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TECHNICAL ANALYSIS


PENDY'S PICKS: September 12, 2012

09/12/12 08:47:34 AM
by Donald W. Pendergast, Jr.

The .OEX cranked slightly higher on Tuesday, appearing ready to make another attempt at a new post-crash high.

Security:   .OEX, PG, COST, AMZN, IYC
Position:   N/A

The .OEX (Standard & Poor's 100) finished Tuesday's trading session at 658.02, closing up by 0.29%. Despite the recent five-day cycle high in the index, the 10-, 20-, and 40-day price cycles are all still on track to make a final multicycle high in the near future.

Figure 1 shows us the strongest four-week relative strength (RS) performers in the .OEX; Bristol Myers Squibb (BMY) is trading a little above its 200-day exponential moving average (EMA), but its long-term money flow readings are very poor, stagnant for four weeks now. Accenture (ACN) has been performing very well since late June 2012 and is only a dollar from making a new multiyear high, yet its long-term money flow indicates that distribution is already under way -- look out below! Freeport-McMoRan (FCX) is closing in on a new multimonth high, with all money flow readings in bullish posture; look for 44.28 to act as strong resistance, should this stock's rally persist.


FIGURE 1: STRONGEST COMPONENTS. The 10 strongest S&P 100 (.OEX) components over the past month, as of Tuesday, September 11, 2012.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
Figure 2 is a look at the weakest four-week relative strength performers in the .OEX; Hewlett Packard (HPQ) appears to have put in a multicycle low and is on track to rise to its 50-day EMA (currently at 18.75). Money flows are still poor, although there is a bullish divergence on its short-term money flow histogram. This is still a stock to sell into strength on, rather than one to hold for several months, at least at this point.

Coca Cola (KO) is in a confirmed downtrend on its daily chart; money flows are negative, and a drop below 37.13 should unleash even more selling. SprintNextel (S) had been consolidating for a couple of weeks, but Tuesday's wide-range selloff looks plenty ominous; the stock is under distribution and looks like a cinch to drop to its 21-day EMA near 4.85.

FIGURE 2: WEAKEST COMPONENTS. The 10 weakest S&P 100 (.OEX) components over the past month, as of Tuesday, September 11, 2012.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
Figure 3 are the S&P 100 components giving overbought and/or exit signals. Six stocks gave overbought/exit signals; Amazon (AMZN) is under distribution and a pullback to its 21-day EMA at 245.00 looks more likely every day.

Costco (COST) still has exceptionally strong long-term money flow, but its short-term money flow indicates substantial distribution; this one also looks like a high-probability pullback to its 21-day EMA near 97.75. Nike (NKE) has been stuck in a rising channel since early July 2012 and looks neither especially bullish or bearish at the moment; expect that to change unless its long-term money flow starts strengthening soon.

FIGURE 3: OVERBOUGHT AND/OR EXIT SIGNALS. The S&P 100 (.OEX) components issuing overbought and/or exit signals at the close of trading on Tuesday, September 11, 2012; no new buy signals were issued.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
Among the exchange traded funds (ETFs) that Pendy's Picks follows there were two buy signals, along with one overbought/exit signal. The iShares US Regional Banks (IAT) and Global Consumer Staples Sector (KXI) ETFs fired buy signals, with the iShares US Consumer Sector (IYC) ETF issuing an overbought/exit signal. See Figure 4.

FIGURE 4: BUY SIGNALS. The exchange traded funds issuing buy signals at the close of trading on Tuesday, September 11, 2012; there was one overbought/exit signal issued on Tuesday.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
The .OEX managed a modest turn higher on Tuesday, suggesting that the indexes bullish 10-, 20-, and 40-day cycles are back in control for the time being. The move higher from early June 2012 is mature and ripe for a substantial corrective event, trigger unknown. Trade wisely until we meet again.



Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title: Writer, market consultant
Company: Linear Trading Systems LLC
Jacksonville, FL 32217
Phone # for sales: 904-239-9564
E-mail address: lineartradingsys@gmail.com

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