Wednesday, June 27, 2012

JP Morgan (JPM) breaks through resistance

Markets rallied at the open today (Wednesday, June 27) and then vacillated within a relatively narrow range. Here’s how the indices closed:

S&P500 +0.9%
NASDAQ +0.7%
DJIA +0.7%

JP Morgan advanced past an important resistance level in today’s trade. The stock broke through the upper boundary of a downward-sloping price channel stretching to May 1, a tumultuous period that featured surprise revelations of a gigantic trading loss by one of the bank’s proprietary trading desks.

JPM, 180 d 1h (zoomed in)
Today’s rise of 3.0 percent brought JPM to different price channel resistance, so the stock might be expected to consolidate underneath $37. Downward retracement to the breached price channel (approximately $35.5-36) is a possibility.

Life Technologies Corporation (LIFE) matched the day’s rise in JP Morgan shares; it too rallied 3.0 percent. This NASDAQ-100 component seems less poised for further appreciation, however. LIFE’s intraday high of $45.35 brought the stock precisely to resistance from a 6-month price channel, and retracement lower seems likely.

LIFE, 180 d 1h
That said, LIFE is enjoying some serious bullish tailwinds at the moment. Today’s price action (on the hourly chart) was more than $3.00 above the 200-period simple moving average (SMA), an intensity of bullish sentiment not seen since February. Demand for LIFE shares is strong, which makes violation of resistance somewhat more likely.

Finally, the WTI crude oil futures market (/CL) is worth a look. The relationship of recent price action and the 200-day SMA is developing as a mirror image of last Fall, when a nadir was reached at $75. In both cases, bearish sentiment turned as price reached about $17 below the 200-day SMA. Time will tell whether this week’s nascent rally in crude will mark a durable turning point.

/CL, 4 y D (zoomed in)

Tuesday, June 26, 2012

Dow Chemical (DOW) at price channel support

Markets settled modestly higher today, Tuesday June 26th: 

S&P500 +0.5%
NASDAQ +0.6%
DJIA +0.3%

The Dow Chemical Company (DOW) had interesting price action during today’s trading. The S&P100 component closed 2.9 percent lower, slicing through its 200-hour SMA in the process. The last time DOW closed below the 200-hour SMA, which happened on April 30th, it proceeded to decline nearly 15% over the next 2.5 weeks.

Yet trend channel analysis makes a cautiously bullish argument for Dow Chemical, not a bearish one. Today’s intraday low of $31.18 touched price channel support stretching back to May 18th. Scrutinizing the below screenshot of DOW, which shows price action from approximately the beginning of March, the stock’s movements do seem relatively well contained by the two drawn price channels. Rarely does price slice through a channel boundary, and when it does, it usually first bounces away weakly.

DOW, 180 d 1h (zoomed in)
A long position with an entry around $31.18 therefore seems sound, so long as a stop just below is used to limit risk. A concern with that forecast, however, is the steep descent that price action has taken over the last four sessions.