Posted by barkand on October 23, 2011 under Commodities, Price trends, RSI, Support / Resistance | 
In specific situations, we like to include a 4-period RSI with our charts. The current weekly chart of gold fits the conditions.
Notice how RSI(4) dipped below 30 last month. It hasn’t done that since January 2010, or 20 months ago. What we are looking for is whether RSI(4) will make a second thrust below 30 or if it will cross convincingly above 50.
A cross above 50 would be a signal that the trend remains intact. However, another break below 30 would turn us bearish in the short-to-intermediate term.
And look where we are on the chart. A $100 drop in gold would put us back at the bottom of the price channel and also at our modified lower Bollinger band. A break of that support would almost certainly push RSI(4) well below 30. Those three signals, together, would be a big negative for the direction of gold prices.
Of course, gold could simply turn higher from here. But if it does reach the mid-$1500 area we will be watching intently.
Posted by barkand on October 21, 2011 under Bollinger bands, Support / Resistance |
People love trading low-priced, high volume names like Canadian Solar (CSIQ).
Judging by how the chart looks, we imagine that many have been burned from trading this one. Down 70% since the end of June, the shares now fetch $3.20. And there was barely any sunlight. CSIQ skidded along its declining lower Bollinger band six different times. Only once did it manage to briefly break above its 20-day moving average. Even that did not last long, as it was quickly hammered back down.
But it is possible – possible — that the long winter is over. The stock has recently found support at $3 and could be forming a bottom within the Bollinger bands – a bullish development. After the previous bottom (that would be number 6 on the chart below) there was unusually strong volume taking the price back up to $4. We noticed also, however, that the shares have been meeting stiff resistance at $4. Adding it all up, we feel that CSIQ has potential to reverse here. Or, worst case, it could go through a period of ping-ponging between $3 and $4 for a while. That doesn’t sound like much, but in percentage terms it could add up to big profits.
Posted by barkand on October 20, 2011 under Bollinger bands, Candlestick charts |
Rare earth darling Molycorp (MCP) is flashing some bullish signals after its meltdown last month.
MCP fell more than 40% in just two weeks. The freefall was arrested with two consecutive “hammer” candlesticks, which formed well within the Bollinger bands. During the first leg of the decline, prices closed outside the bands five days in a row. So selling pressure was easing and those hammers were an indication that buyers were beginning to appear.
For the past week, there has been a pattern of modest accumulation. On the chart below, you will notice a pattern of relatively high volume on “up” days as compared to “down” days. With a little help from some positive market sentiment, we feel that shares of MCP could rally back to its previous trading range from $50-60.
Posted by barkand on October 13, 2011 under Classic chart patterns, Commodities |
Today we have a quick note on everybody’s favorite commodity / currency / religion.
After getting whacked a few weeks ago, gold has been slowly creeping higher. We see alot of resistance ahead. Consider:
- GLD is currently sitting at the 20-day moving average, which should at least act as a speed bump. Gold itself hit the 20-day average yesterday and pulled back.
- GLD is nearing the first Fib line of resistance at 166 and change (next one is at 169).
- The quasi-window from 166-167 should also be resistance. Of course, the spot market for gold does not have these price gaps. But looking at the U.S.-traded ETF helps to see areas of fast-moving prices.
The current chart pattern, along with diminishing volume, has us on alert for a bear flag which could potentially take GLD down to 135. We are not looking for things to get that bad. In fact, we would not be surprised if gold eventually goes much, much higher. But we do expect more “backing and filling” to frustrate the bulls before that happens.
Posted by barkand on October 5, 2011 under Candlestick charts |
The first two days of this week created very similar chart patterns for most U.S. stocks. Starting from a weak position, they were down badly on Monday. Down again most of yesterday. Then an orgasmic reversal later in the day.
Some stocks rebounded better than others. We can look at variations of a “piercing pattern” to separate the men from the boys. Let’s examine three stocks which look similar but have one important difference in yesterday’s price movements.
First up is E-Trade (ETFC). Yesterday, prices were plummeting as part of an ongoing downtrend. The big reversal brought it back all the way to Monday’s close (and also all the way back to the lower Bollinger band). In candlestick terms, this is an “in-neck” pattern.
Next is US Steel (X). The chart looks nearly identical to ETFC over the last three months. But notice what has happened this week. Prices not only reached Monday’s low but thrusted well into the previous candlestick’s real body. This is a sign that US Steel has a better probability for a rebound than does E-Trade.
Then there is Dupont (DD). Does that chart look familiar? But look at what happened yesterday. Shares rallied so strongly that Monday’s candlestick was completely engulfed by yesterday’s price swing. Notice also that, like US Steel, the current price is now well above the lower Bollinger band. Of the three, DD looks like the one which will fare best in the immediate future.
What we have here are really three shades of grey. In the end, all three will be strongly influenced by the mood and general direction of the market. But of these stocks, we expect DD to be the strongest, followed by X, and then ETFC will be the weakest.
