VHC recently had a crash in its stock price on record heavy volume. However the stock has found itself perched right on a key critical support level and creates a potential opportunity.
I am looking for an upward automatic rally from this crash.
VHC has a reasonable size trading float which appears to give it a history of 3 to 4 day consolidations before the upward reactions (this has happened historically as well).
Obviously support must hold here for this setup to be valid.
It is consolidating in a small decending triangle and a break up from this triangle may be first indication that the automatic rally wants to ensue.
The most difficult stocks to buy are the ones where the risk appears to be the highest. The risk definitely appears to be very high after looking at the crash. But the heavy volume capitulation and the horrible news opens the door to a reactionary rally as long as support holds WELL.
Here we are in the midst of the slow summer trading season and the market continues to try to press higher. So it would appear that the market still has a chance to press higher but now in the short to intermediate term there are some patterns that are showing we could be coming into bearish correction territory again.
There is a Gartley Sell pattern in the Nasdaq Composite index and at the same time there is a bullish butterfly pattern in the VIXY (ProShares VIX short term futures). So this appears to be pretty good potential probability that the market is a bit tired at this juncture.
The Euro breaking down to new lows and the US dollar perched at highs seems to be helping the bearish scenario.
It is still early, but one cannot rule out that we are at a possible key juncture for a ‘continuation sell’ of the bearish tape action that has been occurring since the 2012 march top.
The sp500 finished the quarter and month this past Friday with a bang. It was really quite impressive and the huge up day we had June 29, 2012 should be respected and taken exactly for what it is… A valid sign of strength and kick starter to a new up leg going into the election 2012.
This market is going higher into the election. I do not see any other possibility unless the market starts to fail badly at the previous 52 week highs again. It will be very interesting to see if the market can manage to get back up to the 52 week high range on the sp500 before August 2012 starts.
Secondly it will be interesting to see how the market is able to weather the traditionally seasonally weak August September 2012. My take is that we will blast higher to new 52 week highs all along the way. The longer term charts are pointing this way.
It is AMAZING that one day of trading action can mean so much in the sp500. The June 29, 2012 huge upward surge shot the market into a substantial quarterly breakout above the longer term 2007 bear market line as shown in the chart above. This is clear conviction in my view that we are at a valid breakout now and will continue higher, possibly to max level of 1600.
The TNA Triple long Russell 2000 ETF is looking quite ideal at this juncture.
The most difficult part of market analysis is WAITING for clear signals such as the one we had 6/29/2012. So much of the price action before that was NOT decisive and yet probably many traders were making strong bearish or bullish bets. But a day like 6/29/2012 is like wind at your back… it is the evidence needed to give more confidence on trading the long side.
For me the next two MAJOR challenge zones or resistance points for the sp500 are 1470 and slightly under 1600. Of course it will take plenty of time to get to those zones, but I think they will be key as far as potential resistance zones and/or turning points.
I am Seeing Many Dow Jones Industrial Stocks that are Looking Very Bullish Longer Term
Take Microsoft MSFT for example. It has a bullish breakout on the yearly basis from the bear market that started in the year 2000. I feel confident enough to say that MSFT is a great long term buy from this zone. I suppose you could call this a very long term position type trade. Microsoft is a slow mover but for most conservative type investing the buy zone is right here and now in my opinion.
I will leave it to the fundamental analysis experts to figure out why it is getting ready for a huge multi year run, but their new tablet and windows 8 may have a lot to do with it. Their new tablet looks quite amazing and I personally think it will take a nice size bite out of Apple’s seemingly endless tablet profits.
The Microsoft tablet has a nice attachable keyboard which is long overdue from the slow and clumsy screen keyboards on most tablets.
This table will probably be a huge growth driver for windows 8. They also claim that the tablet is designed to run best in class windows applications as well so this tablet definitely seems like it is not just for browsing or ‘apps’.
It is not just MSFT that is looking good. Walmart and Merck also are looking really good on the bullish side. There are huge patterns developing and huge LONG TERM patterns that are looking quite bullish.
Context is everything. The truth is that we have been in a large bear market trading cycle since the year 2000. Whether 12 to 13 years marks the end of that cycle remains to be seen. 12 years of corrective price action is still quite a good chunk of consolidation and at least potentially creates good long term entry points in many big stocks.
Once again, technical analysis seems to have triumphed over the bearish ‘news’ smoke screens…
I still get this sense that many traders are waiting for the ‘dog to bark’ in regards to the stock market but time and time again it is just not happening. Despite all the potential bearish events we could have seen transpire over the last few months, they are not really happening. This is a very important clue in my opinion. The dog is not barking and therefore we must assume the opposite will happen. That opposite is likely to be a huge upwards surge in the USA stock markets.
I still think this market (sp500) has a shot at 1600 in the next 6 to 12 months.
I still think my Euro bottom call is correct. Admittedly it has taken a good amount of time, but this should be a given since the size of the pattern was so large. Whether that translates to a major bottom in Gold and Silver and some other commodities remains to be seen.
Tomorrow is the last day of month and quarter! If we finish strong tomorrow it could set up a bullish stance going into next quarterly candlestick !
I will have a review of the quarterly charts this weekend.
I think yesterday’s bearish market action may have been a fakeout. I am referring to 6/21/2012 market action. This may have been a fakeout similar to the one that occurred on 6/11/2012 where it looked like a huge reversal was taking place.
One hint that 6/21/2012 may have been a fakeout was the low volume and the high ARMS reading indicating mass oversold with only one days action.
Next week we have end of month and end of quarter window dressing. This should keep the market afloat next week.
I said in my previous post that we needed to hold 1325 in the sp500 today which we did. This is the valid retest level of the short neckline of a head and shoulders inverse pattern. So as long as we can hold 1325 next week, then my longer term bullish scenario seems to still have good odds of working…
RPRX should be on watch next week for a possible nice upside move. I talked about ARNA and RPRX last month as bucking the current bearish market trend. Biotech recently has had very strong relative strength and seems likely to continue for a while.
RPRX looks like it may want to enter the RSI power zone early next week with RSI pushing into the 70 range.
RPRX has a nice tradeable void above 10.00 ( a tradable void is previous price action that is not too ‘busy’ and does not contain much heavy resistance, it is usually straight line price action) and should bode well for the stock assuming it is able to bust above that range.
It is quite positive in my eyes that RPRX only did a 38% price retracement of the entire rally that started in mid May 2012. It is usually a sign of internal strength. Granted biotechs have a habit of surprising on both sides, but for now this looks pretty damn good.
Note RSI moving into power zone.
RPRX has a reputation for making some notable historical huge upward spikes on the C to D upward leg. I do not believe the volume is correct for 6/22/2012. I do not know why it printed north of 2 million shares on most services. That might be an error. I think the volume was more in the 300 to 400 thousand range today.
Biotech as a sector is very strong right now but one has to still choose very carefully. Not all charts are created alike.
Today was a huge sign of weakness in the markets in terms of price, but not volume. We had a very large wide range bar, a typical clear sign of weakness and possible emergence of new trend (bearish). We did on the DIA close right at the neckline of a small inverse head and shoulders. So a retest back to neckline is not abnormal at all, but the speed with which it was done today is a bit concerning.
We absolutely MUST hold 1325 in the sp500 tomorrow otherwise the prospects for bullish trend continuation are severely damaged.
I just mentioned in my previous posting that the last 6 days of this month and quarter will very extremely important. It will define either a confirmed yearly breakout and quarterly continuation higher or a rejection that tips the scales back to the downward bias.
The quarterly candlestick this month is showing a bearish ‘meeting lines’ setup right now. This bearish meeting lines pattern would be even more bearish if we get a sharp drop into end of month and quarter near the 1250 range.
After reviewing a few other charts including OIL an GOLD I might as well not be shy about it and just say the action today may have been very pivotal and enough evidence to warrant switching back to long term bearish stance.
The only condition upon which I will reverse such a stance now is if the sp500 readily and easily maintains and holds 1325 range.
Note the possible broadening wedge formation which can have serious bearish potential if the environment is right.
If we end this month and quarter near 1250 it will be extremely bearish setup in my eyes.
P.S. I will have extremely important long term ‘State of the Markets’ report at the end of next week (June 2012) since we will have final QUARTERLY and MONTHLY prices to judge the market on… stay tuned…
But now the market is in the zone where it must show proof of its bullishness.
Right now and today we are trading at the 61.8% retracement of the May 2012 decline. This is a key level and the next 6 trading days will be very important in determining the monthly and quarterly closing price candlesticks. Of course I will have them updated by the end of this month along with conclusions.
So far today in the early going it is looking like we are respecting the 61.8% Fib level, but it is too early to tell how much of a respect this is. If we see a very hard down move today it will not be a good sign for the bullish case as it would show that the bearish interpretation of the Fib level is engaging.
Flexibility is key here. The month and the quarter is not over yet. Not for another 6 trading days.
There is a possibility of a confirmed MACD histogram sell confirm today as well.
The confirmation or rejection of my previous bullish forecasts really rest on the next 6 trading days. The market must decide and show what it wants to do into end of month and end of quarter. If we end this month and quarter very hard down then I will have to cancel out the bullish prospects. A hard down closing into this month could open up the long term bearish scenario again.
The market has to make an important decision during the next 6 trading days! At the 61.8% Fib Retracement level there is always the risk of a strong bearish continuation so it important to be on watch for that. On the chart above of the DIA, a move to 125 is normal, but breaking below that would be an important technical weakness.
Here is a quick recap on some of the reasons why I see USA stock indices trading much higher, probably up to new 52 week highs. Some of the reasons are more heavily weighted than others, but they are all important.
Everyone hates the Euro and even the mainstream media has caught onto the ‘end of the Euro’. Problem is the commercials traders don’t seem to agree with this view and they are usually right. In addition BestOnlineTrades.com identified a important buy zone in late May 2012 from a large Gartley Buy Pattern in the FXE Euro. The patterns are never guarantees, just probabilities, but this one looks highly probable to me.
There is also a bearish pattern in the UUP US Dollar. So that typically means the stock market goes high as dollar weakens. This is starting to look more and more likely as we head into the election.
There was a bullish Fib pattern in the Dow Transports recently.
There were recent bullish Fib buy patterns in the GDX and the USO which supports the bear pattern in the Dollar Index. Also there was a Fib Buy pattern in Gold.
NYSE Summation Index as well as other breadth indicators are currently in a bullish stance for the first time in about 2 months.
The above chart of the long term sp500 along with bear market resistance line is a beauty and a very important one too.
There are a few important points to note about the chart above.
First, it is a monthly chart so it is long term. Second note that the blue dotted line is essentially the equivalent of the long term bear market line. Staying UNDER this line provides opportunities and potential for more heavy long term bear market action. Staying ABOVE this line shows a breakout and removal of the long term bearish trend.
Note in the chart above the monthly price candlesticks that show how the sp500 did a northward topside breakout on a sign of price strength.
And lastly, note the KEY JUNE 2012 price candlestick action which currently shows in mid June 2012 that we have a REJECTION of the red shaded bear area and a holding above the blue dotted line. This tells me we have done a successful retest and can now resume higher again.
My only caveat with the above mentioned conclusion is that the month of June 2012 is not finished yet. The monthly June 2012 price candle could still suffer a huge sell off in the second half of June and cause the above chart to look much more bearish. However at this time that is not my take. My take is that we have done a successful retest and will now resume higher to new 52 week highs.
