Well, this earnings season has something for everyone as the indices grind upwards but some leading stocks have been hammered, some have whipsawed, and others have missed targets and yet still have bounded upwards!
What I want to emphasise today is how powerful the OVI is in terms of being “ahead” of breaches of support and resistance. Remember, we’re not looking to enter trades at absolute highs or lows of swings. We’re looking for high probability breaches of support and resistance. And there have been plenty of those as you’ll see.
Let’s look at the three main indices first and then a few leading stocks:
QQQ
The OVI turned positive on April 19th, the day after the doji, and since then we’ve broken resistance shown by the two dotted blue lines as the Nasdaq enters into 10-year highs.
SPY
Same goes for the S&P as it breaches 2-year highs. Notice how the latest run occured after a most obvious looking doji bar. The OVI is soaring, so I’m now expecting something of a rest phase while a consolidation pattern has the chance to form before a potential resumption of more upside.
DIA
The Dow-30 is also having fun as new 2+ year highs are breached to the upside, the OVI goes wild and potential more upside to follow. Notice again how the OVI turns positive before the resistances are breached. We don’t need to nail the absolute highs and lows of every move, we simply need to have a high-probability area to enter on a break of suppor and resistance. In this case the OVI was positive as the doji reversal bar was formed, but I’ll caveat that in the case of the DIA where the OVI typically leans to the bullish side.
Stock Highlights
AAPL
We just have to start with AAPL which is forming a delicious bull flag right at an important trend line. The OVI is positive and a break of the top of the flag (or trend line) could see new highs reached pretty quickly. The only questions are (a) whether the flag/trendline is broken at all, and (b) the “sell in May and go away” syndrone.
BAC
Now, just for a bit of contrast, BAC has been bearish for some time with a negative OVI and nice breaches of support. This flag is going on a bit and there’s the gap that may need to be filled, so this is just an “observe” for now.
GOOG
GOOG is a good one for your education! We have a bear flag that looks to have failed and a pretty wide gap that needs to be filled. GOOG has a habit of filling its gaps over time and you wouldn’t bet against it happening this time either after a negative reaction to its last earnings report. A break of $550 to the upside could see a $20 gain to fill that gap. The OVI is poking into positive territory again so observe this one.
RIMM
Another one which could be about to turn around. There’s a gap to fill and we’re beginning to form a bowl like pattern with short term resistances market by the horizontal dotted blue lines. The OVI seems to be grinding upwards so keep an eye on what it’s doing as we approach the resistance around $58.
If you’re a member of my Private Traders Club you’ll have found many good opportunities within my CANSLIM filters lately. I’ll be writing more about this in the coming weeks. It’s one of the best ways of quickly sourcing the highest quality stocks in a matter of seconds.
More soon.
All the best
Guy
