BAC...an opportunity

There are a number of bullish technical developments in BAC that have been occurring throughout the course of 2012. The numbers below correspond to the numbers on the chart.

1) BAC has been in a bear trend for a number of years. It is seen more clearly from the action over the past 2.5years or so. Using the most recent primary peak after the 2009 low, seen here as early 2010, and connecting the highs we can see that the stock crossed above this bearish trendline recently in early September.

2) Since bottoming in December 2011 the stock has been in an intermediate term bullish phase. A series of higher lows with constructive volume and moving average support has lead to improving price within an ascending triangle. This ascending triangle is highlighted by the green up-sloping line and the red horizontal line. Ascending triangles are bullish, but a break below can be violent - more on that later.

3) This line represents the target zone once a breakout over $10 occurs. This area represents not only a measured move from said breakout, but also the support/failure level from April 2011 when the stocks tumble started to accelerate.

Conclusion:

Depending on your investment/trading style, there are 2 ways to approach this...

1) The high probability trade, and text book way to play an breakout from an ascending triangle, is to buy a high volume close over resistance - in the case of BAC that is $10.

2) The other way to play a possible breakout is to buy on light volume weakness into areas of support.  First support is the 50day ma currently near $9.33 followed by $9. If the broad market happens to fall hard and take BAC with it, much stronger support exists near the 200day sma currently near $8.37 followed by the ultimate line in the sand for the ascending triangle, the ascending green bullish trendline which is currently near $8.

The caveat is a break below the ascending bullish trendline. A high volume close below can lead to a violent move lower as all those longs from inside the triangle have to manage their risk which puts pressure on price. If that happens, the bullish trade/breakout scenario as outlined above is off.

Ultimately, a high volume close over $10 is likely to lead to a measured move rally up into the low $13 area which represents an approximate 30% gain. If buying into areas of support and THEN the breakout occurs, returns would obviously  be much greater.

Shanghai noon...can you see where we are headed?

Watch China.

I have beat this drum in the past but now that the SHCOMP (Shanghai Composite Index) closed below 2000 for the first time since early 2009 it has to be on traders radar. Stocks to watch include, but are not limited to, SINA, SOHU, BIDU, RENN, DANG, etc.

If the Index doesnt recover the 2000 level in the next few days then look for the slide to continue all the way down to its long term bullish trendline in the mid 1600's. Additionally, each time the oscillator turns down from a low position the index comes under pressure (see red circles)...and that is happening now. With that, additional pressure on many Chinese stocks, including the ones above should be coming.

Remember the SINA post here from November 2nd? Although there is always the possibility of a violent bounce in these Chinese names, SINA included, that thought on where this stock is headed  still stands, and applies to the others as well.

As stated previously, play from the short side until the signs tell you otherwise!

 

 

 

AMZN - on the lookout for some trouble.

Its cyber Monday and the stock is only up $2...what gives?

Actually, I guess those with good enough timing to get in near the 200day moving average near $220 cant complain with the stock trading near $242. But AMZN is in an intermediate term bear market...so longs need to be wary here.

Technically, there was a short term buy signal on November 19/20th (along with many other stocks) that may have more legs. But, as the saying goes "Buyer Beware". There are 2 warning signs looming after the latest 10% bounce...first, the 50day moving average sits just above at $243...second, the 61% Fibonacci retracement level of $245 (measured from the Sep highs to the Nov lows) is a formidable foe for any bear market bounce.

If looking for short exposure put this one on your Christmas list. First level of support on the downside near $235 followed by the gap near $227...while another test of the 200day ma will be very interesting. Stops according to your risk tolerance but a higher closing high around $247.50 will likely be a spot for many.

 

Continue to be BEARISH and defensive!

Did I mention the market is turning lower? Oh yea, see this post BE The Bear from nearly one month ago on October 23rd. 

Since then bearish posts on C, SINA, MSFT, AAPL, GOOG have been spot on!

It helps when the entire market turns south but the signs were, and still are, there. All major indices are below their respective 200day moving averages and many leading stocks are also below. That, needless to say, is unhealthy.

And with tax increases coming in 2013, why WOULDNT people want to sell in 2012. I dont see much relief for the rest of the year. Playing from the sell/short side is likely the smart side until 2013.

AAPL...the pain isnt over yet.

Now that AAPL is down 20% from its highs many will be talking about the bounce opportunity, and there may be one in the short term. But the short term and intermediate term trend has changed to bearish (not yet below its long term bullish trendline so primary trend still bullish).

I have touched on this stock a few times in the past and now would be a good time for an update.

*Stock below all 3 of its major moving averages

*The fall from it 100day break to its 200day was telegraphed

*Institutional sellers remain vigilant about unloading their shares

Where does it stop? Not anywhere soon. Look for big levels like $550 and $500 to act as big psychological support but real support from the nearly 4 year bullish trendline doesn't come until the $460 area. Another level to consider is the $420 - $445 gap zone and the very large support level of $400.

Do I think it will get that bad? Yes...maybe not $400 but I would expect the bullish trendline from the March 2009 lows to be tested if not this year than early next.

MSFT - The Surface isnt The Savior

MSFT has been struggling since the spring - falling approx 10%. But the recent release of its tablet, the Surface, has put some juice back in the stock. The Surface has put some pop back into a dead stock with a rally of $2 last week, and appropriately right off the nearly 4 year bullish trendline from its March 2009 lows.

Quick and dirty opinion - sell the news.

The tech sector has been struggling and MSFT stock price is no exception. This news related pop into an area of resistance near $30 is an excellent opportunity for longs trapped at poor prices over $30 to sell for a small loss, and for shorts looking for downside exposure to get a good risk/reward entry. Watch for the stock price to revert back towards its long term trendline near $28 in the near term. Then watch for an eventual break of said trendline for support near the $25 zone.

 

 

SINA...sloppy at best

You would think SINA should be acting better as the SHCOMP is trying to move off its recent bottom. But that has not been the case as this Chinese internet media company has been getting slowly slaughtered since peaking in mid September near $70 (last $54)!

Todays action puts the stock decidedly below its 100day moving average near $55.50 and below all 3 of its major moving averages as well as below gap support from August. No idea whats happening inside the company but the technicals show a deteriorating picture with near term support near psych level of $50. That will be a big test. If the stock cant find legs there watch the $45 zone which was the double bottom area from July/Aug for some buyers to step in...but given the weak backdrop that is definitely not a certainty. The stock has been in a primary downtrend since early 2011 and the short side, especially now since below all 3 of its major moving averages, is surely the way to play it.