Good afternoon. I’m going to give a brief commentary and get to a highly requested chart that is running today. Some of us in the live chat are in it as well. First off, let’s quickly cover what is happening today.
We are seeing a weak day with some small areas of strength. Market breadth is mostly negative and we are mostly red in all sectors. I have been following high volume stocks on the day and moving in and out of them quickly for my main activity lately. Following those near or breaking their 52-week highs seems to be one of the best bets lately, as finding a stock with existing strength on a red day is seeing additional buyers these days.
The jobs report was negative this morning and the unemployment rate only decreased because they stopped tracking 650,000 people who gave up searching for jobs. Do not be fooled into thinking the rate went down meaning anything positive about our economy, unfortunately.
Pundits on CNBC are creating a buzz around this “death cross” where everyone is now a technical analyst. Pay them no attention as this “death cross” is more Hollywood than reality. If we go down, this “death cross” will be the supposed reason, even though it has nothing to do with anything. Look up the history of it and you will see it is useless buzz created for ratings by non-technical analysts.
Traditionally speaking, the first market day after the holiday weekend is a strong one. I will be hopeful that the bulls gain some traction into the final hour and a strong open on Tuesday but many have already left for the weekend so I will not bank on it. Now onto the most requested stock of the day.
Orient Paper (ONP) (5-day chart, 5-min intervals)
A/D line: Sharp upturn, very bullish
ADX line: Bull phase with the trend strengthening as the ADX (yellow line) moves over 50. That indicates a very strong trend.
MACD: Signaled buy earlier and it fighting back and forth now. This is one lead indicator to watch for a trend change
CMF (15): Very strong almost all day, above .5 is very bullish
OBV: Confirmed all moves in the PPS, normal
RSI: Over 70 is considered overbought however that does not mean the stock will fall. I’d be reluctant to add when the RSI is this high though
Analysis: ONP is a stock which was hammered recently. This was due to a supposed bogus report that fueled significant shorting. Now that the panic has subsided and this report is considered bogus, the buyers are quickly coming back in. The nice thing is we are seeing volatility, so the members of the live chat have been using a core position to trade around to lock in realized gains and buy back on dips. I expect us to be over $8 by next week, if not today. I have been selling some small increments when we are up and buying back on dips to maximize my profits when it’s all said and done. Due to the shorts covering, we could even shoot up higher than previous levels, but be ready to sell as I would not expect levels higher than $8.33 (the closing price before the panic) to hold too long. It is safer to take your profits and move on when we move over $8 than to hold too long. Traders should be having a lot of fun in ONP today but be wary that some will leave around the final hour. If not enough bulls are around to eat up their shares, this could put the final hour towards some extra pressure. I look forward to it and will embrace cheaper prices but will look to exit more of my position before the final hour, so I can buy back more shares and profit once again.
Watch the A/D line as one of your lead indicators on when the trend might reverse. If it turns down sharp, you can expect the bears to gain some traction. The ADX trend should be broken soon afterwards, if not before the A/D line turns down, therefore making the ADX another lead indicator to watch closely.
Hopefully, this information provides you with a better understanding of technical analysis. As always, do your own homework to see if you agree and join our live stock market chat-room, if you have questions. Good luck out there.
Mike
At the time of publication, Kudrna was Long ONP but positions may change at any time.
Random News: For you speculative players, watch ATNP.PK for some news on Tuesday. I am a buyer on weakness today and looking to sell on the news next week. However, since my cost average is very low, it is less risky for me than starting a new position now, so keep that in mind.
