Healthy Pause For Harman International (HAR)

Posted by barkand on January 25, 2012 under Classic chart patterns, xattascope | Be the First to Comment

Harman International (HAR) is now in a classic technical setup.

On the daily chart below, we see Harman hitting lows along with the rest of the market in early October. Then prices shot up to a high of $44. Since then, it has spent three months forming a base. Some would call it a “coiled spring”. Others might see a “lumpy” cup-and-handle pattern. In either case, it is a bullish development for HAR. And now the shares are once again at $44 and drifting sideways to down on diminishing volume over the past three days. This is exactly the behavior we want to see if prices are to continue higher.

Let’s take a closer look at this base through the xattascope, to be sure the market is not tricking us.

On this hourly chart, we see that the leveling off of prices has been accompanied by quiet accumulation. Once it reached the $44 level every burst of volume pushed HAR higher, as noted on the chart. The bulls are clearly interested in snapping up more shares any time the price drifts a little bit lower.

We expect HAR shares will resume their uptrend before the week is over – possibly as early as today.

JA Solar (JASO) Gets Microwaved

Posted by barkand on January 20, 2012 under Classic chart patterns | Be the First to Comment

So at this time yesterday, JA Solar (JASO) shares were sitting at $2.11 and it seemed to us there was some constructive price action. We thought JASO would continue up to the $2.30 – $2.40 area.

Well that didn’t take long. Within 30 minutes of the market open, JASO ran up to a high of $2.34. And then….

And then the shares crashed 25% over the next three hours – as did many others in the solar energy sector. After that, JASO limped sideways into the close. But the internal dynamics in the market suggest it was saved by the bell. Prices appeared to be carving out a bear flag (really more of a pennant) as seen below on the 5-minute chart of the past two days.  It sold off a bit into the close and we expect more of the same at the open today.

We are going to relax, make some microwave popcorn, and watch this one from the sidelines.

Hiding Under Rock, Solar Stocks Found

Posted by barkand on January 19, 2012 under Classic chart patterns, Volume, xattascope | Be the First to Comment

Traders and investors rediscovered the solar energy industry last week, after shunning anything solar in 2011. The charts look similar for almost any stock in this industry, or even ETFs like KWH or TAN. But here we will look at JA Solar (JASO) as one which is representative of the group.

The most prominent feature on the weekly chart below is the cascading bear market covering all of last year. It got so bad that JASO took out its March 2009 low. But if you look more closely you notice that, late last year, the stock began making lows well within the Bollinger bands instead of sliding down the lower band. You rarely see a stock spend an extended time hugging the lower band and then launch into a bull market. This intermediate step of a low within the bands is usually necessary.

Another thing to consider here is that while JASO made a big move in percentage terms in the past week, it has barely made a dent in recovering territory lost last year.

Now let’s look at JASO a bit more closely and see whether this was a healthy breakout or not. With our xattascope, we will examine a 15-minute chart stretching back five days.

What we want to see is heavy volume on the original breakout followed by steadily decreasing volume as the base is formed, And that is exactly what happened. Even in yesterday’s push above $2 you can see that the move was accompanied by a good amount of volume. And, more generally, the fact that JASO broke out of this new base so quickly tells us that the market is eager to buy more.

Where does it go from here? One popular – if arbitrary – method of making price projections on bull flags would say the next stop should be in the $2.30 – $2.40 area. That also happens to be where some minor congestion appeared during a failed rally in late October.

Ruths Chris (RUTH) Sizzles Through Resistance

Posted by barkand on January 13, 2012 under Classic chart patterns, Point and figure charts, Support / Resistance | Be the First to Comment

Today we are looking at Ruths Chris Steak Houses (RUTH), and not just because we are hungry. And today you get two charts for the price of one! First will be a candlestick chart and then we will look at a point-and-figure chart.

RUTH broke out of an ascending triangle yesterday on heavy volume. A strong resistance area had formed the upper line of the triangle near $5.50. It began last summer with a congestion area in the mid-$5 region and had been threatened unsuccessfully several times since then. The lower line, providing support, finds its roots in the lows formed in October. These two lines would soon be meeting and the typical result is for prices to push through the resistance area.

Next, we will look at the same data in a point-and-figure chart. Specifically, we are using a 10 cent box size with a 3 box reversal. There are a couple reasons for showing this chart: (1) it cleans up alot of the noise on the candlestick chart seen above and (2) it provides a classic textbook structure rarely seen on 3-box reversal charts.

On the chart below, we can clearly see that RUTH had descended into a trading range from $4.40 to $5.40. If you focus on that congestion area you can see the symmetry in the price pattern. You might notice also that in the middle of this congestion area prices broke down badly and then completely reversed. This was a first clue that prices were bottoming.

In December, RUTH finally poked her head above that congestion zone. Prices did not make much progress immediately, but it nevertheless generated a price target of $6.80 according to P&F rules.  Yesterday’s break above $5.60 (actually closing at $5.95) made us more confident that RUTH shares would start to sizzle.

A “Triangolo” for Russell 2000 (RUT)

Posted by barkand on November 8, 2011 under Classic chart patterns | Be the First to Comment

Just a short note today about the Russell 2000 (RUT).

The Russell was one of the last major indexes to break out of the trading range of the past several months. But it has been catching up, outperforming the S&P 500 since the end of September.

RUT has formed a symmetrical triangle beginning with the lows from the latest congestion area and the high formed a week later. It seems set to break through the triangle in an upward direction today, if the futures prices are any guide. Of course, alot depends on what happens in Rome. So maybe it is more appropriate to refer to this chart pattern as a “triangolo”.

Watch The Railroad Tracks On PPG Industries (PPG)

Posted by barkand on November 7, 2011 under Classic chart patterns | Be the First to Comment

We have a chart today which illustrates a seldom-used chart pattern some like to call “railroad tracks”.

On the daily bar chart of PPG Industires (PPG) seen below, the two latest bars together produce a set of railroad tracks. Both bars cover roughly the same territory and close at roughly the same place. Proper railroad tracks should be reasonably long, as these are.   

This should be thought of as a “continuation pattern” in the sense that prices should continue moving in the direction of the closes. In this case, prices closed near the highs so we expect PPG to continue moving higher.

So long as we are looking at PPG, we would point out also that this boring industrial company has been strongly outperforming the S&P 500 since late September. The market had one of its best months ever in October and PPG did even better. The stock is now back to its pre-”Euro crisis” level in the high 80s.