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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday July 21, 2016.
Stocks closed higher Wednesday that saw the S&P closed at a new record level as traders’ cheers a fresh batch of better-than-expected earnings. For the day, the benchmark gauge closed 9.24 points higher at 2,173.02. The Dow Jones Industrial Average closed at 18,595.03, up 0.19 percent. The Nasdaq closed more than 53.56 points higher, or 1.06 percent. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 1.67 percent to 11.17.
Cintas Corp (CTAS) was a notable winner Wednesday, soared 9.68% to 106.85 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of CTAS suggests that the stock could climb above 118 in the coming days. Just so that you know, initially profiled in our January 14, 2015 “Swing Trader Bulletin” CTAS had gained about 38% and remained well position. Below is an update look at a trade in CTAS.
The graphics below are from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges. As shown, the underlying is in a short-term bullish trend when the price bars are painted in green. The underlying is in a short-term bearish trend when the price bars are painted in red. The yellow bars identify period of neutral or sideways trading pattern. Additionally, the light-blue shading represents the short-term trading range. A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading). Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.
Chart 1.1 – Cintas Corp. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates CTAS as a Buy. The overall technical outlook remains bullish. Last changed July 20, 2016 from bearish.
Over the past few days, CTAS had been trending lower in a short-term corrective mode as it worked off the overbought condition. The correction found support near the early July breakout point. That level roughly corresponds with the trend channel moving average (as represents by the white line in the chart).
Wednesday’s bullish breakout had helped clear resistance at the July high and pushed CTAS above the 127.2% Fibonacci extension. This is a bullish development, supporting further upside follow-through and a test of the important resistance in the 118 area, based on the 161.8% Fibonacci extension
Support is around 100. At this juncture, only a close below that level can wreck the near-term bullish outlook.
Chart 1.2 – S&P 500 index (daily)
Near-term technical outlook remains bullish. Last changed June 29 from bearish (see area ‘A’ in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
S&P exceeded resistance near 2170 Wednesday, defined by the early July falling trend line, suggesting that the bull flag pattern had resolved itself into a new upswing. Perhaps, the positive Money Flow measure is the best illustration of the bulls’ case. Consecutive close above this level would confirm the bullish signal, supporting further upside follow-though and a test of our breakout target of 2200, which we’ve determined using the upper end of the red band.
The lower end of the red band, around 2160, represents key support. A failure to hold above that level would signify a bearish reversal and retest of 2130 should follow shortly.
In summary, S&P cleared key resistance Wednesday, signify a breakout and bullish reversal that support further follow-though and a test of the important sentiment 2200 mark. Consecutive close above 2170 Thursdayis needed to confirm the bullish signal.
(By：Michelle Mai for Capital Essence)
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