Don't Ignore This Chart

November 2015

Don't Ignore This Chart

A Boring Biotech that Deserves a Second Look

by Arthur Hill

Gilead is up for the most boring biotech award because the stock has traded relatively flat since September 2014. Despite numerous crosses of the 105 area, the overall trend is still up and chartists should watch for a breakout to signal a continuation of this uptrend. On the price chart, GILD recorded 52-week highs in late 2014 and mid 2015. The stock also held support in the 95 area from October 2014 until October 2015. The combination of solid support and higher highs indicate that the bigger trend is still up. More recently, the stock pulled back the last 5-6 months and established Read More 

Don't Ignore This Chart

Understanding What Works For You

by Tom Bowley

The first thing to investing or trading smarter is understanding your own personal strategy - what works best for you.  Are you a short-term trader?  Do you swing trade?  Do you prefer longer-term holding periods?  Without understanding that basic personal trait, deciding whether to buy or sell becomes a very emotional decision.  And market makers THRIVE on short-term emotional trading.  Take Tech Data (TECD) as an example.  In August, TECD soared on solid quarterly results while just last week the company tumbled on its latest results which Read More 

Don't Ignore This Chart

Classic Ascending Triangle Breakout On This Software Stock

by Tom Bowley

Imperva Inc (IMPV) made a steady move higher from April through July before consolidating in a very bullish ascending triangle continuation pattern over the past four months.  On Tuesday, volume accelerated and triangle resistance near 74.00 was cleared as IMPV extends its prior uptrend.  The measurement of this pattern is from the bottom of the triangle in late August (53.00) to the top of the triangle (74.00), or 21 points.  Once we see the breakout on heavy volume, the target becomes the breakout level (74.00) plus the measurement (21 points), or 95.00.  Best Read More 

Don't Ignore This Chart

A Mid Cap Stock Tries To Breakout To All Time Highs (EDU)

by Greg Schnell

New Oriental Education and Technology (EDU) has been a high-flying stock before. StockCharts.com moved it into the Mid Cap Group for an SCTR ranking and that has currently surged to 99.3. That is a really strong ranking and we can see it made new 52 week highs in mid-October. After building a 6-year consolidation between $18 and $30, the stock looks primed to breakout to the topside if it can get through this last bit of resistance. The breakout in January 2014 quickly stalled and rolled over. It trades an average of 5 Million shares/week. Watch to see if Read More 

Don't Ignore This Chart

Home Construction iShares Goes for a Breakout

by Arthur Hill

After lagging the market in October, the Home Construction iShares (ITB) is perking up with a breakout on the price chart and upturn in the price relative. ITB peaked in August and fell into September.  Even though the market rallied in October and early November, ITB did not partake and continued to underperform as the price relative (ITB:SPY ratio) continued lower.  There was a lot of consolidation in the 26.5-28 area as the two moving averages converged and the ETF broke out with a surge the last eight days. The uptrend is resuming and the lows extending back to mid October Read More 

Don't Ignore This Chart

First Solar Tests The Primary Trend (FSLR)

by Greg Schnell

First Solar (FSLR) looks very interesting here. This stock has been down drafting on the back of lower energy across the industry group. However, it might be time to think about FSLR above $60. The SCTR is back above 75 so it might have the momentum to break out. We can see the primary downtrend shown in blue. The two blue support lines look very similar. In 2011, this resolved to the downside. In 2015, we have had 2 tests to the upside that met and stopped at the primary trend line. If price can break out here, I think there is a huge signal for a new primary trend Read More 

Don't Ignore This Chart

Big Candlesticks Form Potential Reversal Pattern in Alcoa

by Arthur Hill

The overall trend for Alcoa is currently down, but the ETF is showing signs of life with a bullish reversal pattern taking shape. The chart shows AA making a round trip from 8 to 8 with a double top at 17 in between. Chartists can apply the inverse logic of the double top to the current situation because a double bottom is taking shape.  The first low formed in August with a long hollow (white) candlestick and bullish engulfing pattern. The second low formed with a piercing pattern as the stock opened below the prior candlestick low and closed above the mid point of the filled (black) Read More 

Don't Ignore This Chart

Intel Prints Shooting Star Candle

by Tom Bowley

After gapping up off its recent uptrend, the buying continued on Intel (INTC) intraday on Friday as it surged to a high of 35.29.  By day's end, however, INTC closed at 34.66 - EXACTLY where it closed on its recent high on October 23rd.  Volume was very strong but leaving a long tail above resistance and failing to close above it has short-term bearish implications.  A filled candle would have been worse because that would represent a close below the open.  At least on Friday the bulls had a hollow candle with a higher close than open.  Still, INTC will open Read More 

Don't Ignore This Chart

Abercrombie And Fitch (ANF) Surges To A Strong SCTR Ranking

by Greg Schnell

Abercrombie and Fitch (ANF) popped above an 8 month base in what can only be described as a breakout. The apparel retailer industry group only had one stock with an SCTR above 65 yesterday. What a difference a day makes. Now Abercrombie is leading the group. Abercrombie literally jumped to end the building of the 2015 base in the price chart. The volume soared, the SCTR went above 90 and the base looks complete. The SCTR had been working higher and the move today appears to confirm the change in investor sentiment towards the stock. If you look Read More 

Don't Ignore This Chart

DHI Threatens Breakout; Home Construction At 2 Month High

by Tom Bowley

The Dow Jones U.S. Home Construction index ($DJUSHB) hit its highest level in two months this morning and a close above 600 would likely signal more strength to come.  DR Horton (DHI) and NVR, Inc (NVR) represent two of the strongest stocks in the group technically and are both poised to lead the rally subsequent to a breakout.  While the 10 year treasury yield ($TNX) is a proxy for mortgage rates and has been up sharply since late October, traders are apparently focusing much more on the reason for a rate hike - a potentially strengthening economy.  Below is the Read More 

Don't Ignore This Chart

Gold Hit by Dollar and Rising Yields

by Arthur Hill

The PerfChart below tells the story for the Dollar, Treasury bonds and commodities since late September. Note that stocks, the Dollar Index ($USD) and the 10-YR Treasury Yield ($TNX) are down, while the 10-yr Note ($UST), Spot Gold ($GOLD), Spot Crude ($WTIC) and Spot Copper ($COPPER) are down. It is a classic relationship at work: commodities suffer when the Dollar rises. Normally, bonds tend to rise when commodities decline because this is disinflationary. However, it looks like the bond market is making an adjustment to Fed policy, or rather perceived Fed policy because nobody really Read More 

Don't Ignore This Chart

What's LUV Got To Do With It?

by Greg Schnell

Southwest Airlines (LUV) has been one of the few airline stories where investors have been able to make money since 2012 from buy and hold. Through the summer of 2015 Southwest had one of its biggest selloffs in 3 years. Some of the airlines are trading around their 200 DMA but Southwest is well above on every metric. The long term chart looks great with the price tucked up top right on the chart.  Southwest is trying to make a break above the spring highs after trying last week and pulling back. While the Read More 

Don't Ignore This Chart

QQQ Attempts to Firm: Here's What to Watch

by Arthur Hill

The Nasdaq 100 ETF (QQQ) was hit quite hard last week, but the ETF is making an attempt to firm on Monday and chartists should watch three things. First, the ETF gapped up and surged above 115. This gap was part of a 16% advance off the September low and QQQ was quite overbought in early November. The decline back to the 110 puts the ETF at the bottom of this gap zone and this is the last bastion of gap support. Second, the November decline retraced 38% of the prior advance. This Fibonacci number (.382) marks the minimum retracement expected on a pullback and also a potential reversal Read More 

Don't Ignore This Chart

DKS Sports A Test Of Long-Term Support

by Tom Bowley

Retailers were rocked on Friday with the five worst performing industry groups all in the retail space.  The S&P Retail index (XRT) dropped nearly 4% on Friday and more than 8% last week.  Many of the retail industry groups and stocks within those groups are at or challenging October 2014 lows on the heels of a poor monthly retail sales report that was released in pre-market action on Friday.  One of those companies, Dick's Sporting Goods (DKS), is testing an area of price support it's tested on several previous occasions over the past 3-4 years.  The Read More 

Don't Ignore This Chart

The Broker-Dealer Index ($XBD) Looks Precarious Here

by Greg Schnell

In bull markets, brokers do very well. On the back of the recent rate rise, the Broker-Dealer Index ($XBD) ran up to test the 200 DMA. Now the chart warrants close scrutiny.  On a Year to Date basis, the results are essentially flat, but the support-resistance line at $187 seems very important. This level marked the highs of 2014. As well, this was the level before the market dropped in August 2015. Now we have come back to retest it and so far it looks like we have failed. The 200 DMA is also here so a failure to get above a long-term trend that the index has been above for years is Read More 

Don't Ignore This Chart

XLE Negative Divergence Plays Out As Price Support Tested

by Tom Bowley

Prior to this week, energy had seen its strongest rebound since topping in June 2014.  But a long-term negative divergence and slowing volume suggested the rally was long in the tooth.  After hitting nearly 72.00, the XLE has retreated and the energy bulls will now be tested.  During an uptrend, I look to the rising 20 day EMA for support but once a negative divergence prints, my preference is to await a 50 day SMA test, which the XLE saw on Thursday.  That also coincides with recent price support near 66.00.  Here's the chart: Read More 

Don't Ignore This Chart

Small-caps Attempting an End-Around on the RRG

by Arthur Hill

Small-caps are still underperforming large-caps, but the small and mid-cap indices moved into the improving quadrant on the Relative Rotation Graph (RRG) with a classic end-around play. Just go to YouTube if you need to review this play. The RRG shows performance for the S&P Small-Cap 600, Russell 2000, S&P MidCap 400 and a few others against the S&P LargeCap 100. The vertical line at 100 marks the line of scrimmage and this is the difference between a successful end-around and a failure. A move past 100 would put these three in the leading quadrant (green) and suggest Read More 

Don't Ignore This Chart

Infrastructure Builder McDermott International (MDR) Builds A Nice Base

by Greg Schnell

Scanning through the list of new highs this morning, I noticed McDermott International (MDR) had a really nice chart pattern. The stock had an initial thrust off the lows and has quietly built a base supported by the 200 DMA. The 200 DMA was in a downtrend and has a nicely rounded basing pattern that has turned up now. The Relative Strength has made 4-month highs and is very close to making new 1 year highs. Volume is nice with 3.5 Million shares/day. The MACD has been making a series of higher lows and looks like it wants to stay above zero here. It recently had a Read More 

Don't Ignore This Chart

Momentum Turns Down on Deere

by Arthur Hill

Deere (DE) is not keeping pace with broader market and a bearish momentum signal just triggered. Deere was hit with the rest of the stock market in August and fell sharply. This was normal because the broad market was under intense selling pressure. The S&P 500 ultimately held its August low in late September and surged in October, but Deer broke its August low and the October bounce stalled out after the first week. The stock is clearly not keeping pace with the broader market and this is reflected in the price relative (DE:$SPX ratio), which hit a new low this week. A new low in the Read More 

Don't Ignore This Chart

Bullish Cup With Handle Breakout on Semi Stock

by Tom Bowley

Semiconductors have been one of the hottest areas of the market off the August low and especially during the month of October.  That's created a number of trading opportunities in the space.  I would consider Microsemi Corp to be one of those opportunities now based on its cup with handle breakout on heavy volume Friday.  Volume trends have been strong on MSCC throughout 2015.  A breakout and strong first quarter was followed by a negative divergence on its weekly chart in the second quarter.  That resulted in selling during the summer months and a reset of its Read More 

Don't Ignore This Chart

Goldman Sachs Jumps Out Of Bed (GS)

by Greg Schnell

With the jobs report this morning being so good, the financials were off to the races on the news of a probable interest rate rise from the Fed in December. Goldman Sachs (GS) has been struggling to get back above the September highs even with the October surge. Well today, all that changed. Goldman gapped up in the pre-market action and since the open it continued to work higher. There is a little resistance at $200 but this is a big push higher on the back of the expected increase. With all the euphoria around the financials and the interest rate Read More 

Don't Ignore This Chart

This Signal Is Bullish And Rarely Fails

by Tom Bowley

No signal is perfect, but the relative performance of consumer stocks is one to watch.  The reason is simple.  When consumer discretionary stocks (XLY) outperform their consumer staples counterparts (XLP), a bet is being made by market participants that our economy is strong or appears to be strengthening.  Keep in mind that consumer discretionary stocks sell the products that people WANT while consumer staples stocks sell the products that people NEED.  The latter group represents things like soap, deodorant and toothpaste.  If you're worried about your job or Read More 

Don't Ignore This Chart

Treasury Yields Surge Across the Board

by Arthur Hill

Short-term Treasury yields surged over the last six days and recent breakouts suggest that the Fed will raise short-term rates in December. Yes, it sounds blasphemous, but the bond market tends to lead the Fed in these matters.  In fact, I would suggest that the bond market is the closest thing we have to inside information, at least when it comes to the Fed. Just a month ago, the 5-year Treasury Yield ($FVX) was at its lowest level since January and the odds of a rate hike from the Fed seemed quite small. This has suddenly changed as the 5-year yield surged to its highest level since Read More 

Don't Ignore This Chart

Is It Time To Let Cyber Security (HACK) Into Your Portfolio?

by Greg Schnell

Cyber Security is a growing problem in the technology world. The companies that sell cyber security solutions are associated with high multiples and strong growth as almost every client increases their cyber security spending each year. As the overall market softened, these high-multiple stocks pulled back rather hard. One ETF for the Cyber Security stocks is HACK.  There are some interesting trends changing. The stock made a new one-month high this week and started to make higher lows and higher highs. The downtrend in relative strength to the $SPX has been broken today, but Read More 

Don't Ignore This Chart

Phillips and Tesoro Lead CRAK with New Highs

by Arthur Hill

Refiner stocks are showing relative strength and absolute strength. The table below shows nine refiner stocks from the Oil Refiners ETF (CRAK). Eight of the nine are part of our StockCharts Technical Rank (SCTR) universe and six of the nine have SCTRs above 90. Calumet (CLMT) is a small-cap stock that is not part of our SCTR universe for small-caps. CLMT, however, is challenging resistance on the price chart and a breakout would forge a 52-week high. Elsewhere, Phillips 66 (PSX) and Tesoro (TSO) hit 52-week highs today and show upside leadership.  Read More 

Don't Ignore This Chart

Reverse Head & Shoulders Pattern Worth A Gamble?

by Tom Bowley

Gambling stocks ($DJUSCA) have been BY FAR the worst performing industry group within the consumer discretionary sector over the past year, dropping 27.72%.  There are only two other industry groups in this sector in negative territory - clothing & accessories ($DJUSCF) and recreational products ($DJUSRP) which have fallen 8.44% and 2.40%, respectively.  Gambling stocks have rebounded an astounding 29% in the past month as they set up in a potential reverse head & shoulders pattern.  While the return over the past month has been very strong, a breakout of Read More