More Charts Are Setting Up Nicely

Here are charts of the stocks I talked about earlier that put in nice, earnings-related breakouts today. I believe all of these stocks are IBD-type stocks with good fundamentals, and their charts look good as well. I am interested to see if these follow-through at all. I would be interested in a few of these on pullbacks if the market cooperates.

CYBS, OTEXMPWR, GFA

CSIQ, AMED

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here are some of the best charts I see setting up right now. I got more in my scans tonight than I have for the past week or so. I hope that's a good sign. I still have to wait until the market shows its true colors before I would start positions in these, those. The possibility of getting whipsawed with any new purchases still scares me here, and I will trade accordingly.

APWR, BMRN

ASTI, VIT

ASIA, PWRD

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I don't have time to put up charts of all of these, but here are some others that I am watching if they rest a bit more. Some of these are oil-related and have pulled back in an orderly fashion. Some oils haven't been so orderly, so I am not sure what to think about the group overall. Here are the names:

REXX, BEXP, GDI, TDY, DECK, MTL(if it gets to the 50 day MA), CPO, XCO, and NUAN

Tomorrow should be interesting. Hopefully the market decides it likes the statement and we break out soon. Best of luck with your trading.

Tags: OTEX, MPWR, CYBS, GFA, AMED, CSIQ, APWR, BMRN, ASIA, PWRD, VIT, ASTI, CDS, REXX, BEXP, GDI, TDY, DECK, MTL, CPO, XCO, NUAN

State of the Market - 4/30/08

Better than expected GDP and ADP employment reports caused a higher open this morning for the markets, and momentum continued throughout the morning, as all indices posted medium-sized gains and held them through the lunch hour. When the Fed report hit around 2:15, all of that changed, as the market rocketed upward, then downward, then upward, and then finally downward as stocks started selling off around 2:30. The downward momentum continued into the close, when only a late bounce saved stocks from closing at their lows for the day. Volume appears to be higher, and if so would probably count as another distribution day on the total count after the Dow and S&P added one yesterday. That will give each of those indexes four distributions days, while the Nasdaq has two. Certainly not what you want to see if you are a bull. I will remind you though what I said yesterday – it often takes several days to determine the true market reaction to a rate decision, so I am not ready to be a growling bear yet. If we more distribution tomorrow and into Friday, then yeah, I will start reassessing my stance on the market. Until that happens, I am willing to give the market the benefit of the doubt.

Here is a brief summary of the actual Fed statement that seems to drive so much of trading on these days:

“In announcing its decision, the U.S. central bank pointed to the "substantial" reductions it has already put in place and noted that energy and other commodity prices were on the rise. It also dropped a reference contained in its last interest-rate announcement that "downside risks to growth remain."

"The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity," the central bank said.

While the Fed said uncertainty on the outlook for prices remained high, it also said it still believed inflation would moderate over time, which some analysts saw as suggesting the possibility rates could move lower. Two Fed officials dissented from the decision to cut rates, preferring no change.”

The part in bold is what worries me a bit. Here’s part of the actual Fed statement regarding what they expect inflation-wise.

"Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months," the Fed's statement said. "The committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully."

I don’t see much in there that tells me they care deeply about helping the average American and fighting inflation, but I am not an expert. Maybe someone can help me out here. The part where they say “inflation will moderate” is what scares me the most. How do they really expect inflation to moderate over the coming quarters? What is exactly going to cause this happen? I really don’t know, but that is why I am a bit worried and one possible reason the market didn’t rally on first look of the statement. My guess is what the market wanted to hear is that the Fed will start fighting inflation and either hold rates steady or raise rates over the coming few months. Right now, the consumer is hurting mightily and until these energy and food prices come under control, I don’t know how the economy can improve. Maybe that’s just what I wanted to hear. We’ll see where the Fed goes from here. They seemed to leave the possibility of more rate cuts in the future open, and if that tool is still out there, I fear they will continue to use it to help the banks and brokers, instead of consumers and taxpayers.

I am still planning on not trading tomorrow or until the market tells me it wants to go higher, but based on individual stocks, I saw some very good things happening today. There were several IBD-type stocks that broke out today on higher volume, and if the market was a little more lucid here and if the Fed decision wasn’t on our plates, I would be jumping on several of these. Check out CYBS, MPWR, CSIQ, OTEX, GFA, AMED, VIV, and SPW. The thing I like is that many of these breakouts were earnings related, and that is one less thing you would need to worry about if entering these stocks. If we have more days like today where newer individual stocks breakout out of nice patterns, I would be much more bullish on this overall market. As it is, I will still remain patient due to the likely volatility of the next day or so, but these stocks will be on the top of my watchlist.

I will be back later with some charts setting up and some of the charts that put in nice moves today. Perhaps tomorrow we will reverse the afternoon reversal and head higher. With the amount of short interest out there and the fact that we are right at resistance, a breakout here could turn into a very nice move higher for the market. Then again, perhaps we head lower still with the month of May beginning. I have no idea and am preparing for either outcome. We shall see what tomorrow brings. Until then, best of luck and be careful.

Tags: CYBS, MPWR, CSIQ, OTEX, GFA, AMED, VIV, SPW, Fed Decision, Federal Reserve, Inflation, Rate Cuts

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.

Tags: DE, MON, POT, AG, CYBS, STAR, VMW, FWLT, KBR, BOOM

State of the Market - 4/29/08

I expected a quiet day today in the markets ahead of the Fed meeting, but the morning action wasn’t very quiet, as a somewhat flat open was quickly sold and the indices headed lower throughout the morning. Mixed economic news in the form of a higher-than-expected Consumer Confidence reading and more bad news about home sales seemed to do little to effect trading. Around 11:00, the market hit a low and rose throughout most of the rest of the day. Once again, however, some late selling put the indices back toward their lows for the day at the close. The Nasdaq did show some relative strength today compared to the S&P and Dow. Ags and other commodity stocks continued to get destroyed today, perhaps a sign that investors do indeed expect the Fed to show some restraint tomorrow with further rate cuts. Volume appeared to be a little heavier on the S&P and a little lower on the Nasdaq. Overall, it turned into another pretty boring day but I think it is good that we are pulling back a bit here before the Fed decision.

Today will be a short commentary because, to be honest, I can’t think of much else to write about. Until we get the Fed decision tomorrow, it is hard to know what the market is going to do. If you’ve read my recent posts, you already know there are good arguments for being bullish and bearish here. As it is, I have to remain bullish until the market tells us otherwise. Let’s hope we get some movement after tomorrow, and hopefully that movement is upward. We shall see. I am interested to see what the Fed does do. Here is a few interesting articles I found today dealing with inflation and the decision tomorrow to keep you busy while we wait for some news and market movement.

The Fed's Dilemma: Rescue the Housing Market or Feed the Poor

Why Were Stuck With Insane Prices?

I'll be back later if I seen any more charts setting up. Although I haven't been making many moves the past week or so, you always want to remain prepared for when the market decides what it wants to do. Best of luck.

Tags: Inflation, Fed Decision, Food Shortage, Housing Market

Some Oils Setting Up - Are You a Risk-Taker?

This is the stock I took a small position in today. I am hoping for a breakout here and if it doesn't happen, I will exit the stock quickly. I may add to this but won't make it a large position due to its lack of great fundamentals.

IDRACharts from Telechart2007, Courtesy of Worden Brothers, Inc.

A few charts setting up. CSIQ continues to be a stock that I like due to its fundamentals and tremendous growth, but the chart isn't perfect. It could be forming a handle here but it is a little choppy. I will keep an eye on it to see if it can get above this short-term trendline.

CSIQ, GA

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

A lot of the setups I saw tonight were oil stocks that have pulled back and consolidated some of their recent gains. My main worry with these is that if the Fed finally decides to fight inflation and pauses Wednesday, or even suggests that it is done cutting rates, then commodity stocks are likely going to be hit. The ags look very toppy here but many of the oils have held up pretty well. I don't know if this is a risk I want to take here.

TTES, MCF

XCO, LUFK

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Overall, I still am not seeing a ton of low-risk setups, so I will remain cautious overall. If you look at the stocks I put up this weekend, some are still looking decent, so if you are looking for long candidates, check them out.

We are really in the heart of earnings season now, and one of the strategies that usually work well in an uptrending market is buying stocks of smaller stocks that post great earnings in a surprise fashion. I have not really discussed this strategy, but it has been documented on several blogs I follow and I have used it before with success. I plan on writing a post describing what I look for in an earnings-related play sometime this week. I haven't seen too many opportunities in this arena yet this year, mainly because I look for unknown stocks putting up great earnings, like WSCI. This stock put up a 179% gain in earnings and a 45% gain in sales on April 3, and if you check the chart out, you can see what it has done since. That type of growth and reaction from the earnings is what I look for. UFPT is another stock that put up nice earnings (March 6) but looking at the chart, I probably would have been stopped out of the stock after buying it. But it has moved much higher since then, likely based on their earnings. SOHU is a stock that posted excellent earnings today, but is a little bigger than I look for in these plays. It was also extended going into this report. However, I will watch it carefully and if it can rest, I would be willing to jump on. The catalyst (today's report) is now out there for it to continue higher if the market cooperates.

I don't expect this market to do much of anything tomorrow because of the Fed. So it is likely to be a boring few days, but that's not a bad thing with the market being overbought. Best of luck tomorrow.

Tags: IDRA, CSIQ, GA, TTES, MCF, XCO, LUFK

State of the Market - 4/28/08

A slow, quiet day for the most part on Wall Street today. Futures were basically flat heading into the open, and stocks traded in a pretty tight range for the first half of the day. The market broke out of the range around lunchtime, but didn’t really move much higher. A late selloff had stocks closing near their lows for the days, but it wasn’t very sever. Basically there isn’t a whole lot that can be said about today’s action other than it appears that we are consolidating here a little. There wasn’t much news to influence trading – most of the news will come later in the week in the form of GDP and the Fed decision on interest rates, and that will probably determine where we go from here.

Technically, today did very little to change things from where I described them this weekend, except that the T2108 indicator is getting ever closer to the 80 mark which represents very overbought markets. My Market Monitor ratios are showing a market that is still a little extended, although the readings aren’t as extreme as they were last week. It is very possible that we have another day like today Tuesday and most of the day Wednesday. Traders usually are hesitant to do much of anything before a Fed decision. This type of quiet consolidation would actually be beneficial because it would allow the market to work off a bit of the overbought condition it has and allow a breakout over these resistance levels to be more powerful. As I’ve said before, a lot depends on what the Fed does – the consensus seems to be that they will do a small cut of 25 basis points and say they are pretty much done, or they will hold on the cuts and say they are pretty much done. Not many people are expecting them to continue with the cuts, which makes sense. I think either of these two expected outcomes could really cause problems to the commodity stocks, which already look quite toppy. We shall see.

As for my trading, I almost started a position in CYBS today but then saw that they release earnings tomorrow, so I passed. I like the chart and maybe it busts out of this double bottom because of earnings, but starting a position right before earnings is basically gambling, and I try not to do that if I can help it. DGLY is another stock that looks good today but has earnings soon (Wednesday) so I had to pass on that as well. There were a few other charts that I saw that moved higher today that I considered entering, but I only ended up starting a small position in IDRA at the end of the day based on the volume. With the market overbought, and the Fed coming up on Wednesday, I agree with most traders seem to be saying - there’s no reason to do a ton of trading right here. I will wait for the reaction to the Fed news and look to get more heavily involved in the market then. WSCI acted nothing like I expected it to today – no IBD pop, but it is quite extended here so maybe I was expecting too much. It did pullback today and on higher volume, and I am going to be patient here and use some short-term moving averages as support levels. Having the patience to let big gains develop is the hardest part of trading for me, and I am trying to show some here. We’ll see what happens.

Not a long commentary today because there isn’t a ton to say. The back half of this week should be more exciting than today. Until we get there, remain patient. I’ll be back later if I see any new stocks setting up. Best of luck.

Tags: CYBS, OME, IDRA, WSCI, Fed, IBD, DGLY, Commodities, GDP, T2108, Telechart

Weekend Charts to Watch For Next Week

Let's start out with the indexes. There is little doubt the market is a bit overbought here and that the market is still right at resistance levels that they have had trouble getting through. That being said, they seem to be forming some bullish bottoming patterns, and if they do breakout above these levels, I would become much more bullish and look to put much more money to work. I have no clue if they will finally get above these levels, but bullish markets can stay overbought so it is possible.

S&P 500 and Nasdaq

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here's Telechart's T2108 indicator showing the percentage of stocks above their 40 day moving average. Just like readings below 20 show very oversold markets, readings about 80 show very overbought readings. We are closing in on that level.

T2108

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

One of the things that still bothers me about this market is that I continue to see stocks that have been strong and have been setting up decent chart patterns just get destroyed. GU is a prime example. These type of blowups shouldn't happen in great markets.

GU, ISIS

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I have been mentioning that we need new sectors to start taking over leadership of this market if we are going to move much higher. Well, I saw the hospitals breaking out on Friday. Perhaps this is a signal that health care could be ready to take a leadership role.

THC, CYH

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I am still bullish overall until evidence points to the contrary, so I am still looking at possible stocks to enter. I still don't see a ton of great ones ready to buy. ETF's are an option because of this. I have some charts below to check out.

CCK, CYBS

IDRA, DMLP

UYG, USD

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

These are all stocks that I am watching but need more rest before being safe to buy. If more of these setup, that would be very nice to see. Most of these are fundamentally sound stocks but just need a little bit more work.

DGLY, GSI, ANW, BEXP

SOL, CSIQ, MPWR, DRQ

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Hockey is just about to start so I am out for today. Feel free to ask questions about any of these charts if you have them. Best of luck during the upcoming week.

Tags: UYG, USD, T2108, Nasdaq, S&P 500, SOL, CSIQ, MPWR, DRQ, ISIS, GU, DMLP, IDRA, CCK, CYBS, CYH, THC, DGLY, GSI, BEXP, ANW, Telechart

Switching Domain Names

This weekend, I am switching my domain name. The new web address will be http://www.chartswingtrader.com This blog should automatically redirect you to the new site, but in case there are any bugs or problems with the transfer, you should be able to use the direct URL. Hopefully things will go smoothly. Thanks for your patience.

State of the Market - 4/25/08

Mixed earnings reports from American Express and Microsoft caused a mixed opening today on Wall Street, with the Dow and S&P starting higher and the Nasdaq starting lower. As trading proceeded, however, all the indices turned red, and established some bearish looking patterns on their intraday charts. Prices fell lower throughout the morning before getting a small bounce as the lunch hour started. Stocks meandered their way through the early afternoon before starting another bounce higher around 2:30. This bounce allowed the indices to close in an impressive manner near their highs for the day. Tech lagged today while some of the commodity stocks that were beaten down so badly yesterday bounced back strong.

Technically, the Dow is the only index that has clearly broken over resistance. The S&P has still not broken above the key "1400" level, and the Nasdaq is still right at the downtrend line. The small caps are right at resistance levels as well. Because of this setup, it is still possible for the market to move either way here. I will post these charts sometime during the weekend.

I learned from Josh Hayes when he had his Mauitrader blog that trading intraday is often a recipe for trouble and GENC proves that fact very well. I bought the intraday dip yesterday, thinking it had to bounce at support, and watched as it fell further, stopping me out with a loss. If I would have waited, I would have avoided the loss, and possibly bought at the open, when it did bounce after having a pretty strong pullback. WSCI looks good here and should debut on the IBD 100 list like I have been talking about for a while now. While this is good news, I will also probably looking to take profits early next week on the likely pop. The 50 day moving average is right around $10.50, so I think the upside of this stock is the $21 area at most in the short-term. I would doubt it gets this high before pulling back, but it could. It can't continue this torrid pace for much longer, so I expect a violent pullback at some point next week, shaking out those that bought it late or on Monday. It might even get back to the $14 area, and I would then like to reenter around there. Right now, the 20 day moving average is around $14. We’ll see how things play out. I am just going by how past plays like this have gone.

Another good article from Jim Jubak for you to check out about this rally and where we head from here. I agree with a lot of the points he makes in this article, and I am very interested to see how the seasonality factor plays out. Here are some of the bearish arguments I see, some of which are taken from his article:

• May through October are typically the weakest months of the year.
• The indexes have risen over 10% since the middle of March, pretty typical of bear market rallies.
• We are oversold or very close to being oversold on several indicators I use (T2108 being one)
• We are right at or just past major technical resistance on the chart of the indices.
• This entire rally has lacked a lot of volume, telling me the big institutions are not involved heavily in the buying.
• Good charts have not been acting well in a lot of cases(look at GU and ISIS today).
• There has been a noticeable lack of new, fresh charts popping up in my scans the last few weeks.
• The economy still has problems, many of which we still don’t know about.
• Inflation continues to increase and unless the Fed starts fighting it, will continue to cause consumers to lose spending power, which will hurt the economy even more.

At the same time, I can’t be a raging bear quite yet – the market needs to show me. There are some good arguments on the bullish side as well. They are:

• Commodities look like they may be topping here and if they do, inflationary pressures on consumers should decrease, helping the entire economy.
• Short interest is very high, and there is still some negative sentiment out there.
• Stimulus checks from the government should soon start arriving, which may give a boost to retailers.
• Often it takes several months for rate cuts to work their way through the system, so the Fed cuts of earlier this year should soon be showing the desired effects.
• Earnings reports haven’t been as bad as many expected.
• Rotation into tech looks like it may be beginning here, and if it happens, the rally has a higher chance of sustainability.
• We’ve had a few days this week of accumulation, with the market posting gains on higher volume.
• The market has posted nicer closes recently, and has fought off early weakness in the trading sessions, which is typical of bullish markets.

If commodities are indeed topping here and the dollar can bounce, I can see this rally continuing with the amount of short interest that is out there. Of course, that means putting faith in the Fed and their decision-making on interest rates, and I don’t know that that is a smart thing to do. Maybe I should be more bearish. Are there any bullish or bearish points I missed that you want to share? What do you think? Where are we headed as May approaches?

To wrap up, today was another nice day overall for the bulls as the market finished near their highs and bounced back from some early selling. Hopefully, my scans will show more nice-looking charts that are popping up. If that happens, I will get more bullish. As it is now, I am a bull but remain a bit cautious about things. Enjoy the weekend and I'll be back at some point with some charts. Hockey tonight, NFL draft tomorrow, and hockey on Sunday - sounds like a good combination. Best of luck.

Tags: WSCI, GU, ISIS, IBD 100, NFL Draft, Dollar, Fed, Inflation, AXP, MSFT

A Few Nice Charts, But I Want to See More

Let's start with some bad charts and get them out of the way. I saw a few major blowups today like shown below and that is something to pay attention to. Earnings play a role here but good stocks should not totally crash like this in a healthy market.

AXYS, NEU

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

The commodity sector did get hit today but all in all, from what I saw, the oils held up fairly well. Many got support near their short-term moving averages and bounced off their lows for the day. There are some charts that don't look very nice though, and it is certainly possible that today was the start of a more severe pullback in this sector. They certainly could use one so it pays to be careful here.

BEXP, CLR, TTES, SPN

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Two new charts to put on the watchlist - neither are ready right now but could be very nice setups with a week or so of rest.

WGOV, CLS

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here are a few that look ready for possible buys if you like. Keep your discipline and enter into these or any other longs in portions, making sure you're right with your buy before adding to it.

UFPT, CCK

DGLY, IDRA

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I still didn't see a ton of new, great-looking charts in my scans, but I have to give this market the benefit of the doubt on the long side until it gives evidence to the contrary. Let's see what tomorrow brings. Best of luck in your trading.

Tags: AXYS, NEU, BEXP, CLR, SPN, TTES, UFPT, WGOV, CLS, CCK, IDRA, DGLY

State of the Market - 4/24/08

Quite a crazy day in the stock market today. A few disappointing outlooks from Amazon and Apple caused futures to be lower, but the market actually opened slightly higher. The first hour or so was some of the most choppy and whipsaw-type trading I’ve seen in a while, with the market going up, then down, then up, then down. There was a lot of movement in a lot of stocks but I didn’t feel comfortable putting any trades on at that point due to the choppiness. Then, around 10:50, the market just took off, shooting straight up until lunchtime in a stunning fashion, with the Nasdaq gaining 50 points in a little more than an hour. This took the Nasdaq past the last levels of resistance and to its highest point since January. The afternoon stayed strong for the most part. The gains came on higher volume, as well, although I did not like the way the market closed, with the Nasdaq giving up almost 20 points in the last hour of trading. Nothing is easy with this market I guess.

Technically, the Dow and S&P 500 have cleared their downtrend lines and have the 200 day moving average to deal with next. The Nasdaq is right at its downtrend line and still needs to bust through it, but also has the 200 day moving average ahead. I'll try to put the index charts up later tonight. I am not even going to attempt to predict where we head from here, but things look bullish and until we get evidence to the contrary, I have to trade that way accordingly.

I’ve been mentioning for a week or so that all of the commodity stocks were very extended and in dire need of a pullback. That pullback looks like it started yesterday, and it definitely continued today. To be honest, I expected a more powerful, blow-off type top in some of these names before they crashed lower, but we didn’t really get that. I didn’t expect them to just die out right here, even though there were very extended. Both the energy and agriculture stocks got blown up today, and you would assume that this means their recent runs are now over. However, I remember at least twice this year when I thought the exact same thing, and it never materialized, so who knows? There are a lot of dip buyers out there just waiting to get in these stocks, so the “top” in these could take a few more weeks. Some energy stocks finished off of their lows for the day, but the ags didn’t and the charts look rather ugly in many cases now. Look at NEU. This was a company that supposedly blew away their earnings but totally crashed today. Looking at a chart like this tells me maybe, just maybe, this might be the top for commodities. Let’s see if the Fed does the right thing and holds rates, which really could be cause these stocks to head lower.

The one thing I really didn’t like about today was that the solars, which looked in many cases to be setting up possible bases, got hit as well today and now look a little more questionable as possible market leaders. This high-growth, new-technology type of group is exactly what I look for in terms of making big gains, so it is unfortunate to see them have trouble on a nice day for the overall market. I was hoping for CSIQ to setup a handle and although volume was not heavy today, the action makes the chart a little uglier than it was.

The question now becomes, if indeed the commodities have topped(I don’t know if they have or not), where does all the money that poured into them late now move to? Where will the new leaders come from? If this market is to continue to move higher from here, we have to get some new sectors working and working quickly. Semiconductors and some tech names have done well recently, but I still see no new exciting stocks from these sectors popping up in my scans. What I do see is mostly just older stocks that were leaders in the 2003-2007 bull market. That is not the recipe for a powerful, stock market rally that can lead to nice-sized gains for individual investors. I think it is possible to play this possible rotation with some ultra ETF’s in the form of USD and UYG, but I wish I could play individual stocks instead.

As for my trading, I decided, based on the morning bounce, to take a chance on a pullback in GENC and got in around $26.75. I sold out later in the day for a 5.3% loss. I was also looking at FEED on its pullback but waited and then it was too extended, so I went with GENC. If you look at the charts now, I definitely chose the wrong one. Sometimes you’ll have that. I thought this was a very strong stock with very strong fundamentals and a great looking chart, and I thought it might be worth a shot as it pulled back to its 9 day moving average and the previous high it broke above last week. I made a mistake by hesitating on FEED, and I definitely lost my discipline on this and just should have waited until the end of the day. I also did not sell immediately when it headed lower. Being such a thin stock made it difficult to set a stop loss and keep it. I need to be better disciplined, especially in this market.

WSCI is looking good so far and if it can close above $15 tomorrow, it should take a spot near the top of the IBD 100. I noticed someone searched the site as to when to sell a stock like WSCI. Well, I did some research on similar “99/99” stocks as I like to call them and came to a few conclusions. In general, these stocks tend to pop after their debut in the IBD 100 but often that pop last no more than one to two days. They then often pull back sharply, often to the 20 day moving average. Typically, after this first violent pullback that I am sure scares a lot of late buyers out of their position, the stock starts to climb again. As it gains momentum, the 9 day moving average usually becomes the key support level through its climb. If you have the nerves and the patience to sit through the entire climb, one possible way to tell when to sell is to watch how far the stock is above its 50 day moving average. I saw that often these stocks top out soon after they are 100% or more above their 50 day moving average. Often a break of the 20 day moving average is a sell sign as well. I put a few charts below that can give you a better idea of what I am talking about. These examples are very similar to WSCI in that they had no analyst coverage, had very low floats, and moved very quickly.

ERSNGSCharts from Telechart2007, Courtesy of Worden Brothers, Inc.

Not all of these “99/99” stocks work. If you look at BOLT (formerly BTJ), it went much lower after making its debut on the IBD 100. I got frozen when this happened and ended up taking a much larger loss than I should have with this stock. It is important to set stops and keep them just in case WSCI doesn’t work out the way you might hope it does. If it closes above $15 tomorrow, I may be looking to take profits early next week on at least some of my position and then reentering on the first violent pullback.

BOLT

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

To wrap up, today was another good day for the bulls but there are still things that worry me overall. The leaders that have held this market up for so long now look like they could be topping, which is not a problem if other sectors are ready to step in and take over a leadership role for the overall market. That's a big "if" right now, however, and I don't see a ton of stocks rising to the surface saying they are ready to be the new leaders of this market. I really wish I could get long in more stocks, but even today, in my early scans, I see very little to excite me. I am still a bull here, but I am also still very cautious. With the short interest in this market, it would not surprise me to see the market continue higher. But I have my finger on the sell button just in case, because leadership has to emerge for the market to make a significant move higher. Perhaps I will find some new stocks after I run my final scans - if I do, I'll post some later on tonight. Microsoft earnings are tonight so we'll see how the market reacts to them. With a good report, maybe tech can get going here. Best of luck.

Tags: AAPL. AMZN, WSCI, GENC, MON, POT, ERS, NGS, Commodities, NEU, CSIQ, USD, UYG, Semiconductors, FEED, IBD 100

Some Charts to Watch, But Not Buy Yet

As the title of this post states, I don't think I would buy any of these right now. I am showing them to show you some of the nicer charts I am seeing right now in the market and ones that I am watching and looking for lower-risk buy points. Many of these stocks need more rest. The market has to let that happen first, and I don't know if it will or not. We shall see. As boring and redundant as this is to say, this is not a great time to go long or go short. It is a good time to sit on your hands or manage current positions. That doesn't me you should stop working - that's what I am trying to do by doing my scans each night to see if charts are showing up. These are most of the charts I am watching because I do want to be ready in case the market decides it is ready to move higher and these charts show they are also ready to move higher. I wish I had something new to tell you but that's where we are at in this market. Best of luck tomorrow.

DAR, DGLYBG, MATK

CCK, BOKF

GU, MEA

PLLL, OME

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Tags: DAR, DGLY, BG, MATK, CCK, BOKF, GU, MEA, PLLL, OME, CLR, GTLS, MEE, TTES

State of the Market - 4/23/08

A good start to the day this morning on Wall Street as some quick little selling was bought up around 10:00 and stocks rose sharply higher on the back of earnings news and lower oil prices. Some selling came in around 11:00 as the indexes probed the top levels of resistance on the Nasdaq and S&P 500 and backed off. They continued lower through the lunch hour, losing virtually all of the earlier gains. At this point, I expected more problems, but intraday support held and stocks managed to rise back into the close. A late pullback prevented the indices from closing back near their highs, and the market closed with marginal gains. The Nasdaq outperformed the Dow and S&P today with a gain of 1%. Volume appeared higher on the Nasdaq and lower on the S&P.

I was kind of confused as to why stocks were up so much in the morning because my quote screen was almost totally red. Tech was strong today but most of these stocks (AAPL, MSFT) are lagging stocks. I still didn’t see many new stocks putting in nice gains. On the other hand, the commodity stocks got hit today, but that’s not a total surprise. The damage wasn’t quite as bad as I thought it may be when these stocks pulled back(with the exception of LNN), because in many cases the selling volume was not that high today. A few had damage, but many held short-term support with their 9 day moving average. I did not take any of the trades I posted last night as possibilities because I forgot about the oil inventories being released today, but I will still be looking at them. I was hoping for a quiet rest for these stocks, but with all of the hot money now in these stocks, that probably was a pipe dream. Solar stocks also got hit today a bit although it was on lower volume. Perhaps a stock like CSIQ can form a handle here on lower volume, setting it up for a possible breakout down the road.

I was hoping for a quiet pullback in the overall market this week as well, but so far the last two days were anything but quiet. I think it is very important to remain cautious here – not many longs were working before this week, and now with the overall market looking weaker, it is best to just stay out of the way for the time being. We’ll see what my scans bring tonight, but the overall quality of my charts continue to deteriorate. Don’t go long and don’t go short is my best advice right now. Just not many great opportunities on either side of the market right now. Why not short? Well, there is still a lot of negative sentiment out there and a ton of people shorting this whole rally. Because of that, I don’t expect the market to crash here or anything. All of those shorts will likely keep somewhat of a floor on the downside. Sitting on your hands is hard to do and quite boring, but it is often the best play in the stock market. I still have only 1 position (WSCI) and don’t expect to be adding many more unless nice charts stop popping up again.

A little light reading to wrap things up for today. I found this article about the options the Fed has available to it as its next meeting quickly approaches. Will they finally put up a real fight against inflation? For some reason, I highly doubt it. What I don’t understand is that everyone is complaining about how bad the economy is, and one of the main problems affecting everyone is the rising cost of gas and food. I am not an economist, but don’t you think people would feel just a bit better about things if they didn’t have to drop $3.50 for a gallon of gas or a gallon of milk? Don’t you think they would take some of the money they are spending on these necessities now due to rising prices and put it back into the economy by spending it on more “luxuries” like eating out and buying electronics? From where I sit, the inflation is what is really hurting this economy and the average American right now, not lower home prices or credit problems by big banks. If the Fed would do its job and fight these rising prices, I think we could work our way out of this whole thing a whole lot quicker. If the Fed does raise rates or even just holds them steady at their next meeting, I will have a bit more faith in this government. If they lower rates once again, my faith in this government, virtually non-existent as it is, will evaporate completely. Will that happen? Unlikely in my opinion, but what do you think? Share your opinions in the comments section.

Also wanted to mention a website I saw today - Angryrenter.com It is an online petition protesting any form of government bailout for all of the homeowners and lenders that caused so much of the economic mess we are in. Not that an online protest is going to do anything - I realzie that - but if you are like me and live within your economic means, forcing you to buy and live in a house you can actually afford, you can sign your name as a sign of protest. In my opinion, it is absolutely ridiculous to have taxpayers' money given to people who bought homes that in so many cases they knew they could not afford. This will do nothing but reward the stupidity and greed that got us in this situation, but then again, that's what our government does best.

If I find any nice charts pop up in my scans, I will post them later tonight. Good luck until then.

Tags: WSCI, LNN, CSIQ, Foreclosures, Homeowner's Bailout, AAPL, MSFT

A Few Charts to Watch

Blogger wouldn't let me post any charts earlier so here is some of the breakdowns I wrote about today. This type of action in strong stocks is not a good sign for the overall market.

Major Breakdowns TodayCharts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here are some of the charts I am watching right now on the long side. I still am not real excited about any of these, but it is good to see a stock like ASTI put in a strong day today. Unlike two weeks ago, when most of the charts I was watching were very green with high BOP levels, these are more yellow, which is one of the reasons I am not jumping all over these.

VISN, BOKF

MTH, HOV

ASTI, OME

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

This next group of charts are all from the energy sector and would only be taken as very short-term momentum trades of one or two days, with stop-losses below the short-term moving averages they are sitting on right now. The groups are in dire need of a rest but don't seem interested in taking one. If by some chance they do in a calm manner for a week or so, I would be jumping on these. As it is, it would be stupid to start long-term positions in this sector with it being so extended, but I expect the momentum to continue to push this and other commodity sectors upward for another week or so. If you follow those tight stop-loss levels, the trades are not as risky, but if you don't get out immediately if they break these support levels, you can get into big-time trouble. Because of all the hot money in these commodity stocks, I don't expect the eventual pullback to be calm. These stocks are in some cases going parabolic (more the ags than the oils) and may be starting into climax-type runs. If that happens, some quick swing trades might work. Just have your finger on the sell button.

ANW, CLR

PLLL, SPN

CLB, SD

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

My scans didn't change my current outlook of being slightly bullish. There are several things that do worry me, however, and if we get another few distribution days, that may signal this rally is running out of steam. We are approaching the end of April, and with it the start of the traditionally weaker time of the year for stocks. I guess we'll find out soon if the old axiom "sell in May and go away" holds true this year. Good luck tomorrow.

Tags: ASTI, OME, HOV, MTH, VISN, BOKF, CLR, SD, PLLL, ANW, CLB, SPN, IIVI, BRKR, PTEC, NFLX

State of the Market - 4/22/08

A mixed bag of earnings reports and another rise in oil prices caused stocks to gap moderately lower at the open of trading today. They stayed in a range until about 11:30, when the indices broke below the range and quickly sold off harder, with the Nasdaq dropping over 25 points in a little more than an hour. Unlike yesterday, when buyers came in and nicely took the indices off their lows in the afternoon, buyers couldn’t be found during the lunch hour, and the selling accelerated. Around 12:45, with the Nasdaq down almost 2%, buyers did show up and took stocks up a bit in the afternoon. I can’t call the bounce strong, but it did enable the markets to close well off their lows for the day, which is nice to see. Volume was higher today so it will count as a distribution day, but I think the action wasn’t nearly as bearish as it could have been.

Technically, I will be looking for the short-term moving averages to come in as support for the indices. The 9 day moving average is around these levels: 12,635 on the Dow, 1367 on the S&P 500, and 2356 on the Nasdaq. These levels held during the lunchtime swoon today, and will hopefully hold for a few more days of rest, thereby allowing this market to move higher. Let’s hope so, at least.

I have been writing that we need to pullback, so today wasn’t a total surprise. However, I said it has to be a healthy one, and I am questioning that a little after today. The main problem I see with today is not the overall loss in the indices, because the action in the afternoon took some of the sting away from those losses. The problem I do have is that I saw a LOT of breakdowns in individual stocks that were up to this point looking quite strong. Look at the following stocks (IIVI, BJS, PTEC, BRKR, NFLX, HLF, VNUS, AAWW, VSIN) All of these were what I would classify as leading stocks, putting in nice gains over the last month or so. To see this many stocks move lower on for the most part much higher volume is not a good sign for the overall market. Many of these charts are now quite ugly. I like to use individual charts as a way to tell what is “really” happening in the market, and what happened in these charts today give me pause in terms of being extra bullish right here. I guess it was not surprising that small caps led the market to the downside today – almost a 2% loss - when you look at these charts.

I have been seeing some poor action in individual stocks for a few days now – BKE, OTEX, and GU were all charts that looked pretty good but acted nothing like they should have. Some stocks are working(WSCI has a nice reversal today off some support and I continue to hold), but mostly those continue to be stocks in the commodity sectors. It is still not a market that you can just pick any growth stock and make a ton of money. Remaining disciplined on your buys and keeping your stop losses are always important characteristics of good traders, but they are even more important in this current market.

Although today was a distribution day, I wouldn't say things are over for the bulls just yet. I would still love to see a few more quiet days on lower volume to close out this week while perhaps holding the lows of today. If we can do that, I think we can continue this move higher. At the same time, the quality of charts I see in my scans continue to deteriorate, while the commodity stocks like POT just continue chugging along and do appear to me at least to be starting possible climax runs. It's still a confusing market overall - we still have lots of earnings to deal with and the primary here in Pennsylvania tonight may affect trading if it can bring any closure to the election race. I will continue to use the commodity stocks as my tell for the overall market, and I have no real feeling where we go from here. I remain slightly bullish, but am ready to flip if we get a few more days of higher volume selling. Patience here is probably a good idea. While some charts broke down today, I did see a few that I was interested in, and I will be back later to post those. Best of luck.

Tags: IIVI, BJS, PTEC, BRKR, NFLX, HLF, VNUS, AAWW, VSIN, BKE, GU, WSCI

Scans Confirm We Need More Rest

My scans aren't showing me many long candidates right now. Anything that looks good is extended, confirming my thoughts that we need some more days like today so we can rest and charts can digest some of the big gains they have put in over the past few weeks. I only have four candidates that I am watching and actually two of them I would not buy right now unless they can form a week-long handle.

IDRA, ASIA

SDTH, CSIQ

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

My scans did nothing to change my mind about commodity stocks being super extended and in great need of a pullback. I don't know if this will happen or not. If it doesn't, I can still see a good chance of some climax runs being put in - check out some of the charts below and you may see what I am talking about.

GENC, MMR, AGU, NEU

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Although the overall market situation is still quite bullish, I just don't know if this is the best time to put more money to work. Wait for a little pullback, hopefully on lower volume, and get some support levels identified on your favorite stocks to be ready if we are lucky enough to get one. Good luck tomorrow.

Tags: CSIQ, SDTH, IDRA, ASIA, NEU, GENC, MMR, AGU