Don't Ignore This Chart

Tesla Weakens But Chart Is On Cruise Control

Tesla (TSLA) remains a crowd favorite as the stock's 2017 advance has been accompanied by extremely heavy volume.  I see major accumulation when I look at TSLA's chart.  But like every other stock, momentum can become an issue from time to time and TSLA appears to be battling momentum issues.  Here's the latest weekly chart after TSLA dropped 7.56% last week:

Back in June, TSLA's weekly RSI moved above 80 and that's, quite frankly, an unsustainable level.  Consolidation began at that point and I expect to see one of two things moving forward.  Either TSLA continues to consolidate in a potential bullish ascending triangle with upcoming price lows in the 340-350 area or the slowing momentum results in a drop back to test recent lows and price support from the 280-300 range.

In either case, I'd be a buyer of TSLA.  Obviously, the best reward to risk would be that 280-300 test, but I'm not sure we get there.

Happy trading!

Tom


 

Is Apple (AAPL) About To Take A Bite Of Your Portfolio?

Apple (APPL) long loved and always watched for exciting products came out with a new suite of products last week. With their ability to garner a lot of free advertising in the media discussing the new products, Apple usually generates a tidal wave of sales. 

While that might be true, the shareholders are starting to tell us a different story. We have seen investors fail to follow through before and it usually led to healthy downside corrections. This week looks more important than most for the Apple shareholders.

Looking at the SCTR line, when Apple has remained above 75 for most of the past year, the stock has been trending strongly(Higher!). When the SCTR falls below 50 after a long period of outperformance, this is usually a more cautionary message.

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Let Interest Rates Soar If You're Long Equities!

Fed Chair Janet Yellen suggested there'd be another interest rate hike in 2017 and the Fed's overall tone was a bit more hawkish than was anticipated by Wall Street.  That resulted in a big spike in the 10 year treasury yield at 2pm EST yesterday, the time of the Fed announcement.  There's a common denominator between the Dow Jones and the 10 year treasury yield ($TNX).  They've both been on fire of late.  The Dow Jones rose for the ninth consecutive session.  The TNX has done the same.  While the TNX has fallen consistently since the early 1980s while equity prices have soared, there's actually a very strong short-term positive correlation between treasury yields and equity prices.  Why?  Well, new money has poured into both equity and treasury markets since 1980.  Remember that money coming into the treasury market sends treasury prices higher, but treasury yields lower.  U.S. treasuries are widely viewed as a safe haven and as we've moved to a more global environment, a ton of foreign money has been parked in U.S. treasuries, keeping rates extraordinarily low.

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Broadcom Consolidates within Uptrend $AVGO

This is my third straight DITC posting with a semiconductor stock. The first featured Texas Instruments forming a cup-with-handle pattern and the second featured Intel with a surge towards long-term resistance. Today's chart focuses on Broadcom, which is actually lagging the S&P 500 SPDR over the last few weeks. Note that SPY hit a new high this week and AVGO remains within a consolidation. The long-term trend is clearly up and a consolidation within an uptrend is typically a bullish continuation pattern. This means an upside breakout at 255 would signal a continuation of the bigger uptrend and open the door to new highs. 

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Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Intel Goes for a Big Breakout $INTC

Some sixty stocks in the S&P 500 were up 5% or more last week, and Intel was one of them. Intel's importance seems to have diminished over the years, but it is still an industry gorilla that accounts for around 11% of the Semiconductor ETF (SMH) and 8% of the Semiconductor iShares (SOXX). The chart shows Intel breaking out to new highs and leading the market for a few months in 2016. The stock then moved into a long consolidation and traded flat the last 12 months. On the bullish side, notice that the breakout zone turned into a support zone and Intel consolidated above the breakout (blue zone). In addition, a consolidation after an advance is typically a bullish continuation pattern. Thus, a breakout would signal a continuation of the 2016 advance We are already seeing signs of strength with a break above the triangle line and an upturn in the price relative (INTC:SPY ratio). 

Follow me on Twitter @arthurhill  - Keep up with my 140 character commentaries.

****************************************
Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
*****************************************

Willis Towers Watson (WLTW) Pushes Higher

Willis Towers Watson (WLTW) Risk Management company is breaking out to new highs this week. In the face of Hurricanes Harvey and Irma, the stock is surging. It surged above a three month consolidation last week and today it continues to move higher.

With the MACD turning up while above zero, this looks ready to continue the push to higher ground. The overall chart has been in a pretty good uptrend for a while now. The Relative Strength shown in purple recent touched 3-year highs. 

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After Long Basing Period, Pharmas Look To Break Out

Sometimes the best moves higher occur after an extended period of sideways price action, or basing.  We recently saw a breakout in biotechs ($DJUSBT) and that industry quickly became one of the strongest.  The healthcare sector (XLV) also has been among the strongest sectors.  It makes sense that other healthcare industry groups will likely break out to support the overall sector.  Enter pharmaceuticals ($DJUSPR):

In my August 31st DITC blog article, I featured the autos & parts index ($DJUSAP) as it made a major breakout after an extended consolidation period and the group has raced higher nearly 5% this week.  Lots of technical buyers jump in as these major breakouts occur so it'll be worth watching the pharmas to see if they join the list of industries breaking to fresh all-time highs.

Happy trading!

Tom

Texas Instruments Traces out Bullish Continuation Pattern $TXN

Texas Instruments (TXN), the semiconductor behemoth, formed a bullish cup-with-handle pattern and a classic volume-based indicator points to a breakout. The chart shows TXN hitting resistance in the 83-84 area from June to September (red zone). In between these resistance points, the stock dipped to the 76 area in June and then the 80 area in August. The June dip forms the bowl, while the August consolidation forms the handle (blue lines). A break above rim resistance would signal a continuation of the long-term uptrend and forge new highs. 

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