Bulls happier again, but...

April 5, 2018 12:01 PM

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Did Apple and Amazon Reverse Their Downtrend?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market was bouncing off support level at $165 recently. Is this some bottoming pattern before upward reversal? The market got closer to potential resistance level of $175 yesterday. If it breaks higher, it could retrace more of March sell-off and get close to record high again:

Now let's take a look at Amazon.com, Inc. (AMZN) daily chart. It was relatively weaker than the broad stock market recently, as it got close to medium-term upward trend line. There were some clear negative technical divergences, along with March 13 bearish engulfing downward reversal pattern. The nearest important support level is at around $1,350, marked by the above-mentioned trend line. On the other hand, resistance level is at $1,500, marked by previous level of support, as we can see on the daily chart:

Dow Jones - Positive Pattern Confirmed

The Dow Jones Industrial Average daily chart shows that blue-chip index was relatively weaker than the broad stock market recently, as it continued to trade well below late February local high. The market broke below its early March local low on March 22, and it continued towards the early February local low. It fell slightly below that level on Monday, as it reached new yearly low of 23,344.52, before bouncing off and closing above 23,600. Daily closing price above previous Friday's closing price was a positive signal. On Tuesday, the blue-chip index formed a positive "Harami" candlestick pattern. We mentioned it yesterday. Then, the market confirmed its reversal pattern despite lower opening of the trading session. However, there is a potential resistance level at around 24,500. Will DJIA break above its short-term consolidation? Bulls have a good chance here:

Concluding, the S&P 500 index will likely extend its yesterday's rally a little, but we can see some potential resistance level, marked by recent local highs. Investors will wait for tomorrow's monthly jobs data release, so we may see more short-term volatility.

The early March rally failed to continue following monetary policy tightening, trade war fears, negative political news. What was just profit-taking action, quickly became a meaningful downward reversal. Breakdown below over-month-long rising wedge pattern made medium-term bearish case more likely, and after some quick consolidation, the index accelerated lower, towards its early February low. Just like we wrote in our several Stocks Trading Alerts, the early February sell-off set the negative tone for weeks or months to come.

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