01/05/00 Dow Diamonds Trust (DIA),
McDonalds (MCD)
Points to watch:
DOW DIAMONDS TRUST- DIA fell
below its 21-day moving average (112.68) for the first time since October
27th during yesterday's market selloff. DIA closed at its low for
the day 109.75, the 38% retracement of its rally from the October 18th low
to Monday's intraday high.
Technical indicators are negative:
OBV sounded a warning bell during the market's peak by showing a strong
negative divergence with price, and both RSI and stochastics have turned
down and fallen below 70 from overbought.
Additional downside support exists at
the 200 day moving average at 107.7, and then at 105.75, and the October
low of 99.56. A test of support at 105.75 appears likely. (see chart
1 below)
MCDONALDS- McDonalds has fallen
sharply since hitting an all-time high of 49.56 on November 12th.
The stock closed yesterday at 38.81 and hit an intraday low of 38.38--a
level which also marked the low on October 25th, and is the 50%
retracement of the stock's rally from the 9/21/98 low to the 11/12/99
high. Additional support exists at 37.75--a level which provided support
on May 27th 1999 and in January 1999, and acted as resistance in July
1998.
Long and short term technical indicators
have confirmed the stock's recent drop in price: daily MACD gave a sell
signal on December 13th, daily RSI hit a new low yesterday, and both OBV
and stochastics are in downtrends. Weekly OBV, RSI, and stochastics
are all declining.
A sell short signal would be given if
the stock fails to hold support at 37.75. After a break below 37.75,
MCD would next find support at 35.5, 33, 30.5, and 28.5. (see chart 2
below)
