Don't Ignore This Chart

Do Cyber Security Hackers Pull Back? HACK Suffers A Pull Back

Cyber security is one of the fastest growing segments within the IT community. Recently, an ETF launched to help investors invest in a broad array of cyber security technologies. The cyber security ETF ticker symbol is HACK.

Even though February was a short month, this ETF moved up 20% within the month. After the initial surge in February, HACK pulled back to support around $27.50. With a bounce in mid-March and a new retracement to a lower level this might need more time to find support. We now have a down trend defined by lower lows and lower highs. However, the cyber hackers don't take a break. This looks like a good time to put this on a watch list and watch for an entry that suits your style. The initial support level around $25 is 10% lower from here. While this is a very volatile industry to invest in, the trend in cyber hacking is always rising. A tough day in the market overall, but these can create opportunities over the next few weeks for patient investors. 

Good trading,
Greg Schnell, CMT

Lexmark (LXK) Challenges Wedge Resistance On Increasing Volume

Lexmark (LXK) announced after the closing bell on Tuesday that it was acquiring enterprise software company Kofax (KFX) for $1 billion, its largest acquisition in its history.  Traders were initially excited by the announcement, driving LXK's stock price higher by more than 11% and LXK cleared bullish wedge resistance intraday and intraweek.  Subsequent selling, however, is now reflecting hesitation at that key technical area.  Volume is massive today so the close this week will be important.  The February high just above 45.00 is another critical price level the bulls will be aiming for.  While the acquisition may prove to be a very good one, let's wait to see the technical merits of the deal - either resulting in a high volume wedge breakout or allowing the current excitement to wear off and potentially entering closer to wedge support near 37.50.  Here's the chart:

Happy trading!

Tom

Interface (TILE) Floors It, Approaches Major Resistance

TILE is an industrial goods company that designs, produces and sells modular carpet products internationally.  Strong quarterly results reported in February, exceeding Wall Street estimates, has sent TILE's shares surging 27% higher in just the past month.  Major overhead price resistance is approaching, however, so it will be interesting to see if the momentum will continue and result in a breakout.  The daily chart (not shown below) shows seriously overbought momentum oscillators so TILE may need a rest or period of consolidation before clearing key resistance.  The level of resistance (20.00-22.00) is fairly obvious on a long-term weekly chart and TILE is currently right in the middle of it.  The heavier volume of late could be indicative of accumulation.  You might want to keep this one on your radar.  Check it out:

Happy trading!

Tom

 

A Tweet-Worthy Island Reversal and Squeeze

Even though the pattern is a bit big, the gaps fit and it looks like Twitter (TWTR) traced out a large island reversal from late October to early February. The stock gapped below 45, traded below this gap for a few months and then gapped above 45. The result is a price island where shorts are trapped with losses. Anyone shorting the stock below 45 is now trapped with a loss. The blue gap zone turned into support last week as the stock bounced off the 45 area. We have yet, however, to see a continuation of the February surge. Right now the Bollinger Bands are narrowing as volatility contracts, which tells us to prepare for a volatility expansion, or price move. A break above the upper Bollinger Band would be bullish, and a break below the green support zone would be bearish. 


Click this image for a live chart

Facebook (FB) Breaks Out Above A Nine Month Consolidation

Facebook (FB) has been holding growth investors at bay for nine months. In a world where patience is added or removed, it's been part of the Facebook story for 3 seasons. As we roll into spring this weekend, Facebook is popping up like crocuses in the Netherlands. 

These bases are very welcome on a high growth stock and are traditionally good entry points. Don't forget to plan the trade.

With spring on our door, the Keukenhof gardens open in Holland tomorrow! Perhaps the flowers will bring a smile as big as the one on investors' faces with the new highs in the stock. Did you notice the Dutch flag colours on the MACD? 

I'll be hosting a webinar today at 4:30 EDT, looking for budding opportunities. Click here to register.

Good trading,
Greg Schnell, CMT

Crane (CR) Confirms "W" Bottom, Testing Support

Crane (CR) is a part of the Industrial Machinery ($DJUSFE) space, which has been consolidating since last summer and is poised to break out once again.  CR printed a "W" bottom in December and January, with this bottom confirmed with the high volume gap up and breakout in early February.  This also triggered a relative breakout of CR vs. its industrial machinery peers.  CR became quite overbought in February with its RSI touching 80 and its stochastic reading in the 90s.  Since then, however, we've seen lots of selling pressure and downward price action with the RSI now dropping back to much better level near 40 and stochastic below 20.  The price level is also at the recent breakout point with the rising 50 day SMA serving as further support.  I would look for the 62.00-64.00 range to constitute significant support.  Here's the chart:

Happy trading!

Tom

The Two Strongest Sectors in March Are....

There are several ways to measure relative performance here at StockCharts. Chartists can use ratio charts (XLF:SPY), the StockCharts Technical Rank (SCTR) or Relative Rotation Graphs (RRGs). Chartists can also compare the respective price charts. The chart below shows closing prices for the HealthCare SPDR (XLV), Finance SPDR (XLF) and S&P 500 SPDR (SPY). The red dotted line marks the closing high on March 2nd. Notice that SPY remains well below this high, but XLV and XLF closed above this high on Monday and Tuesday. These are the only two sector SPDRs trading above their March 2nd highs and this is a form of relative strength. 


Click this image for a live chart

Gold Investors Expect A Pot O' Gold Real Soon

While we don't usually use triple ETF's for the 'Don't Ignore This Chart' blog, the clues on this NUGT chart are applicable to all gold traders. 

There are a certain group of traders that trade the 3x ETF's. While I don't trade the triples, this active trader crowd can offer clues to potential trend changes. This week is a good example. I want to zoom in on the volume graph. As the miners drilled lower in late October, the volume exploded on the chart, indicating traders were starting to expect some upside. Their timing was pretty good with a 60% gain in 3 weeks. The volume soared from 10 to 20 Million shares / day. Then in December the volume picked back up again from 15 Million shares/day to 20 Million shares/day and the price doubled. 

Last week, the volume exploded to 50 Million shares/day and spent the whole week above the previous high water level. On the actual GDX chart (click to view) the price basket is still above support and the volume signature is not nearly as obvious.  NUGT, the 3x ETF, is hovering at or below support with a very clear volume signature. The reason I think this might be a chart to pay attention to is where there is this much smoke, there is usually fire. With 200 Million shares on the week, its important to remember one primary cornerstone of Technical Analysis is volume precedes price. A chart that glitters might be worth some attention even if you choose to use another ticker symbol for your trade. Perhaps that St. Patricks Day Pot O' Gold will be coming your way.

Good trading,
Greg Schnell, CMT

Yahoo (YHOO) Could Use A Little Yahooing

In Calgary, we use the word Yahoo way more often than the rest of the world. Our primary usage is during Stampede Week or The Greatest Outdoor Show On Earth. The bars are advertising "the most fun you can have with your boots on", the streets are filled with hay bales and stampede breakfasts, the chuckwagons are running, the farmers are baling hay, and it's almost impossible to be grumpy. The smiles, laughter, and the constant chant of "Yahoo-o-o-o" permeates the foundation of work hard, play hard. There is the odd bit of frac-fluid involved. But we are not here to talk about Calgary's level of enthusiasm as oil hits 6 year lows, railways keep spilling crude and pipeline prevention is not used as an expression of transportation safety. The city couldn't be quieter. We are almost as glum as the Yahoo (YHOO) stock price. Here is the chart!


Chart 1

After getting bucked off its highs by 20%, YHOO has been skidding sideways in the dirt since the start of February.

Continue reading "Yahoo (YHOO) Could Use A Little Yahooing" »

McClellan Oscillators Remain Negative

The NYSE McClellan Oscillator ($NYMO) turned negative on March 4th and moved below -25 on March 6th, while the Nasdaq McClellan Oscillator ($NAMO) also turned negative on March 4th, but did not move below -25 until March 10th (red arrows). As these charts show, chartists can use crosses of the zero line for signals or set a bullish-bearish threshold to reduce whipsaws. There were dozens of crosses above/below the zero lines over the last six months. By using +25 and -25 to qualify signals, chartists can reduce whipsaws significantly. Whipsaw reduction, however, does come at the expense of timing. In other words, these signals will come later and after prices have moved, a bit like trend following. Notice that these indicators are updated after the close (end-of-day (EOD)). Chartists can create McClellan Oscillators that update during the day using MACD and net advances. Click here for a video tutorial. 


Click this image for a live chart