The index opened the week with a downward action, breaking the 65 day MA on the first trading day. It continued its downward movement the following day, creating a gap down and further breaking the support line. The breaking of the support line was a crucial event which would determine if the sideways movement would stop and the possible ascending triangle will dissipate. Just as all hope was lost on the breaking of support, the last 2 trading days saved the index from further demise. The last 2 days of last week saw the index bounce from the lows of the second day, even covering the gap that was created. All of these bullish actions were accompanied with large value turn over.
So what does this mean? It means the index is still on a sideways movement, which is a better predicament rather than moving downwards. The ascending triangle that I was hoping to see will not materialize, but instead, with the creation of the recent low, the ascending triangle formation I was hoping, got transformed into a sideways channel connecting the low of Nov 30, 2010 and the low of Jan 11 for support and connecting the peaks (Nov 22, Dec 9, Jan 4) as resistance.
For the coming week, expect the index to move upward towards resistance near 4260. If the index breaks above the channel, we may see the index moving toward 4500 level. Otherwise, if resistance is strong, expect a ranging movement for the index within the channel I mentioned above.
AP’s last trading day saw a white candle with very large volume and it also created a gap up. All of these point to a bullish action for this stock and possibly an upcoming breakout from a downward channel. The resistance of the channel is at 30.10 which is also the 65 day MA. A break above this resistance line accompanied with large volume can propel the stock to the target price of around 35. This stock is definitely a buy. Just watch out for resistance near 32.50 which is a previous high.
ELI had a bullish run-up last Wed and Thurs, followed by a sell down last Friday. The run-up was probably a reaction to the breaking of a large symmetrical triangle spanning from Aug 2010 to present. There is also a small downward channel from Oct 2010 to present. The target price for the channel has been reached near 0.65 while the symmetrical triangle’s target price near 0.76 is near the current price. However, though it may seem that there is no more chance to capitalize on the breakout since the channel’s target price has been reached, while the symmetrical triangle’s target price is already near the current price, there is still a higher possibility that there is more momentum to this stock for the reason that the sell down last Friday had a relatively low volume compared to the 2 day run-up volume. For the coming week, be on the look out for a possible pennant/flag formation, which means expect for selling action for next week to form the pennant/flag, hopefully not closing the gap created. If a pennant/flag formation does materialize, next target price is near the previous high at 0.95.
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