AMZN: The Hook At Triple Support

What a stunning (and deceptive) move in AMZN off the 181.59 (1) validation of support at the bottom of the Falling Wedge; (2) bottom of the Kumo (Cloud); and, (3) support near the neckline of the Bullish Inverse H&S pattern.

The June 16 close was just a hair below the neckline for a one-day "knuckle-biter" for The Bulls (leaving them wondering if the stock was going to tank), then ... LIFT OFF! The stock has made it all the way back to the top of the Falling Wedge, so that target has been MADE.

AMZN is a stock, among others, that the shorts love to hate, usually based on some opinion that they have of value. "This stock is a piece of junk." "This thing isn't worth yap ... yap ... yap ..."

There's a time to short ALL stocks, and there's nothing wrong with that, but we need to be very careful about getting stuck in some opinion of value. Expressing it during cocktail hour conversation is harmless and can be quite entertaining. Expressing our opinion of value by shorting a stock that is acting bullish, or by being long a stock that is acting bearish, can be deadly if we do it very often.

That June 16 low is a fine example of what many technicians call "a hook" in the trade. It "looks like" a failure, catching the majority of players "wrong-footed," then it rips to the upside.

The January 18 Bearish Wolfe Wave 5 "Fakeout/Breakout" to the upside is another example of "a hook" in the trade. The Bears "buy to cover" the upside technical breakout and The Bulls buy the technical breakout. The proverbial "everyone" is caught "wrong-footed," buying at exactly the wrong time, at a high in the stock. UGH.

What makes those "hooks" so difficult is that we get caught in our mindset, like at the June 16 low in AMZN, thinking, "This looks HORRIBLE." If we can clear our minds, watch what IS HAPPENING, and act on those "hooks," it can be very profitable.

I won't whine again that "they" didn't fill my order for 1,000 shares on June 16, at 181.75, because I should slap myself silly for not "paying up" when I saw AMZN rallying off that 181.59 "hook" at TRIPLE support: (1) bottom of the Falling Wedge; (2) bottom of the cloud; and, (3) Inverse H&S neckline.

How much evidence do you want?

Ouch! Ouch! Ouch! Stop that, Melf! OUCH! OUCH! OUCH!

Triple Breakout Through Triple Validated Resistance

This Triple Top/Ascending Triangle breakout on Monday was what launched the current rally. Notice that after the breakout, 48.50, the lowest of the three tops, became support.

"After a breakout, former resistance 'should be' support on a selloff." It was.



The Triple Top/Ascending Triangle breakout on Monday was followed up with a TRIPLE breakout above TRIPLE validated resistance, similar in effect to the Ascending Triangle breakout of May 25, above QUINTUPLE validated resistance (five red arrows). FCX rallied, the Ascending Triangle target of 52,28 got MADE, then the stock validated resistance at the top of the Falling Wedge after five consecutive, unsustainable gaps higher.

Both rallies were/are driven by "buying begets buying." Shorts are squeezed on the breakouts (in this case four breakouts) as the trade moves against them and longs step in and buy. As an example of that, I mentioned at the FCX Board yesterday that the shorts would get some respite if FCX traded back below 49.65, the top of the Triple Validated resistance, after the Triple Breakout. They only got two minutes of respite when the stock traded down to 49.61, then the pressure to buy was on again into the close, and into early today when the Bull Flag target of 51.07 and the Symmetrical Triangle target of 52.19 both got MADE.

"Don't be caught short an upside technical breakout." Especially not short four pattern breakouts, above Triple Validated Resistance. UGH.



Both the 8/13 and the 13/21 Fibonacci Sequential Measures of Relative Strength gave their first buy signals in many moons, on yesterday's Triple Breakout and print of 49.66, above Triple Validated Resistance. Signals like that in conjunction with breakouts tend to be very supportive of a rally, ala, "We're ready for liftoff, Houston!"



Basis the Ichimoku Kinko Hyo chart, FCX closed yesterday at the "bottom rung" of Kumo (Cloud) resistance, which was from 50.25 up to 52.405. Today's rally got above the Kumo, to 52.62, then pulled back. The May 31 high was 52.70, where FCX failed at the bottom of the Kumo. The May 10 rally high of 52.30 also failed at Kumo (Cloud) resistance. Today's move to 52.62 is the first print above the Kumo in nearly two month's time.

FCX: Triple Breakout

From yesterday morning:

"48.54 + 0.43 = Target: 48.97 IN PLAY

48.50 + 1.10 = Target: 49.60 IN PLAY

The key numbers that The Bulls need to take out continue to be:

1. 49.65 - The Triple Validated Resistance High
2. 49.90 - The Double Validated Resistance High
3. 50.38 - The High at Blue #4 in the Bull Flag/Channel"

Both targets got MADE in yesterday's session, and The Bulls also got through those three important levels of resistance.

I keep getting "error" when I try to upload my charts this morning. I'll try it again later on.

The bad tick down to the 45's on Monday caused me to miss the third pattern in the daily chart, a Symmetrical Triangle, which also broke out yesterday. That pattern is comprised of the last four candles in the daily chart, prior to yesterday's TRIPLE breakout. It would best be seen on an intraday chart, like Tuesday's Triple Top/Ascending Triangle breakout, but unfortunately, we had the bad tick so it can't be seen other than in the daily chart.

For the Symmetrical Triangle:

Data Point #1: 49.90 high on 6-22
Data Point #2: 47.11 low on 6-23
Data Point #3: 49.65 high on 6-24
Data Point #4: 47.40 low on 6-27

No need to post the target since everyone knows how to do that after the dozens of target calculations that I've posted, right? RIGHT??? LOL.

Hint: Take the high of the pattern minus the low of the pattern, then add that amount to where the trendline was when the pattern broke out.

The Triple Breakout:

1. FALLING WEDGE - crossing the trendline above 49.188
2. BULL FLAG/CHANNEL - crossing the trendline above 49.23
3. SYMMETRICAL TRIANGLE - crossing the trendline above 49.40 (<<< hint)

AMZN, BIDU And FCX

(Click on charts to enlarge. Click on them again for further enlargement. Use back arrow on your browser to return to the narrative).

AMZN had a strong day yesterday, coming off validated support at the bottom of the Falling Wedge (181.59) and the subsequent breakout of the Wedge. Intraday, it was up 20 points off the recent low and it has closed above the Kumo (Cloud).

That gain is an excellent illustration of why it's a good idea, in a market selloff, to buy bullish stocks that are testing support, not stocks that have broken support and have to rally into a lot of resistance. AMZN had a lot of support beneath it during its recent selloff from the January-April Bullish Inverse H&S Bottom.



The shorts who didn't cover when the Bear Flag target of 116.02 got MADE continued to get squeezed yesterday. BIDU also has rallied 20 points off its recent low. It has much more overhead resistance than does AMZN, but that's a nice rally.



On the early morning pullback to the EMAs, I placed an order for 1,000 shares at 130.55, but...



..."those buzzard faces" only let me have 300 shares. UGH. I really "shoulda" made it a market order since I cut it so close to those EMAs. The low right there was 130.53, just below my order. I sold the shares on the retest of the early high for a $375 gain, which "shoulda" been more like a $1,200 gain. My bad. Sigh...



FCX had a nice recovery off its morning low. I bought 2,500 of it at 48.22 on a pullback to the EMAs with a mental stop below 47.90 (horizontal red line).

The stock put in a new high on the session, at 48.54, so I raised my stop to "anything that looked like it was coming back in my face." The daily chart still is bearish, so I didn't give the trade much room. When it didn't follow through on the upside breakout above 48.52 - 48.50, I threw it in for a $300 gain and called it a day.



The remainder of the session in FCX proved to be quite interesting. It put in a little H&S Top (neckline: 48.09 and 48.11), broke it nominally ("in name only), at 48.10, then rallied and knocked out the 48.37 high of the Right Shoulder (horizontal yellow line) AND took out the 48.54 high of the Head (horizontal red line).

The upside takeout of the Head puts 48.97 IN PLAY as long as the 48.09-48.11 neckline holds up:,

48.54 - High of the Head
48.11 - The more conservative of the 48.09-48.11 neckline data points

48.54 - 48.11 = 0.43 points of upside

48.54 + 0.43 = Target: 48.97 IN PLAY

Additionally, the chart has a nice look to it. The EMAs now are "in gear" for a rally and the upside takeout of the 48.52...48.50...48.54 highs suggests a rally to about 49.60, as long as 48.50 holds up, as support.

48.50 - The most conservative of the 48.52...48.50...48.54 highs
47.40 - Low

48.50 - 47.40 = 1.10 points of upside

48.50 + 1.10 = Target: 49.60 IN PLAY

If the 49.60 target should get MADE, that gets FCX back to Triple Validated Resistance.



The key numbers that The Bulls need to take out continue to be:

1. 49.65 - The Triple Validated Resistance High
2. 49.90 - The Double Validated Resistance High
3. 50.38 - The High at Blue #4 in the Bull Flag/Channel



Gain on the session: $700

FCX - Triple Validated Resistance

My pre-market comment on the Yahoo FCX Message Board on Friday:

"The top of the Falling Wedge comes in today, June 24, at 49.536
The top of the Bull Flag comes in today, June 24, at 49.46.

A print of 49.54 would mean that, technically, both patterns have broken out again, but as we saw on Wednesday, FCX needs to hold the breakouts.

I consider it much more important to take out Wednesday's DOUBLE validated resistance high of 49.90, then 50.38, the high at Blue #4 in the Bull Flag.

FCX currently is BID: 49.44...ASK: 49.50, right near the pattern breakouts."

You see the reason for my comment in boldface: The open on Friday was 49.45, a penny below the two breakouts. The early high was 49.65, which was another "Fakeout/Breakout" (like June 22, which became DOUBLE validated resistance), then down she went, validating Black Trendline #1-#3 as TRIPLE resistance.

The Bears are very firmly in control, just as they were with QUINTUPLE validated resistance at Black Trendline #2-#4, in May (the five red arrows). Back then, while The Bears were successfully defending that trendline, The Bulls were building an Ascending Triangle from which they finally broke out on May 24.

Breakouts above validated resistance, particularly when a pattern breakout also is involved, usually has "some" significance. It did. The Ascending Triangle target of 52.28 got MADE on May 31 and the rally ended at Black Trendline #1-#3, which became the first validation of that trendline as resistance (high was 52.70).

The Bulls now have a chance to break out above TRIPLE validated resistance, with TWO upside pattern breakouts involved: The Bull Flag and the Falling Wedge. They don't need to do it right away, but the key numbers that The Bulls need to take out are:

1. 49.65 - The Triple Validated Resistance High
2. 49.90 - The Double Validated Resistance High
3. 50.38 - The High at Blue #4 in the Bull Flag

FCX And AMZN

(Click on charts to enlarge. Click on them again for further enlargement. Use the left arrow on your browser to return to the narrative).

Losses never are easy to take, but the most difficult ones for me are when I've basically gotten the trade right, but end up with a loss. I had such a trade in FCX yesterday.

I bought 2,500 shares of it at 47.57 (horizontal white line), at the gap left in the 10-Minute chart from Tuesday morning's Gap Up Rectangle breakout, playing it for at least a partial fill of the gap down opening. I didn't expect the 47.37-47.41 lows of the Rectangle to hold (horizontal yellow line), so I allowed for that by putting my mental stop at 47.17, above the June 16 low of 47.06 (horizontal red line). Given that the market was down so hard, I wanted to limit my risk, and not have to sell into fast market conditions if the stock got out of hand on the downside.

I stopped the trade out at 47.17, for $1,000 loss, just six cents above the session low of 47.11 fer cryin' out loud, then FCX took off to the upside, completely filling the morning gap, and closing up on the session. Say it ain't so!

Arrrrrrrrrrrrrrrrrrrrrrrrgh! LOL.

With the benefit of 20/20 hindsight, it's easy to see that I would have been golden if I had used the 47.06 as my stop, but we all "coulda ... shoulda ...woulda." I made my decision not to do that, and I had to own it, and move on, which I did.

I also had purchased AMZN in the early going, and I needed to focus on that trade, not the "Gee, but I basically had it right" loss of $1,000 in FCX. (Grumble ... grumble ... grumble).

STOP THAT, Melf! Move on!



On yesterday's early morning smackdown, AMZN was my "go to" choice because the daily chart is bullish. I almost caught the exact 181.59 low in the stock on June 16 when "they" didn't fill my order at 181.75 (another disappointment ... grumble ... grumble ...LOL), so I've been watching it for a buying opportunity on a selloff.



I bought 1,000 shares of AMZN at 188.86 at horizonal support (188.85 was a prior high), when the stock was down nearly three dollars on the session. It went down to a low of 188.30, then broke out of this nice Bull Flag:



I sold into the rally (white down arrow) through the inverted EMAs (Exponential Moving Averages), planning to buy it back if I got a selloff to the lower EMA (white up arrow), which I got. That was nice.

I sold it again into the next rally, bought it back again on the next selloff, then sold it again into another rally for a gain of $3,300 on the three AMZN trades.

You all would know that I was lying if I said that gain made up for the FCX trade. Even though I "got over it" during trading, the market is shut now, so it rankles just a little. Curses! LOL.



I finished for the day after the third AMZN trade, but there was another nice buying opportunity around 2:20PM when the stock retested the EMAs, which now were properly threaded, with the 13EMA above the 21EMA and with the 21EMA above the 34EMA. The stock had "gotten in gear," and the icing on the cake for a trade was the Falling Wedge breakout (pattern in white). That was a nice, nice setup.

AMZN finished the day at 194.16, up 2.53, and up nearly six dollars off the session low.



Loss on FCX: $1,000 (UGH)
Gain on AMZN: $3,300

Gain on the session: $2,300

FCX: Double Validated Resistance

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.

FCX, AMZN And BIDU

Bull Traps and Bear Traps get "sprung" when a pattern breaks out or breaks down, then reverses and breaks out in the other direction and remains above or below the pattern.

At the white arrow, The Bears managed to break the Triple Bottom, nominally ("in name only"), by three cents, but The Bulls stuck the close at 47.41, smack on the Triple Bottom for a "cliffhanger close" (my term, not anything in textbooks).

The resolution of "the cliffhanger close" was sprung Bear Trap Gap Up opening, above the Rectangle. The Bears who didn't cover at the Triple Bottom, or who shorted the nomimal technical breakdown of the Triple Bottom near Monday's close, were trapped in their short positions.

Additionally, The Bears have been accustomed to "Gap And Crap" openings in FCX in which the stock gaps up at the open, then fizzles, like we saw on Monday, and they've gotten rewarded for shorting those "Gap And Crap" openings. Yesterday, The Bears got punished for shorting the Gap Up opening and were squeezed higher for most of the session in a "buying begets buying" rally. Here's what I mean by that:

The Bears who didn't cover at Monday's Triple Bottom were buyers. Bears who shorted the Gap Up opening became buyers later in the session when they saw that the gap didn't get filled, and that the stock moved to a "higher high," above the early rally to 48.37, and kept going higher. Bulls who liked the Gap Up technical breakout of the Rectangle were buyers. Bulls who liked the upside takeout of Monday's 48.28 high were buyers. Bulls who liked the upside takeout of 48.80 resistance at Black Trendline #2-#4 in the daily chart (see next chart) were buyers. The proverbial "everyone" is a buyer in a "sprung trap" situation like this one. Now, not literally "everyone." You get the idea.



From yesterday morning:

"The Bulls need to eat some spinach and quit fooling around here. First order of business for them is to go up an knock out the 47.89-47.92 highs of this Rectangle."

The Bulls sprung the Bear Trap with an opening of 48.05 and a session low of 47.95, above The Rectangle highs. Nothing like a good can of spinach to accomplish the first order of business, eh?! LOL.

Yesterday's rally puts The Bulls out of Harm's Way, at least temporarily, and back in The Neutral Zone, above Black Trendline #2-#4, which comes in today at 48.585. That "should be" support on any selloff if The Bulls want to stay in The Neutral Zone.

While yesterday was some confirmation that Thursday's Long-Leggetty Doji Star and Monday's Inverted Hammer were bullish, the intermediate-term still is bearish, below the Kumo (Cloud). 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)



From Friday, on AMZN

"...I saw that AMZN had bounced off support, near 181.64, so I put in a buy order for 1,000 shares at 181.75.

This chart is the reason why my downside target for AMZN was "roughly" 182.00...and is the reason why I wanted to get long at 181.75. It all depended on where Blue Trendline #2-#4 of the Falling Wedge came in, if/when AMZN sold off."

That trendline validation of the bottom of the Falling Wedge (Blue #2-#4) was successful. AMZN broke out yesterday and rallied al-l-lmost got to the top of The Kumo, which came in yesterday at 196.222.



From Saturday, on BIDU:

"The Bear Flag target of 116.02 got MADE in Thursday's trading...The Bear Flag is done. For that reason, it's always a good idea to "take profits, or at least 'some' profits, when targets get MADE." In this case, on short positions."

The Bears had a nice run in BIDU off the May 2 channel breakdown and failed retest in the 147's and 148's, but they "stayed too long at the fair" if they didn't cover their shorts at the final downside target of 116.02 (or thereabouts) from the June 6 Bear Flag breakdown. The Bears got squeezed in yesterday's session and were under pressure to cover all the way into the 127.71 close.

SLW: Bull Flag Breakout

Triple Bottoms should have lows that are fairly comparable, and that's up to the individual analyst to decide whether or not something is, or isn't, a Triple Bottom. In my view, the 29.79 intervening low (white arrow) disqualifies it and is "seeing what we wanna see," but I'm only one analyst and that's just my opinion.

A Triple Bottom should look more like what we saw at the bottom of yesterday's Rectangle in FCX...



The lows certainly don't need to be identical, but in this case, they nearly were. We now know, given today's trading, that the nominal break (a few pennies, down to 47.37) of the Triple Bottom in FCX was a Fakeout/Breakdown Bear Trap since FCX gapped up above the top of the Rectangle at today's open and hasn't filled the opening gap (as of this writing at 2:15PM).



Today's rally in SLW is a Breakaway Gap out a Bull Flag. The high of the Flag is 31.75 and the low is 29.79, so 31.75 - 29.79 = 1.96 points of upside on a breakout.

It's tough to measure these intraday charts exactly, but Trendline #2-#4 was at "roughly" 31.25 when SLW gapped up this morning, so-o...

31.25 + 1.96 = Target: "roughly" 33.21 IN PLAY

33.05 was the low, prior to the gap down on June 9.
33.45 was the last high, on June 9, prior to the gap down, so 33.05-33.45 is next horizontal resistance, and the target of "roughly" 33.21 is right in that price area.

Since the Bull Flag took one week's time to form, one wouldn't expect the target to get MADE in today's session, if it does get MADE at all, but one never knows ;)

FCX: Inverted Hammer; RIMM: Being Hammered

From yesterday:

"All that we got from Friday's session was bearish confirmation."

Still no bullish confirmation of Thursday's Doji Star. The general market and commodity stocks were up yesterday, but FCX was quagmired below 48.80 resistance (Black Trendline #2-#4). The session was a "possibly bullish" Inverted Hammer, but as with Thursday's Doji Star, we need confirmation of any bullishness, beginning with an upside takeout of 48.80.



In the past two sessions, FCX has been showing a penchant for H&S patterns. The first one that emerged yesterday was a H&S Top ( pattern in red), which was nested within a Symmetrical Triangle (pattern in white), and was a "morph" after a broken Rising Wedge formation (pattern in yellow). The breakdown of that Double Nested White Symmetrical Triangle* earned FCX a trip back to the session low.

* (The two patterns, Rising Wedge and H&S Top, were "nested" within the White Symmetrical Triangle, so it was double nested. Multiple patterns tend to give more reliability to breakouts and breakdowns).

The second H&S pattern (pattern in orange) was a H&S Bottom! The neckline was 47.65. The low was 47.40, so 47.65 - 47.40 = 0.25 pts of upside on a breakout of 47.65. 47.65 + 0.25 = Target: 47.90 IN PLAY. FCX rallied to 47.89. That was a score for The Bulls, but unfortunately, they blew it very badly going home, allowing The Bears to send them down for a THIRD retest of 47.40. UGH.



Removing all of those intraday patterns off the morning low of 47.41, trading, essentially, was this range-bound Rectangle. Triple Bottoms in bearish charts (like FCX) aren't rated to hold as support, and technically, this one didn't. At the end of the session, The Bears broke it, to 47.37, but The Bulls managed to pull off a "Cliffhanger" by closing it out at 47.41. Admirable that The Bulls stuck the close, but that's a very weak performance and sloppy, sloppy, sloppy!

The Bulls need to eat some spinach and quit fooling around here. First order of business for them is to go up an knock out the 47.89-47.92 highs of this Rectangle.



MarketBeat
WSJ.com's inside look at the markets

JUNE 20, 2011, 1:18 PM ET
Research in Motion: Bernstein Bails, Another Leg Down

"...Dow Jones reports that Bernstein, which had upgraded RIMM to “market perform” on May 18, has thrown in the towel once more, reducing RIMM to “underperform.” Way back on May 18, RIMM raced to $45.47 as Bernstein opined that “Things Can’t Get Worse in the Foreseeable Future.”

Apparently, the Bernstein crystal ball needs some cleaning, since things seem to have gotten worse.

The Journal’s Heard on the Street late last week noted that RIMM is starting to look unbelievably cheap, trading at less than 5 times expected reduced forward earnings expectations. But looks can be deceiving. “It may look cheap,” the Heard writer says. “But a handset maker that can’t deliver new handsets is hardly a bargain for investors.”

A couple of takeaways from that WSJ piece:

1. When a stock is experiencing a wicked Smackdown and someone says, "Things can't get much worse in the foreseeable future," be ver-r-ry afraid.

2. When a stock is experiencing a wicked Smackdown and someone uses a low P/E ratio to justify owning it, be ver-r-ry afraid.

FCX - Doji Star Confirmation

"There must be some kind of way out of here,"
Said the joker to the thief,
"There's too much confusion,
I can't get no relief.
Jimi Hendrix - "All Along The Watchtower"

I hear those lyrics when I look at this chart. Although FCX put in a Doji Star on Thursday, which "could be" bullish, Friday was a "Gap And Crap" session. The open was 48.62, four cents below the bottom of the Falling Wedge (Blue Trendline #2-#4). In mid-May, that trendline represented QUINTUPLE resistance, prior to the Ascending Triangle breakout and subsequent rally to the top of the Falling Wedge.

On the pullback from 52.70, "former QUINTUPLE resistance at Trendline #2-#4 'should have been' support." It wasn't. It not only wasn't support, we got confirmation from Friday's candle that the trendline is resistance again, when we were looking for some confirmation that Thursday's Doji Star was bullish. UGH.

You see what I mean when I say that these candlesticks have to be viewed in the context of where they appear in the chart and in terms of what kind of confirmation we get, if any. All that we got from Friday's session was bearish confirmation.



In addition to the bearish confirmation that Trendline #2-#4 IS RESISTANCE again, we got bearish confirmation of a Head & Shoulders Top in the intraday chart.

After the "Gap And Crap" opening, FCX sold off to fill the gap, or partially fill it, which was fine. The stock rallied to a new high on the session, poked its head above Trendline #2-#4 resistance (that was fine), but then sold off to a session low, below the gap. Not so fine.

From that low, FCX rallied and formed a Rising Wedge (pattern in white). That' a continuation pattern and the majority of those resolve in the direction of the trend, and we know that the trend is bearish. Uh-oh-h...

The first white arrow was a validation of White Trendline #1-#3, validating it as support. When validated trendlines get taken out, that usually has "some" significance. We can see that it did when the pattern broke down at the second white arrow.

As we see so often, Rising Wedges frequently "morph," or change, into Bearish Head & Shoulders Tops, and that's exactly what this one did (the pattern in yellow). After the H&S Top broke down, The Bears got a brief "knuckle-biter" when FCX rallied back above the neckline. That rally called the validity of the breakdown in to question, but not for very long. At the first yellow arrow, FCX failed at the EMAs (Exponential Moving Averages), which were inverted. The faster EMAs were below the slower ones that succeeded them in the Fibonacci sequence.

The next three yellow arrows were bearish confirmations of "Yes, that neckline is resistance." ... "Yes, that neckline IS RESISTANCE." ... "YES, THAT NECKLINE IS RESISTANCE." (Ms. Market got annoyed with me and started shouting and slapping me upside the head for not shorting those bearish confirmations).

I shouted back at Ms. Market, "I'm not shorting it because I'm looking for bullish confirmations of Thursday's Doji Star, dang it."

Ms. Market said, "Fine! The H&S Top target of 47.64 just got MADE, and you didn't make any money, Melf. Have it YOUR way, you stubborn mule!"

Geez, Ms. Market can be a cruel mistress...

Kidding aside, as hard as I try to be objective, I still tend to see what I wanna see. I watched that H&S Top break down, and simply didn't want to see it. That lack of objectivity on my part cost me some nice $$$, and rightly so. I didn't FOLLOW what Ms. Market was telling me to do and, as we can see, she certainly was telling me loudly and clearly what I ought to be doing at TRIPLE resistance (last three yellow arrows), at that broken neckline. UGH.

What The Bulls need to do here:

1. Take out Friday's high of 48.80, which at least would get FCX back above that extremely annoying (LOL) Trendline #2-#4 resistance, and back into the Neutral Zone.

2. Take out the highs the tops of the Bull Flag (pattern in black) and the Rising Wedge (pattern in blue).

3. Take out the June 14 high of 50.38.

4. Get through Kumo (Cloud) Resistance

Note: Although we got some bearish confirmation on Friday, rather than any bullish confirmation of Thursday's Doji Star, "it ain't over 'til it's over." Look at the Doji Star of May 5 (blue #4 in the daily chart). The next session was a black candle, similar to what got on Friday. The following session was a white candle. That rally ended at Kumo (cloud) resistance, but the stock didn't tank right away

RIMM: Research In Commotion Redux

From Friday morning:

"RIMM traded down $5 in after hours, near $30. That "could be" capitulation, but that was said about the April 29 gap down to $48.50, when the analysts abandoned the stock en masse. UGH."

RIMM was down nearly 50% heading into earnings and sold off 21% on Friday, after the release of earnings. The analysts researching the commotion continued to slash their targets late Thursday, and on Friday. Only one that I saw (there might have been others), Citigroup, finally said, "SELL." I always feel sorry for shareholders who have followed the analysts in situations like this. Oh, my.

This chart sure gives testimony to "Don't fall in love with stocks," and to "Don't try to catch falling knives."

BIDU And NVDA

I meant to follow up yesterday on Monday's "BIDU: Patterns, Patterns, Patterns," post, but forgot since I posted on several others. The Bear Flag target of 116.02 got MADE in Thursday's trading with a little extra on the downside. The low was 114.14.

Remember that when targets get MADE, that doesn't suggest anything about what's next for the stock (or index). It simply tells us that The Bears were successful in achieving that particular target for that particular pattern. The Bear Flag is done. For that reason, it's always a good idea to "take profits, or at least 'some' profits, when targets get MADE." In this case, on short positions.





From May 4, on NVDA:

"I wanted to get long NVDA if The Bulls could have taken out the top of the Falling Wedge in the intraday chart that we looked at yesterday morning. That would have been a "continuation pattern" breakout to the upside, giving some confirmation of the Double Bottom breakout in the daily chart.

Instead, it was gap down, below support? In a word: YUK."

Update:

The Double Bottom was a Fakeout/Breakout. NVDA traded above and below 19.64 on three occasions, rendering the March 28 pivot (19.64) of the possible Double Bottom meaningless.

On Thursday, NVDA broke down below the recent trading range in earnest. In the short-term, the stock is oversold after the June waterfall decline, but we know that "cheap can get cheaper."

Initial resistance on any rally is 16.83 - 17.12, which is the area of the triple lows of the recent trading range. Everyone who bought NVDA in 2011 and who hasn't sold now is holding a losing position. Many of them will want to sell on rallies.

Additionally, rallies to broken support are invitations to the shorts to "sell short at resistance." For an example of that, look at yesterday's chart of US Steel (X). The Bulls tried THREE times to get back above broken support at 43.85, failed on all three attempts, then the Double Top target of 41.43 got MADE.

To establish a downside target in a situation like this one in NVDA, I use the more conservative of the two highs and the most conservative of the three lows, so:

20.44 (high) - 17.12 (low) = 3.32 points of downside.

17.12 - 3.32 = Target: 13.80 IN PLAY, as long as NVDA trades below 17.12. Any trading above 17.12 is a "knuckle-biter" for The Bears.

SPX, FCX, SLW, X, RIMM And AMZN

(Click on charts to enlarge, then click on them again for further enlargement. Use left arrow on your browser to return to the narrative).

The SPX Bulls didn't give it up in yesterday's session and managed to put in another Doji Star on the week. We don't know if it's a "Bullish" Doji-Star at this point. Monday's Doji Star did have "some" upside follow-thru, but the rally failed right at Trendline #2-#4 resistance, then the low of that Doji Star got taken down on Wednesday, so that produced only a "One Day Wonder," rather than a Doji Star marking a bottom.

Speaking of Doji Stars...



...we also got one yesterday in FCX. Again, we don't know if it's a "Bullish" Doji Star unless/until we get some meaningful upside follow-thru, like we had with the three Doji Stars in the chart during the past two months:

(1) The April 18 Doji Star (Blue #2), two days prior to the release of earnings, produced a 6-point rally into the thick of overhead supply from early 2011.

(2) The May 5 Doji Star (Blue #4) produced a three day rally of 2 1/2 points that failed at the bottom of Kumo (Cloud) resistance.

(3) The May 17 Doji Star produced a rally to resistance at Trendline #2-#4 ...a selloff ... then a Bullish Island Reversal candle and an upside breakout of an Ascending Triangle. The total rally from the May 17 close was about 6 points and it also ended at Kumo (Cloud) Resistance.

The low of yesterday's Doji Star was a trendline validation of Black Trendline #1-#3 of a possible Bull Flag. That's a plus for The Bulls, to have established a pattern from which to launch a rally.

If the Bulls can break out of the "possible" Bull Flag, and more importantly, take out Blue Trendline #1-#3, which comes in today at 50.405, that would be a DOUBLE breakout of The Bull Flag and The Falling Wedge. Never any guarantees, but that setup is the kind of thing that can be very helpful, since we still have Kumo (Cloud) resistance immediately overhead, which has shut down the last two Doji Star rallies.



Since the April 11 breakdown of the Rising Wedge, at 44.44, SLW has had five pattern breakdowns (red arrows) and has been a short seller's dream. Yesterday's low of 29.79 got to within fifty cents of the channel (pattern in black) target of 29.28 that has been IN PLAY since May 2. That target might still get MADE and SLW might go lower than that, but given the nature of the waterfall decline off the May 31 high of 37.20, The Bears might want to think about not staying too long at the fair.



After closing below the 43.86 low of the Triple Top in US Steel (X) on June 3, The Bulls made three attempts to get back above it and failed at 43.84, 43.85 and 43.80 (the three red arrows). Off that TRIPLE resistance, the Triple Top target of 41.43 got MADE in yesterday's session, after which I played it long for a snapback rally trade. That $500 gain turned out to be my best trade of the session. I ended up trading AMZN, without much success :(



One of the most difficult things to learn in the stock market is to take losses on SERIOUS breaks of support, like the gap down to $57 on RIMM's earnings in March, or on the gap down to 48.50 in April, when the company lowered guidance.

There are two old market saws, "Don't let a loss turn into a disaster," and "Don't try to catch falling knives." RIMM has been both a falling knife and a very avoidable disaster. "Know when to hold 'em...know when to fold 'em."

RIMM traded down $5 in after hours, near $30. That "could be" capitulation, but that was said about the April 29 gap down to $48.50, when the analysts abandoned the stock en masse. UGH.



The broken flag target in AMZN of "roughly" 182 got MADE in yesterday's session, without me being short. Gr-r-r...






I shorted AMZN at the top of this Rising Wedge and the trade looked golden when the Wedge broke down, but I got one of those "knuckle-biters" in which AMZN traded back above the broken trendline. UGH. I tend to throw those in, not wanting to get caught in a short squeeze if it was a Fakeout Breakdown, so I covered for a $50 gain. At that point, I had been working for 8 hours and needed a break. You can imagine what I said when I came back to my screen and saw what AMZN had done on the downside.

Arrrrrrrrrrrrrrrrrrrrgh!

After I quit screaming, I saw that AMZN had bounced off support, near 181.64, so I put in a buy order for 1,000 shares at 181.75. "They" only gave me 190 shares. Geez, I get tired of that nonsense. I sold the 190 shares when AMZN rallied about a dollar, for a $150 gain. Sheesh.



This chart is the reason why my downside target for AMZN was "roughly" 182.00 on the Flag breakdown in the daily chart above, and is the reason why I wanted to get long at 181.75. It all depended on where Blue Trendline #2-#4 of the Falling Wedge came in, if/when AMZN sold off.

AMZN broke out of a Bullish Inverse H&S pattern on April 27 on a HUGE white candle, after two Bullish Island reversals below the neckline. While the general market has been selling off recently and breaking support levels, AMZN has been pulling back to neckline support, and to support at the bottom of the Kumo (Cloud). It remains to been seen if it will be successful or not, but AMZN is showing excellent relative strength here, thus far.



Gain on the session: $700. UGH.

SPX: Validated Resistance

We knew that the June 3 close of 1300.18 was a confirmed DOUBLE BREAKDOWN of both the Double Top (horizontal red line) and the Falling Wedge (Blue trendline #2-#4). The open (and high of the session) on June 6 was about a point below Blue trendline #2-#4, which was a validated trendline, and down she went. The trendline validation is the green up arrow on May 23.

As we know, when validated trendlines get taken out, that usually has "some" significance. In this case, the significance was the the Symmetrical Triangle target of 1291.18 (that pattern broke down on May 16)and the Double Top target of 1278.40 both got MADE.

After validated trendline #2-#4 got broken to the downside, "former support 'should' act as resistance" on any rally. We can see that the June 14 rally got to within less than one point of that trendline.

Any trading back above broken trendline #2-#4 would be a "knuckle-biter" for The Bears because that would put trading back inside the broken Falling Wedge and put the very short-term outlook at Neutral. The Bears' job after the June 14 close was: (1) to defend broken support (trendline #2-#4) and prove that "former support now is resistance," and (2) eventually to take out the 1265.64 low of the June 13 "bullish looking" Doji Star Hammer.

The Bears accomplished both tasks in yesterday's session.

The Bears clearly are in control at this point. Their next order of business is some kind of test of the March 16 low of the Rising Channel, 1249.05, which still is IN PLAY.

RIMM: Near 2009 Bear Market Low

Yesterday's general market rally was of no help to RIMM. It's down almost 50% from its February high and has given back almost all of the gains since the March, 2009 Bear Market low of 35.05. UGH.

BIDU: Patterns, Patterns, Patterns

(Click on charts to enlarge. Click on them again for further enlargement. Use left back arrow to return to narrative).

BIDU has sold off nearly 25% since its April top. Most recently, it broke down from a Bear Flag, but notice that in February/March, the resolution of that "Bear" Flag was to the upside. These patterns aren't always bearish.



BIDU had a bit of a rough start yesterday morning, but then staged a sharp rally, to White Data Point #1. At White Data Point #4, the stock had formed a Falling Wedge near the EMA's (exponential moving averages), which had turned up. That looked like a nice setup for a continuation of the countertrend rally, so I got long for a trade to the prior high of 123.60, sold there and called it a day.



The Falling Wedge (in yellow in this chart) turned out to be the Left Shoulder of a H&S Top. After that pattern broke down, BIDU retested the neckline and got slightly above it into the EMA's, which had turned down, and failed (white arrow). Both the breakdown and the failed retest were nice entries for selling short.




Quite a few patterns (and trading opportunities) formed over the entire session after the H&S Top breakdown. I should have stuck around ;)

1. Bear Flag (pattern in red) - There were two failed retests of that breakdown (red arrows).

2. Another Bear Flag (pattern in orange) - There were two validations of resistance at the top of the flag (orange arrows), prior to the breakdown.

3. Bull Flag (pattern in purple) - that was a Right Shoulder of an Inverse H&S pattern.

4. Inverse H&S (pattern in white) - both the Bull Flag and the Inverse H&S broke out to the upside, but the latter was a Fakeout Breakout (white arrow). When a H&S pattern breaks out, we don't want to see the low of the Right Shoulder (horizontal yellow line) get taken out (the opposite, if it's a top). That usually spells trouble, but not always.

In this particular case, the Right Shoulder low got taken out, then the breakdown was confirmed by a failed retest (yellow arrow). Uh-oh. Down she went.

Not only were there a lot of patterns in the intraday chart, but there were quite a few validations of resistance, and validations of the breakdowns. Those kinds of confirmations present nice trading opportunities. If we're not out gardening ;)



Gain: $1,200.