Bullish Channel Must Hold in Dow
Price Patterns
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PrintThere's a well defined bullish, or ascending, channel that has been guiding the Dow Jones Industrial Average ($INDU) higher. A breakdown in the channel might very well mark the end to the upward trend in place since March.
The Dow just can't seem to get, and stay, above 13,000. It's been trying for a few weeks now and just keeps failing. If it can't go any higher, might the Dow go lower? That's what I'm wondering.
Notice how the Dow's been clinging to the lower-end of the channel, or diagonal support, since last week. Going into next week, I'll be watching this line very closely. From my perspective, a breakdown below 12,800 could pave the way to additional downside. Confirmation would come on a drop below 12,700.
The set-up in the Dow dovetails with two other patterns I've been following. Both Fannie Mae (FNM) and the Financials Select Sector (XLF) are on the brink of breakdowns. Cracks in these two should eventually drag down the Dow.
Fannie Mae (FNM) Triangle Set to Break
Fannie Mae (FNM) is one of the more controversial stocks in the market right now. Keep close watch of the triangle that is unfolding in the stock. A break in either direction could have a big influence on the broader market.
The trend in FNM is lower, so my guess is that the stock will eventually breakdown from the triangle. If it does, it should cause some selling in the broader financial sector which, in turn, should cause some worries to slip back into the broader market.
Alternatively, a breakout, to the upside, in FNM might be a catalyst to firm up the financial sector which, in turn, will be cause for rejoice in the broader market.
Either way, keep tabs on the triangle in FNM. It should prove actionable in the coming days or weeks.
Broadcom (BRCM) Breaking Out from Bull Flag
Broadcom (BRCM) looks good to go as it emerges from a bull flag. Semiconductors in general are screaming higher today, reaching a new high for the year.
Take a look at the action in the Semiconductor Index ($SOX). Today's high of 415 is a new one for 2008.
BRCM is mirroring the action in the SOX. The stock is cracking its very short-term descending resistance line. Look for confirmation with an advance past $28. Target between $29 and $30 in the next few days for a quick trade.
Bearish Flag About to Break in Gold
Gold prices have tumbled lower in the last three months. The spot market is off from above $1,000 an ounce to $870 an ounce today. Of course the Gold Trust (GLD) is lower, too, from near $100 to about $87.
Some of my new readers from the Forex Factory might be interested in following the unwinding of the gold bull market. Gold is very much the anti-dollar. Gold tends to trend higher when the dollar weakens. Alternatively, gold tends to trend lower when the dollar strengthens. With this relationship in mind, it's worth tracking the short-term bear flag in gold over the next few days as it relates to the forex market in general and the greenback in particular.
Apple (AAPL) Is Unstoppable
Apple (AAPL) is powering higher without hesitation. It's a truly amazing bullish trend on display in the stock. AAPL seems destined for $200 in the next few weeks.
APPL has risen from about $115 in March to today's highs near $187. The stock's aggressive ascending channel has served as support and resistance during the climb higher. The channel can be used to manage the position going forward. Simply let your profits run until the channel breaks.
