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Strategies & Market Trends : Technical Analysis With Charts -- Ignore unavailable to you. Want to Upgrade?

To: Galirayo who wrote (6643)	5/10/2008 8:30:57 PM
From: Return to Sender	Respond to of 6865

Amateur Investors Weekend Stock Market Analysis (5/10/08) amateur-investor.net As mentioned last weekend I said it was possible we could see a pullback develop this week as the 2 Period Relative Strength Index (RSI) had closed 3 weeks in a row below the 20 level. The last time the 2 period RSI closed three weeks in a row below the 20 level was in October (point A) which was followed by a sharp downward reversal in the S&P 500 (points B to C). However this weeks reversal (points D to E) wasn't nearly as bad as last October's. Meanwhile also notice after the big initial drop in mid October (points B to C) the market actually rallied the following week (points F to G). It's not out of the question we could see a similar scenario occur next week. As far as the major averages the Dow lost just over 400 points from last Friday's high and has dropped back to its newly developed upward sloping trend line (black line) from the mid March low. If the Dow bounces off its upward sloping trend line next week then we may see it eventually rally up to either its 200 Day Moving Average (purple line) just above 13000 or to its 61.8% Retracement Level (calculated from the October high to the January low) near 13200 (point H). Meanwhile if the Dow drops below its upward sloping trend line then look for a potential drop back to its 50 Day Moving Average (green line) near 12500. The Nasdaq has only fallen 70 points since last Friday's high and still remains above its 20 Day Moving Average (blue line) and newly developed upward sloping trend line (black line) from the mid March low. If the Nasdaq holds support at or above its 20 Day Moving Average early next week and rallies I expect it will eventually rally up to the 2510-2520 area which corresponds to its 50% Retracenment Level (calculated from the October high to the March low) and 200 Day Moving Average (purple line). Meanwhile if the Nasdaq breaks below its 20 Day Moving Average then look for a drop back to its upward sloping trend line near 2380. For those watching the Nasdaq 100 it really didn't drop that much this week and currently is holding support near its 200 Day Moving Average (purple line). If the Nasdaq 100 attempts to rally next week its next area of significant upside resistance remains at its 61.8% Retracement Level (calculated from the late October high to the mid March low) near 2020 (point I). Meanwhile if the Nasdaq 100 comes under some more selling pressure look for support at its 20 Day Moving Average (blue line) near 1920. The S&P 500 has fallen just under 40 points from last Friday's high and is now near a critical short term support level near 1385. The 1385 level corresponds to its 20 Day Moving Average (blue line) and is also along its newly developed upward sloping trend line (black line) from the mid March low. If the S&P 500 can hold support near the 1385 level early next week then we may see a rally develop with a potential rise up to its 200 Day Moving Average (purple line) around 1430. Meanwhile if the S&P 500 breaks solidly below the 1385 level next week then look for a drop back to its 50 day Moving Average (green line) near 1355. Finally when looking for stocks to invest in focus on those with the best looking chart patterns. For example ROSE in the strong Oil sector has completed the right side of an 11 month Cup and now needs to develop a Handle. It's important for a stock once it develops a Cup to develop a Handle before moving higher as the chances for a successful breakout in the longer term are greater than those stocks which fail to develop a Handle. Recently ATLS broke out of a Cup and Handle pattern in late March and has moved steadily higher over the past 6 weeks.