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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday May 13, 2016.
Stocks closed mostly lower Thursday amid weakness in large cap tech stocks. Shares of Apple closed more than 2 percent lower at its lowest since June 2014. The Dow Jones industrial average closed up 9.38 points, or 0.05 percent, at 17,720.50. The S&P 500 closed down 0.35 points, or 0.02 percent, at 2,064.11. The Nasdaq composite closed down 23.35 points, or 0.49 percent, at 4,737.33. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 1.91 percent to 14.41.
ConAgra Foods Inc. (CAG) was a notable winner Thursday, jumped 1.31% on strong volume to 46.43 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of CAG suggests that the stock could climb up to test key price level near 50 in the coming days. Just so that you know, initially profiled in our February 10, 2016 “Swing Trader Bulletin” CAG had gained about 17% and remained well position. Below is an update look at a trade in CAG.
The graphics below are from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges. As shown, the underlying is in a short-term bullish trend when the price bars are painted in green. The underlying is in a short-term bearish trend when the price bars are painted in red. The yellow bars identify period of neutral or sideways trading pattern. Additionally, the light-blue shading represents the short-term trading range. A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading). Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.
Chart 1.1 – ConAgra Foods Inc. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates CAG as a Buy. The overall technical outlook remains bullish. Last changed May 4, 2016 from neutral.
CAG is on a tear in recent days after the early April correction tested and respected support at the trend channel moving average (as represents by the white line in the chart). Thursday’s upside follow-through served as a confirmation and extension to Tuesday’s bullish breakout above the April high, signify resumption of the February 2014 to August 2015 upswing that projects to 50, based on the 127.2% Fibonacci extension.
Key support is around 44. At this juncture, only a close below that level can wreck the near-term bullish outlook.
Chart 1.2 – S&P 500 index (daily)
The overall technical outlook remains neutral. Last changed May 11 from bullish. As for strategy, traders should consider long gold, overweight bonds and stay neutral on stocks (see area “A” in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
S&P moved down to test support at the trend channel moving average after last week’s rally attempt ran out of steam near the lower edge of the pink band – the level that offered support since the index broke out in early March. That level was significant when the index broke down late April. It is now an important resistance level. With that said, if the rally were to continue, the index must break through 2085 to maintain upside momentum. Staying below that level heralds a shift in the secondary upswing that has dominated the market since mid-February uptrend.
In accordance to the Japanese candlestick pattern recognition, Thursday’s spinning top indicated uncertainty. Technically speaking, when a spinning top forms after a decline in the market, it can be an indication of a pending reversal, as the indecision in the market is representative of the sellers losing momentum. This suggested that the support would hold, at least for the time being.
For the near term, the market has carved out key short-term resistance and support levels for traders to monitor. The trend channel moving average, currently at 2053, represents key support level. A failure to hold above that level would bring the early May low of 2039 into view.
As for resistance, there is a strong band of resistance between 2085 and 2100. There is no reason to turn bullish until this zone is eclipsed.
In summary: our indicators suggested that further consolidation could be unfold between S&P’s 2085 and 2050. This consolidation band provides rally and retreat trading opportunities for short-term traders. However, market is volatile and tight stops are advisable.
(By：Michelle Mai for Capital Essence)
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