Sunday, January 31, 2010

Stock Market Video - Weekend Watchlist - 1/31/10

Hi, traders. Here's the weekend video - part one takes a look at the overall market and why I expect further selling from here, even though we could bounce soon. Part two takes a look at the short setups I will be watching this week. As I state in the video, I am done trying to buy dips or time bounces until we get down to the support levels I discuss, as it is cash or shorting only for me. Hope the videos help you out for the upcoming week. Take care and best of luck.

If you click "full-screen" and "720p" in the above videos, they will be much more detailed. YouTube takes a little time to process the videos fully to get them at the highest quality so if there is a delay or the quality is lower at first, I apologize - it should be in HD when fully processed.

Friday, January 29, 2010

State of the Market - 1/29/10

Another really bad day today on Wall Street, as stocks started strong and once again faded mightily, giving up all of their gains by 2:30 and closing once again with large losses, finishing near their lows for the day. The lows of yesterday were easily broken today on both the Nasdaq and S&P, and these indices are now down over 7% and 6% respectively in the last eight trading sessions. The next layers of strong support don't come in until around 2025 and 1030 for the two indices and it is entirely possible we soon visit the 200 day moving averages on both, which would represent pullbacks of 10-12% from their recent highs.

Lots of technical "bad news" out there to worry about - UUP looks like it broke out today of a long-term bottoming pattern and that is bad news for anything commodity related, as oil was indeed lower once again. The VIX is forming a very bullish looking flag pattern and looks like it wants to go higher - again, not good news for the overall market. Semiconductors got smacked today and financials look to be forming a bear flag that does not bode well for their future.

Although charts are important in analyzing the market, sometimes you just have to pay attention to how the market is "acting" instead of the charts and today really showed me that this market is much worse than even I thought. A big, surprising GDP number along with more decent to good earnings reports (AMZN) could once again do absolutely nothing to get this deeply oversold market moving to the upside, and that bodes quite badly for the next few weeks. If it can't rally off of this type of news, exactly what is it going to take for the market to rally? I don't know. I do know that I am now strictly looking at shorts until the market shows it has at least some ability to hold a rally, and right now that time looks far away. I've been burned slightly trying to dip buy this week - not much, but slightly - and I think I am done trying. 2009 programmed traders that it was OK to do this, but the fact that is now not working is proof positive we are in a changed market.

I was stopped out today of my PEIX position in the afternoon at $2.05. I went into NEP this morning at $8.15 as volume was very strong early on and I did expect a short covering bounce to happen, but I was later stopped out at $8.05 as it could not hold onto any momentum. Later on, I did finally get short via TSL at $22.43 and GOL at $12.41 - both of these setups were shown in last night's video. I didn't take any more positions on as of now as we are quite oversold, but I am fine with riding just these two and can always add later.

We'll see where we go next week, but I continued to be surprised at how heavy the selling has been and how weak the bulls are right now. I expected a pullback but I guess I thought it would be a little calmer than we are seeing. So be it - I will continue to look for shorts and today proves very nicely that any bounce we get should be shorted, at least until the bulls show that they are still in the game. We are indeed deeply oversold (McClellan below -300 - lowest level since October of 2009) so we could see a relief bounce early next week but I don't know if matters - it will likely just be sold. Take care and enjoy the weekend.

Thursday, January 28, 2010

Stock Market Video - Friday Watchlist - 1/28/10

Hi, traders. Haven't done a video in a while so thought I would put one together with some interesting setups to watch tomorrow. We are quite oversold so a relief bounce wouldn't surprise me (really, nothing would surprise me anymore) but at the same time, the action this week has been quite bearish and I am seeing several nice looking short setups so I will not hesitate to get short tomorrow if necessary. Hopefully the video helps you out and gives you some good ideas. Take care and good luck Friday.

If you click "full-screen" and "720p" in the above videos, they will be much more detailed. YouTube takes a little time to process the videos fully to get them at the highest quality so if there is a delay or the quality is lower at first, I apologize - it should be in HD when fully processed.

State of the Market - 1/28/10

We saw what I guess I would call an interesting session today on Wall Street, as stocks opened slightly higher, fell hard from there, but then bounced back in the afternoon before falling again hard into the close. Stocks ended in the middle of their range but still had large losses. Volume appears to be heavier on the Nasdaq but lighter on the S&P.

Technically, we have seen expanded intraday trading ranges each of the past three days but we've gone virtually nowhere overall the past five days on the S&P and only slightly lower on the Nasdaq. Right now, the technical patterns on both indexes are a little odd, but nonetheless look more bearish than bullish based on the continued distribution we are seeing. Around 3:30 today, when the market were off their lows, I thought a bounce was an even better possibility than I did yesterday (two straight closes bouncing off support levels), but that close made me question those thoughts. I really don't know what to expect tomorrow - we have a few earnings reports plus the GDP number that will likely keep things volatile.

Sector-wise, most ETFs look similar to the markets - their ranges are expanding but they are not really going anywhere. Financials held support today which is good and semiconductors bounced off their lows as well. The U.S. dollar continues to look like it wants to break above some heavy resistance, however, so that could affect things. GLD is at an interesting point, with support around $105 (tested today) so I will keep my eye on it. It remains oversold as do most commodities but I don't know if that matters right now.

I did make a few trades today with very little success. I entered ALGN last night after-hours at $18.40 as an earnings trade and it got as high as $19.25 this morning. However, it could not hold up to the selling in the overall market and my stop was hit at $18.43, losing me a measly 0.29% on the trade after commissions. I should have chosen NFLX last night instead. I also entered TSTC last night at $15.00, but my entire order wasn't filled and it was a very, very small position. It didn't bounce today and I was stopped out at $14.60 for a 3.6% loss. I also got pulled into PEIX this morning as it spiked up. This is a stock I've been watching because I know it can move fast and the overall pattern is very bullish, but it didn't close real well today. I am still in this however.

If my earlier paragraphs are confusing, I apologize, but that's kind of how I feel here. I don't have a strong feeling one way or the other in the very short-term and when you're lacking that feel, trading becomes difficult. In the intermediate-term, I expect this pullback to continue, and I do have some short setups that look good to me. At the same time, I see some stocks that are close to what should be very strong support, so I am tempted to play these on the long side with a tight stop. I'll try to share these charts later tonight here or on Twitter if I have time. Good luck Friday - I'm sure it will be interesting.



Wednesday, January 27, 2010

State of the Market - 1/27/10

We saw bullish action today on Wall Street, as stocks bounced off their lows mid-afternoon and finished at their highs for the day at the close, holding some support levels in the process. There wasn't a huge reaction to the Fed statement released today, but on the surface the market appeared to like it at least somewhat at it did rally after the release. Volume appears to be close to yesterday's totals, but I don't have the final numbers.

Technically, the Nasdaq and S&P were forming bearish-looking flags before today, but both managed to hold key support levels around 2200 and 1080 respectively and those bear flags don't look quite as ominous as they did at the start of the session. They could certainly still break with all the headline news out there, but overall today wasn't bad.

Sector-wise, many ETFs remain oversold and are in position to bounce, but that doesn't mean it has to happen. Financials (XLF) held key support today around $14.00 and continue to basically move sideways in a six month range. If that level is broken, however, watch out. Both retailers (RTH) and semiconductors (SMH) look bearish on the daily charts and need to bounce soon in my opinion. Oil remains weak and with the U.S. dollar looking like it may try to break out soon, it could remain weak for a while. It is oversold however so we could see a reflex bounce in the next few days.

I remain in cash as I don't see many interesting setups on the short side and I don't feel that comfortable trying to buy this dip with all the news coming out this week. I am leaning more long now simply because I don't hear many people at all that are bullish - the bearishness is heavy out there and it almost seems too obvious. I could be overthinking things however. I have my eyes on a few oversold plays but if I enter them it will be in small positions only. I still don't feel this is the time to make big bets on either side of things (as boring as that is.)

Good luck tomorrow - we've got the State of the Union, more earnings, and the delayed reaction to the Fed statement tomorrow to deal with, along with GDP coming out Friday. Fun stuff all around. If we break the recent lows this pullback will accelerate but I am leaning as of now to a slight bounce first. We shall see. Take care.

Tuesday, January 26, 2010

State of the Market - 1/26/10

You know, for the second straight day, I really don't have a lot to say. We saw another very weak day today, as although the closing numbers will say only that the market was slightly lower, the intraday action shows another story. We saw another bounce attempt sold off very hard today and both the S&P and Nasdaq have formed three-day bear flags that on the surface makes it looks like far lower prices are ahead of us.

I have to through my scans tonight but I am guessing there will be a lot of bear flags on individual charts as well and I may have to consider playing a few of these short over the next few days. If I see any good candidates, I will share. My only worry is that everyone is seeing this market move lower and it almost seems too obvious to me that we just pause for three days and then keep falling from there - it almost seems too easy for the bears.

I remain totally in cash as I see absolutely nothing that interests me on the long side as a dip buyer and in a news-driven environment (which we are certainly in now) shorting overnight isn't very attractive to me either. I'll continue to watch that side but I have a feeling I may be in cash for a while. Sometimes that's the best position to have, however, so no bigger - more and better opportunities for making money will come forth in the future.

My only advice is be careful and don't try to be a hero here - with all of the news coming out of Washington tonight and tomorrow, it is going to likely be a crazy market, one that I don't think I want a part of, even though that is boring. Take care and good luck if you're trading tomorrow.

Monday, January 25, 2010

State of the Market - 1/25/10

Another short post today because there really isn't much to say after today's lackluster action - I still think we are basically in no man's land. The market did bounce a bit today off of the heavy selling seen last week, but it certainly was not a strong bounce, with the markets finishing in the middle of their intraday ranges and with only modest gains. Volume also appears to be lower - actually much lower than last week.

We could certainly bounce further from here but in order for me to get bullish this week, I needed to see a very strong bounceback today and we didn't get that. My guess is that we have further downside to go and that is how I plan on playing things this week. I really have no interest in dip-buying right now, and if we get a few more days like today (weak bounces on lower volume), there should be some nice bear flags to play breakdowns from. I am hopeful that's how things will play out, but if we fall fast again without a bounce, I will miss it and am OK with that. We're still oversold enough that shorting right here does not look appetizing to me.

In the meantime, I wait patiently and sit on my hands. I still think that's the best play for the next few days. We have a deluge of earnings reports this week and who knows how they will turn out or how the market will react to them, so cash looks even better considering the uncertainty out there. I am guessing there will be more opportunities later in the week and that's what I am looking toward. Take care and good luck Tuesday if you're trading.

Sunday, January 24, 2010

Some Weekend Thoughts - No Man's Land

I was going to do a video this weekend but after going through my scans, I don't really have much to say or show. I really do think we are in kind of a "no-man's land" here - too late and risky to get short here, and too much uncertainty and news coming (i.e. earnings, State of the Union) to play an oversold bounce. We certainly are stretched here (McClellan is at -271, the lowest since October 30) but oversold can always become more oversold, especially if Wall Street continues to frown upon what comes out of Washington or if the earnings this week are disappointing.

If you are really itching to try and catch a bottom here, I would watch 1080 as an area where the possibility of a bounce is strong. I could see a sharp break of that area to get shorts pulled in, and then a reversal back above it. That's just a guess though, and guesses aren't good enough for me to get heavily involved in the market. I will likely be taking it easy for a few days until things get straightened out, as again, I kind of see swing traders in "no-man's land" here.

My short watchlist is growing by the day, but I need them to form bear flags or bounce up into former support levels as they are currently way too stretched to the downside, so there are no setups ready on that side of the market yet. I will be watching several stocks this week just to see how they act more than anything - former momentum plays like SEED, HPJ, and CAGC. I'll also be watching stocks that look to have held up well the past week like MSPD, RNWK, BEXP, and MAPP. It is these stocks that remain strong during nasty sell-offs that you need to pay attention to, for if this is a short-lived sell off and we bounce right back up like we did in 2009, these guys will likely be the new leaders.

Don't know if this little summary helps anyone out there, but sometimes the best thing to do in the market is sit back and watch others fight it out, and I think for the next few days, it might be best to do just that. Take care and good luck in the week ahead.

Friday, January 22, 2010

State of the Market - 1/22/10

Another awful day today on Wall Street, as stocks once again started lower due to disappointing earnings, tried but failed several times to bounce in the morning, then fell steadily lower after lunch and through the afternoon, especially into the close. Volume does not appear to be as strong as it was yesterday but given the selling I don't know if that is any solace.

Since it's Friday, I'll keep this short (and there really isn't much to say anyway). Things are obviously very bad right now and it certainly looks like we have entered into correction mode. Who knows how long this correction will last, but from what I see, it does look different from the many sharp, quick pullbacks we saw last year. For that reason, I am thinking this is going to be something meaningful (maybe several months) and there won't be much to buy for a while other than potentially short-term oversold swing plays. This long-term chart of the Nasdaq that I posted on Twitter on Monday and on the weekend video shows one reason I am thinking a pullback could be meaningful.

Nasdaq 2005-Present
Charts from Telechart - Courtesy of Worden Brothers, Inc.

I'll go over this more in the weekend's video but hopefully you haven't been damaged too much the past three days. I do get stopped out of a lot of positions, but there is a reason why and days like today and yesterday always help to remind why. I was quite content being in cash the past two days and may be in cash for the near future. We are getting quite oversold in the short-term so a relief bounce soon wouldn't surprise me, but I don't know if I want to play it or not - depends on how lucky I feel. More than likely, I may be sitting back for a little back until we get some weak bounces in stocks that in all likelihood will set up nice short plays. I'll leave. Take care and enjoy the weekend.

Thursday, January 21, 2010

State of the Market - 1/21/10

We had about as bearish a day as you can have today on Wall Street, as the selling was fierce and steady. The day started well enough with stocks up slightly at the open, looking like they were going to continue to bounce off yesterday's morning lows. It didn't quite turn out that way, as they fell quickly, tried to bounce, but failed and proceeded to fall about 14 points on the S&P and 34 points on the Nasdaq in the course of 13 MINUTES!! That was a crazy move and set the stage for more selling the rest of the day. The pace of the selling slowed slightly into the afternoon, but the overall direction was still down. Volume appears to be much heavier than yesterday.

Technically, it was a very bearish day with both the Nasdaq and S&P breaking down through the bottom of the rising wedges I've been showing and although they seemed to get support at their 50 day moving averages (at least the S&P), it may just be a matter of time until those are broken as well. With volume coming in higher, we saw another distribution day, which would be the fourth in less than two weeks - certainly not a good development.

Sector-wise, some of the areas that have been holding up and consolidating nicely like the financials and retail got hammered today and no longer look bullish or neutral. Meanwhile, the oversold commodity sector continued to be hit today as USO (Crude oil) looks to be on a path toward its 200 day moving average around $36. The dollar tried to break above resistance this morning and out of the inverse head and shoulder pattern I showed last night, but couldn't so so, reversing right back into it. Both the transports and semiconductors are sitting right on their 50 day moving averages and the XLF did hold its 50 day, so many sectors are sitting on the brink of much further declines if they don't continue to hold.

Today was a nasty day and not just because the market was down so much. I got whipsawed on two trades but consider myself lucky not to get hurt anymore than I did. I entered CAAS early this morning at $20.17 as it was near support and opened nicely. When the market opened nicely as well, I expected a move higher. That didn't happen and I was soon stopped out at $19.35 for a 4.5% loss. I also entered CLNE at $19.46 on a breakout move, but I was also soon stopped out of this at $19.00 as it quickly reversed course for a 2.7% loss.

I was a little disappointed at this point because I really didn't stick to my plan of buying CAAS around support ($19.50 area) and when it hit that and bounced back without me, I almost went back in. That would have been bad, and that is why I consider myself lucky. The first hour of trading today chopped up quite a few traders I would guess and coming out with only small losses makes me feel a bit better. After those whipsaws, I turned my quote screen off and just watched from "afar".

Bottom-line is that it definitely appears that there has been a shift of character this week in the market, and with now four days of distribution in less than two weeks along with some important support being broken, I am not bullish on stocks anymore, at least for the short-term. Perhaps this will just amount to a normal, short pullback, but there are too many signs to not pay attention to what is happening out there. In Tuesday's post, I said the following, "I still have a somewhat suspicious feeling about this market, as if something bad is about to happen, but I have to stay bullish until the charts clearly tell me otherwise". Well, after today I think the charts are speaking loudly, and as such, I will be looking much more carefully at potential shorts. Until things tighten up, I will not be looking to buy any dips, as dip-buyers have gotten hurt this week for the first time in a long while.

Where to go from here? Well, I really don't want to short a market that has been down as much as we have the past two days, but it's very possible that could turn out to be the best play. A lot depends on earnings, and in hindsight I wish I would have listened to my own advice more about how volatile the beginning of this earnings season would likely be. It looks like GOOG crapped the bed after-hours, so we could see further selling tomorrow.

More selling over the next few days will get us very oversold in the short-term, so please be aware a reflex bounce could happen at any time here and shorting after two big down days is a bit dangerous. Ideally, if this market is indeed topping out, we would see a little consolidation for a few days or a weak bounce, from which a breakdown could be shorted. I have no way of knowing that we'll see that, so there is a very good chance I will be taking things very slowly the next few days. Personally, I would rather wait for that relief bounce and if I happen to miss some further downside action, so be it. I'll keep an eye on my short setups and share any that I like, because although some stocks held up today, most have been damaged enough that it will take some time for them to set up in nice patterns. Take care and good luck Friday.

Wednesday, January 20, 2010

State of the Market - 1/20/0

Not a good day today on Wall Street at all, as a tightening in lending from China along with a stronger dollar and disappointing earnings reports sent stocks down at the open. The selling continued in a very strong manner for the first hour and a half of trading, with the Nasdaq down over 2% at its lowest point. From there, they were able to climb their way back well off their lows for the day, but stocks still finished with large losses. Volume looks like it will be stronger as well (at least on the Nasdaq), which will give the market its third distribution day of the last two weeks.

Technically, it is good that the market held the bottom of its current wedge pattern and its 20 day moving average again around 1130 on the S&P and around 2280 on the Nasdaq. The market is just barely hanging on to those levels however and the distribution we've seen for the past two weeks makes a trip down to the 50 day moving averages certainly a good possibility. It can't get much tighter in the current rising wedge than we are seeing right now so we probably should see a big move one way or the other very soon. That of course means we will go nowhere except sideways for a while, right?

Sector-wise, the financials continue to look good and bounced back from what appeared to be another disappointing earnings report from a bellwether (BAC). A breakout here would seem to be very bullish for the market and I really need to look at this sector closely for some possible setups. Semiconductors (SMH) have pulled back to their 50 day moving average and you would think it gets come support there. Crude oil (USO) did nothing with its positive reversal yesterday and really looks poised to perhaps fall back down to its 200 day moving average around $36, where it also has some trendline support. Gold was hit hard today as well due to a big move in the dollar. As I look at UUP, it is not hard to see a massive inverse head and shoulder bottoming pattern here so that bears watching.

U.S. Dollar

Chart from Telechart, Courtesy of Worden Brothers, Inc.

As you may expect, I made quite a few trades today, getting out of actually all of the positions I started yesterday. I was stopped out of FEED soon after the open at $5.37 for a 3.5% loss. Surprisingly, APWR and CREE (which I entered last night around $59.80 AH - posted on Twitter) bucked the trend and were strong in the face of heavy market selling, so I just moved my stops up on those positions, although taking profits would have been a good idea. I was stopped out of CREE at $62.54 for a 4.4% gain, and out of APWR at $17.31 for a 4.2% gain. I exited ABAT at $4.17 - just a very slight loss there(1%). I was also stopped out of CHINA at $2.62 for a 4% loss.

I was surprised that my account wasn't hurt at all from today's move lower - I think I am up very slightly for the week. I think I am doing a decent job of controlling my losses and have a slightly positive win to loss ratio so far this year. I haven't been able to get that big 20-30% winner yet, however, and that is holding me back a bit. Perhaps I can get a few now that earnings season is upon us - CREE was a decent start but it wasn't a stock that was beaten down and rallying from a low starting point, so I didn't like its longer-term upside as much. The big movers are out there - I just haven't hit on many yet.

From my perspective, this remains a rather weird market in that most if not all of the small-cap momentum names I follow are very oversold and have really pulled back for the past week or two off their highs. Commodities are the same way - oil is oversold and has pulled back considerably now. At the same time, however, the market has not really done so, today not withstanding - we've just been kind of going sideways. I don't know if this is bullish or bearish.

A big part of me keeps expecting a bounce in these momentum names soon and because of that, I wonder how severe of a pullback the market could really have here if support is broken. Seeing so many oversold stocks well off their highs makes it very difficult to get short here. On the other hand, maybe it is worse than I think - maybe the market has been topping very quietly for a week or so and we are about to have a major move lower, regardless of how the individual stocks look. Bottom-line is that it seems to be quite the tough market right now and playing things cautiously remains smart.

I have not gone through all my scans yet, but I will be watching some stocks like CAAS and BEXP tomorrow as they come into what should be strong support and are getting to areas which look like pretty low-risk buy opportunities. I don't see too many shorts other than maybe AMZN, CYOU, and XCO because again, do I really want to short a stock that has been moving steadily lower for two weeks and is quite oversold. So overall, I will probably tread lightly until this market decides which way it wants to go, because right now I don't think it knows. That's what happens I guess during earnings season. Take care and good luck Thursday.

Tuesday, January 19, 2010

State of the Market - 1/19/10

A strong day today on Wall Street, as stocks started the day basically flat but quickly moved higher during the first 45 minutes of trading. They consolidated a bit, then started moving higher again around noon. After making new intraday highs, they moved sideways from there until the final hour, when they tried to break to new highs again. Both the S&P and Nasdaq closed at their highs for the day. Volume was lower than Friday's high options volume but looks to be lower than Wednesday and Thursday's totals as well.

Technically, it was good to see the bulls provide support again at the 20 day moving averages for the Nasdaq and S&P - I talked about the importance of this in this weekend's video. I would feel a lot more at ease about this market if these rising wedge patterns were busted through powerfully to the upside - got to watch 1150 on the S&P (right where we closed) and 2326 on the Nasdaq. Perhaps the election results tonight will provide a catalyst for a move like that, but I also worry that that outcome is too predictable and the news could be sold. We'll see.

Sector-wise, financials were able to shake off the poor earnings report from Citigroup and continue to form a bullish handle on a cup pattern (XLF). A breakout here would obviously be good for the overall market. Oil bounced off its lows and an oversold condition and is certainly in a technical position where it could bounce a bit. That would be good for the overall market as well. Both OIH and XLE are consolidating in a bullish manner. Gold (GLD) is forming a pennant around its 50 day moving average - it's hard to know yet if this is bullish or bearish. Overall, most sectors look neutral to bullish from what I can see.

I made three trades this morning, entering CHINA at $2.72, APWR at $16.57, and FEED at $5.55. CHINA just looked good on the daily chart and I figured it was a good low-risk chance to get back in. I was expecting more however from the bounce. APWR was bouncing off its 50 day moving average and I planned a stop below to limit my risk there. I chased FEED a bit and paid for it - it was strong early on and showed good volume, so I anticipated a breakout given the overall market running too. I didn't get the breakout yet but at least it closed off its lows.

I was also stopped out of my hedge in QID at $18.61, ending that position at just slightly over breakeven. Not a big deal at all - just a test position. I also started a long position in ABAT near the end of the session at $4.20 - a pullback play here that I hope to see some momentum come back into soon.

From my watchlist, I really didn't see too many major breakouts today which in the face of a nice day on the overall markets is a bit confusing. HEAT was a nice play from the video but there weren't too many more pullbacks that had great moves. I still have a somewhat suspicious feeling about this market, as if something bad is about to happen, but I have to stay bullish until the charts clearly tell me otherwise. Perhaps the market is just consolidating underneath the surface and the momentum will pick up soon with the small caps I follow. Seeing some strong bounces off the pullbacks I see (some of which I entered today) would give me much more confidence in a significant move higher from here.

Stocks I will be watching for tomorrow for various reasons include SEED, CYD, CTFO, EGI, CALI, NAK, OWW, LIWA, GEOI, BEXP, CYOU, and CSIQ. Good luck Wednesday.

Monday, January 18, 2010

Stock Market Videos - Weekend Watchlist - 1/18/10

Hi, traders. Here's the weekend video - two parts looking at the overall market and then looking at some stocks that will be on my watchlist tomorrow. I am more cautious today than I was last week due to some things I see on the indices - I think the bulls need to show strength early this week or we will likely pullback further. We'll have to see what happens I guess - with lots of earnings reports along with the big election in Massachusetts, there sure will be enough news out there. Good luck as always.

If you click "full-screen in the above videos, they will be more detailed. My normal server is down for the pop-up video and I have to take some time to find a new one. I will work on the best settings for the best quality over the next few days. In the meantime, here are the direct download links for part one and part two.

Friday, January 15, 2010

State of the Market - 1/15/10

Not a good day at all on Wall Street today, as stocks did not like what they heard from JP Morgan and Intel and sold off right from the start of trading. The drop in the first hour was the quickest, but from there stocks continued to fall throughout the rest of the session, just in a slower manner. They did manage to bounce for the final hour, bringing stocks off their lows of the day, but they still finished with large losses. Volume was much heavier today, giving the indices their second distribution day of the week, although to be fair options expiration probably had a lot to do with the heavy volume.

Technically, the S&P held its 20 day moving average again today around 1130 which also corresponds to its uptrend line from the beginning of November. It looks to be very important that this level holds or a test of the 50 day moving average around 1110 looks to be a good possibility. The Nasdaq also found support at its 20 day moving average today but has several layers of support around 2260. This is also a very important level because a move below it would likely mean a test of the 50 day moving average as well around 2210.

Sector-wise, financials saw some more distribution today with heavier-volume selling but the overall consolidation pattern it has been forming for little more than a week now is still intact. Watch $14.85 on XLF for possible support. USO got rocked again today, breaking below its 50 day moving average. It is quite oversold right here so a bounce wouldn't surprise, but Wednesday's bounce attempt got sold heavily the past two days, so I don't know if I want to play this area or not. Retail is still moving basically sideways but as I look at it today, I think the possibility of a rounding top is starting to come into play.

Based on what I saw as very poor reactions to what seemed like positive earnings, I tightened my stop this morning on CPBY to right below the opening level and eventually that was hit, getting me out at $6.45. I think I may have made about a 1% gain or so on that, but certainly nothing to get excited about. At that point, more on a hunch than anything else, I went into some QID at $18.55. I figured I would get out if it broke to new lows, but it was in a very low risk position so I went with it. Turns out that was a good play. I haven't really been looking for individual shorts recently so I have been forced to go into the inverse ETFs again even though I wanted to stay away from them this year. I am playing them much different however so hopefully that will help. I did post RINO last night on Twitter as a very good potential short and it turns out I was somewhat correct in trying to short CAAS back on Monday - I just mistimed that one. I don't know if I have the stomach to be honest to short these Chinese stocks, at least not right off potential tops.

As I quickly look through my scans, I am once again puzzled by this market. Based on the overall market action today, I would have expected many more severe breakdowns that I saw. I didn't, however. These are the stocks that I would say had pretty bad technical days today - VISN, CPBY, NZ, CAAS, KNXA, ASYS, TIVO, RINO, and JASO. I actually expected much more. It is true that some stocks started breaking down a few days ago, but I was just surprised. I saw several as well as I scanned that looked good to me. I guess that kind of leaves us with questions on both sides right now.

We'll see where we go from here but I really do think it could be either way. The bulls do need to right this thing quickly, and the fact that they haven't had much momentum this week (they never could get back all of Monday's losses) is not a good sign. I will continue to give them the benefit of the doubt as long as I see good individual setups, but there are certainly a lot of warning signs out there. A lot depends on earnings and so far, the market hasn't received them all that well. I talked about sentiment earlier this week and it is certainly possible we are in a situation where anything but perfect reports are going to bring disappointment, and that is going to be tough for the bulls to overcome.

That's it for right now - I'll be back this weekend with some further thoughts and hopefully a video. Take care and enjoy the weekend.

Thursday, January 14, 2010

State of the Market - 1/14/10

We had another up day today on Wall Street, although it didn't start that way. The market opened just slightly lower but was able to right itself very quickly, bouncing straight up for the first forty minutes of trading. There was a sharp pullback at that point, but the bulls once again righted themselves soon after and moved steadily higher for the rest of the afternoon until the final hour started. There was a pullback at that point which took stocks their best levels for the day. Volume appears to be lower once again. Perhaps traders are just waiting for the big earnings reports from INTC and JPM tonight and tomorrow.

Technically, neither the S&P or the Nasdaq were able to close at new highs today and we are at an interesting point here, especially with options expiration tomorrow and the earnings news coming out. We saw a big, heavy volume down day Wednesday and two weaker volume bounces the past two days - typically that's more bearish than bullish. I am still giving the bulls the benefit of the doubt until proven otherwise, but I just would like to have seen them show some real strength by now - they just keep grinding higher and it appears to be weaker to me. The more we kind of just hang out here with very little upward momentum shown, the more I would worry about a meaningful pullback starting soon.

Sector-wise, the financials (XLF) continue to consolidate and have set up a very nice cup with handle pattern that would seem to indicate higher prices. If they do get going, that may be the boost the overall market needs to get going as well. We'll have to see what the JPM report does to that pattern tomorrow.

I made one trade this morning, entering CPBY at $6.34. It was not on my specific watchlist going into the day, but I knew the chart and it showed up on the pre-market website I follow, so I added it to the list. Volume was so strong in the first ten or fifteen minutes of trading that I felt it was worth entering, as it moved on news of updated contracts. By midday, this stock looked great, but I didn't really like the way it closed. We'll see if it can get going tomorrow.

To wrap this up, I don't have a good feel one way or the other of where we go from here, and that makes sense I guess - maybe the market doesn't know either until these earning reports start kicking in. As such, I will remain cautiously bullish and play individual longs as I see them setup, but as my mostly cash position attests to, I think being cautious is smart. I am watching MDC, BZH, DRL, CHINA, and AEIS tomorrow but will have to go through my scans tomorrow before seeing if there are any others. Good luck Friday.

Wednesday, January 13, 2010

Setups I'll Be Watching Tomorrow

Here are some of the setups that looked interesting to me for tomorrow.

Favorite China Plays
Airlines and Homebuilders - Watch Them
Some Pullback Plays - Maybe for the IRA (Plus One Random)
All Charts from Telechart, Courtesy of Worden Brothers, Inc.

State of the Market - 1/13/10

Well, I didn't watch the market too carefully today, but from what I now see in my scans, it seems like it was quite the crazy day out there on Wall Street. The market opened just slightly higher this morning but quickly fell again for the first hour before finding a bottom around 10:30. From there, it was a straight and steady shot upward, as the Nasdaq gained 38 points off its lows before pulling back into the close with the S&P up 16 points off its lows before also pulling back. The final gains were nice but did not quite make up the losses from yesterday. Volume looks to be significantly lower as well.

Technically, the Nasdaq bounced off of some pretty important support around its 20 day moving average today (posted that last night on Twitter) and with the S&P bouncing back as well, it was a good day for the bulls. I would like to see some more strength from them however before giving the green light again to just buy anything. I am still somewhat cautious but you know what, earnings are likely to be the key anyway and who knows what they are going to be like. Technicals may not matter much here for a while.

Sector-wise, oil looks somewhat oversold now and bounced back a bit off its lows so a further bounce in the commodity sector wouldn't surprise. Financials look to be consolidating well but again, earnings will likely determine whether this group pushes to challenge its former highs or never gets that far. I do like the BKX chart however. Retail continues to do nothing.

I said earlier that it was a crazy day not only because of the reversal in the indices, but mainly because of the action in the momentum stocks I follow, particulary in the Chinese stocks. Day-traders had to have a field day because I see so many stocks in my scans that moved 10-15% off their morning lows (take a look at CAGC, NANO, IMAX, CBEH, CAAS, CTFO, CALI, NEP, JASO, CSKI, FSII, and PWER if you want some examples). To be honest, I don't know what to think of these charts now from a swing-trading perspective. I guess it is good that buyers came in to push these back up, but I never like charts that have wild, crazy bars on them like I see now on so many of these and I think the past few days shows that things are likely going to be very volatile in these names so be alert. I don't have a problem going long in some of these names but my profit targets will be very short-term oriented because of the swings we are likely to continue to see.

I didn't do anything today and am going into the final two days of the week with basically an open mind. After a quick look at my scans, I do see some setups that look nice (some new ones) so I'll have them on my watchlist tomorrow and play them if the opportunity presents itself. One of my goals this year was to pay less attention to the overall market and more to individual stocks and this is probably a perfect time to do that. With earnings season upon us, there will be stocks that move higher regardless of the overall market and lower regardless of the overall market. If you can just focus on those stocks moving higher, you'll be fine. I'll hopefully be back in a little bit to share some of the setups I am watching. Take care and good luck Thursday.

Tuesday, January 12, 2010

State of the Market - 1/12/10

I just got back from the doctor (looking at my knee - probably just old age setting in) so I am a little out of it right now in terms of what happened today. This post might be short until I catch my thoughts a bit more. From what I see, the numbers for the overall market might not look as bad as what really happened today under the surface to individual stocks, at least from the stocks I follow. I see a lot of damage in those stocks and perhaps the caution I started to feel yesterday was warranted, as it now looks like we could pullback here a little.

The technical damage wasn't huge on the major indices today but we did get a lot of volume to accompany the selling we saw and that is never a good thing. In addition, oil took a big hit (via USO) and the bullish consolidation I talked about last night is no longer. This would be bad for the overall market. Gold had a major reversal as well and commodities overall look like they could sell off a bit here. Financials had a pullback as well and fell out of the nice tight consolidation they were forming as well but aren't damaged severely yet.

I was stopped out of all my positions today and am back to cash. I guess I got a bit away from my "take profits quickly" mantra with CHINA, as I passed on the 9% gain yesterday and just moved my stop up to breakeven. I was stopped out today at $2.73 for just the slightest of gains. KONG looked good early but reversed hard as well and I was stopped out at $12.77 for a 4% loss, although I got a bad fill on that one - my stop was higher. I was also stopped out of FEED at $5.13 for a 4.75% loss - that in hindsight was not a smart position to start yesterday given the reservations I started to feel about the overall market. I gave back some of my gains for the year today and am up just slightly now.

These are stocks that I follow that had slight to severe breakdowns today - SEED, KNDI, NANO, FSII, ASYS, HITK, JASO, CAAS, CAGC, SOLF, (the last three may have island tops put in), IMAX, KONG, AMKR, CSKI, SWI, GMXR, ARST, APWR, and CYOU. Obviously a lot of China names and recent momentum plays on there and you have to be careful playing these. Don't overstay your welcome or get in too late, or you'll be looking at some quick and sharp losses.

To be fair, not all my charts were destroyed today, and I actually saw some in my quick look through my scans that still look attractive. I don't that today means the end of this rally or anything - I don't think it would be smart to draw that conclusion yet. I think it does, however, give me enough concern to pause here a bit before jumping into anymore of these names on the long side. Let's see if the bears follow-through tomorrow or any other time this week. The gains last week and on Monday were never very convincing, so the setup is there if they can run with it. They have to prove themselves first, however, at least from where I sit.

Earning season has now officially started so that will likely control the short-term direction of the market for a while. It makes it tougher to trade things from day to day so if I trade I will likely remain very short-term oriented. Good luck Wednesday.

Monday, January 11, 2010

State of the Market - 1/11/10

We had a mixed day to start the week today on Wall Street, as a positive open was quickly sold off, but traders came in to buy the dips once again and allow stocks to close off their lows. Highs were put in pretty much at the opening bell and from there stocks fell for the next forty-five minutes. They put in two failed bounces before righting themselves during the lunch hour and slowly climbing back for the rest of the session. The S&P was slightly positive for the session and outperformed the Nasdaq which was slightly negative. Volume was lower, at least from what I can tell right now.

Technically, the S&P continues to grind its way higher along the top of its upper trendline, getting just slightly over it but not breaking out in a strong manner. It's overbought a bit short-term and the chart has me a bit worried overall - I don't like the way it is kind of just griding higher. Meanwhile, the Nasdaq fell back into its range from last week and is sort of wedging up as well. I would like to see a powerful up day soon - who knows if we are going to get one.

Financials had a nice consolidation day today - something I talked about on the weekend video. Gold had a little breakout today but oil did not follow, pulling back a bit. USO however is also consolidating fairly well in this area near its former highs and that is bullish as well as long as we don't see further selling come in.

I went into the morning with four long positions and looking to add more, but in the back of my mind I also had this sneaking suspicion that things weren't going to be easy today. After reading some blogs last night, all of which said basically the same thing I saw in my own scans and put in the video Saturday (namely that there were so many attractive setups out there), I started to worry a bit. I didn't read one person that didn't think we were going to have a great Monday and I felt the same way. Rarely in the market do things work the way you expect.

The opening was quite anti-climactic - I kept looking for stocks with strong early volume but just couldn't find many. I then noticed that a lot of the momentum names were reversing. I actually decided to take profits on RINO at $32.23 for a small 2% gain and also on NANO at $12.70 for a 6% gain, although I just moved my stop up on that one and let it ride rather than selling on my own.

At that point, I quickly changed my plan (sometimes you have to as a trader) and actually looked for a short or two to play. I had a list of CAAS, SOLF, and FUQI as potential plays that gapped up and looked very extended. My idea was a good one, but my choice was a bad one. FUQI was a much weaker stock and that's the one I should have chosen (would have worked out well) but I didn't - went with CAAS at $25.89. I was stopped out later at $26.65 for a 3% loss. Don't ask me why I chose that one - probably rushed my decision making a bit.

I did have a nice move in CHINA which I started Friday at $2.70 but KONG just sat there today doing nothing. I started a position in FEED at $5.37 at the end of the session as I like the daily chart. Those are the only positions I currently have.

It was kind of a weird day overall from my perspective as I didn't have much move on my watchlist other than the stocks I mentioned in the video needing a little more rest - names like SORL, CALI, and TASR - and I wasn't going to trade these without that rest. CHNR did breakout nicely but it wasn't until around lunchtime that we got a boost in volume so I missed that. SEED also popped big this afternoon at 3:00 and ran more than $2 in an hour, but unless you were watching all day (which I can't do) it was tough to catch these moves without chasing. By the time I was at my computer to see it, it had already moved $1.50 or so. Lots of stocks reversed well off their highs as well(NANO, EGI, ABAT, THM, ATLS, VCI, RINO).

Overall, I think I kind of see a mixed bag out there right now. I am still seeing several momentum stocks getting to that possible parabolic point where a pullback could be very sharp if it comes (CAGC, CAAS, SOLF). I am seeing some reversals on what looked like nice setups that don't look very good. Throw the seemingly overwhelming bullish sentiment and I think there are reasons to be start being cautious. At the same time, I am seeing dips continue to be bought on the overall market and select stocks continue to put in gains. I guess the best description I can give to the current environment is that it is a stock picker's market. If you find the right ones, you can make a lot of money, but if you buy the wrong ones, you can get in trouble. I guess that's always true however.

For the rest of this week, I plan on continuing to look for longs to play as long as the market doesn't break down, which it has yet to do. Ones I will watch in particular after a quick look through my scans include PHX, SPAR, ARST, CPBY, PDO, and REV. Just be careful in what you choose, and my profit targets are still short-term oriented overall. I am more cautious today than I was going into the week. Take care and good luck Tuesday.

Saturday, January 9, 2010

Stock Market Video - Weekend Watchlist - 1/9/10

Hi, traders. Here's a free video for the upcoming week - I see many, many nice looking charts right now. Actually, I may see too many - it kind of worries me when things so obvious as they do right now. Based on the charts, it seems like the market will advance from here and because of that, that's how I will play things. If the market pulls a surprise and reverses, my stops are in place but I think you have to stay long until that happens. The video goes over lots of charts that look good - keep them on your watchlists and you should have some nice plays next week. Take care and enjoy the weekend.

Click above links to open video in a pop-out window.

** Also - I realized that one point I forgot to put in the video but wanted to share was put the homebuilders on your watchlists. Many had huge volume moves this week and with a few days of rest should look very good on the long side. (MDC, LEN, BZH, KBH)

Friday, January 8, 2010

State of the Market - 1/8/10

We saw a very boring, anti-climactic day today on Wall Street, as a disappointing jobs number failed to inspire much action by the bulls or bears today, and the markets basically moved sideways after some early vacillation. From lunchtime on, the S&P traded in about a three point range until around 3:40, when the market bounced into the close a bit. We did see a reversal of the pattern of the past two days, with the Nasdaq outperforming the S&P, unlike Wednesday and Thursday. Volume was lower as can be expected.

Technically, the picture remains the same - the S&P is right at the top of an uptrend channel and the Nasdaq is consolidating, just barely finishing above resistance. Financials pulled back a bit which is to be expected, and the oil sector is looking good to me after being quite overbought earlier in the week. XLE looks like it is consolidating instead of pulling back which is typically good news. Another day or so of rest would set it up nicely.

With the momentum names moving early, I did enter two positions this morning - NANO at $11.95 and RINO at $31.45ish. I was watching CAGC as well (posted on Twitter) but it just moved too fast and I didn't get in, going with RINO instead. I was also stopped out of my ERY hedge at $9.81, breaking even there with just the slightest of gains (a total of $11 - wow). NANO acted pretty well intraday, but RINO could never get any more momentum going after the first push and I will likely be back out of that soon.

I did start small positions in two stocks near the end of the day - KONG at $13.26 and CHINA at $2.70. I like the setups in the daily charts, which look poised to move higher. I am anticipating a bit, however, and that can get me in trouble, so we'll see.

Going through my scans, I do see quite a few other nice setups on the long side and I will be putting those in a video this weekend. Based on most of the individual charts I see, it looks like the market wants to go higher from here. There were many extended momentum stocks just a few days ago, but very few if any of them have crashed down to earth, instead just pulling back somewhat quietly. That is bullish action so that's what I am looking for next week.

At the same time, I did see some interesting tweets on Twitter today dealing with sentiment...


RT @sentimentrader: Heading for lowest equity p/c since 9/16. 3rd time for 2 straight sub-.50 readings - others were 7/13/07 & 10/15/09

I found that tweet interesting and just wanted to point that out and keep it in the back of my mindand perhaps yours. Don't ever get too comfortable in your opinion as a trader - it's when things look easiest that the market ruins your best laid plans.

It doesn't have to happen, but all signs point to further gains in a lot of stocks. We'll see what next week brings us. Take care and enjoy the weekend.

Thursday, January 7, 2010

State of the Market - 1/7/10

We had a pretty slow and choppy day today, but overall another bullish one as the bulls were able to contain a morning selloff and finish the market well off its lows for the day. Futures were flat this morning but the first half hour or so of trade did bring selling, particularly on the Nasdaq. A bottom was made soon after, however, and stocks gradually worked their way higher. There was a quick drop at the beginning of the final hour, but the bulls righted the ship again and stocks closed near their highs for the day. Volume appears to be lower.

Technically, not much changed today. The S&P continues to bump up against the top of an uptrend channel and although it looks like it closed slightly above it today, I can't say it was a breakout. Perhaps a good jobs number tomorrow would be a catalyst to get this really above this resistance, which would be very bullish. The Nasdaq continues to lag the S&P this week and is basically moving sideways. It is possible it is just resting and consolidating but I would want to see this get going soon, especially if the S&P can take off.


Charts courtesy of Worden Brothers, Inc.

Financials had a very strong day and although they are quite overbought, they look bullish overall. A pullback or rest in this area wouldn't be a bad thing however. Retailers have been moving sideways for a while and if they can get going, that would obviously be bullish for the overall market as well. Oil remains overbought but did not give anything back today and could just consolidate here for a few days instead of pulling back. That would also be bullish for the overall market.

I did enter ERY (the energy bear ETF) after-hours last night at $9.76, basically playing a hunch that we would pullback today given the extended nature of so many of the stocks I saw in my scans last night. It wasn't a big position and was meant for only a one or two day swing - I have my stop set at very close to breakeven, so if we don't pullback, it's not a big deal for me. I made no other moves today and remain mostly in cash.

I did see a little follow-through on some of the breakouts I did not get in yesterday like CEU and CTFO which is good, but overall I am really not seeing as many attractive setups right now on the long side as I did earlier. The hot China stocks like CAAS, CAGC, CMFO, and CSKI could be consolidating and if they rest for a few more days, you can be sure I will be very interested in playing them long. Right now, however, I don't see many hot momentum plays out there. I'll post my watchlist below for those interested (a few new ones on there), but most appear to be slower movers and with the jobs number coming out tomorrow, I may just do nothing because it might be the best play. We'll just have to see how it goes.


That's it for today - the market continues to be controlled by the bulls and there is no sign that things are changing. A pullback still wouldn't surprise me, but I will be looking to buy a pullback, especially into the 1120 area on the S&P. Such an event would likely setup many nice setups on the long side - who knows however if we'll get that lucky. On the other hand, if we get a good number tomorrow and put in a nice move up, I think you have to play the individual breakouts that occur. Take care and have a great Friday.

Wednesday, January 6, 2010

Setups I Will Watch Tomorrow

Even though the possibility of a pullback is in mind high based on the number of extended charts I see, it doesn't have to happen, so here are a few I will watch carefully tomorrow.

Charts from Telechart, Courtesy of Worden Brothers, Inc.

State of the Market - 1/6/10

We saw a pretty boring session today on Wall Street, as stocks started the day basically flat, chopped their way sideways for most of the day, and ended up mixed, with the Nasdaq ending lower and the S&P ending just slightly higher. Volume appears to be lower today.

Technically, not much happened today so the situation remains very similar to yesterday. The S&P is at the top of its channel and will either bust through to the upside soon or pullback a bit from here. If we do pullback, I would expect the 1115-1120 to act as some short-term support. The Nasdaq has had a very tight range for three days now and a break of that range will likely signal where we head from here - watch 2313 and 2295.

Oil continued its sharp ascent today and remains very much overbought. Crude did close at a new high for 2009 but I think a pullback in this area is very possible so I would be careful chasing names right now in this sector. Financials were up again today but are also overbought in the short-term so you may want to be careful there as well.

I went into today with the mindset of taking some profits in some or most of my open positions and I did do just that - luckily I got a little more bounce in the first fifteen minutes or so of trading that let me book decent gains. I sold RINO at $32.21 for about a 14% gain - just felt the momentum was weakening a bit. It could still go much higher however and I will continue to watch it. I sold IMAX at $14.37 for about an 8.5% gain - felt it was a little extended and momentum was weakening. I sold MTG at $6.34 for about a 5.5% gain - just no momentum there and couldn't clear resistance the way I had hoped it would. Finally, I sold SEED at $13.43 for about an 8% gain - same as others - felt resistance was weakening a bit. As I stated yesterday, I am still in "take profits when I get them" mode as I think a lot of stocks are extended and don't want to give up a nice first week of the year on a sharp pullback.

I did enter one other position today - NLST was acting well pre-market and I entered soon after the open at $5.56. It went up nicely, formed a bullish flag pattern, and then looked like it was breaking out again around lunchtime. I hesitated a bit there which was a mistake, but when it went to new highs, I added to my position at $6.02. This couldn't get going much higher than that, and although it consolidated bullishly, it eventually pulled back too far for my stop, which was hit at $5.70, giving me a small 1.1% loss. I probably set my stop too tight but seeing how quick this moved a few weeks ago, I wanted to see that immediate, powerful action upward and when it didn't do that, it makes sense to get out.

There were a few setups that I have pointed out here the past few days but missed out on today like CEU, CMFO and CTFO but after making a lot of trades early, I thought better of doing much more than I did. I saw some reversals in the hot China names today like CAAS, CSIQ and RINO, and names like TSTC and NEP (shown last night) are extremely extended, looking almost parabolic. Because of these things, my gut tells me there is a pullback coming soon. There seems to be too much easy money being made in these momo names right now. I could be wrong of course. If you continue to play these, that's probably fine - I will as well - but be ready to get out at a moment's notice just in case we do pullback quickly. Don't be left holding the bag.

That's about it for today - I am back in cash and probably will proceed cautiously over the next few days. A pullback wouldn't be a bad thing right now - it would let some of these hot names cool down a bit and provide new, lower risk buy points. We'll have to see what happens. I'll be back later with a watchlist of stocks I will be paying attention to tomorrow. Take care.

Tuesday, January 5, 2010

One Very Extended Stock to Watch For Reversal

Just wanted to point this stock out as being extremely extended based on my scans (using the moving averages and percentages above those MA's) and very susceptible to a sharp one-day pullback. I don't know even know if I could get shares to short here, but if it has another run tomorrow, maybe with a gap up, I am going to keep it on my watchlist and pay attention to any reversal signals. Luckily, there aren't many stocks that are extended this much so I am hopeful the rally can continue in these small caps for a few more days - just maybe not in this one, particularly if oil stalls near its recent highs.

Chart from Telechart, Courtesy of Worden Brothers, Inc.

State of the Market - 1/5/10

We had a choppy session today on Wall Street, as stocks fell slightly at the open, bounced back up to gains by 11:00, but fell from there through most of the afternoon. Losses were not large, however, and by 2:40 stocks began to bounce from support near the gap open yesterday, at least on the Nasdaq. The late bounce was impressive, taking stocks well off their lows and actually closing the S&P near its highs for the day. Volume was higher on the Nasdaq but I believe slightly lower on the S&P, although I don't have those final totals.

Technically, the market continues to appear quite strong as it was nice to see stocks bounce back from the afternoon selling. The S&P is right at the top of a rising channel and it would be great news if it could bust through it to the upside much like the Nasdaq did in December. Short-term, the market is slightly overbought but not extreme enough for me to think that there couldn't be more upside this week. Another day of strong gains may have me taking some profits, but right now there doesn't seem to be any reason to think the market can't move higher, besides many charts being a bit extended.

Sector-wise, oil and commodities continue to act well, even in the face of overbought conditions, which is usually a sign of excellent strength. Financials also acted well today and I will be watching closely how they fair with resistance around $15.

If you did not see the second post from yesterday or the comment section, I did get into RINO yesterday after-hours at an average price of $28.15. It wasn't a real big position, but I had a hunch it would move today and it did which was nice to see. I like the potential here as I think the current setup looks a lot like it did back in mid-September of 2009. That being said, I will likely lock some profits in if it climbs up near its highs around $35.

I also entered SEED this morning at $12.38 as I thought it could see some momentum as well. This did OK but didn't have the same push as the others - I wanted to see it close above $13.20. Oh well, maybe tomorrow it can get the real momentum going. My other two current positions (MTG and IMAX) did alright today but I didn't like the close in IMAX or the lower volume in MTG.

I did miss out on a few charts I have been watching that acted super today, namely UAUA, PDC, and CHINA (all of which were highlighted in the weekend video and/or in yesterday's post), but I accept that - as I get some confidence back, I will hopefully become more fully invested and trade more agressively. For now, I am still taking baby steps as I attempt to get completely back on track. Today however was a good start and I will probably look to lock some of those gains in tomorrow.

For tomorrow, I am mainly going to focus on managing the positions I have, but there are stocks I will have on my watchlist just in case. They include CDII, XRA, SMOD, SNIC, NLST, CMFO, VIT, AMKR, NANO, CHINA, DTG, CEU, CTFO, CPBY, PFWD, CAR, and UQM. Out of these, I would say SNIC, VIT, DTG, CEU, and CAR intrigue me the most. We'll just have to see if the market continues to be strong tomorrow. Take care and best of luck Wednesday.

Monday, January 4, 2010

Charts I Will Be Watching Tomorrow

After going through my scans, these are the stocks I will be focusing on tomorrow. I tried to enter RINO after-hours but not all my order was filled - small position anyway.

All charts from Telechart, Courtesy of Worden Brothers, Inc.

State of the Market - 1/4/2010

The market got off to a good start for 2010 today, as futures were up pre-market and opened very strong. Stocks ran nicely for the first fifteen minutes of trading, consolidated, and then ran again around 10:25, reaching a high a little before lunchtime. From there, things calmed considerably and the market moved sideways in a tight range (six points on Nasdaq, 2 points on S&P) into the close. Volume was heavier than last week's light holiday totals. Most of the move today is likely in response to a falling dollar, which pushed crude oil and commodities in general up nicely.

It is certainly nice to see the markets open the year strong, but that doesn't necessarily mean things will continue that way. The first three days of 2009 were very positive, but the market soon fell precipitously. In 2008, the market started weak and continued to be very weak right off the bat. Hopefully, the market can see some follow-through tomorrow - the down day Thursday took care of some of the overbought conditions and there is room to run to the upside if the bulls have the energy.

There were also some good sector developments today - financials poked their head above a trendline and their 50 day moving averages after flatlining for so long. If they get going, it would be good news for the bulls. Oil also looks quite strong after today but is quite overbought so I would be careful there - a quick pullback in commodities would not be surprising.

I did make a few trades today - got out of my DUG position pre-market at $12.44, which gave me a very small loss of 0.6% (entered at $12.48). From the video watchlist this weekend, ENOC, NEP, VIT, KIRK, RDN, CYD, MTG, and CGA all had nice moves, but nothing spectacular - all in the 4-7% range. I did enter MTG this morning at $6.00 - we'll see if it breaks out soon. I also entered ATHX this morning at $4.34, thinking it was going to bounce. No such luck, however, as it quickly fell below short-term support and I was out at $4.06 for a 6.9% loss. It wasn't a huge position, but I probably should have kept my stop tighter. The only other position I hold now is long IMAX (from $13.23 on New Year's week), but it isn't doing much either.

I do wish I would have seen a bit more explosiveness in individual stocks today - many closed a little weak for my tastes, but perhaps these stocks just needed to rest a bit. I will keep my eyes out tomorrow and will be willing to play some of the setups I see - I would just like to see some immediate follow-through once in a while.

That's it for today - strong move to open the year and hopefully the bulls can keep it going. I am a little worried because it seems like it has been "too" easy for the bulls the past few weeks but who knows? I will remain focused on the individual setups I see and go from there. Have a great evening and best of luck tomorrow.

Sunday, January 3, 2010

2009 Year End Trading Review

Here it is - the 2009 year-end trading review. I broke this into sections as I thought that would help me best organize my thoughts. I am sure I will ramble too much and get off track, but I hope it ends up somewhat readable when I get to the end of this post.

Recap of My Trading Experiences in 2009

I am going to look at my trading year in sections, the first being from January to March 6, when the market bottom. To start, this looks at only my main account, not my IRA accounts, just to be fair. With the market falling precipitously during this time, I was short with 30 trades and long with 19 (probably trying to play oversold bounces). Looking back on these trades, many were in the Proshares ETFs (SSO, SDS, QID, etc) or the real devil for me this year - FAZ, the triple inverse Financial ETF. I made a few nice trades on the short side (MR - 1/2 and 1/7, ACM - 1/29, and ITRI - 2/27) but really at this point all I did was chop my account up with many small losses and a few small gains. Staying away from the ETFs would have likely helped a lot - perhaps overconfidence from a good 2008 hurt here.

The second section of the year I want to look at is from March 6 through May 4, which was the bottom and first thrust up for this market move. Quite possibly the most important trade I made all year was on March 6, when I entered FAS at $2.88 (it has since has a reverse split so the chart prices will look different now). Here's what I wrote at the time - I made a very small trade today in FAS near the open - entered at $2.88. I kind of expected another one-day bounce today, so I took a chance with a tight stop. I was stopped out a little later at $2.81 with a loss but the position was so small it didn't bother me. The fact that we once again sold off a rally attempt did bother me. And the fact that it still didn't lead to a selling crescendo is disappointing. Perhaps we won't ever get that washout. Perhaps just too many people are expecting it, waiting for it. Perhaps this painful grind lower is exactly what Mr. Market has in store for us. I hope not, but I don't know what to think anymore.

Anyway, as I look back, that was a long put on at the exact bottom of the market, but I was stopped out and from there fought the trend up, going short 25 times between March 6 and May 4 and long only 7 times. This stretch really defined my trading year I believe, as this is where my confidence was shaken and I really started to experience a drawdown. I also played around with the inverse ETFs here way too much and was chopped around mightily by them, not only hurting my account but also likely my psyche. I wonder if that one FAS position put on right at the bottom had worked out right away, would my year have turned out differently? Perhaps not, but it is something I will continue to think about.

The third section I want to look at starts from May 5 and goes to July 27. I made a total of zero trades in my main account during this time. That's right - zero. In hindsight, it was probably a good thing because all the market did during this time is move sideways, but I think I was more frustrated than anything else and wanted a little break. Going almost three months without making a trade was a long time but I think it will help me in the long run - more on that later.

The last section I want to look at goes from July 27 to the end of the current year. During this time, I made 32 trades on the long side and only 10 on the short side. I jumped back into the market on July 27 with trades in ININ, CPSL, LCRD, and most importantly, BEXP (around $4.37). This is another trade that really defines my year, as I was stopped out the next session after setting a stop that was too tight (basically scared of taking a loss - psychological wounds from March to May). BEXP is now trading at $13.55. Would I have held the whole way? Probably not. But missing a big winner right after stepping back in and watching it run without me was not easy to take.

From there, I did trade mostly long as the stats above show (so all those of you that think I am an uber-bear, there you go), but really didn't have much to show for it. The big money this year was likely made from March to May, and after that I think the market became extremely difficult to swing trade for more than a few days at a time as historical technical analysis started to become much less reliable and patterns became much more volatile and choppy. More on this in a little bit as well.

So overall, take a little early overconfidence, mixed in with playing with fire via the ultra ETFs, and mix in misplaying the main move of the year, and you definitely have a recipe for trouble, which is what I had in 2009. My main account took a large drawdown (over 20%) after being up 90% in 2008. I guess it happens to all traders at some point, but it certainly wasn't a fun year for me trading. Now, I have had a lot of other important life events occur this year as well (adding a second child to the family, moving to a new house) and I do think those contributed at least slightly to the struggles I had - time became much more difficult to come by and the work that goes along with trading sometimes took a backseat to other things. However, in the end, I have to overcome those and simply trade better next year and that is what I hope to do.

Lessons from 2009

It was certainly a good year for the market from a percentage gain standard, but from where I sit, it was kind of a weird year as well. We saw a bottom that in hindsight did not have massive volume (check out the Nasdaq in early March), no new highs on the VIX (not even close), and no historically oversold readings. Readings were much more severe back in October of 2008, but the bottom occured in March and it is what it is. In addition, many times this year, we saw the market move up on low volume, sell off on heavy volume and break support levels, only to keep moving higher on low volume and repeat the process.

Why did this move occur this year, especially in the face of an economy that continues to lose jobs and by most peoples' accounts is not really improving that greatly? Well, I have written about this before, but I think it comes basically down to two things - the Fed lowering rates to 0% and short covering, perhaps aided in part by the government. When the Fed kills the dollar with a 0% return on holding cash, it forces people to look for other returns, and this year it was the market. With no apparent real economic recovery accompanying gains in the market however, people start shorting the rallies. "Forces" come into prop things up when support starts to break, and then shorts are forced to cover when the market doesn't break down. This process is repeated and each time it gets a little weaker, which is what you can see in the grind we've watched the second half of the year. That's one theory - who knows if it is true?

So what do we learn from 2009? Well, without trying to be overdramatic, I do honestly believe the game has changed (whether due to computer trading or the losses of 2008 or the government getting involved in the economy - take your pick) and because of that, it is up to traders to adjust. How I have traded in past years (and usually at least somewhat successfully) did not work the same and so I have to adjust. Patterns and technical analysis don't work the same as they have in the past and so trading strategies have to change as well.

If 2010 is anything like 2009, this means I will pay less attention to volume. It was not just the market that sold off on heavier volume only to rise back up to new highs on lighter volume - it happened in many, many individual stocks I watched this year. Historically, this has been a warning sign but in this new environment, maybe volume just doesn't matter that much. This will admittedly be very hard to do.

Support and resistance doesn't matter as much either if things stay the same this year. In individual stocks, I have seen too many examples to remember of stocks breaking out to new highs, falling immediately back down through their breakout points (again, historically a very bearish sign) and then bouncing right back up and taking off to new highs. I have seen quite a few bearish reversals where stocks have given back all of their intraday gains and closed at their lows for the session (again, typically bearish) but then just move right back up to new highs the next few days after the reversal. I am sure some people out there will disagree with me, but typical charting ideas haven't worked as well as they have in past years and as such I need to focus on some new ideas in 2010.

This articles was posted by a reader in the comment section recently and I wanted to link to it because I think it really summarizes well how things have changed for smaller, retail traders (mainly due to computer trading) and what us retail traders can do about it - please check it out.

Personal Lessons from 2009

I did learn some important things this year even admist the struggles I had. I learned that I don't have to trade to be happy, and that trading isn't my life. This may sound stupid, but I think it is important. In the past, I wondered if trading was a sort of addiction, where I just did it for the thrills it brought, both good and bad. This year, in contrast, there were several periods of time when I went a month or so (or longer) without making a single trade. Perhaps this is partly caused by my disinterest in what I saw happening in the market (i.e. government intervention, etc.) so maybe my skill didn't develop as much as I think. However, if my patience developed at all, I think that is good for the future - knowing I can sit back and not do anything if necessary. Livermore said something to the effect that the waiting is the hardest part of trading to learn and the most important as well. I think in past years, I overtraded a lot and that got me into trouble. I perhaps undertraded this year because I know there were many opportunities I recognized but passed over. Perhaps in 2010 I can find the right balance between overtrading and undertrading and have my best year yet.

I also learned that trading is a fluid endeavor, not a static one, and to be successful, you must be willing to adapt and adjust as things move. What has worked in the past may not work in the present and future, and I think this year proved that well to me. This is a very hard lesson to learn and to accept because certain principles have worked for so long and have worked so well for so long, but this past year was different. If I am going to be successful, I have to be able to adapt my thinking and adapt quickly. My opinions and beliefs don't really matter in the grand scheme of things - the only thing that matters in terms of trading is making money and finding the best way to do that. Finding that way will continue to be a fluid endeavor and I hope this year that I will be more flexible in my thinking and more willing to adapt. For someone who is stubborn like me, it is not an easy thing to do, but I am hopeful I will learn.

Psychologically, I learned that I am not yet a master trader. Reading Mark Douglas's books again is a top priority to perhaps get my mind straight again.

Oh yeah, one more lesson - let's stay away from the ultra ETFs this year. Of course, one of my two positions right now is DUG - I really am stubborn, huh?

Personal Goals for 2010

My goals in 2010 include become more streamlined and focused in my trading while at the same time being able to manage my time correctly. By correctly, I mean dedicating most of my time to what is really important in my life (family, friends, etc.) and not letting trading dominate it. 2009 was a year where time was tough to manage and I hope I can find the right balance this year to help me become more successful. Streamlining my trading strategies will hopefully help me do this as well.

I hope I can break some of the bad habits I got into in 2009, namely not keeping track of my trades as well as I should (bookkeeping-wise) and not studying my trades as well as I should have in order to learn from them. I got sloppy in this respect and I am sure it contributed to my struggles this year. Managing my time better should help in this regard as well.

I hope I can continue to write and share videos on this blog and I hope that the information is valuable for readers. I do put time into this website and I hope it is worth it. I hope I can develop relationships with more readers and share insight or suggestions as I can offer them.

Finally, simply put, I just want to get back on the winning track this year. 2007 and 2008 were both very good years for me, and I want to get back to the gains I saw in those years. I am confident I can do that, but I also know I need to adapt in order to be successful. If I start seeing some success early, then perhaps that winning track will be much easier to get back on.

Prediction for 2010

I am not even going to try and make predictions about what 2010 will bring us because I honestly have no clue. I guess the first step in making longer term predictions is deciding whether we are in the middle of a new, fresh bull market or if we are actually in a counter-trend rally within a secular bear market that started at the end of 2007. I was not trading back in 2003 when the last official bull market started so to be perfectly honest, I don't have enough experience to have a strong opinion on whether we are in a new bull or not. I kind of envisioned it a little different than what we saw this year but maybe I am wrong. The CANSLIM/IBD method for market timing has not worked as well as it normally does - it caught the first move in March but since then it has been whipsawed many, many times like many other traders.

I am going to take the attitude to trade small until things become clearer for the new year, and focus less on the overall market and more on individual setups. I think this will help me be more successful next year. As I find time, I would like to refine my strategies and perhaps come up with new ones using Telechart - if I do, I will share them as I go.

Some of the greatest lessons in life come out of failure, and I do believe that 2009 was a year the trading gods decided to remind me many times of some key lessons I seem to have forgot. I am not yet where I want to be as a trader, but with work and experience, I am still optimistic that I can get there. You are never going to be perfect as a trader, but learning from your mistakes is a big first step to getting close to that level of perfection everyone strives to achieve.

I know this was long and probably incoherent, but I hope it helped some of you out there. It is always a good idea to look back at your trading moves every so often as you can learn many things from your mistakes and your successes. I am still going to try and get a video out of the best performing stocks of 2009 but it probably won't be until the middle of the week - watch for it. Best of luck to all of you out there for 2010 - I hope it brings all of us good luck and great trading success. Take care.

Stock Market Video - 2010 Trading Watchlist

Hi, traders. This is the first of what I hope will be two posts today - this one deals with the current market and some setups to watch for the upcoming trading week. I really have no idea what to expect from the stock market this week because I really don't think we can learn anything from how the market traded the past two weeks. Volume was so low that the technicals really don't matter in my opinion. I am focusing on longs only right now and that is what the video will go over.

2010 Watchlist
Click above link to open video in a pop-out window.

Later on today, I hope to get my "year in review" post out with my ramblings about the past trading year and what I have learned. In that post, I also hope to include a video looking at the top stocks of 2009 - it is always a good idea to learn from the past, especially in an environment like we are in now where history is being rewritten and trading rules and strategies are changing. I will be working on this post in between football today (my Steelers still have a very slim chance at the playoffs) and again, hope to have it out tonight. Take care and we'll see you later today.