Friday, June 20, 2008

Please Read the 2 Comments...

Chart Signals readers... Please read the two comments to the post "Oil Settles Back, Indices Fall Further" earlier today and just below this post. The first is a question by a reader and the second is our response. We would be very interested in knowing if you are having a similar challenge. If you are, we can put together a more detailed guide on this issue. So, read the comments and then post a comment yourself and let us know if this is a challenge. If it is we can help. The more posts the more effort it is worth. DJIA - 220.40, -1.83% SP500 - 24.90, -1.85% NASDAQ Comp. - 55.97, -2.27% Russell 2000 - 12.10, -1.64% Oil closed at $134.62 up $2.69 As you'll read below all of the indices are at important support areas which if broken could lead to the lower chart price targets for each index. Check with us early Monday and through out the day as we stay focused on the price action in this important support area.

The DJIA continued its bear flag break that occurred on Tuesday and fell to its lowest level since March. Thursday’s non-idealized bullish harami failed to confirm as sellers took control at the open. The DJIA achieved the price target of 11,836 that we posted in Wednesday’s post. The DJIA is in an area of major horizontal support, the lows of January and February and March of 2006. A successful break below the 11,750 would be very bearish. The price target for the large head and shoulders break that occurred on January 8 is 11,054. The DJIA is at an important horizontal support area.

The S&P broke the 1,331 horizontal support area continuing its bear flag break that occurred Wednesday and moved down towards the 1,296 price target we posted on Wednesday. The S&P continues below its 20, 30, 50 and 200 DMA and continues to make lower lows from lower highs. The Nasdaq reversed Thursday's rally and continued its bear flag break that occurred on Wednesday. Buyers stepped in at the 2,400 horizontal support area, on Friday. The Nasdaq fell below its double top low hit on May 23 again which reinstates the previously mentioned price target of 2,310. The Nasdaq is an important short-term support area. The Nasdaq is now trading below its 20, 30, 50 and 200 DMA and has now formed a lower low and lower high since its double top on June 5.

The Russell (RUT) which has been the strongest of the four broad indices fell from its 20 and 30 DMA and continued its bear flag break which occurred on Wednesday. The RUT closed a point and a half below its 50 DMA. Buyers stepped in at the 720 horizontal support area, which has been a key resistance/support all year long. As we posted on Wednesday this bear flag also represent the right shoulder of a potential head and shoulders top. Should the RUT successfully break the 716 area neckline, the price target for the RUT will be 673.

Up Trending Stocks CF after Thursday’s bearish engulfing pattern formed an inside day on Friday, chart is looking like a horizontal bull flag after Monday’s breakout. IPI after Thursday’s bearish engulfing pattern formed a higher high and higher low in its current up trend. DECK gave Dave’s C entry signal on Thursday, formed a higher high and higher low. USO like the price of oil continues in a pennant pattern that began on June 6. MOS after Thursday’s bearish engulfing pattern formed a bullish harami with a small spinning top on Friday. MEE after Thursday’s dark cloud cover formed a small spinning top; some might see it as a doji. The last two days are looking like a pennant. Down Trending Stocks BIDU bounced down from its 20 DMA and is trading below its 20, 30 and 50 DMA. Its 200 DMA is at 315 and horizontal support at 310. SOHU broke its bear flag on Friday and broke through horizontal support on more than double average volume. Chart target 75 area. DRYS broke below its bear flag pattern on Friday while bouncing down from its 200 DMA. Horizontal support is 70. IBM fell below its 50 DMA to horizontal support at 122.50 continuing its bear flag break that occurred on Wednesday. MER fell to horizontal support in the 35 area continuing its bear flag break that occurred on Wednesday.

Friday’s Action Moving Up: CF, IPI, DECK USO, MOS, MEE Moving Down: BIDU, SOHU, MA, FSLR, AAPL, CLF, STRA, DRYS, GS, AMZN, RIMM, MTL, POT, IBM, BTU, NUE, MER, MS, FWLT, JASO, SCHN, CELG, ESRX, NKE, EBAY, GRMN, UAUA, SBUX Intermediate Term Market Trend: Down (DJIA, S&P) Short Term Market Trend: Down

6 comments:

Anonymous said...

Dave:
I'll post to the previous-but I too have problems in this area.
Any help is appreciated.
Robert
CANI_212

John Kevan said...

Aloha Dave (and everyone)
Thanks for the comments on the last post and any more to come.

Maybe part of the issue is "How much of a break of support or resistance is really a break" since support and resistance are areas and not specific prices. Add to that intraday volatility where the market swings 400+ points in a day or two and any support or resistance line can look broken at a moment at any moment in time.

An example of a trade I posted for thoughts is:

http://img145.imageshack.us/my.php?image=ilmnow8.jpg

Entered ILMN on a break of resistance, stock went back into channel but never broke support until about 4 weeks later when it broke both diagonal and horizontal support on a large red candle, that is where I got kicked out.

Looking at it now, I can call it a price fluctuation, at the time, it didn't appear that way.

I know what I should have done was get back into the trade when it headed up again but then I'm thinking is it more price fluctuation.

Maybe the real question could be my trust in my overall overall trend assessment and time frames for what constitutes a break or failure independent of the finacial hit.

OR

Maybe when I switched to seeing an intermediate term uptrend in the market from Mid March to Mid May was failing I didn't switch back to a short term view fast enough and the intermediate term trades I had going I should have not accepted the movement as price fluctuations but trend change

Since we really can't define trend change until we have new higher highs and lows (or visaversa), everything can look like price fluctuations until that point especially with intraday swings.

Sorry if I rattled on for to long.
Mahalo

Anonymous said...

Dave,

I have been a regular of your trading rooms. The last two monday classes really gave me an ahhh haaaa momemt. My weak point in my trading is to know exactly when to get out, I am never clear if it is a hiccup or a trend change, after the fact I can always seem to see my mistake but I am having issues on knowing when to pull the trigger and get out. I can seem to set a stop, but there are times when the move eats up too much time value etc. Any addtional topics you feel would be helpful I am all for it. The addtional post you have bee doing are GREAT......


Tony S

Anonymous said...

Dave,
I noticed on the earlier post that over 9 comments have been posted. I too have issues with this topic. As a new student I am spending many hours a day trying to figure out trend, price movements, etc. I am not sure of short term support and resistance vs. intermediate term support and resistance. ( I have noticed at Investools that various coaches in the Trading Rooms define short term and intermediate term trends in different time frames). What is your definition of Short Term, Intermediate Term and Long Term?
Thanks for taking time to respond to our questions and provide direction. It is really appreciated.
Derek

Tom said...

Dave,

In my own mind this is only a problem when I own the stock. I become nervous Nortus and find myself always second guessing what the next move will be. I will have my support and resistance lines drawn on the chart prior to entry, but seeing the daily fluctuation in value seems like it rattles me too much.

I thank you for your effort to help us.

Anonymous said...

I'm open to learning more regarding short term support and resistance. I'm much better at it now because I've been practicing for a while, but a refresher is always helpful.

Thanks, Dave.