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Have Oil Prices Bottomed?

Charles Delvalle — Fri, 03 Apr 2009 15:59:52 +0000

Oil is a hot topic. Even when I was five my mother always moaned about how much gas prices had gone up. Before I got my first car, I was already an expert at locating the cheapest gas stations. So I felt particularly betrayed that oil prices didn’t move down much further like I predicted they would here. But listen, I don’t like losing. So when I realized was wrong, I decided to look at a chart of the Light Crude Oil Contracts ($WTIC) and see what it told me.

A number of technically bullish things have happened over the past 30 days that has turned me into a fully fledged oil bull.

First of all, oil has been making higher highs and higher lows since bottoming in late December.

Second, oil has rallied above its 50 day moving average and since then that average has acted as support.

Third, just a few weeks ago the 20 day moving average crossed above the 50 day moving average. This is known as a bullish cross.

Lastly, the fact that both the RSI and Slow Stochastic have turned up after hitting 50 suggests the underlying trend is strengthening.

Listen if you’re buying for the long-term, this is a sweet spot to buy it at. If you’re a short-term technical trader, this is still a sweet spot to enter into.

If oil keeps rallying then I don’t expect any headwinds untill the $70 mark. By that time, the 200 day moving average should also be around there (marking a huge resistance point)

Find a Bottom with an Ascending Triangle

Charles Delvalle — Tue, 10 Mar 2009 17:41:39 +0000

How can you tell if a stock has hit bottom? If you don’t know, you won’t make money in the stock market easily. Here’s one fairly solid indicator.
What you see below is something called an ascending triangle.

An ascending triangle is made up of a resistance line (top of the triangle) and then an upwardly sloped trend line (bottom of the triangle) that meets the resistance.

When you see this pattern, you’ll notice that the stock will bounce off of its trend line and hit resistance. Then it will fall at the resistance line and again find support at the trend line.

Eventually, the moves get smaller and smaller as the support and resistance lines meet.

Sooner or later, the stock will break out one way or the other. If it breaks above the resistance, then the bull run is confirmed. If it breaks under support, it usually means the bull run just fizzled out.

Most traders will look at the above setup and trade it like this. They place a buy order for Yahoo, Inc. (NASDAQ:YHOO) about 2-3% above the resistance line.

That way if the YHOO breaks through resistance, shares are automatically bought.

A good trader may also place a short-sell order 2–3% below the YHOO’s support line. If the stock breaks under support, it should move down further.

Why 2-3% away from those resistance lines?

Because it allows for some fluctuation. Technical analysis isn’t an exact science. So you always should allow for a buffer when trading based off of it.

InterContinental Exchange (NYSE:ICE) is Melting Down

Charles Delvalle — Wed, 18 Feb 2009 16:45:10 +0000

Back in 2006 and 2007 one of my very favorite exchanges was the InterContinental Exchange (NYSE:ICE). I loved it because it was an over-the-counter commodity exchange. And unless you were hiding under a very large moss-covered rock in the mountains, you knew commodities were hot.

But now commodities aren’t so hot. That global slowdown is taking a knife to the neck of our old friend “demand”. And the ICE Exchange is slowly melting.

As you can see, the ICE has steadily dropped from a peak of $160 down to just under $60 a share.

Today, its Relative Strength Indicator (RSI – up at top) is showing the trend as weakening. And if you look at the Slow Stochastic (below the chart) it shows ICE as recently coming off an overbought level and heading down towards oversold.

That makes this a relatively low-risk short entry point.

ICE could drop down to its current support at $50 (which was the previous low) and should find a base there. That’s a nearly 15% gain.

And if ICE drops under that, you could see it for $40 a share.

Are You Tuned into Channel Google (GOOG)?

Charles Delvalle — Wed, 04 Feb 2009 17:13:34 +0000

It still bewilders me just exactly how fast Google (GOOG) went from the “Yahoo Wanna-be” to the king of the search engine universe. When it comes to Google shares though, lately they’ve been down and out. But that doesn’t mean you can’t make money.
If you take a look at their chart, you’ll see a nice little chart formation called a trend channel.

A trend channel is nothing more than two trend lines – a resistance and support line – that form a “channel” that any given stocks price trades between.

Google’s trend channel began in late November. Every time Google hit the bottom of its trend channel, shares moved higher. And every time it hit the top of, prices would stall out and move lower.

As you can see, Google is now hitting the top of its trend line. Plus, both the Slow Stochastic indicator (under the chart) and the RSI indicator (above the chart) are showing shares as overbought (meaning sellers should flood the market).

One of the best ways to capitalize on this move is by simply buying a Put option which makes money as share prices drop. The move shouldn’t take more than ten days to complete.

Make 20% by March as Electronic Arts (ERTS) Tumbles

Charles Delvalle — Tue, 03 Feb 2009 19:46:16 +0000

I come from a generation of children that grew up playing Nintendo for at least two to three hours a day. My parents didn’t touch that “magical fun box”. But today, my generation is made up of a bunch of 28 to 34 year olds that all play video games with their kids. Because of that, the video game industry has become one of the fastest growing, and largest sectors of the entertainment industry. And even though it has shown some slowing as this recession has grinded along, growth is still there.

Too bad Electronic Arts (NASD:ERTS) simply is not feeling the love.

After rising for a number of years on increased consumer spending in video games, it’s been all downhill since the credit crunch struck back in August. Shares dropped by 70%.

Just when you thought the pain is over, we notice that on the chart ERTS recently broke under its December lows (it’s previous support line). This break under support constitutes a “Major Technical Break” and could be used to make a bearish trade with.

Shorting this stock could give you a tidy 10 – 20 percent gain by the end of the month. And if you buy a put option… well you could easily make triple-digits.

Just be careful about holding this company short for months on end. As mentioned before, the video game industry hasn’t lost money… it simply isn’t expanding as quickly.

This 70 percent drops seems extremely overdone considering ERTS is one of the top dogs in the industry.