It was a heavy down day it the markets, producing a large proportion of bear signals. The markets have been in a nearly continuous uptrend since Oct. 4, 2011. That means that few stocks have great bear charts; all the action has been on the bull side.
The two symbols that came closest to meeting my standards were IMAX on the bear side and the small-cap stock QLTI on the bull.
I like the IMAX chart, but the stock lacks the options liquidity for a bear play.
A rough Elliott wave analysis of QLTI puts it the the final stages of an upward retracement during a downtrending correction. I judge QLTI to be greatly at risk of a reversal soon that will carry the price below $3.69 from its present level of above $6.
In Elliott wave terms, QLTI has completed a B wave to the upside, which is followed by a C wave to the downside. Within the C wave, QLTI is in wave 2 to the upside, which will be followed by wave 3, which will carry the price below the June 29, 2013 low of $3.69.
Bull signal? Yes. Sustainable uptrend? No.
Click on chart to enlarge.
|QLTI 10 years weekly bars (left), 1 year daily bars (right)
My shorter-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.
Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading.
Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.
See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.