Don't Ignore This Chart

Fastenal Follows Through on Big Island Reversal

Fastenal continues to improve on the chart with two bullish patterns and signs of accumulation. First, a big island reversal formed at the stock gapped below 43.5 in early October and gapped back above this level in late October. Second, the stock broke pennant resistance with a move above 45 last week. Third, the Accumulation Distribution Line (ACDL) bottomed in mid October and moved above its September high. FAST is looking bullish as long as support at 44 holds. 

Click this image for a live chart. 

Three of Five Offensive Sectors Lead within Small Caps

The PerfChart below shows the nine small-cap sector ETFs and the Russell 2000 iShares (IWM). Notice that the SmallCap Consumer Discretionary ETF (PSCD) and the SmallCap Technology ETF (PSCT) led over the last five days with bigger gains. Throw in the SmallCap Industrials ETF (PSCI) and three of the four offensive sectors are leading. The SmallCap Financials ETF (PSCF) is, however, lagging with a smaller gain (neon green). The other five sectors on the right side of the chart sport smaller gains and are lagging. 

Click this image for a live chart. 

Alcoa (AA) Gaps Out To New Highs

Alcoa (AA) has been a strong stock on the run for a while. Recently it consolidated for the last 150 days. This morning Alcoa pushed to new highs suggesting the consolidation is over.

The powerful gap out of the consolidation is nice to see on a very liquid stock. This push to new highs after a sideways period looks very healthy for breakout buyers. With the SCTR ranking pinned to the top and the Relative Strength holding nice and high, this has all the characteristics of a strong stock continuing to climb.  Support looks to be $17. If it doesn't keep closing above that level, it will be a failed breakout for now.

Have a great weekend.

Good trading,
Greg Schnell, CMT

Big Blue Stays Red on the Relative Rotation Graph

The S&P 500 is up over 7% the last five weeks, but IBM is down and flirting with new lows. The chart below shows the Relative Rotation Graph (RRG) with all thirty Dow stocks. With the Dow Industrials as the benchmark, we are seeing the relative performance rotations for all 30 stocks in this key average. The highlighted red line represents relative performance for IBM and it is pointing northeast, which is negative. Also notice that Chevron and Caterpillar are underperforming the senior average. 

Click this image for a live chart. 

Natural Gas and Coffee Lead ETF SCTRs with Big Moves

There is a little gem in the middle of the home page that shows the biggest moves for the StockCharts Technical Rank (SCTR). Clicking "Top Up" will show the biggest relative performance gainers, while clicking "Top Down" will show the biggest relative performance losers. Today we are seeing big relative performance gains in the Coffee ETF (JO) and the Natural Gas ETF (UNG). It must be so cold that people are staying inside with the heat on and a big cup of joe. 

Click this image for a live chart. 

Potash Paints A Big Breakout Candle

Potash Corp (POT) has made a huge bull candle today. We could understate it as just a trend line breakout. 

The whole Potash group jumped today so it does not appear to be company specific. This chart has such nice technicals. MACD moving positive today. Relative Strength breaking out at the top of the chart. We can see a clear downtrend being broken today. I put this chart in monochrome so you can see how to print with only a black cartridge and lots of white space. The area chart at the top is light gray. You can click on the chart to see the settings.

Continue reading "Potash Paints A Big Breakout Candle" »

One Stock in the Energy Sector Hit a New High This Month

The Energy SPDR (XLE) is by far the weakest sector in the market right now. Most of its 43 components are in downtrends and well below the summer-autumn highs. One stock, however, stands out from this crowd. The chart below shows Tesoro (TSO) breaking out to new highs in mid October and recording a new high on 3-Nov. The stock has since corrected the last two weeks with a falling flag. A break above 74 would signal a continuation higher. The indicator windows show TSO outperforming XLE and SPY. 

Click this image for a live chart. 

Two All Beef Patties, Special Sauce, Let Us See... (MCD)

You know you are old when you can recite a 14 word tag line twenty years later. McDonald's (MCD) popped up on the radar today as the dining stocks have really ramped up lately. Could it be the ability to buy McCafe coffee for home or an improvement in same store sales? 

While McDonald's tested resistance today, it was the highest close since the gap down in July. Seasonality is also good for McDonald's in November and December.

You can see that chart here. McDonald's Seasonality. 

Good trading,
Greg Schnell, CMT

The 20+ YR T-Bond ETF Gets the Squeeze

The 20+ YR T-Bond ETF (TLT) went ballistic in mid October with a surge above 125 and then sharply reversed with a close below 122 the next day. The ETF has since worked its way lower and volatility has seriously contracted. Notice that Bollinger BandWidth is at its lowest level in over six months. This means the distance between the two bands is the narrowest in over six months. The price pattern over the last three weeks looks like a small descending triangle, which is a bearish continuation pattern. A break below 118, therefore, would signal a continuation of the late October decline. 

Click this image for a live chart. 

A BlackBerry Gets Picked

Who thought growing a Blackberry (BBRY) could be so challenging? The new CEO seems to be capable of generating interest by investors in their platform. Here is the chart.

With a series of rising lows and this continuing pressure on climbing out of the basing pattern in the stock, Blackberry is starting to show some interesting traits.

Continue reading "A BlackBerry Gets Picked " »

Oil Citations and Sector Performance are Revealing

The top chart shows sector performance since the beginning of September. The bottom chart, from, shows the number of times companies in these sectors cited oil in their earnings calls (from 1-Sep to 6-Nov). Oil fell around 10% from mid June to late August and around 20% from early September to early November. Unsurprisingly, companies in the energy sector cited oil the most and the S&P Energy Sector ($SPEN) is down around 10% since early September. The S&P Industrials Sector ($SPI) appears to be a big beneficiary because these companies cited oil 33 times and the sector is up over 4%. It is the strongest non-defensive sector over this timeframe. It appears that industrial companies are the big beneficiaries of cheaper oil. Companies in the materials sector cited oil 23 times and this sector is the second worst performing sector. It is interesting that companies in the consumer discretionary have not cited falling oil prices much. The decline in gasoline prices should free up more money for retail spending as we head into the holiday season. 

Click this image for a live chart. 

Aroons Cross to Trigger a Signal in Tesla

Tesla (TSLA) gapped down and fell sharply in early October, but ultimately held support from the July low and rising 200-day moving average. The stock moved higher the last four weeks and surged above the September trend line with a 3+ percent gain on Tuesday. Also notice that Aroon Up crossed above Aroon Down to trigger a bullish signal. Traders can mark support at the early November low and 200-day. You can read more about the Aroon indicators in our ChartSchool. 

Click this image for a live chart. 

Industrials and Healthcare Lead the Big Recovery

The stock market bottomed in mid October and then surged over the last 18 days. Chartists can find the leaders (and laggards) for this period by setting the PerfChart for 18 days. Simply double click the date tab and enter a number. The PerfChart below shows all nine sectors and SPY with big gains since October 15th. The Industrials SPDR (XLI) and HealthCare SPDR (XLV) are leading with double digit gains. The Materials SPDR (XLB) and Consumer Staples SPDR (XLP) are lagging with the smallest gains. The Finance SPDR (XLF) shows relative strength because it is up more than SPY. 

Click this image for a live chart. 

Can Precious Metals Become Precious Again?

Gold ($GOLD) is painting a bullish candle today and surging back above the recent gap down. We have had $20 rallies before, but the exhaustion in this particular move seems complete. Who could possibly want to own gold after the beating? That washed out sentiment might be the single most bullish signal. Is it a tradable rally? Probably. Will this mark the final low in $GOLD? That would be a stretch with the US Dollar ($USD) going vertical. For traders it's attractive as the gap structure demonstrates a complete exhaustion.

I have used the tradable ETF's to show todays's rally. Stops can be nice and tight. The breakout would be complete if the two indicators above, can get above the blue lines on the close.

I'll have another guest on the webinar next Thursday. Be sure to register early for that one but only if you can make it. That's just a tease. For attending the next “Canadian Technician” Webinar, Please click here to register.

Good trading,
Greg Schnell, CMT

Minding the Gap on QQQ

The London Tube is famous for its automated announcements reminding commuters to "mind the gap" between the train and the platform (don't fall in). QQQ has a gap that we should also mind. Notice how the ETF opened above 101 and closed above 101 the last four trading days. A close above 101 today would mark the fifth, but not the fifth of the fifth of the fifth. Sorry, I couldn't resist a little jab at Elliott. The ETF is clearly stalling, but the gap is holding and remains bullish as long as it holds. A close below 100 would fill the gap and provide the first sign of material selling pressure since the first half of October. Should this gap become filled, we would then call it an exhaustion gap and consider it bearish. 

Click this image for a live chart. 

New Highs in Key AD Line Affirm Long-term Uptrend

The S&P 500 AD Line ($SPXADP) confirmed the new high in the S&P 500 by hitting a new high of its own. The chart below shows the AD Line holding its early August low in mid October and surging above its early September high on Friday. This means breadth is keeping pace with the market advance. A non-confirmation or lower high would be cause for concern, but this is clearly not the case right now. 

Click this image for a live chart. 

Utilities Make A Strong Push Off The Lows

After the recent pullback, the overall market has blasted higher. Over the last week, I have noticed some of the strong momentum stocks under performing the $SPX. While the $SPX is just marginally above the recent highs of September, the Utilities have absolutely launched forward. This pause by the momentum stocks but the continued ascent by the utilities seems to point to the cycle where materials and energy have topped and Utilities/ Consumer Staples start to lead.

Here is the sector cycle.

Here is a shot of the leading sectors.

There are some great performers in the Utilities right now.

Good trading,
Greg Schnell, CMT




Predefined Technical Alerts Say it All - Gold, Oil, Dollar, Stocks

Chartists can get a good idea of market conditions just by looking at the predefined technical alerts page. Today's alerts are at the top and users can view past alerts by scrolling down the page. Today, we can see several major indices and sector ETFs hitting multi-year highs, which indicates a long-term uptrend for the stock market overall. In addition, the Euro hit a 2-year low, the Dollar Index hit a four year high and gold hit a 4-year low. Note that oil hit a 2-year low on Wednesday, These are the major trends at work in the market right now. 

Click this image for a live chart. 

Sector Carpet Shows a Preference for Risk

Stocks moved sharply higher on Friday with the Technology sector leading and the Utilities sector lagging. As the Market Carpet shows, the average utilities stock is down .05% and the average technology stock is up 1.82%. This shows a preference for higher risk stocks (offense). Notice that the tech sector is dark green because it is the leader. Financials and materials are also showing leadership today. Click this image to see a live Sector Market Carpet. Double click on any of the sector spaces to see the individual components. 

Click this image for a live chart. 

Intel Gaps Down to Lead Semis Lower

Intel (INTC) weighed on the semiconductor group Thursday with a gap down and high volume decline. The chart below shows the stock reversing near broken support, which turned into resistance. This is classic technical analysis: broken support turns first resistance and broken resistance turns first support. 

Revving Up The Multi Utilities Industry Group

Here is a great looking industry group based on the RRG Charts. The Utility Sector has started to accelerate and this industry group looks great.

I have deleted the lines on the other charts that are not that strong by removing the check marks on the list below. This chart has three things going for it.

  • The stocks are accelerating in unison 
  • There is clear acceleration in the tails. They are very long which means they are moving quickly in price.
  • They all have a very positive direction. Both up for momentum and to the right for improving outperformance of the $SPX.

TEG has been very positive, has settled back and looks to be turning to reenter the positive momentum and relative outperformance. 

Good trading,
Greg Schnell, CMT

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