A quick note on Loral (LORL) shares. We are seeing some bearish signals pile up on this one. Consider:

1.  A close below $68 would be the second one below minor support at that point.

2.  The shares are already below their 20-day moving average.

3. The recent pattern in volume is consistent with a distribution phase.

Note that we want to see a close under $68 before we go full-scale bearish. And it should be significant (probably $67.75 would be enough). Merely closing a few pennies below $68 or spending a brief time there doesn’t do it for us. As we write this, the shares are at $68.15.

A – First there was a potential dumpling top around $80. The market was running out of energy here and a gap lower would have confirmed this bearish pattern.

B – Instead of gapping lower, however, MON went to new highs in this “rising three methods” pattern, which is bullish. This particular instance of the pattern is not ideal, but, eh, its close enough.

C -  The string of new highs ended with a bearish engulfing pattern.

D – Then we have a falling window, or gap, at around $82. Another bearish development.

E – Finally, there was an “in-neck” pattern. Just the name of it should tell you this is a bearish, and painful, pattern. After a big fall the previous day, the bulls could not muster much of a counter attack and hung around the previous close.

So, all in all, the candlesticks are telling us MON should go lower. How low? Going strictly by the candles themselves, there is support in the $73-$74 range.

Here’s one to keep your eyes on over the next day or tthree – Country Style Cooking (CCSC).

The stock has formed a nice cup-with-handle pattern dating back to November.  The left side of the cup saw prices get cut nearly in half, from around $13.50 down to $7. The shares bottomed out there during the second half of December before shooting back up to $11. This resistance point was the same area of support back in September. The quiet drift lower during the past two weeks created a handle for our cup.

Yesterday the shares spurted from an open just above $10 back up to that resistance point. Will it break through $11? The key will be volume. Ideally, there would be something approaching 100,000 shares of CCSC traded on the breakout day. We are expecting that any breakout would be tested once or twice, either on the breakout day itself or in the following days. There is no need to chase it.

Our plan would be to nibble a bit below $11, then watch to see how things unfold if/when it pushes through resistance.

Last week we noted that our index of advances and declines on the NASDAQ had reached a point which is often followed by a downturn in the market. Specifically, short-term tops are frequently seen when the index gets to +300 or so. Too much of a good thing has a way of killing the market.

Well our index now stands at a whopping 442 - a multi-year high! If we thought that the market was getting a little frothy a week ago – and we did – then we certainly advise taking a more defensive position at this time. As we write this, futures are looking down slightly. We think it is likely that the market falls more than just a handful of points, however.

Shares of China Cache International (CCIH) are flashing some bullish signals after consolidating upon the conclusion of a jump from $4 to $7. We will quickly review here the information from a purely technical point of view, as always.

First we see that the $7 mark provided enough resistance to stop the initial rally. There were a few incursions, but they were beaten back quickly. And while the stock was struggling with $7, it was forming an ascending triangle. As the profit-takers melted away, the bulls were becoming less and less patient and began buying at increasingly higher levels.

And then, on Monday CCIH broke out above $7, and did so on good volume.

At this point, that resistance point at $7 becomes an area of support. And, sure enough, the shares yesterday came right back to it (ok, actually $6.99). But there was comparatively little volume on the retest, about one-third of the volume on the breakout.

We do recognize that anything – and we mean “anything” - can happen with Chinese shares. However, the technical picture for CCIH currently looks very positive.

The stock market is no exception, as we will show on the following chart. It is generally considered a positive when a large number of stocks are participating in a rally. In other situations, where the market averages are going up but with relatively few individual stocks going up, it is a stern warning of things to come. So we like to see, in a healthy market, many stocks heading higher with the overall market. The problem is it is possible to have “too much”.

We calculate an index of advances and declines which is a cousin of the McClellan Oscillator. We prefer to apply it to the NASDAQ because that market tends to more clearly display the “animal spirits” that we want to measure. A number below minus 400 usually occurs at short-term bottoms. On the other hand, when the indicator reaches above 300 or so it often coincides with a short-term top. There is nothing magic about those specific numbers. It just happens to be what works.

The indicator broke above 300 on Wednesday and now sits at 307. It means there has been alot of “advancing” lately and in fact one more solidly positive day on Monday will push our index well above 300. As you see on the chart, the other two breaches of 300 in the past year were soon followed by sharp downturns. It doesn’t have to happen this time. There are cases in the past where the market started to head lower, then turned around and went to new highs. Still, we expect the market to be weak over the next week or so, with something more substantial looming.

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.

We see a stock where the bulls have been steadily losing their enthusiasm. Starting with the lows formed along with the overall market in early October, there have been four attempts at rallying the troops. And each one ends with less progress made in terms of prices. To take a more bullish view, we would want to at least see better volume on the up thrusts. But in fact volume picked up only after the fourth and most feeble rally attempt.

In each of the last two trading days, prices reached $19.75 early in the day. But the bulls quickly retreated. Clearly, they are not in control here. Indeed, CLD has been underperforming the Market Vectors coal ETF (KOL) for the last month and we expect that trend to continue.

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.

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.