Tuesday, April 29, 2008

Major Problems in Commodity Charts

Agriculture stocks got absolutely destroyed once again today. I have thought these stocks were done twice already this year, and both times I have been wrong. After today, if these charts don't point to much lower prices, then I don't know what type of charts will. I would guess that this selling is perhaps driven by the momentum crowd trying to get out before the Fed decision. I will be interested to see what happens here after the noise from the actual decision dies down.

DE, MON, AG, POTCharts from Telechart2007, Courtesy of Worden Brothers, Inc.


I am not looking to short here, but I want to be prepared just in case, because I still believe we could go either way here. As such, I have updated my short scans and came up with a few possibilities that I will be watching at the end of the week. Right now, the trend still remains up, so you have to respect that until evidence tells us otherwise.

VMW, FWLT
BOOM, KBR
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.


I continue to see very little in the form of new, nice-looking charts for possible longs in my scans. Perhaps I should be more bearish on the overall market because of that. If commodity stocks continue lower as they look like they will, at least right now, then we still need stocks to step into that vacuum and unfortunately, I am not seeing a ton of new leadership. Rotation takes time, however, so these leaders may just take more time to emerge. The two charts below are both earnings plays that I will watch. Both of these stocks put up reports that look promising, but I will pay attention to the reaction the next few days before possibly entering.


STAR, CYBS
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.


I said at the end of March when I reviewed my first three months of trading for the year that one lesson I hope I learned is to not trade around Fed decisions. There is just too much volatility and the true trend often takes a few days to emerge. I am taking this lesson to heart and don't plan on doing anything the next three days other than manage my current positions. Perhaps it is a blessing that there are few setups right now - that makes it a lot easier to stay out of this market. Hopefully by Friday, we will have an idea of what the market really thinks of what the Fed did, and you can have a little more confidence in acting on what you see without the fear of getting immediately whipsawed out of trades. This is what happened when I tried to trade after Fed decisions, and believe me, it is not very fun. I strongly recommend just sitting on your hands until at least Friday, not making any trades. Simply focus on what the market does these next few days, keep your watchlists ready, and be ready to act when the picture becomes a little more clear. Hopefully it will. Best of luck the rest of the week.



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