Technical analysis and trading ideas

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05/12/2007
2007-12-05 20:45:00
Futures analysisA huge rally occurred today, driving the futures back up to the declining 100-day moving average. The double bottom pattern, that I was writing about couple of days ago has been confirmed by today's price action, so we have a short term trend reversal here in WIG20. Futures retraced practically the whole move from 3700, thus the last uncleared gap in this current decline. And if the bulls manage to drive the price above this level, there might be chances, that we will not end up in a bear market here. That would be forecast for the mid and longer terms, but in the short term I think we should focus on particular levels of support, which are plotted on the daily chart (3670 and 3610). These are the key levels, which I expect to be defended, if we are ought to return into uptrend again. Otherwise, this double bottom pattern will be for nothing.The first support near 3670 is probably more likely to be breached, just when any profit taking occurs, so it will probably be...

04/12/2007
2007-12-04 22:20:00
Futures analysisThe futures bounced off from the declining 10- and 20-day moving averages, but the price has pretty much remained steady in the same area over the past few days. Moreover, mentioned averages are about to make a crossover, so recently we are witnessing indecision in the market. Even there is not much of volatility now - the markets are waiting for Fed's decision, which is coming up on 11th of December. As for strict technicals, in the daily timeframe, the futures made a higher low in relation to price action from 28th of November. That means, the buyers have not given up yet and started betting for a rate cut beyond the ocean. As I wrote in one of my previous posts, this is what I expect from the markets in the short term. If Fed cuts the rates, it may cause short term reversals in declining stock markets, but in my opinion, this will not last for long. Euphoric buying will be just natural reaction to major catalyst, which is such event, but clearly the rest lays in ...

30/11/2007
2007-11-30 21:21:00
Futures analysisTwo hammers have been posted by the futures, indicating a strong selling pressure, which holds the price below 3600. In fact, this double hammer pattern confirms, that current downtrend is not going to reverse yet, so another pullback ended up touching declining 20-day moving average - short term level of resistance. As long as this market stays in current area between 3600 and 3440, such situation prevents this potential double bottom pattern (marked on the chart) to actually form and reverse this downtrend. Now, the futures remain in a sidetrend, which signals waiting for Fed's decision, to solve this twofold situation. Breaking above 3600 will confirm a double bottom reversal, and breaking below 3440 will confirm a rectangle, which is continuation pattern. These are the key psychological short term levels for this market.The last two-day action was a retest of key short term resistance level, that ended up being the upper band of a possible rectangle pattern in t...

28/11/2007
2007-11-28 19:56:00
Futures analysisAs it turned out, euphoric buying took place late in today's trading session, which defended short term support area of 3430-50, but the futures closed just at declining 10-day moving average. The global markets totally ignore weak macroeconomical data, coming out from the United States and as a result, we have another rally in the Dow and S&P500, fueled by financial stocks. Now, we can see that what is currently going on is pure short term speculation based on emotional responses to just one or two daily facts. Moreover, there is still a possibility, that the crowd, which is shifting through its emotional states, could drive our WIG20 back to the uptrend. That may occur, because today's price action has established a double bottom pattern in the daily timeframe, which is confirmed if the bulls manage to push this market above 3610 level.Today's session started with an upside gap, which I expected yesterday. The price retested 3440, which is the longer term le...

27/11/2007
2007-11-27 19:29:00
Futures analysisAs I was expecting yesterday, the price retested its nearest short term support, which is 3450 obviously and is now entering a key psychological support area in the daily timeframe. As recent pullback appeared to be very weak, the overall measured move got extended and shows a new longer term downside target for the futures. The previous measured move indicated a retest of the august lows (taken from 3960 to 3550 and subtracted from this 3-day mid November pullback, that had occurred before the latest correction). Now, if I take the whole move from 3960 to 3450 and subtract it from 3615, it will give us price target of 3105 (assuming, that this market will not form a double bottom right here at 3450 and reverse, which is still possible).In the 5-minute timeframe, today's price action was just a continuation of previous movement, that took place on monday. The upper trendline, that I plotted on intraday chart will now act as a resistance, while the futures are declin...

26/11/2007
2007-11-26 20:19:00
Futures analysisThe futures are still in bearish mode and have only managed to reach the declining 10-day moving average, which shows that the buying force is not going to regain strength at least for now. Today's candle in the daily timeframe in alignment with two previous days, has formed a huge bearish engulfing pattern, that drove the close even below thursday's open. This whole recent pullback developed on a declining volume, so in my opinion, the market is poised to decline further. Open interest bouced off just a little and if the price goes below 3450, it would mean that new money supports the short side rather.Intraday data shows recent price action in more detail and it can be seen, that the futures market has retested some important geometrical levels. I thought, that getting above 3600 would bring more bulls and give reason to get long at least in the short term, but this whole movement appeared to be to weak and everything above 3600 has become a bull trap. Recent vol...

22/11/2007
2007-11-22 23:20:00
Futures analysisThe market finally pulled back to 10-day moving average in the daily timeframe, regardless of what I expected yesterday. Global stocks rebounded, which fueled today's reaction in WIG20 futures. Open interest is still rising and supports this recent pattern on higher lows, indicating more aggressive buying. The 20-day moving average has recently crossed below 50-day MA and is about to cross the 100-day average, confirming prior bearish price action. Still, price movement does not show any signs of reversal, except for the short term. The nearest news from America is coming on 27th of November, so until then the global markets will mostly depend on less significant data from other countries and technicals, which would make my forecasts more accurate.The 3550-75 resistance zone, that I pointed out a couple of days ago has expanded to 3595. The futures stopped there and closed, extending 5-day rally, which confirmed short term bottom near 3450 area. Today, the stock exc...

21/11/2007
2007-11-21 22:59:00
Futures analysisAfter a wide-ranging-day the market posted an inside bar, which was a natural reaction to yesterday's positive close in America. But low volatility so far confirms, that what has been happening over the last four days is probably going to end up as just a flat correction in this downtrend. Today's announcement about initial claims in the U.S. met the expectations, so we did not witness any sharp moves as earlier. Open interest bounced up a bit, but new money has not managed to drive this market up even to declining 10-day moving average yet, implying more short term weakness. As for tommorrow, the odds are with sellers and I expect another decline, maybe to retest 3450 again. This would probably be driven by today's downside action of american indexes (S&P500 erasing year's gain).Although intraday action looks rather good (price making higher lows up to retest the main resistance area) I do not think, that there will be any reason to get above 3575, unless so...

20/11/2007
2007-11-20 22:42:00
Futures analysisIn the daily timeframe today's action in the futures ended up as a hammer, which confirmed short term bottom, that I was expecting lately. The market has another chance to recover and will probably reach the nearest declining moving average (10-day in this case). Moreover, today's daily candle is so called wide-ranging-day, which is a common indicator of trend reversal. The price exceeded two previous highs, so there might be a chance to see this market at least staying in recently developed range between 3450 and 3570 for little longer than three days, before the week ends. Still there is a lot of volatility in the markets, caused by unexpected macroeconomical data (today's housing starts for example) and also by betting on upcoming December Fed decision.In the 5-minute timeframe we can see, that the futures have entered a significant short term resistance zone, which in my opinion has become more of a turning point for this market now. That is because getting ab...

19/11/2007
2007-11-19 19:37:00
Futures analysisTwo days of indecision in the futures imply exactly what I said previously: we have a short term bottom. At the time of writing, the Dow is declining more than 200 points on 'sell' recommendations for Citigroup, so if the situation remains this way, tommorow we can expect a retest of 3450. Also, there will be news on housing starts and building permits, which is to determine expectations for december Fed decision. Now, the futures are entering major support zone, that is supposed to slow this declining market, at least in the short term. Today we saw a higher low in the daily timeframe as little evidence of buying, which was fueled by rising open interest. All of the moving averages have downslope now, so current downtrend is unlikely to reverse.Daily timeframe indicates indecision and short term slowdown, but intraday data shows practically opposite situation. As the latest decline finally ended and posted a single day correction, the market pulled back only to 38...

16/11/2007
2007-11-17 00:12:00
Futures analysisToday's session posted a doji bar in daily timeframe, suggesting short term bottom may be forming. The price reached 3453, which is actually prior support level from may and september, as you can see on the chart. We are currently entering another support zone that is theoretically supposed to slow this market. Though I expect a slowdown in the short term only, because of ultimate price target for the futures, that is - august lows (forecast from measured move, check out yesterday analysis). Unless something 'better-than-expected' happens, the global markets are rather meant to decline on weak macroeconomical data coming from the United States. Rising commodity prices spur inflation, which will cause consumers to reduce spending for consumption and eventually drive the economy into recession.The bad thing about today's session is that selling occurred late in the day, not initially. That puts more pressure to the downside obviously, but nonetheless, increased vol...

15/11/2007
2007-11-15 22:38:00
Futures analysisAnother day of decline in the futures. This time, the price fell over 2% in relation to yesterday's close. Weak pullback suggested, that this market is not stopping yet and current sharp decline will extend probably to reach august lows, as plotted on the daily chart. Though, short term support levels, which I outlined yesterday, remain the same - mid-term price target changed. The global markets are declining, because of weak macroeconomical data coming from the United States indicating slowing economy and that is basically what are we going to see in the upcoming weeks. It is actually a delayed reaction of stock markets for rallying commodity prices, that create inflationary pressures.5-minute timeframe tells, that previous important geometrical level was broken - 76,4% retracement. Now, that there is no significant support, the market is on the way down to reach the initial rally point of 3440. The only barrier to break is the intraday low of 3477. As Dow futures...

14/11/2007
2007-11-14 21:31:00
Futures analysisToday we had another decline in the futures. The market gapped up in the morning as a result of yesterday action in the United States, but then it erased nearly all of yesterday's gains. Resistance, that I pointed out yesterday (3640) was actually violated from the upside today, but eventually remained as such, judging by the price action, late in the trading session. Moreover, intraday high of 3667 established at another resistance, creating an actual area, which the price will have difficulties to break (3640-3670). The nearest support level for the daily timeframe would probably be the 61,8% Fibonacci retracement of this August-October rally, which corresponds with some prior support from April. If that fails, then the emergency level, would definitely be the 76,4% retracement, which also corresponds with prior support, but from September. These are the potential levels, that might cause some people to stop selling. It does not mean, they will prove as support fo...

13/11/2007
2007-11-13 22:56:00
Futures analysisFinally we have reaction in this market. Today's session was definitely influenced by american indexes, which rallied on better-than-estimated earnings report of Wal-Mart. Yesterday's inverted hammer proved to be a reversal candle and the price retraced back even above friday's close, so after a sharp decline, we have got a sharp pullback, which will probably extend at least in tommorrow morning, because part of american rally has not been priced yet. The market retested from the downside the latest significant level of support in daily timeframe, which is 3645 obviously. This is definitely a turning point as for the short term and tommorrow's action will show, whether it is going to remain as resistance or not.Intraday triple bottom was confirmed today, so 76,4% Fibonacci retracement remained as this significant level of short term support. The futures retraced back part of the last two-day 'exhaustion decline' as I call it, but found resistance at 61,8% retra...

12/11/2007
2007-11-12 22:55:00
Futures analysisIn the daily timeframe, the futures posted today an inverted hammer near yesterday selloff's low. The open interest is still declining with higher than average volume, so clearly this sharp decline continues with little chances of pulling back in the short term. Although an inverted hammer candle indicates a potential reversal in the market, today's action in the American indexes puts up rather contrary stance for tommorrow. On the daily chart I plotted some levels of support of similar significance. Two previous from early and mid october have already been broken by the price, which initially started this bear market. The nearest downside target will probably be the 3420 area, which is a support of even more significance.5-minute timeframe shows a short term triple bottom, that formed in the past two days, but that does not indicate a reversal yet. Moreover, the price fell to 76,4% Fibonacci retracement and closed actually below it, showing even more weakness with...

09/11/2007
2007-11-09 23:33:00
Futures analysisThe futures sold off again today. Long shadow on the daily chart indicates a possible short term bottom forming, but monday action will strictly depend on the close in America, which is again highly negative (-200 points in Dow Jones). Also, have in mind, that the slowing american economy might finally cause crude oil price to decline, as lower consumer income will decrease overall demand for gas. Nearest downside target in weekly timeframe for crude oil is around 80$ a barrel, which might push the stock markets up. Now we have to wait and see whether WIG20 futures are yet strong enough to even pullback and reach this broken 100-day moving average, because then we will be able to determine the condition of this market (how bearish it actually may become).Intraday data shows how hard is to pick a bottom in this market. Though late in the day, bulls came back for a while and drove the price above 3600 on the close. The futures bounced off of the 76,4% retracement of in...

08/11/2007
2007-11-08 21:31:00
Futures analysisExpect the unexpected - this is probably the best way to describe latest market behavior, which posted another downside gap and ended up forming a hammer candle in the daily timeframe. I am starting to get more confident about what I wrote couple of days ago. What we see, is a delayed reaction on rallying commodity prices, mostly driven by crude oil, gold and silver - the best bets for inflationary times. The futures have formed a double top as historical peak and today's session apparently proved as its confirmation. I was worried about this market getting below the long term moving averages, but it seems that the selloff gained some strength, fueled by constantly rising volume and declining open interest (stop losses). Basically the daily timeframe now shows somewhat of a polarity in this market and that unfortunately fuels the whole concern about whether this situation will turn into bear market or not.5-minute timeframe apparently shows opposite situation, at le...

07/11/2007
2007-11-07 21:37:00
Futures analysisI have learned one really important thing - stick to your primary opinion, especially when you are forecasting the price action. Firstly, I was saying that the futures have yet little more room to retrace, because of the moving averages catching up close to the price. Yesterday I changed my mind and wrote, that this market has found its ultimate short term support and is about to hit the highs again. So now, we have exactly what I said in the first place - retracement towards 50- and 100-day moving averages. Volume was little higher than average in the past few days and open interest declined a little bit, so definitely today we had somewhat of a selloff, or stopping out of the weak holders. On the daily chart I plotted another support zone, which I think might be tested, considering high volatility in the global markets lately. So, if the main uptrend is ought to stay intact, then we would see some bear trap spikes or candle shadows, which would indicate accumulatio...

06/11/2007
2007-11-06 21:19:00
Futures analysisLow range trading occurred in the futures today - no significant news, no unexpected data. Basically we can judge this, as a correction of the short term decline, which begun in the end of october. Trading activity is low, but the open interest still rises, indicating new money coming into the market. Upcoming days will show, which side does this new money support - bulls or bears - depending on the situation in the global markets. Still, the daily timeframe shows that futures have made a higher low and that of course means bias on the long side in this market, so maybe the price has already confirmed bouncing off 3780 and indicated, that we are ready to retest all-time highs again. Surely this is hard to judge, if there is not any significant event, to drive the prices either way.Judging by the intraday data, the futures made today somewhat of a flat correction of monday's rally. There was little more movement late in the day, due to american session open and price...

05/11/2007
2007-11-05 19:43:00
Futures analysisThe futures have retested the lower band of the support zone, that I plotted in my previous analysis. Everything is going just as I have forecasted. We have a lot of volatility going on in the markets, which is caused by rising concerns on subprime mortgage crisis, affecting financial companies' earnings reports. Today we had another CEO stepdown, this time in Citigroup, which also posted huge writedowns. The technicals are still good for this market in the mid and long term. In the short term though we have these crossing 10- and 20-day moving averages, which are currently depicting ongoing decline in the daily timeframe. My only concern about this crossover is that, the last time we saw these averages crossing near the all-time high was when the global markets collapsed, because of subprime mortgage crisis in the United States and it may repeat. Longer term view favours of course rising 50- and 100-day moving averages and that also leaves little more room for the ...

04/11/2007
2007-11-04 20:13:00
Stock candidates' performanceNo winner this week. Especially when upcoming days are going to bring further pullback to the market.ATLANTIS deviated from its symmetrical triangle to finally form a descending version of this pattern. Recently there has been very low trading activity, which does not yet imply that heavy selling pressure is coming. Though I would suggest to be more defensive before getting involved, because the price still could violate the lower band of this triangle - 2,20. Then we would probably see a retest of the closest support level - 1,75.ENERGOPOL also remained in its pattern, which in this case is a classic rectangle. The last two candles in the daily timeframe are hammer and a doji, which puts this stock practically in the same situation as above - low volume pullback and reversal candles with long downside shadows. There is yet a chance to violate 18,90, which is the lower band of the rectangle.MOSTALPLC posted a hammer on friday, also indicating, that it w...

04/11/2007
2007-11-04 11:22:00
Futures analysisFriday's session posted an inverted hammer candle in the daily timeframe, suggesting that current pullback is slowing down, but also that it has little more room to extend and retest previous significant support levels. Another concern is the rising volume, indicating more selling pressure going on recently in the futures. On the daily chart I plotted this support zone, where I think this short term pullback is going to end. Eventually, we could see a retest of rising 50- and 100-day moving average, which are quite close to this zone, if it fails to sustain. As I was warning in some of my previous posts, there is a lot of volatility in the markets right now, caused by ongoing earnings reports season. Recently the major investment banks have been announcing huge write downs, generated by summer subprime mortgage crisis. The american indexes have made lower highs after bouncing off their corrections and now a lot of people are concerned about whether the august lows a...

31/10/2007
2007-10-31 23:24:00
Futures analysisToday was probably the last day of decline in the futures market. Price retested the rising 10-day moving average and considering what happened today in America (Fed lowered the rates by 25 basis points) we are ready to hit new highs. Tommorrow the Warsaw Stock Exchange will be closed due to the All Saints Day, so the market will have a chance to react on this news on friday. Now that the Fed has cut rates, we have one indicator that is left, which will tell us more about future direction in the markets - treasuries. This market has already started to imply inflation concerns and will be discounting it probably until the next FOMC meeting. From now on I will try to post some more information about U.S. debt market, in order to make more accurate predictions.Today's session posted a typical inverted hammer, which indicates reversal in the trend, so that means the short term pullback has ended. Last two days developed a 45 rectangle, which exactly defined the nearest ...

30/10/2007
2007-10-30 21:37:00
Futures analysisToday in the daily timeframe we saw a retest of the rising 10-day moving average, which has been constantly proving to be a solid support level in the short term. Futures market showed a little bit of correction over the last two days and that means, the price has remained safe and sound in a state of being ready to reach the uncharted territory. This two-day decline has developed on very low and yet diminishing volume. The open interest flatted a little, but there is no reason to get short, unless you trade aggressively. This is a typical pullback, which indicates strength of the bulls in a market, because of above factors. There is also possibility, that we are going to see a retest of 20-day moving average, if the decline gets more extended. I am pointing this out, because 20-day MA is lined up with the latest gap support, which for now would really be tough to break (unless Fed decides to leave the rates on current level). Also notice, that the market lately gapp...

29/10/2007
2007-10-29 20:52:00
Futures analysisA record day in the futures. The historical peak equals now 3970 after making a gap on the open today. I don't think anything special is going to happen until wednesday, when the FOMC policy statement is due along with other crucial news including consumer spending. Expectations are for 25 bp. rate hike, so this is definitely priced. The question is: what is going to happen, if the Fed decides not to cut the rates or will lower them by even 50 bp (excluding volatility)? Either way, it is going to be crucial in the longer term for global markets, because soon we will find out if the United States are going into recession or stagflation. As long as the futures remain above moving averages in the daily timeframe, there is little probability of current uptrend to reverse. The open interest is still rising, price is making higher lows, volume is rather stable without frequent spikes, so this market has room to advance.Today we had a session with little volatility, which ...