It's Time To Buy Some Fertilizer

    The ag sector hasn't been hot since 2011.  Is it time to heat up again?  It appears a large up move may be in it's nascent stages.

    Let's start with a previous leader in CF.  This is the daily chart.  You can see it has spent most of April bottoming.  A head and shoulders bottom has appeared suggesting the lows are in.  This confirms over the 50 day moving average at 194.  Other positive developments include the RSI, a rising MACD and a brand new relative strength uptrend.

    IPI is a mirror image of the CF daily chart.  A head and shoulders bottom, a climbing MACD and a new relative strength uptrend.  Short term positives are clear, but lets look at a couple more Ag chemical names to get a long term view.  

    POT and MOS have set up very potent bases on the weekly charts.  They largely have not participated in the market uptrend off the 2011 lows.

    Potash has traded in a compressing range for over a year.  After a breakaway gap on earnings, the stock has traded very well.  If the short term trend for the group is up, it would be safe to say this will try to breakout.  It's also nice to see the moving averages flattening out after the long down trend.

Mosaic has a somewhat similar pattern going on basing for a year and a half between 45 and 65.  As the right side of this base completes, the moving averages are starting to turn up.  Recently price has tightened in a wedge and may be on verge of a breakout.  Again, if the short term trend is higher, the longer trend appears to point higher as well.

• If you want a pure leader, Monsanto (MON) is the way to go.  It's not mentioned here, but it's been going up while these other stocks are basing.  
• From a fundamental perspective, some investors may hold out because of the heavy precipitation in the Midwest this year.  I'll be watching/listening for comments like that.  

 To summarize, a big move may be in the nascent stages.  If I hear weather related reasons to not hop on board in the media, that would reaffirm the bullish scenario.  Good luck out there.

Monday Morning Thoughts

Singapore - trying to break free from it's tight range.  It's an incredible setup after trading in a tight range for 2 months.  We are looking for a test of the 2007 highs over 3800.

EUFN broke it's downtrend last week.  It appears Europe is leaving it's secondary correction.  Similar patterns have appeared in France, Spain and the UK.  EWQ, EWP, EWU respectively.

The next chart is the Nasdaq % of stocks over the 50 day moving average.  It is set for a test of the 200D MA from below.  That is a hurdle to clear in the short term.

Late last week I was preaching the less is more mantra.  That's still the case for position traders as we embark on one of the most significant macro weeks  of the year.

There are lots of earnings being pumped out, the Fed meeting and announcement (this is the most significant Fed meeting since 2011), jobs report, ISM numbers and on and on.

It's not to say do nothing, but odds will be better with some more clarity.  Keep in mind, at this point, the world markets are trying to start a move higher.   Good luck out there.

Bazooka Ben

As gold and other commodities were losing key support levels on Monday, I couldn't help but think of the Fed.

Many thoughts came to mind. What will the Fed do?  Isn't a prolonged move down in commodities exactly why the Fed has been involved in market operations?  Why do they keep mentioning the unemployment rate as a target for determining their exit?

I recently read The Art of Contrary Thinking by Humphrey Neill. (By the way, it's damn a good read.)

One of the best takeaways from the book is a bit on psychology's law of diminishing returns.  Just in case you're unaware of it, the idea is to sustain momentum over a long period of time you have to continuously add more force.  In the Fed's case that means more QE.  A LOT more.

We are seeing the most significant breakdowns in Gold, Copper and Oil in the QE era.  I also find it VERY interesting that this move in commodities is occurring with the U.S. unemployment rate falling.  It seems absurd that QE expectations (therefore commodity prices?) would be determined off of the unemployment rate.  However, this is what the Fed has telegraphed; isn't it?

Maybe this is just smoke and mirrors to appease congressional and/or public ears.  However, we know many companies are cutting back employee hours and hiring more workers, therefore putting a dent in the unemployment rate.

With commodities falling; conventional wisdom leads us to believe that Bernanke has to bring back his super hero alter ego, Bazooka Ben, to drop the hammer with more QE to prevent excessive deflationary forces.

If that's the case, when does the Fed become concerned enough to act?  This is the million dollar question.  I'll go out on a limb and say Fed statements are going to quickly regain significance; starting with the next FOMC announcement on May 1st.  



Thanks for taking your time to read this.  I'd love to hear some thoughts as we are approaching a very interesting and important time in the history of QE.  Have a great next trade!!

Is LinkedIn's chart telling us to buy Tesla Motors?

This post title sounds crazy doesn't it?  What does a networking website have to do with an auto maker??  How are their stocks related??  We'll get to that in a little bit.  First, let's talk about analog charts.

The idea behind analog charts is history repeats; therefore price patterns repeat.  When you find a proper analog, you have a decent idea of what's expected in the future.  I'm not a huge analog fan myself, but you can't ignore a great comparison when you see one.

There is a clean comparison between these two charts.  The interesting thing here, is that both stocks are so close together in time.  So close in fact, that we probably can't call this a true analog.  It's pretty interesting regardless!
    

I highlighted several points of interest in the two charts to help show how similar the price action is.  Let's dive right in and take a look at the LinkedIn chart.  

You can see the initial excitement reflected in price quickly after the stock went public.  This was followed by a period of heavy selling causing disinterest in shares.  During this time funds accumulated the stock while forming a great base.  After the stock broke out of the base, it hasn't looked back since.  

The Tesla chart has followed the same basic principles over a larger time span.  You have the initial excitement followed with just enough selling to make investors very leery of the shares.  The large accumulation period followed and just this month we have this fantastic breakaway gap out of a base.        

The comparison is pretty eery, but in a good way.  Let's keep in mind charts tell us about the stock's supply and demand.  These companies are very similar as both have tons of institutional investor interest, high ceilings, and are positioned very well for future growth.  

Does this comparison mean TSLA will gain 50% from the break out in a couple of months?  Maybe, heck it has already gained 20+% since breaking out.  Well what can we get out of it then? 

• I do think it's safe to say TSLA is positioned very well for higher stock prices over time.  
• We can also use both of these charts for tracking highly hyped IPO's in the future. 
•  Growth managers are treating these stocks the same; like they are leaders of the next few years. 

Thanks for taking your time to read this piece.  I hope you enjoyed it.  If you like what you see, you can connect with me or subscribe to the blog/newsletter using the buttons on the sidebars. .  Have a great next trade!

Weekend Update 4/21/13

After looking at charts all weekend it appears the market is ready to attempt a bounce in the short term.  I just wanted to quickly point some charts out that appear to be important in the short term.

The daily SPY chart shows a strong bounce on the first touch of the 50 day moving average in 2013.  These next two charts show the intra-day action in index ETF's where head and shoulder bottoms have formed.

The Q's also show a similar pattern.

Other world wide markets have potential to bounce as well.  China is a great example of this.  We are seeing some short term bullish signals across the board.  India and Brazil also come to mind.

So again, in short term bulls may have something to work with here.  This potential move appears to be broad based across the world, and I think it's a solid opportunity to make short term bullish trades.  Will it play out that way?  Only time will tell.  Thanks for taking your time to check out these charts.  I hope you enjoyed it.  Have a great next trade!

Random Chart of the Day

PMBC is a small bank with seven branches in southern California. This name popped up on a volume scan both nights this week.  Let's dig in to the 8 year chart.  

Price has done a relatively nice job of holding up after the strong gains, but it's stuck under key longer term moving averages.  If this can get the moving averages turning up and a break of the relative strength channel (graph above price) again it may be a nice long opportunity.

To simplify this a bit, it looks like a big buyer stepped in causing the major run last year and is still holding a significant chunk.  On the flip side, we have to ask why hasn't this rallied with the market.  Maybe there are some issues behind the scenes that market participants are waiting on.  Or, is something wrong with the business?  We'll keep an eye on this in the coming weeks and months to find out.  
   

Update on Energy

A few months ago we highlighted key breakouts in energy groups across the board.  After a couple months of rallying, and commodity breakdowns across the board, it's time to re-evaluate.

The strongest comes first.  Nat Gas stocks.  This market has a rising trend, although a small topping pattern is in play.  We do have an excellent support zone in the upper 600's which may provide a buffer to larger losses.  However, if this support zone is lost, an even larger topping pattern may in play.  No idea if it will happen, but with this same pattern showing up across energy groups, it has to be noted.  You can also see while we had the recent price breakout, relative strength remained range-bound .

Up next is XLE:

I'm looking at XLE for a short term trade bounce off of this trend-line.  From there who knows, but relative strength is crashing.

Oil Producers:

This price trend-line confluence is just huge.  A loss of the rising support line targets the high 40's.  That may create an even larger head and shoulders top targeting the 2011 lows(similar to the XNG pattern).  Note the ~9 month RS support line has broken.  Again you can see the RSI is not that of a bull market.

Oil Services:

 We have no clear direction in this market.  Price, relative strength, RSI, and the moving averages really give us little information other than the 230 area seems significant for determining trend.  

We can conclude energy producers are in a somewhat precarious position right now.  Across the rest of the space recent breakouts were not particularly strong, but that doesn't mean they are doomed as long as support holds.  Perhaps this will give us a reset and a new launching point for gains.  Whatever the result, we will know more about the longer term direction in the next few months.

Latin America turning the corner? 4/17/13 UPDATE

UPDATE 4/17/13 --- the major rising support line is in danger of being breached.  That would nullify this idea.  

The ILF:SPY RS is still diverging.  Does this mean downside catch-up for SPY?? 


The emerging market group has really under-performed the U.S. markets so far in 2013.  Finally, we've found evidence that this is trying to change via ILF.  ILF is our go to Latin America ETF.  

Late last year, ILF broke higher out of a nearly two year wedge.  You can see there hasn't been much action since.  The high RSI level makes me believe this is a market just waiting to advance.  Last Friday, the ETF actually re-tested and bounced off its 20 month rising support line.  This is common in wedge breakouts that stall out.      

All in all, this is a good area to take a shot long, versus last week's low.    Note the relative strength is still in a downtrend.  Let's look at this further.  

  

These last couple of lows have really built up a strong bullish divergence.  The lagging period is about to be over, at least in the short term.  

I like an ILF pairs trade with SPY if/when the relative strength resistance line breaks.  I do like ILF as an investment entry, but if we confirm a breakdown out of the rising support line, you have to bail.

Big happenings in risk off groups

Last week's action appears to signal a move towards yields and safety.  This is evident in a few charts.

I've harped on this IYR/XHB ratio divergence for far too long.  Finally, it's near a price confirmation of a reversal.  This is a risk off signal.  Note the RSI is the highest RSI since the summer 2011.  

This IYR relative strength chart shows what at first appeared to be a significant breakdown.  As the market has broken down, this has quickly reversed and broke out of a wedge targeting ~.475.  

TLT has broken out of a larger falling wedge.  We can target the previous highs at 130.  This is absolutely a risk off signal in the market.  I'm using the TLT/SPX correlation cycle as a bit of a road map.  You can see the similarities in the cycle to 2011.  

The  risk off / hunt for yield theme is also evident in the energy space.  MLP / XLE recently broke a 10 month resistance line and screamed to new highs.  Again note the RSI.  

The message here is pretty straight forward.  We are seeing a unanimous flight out of risk and into safety and yield.  This tells us as swing traders to be selective with longs and more aggressive with shorts.  As position traders and investors, we can take this time to build watch lists or do some fundamental analysis on new stocks emerging.  Stay safe out there!

Charts of interest 4/4

XHB relative strength is near a rising channel break.  Note RSI has been signalling a weakening trend for quite some time.

The furnishings index had broken out of a broadening pattern, and now seems destined to test the upper boundary.  It had a nice break out, but this week has engulfed over a month of price action.

XBI double top?  This is Biotech ETF has under-performed big time lately.  That gap filled quickly and appears to be exhaustion.  The 50D will tell us the story.

LQD/TLT really never could clear the major pivot area since the 11' bottom.  This seems quite bearish for equities or at least signals a top for now.  If you have any thoughts chime in!

Nike held up tremendously as the market sold off.  Now the 10 day moving average has caught up to price.  A push higher here could really get that 200 day turning up.

JCP quickly reversed some divergences at the lower bollinger band with a double bottom in price.  We like this one and are considering adding long exposure (not a recommendation, more of a disclosure).

Charts of Interest 4/3/13

IWM sure appears to be in the second half of a head and shoulders top.  If it plays out the clear area to target is the New Year's gap.  Regardless the support line at 89 looks is important.  Note ADX curling up and getting ready for a fresh trend.

GOOG appeared to break a down trend with a nice gap up yesterday.  However, today the stock has given up most of its gains.  Action in the gap area will tell us a lot over the rest of the week.

NPSP has shown some great relative strength during this market weakness.  Can it break out when the selling stops?

TSLA has dropped like a rock since the great sales numbers posted Monday morning.  Reports are out that they tried to push sales orders to pad their numbers.  Now we have this big gap with price cratering right into the previous highs.  What the stock does around the gap area can give us plenty of information about future direction.  

VRNG has had a heck of a day with tons of volume pouring in.  Will this thing finally break above and beyond its flat 200D moving average?  There are some decent technical signs popping up.  

I thought we should join the cryptocurrency fever.  Instead of buying bitcoins after their huge run, we decided to take a gamble on some speculative Jcoins.  As you can see they are in short supply and I'm the only dealer :)

They go for 5 bucks a pop.  Somehow this market will self sustain (maybe).  Worst comes to worst, you can at least tell your wife you only lost 5 bucks per coin versus 140 dollars per bitcoin.  ;)  

Haha all jokes aside, pogs were pretty cool for kids back in the mid 90's.

Any comments or questions give me a shout @a_jackson on stocktwits or @atmcharting on twitter

  

Charts of interest 4/2/13

The advance decline line is falling off a bit here.  SPY made new highs intra-day, and NYAD failed to confirm.  

Micron has nearly double off of the November lows.  The momentum has cracked and prices look lower.  What really has our interest is the closed gap.  We want to be short any strength here.   

UA looked oh so promising to start the day.  However, at the end of the it had given up the 200D simple moving average.  Which way will it go?  Odds favor downside, but it's not a given if RS breaks out of the range.

SMH is worthy of a Charles Barkley Turrable!  Distribution has picked up and the price structure is very vulnerable.

Materials relative strength has completely broken down and reached new lows.  Expect this area to lead us much lower as we continue topping out.

SSYS is starting to break down out of a rising wedge on the daily, giving this ugly head and shoulders an opportunity to play out.  

Streamline (STRM) was one of the most impressive breakouts on my screen today.  The timing is a bit curious, but there are targets much higher.

Electricity has finally re-test the 2008 Head and Shoulders neckline.  Odds are it fails at first, but this is  constructive price action.  

Who will be April's fools? bears or bulls?

It's an interesting day today with false breakouts across the indices.

Was today just another day where managers can't get that bearish taste out of their mouth?  Into the end of the quarter, after the best Q1 since 1998, managers needed to make their books look not so foolish as most have under-performed this year.

Now that Q1 is in the books, funds need (read: want) to dump those excess positions they didn't really want in the first place.  The market even made it easy for them with an immediate pop to sell into!  How perfect for the bears right now.

Maybe that was all today's action was.  Maybe it isn't.  After all, divergences have been building for quite some time.  Perhaps their selling will create a snowball effect and the sell-off will be a self fulfilling prophecy.

With individual investor sentiment so skittish,  I can't help but think the April Fools joke will again be played on the bears.

Here are a couple of key charts i'm watching:

TLT is still stuck right under some major resistance.  It isn't shying away, but if today was a back breaker for the bulls, wouldn't we expect this to break out?

UPDATE:  4/3/13 This appears to be breaking out.  Score one for the bears.  This occured with all sorts of  other bearish activity in the markets today.

This next chart is a 10 day moving average of the Arm's index.  It essentially measures buying/selling force in the markets.  We are approaching the upper boundary (an oversold level) rather quickly.  

Any questions about what you see here?  Leave a comment.  Or you can follow on twitter @atmcharting or stocktwits @a_jackson and give a shout there.