Bullish Engulfing Patterns Today

DJIA + 152.25, +1.36% SP500 + 21.39, +1.71% NASDAQ Comp. + 51.12, +2.28% Russell 2000 + 24.46, +3.72% Oil closed at $136.04 down $5.33 We have stated in our audio commentary over the past few weeks that a significant drop in oil could translate into strong positive move in stocks. Well for two days we have seen a $9 plus drop in oil prices which seemed to fuel a rally in stocks this afternoon. Technically speaking, oil is in a bull flag pattern. This pull back is reportedly due to profit taking and continuing indications that gasoline demand is falling because of higher prices. You can see the same pattern in ETF USO that trades oil futures. ETF’s OIH and XLE which trades oil stocks have been more dramatic in their pullbacks. Financial stocks including XLF, GS, MER, LEH, MS, AIG, AXP, C and JPM had strong support bounces today. Many formed a bullish engulfing pattern, an outside day or a higher low and higher high today.

Alcoa, AA, reported earnings after the close and rallied in the after-market rising $1.12, kicking off the beginning of earnings season. Remember earnings begin in earnest next week. The DJIA and SPX had been moving sideways over the past five trading days and today the bounce finally happened. Candles that started as inside day spinning tops turned to strong white candles by the end of the day. Today’s large white candles were the largest white candles in each of these indices in the past few weeks…so pay attention to the price action over the next several trading sessions. This one day by itself is not a trend reversal but could turn out to be the first step. At this moment these support bounces are counter trend moves. We have shifted our Short Term Trend status to Neutral. The DJIA formed a bullish engulfing pattern but is still trading below its resistance of 11,437 on June 30. The 11,400 to 11,500 is a key short-term resistance. Also the R1 level, 11,625 area, of the June 26 large black candle is a key short-term resistance area. The SPX also formed a bullish engulfing pattern and is still trading below the short-term resistance area of 1,280 to 1,290. Also watch the 1,300 resistance area which is the R1 level of the large black candle on June 26. The Nasdaq also formed a bullish engulfing pattern. Key resistance area is 2,325. The Nasdaq 100, NDX, also rallied with a bullish engulfing pattern. There was a lack of similar strength in the SOX which was only up 0.89% forming a hammer and inside day. The RUT formed a very large bullish engulfing breaking above the high of the low day which was yesterday after hitting the 650 support area. Also, remember that the mid-section of today’s large white candles are S1 short-term support areas to be mindful when pull backs begin to occur.

Stock Chart Pattern Commentary

MA hit its 50% Fibonacci retracement from its January low and its May – June head and shoulders neckline break at 285 with a price target of 240 and bounced with a large outside day. New price target 300. Dave’s C – Entry: BIDU, AAPL BIDU broke through 333.07 resistance of double bottom with a price target of 362. AAPL broke out of 178 new price target 192. FSLR potential C – Entry at 264 also is bouncing from potential double bottom. POT fell below and then bounced above its 50 DMA today and formed a bullish engulfing pattern; potential C – Entry at 219. GS bullish harami V bullish engulfing CELG breakout out to new high IPI piercing line support bounce MER after hitting the support break price target of 30 yesterday bounced today forming an outside day.

Tuesday’s Action Moving Up: MA, BIDU, RIMM, FSLR, GS, POT, AAPL, DECK, V, DRYS, CELF, AMZN, MER, IBM, PCLN, SCHN, NKE, IPI, STRA, EBAY, MOS, GRMN, LEH, MS, ESRX Moving Down: X, CLF, USO, NUE, CF, SOHU, ANR, BTU, CNX, AGU, MEE, MTL, FWLT, MON Intermediate Term Market Trend: Down Short Term Market Trend: Neutral