Thursday, July 28, 2011

28 July (Thurs), Morning call

Index futures are moderately higher this morning, being boosted by the 8:30a (EST) release of weekly jobless claim figures, which fell more than expected: down 24,000 to 398,000. (Source: CNBC)

Of particular interest will be whether S&P 500 futures (/ES) can clear the overnight high of 1306.

Two DJIA component stocks currently present a particularly interesting picture: Chevron (CVX) and Hewlett Packard (HPQ).

CVX, hourly-bars:

With regard to the former, Chevron has come into a critical support point of three separate price channels, all based on an hourly-bars chart. That said, the picture is not particularly promising to bulls. The longest of the channels (peach-colored) is already breached, while the middle-length channel (green-colored) will be broken if prices open near the current, pre-market bid / ask levels (about 105.3). The highest-sloping price channel (yellow-colored) is valid down to about $104.7. Additionally, this last price level – approximately $104.7 – has served since March as a horizontal support / resistance level.

Of note, Chevron will release quarterly earnings results tomorrow, July 29th, at 18:00 (EST).

HPQ, hourly-bars:

Hewlett Packard has successfully formed an inverted head-and-shoulders pattern between May 17th, its prior earnings release (which was clearly disastrously received) and the present, a strongly bullish signal. The top line of the green price channel represents the neckline of the figure, while lows of late-May and mid-July are the twin shoulders. The mid-June nadir is, naturally, the head. A rally above the neckline on July 22nd completed the inverted head-and-shoulders figure, and the current pullback to that trendline, represented by yesterday’s close at $36.71, is a buying opportunity (per the above framework).

The theory would be invalidated by significant penetration of the neckline, namely a move of a dime or two below yesterday’s close.

HPQ earnings are not due until mid-August.

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