6/23/2014
By Charles Payne

On the show, I often refer to technical formations and terms to help layout how I anticipate a stock will move. I will go over these terms from time to time, and over time, delve deeper.

For me, technical analysis is important because it gives us a pulse on the mindset of shareholders and would-be buyers.

Support: It is the area on the downside where investors simply refuse to sell, and when these levels are violated for a period of time, the psychological toll triggers additional selling.  In the past year, Apache Corporation (APA) stock found support around $78. There was a brief dip, but other than that, the number held on several occasions.

Conclusion: A Buy Signal is triggered when the stock begins to lift off the support point.

Conclusion: A Sell Signal is triggered when support fails to hold and the stock continues to move lower.

Resistance: It is the point where would-be buyers refuse to pay up anymore. These resistance points usually hold for a week. Over the past two years, investors in APA became reluctant once the share price climbed north of $85, but south of $88.

Conclusion: A Buy signal occurs when the stock breaks through, especially on higher-than-average volume (see September 2013 and May 2014).

Conclusion:  A Sell signal occurs when breakout fails to materialize (see February 2013, June 2013 and January 2014).

Trend Lines & Channels: Used to capture major directional tendencies of stocks. Used by traders that go long and short, but is also a signal for long term investors to help decide when to buy or sell. For Apache, there were several points for traders to go long and short simply using the trading channel. In September, the stock broke through top of the trend line: a buy signal for longer-term investors.

Conclusion: When used with fundamental analysis, the urge to buy is bolstered with breakouts through stubborn resistance trends.

Conclusion: Selling is tough, but protecting profits is paramount, and using long-term trends help investors stay disciplined and close-out winners before they become losers.

Charles Payne
Wall Street Strategies

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