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3 Stocks you Should keep an Eye on

By Razvan Mihai Leave a Comment

Walt Disney Company

disney-hesitating-after-150-percent-rally-09.08.2013

Chart: DIS, Daily

From October 2010 the price of Walt Disney Company shares started a bullish market. Ten months later, the price has gained 150% after reaching 67.70$ per share. From May 2013, when the price peaked, a triangle consolidation has started.

At this point the pressure seems to be o on the lower line of the triangle. A breakout and a daily close under this line could signal a 9.5% drop back to the trend line. Do not rule out the possibility of a false breakout on the lower line and a rally above the upper line and resistance. In any of the scenarios there is a good opportunity for taking some profits.

Coca-Cola Company

coca-cola-in-an-up-channel-09.08.2013

Chart: KO, Weekly

Let’s pass to our next company, Coca Cola. Another bearish market that lasted more than 4 years and the price of the shares rallied almost 150%.

At the current moment a corrective movement started that brought the price at the middle of the up channel. It has found a support at 39.60$, but it might move lower to test the trend’s line. The best opportunities for this stock would come with the breakout under the trend line, signaling this way the start of a possible bearish market, or a breakout above the 41.20$ resistance that could mean the continuation of the trend.

MasterCard Inc.

mastercard-signaling-exhaustion-09.08.2013

Chart: MA, Weekly

The last but not least is MasterCard Inc. This company’s share price rallied in less than 3 years almost 250%. It is an impressive market with no important corrections.

This trend might continue for the next three years, only that there are some bearish signals. The price has got close to 700$ per share, the 28 RSI entered an overbought area and the volume started to drop as the chart shows it.  This signals are not enough to take action at this point, but a drop under the trend line (do not forget the chart is drawn on a logarithmic scale) or a candlestick formation could confirm our current signals.

If the signals will be confirmed, a fall back to 500$ per share would be imminent. In this case a shorting opportunity would appear.

If you are not fans for short selling you can always use options to trade this kind of patterns.

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Is the Euro Overbought or the Uptrend is Sustained?

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Well, let us see what are the premises? For the Euro Area we had some very good PMIs published this month, lower unemployment rate and Germany surprised with better than forecast industrial production, trade balance, factory orders and unemployment change. Furthermore the ECB maintained the interest rate unchanged and Mario Draghi recovered his optimism in what concerns the economic evolution of Europe.

Adding to this the fact that Federal Reserve is still maintaining the Quantitative Easing program unmodified we can say that there are reasons for the investors to go long Euro and short the US dollar.

In every FOMC statement and speech of Ben Bernanke it is said that Fed will continue the QE as long as it is necessarily for the labor market to get back on its feet. On the other hand the officials that gave statements to the press believe that the tapering of the program will start in September, because the unemployment rate started to drop and there are signs of economic recovery.

Bering this in mind, we believe that this uptrend will continue until the Fed will announce the tapering of the stimulus and the date that will end the QE.

So to answer our question: The Euro is not yet overbought, but the uptrend might not be sustained for a long period of time.

From the technical point of view, the price has breached above Friday’s top and almost hit 1.3400. For today it seems that the rally stopped. If this week will close above 1.3350 it will confirm the break above the higher line of the symmetrical triangle (you can find more details reading EURUSD Dragged Towards 1.34 on QE Continuity) and also signal that the uptrend could continue for the rest of August.  A false breakout could bring the price back to 1.33 or even lower.

eurusd-overbought-or-trend-is-sustained-08.08.2013

Chart: EURUSD, H1

Looking at the lower time frame we can see that the price has reached a resistance area at 1.3400/20. Adding the overbought in the RSI evolution we should open the eyes for a pullback. A break above the resistance could open the way for another rally that is targeting 1.3500.

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Is Hewlett Packard on the Edge of a 20% Fall?

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hpq-on-the-edge-of-a-fall-07.08.2013

Chart: HPQ, Daily

The answer for this question is in my opinion, yes!

Hewlett Packard (HPQ) has reported earnings above expectations of 0.87$ per share but the price continued to rise at a moderate pace. Starting with the April low the shares gained over 45%, rising almost 9 bucks.

The power of the bulls dropped with each higher high. And this can be seen in the chart, because it has drawn a Rising Wedge. The pattern was accompanied by a fall in the trading volume which also shows that investors are less interested in this stock.  With some effort the price managed to retreat 38.2(26.50$), Fibonacci retrace, from the main down trend started at 51$ per share in April 2010.

Adding the fact that on the 14 days RSI we can see not only a negative divergence created, but also a symmetrical triangle I would say that we just need a price action confirmation before a 20% drop back to 21$ per share. If on a daily time frame there will be a close under the lower line of the pattern the fall could be imminent.

All the facts are indicating a drop, but do not rush in taking a decision right now. Wait for a breakout and a close under the lower line and you can act. Short selling the stock could be a choice, but if you prefer you could use options to limit your risk in case of a false breakout.

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Looking for a 15% Drop on eBay Share Price

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Chart: eBay Inc. Weekly

In almost 4 years eBay Inc. gained about 480%, rallying from 10$ per share all the way to 58 dollars per share, having an all-time high around 59 bucks. From the first day of 2013 the price started to consolidate itself in a rectangle.

This price pattern was drawn right above the rejection line of an ascending channel. Until now the buyers did not have enough force to drive the price through the key resistance and now it will be even harder. The company announced a profit of 0.63$ per share, missing the estimates of 0.64$ per share. The price dropped suddenly 4 dollars from 57.50 to 53.50.

Taking into consideration the factors mentioned earlier and combining them with a negative divergence on the 14 weeks RSI we can say that we have some good signals of shorting. The confirmation would come with a close under 50$ per share, sending the price back into the channel. The support it is found next to the trend line at about 45$ per share. From the current level to the support it is about a 15% drop.

Keeping in mind that until the end of 2012 bulls were pretty strong, we should keep an eye over the resistance. A break and close above 59 – 60$ per share could trigger another rally targeting 65 and 70.00 levels.

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Apple Inc. Is Signaling a 5% Drop on Rising Wedge

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aapl-might-fall-5-percent-12.07.2013

Chart: AAPL, H1

The stock of the week is Apple Inc. with a pretty interesting price pattern.  After the 15% drop started at the beginning of June the stock managed to gain back 61.8.

On the way up the price started drawing a Rising Wedge, which topped at 430.50$ per share. The price pattern was formed during the last 3 weeks. In all this time it can be observed that the volume started to drop. Next to this signals we can also add the 14 periods RSI which has made a negative divergence and it dropped under its trend line.

Now the price got very close to the apex of the pattern. The width of the Wedge is 21.50 dollars. If the pattern will be confirmed by a close, on a one hour chart, under the lower line, we can expect for the stock to lose at least 5%. Why at least? Because if we look at the trend, it is descending, so a new drop might become another impulse for the current main trend.

Even though our favorite scenario is on the down side, we have a backup. If the price will break and close above 431$ per share we will revise our analysis.

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FX: Today’s Wrap Up, GBPUSD Signaling Reversal

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Today’s calendar was full of economic publications with high impact on the Forex market.

For the Euro Area (Italy and Spain) the services PMIs were mainly in line with expectations. A surprise came from Retail Sales which had a 1.0% growth.

The USA reports were the most expected by investors. The ADP Non-Farm was published above expectations, 188K. This good reading was balanced by a lower Trade Balance, 45.0B, Unemployment Claims in line with the expectations, 343K, and a lower than expected ISM Non-Manufacturing PMI, 52.2.

eurusd-falling-wedge-03.07.2013

Chart: EURUSD, H4

Euro with the US dollar had a dip right after the ADP release, but it didn’t last too much because the next data from United States have pushed the dollar lower and the quotation got back above 1.3.

On the chart we can see several bullish signals. First, the price action made a Falling Wedge, second the RSI made a positive divergence. If the signals will be confirmed, we might see a rally of the euro back to 1.3100 or 1.3190.

gbpusd-bullish-engulfing-03.07.2013

Chart: GBPUSD, Daily

In our last analysis on GBPUSD (FX: GBPUSD Is History Repeating Itself?) we were expecting for this pair to recover after an important fall. After a false breakout under the support the British pound started to gain. Today’s rally was triggered by a very good Services PMI (56.9 vs. 54.6 expected).

At this point a Bullish Engulfing was drawn. This pattern could be the confirmation needed for an up move. A rally of the GBP could get the price up to 1.5350 or even 1.5400.

usdjpy-rising-wedge-03.07.2013

Chart: USDJPY, H4

The dollar gained 7.5% in front of the Japanese yen during the last month. Now we can see that the price is pretty close to the trend’s line. A break under it, or better said, under the 99.25 support could trigger another fall for the US dollar. Potential targets for a fall are 0.382 retrace (98.13) and 50% retrace (97.30).

If the local resistance, 100.15, will be broke, we can expect a rally back to 100.80 or even higher, to 101.00.

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