While the bond traders will be sleeping in tomorrow, equity folks still have a market to contend with during the day.
It's been a fantastic two weeks for the bulls. We're starting to hit areas on some indicators for the daily charts where the continued climb becomes difficult without at least a short rest. Still, the weekly and monthly charts aren't in the same situation.
One very strong setup here is Time Warner Cable (TWC). This sector continues to see its share of rumors and even some consolidation, but that's not my interest. I like the technical setup.
The weekly chart of TWC is far and away the most compelling. After a strong run in the first half of 2015, bulls have been consolidating the big move. The bull flag pattern on the chart is close to releasing price to the upside once again. The upside break here should trigger on a weekly close over the $190 level, although a more conservative trader may wish to use a close over the 52-week high of $193.40.
My thesis would be to use a close above the solid black resistance line. I don't believe the $193 area will provide much resistance especially since very little volume trading has occurred in that area. The stock has performed well over the next six to eight months after the Commodity Channel Index (CCI) bounces back from an oversold level of -100 or below. We witnessed that last in late September. While this doesn't always mean straight up in terms of price, it should mean the $171 area is our expected low. So, any weekly close under $170 would mean not only the bullish thesis is dead, but we should be looking short here.
The Relative Strength Index (RSI) remains strong and it has consolidated along with price. I would only be concerned here if we fall below 50. True, we do currently have a lower high, but with the huge move in June the 13-period look here is a bit skewed as far as lower highs are concerned. Instead, I would just focus on the 50 level. Lastly, the On Balance Volume (OBV) is trading above the 21-week simple moving average (SMA). The stock has performed best when this is present. Seeing the OBV fall under the SMA would be another big yellow flag.
The weekly action looks a little more like a blip on the monthly chart. Going all the way back to 2012, it is clear how strong TWC has been in terms of consistency and performance. A very clear support line has been created. This support line reiterates the importance of the $170 level and how the bulls must absolutely hold this line or performance could get ugly. That being said, we have a stock not only trading above the important support level, but also consolidating with a descending triangle pattern here. I would anticipate the support base of the triangle will meet with the support line by the end of 2015. This will become a huge level that I wouldn't want to see broken.
The Mass Index remains in a strong bullish indication, but this too needs to keep rising. My fear is the Mass Index falls back through 26.50 or 26 as the two support levels come together. If price falls through while the Mass Index retreats, the conclusion would be the big bullish move is now over. Now that we have the concerns out of the way, note none of this has occurred. We still have a very strong RSI that hasn't broken below 50 since late 2011. The Chaikan Oscillator has been in strong bullish/buying territory for as long as the chart goes back, with only a blip in late 2011. The upside target on a monthly close over $190 is $210 minimum with $220 expected. The ultimate high side coming in around $230. Realistically, I find the $210-$220 target by the latter half of 2016 to be the most realistic.
Time Warner provides a very clear support level of $170 that we can use to maintain our bullish thesis for either a weekly or a monthly view. Option players can simply use that strike to define risk, whether it be through long calls or long stock with a married put. Stock-only players can use the same level with the understanding they will incur gap risk or time risk if they are using a closing bar level. In other words, if you are trading based on a weekly or monthly close and the stock falls below $170 before the end of the week or the month, then you still have the remaining days (time) as risk for further downside. I certainly prefer the options approach for this name if we see a triggered breakout this week or this month.