QQQQ STALLS NEAR JANUARY-FEBRUARY SUPPORT -- APPLE FORMS TRIANGLE AS AROON PARALLELS LOWER -- DOW TRANSPORTS FORMS BEARISH FLAG -- DOW INDUSTRIALS HAS A DJ VU MOMENT -- NUCLEAR-URANIUM ETF AND CAMECO PLUNGE ON HUGE VOLUME
QQQQ STALLS NEAR JANUARY-FEBRUARY SUPPORT ... Link for todays video. After a three-prong decline from 59 to 56, chart 1 shows the Nasdaq 100 ETF (QQQQ) finding support with a bullish engulfing on Friday and indecision on Monday. Support in the 55.5-56 zone stems from the late January lows and the late February low. Fridays bullish engulfing formed as the ETF opened weak (below 55.83) and closed strong (above 56.49). The resulting white body engulfed the body of the prior candlestick. With some indecision on Monday, the pattern over the last two days is a harami, which are also potentially bullish reversal patterns. As with the bullish engulfing, both require confirmation with further strength. In particular, the ETF needs to fill Thursdays gap with a close above 57. Barring a bounce from here, the next support zone resides around 54.
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Chart 1
The indicator window shows Aroon(up) in green and Aroon(down) in red. Aroon(down) surged above Aroon(up) at the beginning of March with the first sharp decline in QQQQ. The second sharp decline pushed the indicator above 90. Momentum-wise, the bears have an edge as long as Aroon(down) remains above Aroon(up). At the very last, a move below 50 in Aroon(down) is needed to show some stability.
APPLE FORMS TRIANGLE AS AROON PARALLELS LOWER... At a jaw-dropping 21.12%, Apple (AAPL) is by far the signal biggest holding in the Nasdaq 100 ETF (QQQQ). See www.invescopowershares.com for details. Apple counts for more than Qualcomm (4.91%), Google (4.09%), Microsoft (3.55%), Oracle (3.14%), Intel (1.91%) and Cisco (1.67%) combined. Simply amazing. Apple is holding up better than QQQQ because the stock held above its late February low. Chart 2 shows Apple forming a triangle consolidation over the last five weeks. This is the second triangle in three months. With a bullish engulfing on Friday, the stock established first support at 345. A move below this level would break triangle support and argue for a correction.
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Chart 2
The indicator window shows the Aroon indicators again. Notice how Aroon(up) and Aroon(down) are both moving down in a tight parallel channel. Less than 20 points separates the two indicators and both are at relatively low levels (30 and 15). This action in the Aroon indicators is typical during a consolidation. Notice how both declined with a parallel channel during the November consolidation. Aroon(green) was the first to reverse with a surge above Aroon(down) and break above 50. The November channel was wider because the November consolidation was also wider (300-320). I am watching the Aroon brothers again for the next directional signal. The first to surge above 50 will provide the next directional clue for momentum.
DOW TRANSPORTS FORMS BEARISH FLAG... Chart 3 shows the Dow Transports with a bearish flag taking shape the last 2-3 weeks. After a 52-week high in mid February, the Average was hit hard in late February and broke below support at 5000. This support level stems from the mid December and late January lows. Even though the Average moved back above the support break, a tight rising consolidation formed. Bearish flags rise and bullish flags fall. A move below 5000 would break flag support and argue for a continuation of the late February decline. Traditional technical analysis teaches us that flags fly at half-mast. The first decline was around 350 points. Another 350 point decline from 5150 would target a move to around 4800. Broken resistance and the November low confirm support in this area. The indicator window shows the Dow Transports relative to the Dow Industrials. The Transports have shown relative weakness since mid January as the Price Relative broke support then.
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Chart 3
DOW INDUSTRIALS HAS A DJ VU MOMENT... The current decline in the Dow Industrials is looking more and more like the November pullback. Chart 4 shows the November pullback as a falling wedge that lasted 3-4 weeks. The indicator window shows MACD (5,25,9) dipping into negative territory and then abruptly turning up in early December. Flash forward to March 2011 and the chart shows the same setup. A falling wedge formed over the last 3-4 weeks and MACD(5,35,9) just dipped into negative territory At this point, the Dow needs a bullish catalyst to reverse the falling wedge and MACD(5,35,9). A move above 12200 would break wedge resistance and a move above 100 would put MACD(5,35,9) above its signal line. Notice how strong the catalyst was on December 1st. Anything less would be suspect. Why use MACD(5,35,9) instead of default MACD (12,26,9)? A shorter short moving average (5 versus 12) and a longer long moving average (35 versus 26) makes MACD more sensitive to price movements. It is just a personal preference from a chronic tweaker.
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Chart 4
NUCLEAR-URANIUM ETF AND CAMECO PLUNGE ON HUGE VOLUME... A number of stocks tied directly or indirectly to the nuclear power industry experienced heavy selling pressure on Monday. For ETFs, the Global Uranium ETF (URA) and the Market Vectors Uranium-Nuclear Energy ETF (NLR) were both down over 10%. Chart 5 shows NLR breaking the August trendline early last week and gapping down on Monday. Selling pressure pushed prices below 20.5, but buyers stepped in and the ETF closed near its high for the day. Given the huge surge in volume and intraday recovery, this certainly looks like a selling climax. Also notice that the ETF opened near the 62% retracement mark and found support near the November low. Despite some promising support and a selling climax, the ETF is still in the falling knife category and carries above average risk.
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Chart 5
Chart 6 shows Cameco (CCJ) with a similar pattern. Cameco is the worlds largest uranium miner and accounts for around 20% of global uranium production. The stock broke down last week and the decline accelerated on Monday. CCJ traded over 25 million shares today with a huge gap down and strong close near the high. Such a high volume reversal argues for support in the 30-32 area, but it may take some time to build a base and digest the events of the last few days.
