Fighting Resistance – Weekly Technical Outlook
Despite a slight rise in the unemployment rate, the unexpected increase in non-farm payrolls allowed my ultra-bullish outlook from last week to come to fruition. Throw into the mix, more volatility from Draghi comments, and a Knightmare in several issues on Wednesday, and we have seen some exciting action to begin the month.
Now what? With the index and several of its key components finishing at or near their highs for the week (and in some cases – 52 week highs), immediate follow through on Sunday night is paramount for this rally to continue. Now the bears will tell you that this market is overbought, but how many traders have lost a fortune either shorting overbought markets or buying oversold markets? The market does not know when it is at extreme levels, and it will turn when the herd least expects it.
From a technical perspective, there is very little resistance between Friday’s high (1390.50) and the multi-year high of 1413.25. However, there are still several large institutional sell orders on the books in many issues, making the climb a bit boring at times. In order to classify the most recent rally as more than an expansion of the recent trading range, the index needs to clear 1413.25 early in the week and close above it. A break below 1376 may reinvigorate the bears and send us right back down to 1350.
One issue devoid of large institutional sell orders last week was Apple (NASDAQ:AAPL). However, that may change this week. AAPL is now approaching some very important resistance levels. These levels are of major significance for a few reasons. First of all, 618 was the high after AAPL released its blowout earnings in April. 619.87 was the high after a 90 point rally in July. Therefore, if AAPL can clear 620 and hold, 624.70 and 631.33 will serve as only minor resistance points on the way to 644. On the other hand, if AAPL hovers around 620 with tight ranges for the next few days and does not break out, it may be prudent to move your sell stops to 610 to lock in previous gains. If you want to give it a bit more room, Thursday’s low (600.25) would be another area of support to focus on.
Enough is enough with this 88 level in Exxon-Mobil (NYSE:XOM). With multiple attempts this year to crack this major resistance, will the High Frequency Traders surrounding 88, finally succumb to buying pressure? The close of 87.55 certainly will help, as XOM will only have to travel 45 cents to get there, as opposed to reaching that level late in a trading day after a significant rally. If XOM can clear 88 expect a few stray sellers at 88.23 (February 23, 2011 high) but then traders are looking at levels not seen since July 2008 for resistance (88.88). On a pullback, XOM will find minor support at Friday’s low (86.80) and major support at Thursday’s, which is also the six day low (85.50).
Once again, International Business Machines (NYSE:IBM) is trying to break into the 200 handle. After failing at that level in mid-June and falling to 181.85, IBM is at it again. If the overall market continues with its recent rally, IBM may test the waters at 200 on Monday. Expect the first attempt to probably fail as the HFT crowd will be stepping in front of the institutional sellers at 200, so it may take a few intraday attempts to take it out. If it gap opens into that 200 level, one should use extra caution playing a break out under those circumstances. After the 200 level, expect minor resistance at the May 17th high (200.79) and more sellers at the double top from May 15th and 16th (201.35-201.47). At this time, IBM will find minor support at Friday’s low(196.16) and major support at the weekly low (193.02).
After not participating at all in this recent rally, Microsoft (NASDAQ:MSFT) finally joined the party on Friday. MSFT, which has been in a little more than a 1 point trading range over the previous nine sessions, maintained its big up open and continued north. Although it was unable to fill the gap from July 20th (30.05 low), it may make another attempt on Monday. It should be interesting to observe the way MSFT trades in the 30 handle, since it sliced through the entire handle on July 20th after positive earnings and a huge premarket rally. With that being said, I can only identify the July 20th high (31.05) as major resistance above 30.05. MSFT does not move 1 point in a day very often, but from a technical perspective, this is a possible scenario. Expect minor support at Friday’s low (29.48) and major support at Thursday’s low (28.97).
Can General Electric (NYSE:GE) finally take out the large institutional sellers at 21? After closing at 20.96 on Friday, GE will have a running start, especially off the open when HFT players are mostly absent (see this video for more information: HFT liquidity – Not at the open). If GE can clear 21, the next minor resistance point will be the March 1st 2011 high (21.17) or wherever the next 100,000 share sell order in the book is, as will be identified by the HFT bandits. After that level, GE will be approaching levels it traded at in February of 2011. One area that really stands out is the six consecutive highs (February 11-February 18) from 21.44-21.65. On the downside, expect minor support at Friday’s low (20.77) and major support at Thursday’s close (20.52).
How does a trader play Chevron Corporation (NYSE:CVX) at this heightened level? Very carefully. Certainly trading it from the short side last week would not have been profitable. On the other hand, being long it, would have required the utmost patience as it clawed its way through the 110 and 111 handle. The only point of reference on the upside is the all time high of 112.28. For the swing traders looking to short this issue, you can either wait for that number, or use it as a stop out level. Expect institutional sellers to continue to be present from Friday’s high (111.88) up to 112.28. On the downside, below Friday’s low (110.90), there may be minor support at Thursday’s high (109.93), but no major support until the weekly low of 108.47.
Another new 52 week and multi-year high for AT&T (NYSE:T) reaching 38.28 on Wednesday before closing on Friday at 37.58. What can you say about an issue that pays a 4.68% dividend and has appreciated 23% this year, except that you wish you had it in your portfolio. On previous occasions following a large move, T will consolidate for a few days and then make its next move. At this time, it appears T may bounce between Monday’s low (37.03) and Friday’s high (38.00) for a few days, before making its next move. With Friday’s close of 37.58 being in the middle of those two levels, it may prudent to wait for the stock to approach the resistance at 38, or the support at 37.03, instead of trying to decipher the mid-range chop.
Johnson&Johhnson (NYSE:JNJ) made a valiant effort to reach its September 25th 2008 high of 69.97, but was thwarted in its attempt at 69.75. The resting institutional orders at 70 were too much for the HFT crowd to resist, so they have been stepping in front of that area whenever the opportunity arises. With a close of 69.12 on Friday, JNJ has some work to do on the upside before it makes another attempt at that 70 area. Expect JNJ to struggle a bit at Friday’s high (69.32) and to labor all the way from 69.75-70. Under Friday’s low of 68.89, major support can be found at Thursday’s low (68.02).
Wells-Fargo (NYSE:WFC) aided by the Knight algorithm, sprinted to a new 52 week high on Wednesday (34.80) and closed at its highest price (34.34) since May of 2008. WFC has managed to avoid many of the problems that has plagued otherUSbanks and is one of the few financials that has recouped all of its losses since the financial crisis. Most likely there will be large institutional sell orders from 34.80-35.08 (November 4, 2008 high). After that level, WFC will enter the vacuum area from June of 2008, when WFC plummeted from 40 down to 33. As a result, use all the half and whole numbers in each handle as minor resistance points. Expect minor support at Friday’s low (33.63) and major support at the weekly low (32.84).
Another issue making multi-year highs is Pfizer (NYSE:PFE). After releasing better than expected earnings last week, PFE traded up to 24.49, one cent shy of its December 7th, 2007 high. Above that level, PFE ran into a host of sellers between 24.50 and 25.00, back in October of 2007. Perhaps wait for a double or triple top to form, to use as a reference point if you are attempting to short this issue or take profits. On a pullback, expect minor support at 24 and major support at Thursday’s low (23.63).
In closing, the index and many of its components finished at their highs for the week, while several are at 52 week or multi-year highs. This is very similar to last week’s scenario, when the index stalled at the Friday highs, then retreated and battled its way back later in the week. With limited resistance levels above 1390.50 and a close right at that level (1389), traders should focus on that area to determine whether or not the Friday fade was the play, or if new highs are on the horizon.
Comments are closed.