Don't Ignore This Chart

Rite Aid Pharmacy Generates Headaches For Shareholders

Rite Aid Pharmacy (RAD) changed its shareholder medication this week. The pharmacy chain moved up 900% in 18 months delivering happiness to the shareholders. That move up topped out in May. Since then, the pharmacy lost almost 50% of the gain.

This week the headache was confirmed when the stock could not stay near the 40 WMA and lost 18%. Rules based trading can help newer investors. When the trend in the purple relative strength was broken at point #1, it may have encouraged a swing trader to exit at least part of the position.

This stock was just being added to the SCTR rankings when upgraded the number of stocks with SCTR's in March. Rite Aid's SCTR  gave a sell signal (Point #2) roughly when the stock crossed below the $ 6.96 level the first time which was also a plateau of support (point #3).

So this stock offered three different sell signals using a basic weekly chart for longer term position traders. 

1) A break of the relative strength up trend.

2) The SCTR falling out of the top quartile. 

3) A break of support through $ 6.96

The hardest part of trading is selling big winners and big losers. The current price is right in the middle of the September to February consolidation area. There are lots of shareholders who entered at this level and have round tripped the profit only to be back near where  they started. With the huge volume surge this week, it might have washed out a few of the weak hands in the stock. Now the shareholder needs a pain management plan. 

Good trading,

Greg Schnell, CMT

Schwab Leads Broker-Dealer iShares to New High

The Broker-Dealer iShares (IAI) is showing leadership over the last few weeks with a surge above its March highs. Notice that the ETF is up around 10% from its early August low. Within the group, Charles Schwab (SCHW) is leading with a new high in late August and further strength this month. Etrade and TD Ameritrade are playing catch up with big moves the last two months. Strength in the brokers is positive for the market overall. 

Click this image for a live chart

Would a Russell 2000 Death Cross Really be Bad?

There is a lot of talk of an "impending" death cross for the Russell 2000. This event occurs when the 50-day simple moving average crosses below the 200-day SMA. While this event has triggered a couple of good signals over the last 20 years, the majority of signals have not been very good. The chart below shows these two moving averages in the main window and the Russell 2000 in the lower window. There were two bogus death crosses in the run up to the 1998 peak and three bogus crosses in the run up to the 2007 peak. We have seen two death crosses since 2010 and neither resulted in a major bear market or significant decline. In fact, these so-called "death crosses" actually marked good entry points during bull markets. One of these death crosses will eventually coincide with a bear market, but it is not a very reliable indicator when used on its own. 

Click this image for a live chart

Energy and Pharma Stocks Lift the Dow

The Dow Industrials is bucking the selling pressure with strength in Chevron, Pfizer, Travellers, Procter & Gamble and Home Depot (among others). Chartists can easily spot the winners and losers on a Market Carpet. The chart below shows at least ten green squares, which means these ten are up. There is some red, but the green is outpacing the red for now. The top gainers and losers can be seen in the table on the right. You can learn more on Market Carpets with our videos

Click this image for a live carpet

$SILVER Sits On Important Support

Silver ($SILVER) collapsed this week to the same level where support has been found before. The $18.61 level is critical for $SILVER. There is a small chance at $18.17 to find support but Silver needs to get up and go from here. 

The role of the $USD has been discussed many times in applying pressure to the commodities. Without question, the last 8 weeks have been rough for the $SILVER metal. This week, $SILVER did go as low as $18.45 but bounced to close at $18.62.

Consensus is very one sided on both the dollar long and $Silver short. Eventually support fails when tapped enough times. However, with the upcoming week containing the  volatility of the Fed meeting, the Scottish vote, Quad witching on Friday and a change in the bond behaviour last week, all would be a reason for $SILVER to bounce or breakdown. While its too tough to call which way it will move, investors should have a big opportunity with all the volatility on tap. 

Good trading,

Greg Schnell, CMT

The Long Bond ETF (TLT) Changes Character

The long Bond ETF (TLT) has changed its character this week.

We can see in Early September, the SCTR fell below the top quartile reading of 75. The Purple trend line on the relatives strength to $SPX has been broken. So both of those are concerning. The MACD is dropping below the zero line which looks quite ominous.

The big signal today is the price. It broke the uptrend line. The RSI at the bottom is weaker than it was when the ETF made its final low.

Good trading,

Greg Schnell, CMT

General Electric Gets a Squeeze

Trading in General Electric (GE) has slowed over the last two weeks and the Bollinger Bands have contracted to their narrowest since early July. The indicator window confirms this volatility contraction as BandWidth dipped below 3 again. Chartists should now prepare for a volatility expansion and a decisive break. Watch 26.4 up and 25.7 down. You can read more about Bollinger Bands and band-related signals in our ChartSchool. 

Click this image for a live page

SCTR Surges for the Networking iShares

The Networking iShares (IGN) is making a move over the last few weeks and the StockCharts Technical Rank (SCTR) surged above 50 this week. The chart shows IGN with a big triangle forming since March. A break above triangle resistance would signal a continuation of the prior advance, which was from 29.5 to 36. The indicator window shows the StockCharts Technical Rank (SCTR) breaking above 50 for the first time since early July. You can read more about  SCTRs in our ChartSchool

Click this image for a live page

Nike (NKE) Makes A Move

The battle for sports jerseys is always a big deal. Its an even bigger deal with the World Cup in 2014. Nike (NKE) is interesting because the stock was relatively static leading into the World Cup in Brazil. Now it has broken above a 10 month consolidation with average volume. As a large cap stock Nike is trying to push into the top quartile on the SCTR. You can see the stock lapsed when it fell below the top quartile back in December. With a nice breakout last week and a close near the highs of the week, NKE hit another high today. 

The volume has been declining, but lots of charts have had declining volume. At least it pushed higher on the breakout week. The MACD is going higher. The $SPX relative strength is breaking above the last 6 months. With NKE outperforming the $SPX, this all looks good. Maybe it will be McIlroy, a Nike celebrity, that wins the Fedex Cup in golf this weekend and push another Nike Celebrity into the global spotlight. We'll have to see, but currently we can put a big swoosh beside this stock.

Good trading,

Greg Schnell, CMT

Spot Silver Forms Large Continuation Pattern

The chart below shows Spot Silver ($SILVER) consolidating after a sharp decline. Notice that the metal fell from 35 to 19 and then traded flat from June 2013 until now. With lower highs taking shape, a descending triangle has formed and this is a bearish continuation pattern. A break below support would signal a continuation lower and project a 26% decline from the support break. Chartists can mark resistance at 22. 

Click this image for a live page

Other StockCharts Blogs

Subscribe to this blog