Investing Adventures

In our previous analysis, the general consensus from myself and readers is that EMC, upon breaking the neckline of the inverted H&S, may have some bullish tendencies. Now, let’s couple the initial chart reading with some indicators I’ve begun to use thanks to the instructors at Think or Swim. (Shameless plug, but TOS is by far the best broker I’ve used to date!)

Let’s go ahead and add three indicators to our EMC chart, the MACD, the Slow Stochastic, and the Money Flow Index.

Now, you (and I both!) should have a good understanding of how the MACD, SS, and the MF work. Investopedia has great articles on all three so we’ll go ahead and forgo a long explanation of the three. I’ll come back to that at a later date.

First, the MACD indicator. As you can see (and if I’m reading this correctly), the MACD (the solid black line) has crossed over the 9 day EMA, or trigger line (the red dashed line). When the MACD crosses the trigger in a positive way (i.e. the MACD doing the crossover instead of the trigger), this may signal a bullish trade. One indicator, at least in my opinion, probably does not give the whole story so let’s move on the next indicator, the Slow Stochastic.

The Slow Stochastic is made up of two lines, the %K and %D line. To keep things short, when the %K line crosses the %D line in an upward trend, that may signal a buy while crossing on a downward trend can signal a sell. What’s neat about the slow stochastic from the TOS classes is that if the %K line begins to diverge from the %D line, a bullish trend becomes more and more likely since stock prices are closing closer to their intra-day highs. With EMC, the %K line appears to be diverging from the %D line in an upward trend.

The last signal I was taught is the Money Flow Index. The money flow is just that. How much money are large institutions pouring/withdrawing from a specific stock. In this case, it appears that money is slowly flowing back into EMC after the harsh selloff a month or so go. Don’t fight the trend.

From the chart analysis to the different indicators, I see EMC going upward over the next month to two months. Within the next couple of months, from charting, I’d give EMC a price target of about $22.50 which is the difference between the low and the neckline added to the neckline / resistance level. If the trend is confirmed, it may be worth buying options about 3 months out in case you’re interested in jumping in just to give yourself enough time. EMC also has earnings in early January which may give EMC’s stock another pop. Good luck!