Tech Won't Lead Markets Out of Bearish Pattern 12 comments
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Many investors thought tech might be our leader out of this lateral basing pattern the markets have been sliding through the past few months. But that doesn’t appear to be the case, as stocks like Apple (AAPL), Google (GOOG), and RIM (RIMM) were all up roughly 1 percent for the session, they all printed inverse hammers. This means they were unable to hold big gains they achieved midway through the session. This is very bearish action considering the momentum these stock had generated over the past several session with potential breakouts of their respective triangles.
The rest of the market was on a mission to reach for the upper bounds of their triangle, but their 20/50 day moving averages were an obstacle that they simply couldn’t overcome. This is producing lower highs as we continue on this lateral journey which is indicative of more and more buyers simply giving up. Buyers are losing and the sellers know it, just biding their time. The longer we continue this long lateral journey, the harder we’re going to break out of this pattern, and right now, the bias of the break is down. It’s becoming more and more likely that we’ll see those November lows the more the bulls get rejected.
AAPL was on the verge of a breakout peering about its downtrend line. Other stocks and indexes at least had the excuse of resistance provided by their 20 and 50 day moving averages, but AAPL had left those behind days ago. No excuse there, the Bulls just couldn’t bring it. Perhaps it’s not fair to single out just AAPL, as this was pretty much the same story with the other leaders of tech. But what does fair have to do with anything in the markets? Nothing.
Amazon (AMZN) was a bright star this past week with its outstanding earnings, and breakout from an inverse head and shoulders pattern. But yesterday it couldn’t catch a bid, in fact it printed a bearish engulfing candle which erased all of the previous days gains. This is not the type of behavior you would expect from a stock with such a strong breakout pattern, with the wind at its back. With this action, it’s highly likely that AMZN will backtest the neckline support it gained with its breakout.
If AMZN doesn’t hold its breakout, I would not hold out much hope for the rest of tech, and thus the leaders will no longer be leading. Will there be any stock left standing, ready to take the reins should the leaders tank? I don’t see anything that holds promise. So watch these leaders closely over the next few days, they’ll be the tail that will wag the rest of this dog market.
Stock position: None.
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This article has 12 comments:
Is it because they came out with the wizbang gadget of the century, the kindle (the one that EVERYONE is buying but nobody seems to own)?
But the actual trend for the past 10 days or so is up. And it doesn't matter if you think that looks more like a candle or a hammer or whatever. (I'd go with 'hammer' too, if I were you, it sounds worse.)
On Feb 05 02:43 PM A.S. wrote:
> Zach, please stick to your promise and DISAPPEAR for good once AAPL
> passes 100, since u predicted it will NOT trade over 100 in 2009...so
> in the next few days, you'll be lost in the wilderness !!
also, don't come back in June when AAPL 50 day crosses the 200 day MA above 130 and tell us that signals a big move ahead of 50% to 180, I already know that myself !!
On Feb 05 03:54 PM Zach Bass wrote:
> You are delusional A.S. Never made such a promise. Besides, I would
> love it if AAPL gets above 100, I just think it's gonna be tough,
> and if it does, it will be short-lived in 2009. Things could get
> better by years end, but they'll get much worse before they get better.
>
>
> On Feb 05 02:43 PM A.S. wrote:
You're boring us to tears with the schizophrenic prognostications.
This is still a consumer DISCRETIONARY product company, don't forget. People do not NEED expensive iPhones nor iPods, nor powerbooks, nor macbooks. We are in a serious recession here; unemployment is growing. The longer this lasts, the less people will buy expensive toys, when cheaper ones are available (ie: Centro, Sansa, Dell/HP PCs). Anyone can buy TWO of the latter lot and still have change left over compared to purchasing ONE of Apple's counterpart products. get real!
and brewer, you should know what an inverse hammer is.. you have posted here a few times.. When it occurs during an upward trend, it means the market is going to turn or reverse.
It is a BEARISH REVERSAL pattern in candlestick charting language, and the trend the last 6-8 trading days for AAPL is up.. therefore, the appearance of the hammer (or Shooting Star as it is correctly known as in original Japanese charting ) indicates that the trend is quite likely to reverse or turn DOWNWARD. Apple is hanging on to the current levels ($80-$100) by their fingernails, literally. They are in a declining wedge pattern, and today, we saw a Shooting Star put up. BAD NEWS!
If you are long AAPL, you might want to watch the early action Monday, preparing to lighten up when the confirmation signs appear.
As far as tech leading the way, Solar and wind are just getting started. Nuclear with the new pebble reactors. Changing from oil to Nat Gas plus the home filling stations. Explosive growth of broadband and sat nav plus, well, tech will explode after 2010 and in a good way.