But cheer up ZNGA fans! This week’s action is providing some evidence that the cascading drop in prices is at an end. Here is what we see:

1) On Tuesday, ZNGA opened with a gap lower but soon reversed with a thrust into the previous day’s range. It is not a “buy” signal by itself. But it is a possible sign of hope.

2) This week’s bottom occurred well within the Bollinger bands, after skidding down the lower band for so many weeks. This indicates to us that selling pressure is subsiding.

3) The reversal came at the same price – $8 – where the shares made a low earlier this year. “Somebody” out there is coming in to the market and buying at that point.

4) We do not use the MACD indicator in our work. But we realize that many other people do. And we noticed that MACD is about to generate a crossover which many will see as a sign to buy.

We think a first attempted rally might get stuck at the 20-day moving average. That average is a little above $10 right now but falling fast. Still, there is maybe a 5-8% move possible in a short time. Those with more patience may recover a good chunk, if not all, of the past two months of losses.

The chart below is of WuXi PharmaTech (WX). Right there, in the middle of the chart, is an unmistakable cup-and-handle pattern. The cup itself had a nice, rounded shape to it with volume rising and falling at the appropriate places. The bulls were clearly taking control of this one. And then. after prices traced out the right hand side of the cup, the next handful of days formed a low-volume handle. At this point it looked like something out of a textbook.

The shares then did what they were “supposed” to do and shot up above the top of the cup, going above $15. Perfect. Except that, the next day, WX quickly reversed and has been in a steady drift lower ever since.

Probably 9 times out of 10 this chart pattern would have preceded higher prices. This time it didn’t.

Here’s why:

1) Volume on successive pushes higher has dried up. There are simply not enough buyers coming in to the market.

2) RSI, always to be taken with a grain of salt, has nonetheless been trending lower as the market for XOMA shares has become more uncertain.

3) On the most recent push up, XOMA found it difficult to reach for that upper Bollinger band. In a more healthy environment, the shares would have been bumping along that band. Prices may finally reach the upper band, but only because the band is now falling.

Our advice is to sell into any rally.

Yesterday, the 2000 was extraordinarily weak in a weak market generally. RUT finished the day just slightly below its low set in early March. On the chart below, generated by masterdata.com, we find that the advance-decline line for the Russell 2000 is actually at its lowest point since the start of the rally in December 2011. Aside from the occasional “snap back” moves, we expect RUT will continue to underperform the broader market in the intermediate term (i.e. a few months).

At this point we expect it to continue higher. However, the area around $7 has been a major resistance point for a long time. On the chart below, we have highlighted in green a price band where prices have stalled out in the past. Surely, the shares will at least pause here. We will watch how they act in the neighborhood of $7 before we decide on our next steps.

We will point out also that if ARWR does convincingly break through $7 there is a bit of an air pocket between that point and $9. It could get there quickly, but let’s take things one step at a time.

What do you see here? We’ll suggest 3 possibilities.

1) First, of course, is the general uptrend coming out of the 2009 meltdown. As time has passed, the market has slowly become more comfortable with getting into the “more risky” small cap stocks. Our relative strength line is dipping down towards a trendline, so perhaps a burst in the 2000 is coming.

2) You might also see a series of three distinct pulses higher, followed by a lower high. This would clearly be a negative for small-caps, especially if the ratio makes a lower low here.

3) And then there is that rather complex top that developed on that third, and highest, pulse. In fact, is that a head-and-shoulders pattern? If so, the neckline was broken in late July of last year. This would also be negative for small-caps, though it possible most of the damage has already been done.

You probably also are aware that HOLX has been in a consolidation phase for the past month. Even today the shares made a brief run towards $21.75 only to be quickly turned away again. So we decided to put the xattascope in reverse mode and get a long-term view of what is happening here.

Looking at weekly data going back 5 years, the situation becomes more clear. It took nearly a year to do it, but a well defined cup-and-handle pattern has been formed. The shares are now well into the “handle” part of the pattern. Maybe it will not break out today but if or – more likely – when it happens, where will it go? Our best guess, based on the size of the cup and a congestion area dating back to 2008, is that the next stopping point woould be in the $28-29 area. Just remember that this is a long-term chart – don’t expect HOLX to get there in a matter of days.

Let’s start with a downward sloping trendline, which dates back to last spring. It began as resistance and by summer had turned into support. Around this time, a second trendline was born, again providing stiff resistance to any rally in the shares. In effect, these two trendlines created an formidible price channel (the yellow shaded area on the chart below). After more than half a year of ping-ponging down through this channel, CHK finally gapped out of it last month.

More often than not, markets do not just suddenly flip from bearish to bullish. Late in 2011, the market began struggling with finding a bottom. Prices continued going lower. However, the bears had lost the ability to tag the lower end of the channel. And after a couple months of fighting for control of the market, the bulls finally broke free. This whole process formed a cup on the chart. The last several weeks of trading activity have formed a low volume handle for our cup. The cup-and-handle is noted in green on the chart.

That handle is beginning to get uncomfortably long. There is a danger that the previous upper bound of the price channel will simply become the lower bound of a new channel. However, we belive it is more likely that the situation resolves itself to the upside, as is typical of a cup-and-handle.

And technical analysis, after all, is what led us to ARWR. As you see on the chart below, ARWR has been meeting resistance at $5.50 since the beginning of this year. It was first repelled at that point in early January. Then on February 28 it again reached $5.50 but was quickly pushed back. The following day – leap day- it actually made a brief incursion above $5.50 but once again was forced to retreat.

Meanwhile, the stock was creating a series of higher lows, beginning with the bottom in early February. So what we have is an ascending triangle which is about to reach its apex. Classical technical analysis would suggest that the next move would be to break through the flat upper bound of the triangle with a price target of $6.25. This also happens to be an area of resistance reached in late 2011.