Harry Boxer, author of TheTechTrader.com (www.thetechtrader.com), selected Direxion Financial Bull 3x Shares (FAS) Tuesday after the close as his Chart of the Day. Harry describes the technical outlook for this financial ETF:
The FAS has been in a dramatic downtrend from the 29-30 zone all the way down to 2 and change recently, the low being 2.30 or so on Friday. The stock has done well in the last few sessions, moving up Monday and flagging, and then Tuesday gapping up and running hard.
The 1-minute chart shows a big gap up on Tuesday, a strong move in the morning, flag, and then explosion to the upside, followed by a long multi-hour consolidation, after which it edged slightly higher in the aftermarket.
Looking at the 15-minute chart, the mini-downtrend it was in the last 7-8 days was broken in Tuesday's price-breakaway gap. I'm looking for a move that takes us up to test the area just above around 4.00-4.05, but likely it moves to the declining tops line and secondary lateral price resistance at the neckline of the head and shoulders top up around the 4.75 area, maybe as high as 4.90 early Wednesday with any luck, provided we get a market follow-through in the financials. That area is key overhead resistance. If we get up through that , I see the stock getting to 6 1/4-1/2, even as high as the 7 range, depending on market action of course.
If we do get a pullback on Wednesday, somewhere around the 3.40-.50 zone is support, maybe as high as 3.60, which on a low-volume pullback may be a place to add. That is also near the emerging trendline of a newly forming rising channel.
See Harry's Chart of the Day Video Analysis on FAS.
http://www.thetechtrader.com/info/charts/index.php?id=324
Looking at the the daily chart, the stock obviously has exploded off the bottom of the channel on heavy volume with Tuesday the first green day in a month, with volume of 290 million shares. The stock has traded over a billion and quarter in just the last 4 days, so it could be a high volume reversal, followed by a high volume break that results in a move to the top of the long-term down-channel.
Mike Paulenoff, author of MPTrader.com (www.mptrader.com), likes the semiconductor sector:
The enclosed chart shows the ratio of the Semiconductor HLDRs (AMEX: SMH) and the S&P 500 Depository Receipts (AMEX: SPY) for the past nine years. We noted this chart for our subscribers 10 days ago to illustrate how the SMH has begun to strengthen vis-a-vis the SPY in the last 3 months after falling substantially in relation to the SPY's price (from 68% to 18.4%) between 2000 and 2008. This indicates the beginning of a big resurgence of technology relative to the overall market, and that when the stock market actually reverses direction, technology should take a leadership role.
Since we wrote that on February 27, the SMH as a percentage of the SPY gained while the market was on the way down, and today with the overall market up the SMH is relatively strong again. Let's notice that the ratio itself is about to break out to the upside as it crosses above 23.6% on the way to 26% next.
See SMH vs SPY Chart.
Jack Steiman, author of SwingTradeOnline.com (www.swingtradeonline.com), thinks the rally has further to go:
We are quite a bit overbought on the very short term charts but I don't expect too much of a selling day tomorrow. Some is very possible but I think we'll push higher here. We're trying to clear the Sp 708 gap and 715 trend line. The 729/734 gap is up next with that nasty 741 level waiting beyond that, really only 1 to 1.5% away. the Sp needs to clear 741745 before the bulls can get at least a little excited about things. We all know about 775 and let's not waste our time even talking about it. Let's allow the bulls to at least enjoy this one day vacation from the intense selling.
Try to keep in mind that there's a mindset out there due to the action of the past 18 months. The mentality is sell all rallies by the bulls because it'll pay off in spades in short order. That mentality is not going away because of the action of a single day. This too will add to the difficulty the bulls will have carrying things higher past strong resistance levels. In fact, over the past eighteen months, it has been a day just like today that have paid off the best for the bears by shorting at the very end of the day. The difference here is the daily's are compressed and technically improving along with a Vix looking ready to break down thus the attempts by the bears tomorrow should get pushed aside by the bulls allowing higher prices to come before this rally ends. Also, remember that the bull bear spread is now 52% more bears, by far the highest in history. Don't let all the talk of impending doom sway you here. We'll worry about that when the market is somewhat higher. I don't think that's in our near future, if at all. One step at a time.
Gary Dean, author of MarketsPath.com (www.marketspath.com), agrees, though cautions that Elliott Wave analysis shows another wave down before the rally resumes:
The long awaited wave 4 has finally arrived!! We need to be a little careful up here, as the short-term charts are looking a little tired. We are approaching some pivot areas 725/732 where some bears will be waiting. I am expecting a nail biter or wave b down to the 700 level in the coming hours/days. Once completed, we should see the next leg up to the 750/780 target zone. These moves may come pretty fast, maybe by Friday.
I am NOT 100% certain that new lows are needed to stamp wave 5 of 5 (A) complete. This means that the major multi month rally or wave (B) up to the 1000/1100 targets, may have started with the lows that were stamped Friday. But we have to expect and monitor the next leg down when this wave 4 completes. If we hold the lows from Friday and take out the highs of this leg up when completed, we will be able to stamp wave (A) complete and wave (B) in progress.
