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Wednesday 20 July 2011

Wedges and AAPL

Rising and falling wedges are some of my favorite patterns, not because they reliably reach target, because they don't, and as a result they aren't rated particularly high by Bulkowski and others, but because they really are good at signalling reversals. The falling wedges on Dow and SPX and the rising wedge that I posted on silver yesterday were excellent examples of that. They seem to perform better for me that for others, but that may well be because I'm more particular about exact touches to establish trendlines, and because I don't give the classical wedge targets much weight. A vague trendline often isn't a usable trendline at all in my experience, though I know a lot of others like them. The SPX wedge I posted yesterday broke up very nicely and the target there is just under 1345:
The same on the Dow, with another potential IHS neckline pencilled in just above the closing level yesterday. I'm not really expecting that to form but it's worth noting:
NDX broke up from the declining channel and I'm very much looking at the almost fully formed cup with handle pattern there. The target would be in the 2650 area, which should carry SPX well over 1400 if it is made:
RUT also broke out of the declining channel there, and a small IHS formed indicating to the significant resistance level at 845:
Here's a close up of that little RUT IHS. I posted this on twitter yesterday afternoon:
I posted the little rising wedge on silver yesterday that obligingly broke down in the afternoon. The obvious target to my eye is the potential H&S neckline at 37.87, though there's some positive divergence on the 60min RSI now and it may not make it that far:
Oil is at a critical level this morning. I posted a possible triangle developing on oil the other day and the low this week overthrew the lower trendline slightly,suggesting a break up soon. There's some stiff resistance below 100, but if CL can clear 100 with any confidence then a run to 105 at least looks likely:
I'd normally post a EURUSD chart here to close the post, but it hasn't done much since yesterday and still just seems poised to go to 1.43 and possibly higher. Instead I'll post one of the most important charts for this cyclical bull market and that is the AAPL chart. I've been watching this develop since the April high last year and we are now near (what could be) the climax of the huge broadening ascending wedge I have for AAPL, which should be at double trendline resistance in the 410-20 area. AAPL is trading at just under 400 overnight and yesterday's earnings were obviously stellar. My target may well be reached this week and the question is what happens then? Does AAPL break up and lend enormous weight to that NDX cup with handle? Or do we see a big reversal at resistance which would effectively kill any big bull move up on NDX and probably on the other equity indices as well? This is a major inflection point approaching on a massively influential stock, and anyone who doubts the power of these longer term trendlines should check out my post on BP in June last year, calling the low on the basis of a 13 year old pattern a day or two below the low was made. You can see that here. Food for thought and something to watch closely:
In the short term today there is strong resistance at 1329.50 ES and ES is stalling there at the moment. The Gap Guy is saying that the odds of a gap filling today are excellent. If that resistance level on ES can be cleared I'll then be watching the 845 target on RUT for the next possible reversal level.

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