I hope you are all having a great weekend so far!
I looked over the 2000 and 2008 market crashes and found something in common with their charts. The major indexes failed to make new highs for an extended period of time, like a few months, and then proceeded to break a key support level. The “crashes” were all very slow grinds downwards, and the charts gave lots of warning signs.
I will show you the key support levels on the major indexes below.
If QQQ breaks below 155 on a weekly close, this raises some concern for the bulls. If we close below 150 on the weekly chart, I expect an additional 10% drop within the next few months. Also, the MACD indicator will flash a sell signal if the lines cross below the middle 0 line. We are still far above 0 right now, so there’s no reason to doubt the uptrend if we look at the chart alone.
Here’s the SPY with the support level in the 250-260 range. I suspect that if we test the bottom area of the range again, we will probably break down below it. Watch out below if the SPY closes below 250 on the weekly chart.
The DIA has a support zone from 230-240 on the weekly chart. Again, a close below 230 would signal a lot more downside.
See you Tuesday!
Fun Fact #52
There was a puppy stolen from Amazon on 5/4/2018. Read about this bizarre story here.
The FAANG stocks dropped about .5% today. My three week forecast is still bullish, although I’m not expecting a huge explosive move upwards.
Due to various reasons, I will be updating my blog on Tuesdays, Thursdays, and once on the weekends now. You can expect a post on Sunday this week.
The weekly chart of QQQ is above. As you can see, we are down a little bit this week. I think that QQQ has a better chance of moving up than moving down in the next few weeks. The QQQ may be forming a head and shoulders pattern with the shoulders at 170, and the head at 175. If this is the case, a strong impulsive close below 155 on the weekly chart would signal a lot of downside ahead.
Fun Fact #51
Nicolas Darvas turned $36,000 into more than $2.25 million in only three years. His strategy involves trading breakouts from the “Darvas Box.”
The SPY is still above the 270 breakout location, so I expect the index to move higher.
*Updates on the blog will be more infrequent due to time spent writing the stock book. Thanks for your understanding 🙂
Fun Fact #50
Xiaomi, a popular Chinese phone company, recently filed for an IPO (they haven’t gone public yet). Xiaomi made a loss of 43.9 billion yuan in 2017, but will still be valued at 100 billion. Read more about Xiaomi’s IPO filing here.
I’ve updated my targets for June 1st, 2018. As you can see, I’m still bullish since we didn’t close down today. If stocks were to fall, I think they will go down a lot. From my “If Wrong” targets, you can see that I would not be a buyer of any of the above stocks (other than WB) due to the relatively low potential upside and large potential downside. In sum, I am not buying any of the FAANG stocks unless they drop a bit lower, like 5% for example.
I still like WB at current price levels because the stock is in an uptrend and offers a low risk, high reward trade.
The SPY didn’t close down today, so I am still bullish. The other indexes also went up quite a bit. Although I am not buying or adding long positions at these levels, I will continue holding.
Nvidia (NVDA) is getting to a price level where it might bounce upwards and hit a new all time high. Although I’m tempted to buy right now, the current price doesn’t offer a good risk to reward. Thus, I’m waiting patiently for the price to drop to the 220-230 zone before buying. I don’t think NVDA will drop that far, but if it does, I’ll be buying with both hands. 🙂
Fun Fact #49
A company may choose to give out a stock dividend instead of the standard cash dividend in order to save cash.
I bought some WB at 103.5 today because I think the 100-105 support zone will hold. My stop is at 95, and my profit exit is at 135. That’s a risk reward of 4 to 1, which is a very low risk trade.
SPY broke-out above 270-271, and is now retesting that level. I suspect that if SPY closes down tomorrow, we will continue lower due to the false breakout.
DIA also broke-out from the 246-247 resistance level. Much like SPY, I think that if DIA closes lower tomorrow, we will continue lower due to the false breakout.
Fun Fact #48
Samsung did a 50 to 1 stock split recently, and shares soared as much as 8.7% as a result. Read about that here.
BABA hit 200 on the penny this morning, but dropped a little bit to close the day. The daily chart looks so bullish that I’m thinking it’s a trap! Either way, I’m holding BABA for the long term (at least a year), so small fluctuations don’t matter much to me.
The key levels I’m watching for on the longer term perspective are a break above the all time highs at 206.2, and a break and close below 165.
Take a look at the monthly chart of BABA below.
Please note that this month is only half over, meaning the monthly candle you see on the chart now will certainly change. Either way, we’ve got something that looks like the rising three methods candlestick pattern.
SPY closed the week above the key resistance level of 272. I’m expecting further upside next week, but I think sellers will get aggressive near the 280 price range.
DIA is still struggling to have a solid close above the 248 resistance level. If there isn’t bad news next week, I think we can retest the resistance zone near 252-254.
QQQ is still the strongest of all the indexes. QQQ is running into strong overhead resistance in the 170-172 zone. Looking at just the price action, I think the upward momentum can carry QQQ to 172 next week.