Atheros: Wireless Technology Breaking Its Channel

Atheros (ATHR) is in a variety of wireless technologies.  The stock had been in a well-defined uptrend since the market low in March 2009.  The stock, in a very orderly fashion moved though the channel illustrated in the chart.  In this month's decline, ATHR broke-down out of the channel.  This could be a very bearish sign for the stock.  In fact, after slicing through the channel on the crazy Thursday, ATHR rallied back to the channel and failed.  However, all may not be lost for ATHR.  On the big down day on May 6th, ATHR fell to the 200 day moving average and bounced.  That point, coincidently represented a 38.2% retracement from the April 21st high.  This retracement level is important to those who follow Fibonacci levels.  Today ATHR traded again to the 200 day moving average and again it bounced.  So where does this leave us?  I'd say that ATHR needs to get back into the channel before it can be considered a buy.  The channel lies around $38.  The stock closed today (May 17) at $34.71.  Of course, if ATHR falls below its 200 day moving average, it could fall a long way, perhaps to the gap between $23 and $24.

SPY chart - 200 day Moving Average - Resistance

The S&P500 (as shown here via the SPY) has been trading essentially sideways for the most of May, even forming a flag pattern. From a technical perspective, it is the 200 day moving average that is presenting a major barrier to upside progress. A close above 95 would be bullish and a good entry point.

Tale of the 200 Day Moving Average

The 200 Day moving average is universally considered an important technical concept. When a stock is above its 200 day moving average, it is considered to be a bullish sign, and conversely, when a stock is trading below its 200 day moving average it is thought to be bearish. We are seeing many stocks challenging their respective 200 day moving averages as the stock market has been moving up steadily since its early March low. Will the 200 day moving average serve as resistance? Or will they be broken on the upside and create a catalyst for technicians to buy, thus continuing the rally? Many retailers have broken above their 200 day moving averages and seem to have been testing and holding. Many of the financials are running into the 200 day moving average. This development worth watching and should provide a key to the short and intermediate outlook for stocks. If stocks are breaking above the average, the move up will continue. If the 200 day moving average proves to be resistance, it is a signal to take profits.

Retailer Bargain Bin: AEO, M, TGT

Many of the retailers I've looked at seem to be in the process of making nice bounces off their recent lows and re-tests of previous lows. It's worth taking a look at AEO, M, TGT. It's difficult to believe that retailers can be "off to the races" as the economy has not recovered. Having said that, these manes are very oversold and the ones with good balance sheets will survive. In the short run, take a look at some retailers for a potentially nice trade.

American Eagle Outfitters (AEO)

Target Corporation (TGT)

I wrote in my last post about TBT, the Ultra Short 20+ Year Treasury ETF. Yesterday the Fed announced that they would be buying Treasuries in the open market to keep interest rates low to promote economic recovery. This development most likely will put a pause on the TBT. While I still believe that Treasuries are over-bought and that a variety of reasons (eventual move to riskier assets, worries over deficits, inflation) will push Treasury prices lower, there is the old adage, "Never fight the Fed." With the Fed buying it's hard to short the Treasuries. The TBT trade looks like it is on hold for now. I'd get out of TBT or at least reduce one's exposure to it. When the Fed reverses its policy, which it will when the economy recovers, TBT will move fast.

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The commentary in this site is not a recommendation to buy and/or sell any security. This is for information and educational purposes only. Please consult your personal financial advisor and understand the risks when you invest.

Everyone's Talking Financials

Here is the XLF chart of the week. Let's see if we can cut through the rhetoric and chatter and cut to the chase.  It looks like the ETF has formed a nicely defined triangle. Trade the lines. A breakout above the downward sloping line is a Buy signal with a stop if the XLF goes back into the triangle. A breakdown below the horizontal support line indicates a Sell again with a stop if the ETF goes back into the triangle.  You need patience to trade triangles. You have to wait till the stock moves out of the pattern.

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The commentary in this site is not a recommendation to buy and/or sell any security. This is for information and educational purposes only. Please consult your personal financial advisor and understand the risks when you invest.