Monday, June 29, 2015

Reversal symmetrical triangle completed in Nasdaq 100 (QQQ)?

The U.S. stock indices dropped over 2% today. Let's examine the charts. First, the QQQ:

As indicated on the chart, today's drop may start a significant decline. But the market does not follow a script. Stocks can and will do anything. As traders, we can only evaluate the potential rewards against the risks of trading a set-up.

Let's look at SPY:

SPY also possibly completed a bearish pattern today: a 3-month Head and Shoulders top. It now rests on its 200-day simple moving average.

Finally, let's look at a 1-year chart of the NYSE index:

What seemed like attempts to break out (up) of a 9-month continuation H&S bottom has now turned into something else. Yes, stocks can still go up from here, but let's consider another possibility. The next chart focuses on the last 6 months:

We see a possible bearish broadening top (megaphone) and today's decline may have completed the pattern. But remember that classical charting is about possibilities and never predictions or guarantees. Stocks may recover quickly from today's decline and invalidate this broadening top interpretation. Keep an open mind.

Tuesday, June 23, 2015

Chart analysis of Ford Motor

We discussed last month a possible bearish chart pattern in Ford:

The price target of the 3-month Head & Shoulders Top was met in early June:

So what now? The next chart offers a possible bullish interpretation for Ford:

Remember, this breakout from the channel is only a possibility. Also, channel breakouts are tricky to trade. The stock can decline and stop us out of our position yet stay above the descending upper boundary. When I trade a breakout from a channel, I use a smaller-than-usual position and set a wider stop.

Saturday, June 20, 2015

Where stocks stand today

SPY has traded within a tight range throughout 2015 and especially since February:

Let's see what QQQ is doing:


So stocks are range bound and possibly coiling, which is what stocks have been doing throughout the year. We could do much worse than staying patient until the market declares its intention.