Chart Junkie: China Automotive, 78-year Anchored VWAP on the Dow, Annotated Yen, and a Bear Trap in Oil

Chart Junkie

CAAS

CAAS

The Chart of the Week from our partners FusionIQ is China Automotive Systems (NASDAQ: CAAS): “China Automotive Systems, Inc. (NASDAQ: CAAS) which manufactures power steering systems and other related products for different segments of the automobile industry in China broke above a downtrend line in tact since 2003 on very heavy volume on Friday. This breakout coupled with its FusionIQ technical score of 97 suggests shares can keep rising. Buying on a modest pullback makes sense with a tight stop. Our upside target is $ 14.50.” To learn how you can get an edge trading/investing with FusionIQ’s powerful platform, click here to watch my product review and take advantage of our special Wall St. Cheat Sheet 20% discount.

Dow32toPresentVWAPa

Precision Capital Management submits this super sweet chart: “Can an indicator launched in 1932 help predict the 2009 March low in the Dow (NYSE: DIA)?  The anchored VWAP line in blue provided good support over the years, including the 2002 low after the tech bubble crash (8).  However, price clearly broke through the line at times, most recently in March 2009 (9).  The lower panel plots the percentage deviation of price from the VWAP line, beginning from the July 1932 low.  Interestingly, the % deviation to the down side has never exceeded the -16% to -24% support area, the lower end of which was precisely hit this March.  This support level also caught the major low in 1974 (5) as well as some early lows in the 1930’s (1, 2 & 3).  Just as the yellow horizontal lines can act as support or resistance, so can the green trendlines.  The 1966 top came after a break through major trendline support (4) and retest of the 110% level.  On the 2000 top (7), there was no upward retest and this did mark the high.  Eventually, the current rally will peter out a bit and, we would expect a long period of sideways action until the far right green downward trendline is finally broken.  Unfortunately, this could take years (points 5 to 6 span eight years).  What will be the high of this rally?  We would expect it to come on a test of one of the two far right green trend lines.  If price were to continue up at the same pace, this would be at Dow 10,700 or 12,500.  However, if the trend slows or stops altogether, these figures will be less of course.  We will definitely be keeping an eye on this indicator for some time.  For background on the powerful support that anchored VWAP can provide (a component of the Paul Levine MIDAS method), please see our website (includes free TradeStation indicator).”

Yen Since 1991 Small

Click for Larger Image

David Singer has some nice Yen (XJY) charts this week: “The technical chart patterns on the long term charts posted above seem to give credence to [a bullish] theory. We had a massive up move in the Yen off of the Plaza Accord in 1985. That topped out in 1994, and we’ve been in a consolidation lasting 14 years since then. Recently, we have had another major round of Dollar weakness and Yen strength, pushing prices out of the consolidation to the upside on a breakout. Seemingly, very bullish long term…” (Source: Singer$Market)

USO Bear TrapCorey Rosenbloom, The Technical Analysis Professor, shows us how a Bear Trap worked in Oil (NYSE: USO): “The lesson I can give you about Bear Traps is that they are generally impossible to foresee ahead of time (that’s why they’re called traps!) but you CAN take advantage of them by recognizing when the trap is sprung and playing part of the rally that comes after bears/sellers are caught in the squeeze.” (Source: Afraid to Trade)

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