By Corey Rosenbloom | January 07, 2010 | 2:03 PM | 0 CommentsTweet This
As seen on the monthly timeframe spanning back to the 2005 index highs, there is a critical overhead resistance level that might soon be broken on the Philadelphia Housing Index chart, which could give us clues as to what to expect yet to come for the housing market, as revealed in the charts.
Let's take a quick look at the monthly key level to watch and then see how the next few weeks or months might play out by viewing the daily chart.
As we all know now, the problems of the housing market and sub-prime mortgages bled over into the broader US economy, helping trigger not only a US recession in 2008, but a global slowdown too that threatened the stability of financial systems.
The Housing Index chart peaked in mid-2005 well in advance of the actual October 2007 market peak. Charts can often be leading indicators to economic reports and conditions... or at least that is the argument when watching charts to anticipate economic trends.
That being said, we note a key resistance level at the 106.50 Index Level which is the falling 20 month exponential moving average. Any break above this level would be a very bullish sign that is flashed by the index price chart. Any follow-through to the downside here would have bearish implications - that is why this level is key to watch.
Monthly prices are still in a pervasive downtrend, as exemplified by lower price lows and highs, and the negative moving average orientation. However, the first sign of life would come from a positive price break above the 20 month EMA, which is why we need to watch this level closely over the next few weeks.
The daily chart shows us the potential short-term pathways for price.
We are seeing a sort of "scallop" or "rounded reversal" pattern that began with the September highs and has continued to the present.
The daily chart is showing price in a positive trend on a lower timeframe, though overhead resistance is clear at the 107.50 index level.
Any move above 107.50 should trigger an upward pathway to test the prior 2009 high at 115.00, and any move higher than 115.00 would be safe to consider the Housing Index to be in a much more bullish orientation, and possibly able to test higher resistance levels on the monthly chart.
Any failure here, or any move down through daily support levels at 102.50 and especially 100.00 would have bearish connotations short-term. A move under 100.00 would look to target prior support at the 90.00 level... and stock market bulls would not want to see this index dip beneath 90.00.
As such, these are all levels to watch both on the upside and downside going forward, which could give us clues as to what the market is pricing in with regards to housing data, and how that could translate into the broader economy and - of course - the stock market.
Register now to hear Corey's upcoming premium three-day webinar entitled, "Price Principles and Trading Strategies To Gain Your Trading Edge" next week: January 12-14 (embed the following link in the webinar title text please without showing URL: http://www.traderinterviews.com/PricePrinciplesWebinar.php ).
Corey Rosenbloom, CMT
http://blog.afraidtotrade.com
Learn the Secrets of Candlesticks with this Free Article from GFT
By Corey Rosenbloom | January 05, 2010 | 2:17 PM | 0 CommentsTweet This
Goldman and Google - the Two "G's" have been showing upward strength recently into the new year. Let's take a quick chart view of the daily chart of both of these leading stocks for clues as to what to expect in them and perhaps the broader market.
Let's start first with the powerful Google (Nasdaq: GOOG):
Google's daily chart shows us the best example of a powerful, relentless, rising uptrend in price.
In general, when traders identify uptrends, the best strategies become buying simple pullbacks (retracements) into support zones, which often come from the rising 20 day EMA. Give a bit of room for a tiny slip under the average in terms of placing stops, or wait for price begins to rise after forming a reversal candle such as a doji or other bullish reversal candle.
As long as price continues to form higher swing highs and higher swing lows, then odds favor trend continuation... which means buying pullbacks tends to be a better 'general' strategy than trying to call a top in the stock.
In general, traders want to exit on a strong swing to new highs that breaks above the upper Bollinger Band as reversal candles - such as dojis - form. Then, a trader would wait to re-buy the stock on the next pullback.
For now, it looks like Google is preparing for a retracement back to the rising 20 EMA - currently at $607 - so it would be a lower-probability trade to buy here and now, even if Google continues higher. As long as price remains above the 20 EMA, odds favor higher prices yet to come as explained by the "Trend Continuity" principle.
With Goldman Sachs (NYSE: GS), the picture is slightly different - a bit less bullish. Let's take a look.
While Google is surging to fresh new highs, Goldman Sachs is roughly $15 below the prior swing high in October 2009.
Price is actually forming lower (daily) swing lows and swing highs - that's not quite the picture of bullish strength at this moment.
However, price is above both daily moving averages, and the most recent swing has formed a new momentum oscillator high (interesting).
I've drawn a Fibonacci retracement grid to identify potential resistance areas on the current swing high, and price - as of this moment - is forming a shooting star candle that failed to rise above the 50% retracement at $176.05.
As such, the buyers have to prove themselves by driving price above not only the 50% and 61.8% Fibonacci Retracement Grid ($176.05 and $179.80 respectively), but also above the $181 swing high formed in November.
Any break above $181 should lead to a rally back to challenge or even exceed the 2009 highs above $190 - that gives a trade set-up to expect for buyers.
Otherwise, the chart is under overhead resistance levels that we need to watch closely.
The 20 and 50 EMAs will soon form a bullish cross or confluence level at the $170 level, so the boundaries become clear for both buyers and sellers:
Long Bias above $181 to target $190.
Short Bias if price falls under $170 to target prior support at $160. Goldman would confirm a trend reversal if price broke the recent $160 lows.
Let's keep those levels in mind going forward!
Corey Rosenbloom, CMT
http://blog.afraidtotrade.com
Learn the Secrets of Candlesticks with this Free Article from GFT
By Corey Rosenbloom | December 29, 2009 | 8:31 AM | 1 CommentTweet This
I know - the title sounds... less than fun... but for those of you interested in learning intraday Fibonacci methods, today gave a great example of both the Retracement and Projection concept, and I wanted to share that lesson with you.
Let's take a look at the SPY intraday chart (5-min) for December 28th:
If you feel overwhelmed, let's take it one step at a time.
Starting with the intraday high near $113.00, we begin both grids. We'll start with the simpler to explain - the Retracement Grid in blue.
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