Interesting Intraday Action in AAPL

May 9, 2008: 6:16 PM CST

Apple Inc (AAPL) showed some interesting patterns today on its intraday chart – I thought you might like to take a closer look.

The day started with an overnight gap down that didn’t fill, although price achieved a 50% retracement.

Gaps that fail to fill can lead to larger trend moves in the original direction of the gap, which in this case took price to new lows.

There were two entries (trades) that could have been taken to the short side in that structure:

Both trades set-up as price retraced to the declining 5-period moving average (with a stop just above the falling 50 period MA).  Generally, it’s best to play for a small target, but in the structure of a trend day, you can use a type of trailing stop strategy (trailed above the 20 period MA).

Price formed divergences into the noon hour, and the 1:30 time formed a higher low, setting up a potential “Sweet Spot” trend reversal trade (with the purple hour that triggered when price rose above the 1:00 swing high).

In terms of being interesting, I wanted to highlight the strange consolidation pattern for the 2:00 hour.  Price was literally sandwiched between the falling 50 and rising 20 period moving average before breaking out to the upside just after 3:30.  It’s rare to see price respond so starkly to these averages in such a clear pattern.

Also, notice the new momentum highs at 1:00 and 2:00 (momentum precedes price, meaning that intraday swing price highs were likely yet to come).

Apple has been doing exceptionally well on the daily chart, but could be encountering resistance which is setting up a sell swing (or brief retracement).  There’s plenty of volatility and price range in this stock to do well as an intraday trader, but if you want to play the daily chart, you might consider options strategies.

It could be another good year for Apple and I’ll continue to update you on patterns and trends I see developing in this and other stocks!


Crude Oil and Trade Triangles

May 9, 2008: 10:15 AM CST

Crude Oil tapped above $124 intraday today, marking yet another new record high for the crucial commodity. Is there a potential way to analyze and trade this development with Market Club’s Trade Triangle Technology?

Adam Hewison today released a new brief info-movie for your benefit. I thought it was funny that he described crude oil as “The gift that keeps on giving… or taking.”

Further, he writes:

With crude oil hitting historic highs today, I thought it would be a good idea to do a short video updating you on our “Trade Triangle” technology and the signals we have generated in the June crude oil contract.

This five-minute video will give you an insight into how you can approach the crude oil market using MarketClub’s “Trade Triangle” technology. This approach takes a great deal of the emotion out of trading which is crucial for any successful trader.

I hope you enjoy the video and learn how to employ our technology into your own trading.

Check out the video “May Crude OIl” and also other videos (link at the video page) for other “Trader’s Educational Whiteboard” brief videos.

Beyond this video, be sure to check out the page “Market Club Introduction” and consider joining this beneficial and affordable service.


Commodities Race to New Highs

May 8, 2008: 7:12 PM CST

Do you know where commodities have been lately? Does it matter to the market? Let’s take a look at a few select commodity indexes to see the new highs made on some of these indexes today.

First, the Goldman Sachs Commodity Index:

Notice the extreme price movement that created the surge which took this index to new highs.

Now, let’s compare this to the more popular (and probably more widely followed) $CRB Index:

Notice it made new intraday highs but closed right on new high territory. Price may be forming an ascending triangle (bullish) pattern, as the lower trendline appears strong because it has been tested at least four times.

Let’s examine two commodities – one to be serious, and the other to be fun.

Crude Oil Prices ($WTIC):

Crude Oil has been frequently mentioned on the news as making new highs.

The Bull Flag (not shown, but mentioned previously on this blog in my price projection post: “Crude Oil Gushes to New Highs” – I called for a target near $124 per barrel) has resolved and achieved its price target, and so that is no longer the dominant technical chart pattern in play now. The recent surge resembles some sort of ‘blow-off’ top complete with momentum divergences (also not shown).

Finally, let’s look at an index you’ve probably never seen before – The Goldman Sachs Livestock Index:

I wanted to show this chart ($GVX) because of the amazing and remarkable gaps (that can occur with these commodity markets) from early to mid March. Recall that futures market can go “lock limit up” where trading ceases for the day and few orders can be filled. It’s an interesting twist to futures trading that can scare away new traders.

Nonetheless, the index itself is near new highs (2007 showed highs of $250), the price action is interesting and very volatile – but it serves as an interesting contrast to the many stock and index charts you’re used to examining.

For more insights on commodities, futures trading, and even stock trading (including proprietary trading signals, analysis, scans, and trader interaction), join the Market Club.

For some real ‘heavy lifting’ analysis software, check out Tradecision – readers receive 15% off the one-time purchase (no monthly fees).  I’m still mastering this amazing software tool available to retail traders.


VIX Off 2008 New Lows

May 8, 2008: 11:31 AM CST

The $VIX (Volatility Index) is bouncing off new lows for 2008 in a sign that traders and funds have become less fearful in the current market environment.

Perhaps they are unwinding their hedges or engaging in some sort of risk-seeking or ‘cooling off’ period, but it is interesting to note that it took the VIX 6 months to make a new low in 2008.

The VIX actually tested a low made near Christmas of 2007 and could be finding support at that level as the main US Stock Market indexes find resistance on their daily charts.

There is a tight range for the indexes, as they are generally beneath their falling 200 day moving average and above their 20 and 50 day moving averages.

Conversely, the VIX is beneath all key moving averages and is in a confirmed daily downtrend while the S&P has been in a short-term uptrend since mid-March.

If you’re not familiar with how to analyze the VIX, or why it’s inverse the S&P 500, check out Bill Luby’s post at the aptly named VIX and More site entitled “Ten Things to Know about the VIX”.


Intraday Foibles

May 8, 2008: 1:45 AM CST

I was quite impressed by the strength of the bears in swiping the US Indexes lower on Wednesday, giving the bulls only a marginal chance for any sort of retracement.  I recommend saving today’s charts for the files under “strange price action” for future review.

Let’s look first at the DIA:

Price made its intraday high just above yesterday’s close, which formed a shooting star (bearish reversal) candle pattern.  After consolidating into the 11:30 time slot, the market broke to the downside and consolidated in a slightly rising formation (actually flat on the SPY) which broke sharply and quickly to the downside.

Bulls only neutralized selling pressure, and did not overcome it, as evidenced by the strange ‘flat-line’ price action into the 2:00pm hour before the bears took full domination of the intraday price action, pushing the indexes to new lows on surging volume before making one final push downward to close near the session lows.

In terms of ideal trades, one could have entered short on the shooting star candle at yesterday’s close at 10:30 and targeted the 200 period moving average.

One could have ‘gotten short’ again when the Bollinger Bands narrowed at 1:00 and entered playing for a breakdown in price with a stop above the key moving averages.

A second such trade could have been entered around 2:00 (actually any time before that once you recognized the price retracement and flat-line price action – akin to a rectangle).

Price breakdowns can give you large targets, and with the swift action, you may have been tempted either to take a small target or try to fade the action when you felt it ‘bottomed’ but momentum often precedes the price and the new momentum (and price) low at 2:30 was a clue that the actual price low was likely yet to come.  Indeed this was the case.

I focused on the rectangle consolidation patterns on the SPY chart below:

It’s unusual to have two rectangle consolidation zones back-to-back, and also unusual to see price form such a clean stair-step pattern without meaningful retracements against the prevailing trend.

File this day for your future reference and study price action to gain greater clues into your own interpretation.

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