Tag Archives: SP 500
The Technical Breakout Trader utilizes multiple time-frame analysis to determine high probability setups in the markets. This strategy can be applied to the major market indices to get a feel for the overall market condition and the future direction. Below is a multiple time-frame analysis of the S&P 500.
Weekly Time-frame Analysis;
Stocks have been on a tear since the early January breakout over 1475 resistance from September 2012 highs. Prices are just below the 2007 highs of 1576 sitting at 1514 ending 2/28/13. Last week the SPX printed a weekly doji candle signaling indecision in the market. The MACD is flattening out and selling volume is picking up indicating a pull back may be near. It’s interesting to note the last two pullbacks have found support around the weekly 50 EMA which currently sits at 1414.30.
Daily Time-frame Analysis;
The SPX has been whipping traders up and down looking for direction recently. 1515 was a key resistance level that was broken for 5 trading days before seeing a sell off last Wednesday, 2/20/13 putting it back in its trading range between 1495-1515. The bottom of the range, 1495 was the key support that was compromised on Monday’s sell off only to be regained on Tuesday after price found support at the 50 EMA. Today’s action was very interesting. The market showed continued strength following yesterdays big gain up until the very last 10 minutes of trading before falling slightly below 1515. 1500 is a significant psychological level to watch as well.
Hourly Time-frame Analysis;
Intra-day market analysis on the hourly time-frame shows todays action as mentioned above. 1525 was rejected at the end of the day, and is a key level to watch to be broken for continued upside in the SPX. The MACD is turning down and RSI pointing south indicates the end of day weakness may continue into tomorrow. If so, I believe 1500 will be tested again.
We need to see prices retake 1515 and breakout over 1525 for more up side in the rally. If this occurs a test of 2007 highs of 1576 is more likely. However, the weekly chart indicates a pullback is becoming more and more probable. If 1500 is broken again, and both the daily 20 & 50 EMA’s break down it would suggest a pull back is happening after all. If so, I would look for support around 1410 the weekly 50 EMA. Until either of these scenarios play out, I expect more choppiness and indecision in the S&P 500.
A few weeks ago Andrew Barry from Baron’s insight wrote an article about the contrarian investing strategy of buying last year’s losers via The Wall Street Journal. Here is the link to the original article, http://online.wsj.com/article/SB10001424127887323374504578219492799899724.html.
The investment strategy is to buy last years biggest percentage losers. Over the past 3 years this strategy has proven to work and bring in above average gains compared to the S&P 500. Andrew identified the following stocks meeting his criteria ;
Below is Technical Analysis of Andrew’s picks to determine if they are indeed good picks today.
APOL- Has been on a monster decline all of 2012 losing -61.17%, the worst performer on the list. Significant downtrend and horizontal resistance lies above around $23. RSI hit oversold territory in October 2012 and has been rising steadily since. MACD seems to have put in a bottom for now but is well below the zero line, indicating a bearish trend. Technically APOL is looking for more downside ahead unless $23 can be broken to the upside.
AMD- Looks like it has broken it’s 2012 downtrend recently, and prices are already up 19% since 2012 close of $2.40. This could be a relief rally from RSI oversold conditions. Across above the RSI 50 line is considered bullish.
BBY- BBY has been in a 2 year downtrend, but is up 33% since 2012 close of $11.85. Broken support levels have turned into resistance levels, with significant overhead resistance at $17. RSI has crossed above the 50 line, but has done so in the past giving a bullish “headfake” signal. A break above $19 could be considered a possible reversal.
HPQ- Is sitting right below horizontal and downtrend resistance at $17. A break to the upside could indicate a possible reversal in the making. MACD is showing divergence indicating the downward momentum might be letting up.
JCP- Downtrend resistance and old support that should act as new resistance lies above at $23. MACD is showing signs of divergence as well.
PBI- Has been in a 2 year downtrend with overhead resistance of old support at $12.50. MACD showing signs of divergence.
CLF- Is sitting right below old support now resistance roughly at $36. Slight MACD divergence. Its interesting to note the above average weekly volume over the past 6 months.
ATI- Has been on a heavy decline starting in 2011 after breaking down below the neck line of the Head & Shoulders pattern seen below. Now ATI prices are right below the downtrend line resistance. MACD divergence over the past year may signal a reversal is in the near future.
EXC- Excelon’s share price dropped off very fast October and December of 2012 hitting a low of $28.50. Look for a short term up move to the broken $34 support or resistance from the downtrend line.
EA- Looks like it is the only one on the list that has begun a reversal. Look for more upside over $15.50. MACD is trying to break above its zero line and RSI is above 50, both are considered bullish.
So far, betting on the S&P 500 biggest losers seems to have some ST momentum but all could soon run into their respective long term resistance areas. Out of all mentioned, Electronic Arts (EA) and Advanced Micro Devices (AMD) look the most promising of a reversal and big gains in 2013.
What a crazy day in the market today 12/27/12! The daily view of the SPY shows a large hammer forming, as it rejects the 50EMA. With the fiscal cliff approaching with no resolutuion I see the market being very mixed moving forward.
It’s more interesting to take our view down to the hourly charts for a better understanding of the price action today. Price fell very fast through $141.50 support this morning and then proceeded to retest this area. The close left price sitting right below the broken support at $141.50 which could act as new resistance. Price also rejected the 20EMA which lies at $141.62. Tomorrow will be tell-tale to see if the V shape correction at $140. plays out or if the new resistance at $141.50 holds.