Stepping Inside the Straight Up Rally for the SP500

Aug 27, 2014: 2:43 PM CST

What does the chart suggest about the current rally into 2,000 and what can we see by “stepping inside” the market right now?

Let’s take a quick look at the S&P 500 and focus on key levels:

Let’s focus on the strong impulsively rally up from 1,900 to 2,000 (we’ll start simply).

Price achieved the full 2,000 index target and now is forming doji/reversal candles into the upper Bollinger Band (and 2,000 target).

This alone suggests odds favor a retracement down as opposed to yet another short-squeezed breakout higher.

WE then add the Volume Divergence along with the momentum divergence as seen best on the hourly chart:

The Momentum oscillator – along with volume – peaked mid-August which suggested price was likely to continue trading higher.

Price did fully achieve the simple 2,000 target but this time with divergences across the board.

We’re even seeing divergences with key Market Internals:

Breadth, TICK, and Volume Difference (of Breadth) all are forming lower highs as price forms its all-time high.

I wanted to highlight the “heart” or core of the rally (middle) which was marked by spikes (confirmations) in Internals.

At this point, we’ll focus our attention on the 2,000 level and the Daily Chart where classical odds are rapidly shifting to the bearish/retracement case.

Of course, if buyers ignore the evidence and keep pushing prices higher, then more well-intentioned short-sellers will be forced to buy-back to cover losing positions, which perversely will push price higher despite any and all evidence to the contrary.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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Join Corey Wednesday for a Special Five Steps to a Reversal Webinar

Aug 26, 2014: 11:51 AM CST

I’m excited about a webinar opportunity I’ll present for you Wednesday as part of Trader’s Coach’s Wednesday Night Live educational webinar series!

I’ll be discussing “Five Steps a Market Takes Before a Reversal/Breakout” and – given our recent breakout – it should be a perfectly timed event.

I’m honored to be a guest of Bennett McDowell again as part of their Wednesday Night Live events.

If you’ve ever wanted to know a process for spotting trend reversals – and breakout trades that occur during the process – then join us live this Wednesday evening at 7:30pm EST / 4:30pm PST.

We’ll see you there!

Corey

Continue Reading…

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Charting Three Top Trending Stocks to End August

Aug 26, 2014: 9:56 AM CST

I’m a big fan of the concept of “Strong Getting Stronger,” and three such stocks stand out as strong candidates.

All three names are overextended so these aren’t instant-buy candidates, but they do underscore the principle of trend following (as opposed to fighting a trend).

Let’s take a look at three strong, overextended stocks as we end August.

US Steel (X):

I’ll just do a quick highlight of these stocks and allow you to compose your own analysis and spot potential entries as they develop.

US Steel broke above the $28.50 horizontal resistance (rectangle) area with a strong impulse candle (on high volume and momentum) and continued the uptrend higher on a straight-up impulse toward the $40.00 per share region.

We’ll focus attention on the $40.00 level but will remember the “breakout and impulse” lesson here. Continue Reading…

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Current Market Rally Echoes a Pattern from the Past

Aug 26, 2014: 9:38 AM CST

If you look closely at the current market rally, you may see something eerily familiar.

Let’s chart the current intraday rally (as we’ve been highlighting) and compare that to a familiar friend on the chart and learn a quick lesson about technical analysis in the process.

I’m using the @ES futures contract (S&P 500) to show the overnight data.

Initially, I wanted to see how strong – how pure and persistent – this rally has been but in the process, I saw something rather interesting.

If you take nothing away from this chart, let it be that market rallies can be strong and should not be fought (strength can lead to more strength).

However, if you want to take it a step further, compare the intraday (hourly) chart of the @ES futures with this one: Continue Reading…

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Bearish Engulfing Opportunity in Altera ALTR

Aug 25, 2014: 1:28 PM CST

Altera (ALTR) showed up on two of my stock scans this morning and I wanted to share the chart both as an educational resource and a potential trading opportunity.

Let’s see the chart and discover why this stock appeared on two separate scans:

First, Altera (ALTR) appeared on my morning “Consecutive Closes” scan as the stock that has closed the MOST times to the upside in the S&P 500.

To be specific, ALTR has closed higher 11 days in a row.

I’ve been including daily results of this scan in the Daily Membership report (it provides aggressive yet short-term trading opportunities).

The 11-day consecutive rally has taken price from the lower Keltner Channel ($33.00 level) to the current location above the upper Keltner Channel ($35.00 per share).

There’s another reason we’re interested in this stock – see if you can discover it before I reveal the answer: Continue Reading…

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