Saturday, March 8, 2014

SOCL Social Media ETF Weekly Chart Overbot Rising Wedge Negative Divergence

The social media stocks continue running higher. SOCL is up 110% over the lasts 17 months. The Fed says there are no asset bubbles in markets. Comically, they must consider a doubling and more of indexes and stocks over about one year's time to be routine. Obviously, the Fed will never admit to bubbles existing since they are the ones creating the bubbles with their easy money policies.

YNDX, the GOOG of Russia, stumbled last week because of the Ukraine turmoil, but it recovered and there is no lasting effect on SOCL, the global social media ETF, as price prints new highs. The positive divergence, oversold conditions and falling wedge in 2012 launched the joy. The tight squeeze on the standard deviation bands added the upside rocket fuel (pink circle). The price move is long in the tooth with a rising wedge now in play. The indicators are at or near overbot conditions and the negative divergence over the last several months remains firmly in place. The RSI and MACD line are trying to squeeze out some more upside juice, to coax price to print in the apex of the wedge but the move is becoming tired.

The violation of the upper band should send price lower to the middle band, at 20.76, at a minimum. Price is extended above the moving averages requiring a mean reversion. A topping out of social media stocks would be expected over the next month. There may be a further +5% or +6% upside but the downside potential is from -10 to -40%; the picking up of nickels in front of a bulldozer scenario. Price collapses out of rising wedges can be quite dramatic. In late 2012 early 2013, price spiked from 11 to 14.5, over +30%, in only 14 weeks. Remember this style move can happen in reverse when price falls from the rising wedge. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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