The major market indices have been in a volatile range for the past two weeks. Consolidation patterns are present on the daily charts which suggest continuation of the previous uptrend. The volume patterns, on the other hand, are implying potential bearish reversals.
Both the SPDR S&P 500 Trust (SPY) and iShares Russell 2000 Index Fund (IWM) are close to a range resolution, via a pattern break, since the boundary lines of their consolidation patterns are converging and the range is narrowing. Waiting for a confirmed trigger, in either direction, is key.
Below are charts outlining the consolidation patterns in SPY and IWM, followed by a short idea in Venoco Inc. (VQ).
Venoco Inc. (VQ): An aggressive sell-off began at the beginning of February that was halted by a cluster of support. The support was composed of the primary bullish support line and the 200-Day Simple Moving Average. Currently, a bear flag pattern is forming directly above these support levels, adding weight to the cluster’s evidence.
A break below the cluster would trigger the pattern and be extremely significant, leading to lower prices in the near future. Trigger: Daily close below the trend line, moving average and lower boundary line of the flag, currently around $17.90. Target: $14.50 is the minimum expected objective, measured by the pattern. Protective Stops: can be triggered on a daily close above $19.
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Disclaimer: The information contained herein is not guaranteed. This is not a solicitation of any order to buy or sell. This material is based upon information that I consider to be reliable, but I do not guarantee its completeness or accuracy. Assumptions, opinions and recommendations contained herein are subject to change without notice, and I am not obligated to update the information contained herein. I have positions in VQ and SPY. This communication, including any attachments, is for the exclusive use of the intended recipient(s) and/or the intended recipient’s designees. Any use, retention or dissemination by a person other than the intended recipient is strictly prohibited. If you are not the intended recipient or designee, please notify the sender immediately by return e-mail and delete/destroy all copies of this communication.