Adobe Systems Incorporated (NASDAQ:ADBE) has a classic bear flag on the daily chart. This is coming off of a reversal candle from last week. These signals show a very bearish setup for the coming days. Also, please note that Adobe is flat on the day while the markets are nicely higher. This is another weak signal to pay attention to called relative weakness.
Look for a down move into next week the potential to reach the $61.00 level on a larger drop in the markets. [more]
Anytime a trader or investor looks at a stock chart they should look to see if the instrument is making a new high, or a lower high. Continuous lower highs are a good indicator that further weakness is ahead for the equity.
Earlier today, the leading mining equipment company, Joy Global Inc (NYSE:JOY) reported earnings. The stock is trading higher by $1.91 to $57.73 a share. While this pop in the stock seems great in the near term the weekly and monthly charts are signaling a move lower. You see, the larger time frames have a series of lower highs on the chart beginning with the April 2011 top. Anytime a trader notices lower highs on a chart they must assume that the stock is ultimately going to trade lower before making a final bottom. According to my calculations, JOY stock has downside potential toward the $37.00 area before making a significant low. Now please understand, this does not mean the stock is going to decline today or even next week; the current chart pattern just tells us that the stock is ultimately going to trade lower. Therefore, as smart traders/investors we need to be prepared for that move.
Other stocks in the mining equipment sector also have lower highs on the larger time frames, so this chart pattern is not specific to JOY only right now. Leading mining equipment stocks such as Deere & Company (NYSE:DE), and Caterpillar Inc (NYSE:CAT) are forming the same exact pattern on the larger time frame, these stocks are just as susceptible to lower prices in the months ahead.
When finding a great swing trade, one must look at multiple factors. I hope to reveal my mindset fully, helping the average investor understand how I reached my decision to short Dupont (NYSE:DD). I believe a short on this stock an extremely high success rate, bordering on 90% over the next month. The downside target is $64.75, then $59.95.
1. The chart is extended. In the last month DD has jumped over 10% and currency is trading at highs not seen since the year 2000.
2. There is a key gap fill in this range from 2000 that the stock has currently filled.
3. Connect the recent highs from May 31st, 2013. They connect perfectly and everytime the stock has touched this level, it has pulled back.
4. There is a time count on the daily chart extending into the doji forming today. This should be a short term pivot top.
5. The stock has extended itself to the max move above the 200 moving average. Note how throughout history, the stock has never been much more extended from its 200 moving average prior to pulling back.
These reasons create a very solid base for a short trade on Dupont (DD). The downside should begin shortly and last at least a month or two. [more]
This morning, leading retailer Kohls Corp (NYSE:KSS) is coming under some selling pressure. The popular retailer is falling lower by 0.76 cents to $55.13 a share. Short term day traders should keep an eye on the $54.03 support level for an intra-day bounce. This should be a level where the institutional money will likely step in and sponsor the stock. Other leading retail stocks that are declining lower today include Target Corp. (NYSE:TGT), Dollar Tree, Inc. (NASDAQ:DLTR), and Costco Wholesale Corporation (NASDAQ:COST). Keep a close eye on these levels and stocks as they will present good profit making opportunity.
Every bull and bear market has a life span before it ends. So often, traders and investors that simply follow the news and fundamentals think that the current trend can last forever, but we all know that is not true. In 2007, it took three small stock market crashes before the public realized that the bull market was ending and a strong bear market was about to begin.
Here are three reasons why the current bull market is on borrowed time and could be ending very soon.
1. Most bull markets last around 50 to 67 months. This bull market is about to reach its 60 month anniversary on March 6th, 2014. While bull markets don't just die on the exact anniversary date, it should signal to traders that it is long in the tooth and very mature at this stage of the game. Ironically, the bull market that began in 1982 lasted roughly 60 months before the 1987 stock market crash. The same time period was again seen from the 2002 low to the 2007 high, this was 60 months. So any trader or investor with half of a brain should take note of this current 60-month cycle. The one coincidence of the 60-month bull markets of the past was primarily due to easy money by the Federal Reserve, this time no different.
2. The Federal Reserve Bank has ballooned its balance sheet to over $4 trillion. It will be a very tough task for the central bank to unwind that gigantic number. Currently, the Federal Reserve Bank is trying to unwind its QE-3 (quantitative easing) program by tapering its monthly purchases. Once the central bank starts to ease the amount of created money it should cause major problems. This tapering will soon hurt the equity markets as less U.S. Treasuries and mortgage backed securities (MBS) are purchased each month.
3. Other countries are starting to feel the pressures of inflation. Countries such as Brazil, India, Ukraine, Venezuela, Thailand, Syria, Bosnia, South Africa, Turkey, and many other countries are dealing with the rise in food prices. Civil unrest has already started to occur in many of these countries due to price inflation. Higher interest rates are really the only way to bring down food inflation. Unfortunately, when higher interest rates occur the economy will usually slow down. Remember, while easy money helps to lift asset prices it does also lift food and energy prices as well. Food and energy are really what people need to survive. The central bankers who run the monetary policy around the world have to be looking at the high food prices, and they will all need to start pulling back on the easy money policies that have been in place for over five years now.
While the writing on the wall is obvious to any intelligent trader or investor; one thing we know is that regardless of the market direction, up or down, there is always a trade. All we look for is the continued volatility, as that is what creates great opportunity for us to profit.