Posted by barkand on May 27, 2011 under Commodities | 
Silver prices have come down hard – by about 20% – during the past month. So is silver cheap here?
The short answer: No.
Silver would need to fall by another one-third from today’s levels to reach the long-term ratio of silver to gold. Of course, another way to accomplish this would be a massive run-up in gold prices relative to silver. But our guess is silver will do most of the work in this relationship.
The chart below shows us the ratio of silver prices to gold prices. When the ratio is going up, silver is becoming more expensive (valuable?) compared to gold. As we see, the ratio was somewhat stable until last autumn. Then the silver mania kicked into gear and sent the price up to near $50 per ounce.
There are two more items of interest here. First, the silver-gold ratio is now sitting right at its 20-day moving average, which is currently acting as some weak resistance. And we didn’t show it on the chart , but the move from the recent low in the ratio to this week’s top was exactly a 38.2% Fibonacci retracement.
Posted by barkand on May 24, 2011 under Bollinger bands, Candlestick charts, Commodities |
The share price of North American Palladium (PAL) has been cut in half in a short time. Most of the damage has come this month. It started May near $6.50 but has been living near $3.50 recently. Yesterday, it rose to close at $3.68.
We think the conditions are good for PAL to bounce back and reclaim at some of the ground lost this month. Here’s why:
- It is possible that prices have made a bottom within the Bollinger bands after skidding along the lower band. Downward momentum has slowed. But has it reversed? Yesterday’s “piercing pattern” gives us some optimism, although we would have preferred to see more volume.
- Many people buy PAL as a proxy for palladium. And palladium prices have moved sideways for the last two weeks while the share price of PAL has continued falling.
We would be a cautious buyer here. A more low-risk approach would be to wait for a break above $3.80.
Posted by barkand on May 19, 2011 under Classic chart patterns, Support / Resistance |
With the day of rapture upon us, it seems appropriate to take a look at the prospects for MGM Resorts (MGM).
Eternity is a long time, but the chart below covers only the last three years.
What we see is a very long ascending triangle. The top of the triangle, providing resistance around $17, has been touched four times: In October 2008, January 2009, April 2010, and again in January 2011.
Prices bounced off the bottom of the triangle most recently just last month, and are now headed back toward $17. The most likely outcome is for the price to break out through the top of the triangle. And when (or “if”) it happens, it could eventually reach the $25-28 range based on the height of the triangle and previous support before the triangle was formed.
Remember to take your shares with you to the afterlife.
Posted by barkand on May 13, 2011 under Candlestick charts, Classic chart patterns, Commodities |
On the MTA website recently, there was a small discussion about the exact meaning of “dead cat bounce”. Today, courtesy of the silver market, we have a good visual example.
It is not strictly necessary, but in this case prices did retrace back to the first Fibonacci level before falling to new lows. Also, the bounce here could be described as a case of a “falling three methods” continuation pattern in candlestick terms.
Posted by barkand on May 11, 2011 under Bollinger bands, Candlestick charts, xattascope |
Net1 (UEPS) has been in a severe downtrend, losing one-third of its market value just since the beginning of the year. However, the last three trading days strongly suggest that the bottom is in for UEPS shares.
The dragonfly doji on May 6 followed by higher closes the next two days is a strong signal that the market has changed. When you add in the strong volume on all three days, it makes the situation look that much more positive. [ By the way, the spark for the change in sentiment was an earnings report - the company reported a loss.]
We were curious about that dragonfly doji, so let’s take a look at it under the xattascope. Below is a 15-minute chart covering the last five trading days. The initial selloff following the earnings release was not a matter of a few panicked trades. It lasted more than half an hour, pushing the share price far below the lower Bollinger band. Notice how the market caught its breath around noon New York time and started moving higher. When prices make a bottom within the bands after making a bottom outside the bands, it often leads to a trend reversal.
And what should we do now? In this case, we can advise a 3 step approach:
- Nibble a bit now.
- If UEPS can close above its 20-day moving average, buy some more. Notice that the shares were repelled from it yesterday.
- If the 20-day moving average turns up and the price action is still positive, you can add to your position.
Posted by barkand on May 9, 2011 under Bollinger bands, Cartoons |
An article in the May 6 2011 edition of USA Today got our attention (McDonald’s Revamps Stores To Look More Upscale). A billion dollar makeover is coming to many McDonald’s stores, which includes wood furniture and softer colors. The article includes this quote from the editor of BurgerBusiness:
“The trick is to go techno without going Jetsons.”
We immediately recognized this as an opportunity to have the one and only Judy Jetson to make an appearance on this blog. That’s her to the right, apparently dining at a futuristic McDonald’s.
This blog is about technical analysis, so let’s look at a chart of MCD. Below is a 30 year history of the stock. Notice how the shares went from seemingly nothing to its current price near $80. The Great Crisis barely registers on the chart. However, the stock did lose two-thirds of its value from 1999 to 2003.
What is interesting to us is that the stock has been riding up the upper Bollinger band almost constantly since 2005 – but for the crisis related period in 2009. The shares hit $80 late last year and pulled back. Will prices ultimately go higher? It probably depends alot on how the new look is received by customers.
But one thing we are sure of: You will see it in the chart first before the fundamentals give us any information.
