Don't Ignore This Chart

Applied Optoelectronics Follows Other High SCTR Stocks Lower On Friday

If you're someone that finds great investments among the high SCTR (StockCharts Technical Rank) stocks, you probably enjoy better than average returns most of the time.  However, Friday was not one of those times.  The NASDAQ 100, clearly the best performing index among our major indices in 2017, was trounced on Friday.  The technology sector (XLK)?  Again, the XLK is our best performing sector and it was trounced.  The high SCTR stocks (ie, best relative performers) also were trounced on Friday as everything that had been working......suddenly stopped working.  Many of these stocks will likely offer up great short-term trading opportunities as panicked sellers drive prices lower very quickly.  You'll need to have a strong stomach, but Applied Optoelectronics (AAOI) could be one of those stocks that offer up a quick, high reward to risk trade.  Here's the chart after Friday's bloodbath:

The negative divergence provided warning signs that price momentum was slowing.  Then the sellers hit on Friday and AAOI lost 11.5% and most of the gains it had realized over the past month.  Volume was very heavy on the selling and it wouldn't take much more selling for AAOI to hit its first key level of price support near 60.  The rising 50 day SMA is just above 57 and that's always a potential target when a negative divergence surfaces.  Finally, with the 2017 uptrend line in the upper 50s, it would seem that any reversing candle in the 57-60 area could provide a very solid short-term entry point on the long side.

Happy trading!

Tom

State Street (STT) Turns Up The Hill

State Street (STT) turned up to new highs this week with a stronger consolidation pattern than the big banks have shown. State Street did not drop down to test the lows recently and still has not tested the 200 DMA which most of the bank stocks have been doing. The SCTR suggests this is resuming the up trend with the SCTR staying in strong territory.

The stock shows above average volume coming in all week and the MACD is turning higher from above zero. All positive developments as the stock breaks out.


Tom Bowley and I recorded a new edition of StockCharts Market Outlook 2017-06-10 on Saturday.

The StockCharts Outlook - 2017-06-10 11:00 from StockCharts.com on Vimeo.

Good trading,
Greg Schnell, CMT, MFTA

 

Industrials Back Test Their Ascending Triangle Breakout

Over the past week, it's been about an even split among sectors in terms of winners and losers.  Industrials (XLI) is one sector that's been slightly lower over the past week, but technically things still look very bright in this space.  Broken price resistance generally becomes solid price support - that's TA 101.  In the case of the XLI, broken price resistance also was the top of a very bullish ascending triangle pattern as you can see below:

After the XLI rose well above 68, we saw it pull back to test not only price/triangle support, but also its rising 20 day EMA, which is currently at 67.15.  Volume accelerated on the triangle breakout which, in my opinion, helps to confirm the pattern.  Now that the back test is complete, I'd look for absolute and relative strength from industrials.

Happy trading!

Tom

Vulcan Materials Consolidates above Breakout Zone $VMC

After struggling the first three months of the year, Vulcan Materials (VMC) is showing signs of life since late March with good upside volume and a breakout in early May. Notice that the stock broke above a resistance zone in the 122-125 area and this zone turns into support. The stock fell back into this zone and then consolidated with a triangle of sorts. We can debate where to draw the triangle lines, but this misses the bigger picture. The stock is consolidating above the breakout and this consolidation is a bullish continuation pattern. Look for a breakout at 130 to signal an end to this consolidation and a resumption of the bigger uptrend. I consider the bigger trend up because the 50-day EMA is above the 200-day EMA, the 200-day EMA is rising and the stock is above the 200-day EMA. 

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Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Gold Finally Breaks Out With The Miners

Investing in Commodities has been tough for the first 1/2 of 2017. Every rally was a false breakout and every opportunity seems to have dried up. From Agriculture, energy, precious metals, industrial metals, steel, copper and cocoa, it has been a hard spring for trading from the long side. Today, Gold gives us a glimmer of hope that this may be changing. The miners alsolutely soared today up 4.5% in the GDX ETF. The volume was even more impressive with 98 million shares today with an average of 55 million normally. 

Continue reading "Gold Finally Breaks Out With The Miners" »

UPS Goes for a Breakout

United Parcel Service (UPS) has been lagging the broader market this year, but may be turning around as it bounces off support and momentum turns up. UPS surged to a 52-week high in December and then retraced 50% with a sharp decline in January. The stock managed to firm near broken resistance and consolidated after this plunge. There is clearly a lot of support in the 102.5 area and the stock surged off this zone the last two weeks. Also notice that weekly MACD turned up and crossed above its signal line. This improving technical outlook increases the odds for a resistance breakout and a continuation of the 2016 advance. 

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Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Fortinet In Strong Industry, Tests Gap And Price Support

Fortinet (FTNT) is down roughly 5% from its recent price high as money rotates within the software industry ($DJUSSW).  It's up close to 30% year-to-date, however, so a little profit taking in the short-term is likely providing an opportunity.  FTNT looks to be approaching and testing a key price and gap support level that's been holding for the past 6-7 weeks.  RSI is in the mid-40s as FTNT has been underperforming the software industry as a whole during its consolidation period.  Here's the chart:

Continue reading "Fortinet In Strong Industry, Tests Gap And Price Support" »

Abbott Labs (ABT) Cracks The Glass

Abbott Labs (ABT) has been trapped under the $45 level for about 18 months. This week, the stock blew through the glass ceiling, cracking new highs. The recent breakout in late February was a cautionary signal the stock was trying to go higher. This week it is looking to close near the top end of the weekly range.

Continue reading "Abbott Labs (ABT) Cracks The Glass" »

Coal Facing Poor Technical Conditions And Historical Headwinds

The Dow Jones U.S. Coal Index ($DJUSCL) spent 2016 bouncing from the ashes after a disastrous 2015 in which the DJUSCL lost 90% of its value.  The "dead cat bounce" looks as though it may have ended as price action has rolled over and the weekly MACD has clearly turned bearish.  Here is the current technical view:

Continue reading "Coal Facing Poor Technical Conditions And Historical Headwinds" »

Russian Index Forms Bearish Continuation Pattern

The Russian Trading System Index ($RTSI) is struggling this year and down around 6.5% year-to-date. In contrast, the S&P 500 is up over 7% year-to-date and the Eurotop 100 ($EUR) is up around 6.5%. In addition to relative weakness, the index sports a bearish continuation pattern after a breakdown in February. Notice that the index broke support in February and then formed a triangle the last few months. This triangle represents a rest after the sharp decline and a break below triangle support would signal a continuation lower. Also notice that the rising 200-day SMA is right near triangle support. The triangle measures around 100 points and a break near 1070 would target a move to the 970 area. Take this target with a grain of salt! 

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Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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