ChartWatchers Newsletter logo

January 2007

ChartWatchers

BULLISH ON BIOTECHS

by Chip Anderson

Healthcare stocks have been performing quite nicely over the past few weeks. Looking at the Biotech Index, it appears more bullishness is on the way for this sub-sector. After a nasty 20% selloff from March through May, biotechs stabilized during the summer months before beginning an uptrend that netted over 160 index points in a three month span beginning in August. The continuation pattern that formed over the past two months is the cup and handle pattern. On the chart below, I've highlighted the cup formation. Just to the right of the cup, you'll see the sideways consolidation, or Read More 

ChartWatchers

USO: OVERSOLD AND AT SUPPORT

by Chip Anderson

The U.S. Oil Fund ETF (USO) remains in a clear downtrend on the daily chart, but became oversold and reached long-term support on the monthly chart. The combination of oversold conditions and support argue for at least a consolidation and quite possibly an oversold bounce back to broken support at 50. On the daily chart, I am using RSI to identify oversold conditions. RSI moved below 30 (oversold) in early January and stayed oversold until Friday (19-Jan). The indicator is making a move back above 30 and this is the first positive sign in 2007. Before getting too excited, notice that RSI Read More 

ChartWatchers

ENERGY SECTOR CORRECTION ALMOST OVER

by Chip Anderson

Energy stocks as represented by the Energy Spider (XLE) have been moving in a more or less sideways direction since crude oil topped out in July and entered a bear market. I find it peculiar that energy stocks have consolidated at the same time that crude oil was crashing, but it does give us a clear sign of strength from that sector. Now I am seeing evidence that the correction in energy stocks is nearly over. First, on the chart below we can see that crude oil is very oversold and is probably ready for a bounce. I would not care to speculate whether or not the bear market is over, but Read More 

ChartWatchers

LOOKING AT A PAIRS TRADE

by Chip Anderson

Today we want to look at a "pairs trade" theme we think has good fundamental and technical merit; it is a "long energy/short consumer discretionary shares" trade. Recently, we have begun to put this trade on in various ways; and one that we intend on adding to as it becomes more profitable. From a technical perspective, we use the S&P Energy and S&P Consumer Discretionary ratio (XLE/XLY) as our guide. As we look at the chart, we note that over the course of the past year, the ratio has been in a steady if not relentless decline. However, this decline has taken the ratio from Read More 

ChartWatchers

NASDAQ HOLDS 50-DAY LINE...NYSE NEARS HIGH

by Chip Anderson

The market closed the week on an upnote. The most important action took place in the Nasdaq market which bounced off its 50-day moving average (Chart 1). Broader market measures have held up much better. Chart 2 shows the NYSE Composite Index ending the week just shy of its old high. It's well above moving average support. It remains to be seen if today's oversold rally in the oil market continues next week and if that causes any short-term profit-taking in the market. Even so, the NYA would have to break its January low to warrant any real concern. Chart 3 ends with a point & figure Read More 

ChartWatchers

WEATHER, WEATHER EVERYWHERE

by Chip Anderson

Hopefully things have been better at your house than they have been here in the Pacific Northwest. So far this winter we've had record rainfall, huge windstorms, long power outages, lots of snow, tsunami warnings, icy roads and record cold. The joke these days is "What else?" - although I really don't want to think about the possible answers to that! Despite Mother Nature's wrath, the market has continued to climb albeit more slowly than last month. Our intrepid commentators have been watching with keen interest and their reports are below. While John sees reason for near-term optimism Read More 

ChartWatchers

AIRLINES FLYING HIGH

by Chip Anderson

Don't look now, but the airlines have found their wings. After drifting lower for the better part of 7-8 years, something strange has happened. Could it be? Yes, airlines are breaking out! I know it sounds impossible, but airlines for the first time in nearly a decade have become an attractive investment. Take a look at Chart 1 and you'll see that the multiple tops just above 56 were taken out in mid-November. Since that time, we've seen a nice retest of the breakout level and a reset of the momentum oscillators. The MACD came all the way back down to touch its zero line, or centerline Read More 

ChartWatchers

HHH STARTS 2007 WITH A BANG

by Chip Anderson

The Internet HOLDRS (HHH) started 2007 with strong move on good volume, but the ETF was knocked back on Friday and remains just short of breakout. Follow through is the key. The Internet HOLDRS (HHH) formed a falling flag/wedge over the last six weeks. These are typical for mild corrections, but the correction is not over until there is a breakout. This week's surge carried HHH to the upper trendline and follow through above the December high at 55 would be most bullish. I would also like to see expanding volume for confirmation. Also note that Google (GOOG), Yahoo! (YHOO) and Ebay Read More 

ChartWatchers

NEW NYSE COMMON STOCK ONLY INDICATORS

by Chip Anderson

The purpose of this article is to introduce a new set of market indicators that DecisionPoint.com has recently released, indicators constructed from only common stocks listed on the NYSE. A little background, at its inception The NYSE Composite Index was composed of all the issues listed on the New York Stock Exchange. The approximately 3,500 components were cap-weighted by total shares outstanding, and the NYSE Composite was one of the dullest indexes in existence. In January 2003 this all changed in a major way. The composition of the index was changed to include only common stocks Read More 

ChartWatchers

KEEPING AN EYE ON ENERGY

by Chip Anderson

With the first week of the year out of the way; we have seen a rather sharp and violent sell-off in a number of asset classes including energy. Our interest is energy stocks: we think the sell-off has gotten a bit "overdone" to be sure as the oil service sector has dropped -7%; but as we know - markets can remain irrational far longer than we can stay solvent fighting them. But a buying opportunity is being created; however, it isn't in the oil service shares where we want to place our trading capitalit is in the integrated oil producers such as Anadarko Petroleum (APC) Read More 

ChartWatchers

SERVER ROOM IMPROVEMENTS STATUS REPORT

by Chip Anderson

Back in November, work started in earnest on our new server facility. The new facility will have much more power and cooling capacity and will allow us to install bigger and better computers to drive our website. December's big wind storm set the schedule back by a week or so (not too bad considering) and we now have about 3 more weeks of work before everything is complete. In fact, later this week, we will receive our "Chiller Plant" - a huge aluminum machine about the size of a small house that will sit outside our offices chilling water that will in turn cool our servers. Read More 

ChartWatchers

EMERGING MARKETS SUFFER WEEKLY REVERSAL

by Chip Anderson

The MSCI Emerging Markets iShares (EEM) suffered a downside weekly reversal on heavy volume as shown in the chart below. In fact, the EEM had its biggest weekly fall in more than three months. At the very least, that suggests that a pullback of some type is probably in store. That cautious view is supported by the 14-week RSI line (blue line) which had been trading in overbought territory over 70 for the first time since last May. The RSI line has fallen below 70 for the first time since the last EEM peak eight months ago. Since emerging markets had been leading the global rally during Read More 

ChartWatchers

2006 REVIEW, 2007 PREVIEW

by Chip Anderson

Happy New Year's ChartWatchers! Hopefully the start of 2007 finds you more prosperous than you were at the start of 2006. That's always the goal and, given the performance of the major averages during 2006, it looks like many people achieved it. Basically, everything was up about 17% for the year except the Nasdaq which had a flat start and then was overly punished during a big drop in mid-May. The Amex had the most "interesting" journey through the year as its oil-heavy nature caused it to outperform everything else during the middle of the year. So, what's up for Read More