Charts of the Week, Monday December 11th, 2006
Charts of the Week are stocks that appear to be attractive candidates for short- to intermediate-term (2-6 weeks) returns based on analysis of their daily or weekly chart formations and underlying technicals. Support levels may be used as possible stops.
Analysis: NDX: This week we feature a review of the indices as we approach the year end. We feel it's an appropriate time to take a look at the charts of the major indices, as the 5-month rally gets long in the tooth. The NDX is the index we follow most closely. As you can see a 5-month solid uptrend is in place. The index has not violated price, moving average or trendline support yet, though the dip on Friday tested the trendline. A move below the 1760 area would constitute a break of potentially all three of those -- the 40-day moving average, 5-month trendlines and lateral price support from the previous lows. So that's an area we keep a close tabs on. A break below that would be extreme cause for caution. As you can see, the On Balance Volume is at the top of the window and overbought. Despite the new highs set in October and November, the Money Stream, in particular, is below the January highs and trailing, and the Balance of Power is only neutral at this point. So, there's cause for caution up in this area, but the trend is not broken, the trend is still your friend, and until we get a breakdown we can consider the possibility of even higher prices. As you can see from the three year trend that is also in place, the top of the channel for that is not far away, so we advise extreme caution here, but we continue to play the long side until we get the break.
Analysis: SPX: The SPX chart, displayed on a weekly basis, also shows a strong rising long-term trendline since the fall of 2003. The top of that channel is being tested right here. We're also not far from lateral price resistance, which could extend the trend. A break through the top of this cannel could result in a parabolic spike up perhaps to an important high, so that possibility still exists. As in the case of the NDX, the S&P 500 continues in a solid uptrend since the July bottoms, and again has not broken any price, moving average or trendline support. So the trend remains higher until that break does occur. The levels we'll be keeping a close eye on are the recent support lows around 1378. So the 1378-80 zone, my initial area, would be cause for concern, and beneath that the low in early November around the 1360 area remains secondary strongly support. Resistance currently is around the 1418-20 zone. This trend has taken us through the top of that multi-year up-channel, and is the stronger of the trend, and shows very little sign of a pullback, with the OBV, Money Stream and other indicators strongly confirming the trend. The 40-day moving average currently around the 1388-90 zone is also an area to keep a close eye on as that moving average has not been broken since the breakout in July.
Analysis: SOXX: The Philadelphia Semiconductor Index (SOXX) coordinates with its tracking stock ,the SMH (Semiconductor HLDRs) ETF,which we follow more closely,as it can be readly traded. The underlying trend in the SMH as you can see shows that the index has been meandering back and forth in a 3-year trading range and is trailing the other indices, putting somewhat of a drag on the Nasdaq 100 index. The current shorter-term trend since the July lows shows an uptrend, but a rather muted one with a not too strong angle of ascent. The index has not violated KEY support and the level we'll be watching in its affiliated SMH exchange traded fund would be a breakdown beneath key support, which would be around the 32
Analysis: SMH: See analysis above (under SOXX chart).
|
