From yesterday:
"The Bulls still need to prove themselves by:
1. Breaking out of The Flag (pattern in black)
2. Breaking out of The Wedge (pattern in blue)
3. Taking out the 50.38 high at Blue #4 of The Flag.
4. Getting through Kumo (Cloud) resistance, overhead (seen in Monday's Ichimoku Kinko Hyo chart)"
The Bulls accomplished the first two objectives in the early going, but they couldn't sustain the breakouts so they were failures, at least short-term.
The top of the Falling Wedge (Black Trendline #1-#3) came in yesterday at 49.8837. The session high was 49.90, less than two pennies above that, so Black Trendline #1-#3 now is DOUBLE validated resistance. The first validation of resistance was the Gap And Crap high of 52.70, on May 31.
"Some" giveback when a stock gets to a resistance area is normal and is to be expected. That's why it's called resistance. But, giving back ALL of the session gains, closing at the low of the session and closing on an Inverted Hangman is much more than "some" giveback.
Just as the Long-leggetty Doji Star of June 16 and the Inverted Hammer of June 20 had bullish implications, but weren't bullish without the upside confirmation that we got on the rally in the past two sessions to resistance at the top of the Falling Wedge, this Inverted Hangman isn't bearish, either, without downside confirmation, but it does have bearish implications, especially since it showed up at DOUBLE validated resistance.
If anything bullish can be said of yesterday's session, the June 17 high of 48.80 (red arrow), which was former resistance at the bottom of the Falling Wedge (Black Trendline #2-#4), did hold up yesterday as support, albeit barely. The session low was 48.83. The close was 48.86.
Any trading below 48.80 would tell us that "former resistance isn't support," as it "should be." A minor violation of 48.80 would be okay, but sloppy, if the stock can get back above 48.80. Trading today below 48.56 puts FCX back in the hole, below the bottom of the Falling Wedge (Black Trendline #2-#4).
Since the tops of both the Bull Flag and the Rising Wedge have a downward slope and got tagged yesterday, taking those out to the upside now isn't significant unless yesterday's high of 49.90 also gets taken out. That's the number for the Bulls to beat, then 50.30, which was the high of Blue #4 in the Bull Flag.
4 comments:
Hi Melf, Enjoyed the analysis. I am seeing a cup and \handle formed in these last 7wks. jc
...although I know that's a long handle duration but are these ever that precise though they form.
Good Morning, Jim,
Thanks!
Not only does the duration of the handle disqualify the last 7 weeks of trading as a Cup & Handle, so does the depth of the retracement, which should only be about one-third of the depth of the cup.
No, they aren't precise, as you say, but we also don't want to allow so much leeway that we're seeing what we want to see and seeing something that simply isn't there.
The psychology during the formation of the handle is that there isn't a lot of selling interest as the stock meanders sideways-to-down, thus the one-third retracement rule. A 50% retracement might be okay if the pattern has the right look, but that's pushing it.
FCX has had A LOT of selling interest during the formation of the putative handle. That's no good.
Hi Melf,
Appreciate your explanation. Thanks for feedback. jc
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