Technical Profiles of 8 Key Stocks: AIG, BIDU, CAT, CELG, DRYS, GS, IBM, SKF

 

Fibozachi

AIG (American International Group)

Amidst a rather comical 1-20 reverse split effective 7/1/09 and ever-present levels of insane short-term volatility, AIG has responded exceptionally well when profiled across a few of our custom indicators, which allow us at Fibozachi to rather confidently diagnose the technical profile of its daily chart.  As you can see on the chart below, our FIBs (Fibozachi Inflection Bands™) have provided nearly-perfect support and resistance levels during each of the sharp rallies and sell-offs that have occurred over the past year and change.  Price recently closed below the Lower Red FIB on 10/19, kicking off a strong sell-off that, despite last week’s rally, has still failed to close above the Upper Green FIB and the downward sloping trendline of resistance.  This current profile offers us one of the simplest and most straightforward bilateral trade setups.  Where a close above the trendline and the recent high of 40.09 would trigger a long swing position and a close below the support shelf that surrounds 32.66 would serve as an extremely strong indication of further weakness to follow and a likely a re-test of the area surrounding 25.

BIDU (Baidu)

While we have not paid it any attention since prior to its last earnings call, when we wrote “Baidu (BIDU) Possible Top: Long-Term Elliott Wave Count”, BIDU appears to be at a similarly high probability juncture of opportunity.  It has retraced much, much more than we would have anticipated after management forecast an allegedly one-time deceleration of growth during its last earnings call, supposedly due to a restructuring of order and account processing controls, after which BIDU was taken out back behind the woodshed and slapped silly.  

After registering an all-time intra-day high of 439.90 on 10/26/09, BIDU closed the day at 432.97.  It re-opened on the morning of the 27th with a sharp gap lower to the tune of 17.84% and fought back strongly to close down just 11.39%, which was 63.85% of the day’s range from high-to-low.  At yesterday’s intra-day high of 438.38, on 11/11, Baidu had sharply retraced 85.35 of the 86.87 points that it had shed between the all-time intra-day high on the 26th and the intra-day low of 353.03 on the morning of the 27th; in other words, it has sharply retraced 98.25% of that one-day plunge.  

BIDU must now register a new all-time high in order to shift its chart from a neutral-bearish posture back into a position of bullish intent.  Without plotting a new high, BIDU remains caught within a very wide horizontal channel that is now pockmarked with a series of lower lows and, so long as the 440 level holds, lower highs.  

More specifically: the support trendline that connects the lows of 7/08/09 and 9/01/09 has been repeatedly broken intra-day while price has continually managed to pop back above it into the close.  The last two Doji days witnessed failed attempts at a new high and serve to signify extreme indecision between bulls and bears alike.  In addition, the closing highs of 10/23/09 and 11/11/09 just happen to be exactly 13 Fibonacci days apart and will likely mark a high-to-high time cycle.  A close below the rising lower trendline is now necessary to signal an unabashed shift within BIDU’s profile from being neutral-bearish to exhibiting outright bearish intent.

CAT (Caterpillar)

CAT is an issue that was relentlessly beaten and battered during the 17-month spiral that was Primary wave 1 (circle).  From its high of 85.96 to its low of 21.71, CAT clawed all the way back to a high of 61.28 on 10/20/09; falling just 14 cents shy of the 61.8% retracement level at 61.42.  A closing break below the pair of trendlines that connect CAT’s recent swing lows will serve as a clear warning sign to long-term institutional holders.  A pair of large pronounced gaps, which surround the 23.6% retracement level at 36.87, should act as magnets for price action once the current upward trend fizzles and momentum grows increasingly bearish.  If CAT were to somehow muster the strength for one last push higher, the area surrounding 66.00 would likely provide stiff resistance.

 

CELG (Celgene)

The last three days have gone nowhere while finding support at 53.23, 53.23 and 53.25.  There remains an open gap at 48.40 - 49.74, which beckons to be filled.  A single close below 53.23 ought initiate a move down towards this gap.  Conversely, should CELG somehow muster the strength to surpass 54.89, it could move higher up to the 57.00 level where it would then test a previous swing high at 57.45; similarly, the BBH (Biotech Holders ETF) looks rather weak as well.

DRYS (Dryships)

The last 7 months have formed a triangle that is rapidly approaching its apex. And while intra-day prices popped out above the upper trendline, DRYS could not muster the strength to close above it.  The lower trendline that has had three separate touches will provide support tomorrow at 5.85 and continue to rise approximately 1 cent per day.  A break of this trendline and a close below 5.66 will be strong initial signs that Dryships has begun to take on water and may once again capsize.

During the final throes of a bull cycle run of at least Intermediate degree, traders will often turn back to the “fallen angels” of the prior Bull.  As per DRYS, we at Fibozachi can think of no greater exemplar of such an IBD-esque momentum driven trader’s football.

GS (Goldman Sachs)

Goldman was also early to bottom back in the Fall of last year, putting in a closing low on 11/20/08.  Fast-forward exactly 233 Fibonacci TDs (trading days) to 10/14/09 and what do you get: its upper extreme print for the entire 233 TD cycle.  And what does its chart look like today?

Answer:  On 10/30/09, GS cracked support at the lower trendline of its trading channel and has repeatedly failed to reclaim it over the past week and change.  Should Goldman continue its downward slide, two likely price targets would come into play around horizontal shelves of support at 157 and 135.  While we do not have recent figures to report, GS has often served as the single best intra-day proxy for the SPY, with an intra-day correlation factor (R²) that has reached as high as .96 to .98 during extreme trend days within Primary wave 1 (circle).  Assuming that this correlation factor has subsided in recent months, should GS once again begin to exhibit such a high correlation with the SPY, it may serve as an effective warning sign that the initial brunt of Primary wave 3 (circle) was truly upon us.

IBM (International Business Machines Corp)

IBM is a key member of the ‘Blue Chips’ who bottomed last November rather than with the rest of the secondary indices and OTC (over-the-counter) issues this past March; effectively underscoring the most structurally critical individual issues within the variously weighted frameworks of the DJIA, NDX-100, S&P 100 (OEX) and S&P 500 (INX).  Please see our last article, "Comparing the 6 Primary US Equity Markets, VIX Fibonacci Cycles and the US Dollar at a Critical Juncture", to learn more about why the key components of the DJIA and NDX, such as XOM, WMT, MSFT and APPL, may be the latest in a long-line of ‘Nifty-Fifty’ type issues that the general public has herded themselves into under the alleged notion of collective ‘safety.’  The exact closing low for IBM and many other key issues was 11/20/08, which is … wait for it … exactly 233 Fibonacci TDs (trading days) from its upper extreme of 128.61 on 10/14/109!   All good and fine, but what does IBM’s chart look like today?

Answer:  The recent upper extreme of 10/14 fell just short of the all-time high of 130.93.  The following day’s Hanging Man candlestick pattern preceded a sharp gap that has filled in the interim.  Today, November 12, marked the 21st TD (trading day) since that high when price action registered a Shooting Star candlestick pattern, which is a medium reliability reversal pattern that serves as a clear shot over the bow for IBM longs.  If price cannot penetrate the 130 level, then the bears will pounce and likely drive price back to a retest of support at the rising trendlines drawn below.  In due time, we at Fibozachi believe that IBM, which enjoys the single greatest weighting within the DJIA’s divisor, will fill its pronounced gaps at the 111 and 104 levels.

SKF (UltraShort Financials)

Yesterday found support around the 23.25 level, which has recently provided very firm support.  One extremely important clue that a low of significance may already be in place is that 10/14 and 10/15 formed a picture-perfect Island Reversal chart/candlestick pattern.  This extremely rare pattern is an excellent reversal pattern, which almost exclusively occurs at extreme tops or bottoms.  The SKF’s all-time-high prints across 11/20/08 and 11/21/08 developed an Island Reversal pattern, albeit rather sloppy, with both real bodies gapping despite having overlapping shadows.  

We at Fibozachi have also identified another noteworthy Fibonacci time cycle that has plotted without fail for three consecutive months.  SKF, or the ‘skiffer’ as it is affectionately called across the prop desks which play it, has notched its last 3 swing highs on the dates of 9/02/09, 10/02/09 and 11/02/09; pretty complex stuff, right?  These progressively lower highs have each registered approximately 21 TDs (trading days) apart, marking crisp and thus-far reliable Fibonacci cycles of time.  A close above 28.02 will only be the first step in a rally process that must see two consecutive closes above 31 in order to steer the skiffer’s profile toward clearer waters and markedly bullish intent.  

Disclosure: no current position;
anticipate becoming long various puts on the issues mentioned above
once a multiple confluence of proper trading signals confirm themselves

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Comments

[Anonymous]

Exactly true. Who knows what the true market value of any stock with all the manipulation and fed intervention?I am almost sure that if tomorrow the FED announces that it is stopping every and all programs it has,the market will drop by 20-50 %(if not more). And if you go long based on that theory alone,you don't know if your stock is not going to open up 10-17%lower as happened with many darling stocks(rimm and bidu to name few),simply because market makers ran of inventory and they want to restock on them. And if you short those ailing companies,you will have your but kicked by the same big players when your turn comes(cit,aig to name few). Best thing?forget greed for a long time. Watch from a distance and enjoy the show. Or buy a farm somwhere with no electricity(lol)(Jim Rogers recommendation without the electricity part)...........

[Anonymous]

Guess what? all that analysis is of zero value as long as Government F*cking Sachs is out there raping and pillaging at will with Geithner and Bernanke standing behind them.

As long as GS and JPM exist, the markets will be a disfunctional farce that destroy real capital by funneling it all into the banksters' accounts.

The current situation is simply beyond grotesque and all I can do is hope that these scumbags ultimately get gang raped by all the tribes in africa.

[Sinsecato]

Thanks for another good article.  I especially appreciate the objectiveness and specificity of your posts, and the way you put aside your longer term opinions and rely on the charts to lead the way. 

I would be interested in hearing more about the intraday R² for GS that you mention.  Has the correlation in fact subsided, and if so is it beginning to strengthen again? 

[Fibozachi]

Thanks Sinsecato! Will get proper figures to update that metric and letcha know asap.

On a side note, Corey Rosenbloom, CMT, of AfraidtoTrade, just put out a great piece entitled, "A Look at Declining Volume on Five Prior Market Tops"  ..  it's a very good read and an even better example of rigorous TA; highly suggest checking it out.

Hope everyone had fun at the casino today.  Have a great weekend and, as always, thank you for your time !!

[Anonymous]

Vineet..your Inglish is quite Endian

[AR]

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[Anonymous]

take it elsewhere vineet

[zarrmax]

spam

[stedanrac]

 Great piece, thanks. 

 I would be really interested in your thoughts on the IWM Russ2K charts. 

[Fibozachi]

Thank you for your kind words stedanrac (walter); certainly do appreciate them. 

Our previous ZH piece, "Comparing the 6 Primary US Equity Markets, VIX Fibonacci Cycles and the US Dollar at a Critical Juncture", centered on the Russell having been the undisputed leader between the six major domestic indices over the past 8 months of this reflationary rally. 

Very quick and sloppy, just taking a look at price action … using a basic 'candlestick with trend' chart of the IWM overlaid with Fibonacci EMA's  .. can’t take a picture right now on TS but will certainly throw one up here for you later after we shut down.  IWM just failed at the daily 55 EMA with a kiss of its wick upon it. The weekly Fibonacci EMA's are exceptionally pronounced, with real bodies refusing to be hugged by each long-term EMA like Paul Schaeffer at a strip club. 

If there is a close beneath the 377 EMA @ 57.34 then the area surrounding the real bodies of 7/27, 7/28 and 7/29 as well as 8/17 and 8/19 could come into play … first target for continued weakness would be the upper wicks of 8/07 and 8/12, which was also the spot of a Tweezer Top and Doji day on 8/13  ...  the lower end of that initial range would likely be the support shelf of the filled gap between 8/20 and 8/21.

The market is clearly telling us that this level is important based on how many times price action has inflected across each side of it.  There are also adjacent wicks within the zone from 8/31 -9/01 and 9/04 - 9/08 as well as the low of 10/02.

The daily 4181 EMA, which is sync with this zone, is currently flat-lined at 57.74.  Without being any more tedious than I already have, the 6765 EMA is at 55.99 and if doesn’t hold then my guess would be that we straight test the 10946 @ 54.72 before finding true support and seeing a strong, tradable bounce.   While not intended to be actionable with ten minutes of crappy analysis, still hope that helps a bit in terms of how to look at price action and use a confluence of candlesticks to gauge effective support / resistance zones.

Thanks again for taking the time to not only check out our work but also for leaving us a kind word.  Will get a snapshot of those EMA’s up here after the close; and if I need a toe, I know where to go.