Metal Knives

Posted by downtowntrader | 9/25/2006 08:53:00 PM | 0 comments »

The markets bounced back on higher volume today and could follow through tomorrow. When I think of the possible scenarios playing out, I can envision a strong surge that would get to new highs before resuming putting a top in. The way things have been playing out, it looks like the bulls are determined to take the Dow to all time highs. Although the risk is high right now, it might be worth it if we do indeed get a "blow off" top.

Commodities have been getting hammered and may be getting ready to get a technical bounce. I am looking at a few possibilities in the miners as they are oversold and may have very limited downside from here. So, is this a catching a falling knife scenario, or a buy at value scenario? In looking at the different timeframes and the sector charts, I think there is little downside here, however, anything more then a small allocation would be foolish as well.

Here is a weekly chart of GG (Goldcorp). It fell out of the bollinger band which should present good value. It could bounce back to the middle of the bands and still be in a confirmed downtrend. There are still negatives here such as still declining MACD and Stochastics.

Here is the daily chart showing a gap down at eh end of a downtrend that couldn't follow through. This is sometimes the last gasp, especially if tomorrow has a gap up.

Here is a chart of SLW. This is looking more positive then GG as it is not technically in a downtrend and has a MACD divergence.
Here is a large daily chart showing possible support at the 200sma and previous resistance. Also, the MACD divergence is apparent here.
Moving away from the miners, ILMN is in a better performing sector and could find support at the rising trendline.
TRID may try and fill the gap if semiconductors rally this week.
AXE may be ready to clear this resistance after coming back to support at the 20 sma.
Software has been doing great led by ADBE, so don't be surprised if BMC follows suit.

GROW has pulled back into support and may offer some value here.
ICLR has been trading a very tight range and may continue the uptrend if the markets get going again.
LIFC has been getting support at the 9ema and may get a push soon.
OXPS came back to test support at the 200sma and may resume the rally here.

Thats it for tonight.

Good Luck,