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NASDAQ couldn’t maintain its highs!
Author: Varun Kanotra (info)
Website: http://www.targetsix.com/
Posted: November 9th, 2006 at 11:00 pm EST
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NASDAQ missed the formation of a perfect bearish piercing line candlestick formation today. It got so close that one could argue that it did form one. I’m personally looking at today’s action as short-term (few days) bearish. Let’s analyze this quickly. First, here’s the 1 year daily chart:
By the way, you can click on the thumbnails to expand the chart to a larger size. If you look at today’s action, we had a gap up on open (thanks to CSCO for that) and then right around 11 am we started selling off. Until then, the NASDAQ was strong assimilating CSCO’s spectacular yet expected earnings. The closing candle almost pierced the mid-point of yesterday’s bullish white candle - hence the “almost” piercing line formation.
Let’s take a look on the macro level for the NASDAQ i.e. a looong term chart (like 20 years). Each candle here represents a whole month of price action. Here we go:
Now, we are almost half way through the month of November. If you look at the candle that has formed till now, it shows us that the market is indecisive at this point. And its no surprise that its at the top of the drawn channel line. There is a good chance that we close the month with a red candle (if the NASDAQ complies with and follows the double-top formation). The conflicting thought here is that we are getting closer to the holiday season and the usual trend has been that the market is bullish after thanksgiving and through christmas and new year a.k.a “the santa rally”. Whether we have a santa rally this year remains to be seen but what’s interesting is the timing of all this along with the formation on the monthly chart.
If we break out of this channel, a target of 2,750 would not surprise me. Obviously we are looking at about 18-24 months to get there (close to the presidential elections, yes!…surprised?)
Enough talk on the NASDAQ, here’s a look at what the VXN do today:
As you can see, it fell back into its descending triangle after the market tried to fight the annual highs and make newer highs. It seems to be comfortable here, but for how long?
Since VXN is a measure of fear on the NASDAQ, I would say that the NASDAQ is at a make it or break it juncture. We should have a better sense of direction by next week. If we continue to chop and fall, it wouldn’t surprise me as we’re at the double top formation. If we break-through, the market shall enjoy a nice ride into the new year. That certainly seems to be the favorable place to be considering the recent strong trend and the holiday season that’s coming up.
Now for some much awaited trades:
PD: The stock made a nice 2.5% gain today consider the rest of the market was down. This sure shows some strong conviction in the stock. However, we do have some head wind at 102.50 that the stock will have to break through to make me wanna go long. Until then, enjoy the time decay do its work on those november verticals :-)
AAPL: A beautiful break out today from the recent highs. Here’s the chart on this one (since its been a while we’ve looked at one):
If you ask me, this one’s going to a $100. Keep in mind, we’re heading into the shopping season. With increasing MAC and iPod sales, the stock should do nothing but climb higher. Notice the increasing volume over the last couple of days too.
RIMM: I like RIMM….i like it A LOT! Let’s check out the 1 year chart:
Also, here’s the 5 year look:
See that break-out of the channel? And this is on a long-term chart. That’s what daddy likes about this one :-). A little pull-back would be the perfect entry point. I wouldn’t buy some tomorrow as there was some profit taking today. Let this one consolidate for a few days, see if it continues higher or pulls-back with the NASDAQ.
CME: This one shed off some gains today. The stock has been extremely choppy recently. While that has been great for the ones trading credit spreads, the single-option directional traders got killed. I’d be concerned more tomorrow if the stock closes below 490. Here’s the long term 5 year chart:
There’s definitely bearish pressure on this stock. We will see what next week’s volatility brings.
XAU: I like XAU here. Take a look at the 5 year chart that shows a beautiful break-out of XAU out of the channel formed by a previous fibonacci fans I had drawn (in blue) and the trend-line that XAU seems to be obeying.
Notice that the XAU is in a 50 point trading range (between $120 and $170). Also on the 5 year chart, the lower highs that index has formed are shaping the index up for a bearish triangle. We will have to see where the index tops off. It should be coming soon. So, even though we’ve broken out of the immediate short-term triangle on the micro level, the longer term bearish triangle is still intact. This one should be interesting.
Here’s a look at the 1 year chart
That’s all for tonight. Futures are down currently, but so is gold (only 3 points though). We will see how we close for the week, most likely bullish!
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ETFs, Gold, Indexes, Oil, Stock Market, Stocks, Trading, Varun Kanotra
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