Monday, August 3, 2009

Outloook for the Upcoming Week - 8/3/09

Sorry for the late weekend post traders - I had some family issues to take care of this week and they always take precedence over my trading. As for the upcoming week, I am very neutral overall as right now, I don't have a great feel for where we go in the short-term. I still think Thursday's action was very bearish, and leaves things kind of up in the air. Longer-term, I still think we probably are more likely to head up than down.

I don't know why - call it a hunch - but I am thinking that the month of August is going to be a difficult one to trade. Volume will likely contract even further this month as traders get in their final vacations (me included) and I just think we could be in for a lot of volatile chop, which is never good to trade. Perhaps that's good in that some significant sideways movement could set us up for a really big move come September.

Technically this week, the key numbers to watch on the S&P are 982, 972, and 956 to the downside in that order, and 1000 to the upside. On the Nasdaq, watch 1978 and 1953 to the downside and 2009 to the upside. The U.S. dollar had a mini-breakdown Friday and that caused another spike in crude oil. The trade from a technical perspective has been crazy in that sector the past three days. Thursday saw a 6% loss in crude and a key breakdown below a rising trendline. So what happens the next two days. It spikes right back up over 10% and is close to breaking to new highs around $73. Crazy trading there. Keep an eye on the dollar however - if it breaks this area any further, commodities should continue to spike. Keep an eye on XLF over $13.08 as a possible breakout this week.

As for my trading, if I do much of anything this week, it will be very short-term. Looking back on trades I made the past week along with some of the leading stocks from this market run, I realized that very few of the type of stocks I like to follow (small-caps) have had smooth rides up and although I missed many of them anyway, if I was in them, my trading rules would have likely had me stopped out - breaking short-term moving averages, heavier volume selloffs, etc. Two stocks that stood out to me when I was thinking about this was FUQI and VIT. Congrats if youy have stayed with these over the long-term but I know I would have been out way too early. All this being said, with these volatile moves, I think it is wise (for me at least) to take 20-30% profits when I have them and move on to another stock or rebuy at a better spot. So that's what I plan on doing. My family is going on vacation next week as well so I don't want to have too many positions to manage while I am away, so that plays into my outlook as well.

I am also a little more hesistant trying earnings plays right now after seeing the whipsaw action in a name like FSLR after-hours last Thursday and also the poor short-term action in some recent earnings setups like AMSC, BABY, ASIA, and SHOO. Therefore, I am going to be much more careful in selecting possible plays in this realm.

If you're looking for stocks to watch this week, here is my watchlist. RINO, POOL, POL, CAEI, CLWR, VNDA, ELGX, OGXI, RICK, PZE, TBI, BDK, DCP, SPF, LEN.B, NBG, SIVB, SCHL, EXM, BCRX. Most of these are little flag patterns and could be buyable on a breakout. I would get out however quickly if they reverse or show little strength after a breakout. If you have Telechart, it will be much easier to see why I picked these - most show very good BOP strength which is a major factor for me choosing stocks.

Another group to watch as a whole this week is solars. Many have pulled back to some key support areas and could be forming handles on cup with handle patterns. If they breakdown further, these patterns could be destroyed, but they bear watching this week. YGE and CSIQ are probably the two that I would focus on most right now.

That's about it for me for right now - I will try to get a few videos out this week if I see worthy setups in my scans. As I said earlier, for some reason I feel some chop coming on so we'll have to see how the market reacts. If that happens, I will not be doing a whole lot. Take care and best of luck this week.

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