Overbought Condition May Put A Cap On This Rally

Editor’s note: this column was originally published on Capital Essence’s CEM News. It’s being republished as a bonus for the loyal readers. For more information abouta subscribing to CEM News, please click here.

Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday July 1, 2011.

We’ve noted in the previous Market Outlook that: “several key technical indicators suggest that the bulls are now holding the edge for a short-term correction rally bounce.”  As anticipated, the better-than-expected Chicago PMI report, which reversed recent softening to hit 61.1, triggered another broad-based rally that sent the major indices up more than 1 percent in Thursday trading session.  The Dow Jones industrial average added 153 points, or 1.25%, to close at 12,414.  The S&P 500 gained 13 points, or 1.01%, to finish at 1,320.  The NASDAQ added 33 points, or 1.21%, to finish at 2,772.  The CBOE Volatility Index, a widely considered the best gauge of fear in the market, fell 4.34% to close at 16.52.

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Notably, shares of Cooper Companies Inc (COO) ascended to new multi-year high, up 3.22% on above the daily average volume to 79.24.  This is bullish from a technical perspective. Below is an updated look at a trade in COO.  The stock had been on tear in recent days and is in an interesting spot.  Just so that you know, initially profiled in our May 26, 2011 “Swing Trader BulletinCOO had gained about 8% and remained well position.

The graphics below are from our “U.S. Market ETF Trading Map”, which shows the near-term technical bias and trading ranges for COO and S&P 500 index.  As shown, the underlying is in a short-term bullish trend when the price bars are painted in green.  The underlying is in a short-term bearish trend when the price bars are painted in red.  The yellow bars identify period of neutral or sideways trading pattern.  Additionally, the light-blue shading represents the short-term trading range.  A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading).  Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.

Chart 1.1 – Cooper Companies Inc (daily)

Looking at the one-year daily chart of COO we can see that, the stock has been running into an intact uptrend channel since reaching the interim low in May 2010.  With an exception of a brief pullback in November 2010, Money Flow measure had held firmly above the zero line, indicating there was little selling interest.

Thursday upside breakout had helped clear resistance at the June high, signaled a resumption of the major upswing.  Momentum indicator also shifted higher from near oversold territory, allowing additional upside probing.  This is bullish an increased the probability for a rapid advance toward the upper edge of the one-year rising trend channel, near 84.  That level roughly corresponds with the all-time high set in early 2005.

Support is at the trend channel moving average (as represents by the white line in the chart) currently at 74.79.  A close below it will turn the short-term trend down and bring the bottom of its short-term trading range into view.

Chart 1.2 – S&P 500 index (daily).

Key technical development in Thursday trading session was a breakout above the May falling trend line resistance, suggesting the S&P 500 index may have switched to a rising trend.  Money Flow measure had trended higher from above the zero line, indicating an increase in buying pressure.  This is bullish and increased the probability for a run toward the range top resistance near 1370.

Buyers however, must be mindful that momentum indicator is now indicating an overbought situation.  While overbought condition is normal during long-term uptrend, it normally marks a short-term top.  So, it should not be surprising to see some short-term consolidations prior to the new upswing.  Support is at recent breakout point near 1300.  Pullback that respects this support is bullish and should consider as buying opportunity.

In summary, our near-term work on price pattern and momentum suggested that the S&P 500 index could be in an early stage of a new upswing that targeting the range top resistance near 1370.  The index however, is now short-term overbought following recent advance.  This may put a cap on present rally. So, we’d wait for at least a short-term consolidation before putting more money to work.

(By:Michelle Mai for Capital Essence)
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標普超買可能使上攻受限

Editor’s note: the English version of this column was originally published on Capital Essence’s CEM News. It’s being republished as a bonus for the loyal readers. For more information about subscribing to CEM News, please click here.

這是Capital Essence對2011年7月1日(周五)的市場技術分析。

我們在昨天的市場前瞻中提到:“標普幾大關鍵技術指標顯示,多頭目前掌握着一輪短期修復性反彈行情的主動權。”不出我們所料,芝加哥PMI報告好於預期觸發新一輪買盤推動周四美國股市收高。當日道瓊斯工業平均指數上漲153點,收於12414點,漲幅1.25%。標普500上漲13點,收於1320點,漲幅1.01%。納斯達克綜合指數上漲33點,收於2772點,漲幅1.21%。被廣泛視為市場恐慌情緒最佳衡量指標的CBOE波動率指數下跌4.34%,收於16.52點。

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引人注目的是,Cooper Companies Inc(COO)周四收盤創下多年新高,當日放量大漲3.22%至79.24美元。從技術角度來說,這是看漲的。下圖為COO最新日線圖,該股近日一路上揚,其表現令人矚目。大家知道,自從我們最早在2011年5月26日的“波段交易者公告牌”中做出推薦以來,COO已上漲約8%,而且形態依然不錯。

下圖來自我們的“美國市場ETF交易地圖”,其中顯示了COO和標普500指數的近期技術形態。如圖所示,綠色價格柱狀圖表示市場短期趨勢看漲,紅色表示市場短期趨勢看跌,黃色則表示市場短期趨勢看平。此外淡藍色帶表示短期交易區間。向上突破這一區間意味着超買(紅色色帶所示),向下跌破這一區間意味着超賣(墨綠色帶所示)。

圖1.1 Cooper Companies Inc(日線圖)

COO一年期日線圖可以看出,自從2010年5月中期見底以來,該股便進入一個完整的上升通道。除2010年11月短期回調期間出現例外,COO的資金流向指標一直穩穩站在零線上方,從而表明交易者賣出興趣不大。

COO周四的突破清除了6月高點阻力,宣告上漲大趨勢的恢復。動能指標也從近於超賣的領域反轉走高,允許價格進一步上探。這種現象是看漲的,增加了COO向持續一年的上升通道上沿(84美元附近)迅速攀升的可能性。該位置與COO在2005年初創下的歷史高點大致重合。

目前位於74.79美元的移動平均綫是COO的支撐所在。收盤跌破這一位置將使得短期趨勢反轉向下,短期交易區間底部將進入視野。

圖1.2 標普500指數(日線圖)

標普周四的關鍵技術進展是突破5月份下降趨勢綫阻力,這意味着指數或已轉入一輪升勢。資金流向指標已在零線上方走高,表明買壓增加。這種現象是看漲的,增加了標普向1370點附近的區間頂部阻力位發起進攻的可能性。

不過買家須知,標普的動能指標目前已顯示超買。雖然長期上升趨勢中出現超買是正常的,但這也通常意味着市場短期見頂。因此標普在開始新一輪上漲行情前進行短期盤整是不足為奇的。1300點附近的近期突破位是標普目前支撐所在。不跌破這一位置的回調是看漲的,應該視為買入機會。

總結:近期價格形態和動能顯示指數或處於新一輪上漲行情的早期階段,最終目標直指1370點附近的區間頂部阻力。不過指數在近期上漲後已短期超買,本輪上攻可能因此受限。因此我們應至少等待一次短期盤整後才能投入更多資金。

(本文作者:Michelle Mai)
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﹕Michelle Mai為Capital Essence(錢途集團)撰寫技術分析﹐並為包括市場趨勢在內的數份金融市場投資通訊的首席市場策略師。如欲每日盤前收到更多最新分析, 敬請訂閱

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