Sunday, March 29, 2009

Wk13: Market Recap

Last week the S&P continued its rally right up to the prior 820 support area. The internals favored the bulls with an especially strong Monday and A/D Lines of +1000 the entire week. If we look at week 13, we can see a long shadow on the weekly bar. The fact that the bulls were able to break out over that bar in week 14 is quite bullish.

Wk14: Market Forecast

In the week ahead make note of these important economic announcements.
· Tues: Consumer Confidence 10:00 AM ET
· Weds: ISM Manufacturing Index 10:00 AM ET
· Weds: Pending Home Sales Index 10:00 AM ET
· Thurs: Jobless Claims 8:30 AM ET
· Fri: Employment Situation 8:30 AM ET
· Fri: Ben Bernanke Speaks 12:00 PM ET
Our next target level is the S&P 875 area with a support level at 805. The dailies are forming a bull flag so any break over $833 should constitute a move higher, as always watch for confirming internals, increasing volume, and a retraction in the VIX to confirm a breakout move.

Wk14: Weekly Watchlist

CPSI – Pulled back to support making for a great entry point.
CCK – An ascending triangle is forming on CCK. We typically trade a move like this in one of three ways, an anticipatory trade here, buy the breakout, or buy the retest of support.
CLB, MOS and RCII can be traded in the same way as CCK.

GMCR – Very nice triangle consolidation pattern forming. A break in the direction of the trend should result, which in this case is up.
LINC – A buy over the hammer at $17.50 with a stop under the low at $16.50 allows for an easily managed trade.
RIG – A bounce off support here provides a great entry.
HMSY – Bear flag pattern forming. Notice how the current rally is on declining volume and has not retraced more than 50% of the “pole.” An anticipatory entry or an entry on the breakdown of $29.50.

SIGM – An easily managed trade with an entry below the low of the inverted hammer and a stop above its high, the low volume on the prior rally adds confirmation that the stock is likely to decline more.

More Shorts:

Monday, March 23, 2009

Wk13: Watchlist Update

Monday got off to a great start with news of February Existing Home Sales rising 5.1%, the largest increase since July 2003. We added a few more longs to the watchlist and as we said before, since the market is strong watch for relatively weak stocks to short.
CTRP - Bull Flag: Use the top of the consolidation for entry.
JCOM - Triangle: Enter on the breakout or the retest.
MOS - Ascending Triangle: This can be an anticipatory entry now or wait for a breakout of 46.
RCII - Triangle: Watch for a breakout.
WFR - This stock broke out today, but watch for a retest for entry.
SIGM - Head and Shoulders: Watch for a retest

Sunday, March 22, 2009

Wk12: Market Recap

The four major indices (S&P, Dow, NASDAQ and Russell) finished up slightly on the week, but not before touching the S&P 800 level we talked about. The pullback late in the week feels weaker than in weeks past, the 50-MA acted as a resistance level while the 10-Day MA is acting as support.

Following a withstanding rally in week 11, week 12 economic news hinted that confidence may be instilled in the markets sooner than previously thought.
The breadth ratios on the advancing days (Tuesday and Wednesday) we’re relatively stronger than the declining days (Thursday and Friday). Monday’s action was mixed after Ben Bernanke said it’s possible the recession may come to an end this year on a CBS Television interview Sunday night. With many investors and Hedge Fund Managers sitting on the sidelines through these uncertain market conditions, bargain hunters are back on the prowl.

We usually see stocks rally into Option Expiry (the third Friday of every month) and this cycle was no different. This particular expiry is know as a Triple Witching, meaning contracts for stock index futures, stock index options, and stock options all expire on the same day only occurring in the months of March, June, September and December.

Wk13: Market Forecast

In the week ahead make note of these important economic announcements.
· Mon: Existing Home Sales 10:00 AM ET
· Weds: Durable Goods Orders 8:30 AM ET
· Weds: New Home Sales 10:00 AM ET
· Thurs: GDP 8:30 AM ET
· Thurs: Jobless Claims 8:30 AM ET
· Fri: Personal Income and Outlays 8:30 AM ET
· Fri: Consumer Sentiment 9:55AM ET
Treasury Secretary Timothy Geithner will hold a briefing at 8:45 ET on Monday in efforts to stabilize the financial system. He is also delivering a speech on financial regulation reform before House Financial Services Committee in Washington of Thursday 10:00 AM ET, this could act as market mover as well.
We will be looking at the S&P 750 level as support and the 800 level as resistance. A pullback would be expected and would be nice to see as this would act as a breather and any move sideways would form a stronger support level for future retests.

Wk13: Stocks to Watch

While we found more bearish signals over the weekend, many of these weak stocks are holding at their 10 and 20-Day Moving Averages, and remember, a stock will be most likely to act in the path of least resistance. Easing into the week and staying Delta Neutral will help keep your portfolio balanced until a clear trend is established.




More Shorts (Caution: 10/20-Day MA’s turning higher):

Saturday, March 21, 2009

Wk12: Watchlist Recap

The longs overpowered the shorts last week making some nice gains. Click to see last weeks watchlist in detail.

ARO & XLNX - Broke out and is retesting the old resistance (which is now new support)
BR - Holding sideways
GEOY - Fell back to the prior swing low where a new entry was established over the high of 3/16, earnings are coming up so be warned
SVR - 7 up days in a row and climbing

ADBE - The stock moved higher on earnings news, the stock never broke to the downside, waiting for confirmation helps keep up out of to-be losing trades
BBT - Moving sideways, slowly breaking it’s down trend, no trade here
CALM, ESV & DBD All moved higher before we could place a trade to the short side
CBU - CBU fell nicely on Monday, but began climbing slowly during the week finishing right where it started. A stop above the prior swing high would have kept you in the trade, but with tighter stop over the current swing high, you may have been stopped out. There’s nothing wrong with re entering a trade after being stopped out if the entry signal arises. Sticking to your trade plan is ALWAYS the most important thing so getting stopped out should be looked at as a success when this is the case.

Arms Index – TRIN

Developed by Richard Arms in 1989, the Arms Index, also called the TRIN (TRaders’ INdex) is designed to detect overbought and oversold levels in the markets. The indicator looks at the number of advancing stocks versus declining stocks combined with how much volume is flowing into these stocks.
This is a contrarian indicator, meaning it has an inverse relationship with the market. A ratio of 1 means the market is at parity, above 1 indicates more volume is flowing into declining stocks, and below 1 indicates more volume is flowing into advancing stocks.

Used in conjunction with the A/D Line and Breadth, the TRIN ratio can be used as an intraday indicator to confirm or deny the changing market trend. It can also be looked at from a daily perspective, when applying a 10-Day Moving Average Arms considers a decline below .8 overbought and a move above 1.2 oversold.

Tuesday, March 17, 2009

The Fibo Bounce

Looking at an hourly chart of the S&P, we seem to be breaking a Fibonacci Levels, pulling back, then bouncing off to the next Fibo Level. Looking to the market internals intra-day can help confirm whether or not the pullback is buyable.

Saturday, March 14, 2009

Traders Expo: Los Angeles, CA

The International Traders Expo will be held in Los Angeles from June 3-6, 2009. Click the title for a link to register for free.

Ladies and Gents, We're Back!

After a week in Las Vegas, we're back and ready to fire up the trading again. A lot has happened in the prior week and a lot more is to come in the week ahead. Enjoy!

Wk11: Market Recap

In last week’s news, Warren Buffett’s commented Monday that the economy has “fallen off a cliff,” but is optimistic that the banking sector will recover. Citigroup announced they we’re profiting on the year Tuesday and stocks soared with the DOW up 5.8%, S/P 6.4% and NASDAQ and Russell up over 7%. Citigroup itself ended up 34% on the day. Gold pulled back early in the week before climbing higher with a close of 928.00 on Friday (London Fix PM).

As the week progressed more good news rolled in, well investors liked the news anyways. Bernard Madoff was jailed on Thursday after pleading guilty in the largest investment fraud in Wall Street history, drawing in $65 billion over his 20 years scandal.

Last week’s rally looks small on the longer term chart. With a strong S/P previous support at 800, it seems likely that we would turn lower before breaching this point. That 800 level also happens to be where the 50-Day MA is currently sitting, for those of you who use Moving Averages. The indices broke their down trend line and closed above their 10 and 20-Day Moving averages and are sitting just below the 30-Day MA.

The VIX broke its current trend line to the downside last week. Whenever a trend is broken it is usually retested. That once support, will then act as resistance when retested.
For those of you that are bullish, a buy signal printed on the NYSE Bullish Percent Index on March 12. The BPI is applied to a group of stocks as compared to another and charted using Point and Figure Charts. Since we received this signal in an oversold state, it does give higher probability of success to bullish positions taken at these levels. While the chart may not make much sense, it is based off the simple rules of supply and demand.

Wk12: Market Forecast

In the week ahead make note of these important economic announcements.
· Sun: Ben Bernanke Speaks on CBS 60 Minutes 7:00 PM ET
· Mon: Industrial Production 9:15 AM ET
· Tues: Housing Starts 8:30 AM ET
· Tues: Producer Price Index 8:30 AM ET
· Weds: Consumer Price Index 8:30 AM ET
· Weds: FOMC Meeting Announcement PM 2:15 ET
· Fri: Ben Bernanke Speaks 12:00 PM ET

Other economic news reports are Housing Market Index Monday, Petroleum Status Report Tuesday and Jobless Claims Thursday. Visit the Economic Calendar on the Links Tab for a more in-depth look at economic data.
Using a Fibonacci Retracement from the previous swing high we’re sitting right between the 38.2 and 50 retracement levels. Fibonacci Retracement’s are quite subjective on the level at which the study is drawn, therefore we will use these numbers as a loose range of support and resistance with the 38.2, 50, and 61.8 holding the most weight.

It would be expected to see profit taking in the week or two ahead so a move to the S/P 800 level may be a stretch. If we do begin to sell off one of two things are likely to happen. We see a move lower that does not break the previous low, at which point we put in a slightly higher low. Or, we break the all mighty 666 level where a move down to the 650 area on the S/P would be likely before the bears have had enough and the bulls step back in.

Watch out for news this week, there’s a lot of it so stay on your toes and have your risk managed.

Wk12: Stocks to Watch

ARO - Sitting right at the 200-MA and showing increasing volume on the current rally. Enter close to $24 with a stop under the prior swing low.
BR - Broke out nicely on good volume. Buy on a pullback at prior resistance around $16.50-$17.00.

HANS and SA are acting similar to BR. Use BR’s chart as a reference when drawing your support and resistance trend lines.
GEOY - Buy on a break of $20.30 (Resistance). The trade can be easily managed with a stop below $18.60.
SVR - Emerging breakout. A move over $15.80 on good volume should send the stock higher.
XLNX - Another emerging breakout that can be played one of two ways. You can try and catch this breakout move if the stop opens even on Monday, or wait for a pullback to prior resistance of the $19 area.

ADBE - If we begin to roll over look for ADBE to fall hard as it approached its down trend line and is showing weakness.

BBT - If BBT breaks below the tail of Friday’s candle then we like this one to the short side. A stop can be placed over the high of Friday’s candle.
CALM - Great inverted hammer on this stock. Typically we’d enter on a break of the low of that candle with a stop over the high. Watch to see if the stock is active relatively weak or strong to the S/P before placing your trade.

ESV - Similar to CALM, we also like the decreasing volume on the rally

CBU and DBD have rallied to their prior support levels making for a great entry to the short side as well.

Saturday, March 7, 2009

Wk10: Market Recap

Week 10 was filled with economic data. The ISM manufacturing report showed a second straight month of strength which is leading some to say that the worst may be over. In President Obama’s statement Tuesday, he expressed that the long-term valuation of the stock market is attractive.

Tuesday a very weak pending home sales report headlined the day's economic data. The report points to deepening declines for current home sales. The Fed’s Beige Book reported that the recession is deepening, and a series of comments from Federal Reserve officials seemed to confirm that accusation.

February's atrocious jobs report was expected. The markets expected the unemployment rate to move to 9 percent sometime about mid-year.

Wk11: Market Forecast

In the week ahead make note of these important economic announcements.
· Tues: Ben Bernanke Speaks 8:30 ET
· Thurs: Retail Sales 8:30 ET
· Fri: International Trade 8:30 ET
Look for a break of S/P 725 or 665 for continued moves to the up or downside. We are in uncharted territory so proceed with caution. The most important thing through these times is to preserve capital.

Wk11: Stocks to Watch

For this week’s watch list, look to our Facebook group where Justin will be keeping everyone up to date on weekly market action…

Sunday, March 1, 2009

Feb09 Recap

The S/P and Dow both broke down and closed below the prior lows set back in 2002, while the NASDAQ and Russell are considerably well off those levels. Nonetheless, the month of February was quite bearish. Earnings, Economic Data, and President Obama’s Stimulus Plan were all contributing factors in the month’s volatility.
Even though we are primarily swing traders, it is important to back out and review the indices and individual positions on a larger timeframe as prior levels of support and resistance can come into play matter how far out they may be.

Wk9: Market Recap

The internals do not paint a clear picture of last weeks price swings (Click on the image to read more about the A/D Line and Breadth). With a fake out to the upside mid-week, the bears finished the week on top. Economic news was grim as news of the federal government taking over Citigroup along with a weaker than expected fourth quarter GDP of -6.2% on Friday sent stocks lower.
As we continue making these new lows, the VIX (Volatility Index) is remaining steady with no major price swings. It seems that investors are not in all out panic mode day-to-day and rather accepted the markets slow grind lower.

While we haven’t seen a strong rally OR panic sell that we have been discussing, one of the two on its way here in the week or weeks to come.
As we wrote about on February 18th, we are in an area with very little support, looking back 12 years to even find a point where the SPX was at these levels. Straight lines (moves higher without consolidation) don’t make for good support levels so we may not see a significant support level until the S/P 650 area.

Wk10: Market Forecast

In the week ahead make note of these important economic announcements.
· Mon: Personal Income and Outlays 8:30 ET
· Mon: ISM Manufacturing Index 8:30 ET
· Fri: Employment Situation 8:30 ET

Also pay attention to Tuesday’s Pending Home Sales Index at 10:00 ET and Thursdays Jobless Claims 8:30 ET.
A move lower seems likely, but we are still setting up with some long positions because we feel the risk/reward is such that a sharp rally to the upside will occur at the most unexpected time. The next level of support is not clear cut so be prepared for a strong move in either direction. Keep an eye on the VIX for confirmation of the move (a move down with a spike in the VIX or a move up with a retraction).

Wk10: Stocks to Watch

Last weeks trading session didn’t produce much. As mentioned in a previous write up called “First 15-min. Rule” we do nothing the first 15 minutes the market is open. This gives us an initial gauge of market direction. Typically if a stock gaps up or down off the open it fills, therefore if a stock we are thinking about going long gaps up above our entry price, it will either begin to fail in the first 15 minutes, or move higher. Waiting for this confirmation helps shake out false moves and keeps us from entering many potential losers.

We like the recent pullback in gold and use GLD to play the metal.

Long Setups: ACS, AU, CSTR, FCX, ORLY

Short Setups: BBT, CBU, ESV, FLIR, GMT, SON, VMC