JC, Author at All Star Charts Page

FOX Business: Precious Metals and JC Penney

September 20, 2014 by JC

On Friday afternoon I was over at Fox Business to follow up on some of the things I’ve been discussing in previous appearances, particularly precious metals and shares of JC Penney. I think we need to give JCP some time here before getting aggressively long again. But precious metals are just starting to break down and I believe there is still more downside left.

Here is the quick clip:

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Source:

Should Investors Short Silver? (Fox Business)

Tags: $SLV $GLD $SI_F $GC_F $JCP $PALL $PA_F

Aerospace & Defense is Consolidating Nicely

September 19, 2014 by JC

There are two ways for assets to digest big gains: they can either correct through price or they can correct through time. Often times we see the price of a stock sell off after a big move, regroup and then move on to new highs. But other times, we see a more healthy consolidation where the stock trades in sideways range allowing time to pass by which makes the smoothing mechanisms catch up to price, rather than the other way around.

Today I want to show you guys a good example of this sort of consolidation. This week we launched our US Sectors & Sub-sectors package on Eagle Bay Solutions and members received over 50 annotated charts with commentary on multiple time frames. Aerospace and Defense stood out from the group because of the way it’s digested the gains after its parabolic move between 2012-2013. ITA is the ETF that represents this space which holds companies like United Technologies, Boeing, Lockheed Martin and General Dynamics.

First off, here is a weekly chart showing prices trading in a sideways range over the past year allowing the 50-week moving average to catch up to price, rather than a price correction down towards the moving average. Also notice how this bearish divergence in momentum earlier in the year worked its way off through time. Momentum divergences often signal a change in trend. These trends don’t necessarily have to reverse, they just tend to change. In this case, the trend went from up to sideways. Momentum also found support near the 40 level which keeps it in a bullish range:

9-18-2014 ITA weekly Also notice relative strength plotted at the bottom, which had also been correcting, starting to turn up. This is another good sign from a longer-term structural perspective. We are still maintaining a $122 target which we arrive at by taking the 161.8% Fibonacci extension from this entire consolidation. Structurally, we only like this name above support from the last year. Below that and things get hairy.

Now that we have a longer-term perspective, we can look closer at the daily chart for execution and risk management. Here is a daily candlestick chart showing prices trading above upward sloping 50 and 200 day moving averages. This is a good thing of course, especially based on the long-term chart. However, with momentum hitting oversold conditions in the July sell-off and prices still within this year-long range, it is hard to get overly optimistic in the short-term:

It still looks to me like a sideways range where we can take profits near the June highs around 114. I still think some more time is needed before we can get aggressively long this name. Perhaps some more backing and filling is necessary.

This is a good example of how a long-term chart can look so great and the shorter-term look doesn’t necessarily agree. Risk management is priority number one for us always. This risk is not just money but also time. Opportunity cost is also a risk that we take when we put money to work. So for now, I would be fading strength towards 114. I want to see more time around these levels and let ITA prove that it can break out of this range. That would signal that the longer-term chart is ready to take the next step to new highs and continue its uptrend.

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Tags: $ITA $SPY $UTX $BA $LMT $GD

Is That A Head & Shoulders Pattern In XOP?

September 18, 2014 by JC

We’re excited to launch the US Sectors and Sub-sectors package for our Eagle Bay Solutions members. Paid subscribers receive weekly updates on all 10 S&P sectors like Energy, Financials, Technology and Utilities along with a long list of Sub-sectors like Regional Banks, Gold Miners and Solar stocks. Each ticker comes along with a multi-timeframe analysis of trend, momentum, relative strength, support & resistance, pattern recognition and risk management procedures.

Today I want to give an example of one of our charts on a daily time frame. This is the S&P Oil & Gas Exploration and Production ETF $XOP that consists of popular stocks like $KOG, $WNR and $AXAS. We are looking at a one year candlestick chart with a 14-day RSI plotted below.

Here we can see a very obvious Head & Shoulders topping pattern with a neckline that coincides with the 2013 highs. The top of the “Head” in this pattern is actually the 161.8% Fibonacci Extension target from the 2011 decline in price. So we should not be surprised to see that quick correction down to former support. Now, is this necessarily a bearish pattern? Not unless we break this key support around 72-73:

For now, based on the weekly time frame, an upward sloping 200 day moving average and uptrend line from 2013 lows, we still have to give the bulls the benefit of the doubt until proven otherwise by price. I would continue to be a buyer of this name as long as we are above these levels.

These head & shoulders reversal patterns rarely work out. Another scenario that can easily play out is a brief breakdown below this key support level that quickly reverses higher. This could easily create a squeeze that can escalate quickly. But we have our key levels. We only want to be long above this gray shaded area. Below that and things get messy.

Momentum is not offering much help here other than confirming the the new highs made this summer. But there aren’t any divergences to speak of that can push us in either direction. I would keep tight stops above this level and if we do break, a tactical short might be more appropriate. But again, in that scenario we would only want to be short below the gray shaded area.

I really do believe this area is that important to supply and demand. We pride ourselves in keeping an open mind and having a road map to help us make decisions based on future price action. In this case, we can be long or short from a tactical perspective depending on what happens in the coming week(s).

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Members of Eagle Bay Solutions receive updates on this name every week along with 50 other annotated charts with commentary. Make sure you’ve signed up to take advantage of our New Launch Special Offer.

Tags: $XOP

Is JC Penney Setting Up For Another Leg Higher?

September 17, 2014 by JC

The JC Penney trade is something that I’ve been actively involved with since early March. The bearish sentiment unwind that has sent shares soaring over the last 6 months has been one of the more fascinating things to witness in recent times. The amount of negative feedback I’ve received along the way has also been interesting to watch. People don’t believe the, “turnaround story”. Whatever that means. But we just like to focus on the supply and demand dynamics.

For a little bit of background, this name first grabbed my attention when it gapped higher in early March. This move came off bullish momentum divergences on both the daily and weekly timeframes. The huge short interest was also a major bullish signal (See: Blog Post and See: TV Interview).

Once our 30% upside target was hit two months later, prices continued to consolidate nicely. When prices keep bumping their head against a level, it’s almost inevitable that it will break through. This is precisely what we hoped for when I suggested in early June that $JCP had another 30% upside from that point. It was, “JCP the Sequel” for us (See: Blog Post and See: TV Interview)

Now I see shares of $JCP setting up in what appears to be a bullish flag. I don’t know of a better way for prices to digest big gains than in a high and tight range. This is precisely what we see here. Look at this tight consolidation in price since late August:

Also notice how momentum, based on a 14-day RSI, has been in a strong bullish range since early March. When prices rally, momentum gives us overbought readings, but never hits oversold conditions during corrections. In addition we have upward sloping 50 & 200 day moving averages which makes it difficult for the bears to gain control. These characteristics are exactly what we want to see in order to continue to maintain a bullish bias. Once prices break out of this range, this would be the confirmation that this is indeed a bull flag and a stock we would only want to own above the late August through early September highs.

Now as far as a price target is concerned, there are 3 reasons why the 12.40-12.90 area seems to be the most appropriate. First of all, our polarity principles teach us that former support should turn into resistance. In other words, where there were once buyers that eventually dried out, there should be sellers in control of that given price level. There was a double bottom in August of 2013 that broke down a month later. This former support is the first reason why this area is our next target.

From a Fibonacci perspective, I really prefer when several Fib extensions cluster around the same area. This is especially the case when we have former support and resistance levels confirming that area to be important. In this case we have two 261.8% Fibonacci extensions in the 12.60-12.90 area that we get based on the last two price corrections. The first being the March-April correction and the second more recently from mid-May to early June.

This is how I come up with my targets, when multiple levels cluster together. The market isn’t perfect, far from it. So to give a specific number makes little sense to me. I rather have some sort of area or range that I’m targeting and then reevaluate once we achieve that target. Since early March this is exactly what the strategy has been and it continues to work.

I’ll do my best to update this chart upon any further developments. But from a risk/reward standpoint, I think you guys get the idea.

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Tags: $JCP

Audio: Q&A on Benzinga Morning Show

September 17, 2014 by JC

Tuesday morning I was asked to come on the Benzinga PreMarket Prep show for a brief Q&A session about how I approach the global markets as well as some of the details on the launch of our new Subscription based research service through Eagle Bay Solutions. Towards the end of the discussion we went over some of the ticker symbols that listeners were asking about as well as some correlation analysis between some of the different asset classes.

Have a listen:

Here are some of the products that we’ve already launched.

Stay tuned for upcoming announcements:

Tags: $SI_F $SLV $GC_F $GLD $AAPL $BABA $XLE $XLF

A Look At Energy On Multiple Timeframes

September 16, 2014 by JC

We are thrilled to announce that we’re rolling out our new Eagle Bay Solutions research package this week that includes all of the S&P Sectors and relevant Sub-sectors. Members will receive over 50 annotated charts with commentary each week featuring everything from Financials (XLF) to Utilities (XLU) to Gold Miners (GDX) along with the most highly followed Sub-Sectors like Regional Banks (KRE) and Biotechnology (XBI).

Today I want to focus on one particular sector that stands out and I think is a good example of what our new product will offer our members. The first chart shows the weekly candlesticks for Energy $XLE with a 14-period Relative Strength Index to measure momentum along with Relative Strength plotted below that compares Energy to the S&P500.

You’ll notice that prices are currently above the 2008 highs after breaking out this Spring. Structurally as long as prices remain above these highs, the bulls are very much in control big picture. Momentum is still in a strong bullish range that goes back to the bullish divergence that helped mark the bottom in early 2009.

The one thing I don’t like is the lack of relative strength. You can see plotted at the bottom $XLE vs $SPY is still in a strong downtrend. I would want to see a breakout above the June highs to confirm that a new uptrend in relative strength has emerged. In the meantime, more of a neutral stance in RS is likely our best bet. I am also watching this 50 week moving average (dotted line) that has helped serve as nice support in price over the last few years. I’m happy to stay bullish while we’re above that Moving Average and 2008 former all-time highs.

We like to use weekly charts with relative strength to get more of a structural perspective and then work our way down to a daily timeframe for execution and risk management. Here we are looking at the daily candles along with 50 and 200 day moving averages.

What stands out to me is the brief breakdown below support from early August that previously served as resistance throughout May. We are now trying to get back above that key area shaded in gray and from a tactical perspective, we would only want to be long above it. Momentum remaining in a bullish range is another feather in the hat for the bulls:

Notice how in recent price corrections momentum, measured by a 14-day relative strength index, never reached oversold conditions. This is the type of action we like to see when we are bullish on a particular name: stock, commodity, currency or otherwise.

Target wise, I think we can at least get back to the early summer highs, especially if we get upside follow through Wednesday in the Energy space. If indeed we do break through that down trendline from the July highs, then it would be the third test of this roughly $101 resistance. The more time that a level is tested, the higher the likelihood that it breaks. A breakout to new highs would give us a target near $107 based on a 161.8% Fibonacci extension from the June-September correction.

Based on the structural setup here that we see in the weekly chart, bullish momentum on both weekly and daily timeframes, and most recently the failed breakdown below key support and former resistance, the benefit of the doubt here definitely has to go to the bulls. This is especially the case from a risk/reward perspective as we only want to be long tactically if we are above the gray shaded area.REGISTER HERE to become a member of Eagle Bay Solutions and receive weekly multi-timeframe updates on the Energy sector along with over 50 additional sector and sub-sector charts.

Yahoo Runs Into Historic Overhead Supply

September 16, 2014 by JC

Yahoo has had a parabolic run over the past two years to get back all the way to the early 2006 highs. The problem that I see is that when stocks return to a former level of resistance, especially of this magnitude, more often than not there is some sort of acknowledgement of that supply. Last time Yahoo was up here the stock fell 80%.

The first chart is a weekly bar chart of $YHOO where you can see prices returning back to those previous highs. This sell-off to start the week shouldn’t be that surprising:

Short-term I think this $41 level is the key. This was resistance at the beginning of the year and the last thing the bulls want to see is this breakout fail. You know the old saying that, “From Failed Moves Come Fast Moves In The Opposite Direction”. As long as prices hold 41, the bulls short-term are still in good shape. But a breakdown below that and look out below.

I think the most constructive chart structurally for $YHOO is the weekly chart relative to the S&P500. After being a serial underperformer since 2006, the relative chart broke out nicely last year and still looks like it’s got legs:

We like to incorporate a top/down approach and look at the markets from a structural perspective, and then work our way down to smaller time frames for execution and risk management. We have our levels as I mentioned above. I think there are potential longs as well as shorts setting up in this name. It’s important to keep an open mind and not be stubborn.

We only want to own $YHOO above the January highs. But from a risk/reward standpoint, based on the long-term weekly chart running into historic overhead supply, I’m not sure the risk/reward here favors the bulls. I’d keep a close eye on that $41 level to put stop losses and/or initiate shorts in the future.

I’ll try my best to update this chart upon further developments.

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Tags: $YHOO $SPY $BABA

Join Me On Benzinga’s PreMarket Prep Show 9/16 9AM ET

September 15, 2014 by JC

Tuesday morning at 9AM ET I will be answering questions live on Benzinga’s PreMarket Prep Show. Join us as we go over the recent developments in the US Stock Market, Commodities and Interest Rates.

You can use this link to get your there:

If you have some questions in mind that you would like me to address, please feel free to email info@allstarcharts.com and I’ll try my best to get to as many as I can. Whatever we can’t get to during the Q&A will be posted in an upcoming blog post, so stay tuned.

Check out our products page for Eagle Bay Solutions to learn more about each of our packages: Dow 30, US Averages & Rates, and our latest release Commodities and Currencies.