Don't Ignore This Chart

Shake Shack (SHAK) Is Shakin' All Over !

Every now and then a new stock comes into the market that appeals to a wider audience that just regular investors. Recently Shake Shack (SHAK) went public as a burger joint with some seriously good management behind it. GoPro was another stock that had wider public appeal than just regular investors. If you are in these stocks when they go ballistic, it can be a fun ride.  In the case of the Shake Shack shareholder, this one has milkshake on the ceiling today! One of the best ideas as a share owner is to figure out how to exit as they come back to the regular stock market blender. I like to use relative strength shown in purple to help with the exit. We don't usually use a 60 minute chart, but at the rate of the vertical ascent, it might require a much shorter time frame to help with the exit. Four things are facts: The IPO price was $21, we are at 4.4 X  of that. It opened trading at $46, we are 2 X that. It has moved $25 a share in 2 weeks. That is more than $2 a day! The share price is up 45% in two weeks. Lastly, we are approaching $100. That usually makes every one check the price, especially on a new share.

Click on the chart for a live update.

Smart but cheese loving shareholders may wish to take profits very quickly if the stock starts to break through the purple relative strength line or have some other metric to get out. As soon as this stops moving up faster than the market, it is probably on a pour path back to a normal cup. Said another way, when the overall market starts to outperform (SHAK) on the 60 minute chart, you could probably take profits and be close to the ceiling for now. If it continues its ballistic, sweet but shaky ride, you can stay in the trend as long as possible as long as it is outperforming the market. The three straight orange lines show the 3 phases of a parabolic move. That final vertical run marks the end at some point. The big sweeping line shows the parabolic style of the price action which is a sign of investor frenzy.

Attention: Shake Shack owners, your order is almost ready! 

For more information on Relative Strength signals, the webinar of May 21, 2015 had a solid 1/2 hour on how I trade with the RS trend line. Good trading and have a good weekend.
Greg Schnell, CMT

Penn National (PENN) Awaiting Breakout

The Dow Jones U.S. Gambling Index ($DJUSCA) has been under pressure for quite some time with many gambling stocks under pressure as well.  That has not been the case for Penn National Gaming (PENN), however, as it's been in an uptrend and has been a tremendous relative performer, waiting on the doorstep of another potential breakout, one that would measure up another 12-13%.  Notice the highs reached in each of the last four months?  They're all close to 17.00 with the low in April close to 14.80.  That gives us a measurement of roughly 2.20 to add onto the 17.00 breakout level.  Thus, if we see the breakout on heavy, confirming volume, we should look for a target of perhaps 19.20 in time.  Check it out:

Happy trading!


What Matters Most for the S&P 500?

The S&P 500 is in the midst of one of the strongest and most consistent trends ever. The chart below shows the S&P 500 twice. The top window shows the index with a 7% Zigzag indicator in pink and the bottom window shows a 10% Zigzag. The Zigzag indicator filters out price movements that are less than the parameter. As the top window shows, the S&P 500 has experienced just four 7 to 9 percent pullbacks since October 2011 (blue arrows). Even the plunge in October 2014 did not hit the 10% threshold. 

The bottom window is even more remarkable because the 10% Zigzag is a straight line from October 2011 to May 2015. This means the index has not seen a decline greater than 10% since September 2011. This is clear evidence that markets can trend and can trend for a long time. In addition, the market does not always correct when it is overdue or overbought. This streak is indeed rare, but it is not unprecedented and the second chart shows an even longer streak. 

Click this image for a live chart.

Continue reading "What Matters Most for the S&P 500?" »

Johnson & Johnson Jumps (JNJ)

Johnson & Johnson (JNJ) had a great day on Monday. However, on the chart, JNJ had some meaningful technical signals. Starting at the top in purple, The relative strength is turning to the upside after being in a downward trend. It is at 1 month highs and the .49 level on the left scale would be a three month high. Reading the legend, you can see we are right at the 3 month highs. The SCTR is very weak, shown in black, with the stock behaving better than 37% of the companies. However, there is a long downtrend on the SCTR, and you can see the down trend is clearly broken. I overlay these two indicators to save vertical space. You can click on the chart and separate them.

On the price chart, the stock jumped above the 4 month highs shown with the gold line and also jumped above the 200 DMA. We can see this price level at the gold line is an important support resistance level. 

The volume was well above average and the MACD is surging. The bottom line is this one year consolidation in JNJ seems to be building strength for a new push. The rising lows from February look very good. The 200 DMA marks support at 102. If that fails to hold, it would be a failed breakout. 

Good trading,
Greg Schnell, CMT

Dow Joins S&P 500 with New High

The S&P 500 hit a new high last week and the Dow Industrials followed suit with a new high this week. Overall, the Dow broke triangle resistance with a surge on Thursday and this breakout signals a continuation of the current uptrend. Broken resistance turns first support to watch. A strong breakout should hold and a quick move back below 18000 would show cold feet. The March-April lows mark key support in the 17600 area. The triangle is around 700 points high (18300 to 17600). Chartists can add this distance to the breakout zone for a rough estimate of an upside target (18150 + 700 = 18850). 

Click this image for a live chart.  

Deere (DE) Has Trouble Breaking Higher Ground

On Thursday, Deere and Co. (DE) pushed to new highs. But the equipment could not hold the breakout and rolled over swiftly falling hard today.  Deere is sitting at a critical point on the chart. We can see the rising trend in the price action and this test of the previous high was an important one. After making it $0.03 above the previous high, the selling started. Deere gapped down this morning and looks to test the bottom trend line. If Deere holds and bounces it could be a great entry on the way to higher highs. If Deere fails to hold the trend line this will be considered a trend line failure and a double top failure. Watch the relative strength in purple at the top. If Deere breaks the horizontal line on the chart, I think we can expect more weakness. As long as it performs in line with the $SPX or better, there is a good chance of making and holding new highs.

Just a footnote here. Decision Point has launched an alerts blog for members! Find it here. Decision Point Alerts

Good trading,
Greg Schnell, CMT

Paccar Holds Big Breakout and Goes for Another

Paccar (PCAR) sports a bullish looking chart with two breakouts in as many months. The stock surged from October to December and then corrected with a decline that retraced 62%. After three bounces off the 62% retracement area, the stock broke out with a surge in mid-April. This breakout ended the correction from late December to March and signaled a continuation of the October-December advance. More details are posted below the chart.  

Click this image for a live chart.  

Continue reading "Paccar Holds Big Breakout and Goes for Another" »

Will Sotheby's Get A Bid After Christie's Sells Picasso's Women Of Algiers for $179.3 Million?

The art world is abuzz with Picasso's Women of Algiers selling for $179.3 Million where the commissions to Christie's were 12% or $19.3 Million! That all wraps up as a selling price of $160 Million. Christie's is not publicly traded, but I thought a look at Sotheby's (BID) might be in order. This stock has some great technical patterns. First of all, we can see it has formed a rising series of cup shaped patterns. The pullback of each one has been about 50% to 60% of the previous cup. The horizontal red line marks a major form of resistance for Sotheby's but a bid above that would test the trading range in 2013 and 2014.  If we can see the orange line in the middle of the screen, it marks the ceiling of a cup shaped base. A break through that level of $35 sent everyone into the stock for a 40% gain. The SCTR shows BID was one of the top performing stocks as it broke out in July 2013 above 75 and stayed that way for 6 months.

Now, Sotheby's is trying to get into the top quartile with the SCTR at 73. The MACD has just turned up and the relative strength in purple is trying to make new 2015 highs. Have your bidder card ready, this one looks like it's trying to make all time highs, just like the Women of Algiers! Hopefully you'll agree that my chart work is just as beautiful!

Continue reading "Will Sotheby's Get A Bid After Christie's Sells Picasso's Women Of Algiers for $179.3 Million?" »

Energy SPDR Fails at Long-term Moving Average

The Energy SPDR (XLE) is in a long-term downtrend and it looks like the short-term uptrend reversed over the last few days. The chart below shows XLE failing at the falling 200-day moving average with a bearish engulfing last week and breaking below short-term support at 81. The ETF bounced above 81 on Friday, but fell back below 81 with a sharp decline on Monday. The bearish engulfing is confirmed and short-term support has been broken. Also note that XLE is the weakest of the nine sector SPDRs because it has the lowest StockCharts Technical Rank (SCTR) of the nine.  A small ranking table is shown after the jump. 

Click this image for a live chart.  

Click this image for a live table. 

With The Russell Starting To Underperform, Watch The Action Closely

Recently the Russell 2000 was outperforming the $SPX. Early in April, it stopped out-performing as you can see on the purple ratio. As the Russell Tracking ETF (IWM) hit new highs, it was underperforming the $SPX as the purple area drifted lower. Right now, the IWM has some great technical signals on it, making the next few weeks very important. Next, the SCTR shows IWM dropping from the 90 area to the 50 area. This loss of strength relative to the other ETF's makes this bounce very important to watch. If the IWM can break out to new highs here, we really want to see it pick up in relative performance on both the SCTR line and the $SPX ratio shown in purple. The third major technical signal we have is on the actual price. After breaking out to new highs in February, the IWM lost almost 12 weeks of price gains in one week late in April. Now, the bounce off the 120 is considered a test of support at the previous resistance line. It held up nicely with a big push higher today.

However, the technical structure of the pattern that has formed since February is building a typical head/shoulders structure and the MACD is making a traditional pattern for a Head and Shoulders price pattern. The momentum peaks are getting weaker and recently the MACD dipped below zero. This bounce is a very important place to look for a new thrust to change the sagging momentum and relative strength. If the Russell really starts to perform that bodes well based on the bounce off support at 120. If it struggles to make it up to the previous highs and stops at 126, this will be an important place for investors to add protection. If it makes a new high and rolls over the next day, the same consideration for protection should be in place. Let's watch this move!

Good trading,
Greg Schnell, CMT