Tuesday, January 26, 2010

Will SKF Break Out?

With President Obama's war (fight, bickering, posturing, whatever you call it) against nation's big banks on several fronts, the U.S. stock market swooned last week. This week, both Monday and Tuesday saw the market try to shake off last week's big sell-offs and go up, only to get deflated back under a mountain of uncertainty about the future government actions.

Not surprisingly, the sector that has led the downward movement is financials. If this is a definite trend change, whatever the cause or trigger is, I'd better take a look at SKF (double-short financial ETF) again quickly so I don't miss the entry too badly.

One-year daily chart of SKF doesn't show much movement other than flat-lining. But if you look at a shorter-term daily chart, say 6 months, you see some tradable patterns.

On Tuesday, SKF hit the trend line connecting the tops from August 09 and November 09. Also it hit the upper bollinger band. In the past 6 months that's where the stock turned back down. Also, notice the bottom trend line connecting the October bottom and December bottom. These two trend lines seem to form a symmetrical triangle pattern. SKF broke down from that triangle in early January, and now it is hitting the trend lines from under.

So far, there is no negative divergence. RSI shows positive divergence, albeit slight.

If it were to break back down, it is at least short-term bearish; a short-term target would be to the lower bollinger band. If it were to break upward, this is about the right time and place to do it. If it breaks out, backtests the trend line and holds at the trend line, that will be bullish for this stock, and bearish for the general market.


  1. Very nice analysis. Enjoyed it. But I recently bought FAS at 69. I always wait till 69 & buy regardless of charts or fundamentals, it is a repetative pattern that works for me.

    Check it out. FAS hits 69 & goes to the 80's everytime.

  2. "repetitive", sorry. I hate to look like a misspeller!!!

  3. Yup. I noticed that too. Fins have been range bound since last August. FAS's support is around $65, and it bounced from there again. I will take a look at FAS again. (I was in that from $23 to $71.) Good luck!