just as the women had said, but him they did not see." He said to them, "How foolish you are, and how slow of heart to believe all that the prophets have spoken! Did not the Christ have to suffer these things and then enter his glory?" And beginning with Moses and all the Prophets, he explained to them what was said in all the Scriptures concerning himself. (NIV)These two followers of Jesus were headed to Emmaus after Jesus' crucifixion. They were disllusioned. The text says their faces were downcast. Why? Because they had LOST HOPE. They had "hope that he (Jesus) was the one who was going to redeem Israel", but he had been killed before their eyes. Their master was dead. The movement was crushed. There was...no hope. But there was Jesus. Right there with them. Right beside them. They didn't recognize him. Why? Because they had lost hope. They were "slow of heart to believe all that the prophets had spoken." But that didn't mean that Jesus wasn't there. They just couldn't SEE him there. Sometimes life deals us a tough blow. Who among us HASN'T had a tough blow. In my case, I have had to come to grips with the fact that my idea of "Trading for God" is not going to work out, at least not the way I had envisioned it. I tried for a long time. I prayed and prayed. Why Lord? Why have you called me out to this "ministry" only to have it collapse around my head? Why Lord did you ask for a leap of faith only to let me fall to the canyon floor below. WHERE ARE YOU GOD? These are the difficult questions that I have wrestled with over the past year. I'm sure each of you have your own. In the midst of this trial, I must confess, I LOST HOPE. And as a result, I lost sight of God. I knew he was there. I just couldn't see him. And because I couldn't see him, I got scared. I was like Peter when he looked at the waves around him and began to sink into the water. If he, if I, had only kept looking at Jesus. But praise His name, he was walking with me the entire time and my eyes have once again been opened. I still don't understand what his plan is. I still don't know why things have happened the way they have. But I do know this...Jesus is on the road with me. He is faithful, even in the midst of our trials. He does have a plan, even if we are "slow of heart" to believe it. He is walking with each of us every day. My prayer for each of us is that God will richly bless us in a way that is real and tangible to us. But MORE THAN THAT, my prayer is that we will continue to have faith, continue to hope, even when things don't go our way. Jesus is there on the road with us then too. God's Blessings, TFG
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Post by TradingForGod on Aug 30, 2004 17:18:01 GMT -5
The last time we talked about crude, I listed the myriad reasons why WTI should be nearing a significant top. It had achieved all the price targets, there was a “blow off top” character of the rally, speculative open interest was going down, there was a big momentum divergences, etc., etc. If I had stopped right there, I would be looking pretty smart. BUT, at the end I threw in this little gem: “But frankly, unless there is some “event” like peace breaking out in the Middle East, I think we are at least a week away from any kind of major reversal.” It turned out that we were about 10 minutes away from a major market reversal. Crude prices opened lower last Monday and have not looked back since. As of today, oil prices are over $6 off the highs just seven sessions ago. Clearly the market has reversed in a VERY convincing fashion. What happened? And just as importantly, how did oil reverse so dramatically without an “event”. I was using as my model for the price activity lately the run up in prices ahead of the Iraq War last year. The first chart below is of April’03 crude oil. You can see that, just like now, prices had rallied $11 in a little less than two month. Prices shot higher in a “crescendo of buying” into the high only to fall back almost immediately. But look at what happened next. Prices chopped around just above the 20-day MA (yellow line) for a little over a week before finally breaking lower. Once the 20-day MA broke, prices immediately fell back to the 40-day day MA (blue line) which held for a couple of more days before prices collapsed all together. Crude oil fell a little over $9 is six sessions. That’s sort of what I expected to happen this time…a somewhat gradual erosion of the technical picture followed by a sharp collapse in prices. I got it all right, except for the part about the gradual erosion of the technical picture. The chart below shows the October (front-month) crude contract right as of today. You can see that the rally looks pretty similar to the one last year. But the sell off does not! Prices went from straight up to straight down all in one fell swoop. Note by the way the huge shaded bar the day the high was made. In candlestick chart lingo this formation is called a “bearish engulfing pattern”. That’s when price open at a new high and close below the previous day’s low. As the name implies, the formation is…well…bearish. Crude broke the 7-day MA the day after the high was made, the 20-day MA two sessions later, and the 40-day MA just three sessions after that. This type of price collapse in the face of very positive MA structure is very, very unusual. It usually only happens when some big event occurs. Last year, it was the successful war effort and securing of the Iraqi oil fields with little damage. But this year, there was no such event. Prices just collapsed under their own weight. Actually, there is a lot of oil floating around in the world. OPEC countries are producing like crazy right now. People just couldn’t seem to “find” all of it on the ships moving around in the ocean. Well, apparently all that “lost oil” has been found because my friends in the oil business tell me the market fundamentals look very weak at the moment. But then again the fundamentals were weak as WTI rallied from $44 to $49 in a little over a week earlier this month. Ah, the joys of trading. So where do we go from here? Believe it or not, crude oil has already corrected over 50% of the rally since early July. The 62% (Fibonacci) retracement is at 40.50. Below there is the long-term uptrend support at 38.50. Either of those targets would be decent objectives. Under normal circumstances you would expect some sort of rally, or at least consolidation, after the steep decline we have just seen. If prices rally back to the 20-day MA at 44.70 in the next few days I think that would be a great selling opportunity. However, the market is not behaving normally right now, and we might not see that kind of rally. The speculative funds have been steadily exiting their length over the last week, but they are still at least partially long right now. I doubt crude will quit falling until they quit selling. Blessings to you all, TFG p.s If any of you have a favorite stock or commodity that you would like to see analyzed here, please let me know.
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Post by TradingForGod on Aug 30, 2004 17:18:01 GMT -5
The last time we talked about crude, I listed the myriad reasons why WTI should be nearing a significant top. It had achieved all the price targets, there was a “blow off top” character of the rally, speculative open interest was going down, there was a big momentum divergences, etc., etc. If I had stopped right there, I would be looking pretty smart. BUT, at the end I threw in this little gem: “But frankly, unless there is some “event” like peace breaking out in the Middle East, I think we are at least a week away from any kind of major reversal.” It turned out that we were about 10 minutes away from a major market reversal. Crude prices opened lower last Monday and have not looked back since. As of today, oil prices are over $6 off the highs just seven sessions ago. Clearly the market has reversed in a VERY convincing fashion. What happened? And just as importantly, how did oil reverse so dramatically without an “event”. I was using as my model for the price activity lately the run up in prices ahead of the Iraq War last year. The first chart below is of April’03 crude oil. You can see that, just like now, prices had rallied $11 in a little less than two month. Prices shot higher in a “crescendo of buying” into the high only to fall back almost immediately. But look at what happened next. Prices chopped around just above the 20-day MA (yellow line) for a little over a week before finally breaking lower. Once the 20-day MA broke, prices immediately fell back to the 40-day day MA (blue line) which held for a couple of more days before prices collapsed all together. Crude oil fell a little over $9 is six sessions. That’s sort of what I expected to happen this time…a somewhat gradual erosion of the technical picture followed by a sharp collapse in prices. I got it all right, except for the part about the gradual erosion of the technical picture. The chart below shows the October (front-month) crude contract right as of today. You can see that the rally looks pretty similar to the one last year. But the sell off does not! Prices went from straight up to straight down all in one fell swoop. Note by the way the huge shaded bar the day the high was made. In candlestick chart lingo this formation is called a “bearish engulfing pattern”. That’s when price open at a new high and close below the previous day’s low. As the name implies, the formation is…well…bearish. Crude broke the 7-day MA the day after the high was made, the 20-day MA two sessions later, and the 40-day MA just three sessions after that. This type of price collapse in the face of very positive MA structure is very, very unusual. It usually only happens when some big event occurs. Last year, it was the successful war effort and securing of the Iraqi oil fields with little damage. But this year, there was no such event. Prices just collapsed under their own weight. Actually, there is a lot of oil floating around in the world. OPEC countries are producing like crazy right now. People just couldn’t seem to “find” all of it on the ships moving around in the ocean. Well, apparently all that “lost oil” has been found because my friends in the oil business tell me the market fundamentals look very weak at the moment. But then again the fundamentals were weak as WTI rallied from $44 to $49 in a little over a week earlier this month. Ah, the joys of trading. So where do we go from here? Believe it or not, crude oil has already corrected over 50% of the rally since early July. The 62% (Fibonacci) retracement is at 40.50. Below there is the long-term uptrend support at 38.50. Either of those targets would be decent objectives. Under normal circumstances you would expect some sort of rally, or at least consolidation, after the steep decline we have just seen. If prices rally back to the 20-day MA at 44.70 in the next few days I think that would be a great selling opportunity. However, the market is not behaving normally right now, and we might not see that kind of rally. The speculative funds have been steadily exiting their length over the last week, but they are still at least partially long right now. I doubt crude will quit falling until they quit selling. Blessings to you all, TFG p.s If any of you have a favorite stock or commodity that you would like to see analyzed here, please let me know.
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