January Technical Analysis – DRN, EDC, TMF, FAS, and ERX

For those of you visiting for the first time, I use technical analysis to help make trading decisions related to a covered call strategy. Each month, after options expire, I review price and market action since the previous option expiration date, as well as my commentary from the previous month’s analysis.

As I say in my monthly cashflow report, every investor and trader should review their trades on a regular basis, and this effort helps me improve my ability to “read the tape”.


January Market Analysis

DRN, EDC, FAS, and ERX all broke through long-term resistance, but at still in neutral. the good news is that they are testing their resistance levels as we speak, and could establish new uptrends shortly. TMF appears to be headed in the opposite direction, breaking a long-term uptrend and beginning its search for support from buyers.

Keep an eye on Europe. People in the know say that it is really bad, but our markets seem to shrug it off. Is the wool being pulled over our eyes, or have we really turned a corner?

January Technical Analysis for DRN

Here were my thoughts on DRN in December:

DRN spent…November looking for a low, and the first half of December testing the newly established downtrend.  Currently, DRN seems to be content to ride the underside of the trend.  On the plus side, a sustained positive move would break the downtrend started back in July.  With each of the last two, near-term lows higher than the previous low, there is some upward momentum.  If DRN decides to move higher, the next test of resistance would be in the mid-50’s.

January’s Chart:

DRN Price Chart for January 2012

DRN broke the downtrend started in July 2011, and moved steadily higher to close out 2011.  The past few days have seen more upward price movement, bringing DRN to it’s next level of resistance (mid 50’s).  This level has been tested several times since last August without success.  The recent upward momentum, coupled with a new sideways trend should be good news for option traders, with the next level of resistance is in the mid-60’s.

January Technical Analysis for EDC

December’s commentary:

EDC did its best to test the October lows, but stopped just short and established a new, short-term uptrend.  Unfortunately, the longer-term downtrend also stayed intact.  As of Friday, we reached a decision point…either we’re going to break the longer-term downtrend, or find support for a side-ways or shallow uptrend.

January’s Chart:

EDC Price Chart for January 2012

EDC decided to head north to start off 2012, breaking the July downtrend and gaining 35% since my last review.  Too bad I wasn’t focused on capital gains!  The remaining trends are still negative, so I’ll be watching EDC to see if it can pass the next test (Sept-Nov downtrend).  If so, there is another downtrend to contend with, but not before some impressive gains or another 4 months of sideways price movement.

January Technical Analysis for TMF

December’s Commentary

TMF continued higher, finding support near the 50-day moving average.  As long as economic turmoil is front and center, TMF will continue to move higher.

January’s Chart:

TMF Price Chart for January 2012

Economic turmoil remain front and center, but TMF did not continue higher like I said it would.  Instead, it broke the long-term uptrend and is now looking for support in the low 60’s.

January Technical Analysis for FAS

December’s Commentary

FAS found price support near the $50 mark, and then turned higher to retest the July downtrend.  With the price sitting just below $60, the longer-term downtrend waits to be broken or confirmed.

January’s Chart:

FAS Price Chart for January 2012

FAS broke the July downtrend, and is poised to take out the both the low-80’s resistance level AND the uber-long downtrend dating back to the spring of 2011.  Past those levels, FAS could see 110 before running into any problems.

January Technical Analysis for ERX

December’s Commentary

ERX did retest the $40 support level, then briefly broke the longer-term downtrend that was confirmed in Oct-Nov.  Much like EDC, ERX is at a decision point, and should either confirm or break that downtrend.

January’s Chart:

ERX Price Chart for January 2012

ERX broke the downtrend, but wasn’t able to make as much progress as the other ETFs (excluding TMF).  The mid-50’s are a key test, but ERX appears to have a solid, short-term uptrend powering it higher.


About T. Knight
Blogging about my journey to financial independence via investing for cashflow.

One Response to January Technical Analysis – DRN, EDC, TMF, FAS, and ERX

  1. Pingback: February Option Investing – Covered Calls « Investing for Cashflow

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