Market Leader Cage Match: Two Tech Titans, Only One Survives
- Posted by Greg Harmon
- on June 23rd, 2011
The market cannot seem to make up its mid where it wants to head day to day. Perhaps that is because the leaders that brought it higher are also a bit indecisive or lacking in leadership. Take a look at Google (ticker:$GOOG) for instance. The weekly chart below shows a clear down trend for all
of 2011. Now it is in the consolidation range from last summer between 470 and 495 but looks to be headed lower still from the price trend. The Relative Strength Index (RSI) though is at the level where it has bounced the last three times it has touched it and the Moving Average Convergence Divergence (MACD) indicator is leveling. A bottom or a trip to support at the 425-438 range? What about Apple (ticker: $AAPL). The weekly chart below shows a topping and roll lower as well. It has not yet
reached the 23.6% Fibonacci retracement of the move higher so a continuation can be expected. But it is holding support at the 50 week Simple Moving Average (SMA) and the RSI, although trending lower, is currently bouncing higher. Will it hold and reverse or is 297 in the cards?
Will either of these leaders bring the market higher again? One thing that I liked in theory from my days on Wall Street was how leadership resolution was handled. If there were two capable leaders then they would both be put in charge as co-heads and battle each other. Kind of like a wrestling cage match. Only one co-head would survive through bonus time and emerge from the cage. Pitting $GOOG against $AAPL it is instantly clear from the ratio chart which is the true leader. Upper left to
lower right for 5 years. And there is much in this chart that suggests it will continue. The SMA’s are all sloping lower, the RSI is trending down and not nearly over sold yet, and the MACD is moving sideways showing no support for a divergence higher. Even though there is some indecisiveness in the individual charts there is no doubt on how to play the pair, by shorting 100 shares of Google against buying 145 shares of Apple, even though they are both talked of as leaders. This is just one way to see relative strength but quite effective. Look at your two favorite stocks this way occasionally.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
Dragonfly Capital Updates
- Macro Week in Review/Preview March 7, 2014
- Top Down Options Trading, Risk Management, and Collars
- Time to Sell Corn?
- Long Term Pick of the Week: Bridges, Iron and Voodoo
- Premium Earnings 3-6-14
- Your Second Chance in Natural Gas Is Here
- The Third Pitch From OpenTable
- Premium Earnings 3-5-14
- Prepare for The Euro Breakout
- Hogs and Bats and Crabs