The Coming Spike?

Markets have been steadily climbing, without hesitation but does that mean we are do for a correction? Maybe, or are we about to just plow through any correction and blowoff the bull market in the coming weeks? Chart one shows the Elliot Wave Theory within a channel trend. The signals are pointing to a weakening pattern, but prices can still move higher as the technicals continue to weaken. The rising prices are unsustainable long-term, but in the short-term we can see a blowoff top that would signal the end of "The Great Bounce Of 09", so some strategic planning and execution are what matters - defining a plan is a must to reduce risk.







And what does a simple calculation from Technical Analysis 101 mean for the market? Based on the Head and Shoulders Pattern calculation[(neckline - head) + (neckline) = Target], so the target for the Dow is anywhere between 11500-12500 (see chart below) - I use this large area in the Dow loosely because anything is possible. This is where your execution and plan comes into affect - defining where you want to be for the next 6-9m is crucial in the coming weeks. Liquidation will occur in this area which will increase volatility - it's already showing signs in the VIX.




The only thing one can do is take a measured approach to your risk appetite. You can start to diversify out of stock and into cash or you could take on some hedges by going short the areas of the market which you believe will fall, faster and further, which would hopefully offset the losses from any part of the portfolio that is long. The coming week(s) are going to be one for the record books, again!

Good Trading!

MU - Channel Break.

2 charts: one story - many endings.

A long-term channel break occurring in MICRON TECHNOLOGY(NYSE: MU) could bode well for itself in the next bull market. A channel break, as shown in the first chart, is the sign of a reversal of a trend and direction of the channel. The trend has been down for Semis since 2000 as you can see in The Other Commodity post. If you believe we are to emerge from this crisis stronger, then high-tech manufacturing could be our new shop floor.

If we look at the second chart, which shortens our time frame, we can see a potential cup and handle formation forming. Cup and handle formations are traditionally continuation patterns, and not long-term bottoming patterns, but the channel break could be of more importance in determining which way this stock should go from here.

And since we are in the midst of the unfamliar, a stop loss should be placed at around 2.50 which would break the pattern and cause for more consolidation or continuation of the downtrend.