Wednesday, January 30, 2013

TLT (long-dated Treasuries) at 2-year channel support

JAN30 2359EST. Kai Ryssdal of Marketplace, the National Public Radio business news show, mentioned the yield on the 10-year Treasury Bond during today's show -- an atypical statistic for that particular program, and anecdotal evidence that bonds' recent slide may be overdone, at least temporarily, given that coverage of the rising yield is reaching more mainstream media.

One way to monitor long-dated US government bonds is with the TLT exchange-traded fund, which tracks the performance of Treasuries with 20 year or longer maturities. A chart of price action since August 2011 shows that, earlier today, TLT reached the support line of a well-defined, 2.5-year price channel, shown in dashed red in the screenshot below.

TLT (20+ year Treasuries ETF). Aug 2011 to Jan 2013. Daily candles.
Also of note: the difference between price and the 200-day simple moving average is at the lowest level of the chart's timeframe (nearly negative $7.00; see the oscillator below the price graph). Such an extreme reading of the oscillator further suggests that TLT is oversold. (That said, securities often persist in oversold -- or overbought -- states for quite some time -- caveat emptor.)

Tuesday, January 29, 2013

JC Penny (JCP) threatens 4-month trendline resistance

JAN29 0038EST. Shares in JC Penny (JCP) are peeking through the resistance of a 4-month trendline on the hourly-candles chart. The trendline is shown below as the upper line of the dashed yellow channel.

JCP (JC Penny). Aug 28, 2012 to Jan 28, 2013. Hourly candles.

Thursday, January 24, 2013

S&P500 futures reach 2.5-year channel resistance

JAN24 1930EST. S&P500 futures (front-month, e-mini Mar 2013 contract: ESH3) rallied this morning into resistance from a well-defined, 30-month price channel.

Upon a relatively precise touch of this resistance at 1497.75, the futures contract and the overall market sold off in the late morning / early afternoon, forming a topping tail daily candle.

The chart follows below. The channel in question reaches back to the lows of July 2010 and is marked on the chart as a yellow dashed line.

Of note: the difference between price and the 200-period simple moving average, shown by the oscillator below the price graph, is elevated but not extreme -- buttressing the point that a market sell-off is not necessarily the inevitable outcome of the recent bullish price action.

ES (E-mini S&P500 futures contract). April 2010 to January 2013. Daily candles.

Markets approach overbought levels / SDS at channel support

JAN24 1023EST. Among the many caution signals in the markets at present -- including a VIX reading not seen since May 2007, the financial futures and market indices at trendline resistance levels, the S&P500 in particular just now kissing round-number resistance of 1500, etc -- another chart now joins the Cassandra camp. That would be the 2-month perspective on SDS, a leveraged ETF that tracks the inverse of the S&P500.

The chart, pasted below, shows that price is at the support line of a well-defined, 2-month channel. Since SDS, the Proshares Ultrashort S&P500, moves inversely to the indices, the security's touch of support suggests that the broad markets are at resistance.

SDS (Proshares Ultrashort S&P500). Nov 12, 2012 to Jan 24, 2013. 1-hour candles.
Moreover, the oscillator at the chart's bottom also paints a bearish picture. That oscillator, which measures the difference between price and the 200-period simple moving average, is presently at a 2-month low, which indicates an oversold market for SDS.

Of course, markets can grind on higher still -- such is the nature of bull markets -- and the nimble trader would be well-served by continuing to place bullish bets until they actually stop paying off. Nonetheless, the caution signals merit discussion, even if the initiation of bearish strategies still remains premature.

Wednesday, January 16, 2013

Copper futures (HG) approach 2-month channel / trendline support

JAN16 1337EST. Copper futures (front-month Mar 2013 contract: HGH3) are approaching support from a two-month price channel. If the channel's lower support line is reached in the next few hours, support might be expected at a price of about $3.5925.

A 2.5-month chart follows just below; the channel in question is shown in dashed red. The lower, support line of the channel is well-defined, perfectly touching local minima in mid-November and on Dec 19 -- in some cases, vis-a-vis candle bodies, in other cases, candle tails.

Admittedly, the upper line of the channel is not robustly defined; the line touches local highs on Dec 4/5 and Jan 1/2, but is breached by spikes on Dec 9 and Dec 11.

HG (Copper futures). Nov 4, 2012 to Jan 16, 2013. 1-hour candles.

Thursday, January 3, 2013

Mellanox (MLNX) intraday trade is a showcase for price channels

JAN03 2318EST. Mellanox Technologies (MLNX), a semiconductor producer, dropped 17 percent today on a poor revenue outlook. The day's volatile intraday price action in MLNX exhibited an interesting conformity to a trio of price channels, which merits the stock's inclusion on these pages.

Mellanox (MLNX). Thurs, Jan 3. 1-minute candles.
The morning hours saw a vigorous advance by Mellanox, albeit after a colossal overnight gap lower, first within the bounds of a steep channel (in dashed green above), then within a somewhat shallower channel (in dashed red above). Breaks of both channels, highlighted above with a green and red circle, respectively, precipitated sharp declines of about a dollar.

In the afternoon, meanwhile, MLNX drifted downward within a new channel, shown above in dashed yellow. Like its morning brethren, the afternoon channel was robustly defined; both the upper and lower boundaries coincided with multiple local price extremes, each highlighted by a solid yellow line.

In sum, a small handful of price channels rather effectively models the intraday highs and lows formed by today's volatile price action in MLNX shares. Such is the broader promise of price channels: to effectively identify specific forthcoming support and resistance prices.

Wednesday, January 2, 2013

Herbalife (HLF), recovering, violates channel support

JAN02 2222EST. Herbalife (HLF), the nutritional supplement company, has lately been a headliner. Over the four trading days just before Christmas, the shares gave up a remarkable 43 percent over four days on news that Bill Ackman, the hedge fund manager, had become a vocal short.

Since Christmas Eve however, HLF has been staging a recovery, with price action over the subsequent five trading days forming a well-defined price channel, shown below in dashed red. The rebound has been pronounced, with the intraday peak registering over 41 percent above the December nadir.

Herbalife (HLF). Fri, Dec 21 through Wed, Jan 2. 5-minute candles.
Today's late afternoon price action has, however, violated the support line of the five-day channel. This move potentially heralds a bearish turn in the stock, but another plausible scenario, given the great steepness of the five-day channel, is for price action to drift sideways or higher within a new, less steep channel.