(Click On Charts To Enlarge)
Charts #1 is last weekend's "possible" Bearish Wolfe Wave. Chart #2 is the DOUBLE negative divergence that we had last weekend in the MACD. We're all taught early on in the stock market to follow the technicals and fundamentals, but we often forget to do that. With respect to the fundamentals, it is most important to follow the REACTION to them, and we had a good example of that this week.
Chart #3 is the price action in VPHM to date. We can see that Monday was a rally that got to within 3% of the 13.21 target that was IN PLAY from the June 4 breakout of a 10-month Ascending Triangle.
Tuesday there was news on the stock. What was the REACTION to the news? That is what is important. The REACTION was a gap down in the stock, a move down back inside the Bearish Wolfe, and a severe tank on the heaviest volume since The Crash of August, 2007.
There was a snapback rally on Tuesday, and a bit more rally on Wednesday, back inside the broken Bearish Wolfe Wave, that got VPHM to the Tenkan-sen and Kijun-sen (equivalent to an 8-day and 21-day MA) at 11.28 and 11.29, and that was all VPHM had on the upside. Wednesday's high was 11.26 just below that RESISTANCE.
Longs who didn't get out on the first plunge to 9.67 on Tuesday "sold into strength" on the snapback rally, and any rally back to RESISTANCE always is an invitation to the shorts.
"Sell and/or sell short rallies back to broken support, which 'should become' resistance." It did. VPHM sold off from 11.26, then tanked again on Thursday and Friday. UGH.
It's difficult to get our opinions about the fundamentals out of our way, I know, but I find it best to try to combine them with what the market's REACTION to the fundamentals is, and that gets played out in the chart as we can see from the breakdown, just as we could see the bullish UPSIDE breakouts in VPHM at 9.05, 9.25 and 10.07 when we discussed them back in June.
Despite the prevailing bearish opinions of LEH's fundamentals, for example, we could see from the chart last weekend the possiblilty of a Bullish Wolfe Wave. The short side of the LEH trade was EXTREMELY crowded. LEH (Chart #4) rallied a sizzling 68% from its 12.02 low this week, to its high of 20.15. Regardless of how the Bullish Wolfe Wave possibility plays out in the days to come, that was one heck of a nice rally in LEH this week!
No comments:
Post a Comment