Weekly MACD on CWTR is bullish

[eagleeye]

Hello FibMaster,
I have a stock that I am looking at, CWTR. It is very oversold on the
monthly timeframe as well as on the weekly. The MACD on weekly has
turned bullish, I would assume at this point the stock(bear) either will capitulate by halting around the price or gearup for an up move but I see the stock still moving down. Can you please help me understand this anomaly.

[FibMaster]

Hello FibMaster,
I have a stock that I am looking at, CWTR. It is very oversold on the
monthly timeframe as well as on the weekly. The MACD on weekly has
turned bullish, I would assume at this point the stock(bear) either will capitulate by halting around the price or gearup for an up move but I see the stock still moving down. Can you please help me understand this anomaly.

Wow what a race to the bottom! With this strong trend, the chart could trade at $2.25 in the future.

I do see that the MACD histogram has recently crossed into positive territory. It that your bullish indication?

The MACD really shows the relationship of two moving averages. So a counter-trend rally can cause the faster moving average to cross up over the slower moving average. Especially if the slower (longer-term) of the moving averages still uses past data that contains dramatic price drops (gaps for example). If the quicker shorter moving average has recently moved to ignore those historic drops (and perhaps picks up a few positive data bars), the MACD can look more bullish due to the change in this relationship (between the moving averages).

That's a layman's explanation of what is mathematically occurring. Does that help you? Or you are more interested in how to trade a chart like this?

[eagleeye]

I was actually using the MACD crossover on the weekly timeframe as a bullish indicator. Plus it is very 'oversold' on all the timeframes.

Even after the mentioned context, the stock price was moving down. I couldnt understand this since Weekly MACD is a very strong indicator.

Nah I am not really looking for how to trade this stock but the thread is more for educational purposes, to understand why is it doing for what it is doing (moving down) even after some bullish indication.

Also the fridays close gave a slight indication about change of down move, I guess.

[FibMaster]

I do see that weekly cross up on the MACD. It is strongly influenced by the huge down-weeks in the middle of August. With the short-term moving average component of MACD looking stronger since it doesn't have those prior weeks.

Any rally would be a counter-trend rally, which is less desirable than a rally in an up-trend. In this down-trend, a rally would be considered an opportunity to sell short. As in an up-trend, a dip is an opportunity to buy. Of course, you have to enter at the right place, not just anywhere..

Notice how the weekly MACD crossing up prior to Nov 2006 provided great bullish trades, while the same indicator signals in 2007 provided setups for bears to short?

[FibMaster]

Now trading at $3.78, what a great ride the bears had! Coldwater Creek Inc is up the creek?

[eagleeye]

Neal,
I see the 1.618 expansion at 2.26 as you have already mentioned in your earlier post. The stock has been well honoring the preceding expansion as well. The previous expansions have acted as support and we saw some rally from there. Do you think it would be ok to look forward for 2.25, since it is almost there to prepare for a rally. I am not able to find any retracement support close to the current market price, since it has breached all of them. Hoping this price target to act as support since the stock is way oversold as well.

What do you think?

[FibMaster]

That target is realistic and achievable, but whether CWTR will get there, or even support there, is unknown. Until there is support, you don't buy. that means someone else will get a better price, and the rally might have begun before you enter, but your odds are way better that way.

[FibMaster]

Which other charts are you watching?

[eagleeye]

I got involved in BRKR recently at 11.61. I found it to be bullish as the weekly and monthly trend both are in an uptrend. It is little overbought on Monthly but weekly and daily are oversold. I believe it has got bit more juice in there to the upside.

Also I am bullish since it broke the the 11.56 high of last April. Though I dont watch for this pattern but I believe it is forming a cup and handle pattern on the monthly chart. I could be wrong.