The Rise and Fall of Nokia NOK

Oct 30, 2008: 4:35 PM CST

Nokia (NOK) Weekly:

Nokia investors have experienced a very wild ride in a short period since the start of 2006.  From a low near $16, Nokia rose to $40 per share in two years (though not exceeding is 2000 split-adjusted $55 high) and then has spent the better part of 2008 in virtually total free-fall.

I did want to point out a larger “accumulation-distribution” pattern (or cycle) that was evident in the stock.

From 2001 (after the ‘dot com’ collapse) until 2007, Nokia traded with a range of $10 to $20 before breaking out above this range clearly in 2007.  This would be considered a period of quiet “Accumulation” by long-term investors in hopes of higher future prices – it could also be considered “Phase 1″ (or even Elliott Waves 1 and perhaps 2).

After price breached the $20 level and began a near 45 degree ascent, we would call this the “Realization” (Phase II) period where everyone begins to ‘catch on’ that prices will continue to rise and funds begin to accumulate shares more aggressively (though volume was not significantly different during this period).  This could be also described as an Elliott Wave 3 impulse if you like).

Finally, price went “near vertical” in the October period of 2007 (after a slight pullback to the rising 20 week EMA – Elliott Wave 4?) which constituted the final Phase 3 of the Cycle which is known as the “Euphoria” phase, meaning everyone is clamoring over each other to acquire shares in Nokia and the price soars to unsustainable highs.  It is at this time that the professionals are starting to distribute shares to the mass public (Elliott Wave 5?).

Finally, price peaks above $40 intra-week and then begins a lengthy slide down to current lows of $14 per share.  I don’t so much label this Phase but it can be called the “Mark-Down” phase or “Distribution” phase or the like – now, investors are clamoring to rid themselves of shares of Nokia they had earlier purchased at much higher prices.

(Elliott Wave Bonus:

Corrective Wave A took price down from the $40 highs to $28 lows rather quickly, when many perhaps saw the drop as a chance to get back in – after all, we buy on pullbacks, right?

Wave B then formed as price surged (literally) from $28 to $36 before rolling over as “B” held its reputation as a “sucker wave” before falling back down into the final Wave C decline from $38 down to $28… and beyond.  It’s possible that a new 5-wave impulse down began and may be completing… or more likely we may be setting up corrective Wave 4).

For an additional bonus, let’s look at Nokia’s current daily chart, which offers perhaps a little bullish hope at these low prices.

Nokia (NOK) Daily:

A multi-swing positive divergence has taken price up to moving average resistance (similar to the broader markets) so let’s see if buyers can step up and burst through the $17 per share level and turn the tide of selling.

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Strange SP 500 Confluence Ahead

Oct 30, 2008: 10:43 AM CST

The S&P 500 is striking a strange chord that will resolve eventually into a potentially large trend move – the question is “Which way will it move?”  Let’s see this and look for clues.

First, the S&P 500 Daily Chart:

If you look at this structure, you likely see a powerful “sell” signal setting up as price tests the falling 20 day EMA and has formed a shooting star (yesterday – bearish reversal candle) and a similar pattern (so far) today – both of which have upper shadows at resistance, which hint at a bearish reversal.

However, you also see a clear and present positive momentum divergence on the prior two swings down (the wave structure is very choppy and volatile) which hints at possible bullishness.

Ultimately, I feel we’re in an Elliott Wave 4 retracement up which is taking the form of a classic descending triangle formation (which isn’t technically the same as an Elliott 5-wave triangle).

It’s also quite possible – from an alternate count – that the recent wave 3 down ended at the spike down around October 13th, formed a sudden and violent wave 4 up to 1,050, and then formed a 5-wave (mini) impulse down into new price lows at 850.  IF that is the structure, then we’re likely in a larger wave 4 up of the larger structure, but let’s not get too caught up in that for the time being.

Let’s drop our timeframe down to the hourly chart to see the recent action and see if it offers any sell signals too.

The S&P 500 Hourly Chart (showing recent triangle structure):

Here’s where it gets interesting.

A classic Elliott triangle pattern is a five-wave affair (which is what we could be seeing) and that the “E” corrective wave may be finishing and ready to roll back over to the downside.


I wanted to point out a couple of points of bullish developments.

Most obviously is the triple-swing positive momentum divergence that has set-up for the better part of October.  Momentum precedes price, and divergences often resolve in reversals.

Second, we see that – no matter how you draw the descending trendline (off the spike high or off the ‘most touch’ method) we see price has indeed broken out of the triangle formation on the hourly charts, and in fact, both trendlines could provide potential support at the 920 level.

Finally, we see “Confluence Support” via these trendlines and from a cross-over of the 20 and 50 period EMAs at the 920 level – the 20 EMA just crossed ‘bullishly’ above the 50.

So what’s going on and what might happen?

I hate to say that it’s unclear, but there are possibilities.

1.  Should price find support at this level and break above the 20 period EMA on the daily chart, that would be a strong buy signal for a potential larger move up (retracement only – likely not to go beyond 1,150).  Keep in mind that multiple positive divergences on different time frames can lead to powerful moves.

2.  If price breaks support at the 920 (and especially) 900 level, look to get aggressively short, as we would be set-up for a test of the lows at 840 and could see if that level would hold and if not, then expect new lows to materialize from that.

Now, we’re near the US Presidential Election, and historically there’s a burst in the stock market as the new president is elected – provided there are no recounts (even after the recount fiasco in 2000, the market surged once certainty was achieved).  Keep in mind this possibility.

Historically, November/December have been good months for the market – let’s see if they continue to do so in this highly volatile environment.

Stay alert and continue to guard your capital.


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Published by Corey Rosenbloom of Afraid to Trade.

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CMT Level 3 Exam Today and MTA Sponsorship Request

Oct 29, 2008: 12:00 AM CST

Today’s the big day I’ve been studying almost two years to accomplish – the final examination in the Market Technicians Association’s Chartered Market Technician Exam track (Level 3 written essay exam) Wednesday afternoon.

Wish me luck in this four hour essay exam that makes all aspects of Technical Analysis and Market Dynanamics (including psychology and sentiment) fair game for a comprehensive exam that spans three levels of formal education in the field of Technical Analysis.

Check out the MTA’s website ( for required reading lists for the three levels, as well as information regarding becoming a member and the examination/formal study process.

Specific areas of study include Candlestick analysis, Indicator Applications, Trading Strategy analysis/comparison, Elliott Wave Principle, Intermarket Relationships, Sector Rotation, Statistics, Sentiment/Psychology, Fibonacci, chart patterns, Point and Figure charting, relative strength analysis, Cycles, and other forms of study.

As taking the three exams is not enough to earn the CMT designation, the MTA requires sponsorship from three current MTA members familiar with a candidate’s work.  I am humbly requesting any current MTA members (or current CMT holders) who perhaps are familiar with my daily work on the blog here to contact me for sponsorship.  I would be honored and would enjoy working together with you for the sponsorship process.  Please email me at corey AT afraidtotrade DOT com (more information via my “About Me” page) so I can provide more information as needed.

In addition, I’d be happy to provide any information I can via email to anyone thinking about, or interested in the MTA or the CMT program – and will be happy to sponsor new applicants as well once I become a CMT charterholder.

Thank you to all who read the blog posts and who have been so supportive of me over the two years I’ve been blogging publicly to the Afraid to Trade blogsite.  I’m almost to the 1,000th post mark!  I’ll soon be launching the formal Afraid to Trade website, so continue to stick with me as the website team finishes their work (hopefully before December).

If I can be of further assistance via email or mentoring or just to answer general questions you may have, feel free to contact me.



A Recent View of Goldman Sachs GS

Oct 28, 2008: 10:46 AM CST

Financial giant Goldman Sachs (GS) held its own relative to other large financial institutions who suffered worse or collapsed entirely.  Although Goldman recently broke beneath $100 per share recently, it might be worth looking at this stock’s recent journey to see if we can glean any insights.

Goldman Sachs (GS) Daily Chart:

The daily chart is clearly in a confirmed downtrend, as evidenced by numerous lower lows and lower highs, as well as price being beneath all three key moving averages and those moving averages being in the most bearish orientation possible.

Notice how over the last two months each retracement move to the falling 20 day EMA has served as an opportune short-sell entry… but wait… the Government banned short selling in Financial stocks.  Even with this ban in place, buyers exited long positions into this area of resistance each time it was tested.  Currently, the ban is lifted which could explain why the last sell signal (just after October 20th – the doji at resistance) worked so well.

Price continues to make new multi-year (since 2003) lows, and today (intraday) the price is off 7%.  It’s probably a little late to get a low-risk fresh short-sell on, and though we may be close to a buy signal (a test of the $75 lows or perhaps just beneath), it’s not here yet.

I did want to add a little bullish optimism that comes in the form of a positive, multi-swing momentum divergence.  At a minimum, divergences tell you the winning side (sellers) is losing strength and to exit any short-sell positions but generally we’ll need a little more confidence before initiating a fresh buy.

Notice also how the recent price triangulation action represents the difficulties for both longs and shorts – though you might know that a stock is headed lower, traders may find it difficult not only to locate an opportune short-selling entry, but once they’re short, they are subject to massive ‘rip-your-lips-off’ short-covering or ‘bottom fishing’ rallies.

Case in point, mid-September when the short-selling ban went into effect, price surged massively.  There have been similar one or two day surges that may have absolutely decimated some smaller (retail) short-sellers.  If only trading were easy (in the sense that what is headed down,  travels down neatly, cleanly, and predictably).

Stay safe in this environment and guard your capital.


What a Fresh Five Year Low Looks Like

Oct 27, 2008: 10:12 PM CST

Today, the S&P 500 (together with the Dow Jones, NASDAQ, and Russell 2000) made a new closing low not seen since roughly March 2003.  Let’s take a quick look at this development on the monthly chart and look at a possible, simple Elliott Wave count interpretation.

The S&P 500 Monthly Chart:

Beyond getting deep in the analysis, sometimes it’s just a good idea to pull back the timeframe and see where we’ve come and how fast we got there.

In less than a year’s time, we’ve almost destroyed the entire gain the S&P 500 index made in its 100% appreciation from the 2002 market bottom… bear in mind this constructive period took roughly five years to build.  There’s also a more than decent chance we could retest or even dip beneath those lows established in 2002, which would plunge us to decade lows.  I’ve drawn a blue line (across the volume bars) that represents these lows… now only 100 points away.

Volume has been surging on the index since mid-2007 and there’s no sign its letting up any time soon.

if you take a close look at the top right side of the chart, you’ll see that the S&P 500 index is down almost 30% in a single month… and the month isn’t even over yet.

What might be a simple Elliott Wave Impulse count?  Without getting too technical, notice that the “1″ represents a possible first wave down followed by a three-month counter-wave “2″ which gave way to the current possible (devastating) Wave “3″ into fresh lows.  If this is the actual Elliott Wave count, then we should be expecting another counter-wave “4″ up (perhaps to the 1,000 level or above) before giving way to the final Wave 5 that could take us down to lows beneath the 2002 levels (around 750).  Let’s not get ahead of ourselves, though or get too pessimistic with that possibility.

In other technical structures, price has made a significant new momentum low, breaching levels to the downside not seen before on the oscillator (the -100 indicator lows were the lowest lows seen on that oscillator.  Keep in mind it’s the difference between a 3 and 10 period moving average, and the current reading is near -200).

Also, price is beneath all key monthly moving averages, and the 20 month EMA is now crossing under the 50 month EMA.  The same EMAs on lower time frames (daily & weekly) already have crossed bearishly.  Keep in mind short-term momentum (and structure) precedes long-term momentum (and structure).

This is the current environment in which we trade, and though the larger structure does not change much, it is worth perhaps keeping a chart printed by your trading desk, updating it each month to note the most current bar – the structure will often remain the same.

Be safe out there.


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Published by Corey Rosenbloom of Afraid to Trade.  Click to receive the Afraid to Trade Feed.

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