By: Pej Hamidi
A technician, or anyone looking for timing clues on their trades, looks for areas where multiple technical data points converge. This is what the “quants” do, except they write a program that does it for them, technicians look for them visually. Either way, it’s the exact same principle at work. A congestion of data points will attract prices like a magnet. And a convergence of major technical data sets acts as a major pivot point most of the time. In the case of State Street (STT), I’ve included a weekly chart to show the panic low. Remember, the scaling is logarithmic otherwise we wouldn’t be able to see a thing. The RED lines are Fib. Retracement lines from the rally off the low to the high. $40 was a key level, and it seems a bear flag has started to form over the past several weeks. The gray lines are Fib. Projection lines measuring the entire rally and pivoting off of $40.
I wouldn’t take a position just yet without a little more digging here, but if you take a look at the daily chart, you’ll see a very bearish candlestick pattern, a hammer followed by an engulfing bar, or the “Dark Cloud Cover”. I swear I don’t make these names up. But they do make me laugh sometimes. If I had a desire to get short this stock, I would look to enter somewhere in the upper range of Friday’s bar. Around Thursday’s high of $46.40 with a quick target of $46 to get a little feel for how the stock trades. Maybe re-entry around $46.20 and see how it starts to play out. Maximum 2 units until the trade is validated, at which point maybe a third and fourth unit can be added. I’ll be watching it and will try my best to share the pivot points.
Although there are way too many confluences of technical data points to list, my favorite is the measurement of the bear flag is likely giving us the 2nd point in an uptrend connecting the March ’09 low, assuming everything else is correct of course. Now, if my analysis is entirely wrong for now, meaning the stock has more upside room to go, then I would get long for a ride to $48.60 – $48.90. ENTRY on the LONG Trade is a strong break above $46.25, which will show the bulls maintaining control. If it’s the bears, then target’s are 40, 35, and 32. Those are approximations, use your own numbers so we don’t get clusters of orders. On the upside it’s $48.70. Many “possible scenarios” but a plan for every single one. Think each trade through and imagine each possible scenario, so that when one of them manifests, you’re prepared.