Monday, July 28, 2008

S&P Breaks Short-Term Support, Back to Looking for Shorts

Good evening, traders. Here are the major indices. Some technical damage was done on the S&P today and the same damage may be soon done on the Nasdaq if the bulls don't step up with a better day tomorrow. Volume has been lower on this decline, but we are also in the summer season, and trading has been very heavy up to this point, so I wouldn't be surprised to see overall volume fall for the entire month of August as traders get away for at least a little bit.

The Market Monitor ratios continue to turn more negative and are having the same look as they did back in late February, when what looked like a bounce turned out to just be a pause before the market sold off more and broke the January lows and then set up a true tradeable bounce through May.

S&P 500, Nasdaq

Oil is still holding support but at the same time has not bounce very strongly here. A break below $98 area will likely be bullish for the overall market.

USO

These are the two shorts I took today. I only took partial positions and will look to add if we get more selling tomorrow.

GU, RIMM

I am back to mainly focusing on shorts based on the market's action, but as always there are still stocks I am watching just in case on the long side. I'm not posting the charts, but here are some I am keeping my eye on for various scenarios which I talked about this weekend - IPCM, LCC, UAUA, EURX, VISN, PDO, QLGC, VRUS, IDRA, CLDN, OME, WCBO, PARL, PACW, ABMD, ARBA.

Here are some shorts to watch if we continue to sell off tomorrow. I found a lot of good setups in my scans tonight. The banks are still an area I would look at. One note in their defense - the volume has been much lower on the selling of most banks the past few days. That may not mean anything - stocks can sell off without heavy volume much easier than they can go up without heavy volume.

FBP, OZRK, PACW, EVR

I am still looking at some Chinese stocks as shorts - here are some of those setups I am watching.

CFSG, SOLF, CSR, CDS

Four new setups I haven't posted before that look good to me as possibilities.

GAIA, MTN, RSTI, CPLA

I am even watching some commodity stocks, because even though I think oil is still due for a bigger bounce, these stocks have bounce weakly and in a bearish manner, and still may have further downside based on some of these setups.

ZEUS, GMXR, CRK, XCO

I am looking at some stocks that I got out of recently - they look to be breaking down again.

NEU, SQM, ENER, MELI
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I did not check earnings dates for any of these setups yet so please do so before considering entry. I know a lot of the smaller caps are going to be putting their reports out now over the next few weeks, and taking a position right before earnings is never a good idea IMO.

I did want to mention quickly as a follow-up to the earnings gap-up video from last night that I did not mention the importance of the overall market to the effectiveness of this strategy. After seeing SOHU reverse today and being stopped out of ISRG, I was reminded of this fact. The successful plays I had this year were in April and May, when the market was in the midst of its bear market rally. Right now, these plays can still succeed, but have a much harder time doing so because this market still looks like its headed lower. That's why cutting your losses quickly are important with these. I can't deny that I am surprised ISRG didn't work out better, but that's the type of action you will often see in a bad market.

We'll see what tomorrow brings, but for the moment, it looks like it's back to shorting if the setups present themselves. Bulls need to step up and support things soon on the Nasdaq - if they don't, all the major indices may be looking at a revisit of their recent lows, and if they get there, there is nothing that says they have to hold those. Be careful out there. Good luck Tuesday.

3 comments:

Kevin H said...

Great Blog! I stumbled upon it through a blog directory. How long have you been trading part-time?

Mac said...

Thanks, Kevin. I've been trading for about four years now.

Anonymous said...

Another Round of great setups...
Thanks,

Tom