Thursday, May 29, 2008

A Few Short Possibilities, A Few Long Possibilities, and One Possible Earnings Play

Here are the two shorts I took today near the end of the session. The success or failure of these shorts will likely depend on what the market does tomorrow and into next week. Oil certainly looks like it wants to still head lower and after today, yesterday's bullish reversals look rather meaningless. Let's see if that holds true tomorrow. My stop is very tight on CRZO just in case. Same with ISRG - if this is just an oversold bounce and the market is starting to peter out, then it should work well as a short. If the market has more upside, I will get out with a small loss.

CRZOISRG
Here are a few other shorts I have mentioned before and look very close to being in low-risk positions for entry. To be honest, I don't see a whole lot of other setups on this side.

BOOM, VMW
EDU, LNN

Here is one possible earnings-related play for tomorrow. MRVL beat estimates after-hours and was up over 15%. It will likely stage a breakaway gap tomorrow and this could be the start of a longer-term move higher. The only problem is this is a bigger-cap stock with a big float, so it will not move as fast as some earnings plays. The chart doesn't look too bad.

MRVL

IBD pointed out tonight that today was day 3 of the current rally attempt. If we get a move of over 2% on any of the indices on higher volume, it will signal a new rally is in place, and I will respect that. Before jumping into any longs like MRVL, however, I am going to wait for this follow-through signal. We may never get it, and I would rather be safe than sorry. It would be quite interesting for IBD to go to correction mode and then about a week later get a follow-through day. It can happen, but I don't think it is very common. One good piece of news for bulls is that the Investors Intelligence Survey showed a pretty big decrease in bulls this week, dropping from 47% to 38%. If oil continues lower, perhaps it will give the market the impetus to run higher and start a new rally, but it didn't do as much as I expected for the market today.

I still didn't see too many great charts in my scans tonight, which is another reason I am not overly optimistic right now. These two are among the best I see and I would be willing to take them if the market follows-through. Both have earnings as catalysts for their moves and have been consolidating those gains nicely on lower volume.

ENER, CLS
All Charts From Telechart2007, Courtesy of Worden Brothers, Inc.

This is still a market where some things are working and some things aren't. It's certainly not an easy market right now, and I would still refrain from making big bets until we get a follow-through day on the bullish side or some quick selling tomorrow and into early next week on the bearish side. The only big bets I am making right now is on oil heading lower, and the bets I made really aren't that big. I will continue to move my stop losses up as well to protect my gains in this sector and also protect against any reversals. I would like to give my positions a little more room to move around and not have to micro-manage them, but I just don't think we are in that type of market environment. Tomorrow is the last trading day in May, so it will be interesting to see if they can mark things up one more time, or if the afternoon pullback means anything for Friday. Best of luck either way.

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