Spy of the week.
This week we experienced a sharp decline in the markets. The first two sessions seemed to continue the upward price movement, penetrating the down-sloping channel of the last two weeks, but things changed rapidly.
On Wednesday, 2 hours before the closing, the FED announced a message regarding the future economic policy regarding the U.S economy. A message that apparently market participants saw as a pessimistic one:
That sharp decline going hand in hand with big red bars could give us a warning about the upcoming price direction, which tends to be lower.
In addition, using the Laguerre Filter as a gauge to future market direction further supports the above analysis. Although we have experienced declining weeks this year, it’s been the first time since the beginning of 2013 that the Laguerre Filter points down.
Darvas Box though is still indicating a range-bound box borders, and an important support level of 153.33:
Technology taking some heat
Those of you who analyze the market with the help of Heat Maps have certainly noticed an especially reddish color on the Technology zone:
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This sector has suffered much this week, let’s delve into a few interesting triggers in this sector.
Apple (AAPL) is a very good candidate for Short selling. The overall trend is lower, but specifically speaking, we can see the Laguerre Filter pointing downward in addition to a precise Darvas Box Short signal under 428.75 level:
Corning (GLW), a specialty glass manufacturing company that sells her products to high technology systems has also experienced a steady decline in stock price since late May, being a good candidate for Short selling.
Although it’s a bumpy position, when sound analysis techniques are taking place, you will be on the right side of any positions on the long run –
As the daily story says Sell! the 60 minute chart looks for high potential entry points.
A declining Laguerre Filter tells us to be ready, the Daras Box prints the red line on 14.82 and we are ready to get into a short position. A few days of a bumpy ride but eventually the Magic Bar of 6/18 comes for help and hints of a high probability reversal.
Not all of technology stocks look bad, all we had to do is go over the list and look for an uptrending one, you know, a chart with mostly green bars going up in a positive slope.
It’s a good habit to look for Long buys even if the market is heading lower. This technique acts as a hedging mechanism that will reduce the risk of your portfolio being hammered in case of a sharp up move of the market.
If you take a look at Micron’s daily chart (MU), you’ll immediately understand why its a great candidate for Long positions:
Laguerre Pointing higher on the daily, we delve into the 60 minute chart to ambuscade for another profitable Long position. High volume significantly higher then down volume, Laguerre pointing higher, and Darvas Box giving us plenty of resistance lines that should be broken. This is called a Long setup!
GOLD and other Metallic friends.
If there’s a scenario that overshadows every technical analysis argument whatsoever, it’s a big, decisive gap either way.
Gaps with high volume are one of the strongest facts about a trend direction, and this is what we saw this week on Gold. If we had any hope of a bottom, some sort of divergence we noticed a few posts earlier it’s now gone:
We see heavy selling in GLD, accompanied by large gaps indicated of a certain panic in the market. We will continue to monitor for any changes.
The only metal that is still holding back the avalanche is Palladium (PALL), where prices stand at about the same level of the beginning of 2013. In fact, the price stands on a major multi-year support level. Regarding the actual decline in metal prices, it is quite a strong trait:
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