Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Market Head and Shoulder’s? Where's Your Money?

Companies / Company Chart Analysis Jun 23, 2010 - 02:39 AM GMT

By: JD_Rosendahl


Diamond Rated - Best Financial Markets Analysis ArticleThe DOW trades lower today.  I’ve been waiting for the market to at least consolidate, and we’ve seen the beginning of that over that the past two days.  The market failed at the 50 day MA yesterday, and closed below the 200 day MA today.  The DOW closed at its lows for the day right at the 38% retracement level.  Price has failed at a level that qualifies for a right shoulder of a head and shoulders pattern, and caution on the long side is warranted.  See chart below:

There’s still plenty of room and time for the DOW to trade back and forth and push into one more little advance and create a topping pattern for the right shoulder.  I kind of like or favor this to occur.  A close below 10,100ish probably negates that view.

From My Trading Desk:

The Longs:

We’ve been following 5 stocks (CAT, CSX, COH, UNP, UTX).  We’ve traded them long recently, but we haven’t had an open long position on them for a few days.  We still hold the view of waiting to see low risk set ups.  That has turned out to be a smart strategy for low risk trading. 

COH:  The stock has rolled over.  I thought the stock might make a flag or handle pattern from its recent high, and the first 3 days of the decline it looked like we were going to get just that.  Patience paid because the past two days it has fallen sharply.  While it still could push into one more high, it actually looks like a possible short. 

CAT:  The stock failed yesterday at resistance, and looks like it has formed an Evening Star. 

CSX:  Also failed at resistance.  It too has an Evening Star.

UNP:  failed at prior high with an Evening Star.  I’ve label what could be an ABC flat pattern just for show.  I’m by no means trading that, but just wanted highlight a potential Elliott Wave Flat pattern. 

UTX:  Evening Star.

In the long side charts, we need more time to see if these stocks form flags or handles to initiate long trades.  It’s just too early for low risk trading.

We have to be cautious as conservative traders from the long side because we don’t know if the recent stock market weakness is a pull back into wave 2 or B, or a failure into a right shoulder of a potential H&S pattern.  Mr. Market likes to keep participants guessing.  It won’t take long to know.

The Shorts:

We still carry our shorts as I believe the market will soon fail, and the head and shoulders pattern will be real.  You could say, “I have a bearish bias longer term”.  I expect the stock markets to begin discounting negative data (head winds) coming our way by year end or in 2011.  As always though, we focus on the technical analysis for trading.

DAL:  I highlighted a potential H&S pattern several days ago, and the stock has broken down substantially today.  We have a half position short the stock, and are comfortable with that trade.  We also have solid bearish divergences both the MACD and RSI.  AND, we have a 3 Black Crows candlestick pattern.

MCK:  From my last update on our shorts, the stock has pushed into one more minor wave up, and might have complete wave 5 up with an ending diagonal.  We carry a full position short MCK.

SRS:  I opened a 1/3 of a position on SRS today.  The short real estate ETF looks to have formed a double bottom after making what looks like a wave 4 wedge pattern and wave 5 down.  I like the MACD structure and today seemed like a good time to dip our toe into the waters.

COH:  We have bearish divergences forming on the MACD on a very minor new high.  Yes, we took a half position on the short side.  We need more technical damage to the down side to increase that position.  If it closes below the up trend line and the gap in price, we have more significant price damage.

I’ll be the first one to admit, I’m more aggressive on the short or bearish side.  If I’m wrong, we’ll know in the next few days or couple weeks, and as a trader we’ll have to deal with it in some manner.  That’s trading!

Note:  Shorting is not for everyone.  It’s an aggressive trading strategy that just doesn’t fit the risk profiles of most investors.

Lastly, based on the price structure of the market, now is a great time for those who have buy and hold positions on the long side of the market to take some chips off the table to protect your net worth.  You might want to consider exiting all together or averaging out.

It’s not about what actually happens, but focusing on the risk in the market.  The risk is too great to be holding long term positions, and we have to manage risk first.  Even if the market makes another new high, which I doubt highly, I believe the stock market will be significantly lower this time next year.

Hope all is well.

By J.D. Rosendahl

J.D. Rosendahl was a former stock broker/investment consultant (currently not licensed) before becoming a Commercial Banker for the past 14 years. He manages his family's wealth, helping them avoid the high tech bubble and the real estate bubble melt downs and preserving wealth.

© 2010 Copyright J.D. Rosendahl - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules