(Click On Charts To Enlarge)
XING was down only 2% in December, but it was VERY dirty:
1. The Bear Flag that began to form at the November 21 "possible" Double Bottom low of 7.81 broke out to the upside, then failed on TWO Bearish Engulfing patterns. The downside targets of 7.81 and 7.39 ended up getting MADE shortly after the earnings Crash opening on December 20. BULL TRAP for anyone who bought the Bear Flag upside breakout/fakeout.
2. The Crash opening on December 20 took out 18 months of support, and also took prices well below the 5-year channel in the monthly chart. Long-term holders of the stock who understandably sold that kind of breakdown, and those who understandably shorted it both got caught in a BEAR TRAP when....
3. Wu came out with a press release on December 27. The stock had a "Gap To Crap" opening all the way up to 8.98, put in a high of 9.38 right at the declining 50DMA, which was at 9.3838, finished the session on a Bearish Doji Star Hangman, sank to a low of 8.16 and a close of 8.25 in the final session of 2007, springing at least a short-term BEAR TRAP for anyone who bought the Wu PR "Gap To Crap" candle.
Whew. Or, Wu? Dirty enough?!
Crashes: As the technology improves, it would be great if someone could develop a program that would tell us things like: "In this situation, you are favored to win by 78.6% if you go long this breakout" like they do in Texas Hold 'Em. If we're dealt pocket Aces, we're not guaranteed to win the hand, but we're the overwhelming favorite to win that hand "over time."
When XING crashed into the $11's on July 17, anyone who sold that break of a 10-month H&S Top was rewarded for "making the right play," statistically. More often than not, that kind of breakdown leads to lower prices, as that crash did. XING went into the $7's.
When XING crashed on December 20, the breakdown was even worse than the July 17 Crash because the breakdown was below 18 months' worth of trading, and it also was a break of the 5-year uptrend. But, this time, the situation is different as the chart stands. Obvious emphasis on the latter, because there never are any guarantees, and we'll have to see how it all plays out, but on the Wu PR, the fundamentals trumped the technicals, and we've got indications from two VERY BULLISH possibilities in the charts that "this time could be different."
Daily Chart: We've got a Bullish Island Reversal in the Daily Chart, which also is a "possible" Head of a Bullish Inverse Head & Shoulders pattern. XING even has room to go a bit lower toward the Bullish Island Reversal Gap, and then break out (illustrated by the green arrows). In fact, if XING spends some time in early January forming this "possible" Right Shoulder on low volume, it would give strength to the pattern: "The bigger the base...the better the breakout."
It's possibly "okay" if XING fills the Bullsih Island Reversal gap, but that wouldn't be nearly as bullish as it would be if the Bullish Island Reversal gets left on the chart, and NOT filled. Reason: Bulls who capitulated and sold the Crash would like to have the stock back at those "island prices." Bears who shorted the Crash are under water in the trade, and they'd like to "Buy To Cover" at those "island prices." If that gap isn't filled, both groups will have to chase the stock higher if they want in, or if they want to cover their short positions. If XING languishes and goes back well into the $7's, especially back below the 7.65-7.81 "possible" Double Bottom that had been in place, that's "mediocre" at best.
Monthly Chart: We were watching to see if XING could hang on in December to the bottom of the channel, which came in at 8.18. It was severely violated during the December 20 Crash, but XING stuck it at 8.25 in the final session of the year, and in doing so, has put in a "possible" Bullish Doji Star Hammer that ALSO could be part of a Bullish Morning Star pattern in the monthly chart if XING can finish January half way through November's long black candle. That would necessitate a close of 9.62, or better, in January. December's candle only is bullish if there's upside follow-thru.
Relative Strength: Looking at the sequential Fibonacci measures of Relative Strength ... 8, 13, 21, 34, 55 ... they've had a Bullish Thrust higher on the Wu PR, and they're pulling back to Bullish Synchronicity. Those need to bang higher shortly, or they'll roll over to the downside on a loss of momentum.
MACD: We last looked at this chart when MACD broke below its signal line, on October 19. At the October 26 earnings "Gap To Crap," the MACD broke the neckline of the H&S Top pattern, and XING was down hard from there, the opposite of the very bullish breakout of the MACD on September 17, coming out of the Bullish Double Bottom. I don't consider technical analysis to be a science, per se, but those two H&S patterns do bring to mind Newton's Third Law of Thermodynamics: "For every action, there's an equal and opposite reaction." The moves up and down from the two H&S patterns weren't equal, but they certainly were BIG moves.
Currently, the rally in XING on the Wu PR put the MACD back above its signal line, and it has some room to come down and "back kiss" the signal line, then bang higher as well.
Summary: 2007 was a horrible year for XING, painfully highlighted by the fact that it was such a great year for so many Chinese stocks. Put away the old...and bring in the NEW YEAR. More so than at any time since the Double "Gap To Crap" failures in October at the neckline of the 10-Month H&S Top, XING has got bullish possibilities here heading into 2008, with the Bullish Island Reversal in the Daily chart, and the "possible" Bullish Doji Star Hammer in the Monthly chart that was a monthly CLOSE above the bottom of the channel.
For anyone who has been a long-term investor in XING, I'd like nothing better than to see the completion of a Bullish Morning Star pattern in the monthly chart in January, at a close of 9.62, or better.
Happy New Year, and best to everyone in 2008!
