Click here to Signup for a "Free" 2 Week Trial Membership
which includes our Stocks to Watch Buy List and Market Timing Indicator

 

Weekend Stock Market Analysis

(4/15/06)

The price of Crude Oil which held support at its 200 day EMA (green line) back in February and March has now rallied back to where it stalled out twice before in the lower 70's (early February and last August).  As we have seen in the past when the price of Crude Oil has undergone a substantial move upward (points A to B) this has usually led to some selling pressure in the Dow (points C to D).  Meanwhile as mentioned above since mid March the price of Crude Oil has been on the rise (points E to F) and once again this has led to some selling pressure in the Dow (points G to H).  

At this point there are two scenarios that may occur with the price of Crude Oil over the next few weeks which may affect the Dow.  The first scenario would be for the price of Crude Oil to stall out in the lower 70's and then pullback to its 50 Day EMA (blue line) which is currently near the 66 level.  If this occurs then this may have a positive affect on the Dow over the next few weeks.  Meanwhile the second scenario would be for the price of Crude Oil not to stall out in the lower 70's and continue to move higher in the weeks ahead.  If this were to happen then this would likely have a negative affect on the Dow.  

In the near term the Dow so far has held support near its 50 Day EMA (blue line) and upward sloping trend line (black line) that originates from the October 2005 low.  As talked about above if the price of Crude Oil were to stall out in the lower 70's and then pullback to its 50 Day EMA near the 66 level then the Dow could begin to rally and eventually rise back to its previous high made in mid March near 11350 (point I).  However if the price of Crude Oil were to continue higher and eventually rise into the upper 70's to around 80 then the Dow may break below its 50 Day EMA and upward sloping trend line leading to an eventual drop back to its 200 Day EMA (green line) near 10800.  

As far as the Nasdaq it broke out of its 3 month trading range a few weeks ago however it wasn't able to follow through and dropped back to its 50 Day EMA (blue line) near 2300 early in the week.  However on the positive side the Nasdaq did hold support at its 50 Day EMA on Wednesday and Thursday.  

Keep in mind the once sector to watch which may have an impact on the Nasdaq is the Semiconductors.  The Semiconductor Index (SOX) encountered strong resistance at the 560 level back in January which coincided with where it had stalled out in January of 2004 (point J).  Meanwhile since early January the SOX has been in a pullback mode but so far has been holding support at its 40 Weekly EMA (blue line).  At this time there appears to be two possible scenario's for the SOX in the longer term.  The first scenario would be for the SOX to eventually break above the 560 level resistance area and make a substantial move higher which would have a positive impact on the Nasdaq in the longer term.  Meanwhile the second scenario would be for the SOX to eventually break below its 40 Weekly EMA leading to a significant downward move which would have a negative affect on the Nasdaq in the longer term.       

As far as the S&P 500 it broke out of its 2 1/2 month trading range back in mid March but just like the Nasdaq hasn't been able to follow through and briefly dropped below its 50 Day EMA (blue line) this week.  At this point the question is will the S&P 500 be able to hold support near its 50 Day EMA next week or not?  If the S&P 500 can hold support near its 50 Day EMA and then begins to rally it may rise back to the high made just over a week ago near 1315.  However if the S&P 500 is unable to hold support near its 50 Day EMA then it may eventually drop back to the 1255 area which coincides with the bottom of its previous trading range (point K) and rising 200 Day EMA (green line).

Finally no matter whether you are new to investing or are very experienced at it focus on those stocks which are breaking out of a favorable chart pattern such as the Cup and Handle, Double Bottom or Flat Base.

For example HSR had developed a 5 month Cup followed by a 12 week Handle before breaking out this week accompanied by strong volume.  Remember the key is to find these type of chart pattern before they breakout and not after.

Meanwhile a longer term chart of HSR shows that it has now completed the right side of 15 month Cup.  Over the next several weeks I will be watching HSR closely to see if it can develop a constructive Handle much like we saw in the chart above.

 

Signup today for a "Free" 2 Week Trial Membership to Amateur Investors and  have access to all of the Stocks in our current Stocks to Watch Buy List which contains stocks that are currently developing a favorable chart pattern such as the Cup and Handle, Double Bottom and Flat Base which can be used with either our Long Term Investing Strategy or Short Term Investing Strategy.  

Also you will have access to these other investment products.

Daily Breakout Reports
Market Timing Indicator
Daily ETF Buy and Short Signals

Click Here to Signup for a "Free" 2 Week Trial Membership

 

 Send this Free Newsletter to a Friend or Relative

      
    Tell-a-Friendİ

 

Amateur Investors