The global signals are pretty positive today. The Asian markets were good on Monday and at the time of writing the Dow Jones is about a percent up i.e. 130 points in the green while the FTSE-100 closed 85 points up with a gain of about 1.3%.
I thought it might make some sense to look at the chart of Dow Jones also. As discussed in an earlier issue, the 9 month old trendline and the top of a 4 month old rectangle near 12740 was crucial and a cross above that would give us a target of 13700. This resistance was crossed on 21st Apr 2008 and has since gone through a pullback too and is now inching its way up. The downward sloping trendline at 13010 is providing resistance but at this moment, the Dow Jones is trading at 13132, much higher than this trendline. If it manages to close above this level (still about 3 hours of trading left in the day) today, it is on its way up to 13730 and then 14650. A close above 13010 will signify the end of the intermediate term downtrend in the Dow too.
Seen above is the daily chart of Aban Offshore and on it are seen three trendlines marked as 1, 2 and 3. Let us discuss each one in detail. The first trendline marked as 1 is the downward sloping trendline from the highs made on 29th Feb 2008 and Friday’s price movement confirmed that this trendline was broken. The second trendline, marked as 2, shows that the price has been finding resistance whenever it went to 4000 since 23rd Jan 2008, except for two exceptional days in February. The price did go above this trendline on Friday but closed well below it. The third trendline, the dashed one marked as 3, is an extended trendline starting from the lows made on 19th Mar 2007 (not shown on this chart). This trendline has been respected throughout except for the two areas marked by circles. A break of these three trendlines will be significant for Aban Offshore and the high volumes on Friday along with a large blue candle seems to suggest that this may soon be a reality. It may make sense to buy above 4000 with a stop loss of 3500 for a medium term target of around 5170.
Steel Authority (SAIL), if it manages to go past the trendline marked 1 on its daily charts would suggest an uptrend in the stock, which could take it to the next resistance near the trendline marked 2. The large blue candle with huge volumes on Friday seems to suggest that the price could go past this trendline on Tuesday. Consider buying above with a stop loss of 165 for a target of between 215 and 220. Revise the stop loss to 190 if the low is above 190 for two consecutive days.
Happy Investing!!!
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