Harry Boxer, author of TheTechTrader.com (www.thetechtrader.com), selected AgFeed Industries (FEED) as his Chart of the Day after the close on Monday. Harry describes the technical outlook for this stock:
The stock had a great day. Viewing the chart you'll see a beautiful bullish pennant the stock has been in. With volume dwindling and an inside day, we ended up entering it into our model portfolio on Friday. The stock popped 80 cents, or 33%, just on Monday and looks like it may be headed for around 5 1/4, the tops back in October and November.
Looking at the 1-minute chart of Monday's move, the stock slightly gapped up and pulled back, but held around the 2.36 area, and then exploded in the next half hour to the 3.09 high. A 2-hour coil followed. The stock broke out of that coil, flagged near the highs, and then went to session highs around 3.25-3.28. Another several-hour consolidation resulted in a late surge that tagged in a new high, then backed off at the close.
But next on the day, as mentioned, a gain of 80 cents, or more than 33 percent of the day. What's significant about that is that not only did it take out the flag/pennant, but it closed above the March high and December high to a new 6-month high on very heavy volume of more than 8 million shares, with a surge in technicals. This one looks like it has room to run. Target around 5 1/4-1/2 and then something around 8 1/2-9 -- or a triple -- is doable on an intermediate basis.
See Harry's Chart of the Day Video Analysis on FEED.
(http://www.thetechtrader.com/info/charts/index.php?id=338)
Mike Paulenoff, author of MPTrader.com (www.mptrader.com), studies the chart of the Q's for clues about the market's direction:
From a point and figure chart perspective, the Q's (NASDAQ: QQQQ) have carved out a beautiful bullish price channel off of the March low at 26.50, which hit a high Monday at 33.00. Let's notice, however, that Monday's high registered a near-term Double Top with the prior high at 33.00 (last Wednesday), which will need to be hurdled if the uptrend is to continue.
Conversely, to preserve the uptrend, the Q's must hold the 32.00-31.90 support zone [pt. & fig. basis]. Although a column of "O's" will start on a print below 32.60, a print below 31.90 will inflict serious technical damage to the overall uptrend.
Jack Steiman, author of SwingTradeOnline.com (www.swingtradeonline.com), says to watch the earnings season carefully:
The banks/financial's are now on breakout and if that holds up through Tuesday once the Goldman Sachs (GS) day is over it would be very bullish and would make you wonder how much selling would take place from Sp 875 should we get there. The masses do believe we will get hit hard at that level or lower and it's hard to argue with them. Technically the market is set up to fail there but put in a potentially bullish right shoulder of an inverse head and shoulders pattern. If you're bullish, a good pullback from 875 Sp would be healthy if the internals remain strong and the selling doesn't flash hints of distribution. That all needs to be watched and right shoulders can look very scary at times thus making you feel as if the end of rally is upon us. It would ratchet up the pessimism as well which would be favorable for future rally attempts.
Folks worry a lot about what happens to a market once the crux of the earnings season is over or at least when most of the big important names have done their dirty deed and told the world about their future over the next few quarters. I think instead of taking a negative tone once the earnings are over, if the majority of the big caps are favorable, the market should hold up well overall. A dull market is not one to short. If things held up well through earnings they are likely to hold up well thereafter. The bears will have a very hard time bringing this market down significantly if the earnings reports come in more favorably so it's more about these reports coming over the next few days that are going to matter about how the market looks a few months from now. Strength in earnings will equal strength in share prices and thus the overall market. You'll need to keep score on those that report well and those who do not.
Gary Dean, author of MarketsPath.com (www.marketspath.com), see weakness in the coming days:
We are still trading within the bearish rising wedge I pointed out in last night's update and at today's highs; the spx touched the top of the wedge. But as I stated, a rising wedge isn't bearish until it is broken. If the spx is going to follow the wedge, we should see a pullback to the 825 area or the bottom of the wedge. If it breaks, we should see wave 2 start and the downside target would be the 766/741 area.
The financials have been the leaders of this entire rally. I posted a chart of the xlf in tonight's update and you can see, it looks like it is also forming a topping pattern. Goldman Sachs reported good earnings in after hours, which caused a quick pike up in price. When they announced the 5 billion secondary, the rise in price quickly gave way to a $2+ pullback.
Banks like Citigroup (C) and Bank of America (BAC) ignored the pullback in GS and continued to trade higher in after hours, which in kind of strange, as they are probably the 2 weakest banks in the index. It sure does feel like dumb money is chasing the highly speculative banks ahead of earnings. Once the momo runs dry with the banks, we may see buyer's remorse, which will most likely take place during wave 2 down. It would make perfect sense if today's highs were the highs for wave 1. If they aren't, we would have to look at the 875 area, but that would most likely come after a trip to the bottom of the wedge.
The smart money did a little buying during the early weakness, but switched hats and was seen on the sell side for a majority of the day. They continue to accumulate a ton of selling volume over the last 5 weeks and it should affect the tape in the coming days. For Tuesday: If we see early strength, we will watch today's highs as an area to fill the trades. I believe weakness could carry the spx to the 825 area in the coming days. If we didn't see the highs for wave 1, we are very close.
