Sunday, September 19, 2010

Technical Analysis

Technical Analysis works. As I chart every night over 300 or so stocks, I love to look for winning patterns. Cup with handle, double bottom, three week tight formations all work. However the simple moving averages, 50 and 200 day MAs offer support. Some of the markets best leaders this year all were supported by their 50 day. These include VMW BIDU FFIV AAP. But often a stocks last stand lies at its 200 day. The proverbial line in the sand. Just to prove that these moving averages work, lets consider the list forthcoming of stocks this year that found support at that all important line. And note the rich, diversity of industry groups. MCD MFB PNRA FOSL DLTR VIT DE AAPL ALTR BWA EMC EXXI TRW LXK TEN TTM NTAP LVS CXO DTVXEC CMI WLL INTU EGO PSA SPG CTSH. I can go on and on, but I think you get the point. Now if that line is breached to the downside, it quite often spells doom for the stock.

Sticking to the theme here GS has an important clash with its 200 day MA. A psychological market bell weather, if GS can pierce that 200 day it can foreshadow good things for the future. It failed there in early August, and again 5 days ago. Going to be fun to see how this one plays out. Lets see if it can break thru 155 on the upside with powerful volume. IPI, in the top performing agriculture sector, popped its head above its 200 day in strong volume on Friday. Lets see if that line in the sand becomes support now. It should hold 26.

One last recommendation. Short TSLA under 20, going below its 50 day.

Good luck.

The author owns positions in FCX, AMT, AN, NZ, STRI, AKAM, EXXI. Short AVGO JKS

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