Wednesday, July 22, 2009

Some Evening Thoughts

First, if you do not follow me on Twitter, I did take an after-hours position in ISRG based on earnings at $190.50 and $194. Someone commented that I had "guts" to go with that, but I really don't look at it that way. I will get out of this very quickly if it falls back from where it should (hopefully) open up. It closed today's after-hours at $199, so I already have a small cushion. If it opens higher than that tomorrow but then falls, I will likely move my stop to breakeven and I'll be out with no gain/no loss. Not a big deal. I am not as optimistic about this just because the market has been up so many days in a row and is long overdue for a pullback, but it will likely gap out of a double bottom pattern tomorrow morning and I could see it get up near $250 if momentum continues where it will start running into some overhead resistance.

Second, although it is quite obvious to everyone that we need a pullback soon, we are not as overbought as we have been at some points in 2008 and the beginning of 2009. The McClellan oscillator actually went down again today for the second day in a row. It is below 200 again after hitting a high of 229 on Monday. That is rather bizarre considering we've been up the past two days, but bizarre is the nature of this market right now.

I am not saying we're going to be up another 11 days in a row here, but my point is that further gains are, although difficult to believe, probably not out of the question based on a few indicators. Remember that on those 11 straight days of gains by the Nasdaq, only 4 of those were gains of 1% or higher, and 6 were gains less than 1/2%. Is it possible that we've been sort of consolidating as we've gone up, as weird as that is to say? Just putting that out there - to be honest, I am having a hard time figuring this thing out just like everyone else out there.

As I showed on the video last night, I do contined to find some stocks that I would be VERY interested in if only they will rest and consolidate a bit. I added a few to the list tonight - check them out when you get a chance, although some are repeated from the video: CHINA, GROW, HGG, ININ, VITA, CISG, DAN, ANR, SWHC, CSIQ

One bearish thing I noticed tonight in my scans is that the number of stocks in my BOP scans through Telechart have declined a good amount over the past few days even though the market has gone up. BOP stands for Balance of Power and is a proprietary indicator found only in Telechart - it measure the underlying accumulation in a stock. If you've ever wondered why my charts are green, yellow, or red, it is because of BOP. If you want more information, check out the Telechart website and their 30-day trials. Anyway, a decreasing amount of max BOP stocks with the market going up typically can be interpreted as weakness, since stocks aren't being accumulated as strongly.

Lastly, if we do get that pullback that everyone is expecting, one stock you may want to watch as a potential swing short is STEC. This is very risky as this has been one of the top stocks in the market recently, but looking at the chart below, it has had three consecutive gains but all three came on below-average volume that decreased from the day before. This may have a blow-off top instead, but a sharp pullback, maybe down to $27.50, would not be shocking to me at all. Just saying.

STEC
Charts from Telechart, Courtesy of Worden Brothers, Inc.

I won't be around tomorrow afternoon as my family is visiting some friends from college so my after-market post may not be up until later or maybe not at all. Good luck Thursday.

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