Let’s look at some weekly charts since we haven’t done that in a while.
The QQQ has continued to grind upwards, and although I think we will continue to move higher in the next few weeks, I expect a 5%+ correction (possibly >10%) within the next two months. The reasoning for this drop is the bearish rising wedge, which is confirmed by negative RSI divergence. QQQ keeps making new highs, but the RSI reading fails to make a new high.
The price target of a broken rising wedge is calculated by the largest distance of the wedge, which happens to be about 20. The bottom of the wedge is at 180, so a break of that trend line suggests a price target of 160.
The SPY and DIA performed significantly better this week, both reaching new all time highs.
Here’s BABA on a weekly timeframe. BABA is having issues breaking through the 165-170 level, which was previously strong support. That level is now acting as resistance. My first thought would be to purchase BABA near the previous low at 150, and then buy another batch between 100-110, and finally buy more at 80-90. Of course, these are long term support levels to watch for, and these levels can mostly be ignored if you are trading on much shorter time frames (like I used to do).
From a 5 year perspective, MU looks extremely bad to buy at this price level. Maybe I’m just finding too many obvious sell signals, and having a big bias towards where I think the price will go. Here are some reasons why the price looks bad here.
- MACD crossed below 0, and the last time that happened, stock price collapsed >60%.
- Same pattern of RSI divergence on the weekly chart
- From the above reasons, we can see that clearly the upward momentum is gone
Here’s where I think price will go based on my weekly price analysis. Within the next month, if we break below 40, in the following 3 months, we will see a price in the low 30s. Following that, we will continue to grind lower for the next 4-6 months until we bottom out in the low to mid 20s in May-July of 2019.
Again, we could easily retest the 50s, and then move lower, or just move higher from here. Price is telling me that the top has already been reached.
Oh and one thing, this time the volume is significantly higher than the last time the cycle ended. I have no idea what that means. Another thing to consider is that the company announced a 10 billion dollar buyback which is planned for fiscal year 2019 (October 2018 to September 2019).
It’s interesting that the cyclical cycle is projected to end in May-July range in 2019 (by my pattern recognition skills), which is when their buyback roughly ends. Perhaps the company has already predicted a collapse in their stock price and are trying to stabilize it.
Hopefully this post can make up for me being a day late last week.
Good luck, trade safe, and have a nice day! Thanks for reading.
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