AMTD will trigger a short entry on a break below this bearish rising wedge patter. Stops will depend on one’s entry price and preferred target level(s). Click here to view the live chart.
This the daily chart for the Investment Brokerage Sector (National Brokers), which includes companies such as Ameritrade, the CME Group, Morgan Stanley, E-Trade Financial, Scwhab, Interactive Brokers and more, many of which are sitting precariously above very extended and well defined uptrend lines with solid negative divergences in place on just about all indicators and oscillators. Several of the names above will be added as short setups asap but I just wanted to get the chart out there as it is always best to align the trade of individual stocks with the chart of their particular sector. This is especially important when entering positions that are counter-trend trades to the prevailing trend of the broad market and one reason that we’ve have numerous short trade ideas recently hit profit targets for double-digit gains, such as the solars, despite one of the most resilient uptrends in the broad market in years.
There are a numerous attractive short setups forming in the investment brokerage sector. ETFC (E-Trade Financial Corp) will trigger a short entry on a break or daily close (for those preferring additional confirmation in order to reduce the odds of shorting a false breakdown). ETFC does have the potential for a longer-term swing short trade if we get a bearish cross of the 20 ema below the 50 ema. By my best guesstimation, I would say that bearish trend change signal would come around the time prices move down to the T1 area (in which case I would likely hold out for T3). Targets levels are shown on this chart with the exact suggested buy-to-cover levels to follow. Stops to be determined upon entry. Static daily chart shown or click here to view the live, annotated chart.
Today’s sell-off in US equities resulted in some solid technical breakdowns in some of the more volatile indices and sectors, such as the $RUT (Small Caps) and XLK (Technology) while the broadly diversified large cap indexes, such as the S&P 500 and Nasdaq 100 are still perched comfortably above their respective primary uptrend lines, albeit looking increasing vulnerable to a significant correction at this time. The S&P 400 Mid Cap Index, which falls between the more volatile, lower quality small caps and the more (relatively) stable large caps are very close to, but have not yet broken below its primary uptrend line/bearish rising wedge pattern. This pattern of the recent under performance of lower quality small cap stocks following the pronounced outperformance by small caps in the 2nd & 3rd quarter of this year is typical of the market action often observed in the final stages of an advance. (Discussed in detail in this post a couple of months ag0).
2013 has been a year plagued with false sell signals and bear traps and with all but the shortest-term trend indicators remaining on buy signal for now, today’s breakdown in the small caps and tech sector may very well prove to be just another false alarm. However, a preponderance of bearish developments such as extreme sentiment readings, record high margin interest, multi-year low short interest, multi-month bearish divergences and wedge patterns on just about every major index continues to build and will almost certainly manifest in the form of lower stock prices in the coming months. The chart below is a screenshot of four trend indicators for the S&P 500. My guess is that by the time the S&P 500 & Nasdaq 100 finally do fall below the primary uptrend lines shown on the charts above (and that can & most likely will happen much faster than most expect, as prices tend to fall much faster than they rise), that the short-term indicators will all be on solid sell signals with the intermediate-term trend very close to moving to a sell signal as well.
One final chart worth mentioning is the $NAAD (Nasdaq Advance-Decline Index), which finally triggered a sell signal today on a break below this very long uptrend line and large rising wedge pattern. As the chart illustrates, a sell signal is given following a break below the $NAAD uptrend line once negative divergence has been put in place (the MACD making a lower high while the $NAAD makes a higher high). Nothing is 100% and I believe that I’ve posted one false sell signal using the $NAAD earlier this year but that was in the early stages of a trendline break on a questionable trendline draw (very few touches), nor was I using the negative divergence as confirmation to the signal. Maybe this sell signal pans out, maybe not but this is an extremely well defined and long standing uptrend line with solid divergences in place. One possibility would be for the $NAAD to make one more thrust higher to backtest the wedge from below before a solid trend reversal in the $COMP takes hold. However, this is only the 5th confirmed sell signal in at least the last 4 years and the previous four signals were all followed by corrections that were roughly commensurate in scope and duration to the preceding advance in the $NAAD so both bulls and bears alike may want to keep an eye on this indicator.
Over the last couple of months, I’ve been working on building out the new Live Chart Links page with links to numerous live, annotated chart of various US & global stock indices, various sectors, commodities, fixed income instruments and market leading stocks. I will continue to add new chart links to that page going forward so check back from time to time and feel free to contact me if you have any suggestions for a specific chart to be added or notice that any of the trendlines or comments on the charts need to be updated.
I’m also working towards a goal of providing live chart links to as many of the trade ideas as possible, especially for the more promising trades, such as this P (Pandora Media Inc) short trade that was first mentioned in the Nov 19th Social Media Stocks Video. The live chart for the P short trade can be viewed by clicking here. At some point in the future, links to live charts on all the trade ideas might be located together under the respective categories below the Trading & Investments Ideas master category found at the menu bar toward the top of the site. Currently, trade ideas with a live, annotated chart will include a link to the live chart under each recent post. Static posts are also provided for a quick visual reference as well as a useful educational resource by providing a pictorial history of each trade. As always, all posts associated with a specific stock, index, or ETF can easily be referenced by using the Posts By Ticker Symbol drop-down box on the sidebar located on the home page. For those following a particular trade, either bookmark the live chart link (or save the chart as your own if you subscribe to StockCharts.com, checking back for any modifications or updated to the live chart from time to time) or you may continue to reference the recent posts on the trade as discussed above, where the live chart link will remain at least as long as the trade is still active.
HON will be added as an Active Short Trade here on this break below this large bearish rising wedge pattern. Targets are marked on this daily chart with the exact suggest target levels to follow. A suggested stop on a move above 89.60 (just above the recent highs) offers a R/R of about 3:1 to my current preferred target of the T2 zone (76.30-75.40). As always, stops should be set commensurate with one’s own risk tolerance, trading style and preferred profit target.
On an administrative note: I’m noticing quite a few potentially significant technical developments today (obviously bearish). As the frequency of chart & commentary postings will likely increase this week, the automatic email notifications feature will be suppressed for some of the non-time sensitive posts (email notifications on actionable trade ideas such as this will continue to be sent immediately upon publication). The new feature to opt in or out of notifications on specific categories should also be available by the end of this week as well. As such, those signed up to receive email notifications may want to periodically check the site for new updates in which notifications may not have been sent out.
YZC (Yanzhou Coal Mining C0) has pulled back to support & could provide an objective long entry or add-on. Consider a stop below the 9.10 area (or higher, based on your average cost). YZC was added as a Long Setup on Oct 21 with a buy trigger for only a partial position on a move over 10.75 (bringing to a full position if & when the downtrend line is cleared). The stock triggered an entry on Nov 21 but reversed a few days later and has now fallen to a key support level. Although one could add to an existing partial position here or establish a new entry, with a stop not far below, my preference is to hold off on adding any long exposure at this point as both the $RUT & XLK (and likely some other key sectors or indices) have broken those key uptrend lines highlighted earlier today. Also keep in mind that KOL (the coal sector ETF) still remains below key resistance. The updated daily chart of YZC (adjusted for dividends) shown or click here to view the live chart of YZC.
The $RUT (Russell 2000 Small Cap Index), XLK (Technology Sector ETF) and XRT (Retail Index ETF) are just a few U.S. indices and sectors currently at key technical support levels. Any significant downside from current levels would trigger sell signals and likely bring prices down towards the first support or target levels on these charts. Links to these charts are available from the Live Chart Links page, which can be found under the Market Analysis tab on the menu bar at the top of the page.
Most, if not all of the charts on the Live Chart Links page are up to date including this AAPL (Apple Inc) daily chart. Thursday (Dec 5th) was an interesting trading day for AAPL. The stock just managed to break out to a new 52-week high as it took out the Dec 4th, 2012 high, but still fell shy of the Dec 3rd, 2012 high… interesting time symmetry. What I also find interesting is that AAPL was stopped cold at the 61.8% Fibonacci retracement of it’s previous bear market (when using prices adjusted for dividends). The 61.8% retracement level when using the unadjusted stock price lies about another 8 points or 1.4% above Thursday’s highs, another potential resistance level to watch should AAPL make another thrust higher.
Essentially, prices have been wedging higher while most indicators and oscillators diverge over the last several months. Since those bearish divergences began forming in mid-late August, AAPL has registered two separate clusters of overbought or very near overbought readings on the RSI (see red arrows on chart for the history of price action following such readings). The previous cluster of overbought readings which came with the second lower reading on Sept 9 was immediately followed by a 13% plunge in the stock. The second and most recent overbought cluster has just occurred with the sell “trigger” coming on Friday’s RSI cross back below the 70 level. Finally, keep an eye on the CMF (Chaikin Money Flow) which I’ve added to the top of the chart. Historically, the CMF has cross from positive to negative territory in the very early stages of significant corrections in Apple. Barring an immediate and sustained move higher in the stock, the CMF will likely move solidly into negative territory over the next several trading sessions.
RNO (Rhino Resource Partners) will trigger a long entry on a break above the descending price channel as shown on this 60 minute chart. RNO was a recent Growth & Income Long-term Trade that was stopped out on a weekly close below the larger falling wedge pattern shown on the 2-day period chart below. All posts associated with that trade have been moved to the Completed Trades category and RNO will now be added back as a new long setup (a swing trade most likely lasting anywhere from 1 day to a few weeks) with an entry to be triggered on a breakout of the 60 minute descending channel (complete with bullish divergences in place). Stops TBD upon entry.
Regardless of the recent sharp sell-off in this high-yielding coal stock, RNO may still offer an objective longer-term swing trade entry if prices break above this steep descending channel and then manage to move back above the base of that larger falling wedge pattern. The volume surge on the recent break below the bottom of the wedge may indicate a selling climax as well as a bear-trap, should prices move back well above the larger pattern in the upcoming days/weeks. If so, an entry based off this shorter-term pattern could potentially morph into a longer-term trade with additional price targets to be added but for now we’ll just have see if we get some decent technical evidence of a potential trend reversal in the stock.