S&P 500 index weekly graph shows the index could not break above the resistance level, indicating a series of falling candlesticks could be the next weeks’ candlestick formation. I will be looking for short selling stock picks during the next month, unless the index finally overcomes the resistance. Today I have picked 2 stocks as candidates for short selling, but there is also one stock that offers potential in going long.
CSCO stock has definitely seen better days than the previous week when the stock price plunged from $24.50 all the way down to almost $20. The stock is trending sideways according to the monthly stock graph but seems to be entering a downtrend in the daily graph. We could short sell if the price breaks below the previous support level at 19.82 and setting a stop loss right at the previous candlestick’s high in the daily graph. Watch how the falling candlestick of the previous week is bigger than the 2 most recent big red candlesticks, which could mean the sellers are getting stronger. Following the trend has usually proven a correct trading strategy, but always be prepared to exit the trade when there are reversal signals in daily or even 60 minutes charts.
The next stock pick is Sprint Nextel stock. The S stock price has hit the verified support level at 3.90 and since it has been consolidating for more than 15 months, it could be a safe bet to buy the stock and set a target profit around 4.40 which was the previous short-term support level, now resistance. Of course the stop loss should be set somewhere below 3.90 and also pay attention on the time of entry point. We still need verification for the bounce, so we need to go long on the S stock when the stock price breaks above 4.06, which is the resistance level in the 60-min stock graph.
IVZ stock might seem like a promising stock to buy if you look at the daily graph but the weekly and monthly graphs imply that the stock price might not be able to break above the resistance level at 24.40. As the level is pointed out at the much longer timeframes, we should trust it a bit more than the uptrend signals found in the daily IVZ stock graph. Surely it is obvious the stock price has been going north the last 5 months, but more importantly it is certain there is great resistance found at 24.00 mark, also indicated in the daily graph. Watch also the MACD divergence at that peak. A recommendation is to wait for a Fail Top in order to short sell IVZ stock or expect a support breakout at 21.70, the lesser being a much more promising signal. If there is a breakout downwards, set a stop loss right at the high of the breakout candlestick. If the stock price tries for a higher peak than 24.00 and fails, set a stop loss right above the Fail Top candlestick.
As a general investment advice of stock trading the US stock market is to begin the technical analysis at the monthly and weekly stock graphs, then look for entry and exit points in the daily or 60-min charts. That way you are much more confident you are not entering the market in the wrong way and you are trying to get advantage of smaller price movements inside established trends in the longer timeframes.