Saturday, July 19, 2008

Based on My Scans, Not Yet the Time to Make Big Moves, Short or Long

Here are the major indices. Most got some support on Friday from their short-term moving averages, but the action was so dull, I can't take much meaning out of it. Perhaps everyone just needed a day of rest after the craziness of the past two weeks. Right now, the best thing that could happen to the bulls is for the indices to just rest quietly for three, four, or even five days to digest their recent gains and to work off a short-term overbought condition. This would allows more bases to form as well in individual stocks. We all know how often the market gives us what we want, right?

I am open for anything this week - we could pullback and test the recent lows, or this short squeeze could continue. I still am of the opinion that this is a bear market bounce due to the groups leading the march higher the past three days (financials, airlines, etc) and the lack of really nice charts setting up. I am not locked into that opinion however. Oil is the wild-card and if it continues to fall, then I think the bullishness will continue. Basically, I am still waiting for a follow-through day - if it occurs, then I will began to get more bullish, especially if some new charts can start popping up as well.

Dow and S&P 500
Nasdaq and Russell 2000

I am putting some charts up of stocks I will be watching today, but I have to be honest and say nothing I really saw in my scans, both long and short, excited me. I just don't see many great plays right now - nothing stands out. Just remember that as you check out the charts below.

Gold is something I am still watching and it is right at a point of support that needs to hold. I would be interested in re-entering if it held here.

DGP, RGLD

Here are the best longs I see right now. VRUS, CIR, and ARST are the only ones I will watch carefully. The others are just not that exciting. I mean, come on, H&R Block??? Is that really going to produce a nice-sized gain? Based on history, no.

VRUS, CIR, ARST, BTM
HRB, RNT, CELG, BVX

IBD listed some stocks in their weekend edition that could, as they stated, be "new names that are trying to lead." The stocks they pointed out were MA, CF, SXE, CLHB, SDA, CMED, and NDSN. None of these stocks were in my bullish Telechart scans and for good reason. I checked them out and they all looked crappy to me. MA is the only one I would really watch, and it still has some work to do before becoming buyable. So again, be careful going long here because I just don't see a ton of great options.

Here are the shorts I am watching, but none of these stand out to me either. I didn't post the solars (FSLR, SOL, SPWR, and YGE) because I think they could go either way here. Keep an eye on them.

SQM, CMP, IPI, TITN
FCSX, ANW, PSEM, GYMB
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Going through my scans, I am looking for oils to set up some shorting patterns soon. After being taken to the woodshed Wednesday and Thursday, most put in very weak bounces Friday. IF they can kind of chill for a few more days or bounce slightly higher, I will be looking at them to reshort, and if those patterns play out, I will post the charts. Right now, however, they are too risky.

We'll see what next week brings us, but I am not planning on doing a lot right now. I am mainly in cash anyway (only two shorts currently) and will just let the market tell me what it wants to do. I am willing to go long or short - I don't have a bias right now. I just want to be on the right side of the market.

I hear a lot of people comparing this past week and the Fannie/Freddie situation to the Bear Stearns situation in January, and there may be some validity to that. But if you look back at the charts of late January and February, I would not say it was an easy time to trade. February was pretty much trendless, and I remember getting chopped up pretty good in that environment because I didn't yet have the foresight or patience to sit that period out. It wasn't until the middle of March that a true tradeable bottom was put in that money could be made from. Part of me thinks we may be setting up that type of scenario again. That's why I think caution is warranted here, unless better looking charts start popping up. I am going to try and do another trading video this weekend so be on the lookout for it. Best of luck next week.

3 comments:

Gio said...

Same sentiment with me.n. I think the current market conditions these past few days is a metaphor for high surf advisory... Stay out if u can't swim. But there were some big waves to ride- energy and financials (SKF!). I think things get calm for the rest of the month, or at least until oil moves sharply again. There was little impact on the markets when MSFT and GooG got slammed, so I'm taking that as a sign that were at neutral zone. I'm paddling back to shore, keeping my trades small.

I already have shorts in SQM. Howd we miss the short in ICO on thursday?!

As always, lovin your screens.

-gio

Anonymous said...

Quite some stocks and indices are close to or at the their lower channel lines on the weekly charts, which makes me think we might see some mixed action over the next week or two, and then have a another rally that might last a month or so until we reach the upper channel lines, and then see if we can break out of this overall down trend. Just some thoughts.

Mac said...

Gio - yeah, I just get the feeling that we're in for a few weeks of difficult trading. I could be wrong - it wouldn't be the first time. My basic attitude is to take a trade if I see it but don't force anything. I am looking at oils resting for a few more days and if they do, I would be interested in reshorting. I am also looking for earnings trades - they seem to work well regardless of the market if you can find a good one.

I saw ICO but I have had bad luck deciding which of these coal stocks to short - they all look so similar, but some drop and some don't. FDG is showing me a small profit and I'll probably tighten my stops a bit.

Anonymous - a rally is certainly possible here - I just don't see many nice charts. I will continue to look for charts and if I see any and we follow-through, then I will be willing to take them. I just don't want to force anything right now.