(Click On Charts To Enlarge)
From November 24th:
"...if this Bear Trap is any good, we ought to at least get up to the top of this "possible" Wolfe Wave/Bullish Falling Wedge pattern."
The NASDAQ Composite still is shy of the top of the pattern, but the QLD broke out of its channel intraday and closed ON the top of it, within less than a penny. From the Bear Trap lows of November 21, the QLD has enjoyed a rally of 44.42% to yesterday's high, doubling the NASDAQ's rally of 22.26% almost exactly, which is it's aim. That would be an outstanding performance over one year's time, let alone less than three week's time, Bear rally, or no.
The QLD now is a Barbarian At The Gate, champing at the bit for a break out of top of this channel, which represents resistance. There's a gap below here from yesterday, at 25.94. A pullback right here would work off the near-term overbought condition, as well as establish the top of the channel as validated resistance.
We can connect any two data points and call that a trendline, but we don't know if it's significant or not unless Ms. Market validates it with a third (or more) hit. If a validated trendline gets taken out, that usually does have some significance.
Case in point: the lower trendline validation in the NASDAQ chart, on November 13, which set up the reversal rally that resulted in a Bull Trap. When that validated trendline got taken out to the downside, it was very significant because it set up the Bear Trap "Fakeout/Breakdown" on November 21, which spawned the recent rally. On December 1 (the big black candle circled in red) the NASDAQ sold off hard, back toward that validated trendline, but it never was reached, nor was the Bear Trap gap ever filled. The NASDAQ re-established support near the bottom of the pattern, then moved higher toward the top of the pattern.
For an example of what a pullback from here, then a breakout above a validated trendline would look like, scroll down to the chart in "XING: Bullish Falling Wedge Breakout" posted last weekend. XING pulled back for two days from a trendline validation, then broke out last Friday and continued to rally yesterday, al-lmost getting to the 2.74 target IN PLAY. High was 2.65.
The Bear case here for the QLD is that the 44% rally has been nothing more than a Bear Flag rally (pattern in red) back to resistance at BOTH the top of the flag AND the top of the channel, and that it isn't going anywhere but down, below the flag, and then back below the channel again. That case certainly has technical merit, and anyone shorting the QLD yesterday AT RESISTANCE had reason for doing so, but Bears need to hold this little Barbarian At The Gate, and not allow him out of the channel.
4 comments:
Melf,
I think your analysis is excellent.Some ques.:what does the red m on some of your charts signify? secondly,do you think the gap on gld will fill and is it generally difficult for 50 dma to be breached?
Thank you very much, Mark.
The red "M" is a bearish MACD signal. Many of them on my charts are a "kiss of death" signal, which occurs when the MACD back tests the signal line from underneath, and fails. The signal (like any) always has to be considered in context of what the chart is doing. If a pattern already has broken down, and price ALSO is trying to make a bid for something like a declining 50 Day Moving Average, or the bottom of a broken pattern, the signal tends to work quite well.
An example would be the UYG, on September 29, breaking below the prior day's low of 18.12 (known as a "sell pivot") in tandem with the MACD "kiss of death" signal. Four sessions later, a THIRD "nested bearish pattern" broke down and they "pulled the plug" on it, as it were. The UYG went down hard from there.
Regarding the GLD, I have no idea if the gap will get filled, but it's much more bullish if it doesn't. Friday's candle was BOTH a successful retest of the November 21 Symmetrical Triangle breakout, AND the "island" of a Bullish Island Reversal.
The Top of the Symmetrical Triangle came in at 74.41 on Friday. The GLD gapped down and sank to 72.91, but came roaring back and closed at 74.52, back above the pattern on a Bullish Hammer.
Yesterday's gap up created the Bullish Island Reversal. The candle stands alone, disconnected from both Thursday's and Monday's sessions. That's VERY Bullish, especially combined with the successful breakout retest. If the gap gets filled, it's "okay," but not nearly as bullish because the idea behind a Bullish Island Reversal is that no one should be allowed to have the GLD at Friday's cheap "island prices." They should be forced to "pay up" to buy it, or to cover a short. If anyone at all can have it below 75.00, Friday's "island buyers" might not have gotten such a great deal, if you see what I mean, and it would put the bullishness in question, especially if the GLD goes back below the top of the Symmetrical Triangle (connect the highs of October 29 and November 19 to draw that trendline)
You will forgive me, but since I don't want anyone to get the idea that I do "stocks by request," due to my personal time constraints, I should say that I normally wouldn't have the time to do an analysis like this. I already had done the work, so no problem and I'm happy to share it. I appreciate your understanding about that.
Good luck to you, Mark!
Thank you s much for your help. I am terribly embarrassed as I mistyped and sent GLD when I was interested in
QLD since that was what you were analyzing. Again my apologies
Mark,
No need to be embarrassed at all. It was an understandable typo. I make plenty of them.
I was surprised that you were asking about the GLD since I've studied that one pretty closely. Nothing more than a funny coincidence ;)
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