Fun Fact #53
MU announced a buyback along with an Intel deal day. As a result, MU surged despite the entire market being down! Read more here.
Note that the above price changes are for the last 2 days. I am still bullish.
I think QQQ has made a bull flag pattern. This pattern is formed when the price goes up vertically and then consolidates. I’ve drawn the flag on the chart above. The target if QQQ breaks out above 170 is the length of the flag pole, which is about 8-10 dollars depending on how you draw the flag. That means QQQ could reach 178-180 within a few weeks after breaking out over 170. The only concern is that the move upwards wasn’t on significant volume.
DIA, like QQQ, also looks quite strong. Since DIA broke out above the resistance level near 247.5, I think there’s a good chance DIA will bounce upwards from the 245-247.5 support zone. I’ve highlighted that support zone in the chart above. Also, please note that the volume on down days is significantly lower than on up days, signaling that buyers are still in control of the price action.
The SPY is doing the same thing as the QQQ and DIA. It is currently taking a break after a strong upwards move. I think the odds favor a breakout upwards, but if SPY closes below 270, I think we move significantly lower.
Speaking of bull flags, here’s the chart of BABA. Notice how BABA had a vertical move up on huge volume, and is now consolidating. The volume has decreased significantly as well which is a great sign. A break above 200 signals a lot more upside. The length of the flag pole is 30, so if BABA breaks out above 200, the measured move up would be to a price of 230. I analyzed the weekly chart of BABA in a previous blog post, and the chart also hints that a break above the 200-205 resistance level signals a lot more upside.
Thanks for reading, and I will see you Thursday!
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.
Fun Fact #46
Since a stock price drops the same amount as the dividend declared, you may be wondering why companies even give out dividends at all. I recently learned in my accounting class that dividends are a “signal” that the company is financially healthy.
Growing dividends = healthy company. It’s as simple as that!
If SPY can sustain the breakout above 271, we will likely see a test of the resistance zone from 275-280.
BABA continues to have trouble pushing through the resistance zone from 197.5-200. An upward break above 200 might send the stock soaring above 205. I expect some profit taking soon.
Fun Fact #45
Companies do stock splits to “signal” to shareholders that their company is doing well. A secondary reason for a stock split is to increase liquidity (more easily converted to cash) by allowing people to purchase shares at lower prices. Let’s say you had $1,000 and wanted to invest in Amazon, but since the share price is currently near $1,600, you wouldn’t be able to buy any Amazon. If Amazon did a 10 to 1 stock split, making the share price $160, you would be able to buy 6 shares with your $1,000!
Although yesterday I was quite bearish because the price action was hinting that we would close red today, since we closed green, I maintain my bullish bias from 5/7. Google hit my “if wrong” target after jumping nearly 3% today.
I’m still skeptical on Apple’s current price action and think it will pullback to 180 soon, but the markets don’t care about what I think.
QQQ broke above a key resistance level at 167 today. This is very bullish, but beware that since everyone looks at the same chart, this could be a classic “bull trap.” Bull traps occur when bulls get baited into buying right as price reverses sharply lower.
Generally, I’ve found that if BABA drops when the market goes up, this is a sign that BABA will drop further. We will likely find out if this is true after tomorrow’s close.
Chipotle (CMG) has been trading in a very tight range in the last 2 weeks. Look for a breakout in either direction either above or below the rectangle that I’ve highlighted in the chart above. You can buy CMG on a break above 430, and short it on a break below 415. Or you can be aggressive and just short it when it hits 430 with a tight stop. I favor a downward breakout with a target of 390.
Fun Fact #43
Warren Buffett still plays Ping-Pong! He played against Bill Gates at Berkshire’s annual shareholder meeting today. Source.
QQQ is running into overhead resistance. We will have to see if QQQ can push through this level tomorrow or if we pullback from here.
Apple is the largest component of QQQ, and it looks like it has found a temporary top. It looks good to buy in the 177.5-182.5 zone, although I favor the high 170s since it offers a better risk to reward.
One more push, and BABA will be at 200 again! Unless you think we break out over 205, it’s probably a good idea to take partial or full profits near this price.
The weekly chart of QQQ is above. I’ve circled the lower tails displaying buying pressure, as well as highlighting a divergent high. A divergent high means that the index/stock made a higher high, but the RSI indicator made a lower low. That is bearish. However, we are still in an uptrend, so it’s generally a better idea to buy on dips instead of short selling high points.
The weekly chart of SPY is currently stuck between the support and resistance area. That makes the direction unclear, although currently, there’s more evidence supporting a move up.
Look at the weekly chart of BABA above. I’ve mentioned in multiple posts that BABA was a good buy in the 165-175 zone, and a good sell in the 190-200 zone. BABA is now approaching the 190 area, which represents a good price to sell at. However, I believe BABA can hit 200 on this move up before pulling back because BABA had good earnings last Thursday. Note that a break and close above 205 on the weekly chart would be very bullish.
Here’s the weekly chart of MU. I think MU is a good long term hold and represents a good swing trading opportunity here. As long as MU holds 45 on the weekly chart, I think we retest the highs near 60. Do note that we’ve made a divergent high. Like I described in the QQQ chart near the top of the page, this is bearish. As you can see in the chart, prices fell from the recent high.
Apple broke out to an all time high (ATH) after selling off hard in the last few months. Although Apple is up 13.25% in just one week, the chart hints that Apple has enough juice for another move up before pulling back. If we move up, I suspect a test of 190 since it’s a nice round number.
Chipotle (CMG) recently broke out upwards after releasing a very strong earnings report. Judging from the price action and moving averages, I think CMG will pullback to at least the 380-400 area from a weekly perspective, which is another 5-10% down. Of course, the upward momentum could easily carry the stock higher too, but my bet is down.
Thanks for reading!
Fun Fact #42
A deer market is a flat/neutral market, being neither a bull nor bear market.
Apple hit my target 3 weeks ahead of schedule… Interesting. I’ve put in a target for BABA now that earnings are out of the way.
From the current look of things, it looks like the markets won’t drop unless some unexpected event happens. Perhaps most of the above stocks will reach my “If wrong” targets instead.
This morning, I woke up to see BABA in the premarket hovering near 191 due to an earnings beat. By 8:30 AM, BABA was red (dropped 4% from where I was watching it), which was quite uncomfortable. After checking back on it at the end of the day, I was pleasantly surprised 🙂
Warren Buffett announced a purchase of 75 million additional shares of Apple (AAPL) in Q1 this year. That sent the stock flying today, carrying the entire market up with it. Job payroll numbers came in much lower than expected, which I guess was “good news.”
Notice the extremely high volume today. Although the target is set for 5/25, I could see BABA hitting that 200 target within 5-7 trading days. If I’m wrong, I expect BABA to retest 175, which is the bottom black horizontal line in the chart above.
Apple has hit my 183 target 3 weeks ahead of schedule. Although I could see it moving higher in the coming weeks (perhaps to the 188-190 level), taking partial or full profits here seems appropriate. After glancing at the last few times when Apple made a new all time high, it seems to either rocket higher, or have a significant correction.
I look forward to updating my blog with weekly charts this weekend! Thanks for reading, and have a great weekend.