U.S. markets closed in a symbolic positive territory after the calm session, the S&P 500 tested the expected resistance that I mentioned yesterday. I initiated the Put position because there are high chances of earning trading this option near the resistance. After a slight roll back last week, the index is well kept and built a series of rising tops and bottoms and that usually stands for a buyers’ strength, but it doesn’t seem to be very reliable to me because of the bear flag development.
Consolidation lower than 50% from downward movement indicates that sellers are still in control of the situation. At this point I have a neutral position and I will respond to the penetration or repulsion from the levels marked on the chart. The preferable scenario here is the trend line (bear flag) penetration — zones that are marked with an orange color on the chart.
Asian Markets Closed Indefinably
Japanese Nikkei holds its two week growth with a small addition for 0.29%, Chinese Index fell for almost 1% because of uncertain situation in Iraq. Such big exporters like India and China are dependent on Iraqi oil, the price of which has increased due to an interruption in supply.
European markets opened on a green territory, during the day come out important inflation news from the UK. This Index observed by representatives of the Central Bank, as it is key in determining the Monetary Policy.
Today we’ll look at sentiments in various sectors of U.S. stocks, as all of them act in a different way, and compare them to the common market to see some strengths/weaknesses of the sector. In times of strong trend the profitable strategy is to search for strong stocks.
Recently the leading Banking Sector reached 21 EMA when market was traded about 8 EMA. This suggests short-term weakness, but still well behaved and can be an attractive idea to continue the upward movement if it holds 21 EMA and resumes 8 EMA.
The weakest shares in this sectors are Bank of America’s shares. BAC turned down as soon as it reached my target of $15.90. There were a few points to correct your strategy:
- When penetrated and closed above $15.55 8/21 EMA
- When didn’t manage to hold up level of $15.30 where it has started its growth.
These tips are against buyers and shares can continue to fall combined with S&P Index correction scenario. The first support is $15.00, then $14.80, then we have $14.38 bottom that formed in the end of May. If sellers want to stay in control of price, they should not give up the zone of $15.30-$15.55.
We have a similar picture with Citigroup, that didn’t manage to hold up its growth and fell above the key moving averages including 200 EMA. I’ll look for trading opportunities from the resistance of $48.00-$48.50. My first target will be a support rate of $46.00.
Investment bank Goldman Sachs shows us a relative strength in this weak sector. After it has found a support at the level of $150-$152 and broken through the important resistance of $160-$162, it reaches $167, where the downtrend line is. I like how the share remains above 8 EMA in a narrow consolidation near the top of a large, green candle. I’ll consider the scenario down and up on the penetration of the base $164.45-$167.25.
LinkedIn and Twitter were falling behind for a few months, but now investors are looking for some perspective companies that can promise a steadily and quick growth. As it’s hard to buy growing companies at such high levels, they can withdraw money from some sectors and invest into the other ones, which showed more modest results. Signs of these purchases were seen as early as late last month when Twitter found the bottom at around $30. The great point was the trend line and $35 rate’s penetration. It has almost reached my targets. Quote of the notes from 29-05-2014: “Closest targets of resistance, where we saw a gap down to $36.10 and the level which was a strong support in $39-$40 area. By coincidence there is also 50 EMA, which controls the price since the beginning of March.” Now I expect a short-term rest above the 8/21 EMA before it continues to move upwards. The closest target may be $42 where 200 EMA is.
Shares of the solar sector that manufacture batteries also were relatively weak last three months. But as the chart shows, after breaking the bearish channel, then the point of penetration testing they established a series of rising peaks and bottoms that indicates the power of buyers as well as their interest in these actions.
Generally even though the market is at its high, sectors and shares behave differently and many trading opportunities are both up and down.