When it comes to reviewing a stock chart, it is important to remember to look not only in different time frames – but to be sure to look at the chart from both the Bull & Bear perspective. For an example today, I have chosen the IYR (iShares Dow Jones US Real Estate Index Fund ETF). Man that’s a mouthful.
Here you have a monthly view with a Fibonacci drawn from the February 2007 highs to the March 2009 lows:
As you can see it has retraced more than 50% of the move, pulled back to the 38.2 Fibonacci line, and is now simmering under the 50% retracement line. Now let’s look at the Weekly:
The Weekly chart here shows a zoomed in view of the action noted in the Monthly chart. Here you can see several candles in August with what we call “topping tails” – which is the Bear case. Bull says “building a new base”. No matter the view, there is a range defined here that can be traded.
Now on to the Daily chart. On 9/2 we see an Inverted Hammer candle which signals a Trend Reversal (TR). Will need confirmation on 9/6. Bears say Stochastics rolling over and will cross down through %D 5 line. Bulls will note the Inverted Hammer and look for a hold here above the 20 day moving average for a TR.
One final perspective using a different chart style all together – The Area chart. Note the rising channel here on the Daily:
Can it recover the 10 day moving average or does it drift down to the bottom rail of the channel for a test?