Seven Charts, Pulled out of a Hat

Some folks like to almost dictate your every move. They believe that, if the S&P 500 -- or equities in general -- are lower when the rooster goes cock-a-doodle-doo, you should be gobbling up longs like it is Thanksgiving dinner. But really, shouldn't we all just listen to price? Headlines aside, price often tells us everything we need to all. Sometimes it is after the fact, as an unexpected piece of news can mean what that price's message yesterday is useless today -- but, fortunately, with a new day will come new information. In any case, let's see what they charts tell us about price. I took an indiscriminate group of charts from across many different industries: financial, insurance, housing, consumer goods, municipal bonds, steel and technology. The list included Owens Corning (OC), Citibank (C), Kellogg (K), Genpact (G), OneBeacon Insurance (OB), BlackRock Muni Income Fund (BLE) and Reliance Steel (RS). The group is fairly split between bearish and bullish charts, but not in the manner one may have thought. The first four are more bearish, while the last three are bullish. A quick glance at each tells us why. Citibank (C) -- Daily Source: StockCharts.com View Chart » View in New Window » Citigroup is setting up with a possible head-and-shoulders pattern at these levels. A close under $47.80 would set up the stock for a target of $43. Ideally, we'd see a big push on volume when the price breaks. Banks are strong right now, so there is no trigger yet, but Citi is one to watch. Owens Corning (OC) -- Daily Source: StockCharts.com View Chart » View in New Window » Owens Corning is a name that had already been in my trading account on the short side this year. Housing obviously benefits from the Fed's quantitative easing, and tapering could hold back names like Owens Corning. The stock is in danger of falling out of this current trading channel, and that should set up a move into the $35-to-$36 area. Kellogg (K) -- Daily Source: StockCharts.com View Chart » View in New Window » Kellogg has been coming up over and over again in the short scans, and it's a name I mentioned along with Tyson Foods (TSN) last week. The price seems to be creating an inverse cup-and-handle here with a $55 downside. After the run Kellogg had earlier this year, it would be amazing to see the move entirely given back. Genpact (G) -- Daily Source: StockCharts.com View Chart » View in New Window » Genpact is a new one on my screens, and one of the most bearish charts I've seen recently. The stock threatening to break not only under this most recent trading channel, but also under a much larger head-and-shoulders pattern. The downside on a close below the support bar is $17. OneBeacon Insurance (OB) -- Daily Source: StockCharts.com View Chart » View in New Window » OneBeacon represents the flip-side of the above trading channels. For this stock, the price is trying to break out above a recent trading channel, rather than fall beneath it. This channel actually looks a bit more like a flag to me. As long as OneBeacon is trading above $14.50, I'll continue to like it on the long side. BlackRock Muni Income Fund (BLE) -- Daily Source: StockCharts.com View Chart » View in New Window » BlackRock Muni is one of many municipal income funds that have gotten taken to the woodshed this year. This looks about ready to change, as the chart appears like a flag formation, or even a much larger inverse cup-and-handle pattern. Where Fed tapering could hurt munis, an Owens Corning holding could well offset BlackRock Muni -- and the latter offers a nice dividend, to boot. A trader would have to be willing to give this one a lot of room on the downside or to keep a stop very, very tight. There really isn't anything in between. Reliance Steel (RS) -- Daily Source: StockCharts.com View Chart » View in New Window » Reliance Steel is at the bottom of the list, but I like steel as a whole. I don't think that has been a secret. This stock looks to be pushing higher out of a falling wedge pattern, which makes for a nice bullish consolidation pattern after a recent push higher. As long as Reliance Steel remains above $71, I'll prefer that you stay on the long side looking for $80. It's ironic that seven charts, chosen in a somewhat unsystematic way, can tell us a lot about price. Hindsight and headlines can be challenging. Ironically, you can take these further. When you start finding patterns, as in this case -- which shows that weaker industries now have the better setups -- you can expand it out, as it usually means so much more. I like taking scans and looking for strength, and then pulling all the charts from that sector or industry. Sometimes a chart that shows up on a scan isn't the best one I'll find. It is that extra effort that makes it worth the time.

Seven Charts, Pulled out of a Hat

These charts -- half bullish, half bearish -- can give us a lot of insight into price.

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