It will be interesting to see if AAPL (Apple Inc) wows the public next month with the widely expected larger iPhones, this oversized iPad or any other tricks it may have up its sleeve because the chart on AAPL is starting to look ripe for a correction. Besides this steep rising wedge with bearish divergences building on both the RSI & MACD, as this chart clearly illustrates, such overbought clusters on the RSI, such as those recently put in place, have traditionally preceded significant corrections in the stock (dashed red arrows). Along with AAPL, several of the charts from the Live Charts page were updated last night including all of the Market Leading Stocks (AAPL, XOM & CVX) as well as the Sector ETF charts.
So far, GLD is playing out as expected after moving lower to tag the bottom of the 4-hour triangle pattern followed by a reversal (so far) though there is still a lot of work to be done to strengthen the bullish case, namely a break above the triangle pattern. However, a move below Thursday’s low of 122.45 would certainly dampen the near-term bullish outlook for GLD. Previous & updated 4-hour charts of GLD below:
SLV broke gapped above the 60 minute downtrend line today & is currently backtesting from above. My preferred scenario has prices moving higher but the 18.50 level remains key support, should this breakout fail. Previous & updated 60 minute charts of SLV below:
GLD is currently at the bottom of the trading range defined by the white shaded box. An upside break of the range (still favored) would be bullish while a downside break (certainly a possibility) would likely bring GLD to the 119.50ish support area. GDX is also sitting near the bottom of its respective trading range and will almost certainly follow the lead of GLD with an upside (favored) or downside resolution from the recent trading range.
Regarding the broad markets, I still think that we’ll probably only see marginal new highs before a meaningful reversal but as recently mentioned, I do not plan to add any more short exposure until we see some decent evidence of a reversal soon (e.g.- a bearish engulfing candlestick or some other type of semi-reliable technical evidence of a reversal). A good start would be to see the SPY close below Friday’s low of 198.74 sometime this week, especially if that were to happen later today (i.e.- a complete backfill on today’s gap & then some). My preference is to keep things light & avoid adding any new exposure, long or short, to all but the best looking breakouts or chart patterns at this time.
The VHI (Valhi Inc) long trade has now hit the second price target, T2 at 7.72, for a gain of 40.4%. Consider booking partial or full profits and/or raising stops, depending on your trading plan. As mentioned earlier, this recent move higher has been confirmed on volume with this most recent sharp move on increased volume actually starting the day before this bullish article from Zachs Equity Research was published. T4 remains the final target for now but again, consider at least raising stops to protect profits if holding out for T3 and/or T4. Longer-term traders might consider a stop below the lows put in earlier this month while more active traders might prefer more aggressive stops.
This 4-year, 2-day period chart shows the track record on VHI with 3 out of the 4 trades (including this one) being successful and all three producing gains well into the double-digits. The first short trade in early 2012 hit the 3rd & final target for a 41.3% gain in less than 3 months and reversed sharply upon reaching the final target level. The second & last trade on VHI, also a short trade, was initiated in early 2013 and hit the second target (T2) for a 19.7% gain and continued to fall about a third of the way to T3 before reversing. In late May, VHI was added as a speculative/aggressive long trade which was stopped out in June. VHI was once again added as an aggressive long entry on the breakout above 5.50 in late June and still looks promising from a longer-term perspective although the stock is quite overbought at this time.
With SLV (Silver ETF) having pulled back to nearly the 78.6% Fibonacci retracement level, a break above this bullish falling wedge/contracting channel would likely signal the end of the near-term downtrend in silver prices. The white horizontal lines mark a few of the near-term targets.
Should prices continue much lower, SLV may test the critical 17.75ish support level that marks the mid-2013 & mid-2014 double bottom lows. Any break & sustained move below that level would have longer-term bearish implications for SLV. By sustained, I am referring to anything other than a relatively brief & shallow break below that support level which could serve as a bear-trap/flush-out move assuming prices were to regain the 17.75ish level shortly afterwards (a bullish event).
As of now, I favor a reversal in both GLD & SLV from at or near current levels but remain open to all possibilities as the precious metals are in a somewhat precarious technical position at this time.
After falling mere pennies shy of T2 back on July 7th, VHI is once again making a run at that resistance/target level, coming within 4 cents of T2 earlier today while trading volumes have been increasing lately (a bullish sign). A solid break and close above T2 would open the door for a move to the 3rd & possibly the 4th & final target soon.
There really aren’t many new developments to report on the markets or with the Long Trade ideas other than the fact that I plan to move to the PWE long trade to the Completed Trades category as it had exceeded its previously suggested stop (both a solid move & close below 7.40) the day after the last update on Aug 4th. All trade ideas, winners or losers, are updated when removed for archiving purposes but I need to post the PWE trade removal under a separately tagged post for categorical purposes (email notifications will not be sent as that will be an administrative & not a time-sensitive post). There are also several Active Short Trades that I plan to remove as they have either exceeded a suggested stop or no longer look compelling from an R/R perspective. Those closed trades will be sent out in a single post with any relevant notes on the individual trades & an email notification will be sent when posted.
Other than the trade updates, I’m still watching GLD closely and so far, so good as GLD has found support just above the bottom of the symmetrical triangle pattern & the horizontal support zone posted on the 4-hour chart yesterday. My expectation remains that the near-term downtrend in gold prices will reverse soon with a resumption of the intermediate-term uptrend but we’ll most likely have to wait until next week to see if that is the case. As mentioned in last Thursday’s market update, my primary focus & positioning at this time is long gold & the mining sector in anticipation for the next major leg up (although I will start taking defensive measures/reducing my holdings should gold prices break the aforementioned support levels). Although I’m also positioned long with several other individual stocks and ETF, such as select commodity related ETFs, my overall positioning remains net short with a overweight on the regional bank sector & select financial stocks but as also mentioned in last Thursday’s market update, I do not plan to any more short exposure until/unless prices move back below the upper-most resistance levels (now support) covered in that post. Feel free to contact me if you have any questions regarding any of the Active Trades or Setups listed on the site at this time.
GLD (Gold ETF) has been consolidating within this large symmetrical triangle & is poised to gap towards the bottom of the pattern (along with horizontal support) today. A daily close below the triangle might open the door for a test of the mid & late 2013 lows in GLD. If this intersecting horizontal + trendline support level around the 122.80-123 area is taken out (a daily close below), the next decent support level before a test of the mid & late 2013 lows comes in around 119.40. I favor a bounce off the 123 level but will not be adding any more exposure to gold or the mining sector should prices move below the triangle pattern.