Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Even strong earnings from software giant Microsoft and on-line retailer Amazon was not enough to prevent stock prices from returning all of yesterdays gain, and then some.
 

Our market timing trading strategy from yesterday of recommending caution on taking new long positions until stock prices break through the resistance at the 11,250 level was right on the money today.  What’s worse, stock prices have appeared to have given up attacking the resistance at 11,250 and are now working on the 11,200 level.

Is more downside movement of stock prices in the works?
 
Let’s view the stock charts for a more insightful technical analysis.
 
The weekly stock chart has traced a second indecision candlestick in as many weeks.  But from a weekly perspective the time frame is still in a bullish status.  This is shown in the table below for next weeks trading.  

The weekly CCI(20) is still above 100 at 109.80 and stock prices are above the PSAR indicator.  These levels support the argument that the weekly time frame is still strong.  

Let’s now review the daily stock chart for insights regarding a trading strategy.
 
On the daily stock chart the CCI(20) has fallen below the 100 level and now sits below 50 at 49.91.  This is halfway to a bearish crossover.  This movement may be the preparation for a new base or it may be an early indication for a switch to further weakness on the daily time frame.
 
Keep an eye on the CCI(5) indicator on the daily chart for a move above the zero line to indicate increasing strength.  If the market can gain some upwards momentum it may set up some excellent buying opportunities.

On the hourly chart prices have been weak for the last 7 trading days or so.  The CCI(20) is firmly bearish and prices are below the PSAR.  The last two trading days have demonstrated support at the 11,000 level.  However, the hourly stock chart is creating a descending triangle.

A descending triangle is predominantly found as continuation patterns in ongoing downtrends which is not the situation here.  So it remains to be seen how prices will develop or breakout of this triangle formation.

If prices drop below the support level of 11,000 then more price weakness should be expected.  If prices break-out of the upper triangle trend line then more strength should be expected.

Trading Strategy:

Thursday’s trading strategy is still valid – until prices can move above the overhead resistance at approximately the 11,250 price level then you should be cautious taking on new long positions.  If you have not yet taken some profits off the table and/or tightened stops in anticipation of further drops in the broad market then you should strongly consider doing so.

If prices drop below the 11,000 level next week it may create an opportunity to take positions in contra-etf’s to take advantage of price drops.  If that happens we’ll suggest the appropriate strategy to use. 

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