Parts of the market have done well since the August and September bottom, but Aetna (AET) did not make the cut. AET looks like it will trade lower.
Take a close look at this chart of AET, above. Look at the June to July period. In June, AET gapped to the upside. Prices then hung in the $130 area before another gap occurred. This second gap was to the downside in July. Volume was heavy on this bearish gap and prices have continued lower. Chartists call this pattern an island reversal.
Think of the price gaps as water and you should be able to see the pattern. We can also see the downward sloping 50-day moving average, which is about to cross below the slower 200-day average. This crossover is commonly called a dead cross. Yes it is a bearish signal.
In this longer-term chart of AET, above, we can see that prices are below the 40-week (aka 200-day) moving average. Also the round number of $100 is a key level on this chart. A break below $100 for AET is likely to prompt further losses towards the next support area. Traders should avoid the long side of AET.
Editors' note: To better serve Real Money readers and present our content in the best possible way, we've revised the format for Bruce Kamich's chart analysis. Bruce will continue to analyze multiple names and sectors throughout the trading day, but we will bundle these into fewer stories that are updated regularly in one story. So please look out for the latest from Bruce to see what's new and catch up on what' you've missed. And we welcome reader input, so feel free to add your thoughts in the comments section.
Nov. 12, 2015 | 11:45 AM
Devon Energy Will Rally, Buy the Dip
- Overhead resistance does not become a factor until we get back to the $55 to $60 area on DVN.
When we shop in an old brick and mortar store we like to get a bargain. Shares of Devon Energy (DVN) are back to their 2009 lows and could be a real bargain here. It's worth a look.
In this longer-term view of DVN, above, we can see the 2006 to 2007 run-up in DVN as energy prices soared -- remember gasoline prices near $5 per gallon -- and then the plunge to a low in 2009. With DVN back near its 2009 nadir, we think shares of DVN are worth a price scan.
This short-term view of DVN, above, shows a 50% retracement this year -- pretty dramatic -- but prices are bottoming since late August. The On-Balance-Volume line is rising, which is bullish, and prices have rallied above the 50-day moving average while the slope of the average has turned up. Also note the bullish divergence this summer between the price action and the momentum study. Traders could buy this current price dip for DVN and then use a sell-stop under $42 for now. Overhead resistance does not become a factor until we get back to the $55 to $60 area on DVN.
Nov. 12, 2015 | 10:55 AM
Whiting Petroleum Has Low Downside Risk
- A rising OBV line suggests that the stock is under accumulation.
My charts are showing an early bottom pattern in Whiting Petroleum (WLL).
WLL has lost ground this year, but you need to focus on the last three months of price action. WLL has traded sideways the past three months, showing an improving On-Balance-Volume (OBV) line, which tells us that volume has been heavier on days when WLL has closed higher. A rising OBV line suggests that the stock is under accumulation. Also WLL has traded around the 50-day simple moving average.
This longer-term view of WLL, above, shows the major retracement in prices. Prices and the trend on this time frame are still down and below the declining 40-week moving average. One bright spot is the improving Moving Average Convergence Divergence (MACD) oscillator in the bottom panel. We see little downside risk in WLL from current levels and traders could consider going long WLL in the teens before it grows up.
Nov. 12, 2015 | 10:30 AM
Go Long on Hess as It Dips Below $60
- Traders could go long at the market or on a dip to $60.
Hess (HES) looks like it has bottomed on the charts and is poised for further gains into the year-end.
In this chart of HES, above, we can see a bottom pattern since July. In August and September, HES made lower lows in price, but the momentum study made an equal low, giving us a bullish divergence which foreshadowed a rally. Prices rallied up and over the 50-day simple moving average, and now the slope of the average is positive.
This longer-term view of HES, above, shows that it has made a 50% retracement and is now poised to cross above the key 40-week (aka 200-day) moving average. Also, we can see the trend following Moving Average Convergence Divergence (MACD) oscillator is bottoming too. Traders could go long at the market or on a dip to $60, if available, and use a sell stop below $56 for now.
Nov. 12, 2015 | 09:27 AM
Add Angie's to Your List
- ANGI should open sharply higher after rejecting the IACI bid; we would book profits.
Earlier this month, we highlighted the base pattern on Angie's List (ANGI) and recommended buying a dip or strength over $8, both of which happened. With the news this morning that the company had rejected a bid from IAC (IACI), ANGI should open sharply higher, we would book profits.
Jesse Livermore, the Great Bear of Wall Street, is known to say that whenever you get an unexpected "gift horse" in the direction of a trade, you should take it.
