Dear Readers, the winds are changing in the stock market. Cash is king and do play defensive to ensure your survival in the financial market. Many stocks are showing topish signals and there is a high possibility that we could see some serious selling taking place. I have an earlier post here last week (click to read) on the "not-too-good" market sentiment. Meanwhile, let's take a look at this week's charts.
The Dow Jones Index and Nasdaq Composite are forming descending triangle formations. Market Indexes are made up of many index stocks and may take time to break down as the individual stock fall sick one by one. Meanwhile, many index stocks are already breaking down and undergoing distribution even as the general market has yet to top out. (Click on charts to enlarge)
Apple Inc. was rejected at the 50day MA which is a sign of weakness as many short sellers piled in at the low risk entry point. Apple Inc. is a market leader and many eyes are on it as leaders are known to lead the markets lower.
Financials are weak and are currently trending down as they broke downwards out of bases. It will take some time for the financials to build their bases and long set-ups. If you only go long, you will have to be patient. Stocks on down-trending have the tendency to bounce up and then be shorted down again by sellers at resistance.
Take a good look at FAZ (Inverse bear ETF for financials) as the ETF looks like its building a firm base for a push upwards. The financials did not took part in this commodities driven rally and being the backbone of the economy, we'll need the financial to take the lead. Currently everything seems to indicate that all is not well with the economy. Keep an eye on the financials. Meanwhile, we are also seeing a lot of such bases being formed in other inverse ETFs as well.
I have a short position in Alcoa and it is acting well. In this case, i will have to be patient as the stock makes its move down, hopefully. Nonetheless, my stop loss will take me out of the trade if the stock bounce above the 50day MA. The Head & Shoulder top pattern have shifted the odds towards the short side for sellers.
With the sentiment in the general market not looking good, i shifted my attention to Chipotle Mexican Grill (CMG). This stock had gained almost 200% since the beginning of 2010. I believe many short-sellers are watching this particular stock as well as it seemed to form a potential H&S top pattern. A break of the neckline would see more selling. Stalking this stock.
Play defensive and trim your long exposure in the market. Have a good weekend.
The Dow Jones Index and Nasdaq Composite are forming descending triangle formations. Market Indexes are made up of many index stocks and may take time to break down as the individual stock fall sick one by one. Meanwhile, many index stocks are already breaking down and undergoing distribution even as the general market has yet to top out. (Click on charts to enlarge)
Apple Inc. was rejected at the 50day MA which is a sign of weakness as many short sellers piled in at the low risk entry point. Apple Inc. is a market leader and many eyes are on it as leaders are known to lead the markets lower.
Financials are weak and are currently trending down as they broke downwards out of bases. It will take some time for the financials to build their bases and long set-ups. If you only go long, you will have to be patient. Stocks on down-trending have the tendency to bounce up and then be shorted down again by sellers at resistance.
Take a good look at FAZ (Inverse bear ETF for financials) as the ETF looks like its building a firm base for a push upwards. The financials did not took part in this commodities driven rally and being the backbone of the economy, we'll need the financial to take the lead. Currently everything seems to indicate that all is not well with the economy. Keep an eye on the financials. Meanwhile, we are also seeing a lot of such bases being formed in other inverse ETFs as well.
I have a short position in Alcoa and it is acting well. In this case, i will have to be patient as the stock makes its move down, hopefully. Nonetheless, my stop loss will take me out of the trade if the stock bounce above the 50day MA. The Head & Shoulder top pattern have shifted the odds towards the short side for sellers.
With the sentiment in the general market not looking good, i shifted my attention to Chipotle Mexican Grill (CMG). This stock had gained almost 200% since the beginning of 2010. I believe many short-sellers are watching this particular stock as well as it seemed to form a potential H&S top pattern. A break of the neckline would see more selling. Stalking this stock.
Play defensive and trim your long exposure in the market. Have a good weekend.
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