Thursday, August 30, 2012

Thurs, Aug 30: AAPL, CTRP, FSLR, VXN

Markets are somewhat more volatile today, in anticipation of tomorrow's Jackson Hole speech by Fed chairman Ben Bernanke.

Apple (AAPL) shares have broken below a well-formed one-month price channel that had propelled the shares upward by 20 percent. Such a violation of channel support is not necessarily bearish, however. An important consideration is the slope of the channel, with violations of steep channels more likely to bring about consolidation rather than reversal.

AAPL. July 23 to present. Hourly candles. International (CTRP), a regular of these pages, appeared strongly bullish as recently as two days ago. Today's price action, however, has brought shares of the Chinese online travel agency to below a price channel encapsulating the last fortnight of data. The technical picture is not unlike that of AAPL above -- i.e. the violation of support from a steeply up-sloping channel -- and the outlook for consolidation is similar. The hawk-eyed reader might notice a short-lived but interesting throwback to the violated channel, occurring around midday today; this blog recently discussed throwbacks with regard to Dentsply (XRAY).

CTRP. Aug 6 to present. 5-minute candles.
First Solar Inc (FSLR) has reversed in dramatic fashion today. The shares rallied very strongly after a well-received earnings report at the beginning of the month, but for the week up to and including this Tuesday, had ground only modestly higher each day on decreased volatility. Such a combination -- token gains on sharply decreasing volatility -- is often a red-flag of forthcoming volatility expansion and, often, sharp declines.

FSLR. Aug 6 to present. 5-minute candles.

The implied volatility on NASDAQ-100 options (VXN) is today consolidating immediately below the resistance side of a 3-month price channel. Per the CBOE, the VXN "measures the market's expectation of 30-day volatility implicit in the prices of near-term NASDAQ-100 options. VXN is quoted in percentage points, just like the standard deviation of a rate of return, e.g. 19.36."

As such, the VXN indicator is analogous to the VIX, which tracks implied volatility on S&P500 options; and VXD, which provides a reading of implied volatility on DJIA options. Of note is that the measured implied volatility is of options tracking the indices themselves, not a weighted measure of implied volatility on the options of the index-constituting securities themselves.

While VXN price action is just below 3-month resistance, VIX and VXD have already broken through their analogous 3-month channels. (Charts of VIX and VXD are not shown.) 

VXN. Dec 13, 2011 to present. Hourly candles.