Sunday, May 22, 2016

Week In Review: Biotech (XBI), China (FXI), Consumer Staples (XLP), Europe (VGK), Russia (RSX), Small Caps (IWM), and Transport (XTN)

We have just finished a dull and dreary options expiration week that left a lot to be desired, but looking at the charts for next week there are some plays that should be examined closely. Most notably Biotechnology appears to be putting in a head-and-shoulders pattern and the Small Caps appear to be putting in a second bounce meaning a modest rise should be seen throughout the week (I'm apprehensive about how far).

Biotechnology: XBI
As I said above a head-and-shoulders pattern appears to be playing out with resistance at $54.50 (a good stop point in case it breaks out). Please watch this closely!
China: FXI
China appears to be putting in a bullish descending wedge which I wish I had picked up sooner. First resistance appears to be $34.50.
Consumer Staples: XLP
Interesting developments have been occurring in bell-weather Consumer Staples on the daily charts. A bearish EMA crossover appears imminent while it simultaneously appears to be putting in a bear flag. Upward resistance is at the crossover point (about $52.80) in case this bounces up but divergences abound on the MACD indicators.
On the weekly chart a massive ascending bearish wedge has appeared while crossovers and RSI sell signals have appeared.
Europe: VGK
Europe is a bit of a puzzle at the moment. EMA's are about to bearishly crossover yet a buy signal on the RSI(5) appeared. What I think may be happening is a half-hearted bounce will occur with a lower high going in. The overall trend however is downward for Europe, so be careful buying VGK.
Russia: RSX
Russia does not appear to be in a good place at the moment. A bearish declining triangle has appeared and long-term divergences are still present on the MACD and Trix indicators. In addition to this the EMA's appear to be about to bearishly crossover. RSX is a strong short/sell.
Small Caps: IWM
Despite having a poor showing last week I think IWM will surprise us with a bounce upwards. A buy signal has appeared on the RSI(5) and a divergence on the MACD are suggesting this. Please use $109.00 as your 'stop.'
Transport: XTN
A second bell-weather in the market is Transport (XTN) which also appears to have put in a buy signal on the RSI(5) just as the EMA's have crossed over bearishly. Upward resistance is at $44.00 and $45.00 but it will be important to gauge the market next week with the moves XTN makes.