Posted by barkand on March 24, 2011 under Classic chart patterns | 
Stock charts don’t always give us pretty “textbook” patterns to evaluate, and that is the case with Molycorp(MCP).
If you connect the relevant closing prices going back to last autumn, you can see something of a triangle, or “coiled spring”, forming on the chart. Funny thing is the shares originally broke out through the bottom of the triangle first before reversing. Elliott Wave people might call this a “throwover”. Whatever you want to call it, we give more credibility to the reversal than the original breakdown simply due to the volume.
Some people might fear that the prices of “rare earth” minerals the company produces are not sustainable. Or that the share price is too high, compared to the price last summer. But in our collective mind, whatever excesses existed in the share price have been worked out during the basing period that began at the beginning of the year.
If we are right, MCP should add $20 from its breakout point and reach new highs in the upper $60s. If our analysis is wrong, we plan to bail out at the apex of our triangle around $47. All in all, we feel its a chance worth taking.
Posted by barkand on March 16, 2011 under Bollinger bands, Candlestick charts |
If you look at a daily chart of the S&P500 – which you can do in this post – you will see that yesterday’s action formed what appears to be a very handsome hammer. Don’t trust it.
There are two reasons why you should not grab that hammer. First we have to consider how the “price” of the index is calculated. In yesterday’s mini-panic at the open, it took a moment or two or three to find an equilibrium price for many NYSE stocks. So the opening value of the S&P500 was calculated using the last price from the previous day. (This is true also for the DJIA.) In reality, the market opened – eventually – down more than 2% but it isn’t reflected in the chart. What appears to be a hammer was actually a long white candle, which is not the worst-looking candle you could see, but it isn’t clear what it means in the current circumstances.
Even if it was a hammer, we should consider where it is. The market still closed below the lower Bollinger band. We want to see a bottom made within the bands, along with some bullish candle structures and with volume rising and falling appropriately.
Posted by barkand on March 15, 2011 under Commodities, Point and figure charts, Price trends |
Well after a short holiday, we’re back looking at energy prices.
With the developing nuclear catastrophe in Japan, every market everywhere is getting whacked. Or about to get whacked, as the US market opens in a little more than an hour from now. Even energy prices and shares of energy-related companies are getting hit.
Below is a chart of the Dow Jones US Oil + Gas Index. We have applied a 3% filter to the data, so in a sense, it is analagous to a 1×3 point-and-figure chart except this chart retains a time element.
The index has gone up almost in a straight line since last August. It only recently gave some ground along with most other markets, and will retreat more later today. The ADX indicator is also dropping from over 40, suggesting the end of the current trend.
How low can it go? After such a strong advance, the 20-period moving average often provides solid support. In this case, the 20-week MA is quickly approaching 600. That level would also represent a 50% retracement toward the three peaks registered in late 2009 and early 2010. After perhaps a brief rest, we expect energy prices and energy stocks to continue advancing.
