Hi DaGushman,
The indicators are bearish in terms of where ING has been, true enough. But we would rather know where ING might be going.
Pivot points that precede very strong moves in a stock usually occur at extreme oversold levels. And that is exactly what we see in ING. I am not saying ING will reverse here (see below). The point I am trying to make is that in a stock that is in a long-term or medium term uptrend (which ING is), after a several days correction, one should begin more and more to take a contrarian view---the likelihood of reversal and resumption of the long-term trend becomes increasingly likely.
139.142.147.218
Normally, for a chart like this, I would put this under close radar surveillance because a reversal looks imminent for several reasons:
139.142.147.218
1. BBs have been pierced to the downside. This is unstable, and tends to precede reversal.
2. The stock is extremely oversold and has been for about 3 weeks. Traders will increasing consider the stock relatively cheap, therefore buying interest will increase.
3. ING has for quite a while been in an orderly uptrend.
Note, by the way, the bearish divergence in Price Rate of Change that began in mid-December, despite a stock price that continued up for the next two weeks. That divergence was a nice predictor.
So the things you consider bearish are not really bearish, even though the stock has corrected sharply---remember, we are much less interested in where a stock has been (bearish), much more interested in where it might be going (potentially bullish). So, the signals you see are potentially bullish, and only bearish looking back in time.
So, would ING be a good long position now?
Despite what I wrote above, which applies to many cases, I don't think so. Not yet.
Why? Because there are things about the chart I don't like:
Let's look at the weekly chart in a 2 year time frame.
139.142.147.218
You can see that ING has gotten far ahead of of the 20 ema. The last time this happened, there was a severe correction that snapped ING not just back to the 20 ema, but overreaction momentum dropped it considerably below the 20 ema temporarily about a year ago.
And now, the same thing has happened, but this time ING got ahead of the 20 ema over an extended time span, during which time it was steadily growing in relative strength. The 20 ema is pulling it back now, and I fully expect ING to trade down to that point on the weekly chart, which would be $27.49. But this time, I think it is unlikely that ING will continue thru to hit the lower BB rail. I would therefore look for a reversal at the 20 ema on the monthly chart.
We are not there yet. And there is absolutely nothing I can see in the technicals that even hints at reversal.
So, I would not consider a long position until I saw technical evidence of imminent reversal.
Now, that potential reversal point at $27.49 noted above also coincides with chart support, and the middle of the BBs (an area of relative support/resistance) providing THREE reasons why reversal may occur at that point.
The MACD is not helpful here. It is not a leading indicator, but rather a confirming indicator once a reversal is in progress. Sometimes it can give clues to the strength of the move also.
So, I would watch ING, and would CONSIDER a long position once it traded down to $27.49.
I think it is important to emphasize: reversals tend to occur when thing look extremely bearish (i.e., oversold extreme, BB pierced to the downside, a series of down days). So, when things look bleakest, one should take a contrarian stance, and at least CONSIDER whether a reversal to the upside might be due.
That said, the converse is not necessarily true at all: just because a stock fulfils these criteria, does NOT mean it is ready to reverse necessarily.
I would wait for it trade down to support at $27.49 if it can and will. If not, forget it. I think you have to make a stock meet your pre-established criteria, and if it either can't or won't, move on to something else. Don't compromise your criteria.
Then, wait for it to show you it is serious about a reversal (i.e., early technical buy signals, gathering relative strength, a surge of volume as the stock traded down, a reversal candle, then volume dwindling rapidly immediately afterwards, all of these occuring at a solid support level).
This is important, because even though I think the 20 ema is a good potential reversal point, the middle of the BBs by itself is not nearly as strong support/resistance as the rails. So, that means ING could continue down to the next potential reversal point, the lower BB rail. Again, that is why I would wait until it shows you it is serious about reversal. If that occurs at the 20 ema, fine. If not, watch and wait, looking for an entry at the lower BB rail instead. I think this less likely because support at the middle of the BBs comes not just from the middle of the BBs, but for other reasons as well.
Hope this helps,
T |
