Thursday, April 30, 2009
Technically, this is the second day in a row that the indices faded their early gains and it is very possible the buying interest is fading as well around here. The Nasdaq touched its 200 day moving average early and reversed, and S&P broke back above 875 for the second straight day but couldn't hold above it. Again, I have to think this could be a sign the bulls are getting tired here. You can't really blame them after the rally they've put in. As I've been saying, a pullback here would be completely normal. Let's just watch how the pullback plays out and how severe it is before determining where we go next. I would watch around 860 on the S&P as short-term support if we do pullback further, and 1680 on the Nasdaq.
This morning, I took a small position in HERO on the breakout attempt above $3.10. I entered at $3.09, but was later stopped out at $2.89 as it reversed hard, falling almost 10% from its intraday high at $3.19. Just another typical trade for me - of course it did rally all the way back. I would have been better off just staying away. When the market reversed, I went into a few small positions in some shorts - ACM at $25.91 and ADM at $24.63. I am willing to add to these if they work out but as of now just want to keep things small. If we do start selling off, I have a list that I will be watching for possible shorts (LZ, MET, RRC, SIGM, DCI, AMT, SLH, AAPL, CM, DECK, NOV, BYI, PNFP, and TRH).
As always, we'll see what tomorrow brings but the past two days, the bulls have shown some fatigue in my opinion and with May starting tomorrow, it is possible we pullback as I stated earlier. It doesn't have to happen, but it certainly would not be suprising. As I stated last night, I would be very careful with longs here and be ready to short on further selling. Good luck Friday.
Wednesday, April 29, 2009
Technically, the most interesting thing about today from my perspective was volume. I know volume is light leading up to the actual Fed statement on these days, but for an attempted breakout on the S&P to come on such little volume is disconcerting to me at least. I mean, volume was lower than yesterday and way lower than the 50 day moving average. Maybe it will come in very late in the session but based on the charts I see now, it is indeed quite low. That breakout attempt also looks like it may fail as the S&P got as high as 880 before settling back into the consolidation area below 875. The XLF and S&P are also still badly lagging the Nasdaq, which is not typically a bullish sign. Maybe these don't mean anything, but I have my doubts. Volume on the Nasdaq was a little better and this index continues to lead, but is coming up quickly on its 200 day moving average.
I did have my quotes on at the open today with my long watchlist from last night, but didn't make any moves. I was closely watching WGOV above $19.15 but it had no volume at all early on as it "brokeout" so I passed. Low-volume breakouts are not typically a recipe for success in individual stocks either, and this one did close below its daily average volume. Of course, it did close two dollars higher, so who knows? Maybe this really is a Constanza market as someone in the comments pointed out a few days ago. You have to be a fan of Seinfeld to understand, but if you watched that show, you'll get it. Just do the exact opposite of what makes sense rationally and you will be a whopping success in this market. Today's low volume attempted breakout that looks like it failed makes perfect sense when looking at it from this viewpoint, right? Boy, I think I am going to go buy everything I can find tomorrow.
I did have my eye on a few shorts late in the session today (PNC, GE, MOS, RATE, ACM, ADM) but decided to wait so I am still sitting in 100% cash. I will likely continue to be cautious here as I know nothing is certain with this market. No matter how bearish I may be, the market could be up another 150 points tomorrow, because it doesn't care in the least what I think. That being said, given seasonality, historically high overbought readings, a lack of volume on the attempted breakout today, poor overall leadership, and some heavy resistance that has still not be dealt with, I have to assume we are topping out here or very soon. I don't have a clear signal that says "this is it", but much like we bottomed back in March quietly and without much fanfare, maybe a top around here will occur in the same way - just a slow change in character for the market.
Bottom line for me is if you are long, I would be very cautious. As always, however, I could be completely wrong. Best of luck Thursday and try to remember how volatile the day after Fed days tend to be. It should be interesting.
Tuesday, April 28, 2009
Longs - GAIA, DRL, PAS, APWR, VRTS, CAEI, GMXR, THC, FRPT, WGOV, NM, GLNG
Most of these are forming little flag patterns and could be playable here on a breakout or here on the pullback to their short-term moving averages which seem to be holding in most cases. Get out if they break below them. The main thing I don't like about this list is with only a few exceptions, most of these are very low-priced, and therefore low-quality stocks. These are not the type that are going to continue to lead this market higher in a healthy manner.
Shorts - LHCG, GE, SLH, TWP, RATE, SUN, WSBC, TMK
I am having a harder time finding great shorts here but some of these are setting up in little flag-type consolidation patterns that looked poised to break lower. Others, like GE, are running up into heavy overhead resistance that will be tough to get through.
Anyone trade DNDN today? Wow, down from $25 all the way to $7 at one point before being halted, and then back up to $25 in the after-hours. There is no way I could handle that volatility and is one main reason you will very rarely see me put biotech stocks on my watchlists. Anyway, good luck tomorrow.
Technically, we are still in the range between 830 and 875 on the S&P and until we break out one way or the other, I don't know that I feel comfortable doing much. The Nasdaq is still below its high from Friday on the attempted breakout to new highs and hasn't been able to muster much the past two days. If you are a bull, you are probably looking at the past few weeks as much needed and healthy consolidation. If you are a bear, you are seeing the indices slow down here and possibly setting up a rounding, long-term top. I am still more bearish, but I know anything can happen so I am not discounting either of these outcomes. But as I said yesterday, with seasonality coming into play soon along with the end of these manufactured earnings reports for so many of the financials, I find it hard to believe we are just going to keep moving up and up for the rest of the year.
I was watching a few shorts today and almost went into one or two but we had a quick power outage that obviously shut down my computer and by the time I got connected the market was up 30 points. Sometimes you do get lucky I guess. I still don't have a good feel here and this chop could continue for a little longer in an effort to frustrated both bulls and bears alike. Sometimes the best trade is no trade at all and I am getting the feeling that may be the case right now. Be ready, but don't force anything. Sorry for the short posts the past two days, but there really hasn't been much to write about. Take care and good luck Wednesday.
Monday, April 27, 2009
Technically, the story remains pretty much the same. The S&P still hasn't confirmed the Nasdaq breakout from Friday and remains locked in a range between 830 and 875. Meanwhile, the Nasdaq got no follow-through from its break above 1683 so that could be bearish, but it did hold that area OK. We're still overbought on most time frames and I still believe we are due for a serious pullback some point soon. If you want a more detailed reasoning for this belief, check out last night's post.
Looking at individual charts, I really don't see too many that interest me on either side so I will likely continue to sit things out, at least until I see some really nice setups that I just can't pass on. I still just don't feel comfortable playing this market here and with the chop we've seen the past few days, that may be a good thing anyway. I know I didn't miss anything today. Perhaps the market is just consolidating here and readying itself for another move higher. With seasonality soon coming into play as well as other factors, I don't think that is the likely outcome, but as I have been recently, I could certainly be wrong. Good luck tomorrow.
Sunday, April 26, 2009
Friday was a bullish day by all accounts - strong price gains with heavier volume. Intraday, however, shows me a lot of choppy action that makes me wary of what is going on right now. Wednesday (I believe), we saw a huge drop in the last half hour of trading. I believe we saw the exact opposite Thursday - a huge jump in the last half hour of trading. Friday, we saw a very sharp drop before 2:00, but the indices bounced right back up to confound a lot of traders I am sure. The Dow also had about a 70 point drop in the last five or so minutes of trading Friday. I don't know what is causing all these random spikes and drops, but it all looks a little shady to me. Maybe I am a little spooked from the comments in Thursday's post, all of which were very insightful and well-thoughtout.
Technically, the Nasdaq has broken to new highs for 2009 on slightly heavier volume Friday. The S&P is lagging however and is still under important resistance at 875. The XLF is lagging as well, and the RTH (retail holders) had what looks like a possible false breakout last week. Perhaps that is a negative divergence that bears watching. Worden pointed this out in its report this weekend....
"The resolution came on the upside...BUT. The Dow and SP-500 remained mired down in a lateral trading range. For the Nasdaq Brothers it was onward and upward. Both reconfirmed their Intermediate Uptrends, and both made new highs for the year.
The bothersome BUT was in the failure of both the Dow and SP-500 to attain Intermediate Uptrend status. For the 500 it's only an inch to go, but it has failed to make that last inch a week ago. The Dow has further to go, but two or three days could do the trick. My feeling is that the correction, which is likely to come fairly soon, would be easier to handle (especially psychologically) if all four Major Averages carried Intermediate Status on their epaulets."
Friday's gains made it seven straight weekly gains for the Nasdaq, while the S&P was only 3 points away from matching the seven week win streak by the Nasdaq. We remain quite overbought, with the T2108 remaining above 90 for the past five days by my count. In addition, leaders continue to lag overall as they have for this entire rally. IBD has continued to point this face out -
But some red flags are popping up. First, the IBD 100 continues to lag the major indexes. It rose 0.8% Friday and was down 1.4% for the week. The market's best stocks should be leading the market.
Some leaders are tripping over their own feet. Niche airline Allegiant Travel (ALGT) got tagged for high-volume losses for three days in a row. It's back near its buy point after a bearish reversal for the week.
Neutral Tandem (TNDM), which helps connect callers from different wireless carriers, fell 5% for the week. It logged its biggest-ever weekly volume as shares fell, an ominous sign.
All of this STILL has me expecting a pullback at some point very soon. I don't know if the pullback will just be a small, healthy one, or if will lead us back into the depths of this nasty bear market. My feeling is that this is still NOT a new bull market. Of course, I have been wrong on this rally pretty much the entire month and half it has lasted, so take what I say with a grain of salt right now. Any pullback will be nothing to worry about for the bulls unless the 830 and 1600 levels are broken on the S&P and Nasdaq respectively.
Right now, I still just don't feel comfortable doing much of anything here so I probably won't. As I vented last week on this blog, I think I am just worn out a bit mentally and when you have that mindset, forcing trades you're not comfortable or confident with is not a great idea. So I will probably just be an observer until I get a good feeling regarding a potential move. I will continue to watch for possible earnings plays, but if I make any moves, I will probably still lean stubbornly to the short side. I have not yet been able to put my conscience aside and trust this rally, as I still think has been made completely on lies, smoke, and mirrors. That is something perhaps I need to work on as a trader - trading in the moment and disregarding my personal opinions - but as of now I can't do that. My conscience still won't allow it.
Best of luck during the upcoming week - it should be interesting with the swine flu news coming out that looks to be pretty serious. You may want to keep an eye on some of the drug and pharma stocks as I am sure they will be popping in response. We have the stress (less) tests as well in the news as well as other things that will likely affect trading. I have no idea what the news will be, let alone how the market will react to it, so be nimble and open-minded. Good luck and take care.
Thursday, April 23, 2009
Technically, it looks like the markets are just locked in a little range right now. For the S&P, 830 and 875 seem to be the top and bottom, while for the Nasdaq, it seems like 1600 and 1680 are the boundaries of the current range. It's possible that we could be forming a rounding top here, but it could also be that we are just consolidating before moving higher. On the sixty minute charts I showed yesterday, the S&P still looks to be forming a possible head and shoulders pattern but the XLF showed relative strength all day and just poked its head above a downtrend line on those charts late. We'll have to see if that means anything tomorrow. Last week, I thought to myself that we may just chop around a bit before rolling off, just to frustrate bulls and bears alike, and that's looks to be what's happening. Unfortunately, I didn't pay too much attention to those thoughts in my own trading.
I had another fun day in the markets. I only made one small trade although I took the trade in my IRAs as well. I have really been trying to focus on earnings trades as I got away from paying attention to them recently and missed stocks like FEED and even RCRC that I talked about yesterday. So last night, when I saw LNET up big after-hours on an earnings beat, I paid attention, especially because the daily chart looked very bullish. I put a limit order in after-hours at $2.20, which is were it was selling at the time in the after-hours, but it was never hit, so I went into today with no position. Someone got very lucky getting there.
Today, it gapped up to around $3 at the open, and I basically waited until it formed a consolidation pattern before trying to get in. Maybe I should have just bought right away. You also may say it is completely foolish to buy a stock that was up 100%, but these earnings plays can move much more than you think, and I thought it was worth trying. It did form a flag pattern intraday, so I entered very small positions around $3.30. I put my stops around $3.05, a little under the bottom of the consolidation, which would have put my loss around 8-10%. It tried to break out, reversed, and then went back into the consolidation. At 10:20, it shot straight down, taking out a bunch of stops I'm sure (including mine) and then reversed immediately back up. My stops were hit at $3.05 and $3.01. At that point, I figured it would probably close around $4 or so because I was out of it, and shut it down for the day. Oh yeah, it did hit $4 right around 12:30 and went as high as $4.20. So that was a nice 20% intraday gain that I missed out on. And the beat goes on for me. I realize it did fall back down in the afternoon but I would have at least moved stops up and captured a decent sized gain.
I really don't know if this is bad luck or bad skill right now, but this example basically sums up what the past month or two have been like for me and my trading. It seems like I can do no right regardless of what I try. When I set my stops too tight, they get hit and the stock moves the other way without me. When I loosen my stops, the stock falls apart and I just end up with a larger loss, and in some cases I STILL get stopped out. When I am choosing between two possible trades, the one I pick does nothing while the one I pass on takes off.
I hate to say it's bad luck, because I ultimately realize it is me who is controlling the strings and making the decisions, but that's what it feels like right now and that is one reason my confidence is seemingly gone. It's almost like I go into a trade now expecting to lose just because that's how it's gone. Then I pass up trades that probably are good trades because of this feeling. I know all traders go through times like this, and I am sure I will have other periods like this in the future, but right now it is very tough to deal with. I am now down about 13% for the year. I will work my way out of it - I have done it in the past - but as always the toughest thing about that will be not trying to get it back all at once and I think in a way that's what I've been trying to do.
I apologize if the venting is not interesting to some of the readers out there but part of this blog's purpose is to share the thoughts and lessons learned by a trader and I hope that my stories can actually help some of you out. Hopefully you can learn something from my struggles from time to time. It is not always easy as a trader, and you are always going to have periods when you struggle. Regardless of what you read online, no trader is perfect, and they all have rough periods from time to time. The better ones have less rough periods and hopefully I will eliminate a lot of them as I grow and gain more experience. I think learning to deal with them properly can help lessen the frequencies of those periods.
We'll see what tomorrow brings but right now, there isn't much to do on either side from where I sit because it is just too choppy out there. The bears did not follow-through on yesterday's late swoon at all, but until late in the session, the bulls didn't show me much either. In addition, the whole spikes or drops in the last half hour seem fishy to me. Two days in a row we've seen a move like that but still have gotten nowhere. Overall, there seems to be some indecisiveness out there, and until things clear up, it may be tough to make a lot of money. I will continue to look for possible earnings plays but that's about it - don't feel real comfortable shorting or going long here. Good luck Friday.
Wednesday, April 22, 2009
Technically, the Nasdaq came close to their April highs around 1682 but could not break through and reversed hard, as did the S&P. Looking at sixty minute charts, it looks like some bearish head and shoulders patterns are being set up, and the S&P in particular looks weak on these charts. It touched the trendline today that it broke through on Monday but the late swoon also has it breaking through a bearish wedge. The XLF also looks similar with it breaking down through a wedge pattern. For support, I would look again at the 830 and 1600 levels that were tested yesterday. The 20 day moving average is still there and if it breaks to the downside, then I think this will turn into more than just a little pullback.
I did not enter into SDS again although I probably should have. Right now, my continued lack of confidence continues to affect my trading. I can spot the patterns just fine but I either wait to long to get into them or get out way too early. This is a real battle I am fighting here - just a few winners will make things better, but I got to get those winners first, and that's where I am struggling. I'll get through it and hopefully learn from it, but thinking back over the past month or so, I really am seeing where I made a lot of mistakes that I shouldn't have made. Even last night, I saw RCRC up in the after-hours at around $7.20 on earnings news and I just sat there and hesitated to play it. I ended up passing totally and missed out on a huge gain. That's just how it's been for me lately.
With this market, you can't take anything for granted, but today certainly looks bearish and if we break those levels mentioned above, then I think we can be more certain a top is put in. I am watching some shorts right now that look poised to break down (AIPC, SLH, MON, MS, MASI among others) and will be ready to play them. If we continue to chop around here like we have the past three days, I will try my best to just stay out of the chop. We'll see what tomorrow brings. Good luck.
Tuesday, April 21, 2009
Technically, I said last night that the bulls really needed to make a stand today or things could get ugly, and that's exactly what they did. The 830 level on the S&P was tested twice early on, as was the 1600 level for the Nasdaq at the open, but both held and that is very important. The indices have still not closed below their 20 day moving averages and as such, the outlook has to remain bullish overall. The close took both indices just back above their 9 day moving averages. Yesterday I was starting to think these two moving averages would be crossing soon, which has been a decent trend indicator during this bear market, but now it doesn't look like that will happen.
The open today was sort of weird as I saw so many stocks gap down a great amount. It seemed weird at the time and in hindsight, perhaps that was a signal that we would get that reversal. In the video last night, I pointed out a bunch of stocks that were either breaking down below trendlines or sitting right on important trendlines that needed to hold. Well, after going through that same list right now, almost all of them put in reversals today, and some were absolutely huge ones. Not all of them came on higher volume, but it is something that I have to pay attention to. When so many stocks looked poised to breakdown but then they reverse higher, I have to throw away my opinions and respect that as bullish action.
Due to the wedging action I saw from around 11:40 to 12:40, I decided to try a short or two, but wasn't that successful as you may guess. I made one modest trade today early - short AIPC at $31.29. Later on, as the S&P bumped against its 9 day moving average, I went into SDS at $69.01. Because I was feeling good at that moment about my position, I also went into some FAZ at $10.46. The market was moving up very slowly and very weakly from where I sat, but it didn't matter. When the market took off, my stops were hit and I was out of FAZ at $10.08 for a 3.8% loss. SDS was hit at $68.22 for a 1.2% loss. AIPC still looks OK as of now and as long as it stays below its 50 day moving average, I will hold onto it, but that could change tomorrow.
So overall, this market continues to destroy any bears that are out there (me included) and today was another example of that. As of now, it looks like yesterday could prove to be the same setup that we saw on March 30 - a one day big drop that didn't amount to anything. We see if this time will be different, but so far the action looks very similar. Bulls have to be happy about the way things are going right now. I'll be back later if I see anything interesting in my scans, but there is also a hockey game tonight, so I just don't know for sure. Good luck, and take care.
Monday, April 20, 2009
Technically, the short-term moving averages were broken today on both the S&P and Nasdaq, and both broke longer-term trendlines for this rally as well. So there was some damage done today, and this could be the start of a more severe pullback - at least on the surface it looks like it. Support should come into play for the Nasdaq around 1600 and for the S&P around 830, which is where the 20-day moving averages are and is very close to the closing prices today. I think those levels are very important, and if those levels don't hold, then we are probably looking at a trip to the 50 day moving average. Of course, I've said this before on trendline breaks and the market has just rallied right back. But as I showed last night in the video, with as overbought as we are on intermediate-term weekly charts, I have to think a pullback would be long overdue. I am not saying for sure that this is the top, but I am interested to see how the bulls
One of the worst things about today for the bulls is that the leaders of this rally acted very poorly and in a lot of cases, broke down and now look quite ugly. RGR had an absolutely nasty reversal and failed breakout. The solars like STP and YGE broke short-term moving averages. BAC had an awful reaction to "good" earnings. ASIA had a small breakdown below some short-term support. BBBY also looks like it broke some short-term support. Some held up OK - FEED is a good example of one that acted nicely - but I will continue to watch this. Paying attention to the leaders is a good way of getting a grasp on the overall market.
I pointed out crude oil last night in the video as one of the possible tells for where we head next, and it broke down hard today (7%) out of the coiling formation it was forming for the past few months. Not good news for the bulls. A lot of oil stocks got hit as well today. In addition, both the XLF and RTH had gap downs today that took them below their 9 day moving averages. This will be the first day except for March 30 that the financials closed below their 9 day moving average. XLF should have some support around $9.70, but if it breaks that, then all bets are off. These three areas (oil, retail, financials) are what I will also be watching for clues and if they continue to break, we could be looking indeed at a major top.
I did not make any moves today but I am ready to short if the market continues to sell off tomorrow. If volume was heavier today, I probably would have started a few positions a little early. So far, this rally has been marked by quick support coming in from the bulls to keep the prices moving higher. It will be interesting to see if tomorrow we get the same thing, because as soon as that buying support disappears, then things could get very ugly. I personally would like to wait for a little more confirmation before going heavily short, and early tomorrow should give it to us. Watch those 830 and 1600 numbers to see if the bulls make another stand. Today looks a lot like March 30 to me - back then I thought we were looking at a top. I guess we just have to see if tomorrow and Wednesday look like 3/31 and 4/1 or if this time will be different and if today signals a major change in trend. Good luck Tuesday.
Sunday, April 19, 2009
I guess for me, it comes down to trust as I mention at the end of the video. Do you really trust the government and what they are saying? Do you really trust the banks and what they are saying? If you do and think they are being honest, then I think there is real reason to be optimistic right now. I personally don't trust anyone from Wall Street or Washington. I think they are all lying in some way(wonder why?) and that is one reason I think this all falls apart soon. I hope I am wrong - I guess we'll find out. I go over some short and long candidates in the video as well so you can be prepared for whatever the market decides to do. Good luck this week and be careful - still lots of earnings out there. Off to watch some hockey - take care.
Friday, April 17, 2009
I did sit out today and didn't really watch things either. I do notice now that RGR broke out nicely today, which would have been nice if I held on to it. Looking back, I originally said that as long as it held $11, then it was in good shape. I didn't follow my own advice. Sometimes it is good to get out early - SOLR was an example today. I didn't like how it couldn't hold its breakout so I got out early and save myself a slightly bigger loss today. Sometimes though it doesn't work that way and you miss out on a RGR breakout. As I think about things more, I realize that I am just getting scared about taking losses, and by doing so, I am actually giving myself more losses as an overall number of trades. They might not be big losses, but they can add up and also hurt the confidence of a trader. Then as the losses start to build, I get more scared and the cycle continues. I will get a hold of this soon but right now I realize it is affecting me.
I'll be back at some point this weekend, hopefully with a video. Good luck and enjoy the next two days.
Thursday, April 16, 2009
Technically, another higher high was put in today by both the Nasdaq and S&P, with the Nasdaq breaking to new highs for the year. So the beat goes on for the bulls, and besides being overbought, there isn't much to signal a possible turn coming. I still want to see volume increase on days like today (it did not on the S&P) and I am a little worried that there are now 43% bulls and only 34% bears in the latest Investors Intelligence survey. We'll see if that means anything at all - it may not. One more thing that I am watching is that we are approaching having only 200 stocks down more than 25% in the last 65 trading days. That is usually a sign of a possible turn as well. It may be coming, but I have no clue when, and it has already gone much further than I expected, so I am not going to make a guess.
The beat went on for me today - more terrible results and I continued to be very frustrated. SOLR broke out nicely this morning and followed-through from yesterday's action, so I let it have a little room. It got as high as $7.90 and I set my stop under yesterday's highs around $7.30. Well, because I owned it, it promptly sold off that follow-through and fell right back down, giving up all of its gains and hitting my stop at $7.27. I basically broke even on that trade but gave up a decent sized profit on the reversal. That was fun. Bottom line is the stock didn't act well today and I expected a lot more.
When I saw the financials gap up today I had the same feeling I had when I saw them gap down yesterday - to fade the gap. So as a hedge on my long position, I entered FAZ at $9.83 early in the session. I'll let you guess what happened. Stop was hit around $9.56, giving me a 2.88% loss. Fun stuff as always for my trading account. This turned out to be a blessing as it fell the rest of the session but bottom line is that I shouldn't have made the trade.
In addition to the poor results, I was so frustrated that I turned off my quotes for the rest of the day and missed some nice moves in stocks I was watching like GAIA and CAEI. I keep expecting to get my groove back but it is just not happening right now. It will happen eventually, but right now, I am making the same mistakes over and over and not adapting my trading to this market.
Since I continue to have little success right now, I will not be trading tomorrow. Sometimes as a trader you have to admit when you just don't have it, and right now I don't have it. With options expiration on Friday, that might be a good decision anyway. If I had longs, I would just manage them because this market continues to act in a bullish manner. Sure, we could turn here soon, but trying to guess when that will be could get you in trouble. Take care and good luck tomorrow.
Wednesday, April 15, 2009
Technically, the 835 and 1600 levels proved to be very important on the S&P and Nasdaq respectively, as both were tested several times today and held. That is very bullish and until those levels are broken along with the uptrend line, I have to give the bulls the benefit of doubt here. A break above 865 and 1660 would give the indices another higher high which would also be impressive. We obviously remain overbought on some indicators but that doesn't seem to matter right now. The only thing I would worry about is volume - I want to see it increase on up days and decrease on down days. The past two days have seen the exact opposite of that.
Today was a lot of fun for me...not. When the levels I mentioned yesterday held at the open, I decided to go long a few stocks. I went into BAC at $9.59 with a stop below $9.40, although I was also watching FAS and WFC at the time and both would have been better choices. I also went into RGR at $11.35 and SOLR at $7.19 as both made nice early moves. I was a little late on both but didn't want to just jump in too early. When the morning bounce failed, I was stopped out of BAC at $9.38 for 2.3% loss and moved my stop up on the RGR position to about breakeven. That stop was also hit at $11.29, giving me a small loss of 0.7%. I thought this one looked very promising early on, but the close was not impressive at all and it now looks like it is not ready to break out yet. My SOLR positon is still on the table with a slight gain.
I am very frustrated right as I can't seem to win. I knew to play the market long today in the first half hour of trading, but came away with absolutely nothing overall. I think if I didn't have bad luck, I'd have no luck at all. FAS, WFC, and BAC were all sitting on my quote screen this morning and for some reason, I went with BAC. I was expecting a big move. When it finally moved up to around $9.80, I had a small gain and figured it was good to go for the rest of the session. I felt comfortable keeping my stop below the low of the day at that point, figuring it would not get there. Well, it promptly reversed, went to new lows, and then zoomed higher the rest of the day without me. Looking back, however, I don't think I would have traded it any differently. When it lost that momentum early in the session, I didn't like what I saw. The thing that is even more frustrating is that both FAS and WFC never came close to testing their lows for the day, and I would have likely still been in either of those positions right now if I chose them instead of BAC. I honestly don't know if that's bad trading or bad luck or a combination of both. Whatever it is, I know it is extremely frustrating. I think I just need one or two nice gains to get my confidence up, but I just can't seem to get them. I would be looking at gains of over 20% intraday today if I just would have chosen FAS instead of playing BAC.
After today, the play continues to be on the long side, as the bulls continue to hold support and show strength. I still have my doubts about how much longer we have on this rally, and I will be keeping a close eye on volume over the next few days, but I don't want to fight the trend right now - I have to respect it. I can only hope that I have some better luck over the next few days if I add more longs, which I may do. Good luck Thursday and take care.
Tuesday, April 14, 2009
Technically, one down day does not destroy this rally and as long as the bulls can hold 835 and 1600 on the S&P and Nasdaq respectively, then I think we have the potential for more upside. Both the uptrend line for this rally and the 9 day moving average is in this area, so a break might be significant. Of course, we had a severe break on 3/30 that at the time looked like it would be significant as well but the market just kept rallying from there so who knows? The financials pulled back as well today on higher volume, but if XLF holds the $10 area, then they are probably OK as well. I will be watching closely how the market acts around those levels.
I didn't do anything today but to be honest, I am itching to short this thing. That of course has gotten me in trouble so far however, so I am trying to be patient and get some confirmation on a possible trend change. If we break the areas mentioned above, then I will seriously consider it. However, none of the stocks in my long watchlist from yesterday were really damaged today, so I can't get too bearish yet. If you are a bull, we just might be looking at another little pullback that can be bought. It is really hard to say right now which of those things we're looking at, and again, that's why I would rather wait for some confirmation before making any big moves. This is especially true with all of the earnings reports coming out right now.
Things are settling down a bit here at home so if I have time, I will try to get a video out tonight or tomorrow. Good luck Wednesday. Take care.
Monday, April 13, 2009
Technically, the next lines of resistance for the Nasdaq and S&P remain 1665 and 877 respectively. I don't like that we are overbought heading into that resistance, but so far being overbought hasn't mattered. The financials via XLF kept running today although I really didn't like seeing the lower volume on fresh highs. That is something to watch for here - if volume starts dying off like it did today as XLF keeps moving up, then a turn might be right around the corner. $10 should act as strong support there now. The McClellan oscillator is right around 200, so it remains slightly overbought. The T2108 is over 90 now, the highest I've ever seen it.
I still didn't do anything today as I continued to get stuff done around the house, but I regret missing FEED breakout so nicely today. I listed that stock in my last post and it was a great move today. I am still very hesitant to buy a market approaching resistance and that is overbought, but there are a few stocks I will continue to watch here. STP over $14.60 area looks good to me, along with all of the other solars (in order of preference - SOLR, SOL, CSIQ, JASO). I like RGR in this area with a stop below $11 or so. OCN still looks good as a flag pattern. BBBY looks like it is forming a nice earning flag and with a few more days of rest, I would be interested in that as well. Others to watch include CWCO, DPZ, DUF, STX, BX, ATRO, and WSBC.
One thing I don't like about today is that I started to see some ridiculous moves in speculative names like DRL and CAEI on no news that I could find. When these moves start occuring randomly, it is usually a warning sign that things are get a little "frothy" so to speak. It may not mean anything, but I just wanted to point it out.
Overall, there is reason to be cautious here on the long side but the action continues to be bullish from day to day. My game plan is to cautiously watch the longs I listed above and play a few if I can get over my skepticism of this rally and fear of getting in right near the top. My gut is telling me that as soon as I go long, this thing will reverse and I will be messed up in the mind for throwing in the towel right at the top. We'll have to see what happens I guess. Be flexible is probably my best advice right now. Good luck Tuesday and keep an eye on those earnings reports. Take care.
Friday, April 10, 2009
Onto the markets. We had quite a day on Thursday, with an earnings "surprise" from Wells Fargo that gapped stocks up at the open and they continued sharply higher for the first hour or so of trading. They consolidated for most of the rest of the day nicely before breaking slighty to new highs around 3:00 and closing near their highs for the day. Volume, although not huge due to the holiday, was also higher, which is impressive. All in all, a great day for the bulls as they broke the S&P, Nasdaq, and XLF all to new higher highs once again. The beat goes on for them I guess. Resistance I would watch for now is around 1665 for the Nasdaq (which corresponds with the high of the last bear market rally) and around 877 for the S&P.
In terms of oscillators, most are slightly overbought but not in any way severe enough to warrant caution. The pullback during the first half of the week was very constructive and allowed this move to happen. That is how healthy markets act. The only thing I would worry about is that the T2108 is at its highest closing level ever (89.27) for the four years Telechart shows. It is just above its former high from January 6 which proved to be the top of the past bear market rally. We'll have to see if that means anything - it hasn't so far.
I didn't do anything on Thursday and remain in cash - I just don't like chasing gaps to the upside and actually had to take care of some errands with local taxes and moving things and such, so I wasn't around my computer anyway. There were some decent breakouts on stocks I have posted this week (ALV, EJ, PVH, and BAC) while others are still setting up nicely. I am starting to get many more stocks with high BOP levels which shows a lot of underlying accumulation. Those include SOLR, SOL, FEED, BPO,, SOL, OCN, ATRO, RGR, FRPT, DNDN, CZZ, CTRP, DPZ, and TER. After seeing positive reactions to earnings the past few days, I also plan on watching the after-hours reports more closely over the next few weeks to see if I can catch a few earnings plays.
All that being said, I cannot totally get my skepticism of this rally out of my mind. I still have this strong feeling that this is going to all end very badly. I don't know when it will happen, but I just can't shake that feeling. Let's look at the Wells Fargo report on Thursday which spawned a huge rally in that stock. Great, they made $3 billion dollars in profit. That's terrific. However, the cynic in me starts to think about that and ponders a few questions. Didn't the government have to give billions of dollars to these banks through TARP and other bailout programs? Is this a legitimate profit, or is it just a one-time fluke due to the taxpayer-sponsored handouts to these companies? Heck, I am not a CEO and never attended any business school, but I am pretty sure if someone gave me say $5 billion I could find a way to make a tidy profit on my business as well.
I also think about the mark-to-market decision and how the banks can now claim their assets as basically anything they want to. Honest accounting is out the window. You don't think that may have an affect on profits (paper profits that is)? Heck, I can look at my new house and say, "you know what, I think this house is worth $1 million" (it's not by the way) and then go around telling my friends I am a millionaire. However, reality is a cruel thing sometimes, and just like the reality that I am indeed not a millionaire sucks, I still think the reality of the assets held by these banks has to emerge and be dealt with at some point, and when it does, it is going to suck as well. Just my opinion - maybe I am completely wrong here.
So the bottom line is I continue to be torn as to what I should do here. The trend is definitely up right now and there is no use fighting it (this rally is exactly why I use tight stops - get out early and miss a beating), but I just still have a lot of trust issues with this rally. My guess is that it continues for a few more days to weeks before failing, and then things get really, really bad. I just hope I am paying attention when it turns and can catch it on the short side. For now, I may try a few individual longs from the above watchlist, but I don't see myself going all-in here at any point. My conscience, for better or worse, won't allow me.
I don't know if I will have time to get a video in this weekend, but if I do, I'll show you those stocks mentioned above. Good luck, and have a blessed Easter holiday.
Wednesday, April 8, 2009
Longs I am watching right now include ALV, EJ, STP, SOLR, CTRN, RIMM (only with a little more rest), RGR, BAC, and YGE.
Good luck Thursday. Take care.
Tuesday, April 7, 2009
Technically, I see the indices have pulled back basically to their short-term 9 day moving averages, and as long as those areas hold, then I think the bulls can be happy. Both the S&P and Nasdaq closed slightly below the 9 day on my charts but there is a uptrend line right here as well so I don't think it is a big deal. With volume coming in lower the past two days, as of now this looks like nothing more than a healthy pullback which has allowed some of the overbought conditions to be worked off. As long as the bulls can hold the area we closed at today, then I think they remain in control of things. If we break below the close of today and don't quickly reverse, then things could get trickier. Watch 801(20 day MA) and 789(50 day MA) on the S&P for support on any further selling.
I didn't do anything today and it turned out to be a good decision because the areas I would have been focusing on (financials) actually bounced up off their gap down and closed off their lows, even with the market closing near its lows. I have to take this as bullish. I am not saying that I will be buying any financials any time soon, but they have shown a bit of strength in the past two days when they didn't sell off in the face of a market selling off. Perhaps this is a change of character that I need to respect. XLF is also sitting right at its 9 day moving average and a trendline, so as long as this area holds, I think the bulls remain in control, much like the indices.
For tomorrow, I guess I would lean more bullish right now in the short-term, although I don't know if I want to do anything in the low-volume environment we will likely see the rest of this week. Earnings season is starting up as well so that always makes things tough. In terms of individual plays, the only stocks really breaking down from the shorts I showed this weekend are the education stocks, so that again has to be considered bullish I guess. I did see a few long candidates break their 9 day moving averages to the downside (SOLR, ASIA, HOTT, WSBC, BWLD) which is not good but none look awful. I continue to keep my eyes on the same set of stocks I've been talking about this week -solars and a few others.
The best thing that can happen from where I sit is for the market to just do nothing for the next two days - trade in a tight boring range in this low-volume environment. With earnings, I don't know if we will be that lucky, but if it happens, I would have to get more bullish. As it is, I will lean to that side but probably not do much. If I see any new, interesting stocks tonight, I'll try to share. Good luck Wednesday.
Monday, April 6, 2009
I made two trades today off of what I saw as bear flags this morning but neither worked out. I entered FAZ at $16.90 and short MET at $24.75, but was stopped out later (FAZ at $16.58 for a 2.1% loss and MET at $25.11 for a 1.6% loss). Although the market declined throughout the morning, these stocks actually rose so I am not upset about getting stopped out. It happens (to me this year, it happens a lot.) I am not quite sure why the financials bounced off their gap down while the market continued to sell off off of its gap down, but that's what happened.
I continue to let my conscience affect my trading here and although I hope at some point soon I will be right, it is tough right now. I can't seem to get anything going and my timing has been off trying to short this market. However, I really do believe that the smoke and mirrors being used by those in power to push this market higher will eventually backfire and that the truth will come out. When that happens and traders realize that the news isn't better and is in some cases worse, I do want to be short because I think we could be looking at the final leg down of this epic bear market. That's why I stubbornly keep trying. Perhaps I am thinking too far out but that's the thought that I keep coming back too - one final swoop down where everyone really does give up hope and then we can gradually move higher longer-term. I still just can't buy in my heart of hearts that we've see THE bottom. Maybe I'm just being stubborn. Either way, my timing continues to be off.
Today took a little of the overbought conditions away via the McClellan oscillator but we are still much more overbought than anything else. We need to pullback and as long as we do it like today, then it has to be considered completely healthy and I may have to change my bearish outlook, as difficult as that would be for me. If you're looking for individual plays, most of the setups I showed on either side of the market in the video last night are still valid. Except for CSKI, none of the shorts look like they broke down yet, but neither did they breakout. On the long side, I still need to see some rest from the solars but if they do I would be willing to jump on them. OCN, RGR, and WSBC are the only other ones that look interesting to me here. If I find anything else tonight, I'll try to post some more ideas. Take care, and good luck tomorrow.
Sunday, April 5, 2009
Friday, April 3, 2009
I held my positions from last night (FAZ and SDS) through the morning spike and things looked good mid-morning when the market reversed. At that point, I moved my stops up a bit. When the market bounced, I was stopped out of FAZ at $17.40 for a 0.8% loss. Not a big deal and I don't like to let that ETF move against me too much. Earlier in the morning, I also added a QID position at $43.36 to get short some tech. As the afternoon started and the market started to move higher, I ended up being stopped out of the SDS ($70.98 for a 1.15% loss) and QID ($42.75 for a 1.6% loss). None of the losses were big so I am not too upset. I realized yesterday that these may not work out and accepted that. Timing is always the hardest part of shorting and I am not one that can just sit tight and watch my losses grow. I would much rather get out early and then get back in and that's what I plan on doing.
Overall, I am still looking to catch a move lower more than I am expecting a continuation of this rally, but for the past month, shorting has been a fool's game so I may need to reevaluate things soon. Maybe if we just move sideways for a week I will change my outlook. However, there are several things I am watching oscillator-wise that continue to make me think we are due for a pullback, perhaps a sharp one. In fact, many of the scans and oscillators I watch seem to be coming together here all at once, so based on those, we should definitely see a pullback soon. I will do my best to get a video done sometime this weekend showing these oscillators and scans, but there is still a lot of things move-wise that I need to finish, so I can't promise anything. Enjoy the weekend and take care.
Thursday, April 2, 2009
Technically, both the S&P and Nasdaq broke above the resistance levels I mentioned last night early on and stayed above those levels for most of the day, but the late swoon took them right back to those levels. We'll have to see what tomorrow brings with the jobs number, but with us being quite overbought (back over 200 on the McClellan) I am very hesitant to expect much more upside here. I also found it interesting however that the XLF drifted lower throughout today and did not break to new highs along with the other indices. That is a negative divergence and we'll have to watch to see if that is a sign of impending trouble.
I did get short via a few inverse ETFs late in today's session - FAZ at $17.52 and SDS at $71.66. They are not huge positions and I am still mainly in cash, but I will contemplate adding more tonight after I go through my scans and if these work out. I did want to start a few positions today. I was away from my computer so I couldn't do anything anyway early on on the long side. Some of the longs I posted last night broke out nicely today but I don't feel comfortable chasing them here. I have missed this move to the upside but I am not too upset.
I have been thinking lately about the role a trader's conscience can play in trading. That may not make any sense, but I think my conscience has affected me recently. What I mean is that deep down I know that all of the stuff that been going on - the continued raping of taxpayers by our government to prop up these dead banks for instance and today the ridiculous suspension of mark-to-market today which basically allows banks to totally lie about their assets - is dishonest and wrong, at least from my viewpoint. I have a problem with it, and I think it is at least partly preventing me from getting invested here. I can't buy (figuratively and literally) all this crap they (the government) are doing and am therefore subconsciously refusing to go along with it. I don't know if this is the right response - it probably isn't - but is something I need to think about soon. I have to learn to find a healthy balance between respecting the market action and also believing in what I believe. More than likely, with the direction we're going as a nation, that will be a difficult task.
The close was not very pretty today and we'll see if it leads to more selling tomorrow. It seems to me like this market may be getting a little tired, and remember that basically it continues to be government intervention that causes the rallies we get. I have no plans to go long anytime soon, and will look to add more shorts in time if the ones I took today work out. I want to be patient however on that side because I know that I could easily be wrong and this market could continue to irrationally move higher. I am prepared for that possibility. Take care and good luck Friday.
Wednesday, April 1, 2009
Technically, I said a few days ago that I was hoping for a bounce after Monday's disaster to possibly get short from. I was also hoping for some small bear flags to set up and in some cases (XLF and S&P mainly) that has happened. We are kind of in a small range here basically and I don't think I've missed a lot by not trading the past week or so. Resistance to the upside on the Nasdaq is around 1587 and around 832 on the S&P, so I will be watching those numbers and possibly will look to short a move up to that area.
I have to be honest and say that I still don't have a great feel overall for this market. It is possible we are just consolidating before moving higher, but I still have my doubts. I just have a problem believing we have already seen the bottom and that it is nothing but higher prices from here. At the same time, I know I don't want to discount anything, so I am trying to keep an open mind. Stocks I am watching on the long side (some of which are setting up nicely) include some solars (YGE, SOLR, STP), some retail (HGG, PVH, CTRN, MW, DRI), some precious metals (AU, SA, SLW, IAG), and other random stocks (STEC, NAV, PEGA, STSTI, OCN). These are the best that I see right now and will be what I will be watching. I have to admit that I like the way some of these are setting up. That's why I don't want to get too bearish and go all in on the short side, although I still will keep that option open, mainly focusing on the financials.
Good luck Thursday - I am sure it will be interesting. Jobs number Friday so be careful.