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Break Out (or fake out ?) May 30, 2014

Posted by Tom in Thoughts.
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Since this is the last of the month and I have a Client Newsletter due I’ve been writing a lot today.  So, for those that wish more “big picture” information, I’ll refer you to the tab above labeled “Newsletter”.  More charts and commentary there.

Let’s get technical !

NASDAQ Blog

What I see above is a break out of the trading range (blue dashed lines).  The 4185 level was broken on a (price) gap up and it really didn’t look back.  I look at the volume bars (below the price) and note that while volume was increasing, it still was below the average volume line (dark orange).  So volume is slowly increasing but it’s not high / excessive . . . that’s actually good.  If we saw large amounts of volume (i.e. supply of stock) coming into this market I’d be concerned; someone is selling, and selling big.  Right now, I don’t see that.  Good.

What next?  I’m thinking a pull back (a.k.a. LPS – Last Point of Support), perhaps nearing the 4185 level.  We’ll see.  So if you’re not onboard yet, don’t chase this market, it’s likely to pull back next week.  The key point to all of this is what happens during that pull back.  I’d like to see narrowing bars closing above mid points (most of them at least), on average volume.  This would confirm a Break Out and an LPS.   Or . . .

Wide bars on high volume closing near the low of the day.  Selling.  And that would indicate this last break above the trading range was a Fake Out.  Not good.  We’ll just have to wait.  Next week will have news about China’s manufacturing, the EU bank reports and later US jobs; all potential market movers.  Remember:  If the market behaves badly on bad news (bearish), if it shrugs it off (bullish).

Have a good week !          …………….  Tom  ………………

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