One of the reasons I asked was also because I’m still a rookie at investing and wanted to hear some opinions. I’m as green as can be when it comes to stock market investing, and I understand people lost lots of money, but is the drop really a reason to be nervous? I understand it’s a sign there might be a change in the lending market, but is this a reason to be nervous about investing in the stock market or to start trading all your stocks? I mean it’s not like the America is an unstable country. It’s no reason to start pulling all of your money out of the stock market, right? This is a proven market that should stabilize itself in a while, no? Is this just an opportunity to buy cheap stocks?

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There are many stocks that are now giving bullish signals, but it is interesting to see that in some sectors that are strong, there are still particular stocks that are very bearish. QBE is a stock that is particularly bearish even though the financial sector as a whole is looking strong.

This week has seen the breach below a weekly support line at $20.00. The next major support line is $16.00. Giving strength to the move is several factors. The most recent Lower Peak (indicating Sellers in control) was formed at an intersection of 3 major resistances.

This stacks the probabilities in favour of the bearish move continuing. The first resistance is a 6 month down trend line, the second is a previous up trend support line now turned resistance and the 62% Fibonacci retracement from the high at the beginning of the current 6 month down trend. Not to forget the stock is still trending down since the beginning of the market crash.

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The XAO closed with a Dark Cloud Cover last week on the weekly chart, which indicated a likely pull back this week.

And this is what happened. There was a small pause and bounce created by the short term resistance on the daily chart. Now a lower peak (LP) has been formed under the up trend line, the probabilities are stacked in favour of more downward move next week. 

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BSL is another stock that recently rallied with the strength of the market, but is now showing significant signs of continuing with the overall bearish trend.

As the rally tried to break through the 4 month down trend it lost strength and failed to make a higher peak or higher trough above the trend line. This failure, created a Head and Shoulder pattern.

The short term up trend line that was supporting the rally has been breached as the weekly resistance line and 4 month down trend crossed together and forced the stock down.  Today produced good volume with supports a strong down move.

The next line of support is at $2.20. 

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AMP has had a strong Bull run over the past few weeks, but the stock shows no signs of strength in the move. This is still a bearish stock. The weekly chart tells the story.

The stock has been in a strong down trend channel for the last 18 months. The recent strong rally has been a bounce from an intersection of supports. One, being the bottom of the channel and the second, a support line. It is now close a resistance line after a strong run. Strong runs always have pull backs and it is usually a previous resistance line that forces the stock to pause and retreat.  Should this run be stronger enough to continue past this resistance at $5.70 there is an equal but opposite force that caused the run in the first place just above it at $6.15.

By the time it gets there it is likely that the rally will be running out of steam if not already, and as it is still a bearish stock the probability of is responding to this resistance is very high. There are still no signs of recovery for this stock yet.

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The end of this week saw the XAO break above the 12 month down trend channel. Does this mean we can expect the XAO to climb higher?

Not yet. Though it has broken free of this channel it is still being held down by a strong weekly support. If this resistance is respected once again, a Double Top (DT) formation has been made. This is a bearish pattern. This also keeps the major lower peaks and lower troughs going.  The Seller are still in control.

Should this be broken through and the XAO starts to climb higher, a higher peak will now be formed and the resistance could possibly become support and giving the higher trough. This would then mean the buyers have taking control. But beware; there is still the overall down trend that needs to be broken to truly consider a bull market again.

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The Materials Sector has had a lot of people saying its good investing as it’s holding its own now in this bear market. So let’s take a look and see what the charts are telling us.

If looking at the daily chart of the materials sector (XMJ), it would be easy to see why so may think it’s a good investment right now. November was the last low it hit in 4 years (2005) and it has been slowly creeping up since. This makes a basis for long opportunities in SHORT TERM trades,  as the last 3 months or more are up. But what about for LONG TERM investing?

If long term is more your style you must look at the weekly and see what the charts are saying. On the weekly XMJ, November was the bottom of the first Lower Trough (LT). As mentioned in previous post, Lower Peaks and Lower Troughs tell us the sellers are in control. Then there is significant resistance at 9290 where twice now it has failed to break through and is trying to push it back down. Could this be the next major peak forming? If so it will be a Lower Peak confirming the sellers are still in control. Therefore the highest probability trades for LONG TERM on this sector right now would be short.

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There are alot of stocks forming the same sort of patterns at the moment, and with the overall market down, shorting stocks can be a high probability choice.

CPU is forming a familiar pattern right now. It meets the basic criteria that indicates the sellers are in control and are likely to be around for a bit longer. Let’s take a look starting with the weekly chart.  The first indication sellers have taken control are the Lower Peaks (LP) and Lower Troughs (LT). The stock consistently fails to make a higher price each time it rallies, instead it makes new lows each time it falls. The blue highlighted area is a cross section of 3 strong weekly resistance lines which the stock is likely to respect and be pushed lower again.

Now to stack the odds in our favour, and look for more to give a higher probability of the stock falling. There is a Head and Shoulders (H&S) patter that has formed and been validated. (see previous posts for details on this pattern). The target area is about $4.00, which is also a key support level. The last point I would consider is Fibonacci levels. CPU is at a significant Fibonacci number now, which has a high success rate of acting as a strong resistance.

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Since the beginning of the fall of the XAO in late 2007, many stocks have been back to lows not seen for quite some time.

Today NAB clearly broke through a weekly support level with a bounce off a downtrend channel top, with increased volume. The weekly chart show there is no significant support to hold the stock up, before $14.50. The last time NAB saw this low was 1997.

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Each week the XAO is breaking support and continuing to show us bearish signals, which support the medium term flag break target (identified 15/01/09) of around 2500.

This week saw the confirmation of a double top. The neckline is a weekly support line that was breached on Monday, with the rest of the week re-testing that support line as a resistance line.  Technically, there is now nothing to hold up the XAO before 3200 and this week is likely to see another 300 taken of the index.

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