Monday, October 31, 2011

Was Today Just a Shakeout or the Start of Something More Serious?

After last Thursday's massive up move, a pullback on Wall Street was certainly to be expected.   Friday fit the definition of a "pullback" or "consolidation day" perfectly.   Today did not, as it was quite a bit worse, especially with the nasty selloff into the close.   Last Tuesday was similar to today and it turned out to be a buying opportunity.  Is today a similar "opportunity"?   I think we have to wait and see.

I'm looking for one very simple thing here as a clue as to whether it is time to buy this dip or time to be more cautious.  Anyone who follows my blog knows that I like to use the 9 and 20 day EMA as my "short-term" signals for the market and the stocks too.   I think they work very well.   So far since the 9 and 20 day EMAs crossed on October 11, the Nasdaq has not CLOSED below the 9 day EMA.   It has been tested a few times on big gap downs, but both of those gaps were quickly bought and the market proceeded higher for the next few days.

We are looking at a very similar situation here and tomorrow should give us a big clue as if today was something to worry about or not.   The charts below give you some clues as to why and also what to watch for.   I am in cash but ready to go with some longs as long as the market tells me it's OK.   Good luck Tuesday.

Russell 2000
All Charts from TC2000, Courtesy of Worden Brothers, Inc.

Sunday, October 30, 2011

A Few Thoughts Going Into the Week Ahead

Sorry about the late post tonight traders and also for the lack of a video this week (although I don't know how many care about that or not).   My wife and I got a day away from the kiddies this weekend to celebrate my birthday by visiting the Pro Football Hall of Fame in Canton and am just now catching up on stock stuff after also watching my Steelers FINALLY beat the Patriots at home this evening.  It was a good few days. 

After going through my scans Friday, I didn't see too many nice setups, but that is to be expected.   This market has had an amazing run and after Thursday's major move, many stocks still could use some rest to setup nice patterns.  Actually, Friday couldn't have been more perfect in terms of the type of consolidation the bulls should want to see here.   No damage was done to charts on Friday at all, and many charts were still moving as I saw a positive breadth number in my scans.   Another day or so like that would be PERFECT.

We are still overbought in a number of ways so chasing here can get you in trouble.  I have a couple of longs on going into Monday but I also took profits on ZIP Friday and will continue to take some profits as I get them.   The T2106 and T2108 in Telechart are showing a market that is reaching extreme levels and could pullback.   The scan I use from Pradeep's Market Monitor for sensing momentum extremes (# of stocks up 50% in a month) is also flashing some warning signs,  as it hit 62 stocks on Friday.   I've seen higher, but anything over 25-30 is a sign that a quick, sharp pullback could be around the corner.   That's doesn't mean it has to happen, especially in a very strong market, but don't be shocked if we see it.

I'll share the few charts I am watching going into Monday here, although several traders have posted them already on StockTwits so you may know some of these names already.   If we do rest a bit, there will be TONS of nice flag patterns that set up to play later in the week, so be patient if you're not in this market currently.   Earnings plays are really working nicely as well so keep your eyes peeled to the after-hours and pre-market most active pages for ideas there. 
A Few Momo Names the Daytraders are Watching
All Charts from TC2000, Courtesy of Worden Brothers, Inc.
Good luck this week - hopefully the great action continues. 

Monday, October 24, 2011

Bullish Action Continues, But Be Careful Chasing Here

Today was about as bullish as you can get.   The market started the day only slightly higher but took off like a rocket and gave little to any back throughout the day.   Volume was lower, but to be honest I really don't put as much emphasis into index volume as I used to because it just doesn't seem to matter as much as it once did.   We've seen heavy volume selloffs and weak volume rallies for the past two years so maybe I am just immune to it.  I did see a lot of individual stocks moving up on heavier volume, so that is what I am focusing on right now.  There were winners all over the place - as I tweeted earlier, 13 out of the "final" 22 from the video last night were up over 6% today, including stocks like MOBI (+35%), FIO (14.5%), and YOKU (11%).  Not sure where you are going to find those ideas elsewhere on the web completely for free.

This was one of those days I wish I didn't have a full-time job because it looks like there were a LOT of good intraday entries in these names, but with my job I am forced to enter either pre-market, at lunch, or on a break around 2:00.   Therefore, I was out of luck in many cases and had to enter at less-than-perfect times.   I went into TNA in the pre-market and was able to get a nice gain out of that before getting stopped late in the session.  I was stopped on MOBI late after entering off an intraday flag during lunch - just didn't have enough momo late to push higher.   I am still in JRCC, MAKO, RENN, and one earnings play from after-hours and will ride my stops and see what happens.  

For the third time in the last five days, I found a TON of nice looking setups in my scans tonight.   Too many in fact - I had to do some major cutting to get to a manageable list.   As I did more research however, I noticed that we are overbought in several measures.   My own overbought/oversold indicator is at a very high level, and the McClellan Oscillator (T2106 in TC2000) is up over +300.   The T2108 indicator is also up near overbought levels that haven't been seen in almost four months.  

Charts from TC2000, Courtesy of Worden Brothers, Inc.

This is in no way to insinuate I am bearish here.   Actually, as I continue to soak in the number of nice charts I am seeing with bottoming-type formations, I am wondering if we are in the middle of a major year-end rally that will be more powerful than anyone expects.   I would be cautious however at this particular juncture if you are not already long.   If we get another really strong day tomorrow, I will likely sell into it and wait for a brief consolidation.   Even just a day or two of rest would be tremendous here and allow the market to continue this move higher over a longer period of time.   Overbought can stay overbought and it very well might in this case, but I would be more selective if nothing else at this point because we're stretched.  

We've seen a nice breadth thrust over the past week or so.   I've had more stocks come up in my bullish scans than I can remember in a long, long time the past week as well.   Although this rally is a bit different in that IBD-type names are not really the ones moving, it is a rally nonetheless and until we see some distribution come in, you should remain bullish.   Be careful and very selective in the short-term, but if we do get a light day or two of rest, be ready to go long once again.   Good luck Tuesday.

Sunday, October 23, 2011

Stock Market Video - How to Narrow Down Watchlists (and Setups for the Week) - 10/23/11

Hi, traders - here's the video for the week ahead.   Going into Wednesday's and Friday's sessions this week, I had a ton of bullish setups in my scans.   Thursday didn't work out so well for those scans, but we saw a nice session on Friday and I once again saw a ton of potential setups in my scans this weekend.   Actually, I saw too many.   So what do you do when you have TOO many potential candidates?   This video will look at the process of narrowing down a watchlist and some ways to eliminate candidates.   Included in the video are the final setups I will be watching as the week commences.

Overall, this week was a difficult week to swing trade but longer-term it may have been an excellent one because we did get some much-needed consolidation.   Headline risk remains from the dealings in Europe and is the main reason I stayed in cash over this weekend, but if things can get worked out there, we may have a nice year-end rally on our hands, as hard as that may be to believe.

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials and feel free to retweet the links to your friends.  I would appreciate it.  You can also review my Twitter feed here. 

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.

Tuesday, October 18, 2011

Stock Market Video - "AAPL Misses, But Still Lots of Bullish Charts" - 10/18/11

I don't want to get ahead of myself here, and please understand that I am using fairly tight stops on all positions I am taking at this point, but based on my scans tonight, I am getting  bullish.   Although the market was up 1.5-2% today, I did not expect to see the number of stocks that I did in my main bullish scan.  I had over 600 to go through, which is a number I haven't seen in a long while.  As I went through those stocks, I also saw quite a few what appear to be potential bottoming patterns - stocks that have moved sideways for few months without really selling off that much further.   I take this as bullish.

Perhaps these bullish charts are just another fake-out from this market - pull everyone in before taking a dump.   We shall see starting tomorrow, since AAPL missed earnings for the first in seemingly forever.   If the market opens lower but doesn't sell off much more than that, I will look to add a few more test positions here.   Right now I have two.  I was stopped out of two longs quickly today - just too volatile.   If the market tanks on bad news, then I will have to reassess.   Overall, however, my numbers are bullish and I have to go with what I see, regardless of what I personally think about the economy, the situation in Europe, and the state of the world in general.

The video below is quick (5 minutes) but goes through some of those low-level basing patterns I am seeing.   Hope it helps you out.   If you like the videos or my twitter feed, please leave some feedback here and here.   All of my trades are documented here and updated when I get home from work each day.  Thank you. 

Sunday, October 16, 2011

Stock Market Video - "Bullish But With One Foot Out The Door" - 10/16/11

Hi, traders.   Last week, I discussed my opinion that for the long-term health of this rally attempt, the market really needed a rest or consolidation period.   So much for that.   The market was up each of the five days this week and the squeeze/rally we've seen the past two weeks is getting historical in nature.   My basic outlook as discussed in the video is to remain bullish but also have one foot out the door, ready to go to cash at a moment's notice.  I discuss why in the video.   I also share names I have on my watchlist that will be worth following this week.   Please check earnings dates on any stocks you may be interested in, as the earnings seasons starts up for real this week. 

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials and feel free to retweet the links to your friends.  I would appreciate it.  You can also review my Twitter feed here. 

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.

Wednesday, October 12, 2011

Gameplan Remains The Same - Wait for Consolidation and Then Reassess

I'll be honest - it's kind of sucked sitting out the past few days in the market as this melt-up/rally (not really sure which one it is yet) continued without even a hint of rest.  It's not that I haven't tried playing this rally - I was in TNA on both 10/3 and 10/4 but got stopped out the same day.   I went into CPHD on 10/4 (the bottom) but it did nothing.   I was in JVA from $7.75 on 10/5 but was also stopped out the same day.   Poor trade management on my side I guess, but it's not like I wasn't bullish at the right time.   Believe me, the past week was not fun when I look at where those names have moved to without me.  

All of that being said, it is important to be disciplined when trading, and I've resisted chasing stocks to the upside the past week.   I may have missed out on some gains, but buying a market up four or five days in a row is just not something I do.   If 10/4 was a legitimate bottom, there will be plenty of opportunities to make money.   Right now, I just don't see that many on the long side.   Rest is needed.  

The market did seem a bit tired late in today's session and that is not unexpected.   This has been quite a vertical run and as I've said in my last few posts, healthy markets consolidate as they move up and digest their gains, allowing more gains to be tacked on easier.   The Nasdaq gapped up again today (two out of the last three sessions now) and put it in a bit of a reversal bar, although it was certainly not a major one.  The chances of a pullback are high here, but we've been saying that for a few days now and it hasn't occured.  

As I go through my scans, I continue to see a number of really appetizing short setups.   Not only are the setups nice, but they are also concentrated to the former leaders from the 2009-2010 bull market - names like GMCR, BIDU, SINA, FOSL, LULU, CROX, and SFLY.   This in my opinion is NOT a good thing.  If these setups are confirmed soon, I think it sends another signal that the bear market is still on and caution is warranted.

Charts from TC2000, Courtesy of Worden Brothers, Inc.

If we do get a pullback/shakeout soon, I am not saying this rally is over.   What I am saying is that it is important to watch how stocks act when/if a rest comes.   Do the new leaders (names like STMP, PSMT, SIMO, MAKO) hold up well?   If they do and the market can hold onto its short-term moving averages, then I will likely look to buy a pullback here.  If a pullback occurs and things get nasty quickly (as it did on September 21 and 28 for example), then you know the drill.   We'll just have to see what happens. Tough market to call at this particular juncture.  Good luck Thursday.

Monday, October 10, 2011

Breadth Is Improving - What Bullish Action Would Look Like Here

As this market continues its non-stop climb up off the recent low, I have been stating via Twitter how many short setups I see and how I still am very hesitant to get bullish here.   Well, my main timing system (based on moving averages) did go to a "buy" today so I started looking for any signs tonight that this recent 5-day move may be different than the last few that just ended up being great short opportunities. 

What I found is that the breadth over the past five days has indeed been better than the two most recent rally attempts (starting on August 9 and then on August 23).   The chart below shows you the numbers.   Although this recent five day period is not that much better than August 23, it still impressed me enough that I am willing to give the bulls a shot here.

Notice I said a shot.   That's it.   I actually have two shorts on here (with tight stops) because I think a continued move higher without a consolidation is the very worst thing that could happen for the bulls.   Healthy markets don't form bottoms by moving straight up on ever decreasing volume.   As someone mentioned to me on Twitter today, it did happen back in September of 2010, but circumstances are a bit different from what I see.  Back then, the breadth signal turned immediately (September 1 to be exact), and the decline before that move was calmer and allowed more bases to set up for a large move up.   Right now, all that can be seen are v-shaped cups and bear flags which is not what you want to see. 
September 2010
Charts from TC2000, Courtesy of Worden Brothers, Inc.

I showed quite a few potential winners in the weekend video, with the caveat that I would only be buying if the market pulls back and allows some flags to be formed from which to buy.   I am sticking by that gameplan.   The problem is that most people are thinking the same thing I am and that's not a good thing on Wall Street. 

It's very possible the market keeps moving higher here, but there is just nothing I see here with a good risk-reward at this point on the long side.  If we're lucky, the market will consolidate a bit and setup for a nice year-end rally.  If I had to guess however (and because many are hoping for the same thing I am), I bet we move up for a few more days on lower volume before crashing back down through the moving averages like the previous two times.   I hope I am wrong.   Either way, this is a tough point to be aggressive on either so, so trade accordingly.   Good luck. 

Saturday, October 8, 2011

Stock Market Video - "Two Options for Next Week - Setups Included" - 10/8/11

Hi, traders - here's your gameplan for next week.   We had a bullish week overall as the market bounced as expected, but we are faced with a situation that we've seen several times over the past month, and each time we've had the same outcome.   In the video, I discuss why I am currently bearish and also what I need to see to change my mind and go long.   I included the stocks holding up best right now as potential longs (if the market shows me what I need to see) along with many short setups that are tempting on Monday.

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials and feel free to retweet the links to your friends.  I would appreciate it.

To see the videos in HD, please click the circular button on the video bar.

Tuesday, October 4, 2011

Stock Market Video - "A Bottom or Not? Interpreting Today's Crazy Intraday Action" - 10/4/11

After today's crazy action, I decided to move the mid-week video up a day to discuss what we saw out there at the end of the session.   It is way too early to say if today was a bottom or not.  All you can really say is that it was positive, although it does have its question marks (specifically the intraday action which seemed almost manufactured to me).  I covered all my shorts early today and am riding one long as of now, but may look to add a few more depending on how the market acts the next few days.   I discuss the names holding up best in this market in the video and give some ideas for the rest of the week in terms of interpreting today's move.

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials and feel free to retweet the links to your friends.  I would appreciate it.

To see the videos in HD, please click the circular button on the video bar.

Saturday, October 1, 2011

Stock Market Outlook for Week Ahead - "Not Seeing Anything to Be Optimistic About" - 10/1/11

As we roll into October, (a historically tough month for Wall Street in many cases) the market comes off what was a very bearish week.   We saw extremely bearish intraday action the past four days, and after another heavy afternoon selloff Friday, all indices are poised to test (and maybe break through) their August lows soon.  Looking at both individual and index charts, there is just nothing I see that makes me even a little bullish.   The only reason to be bullish right now is that there is absolutely no reason to be bullish, if that makes sense.
 S&P 500
Charts from TC2000, Courtesy of Worden Brothers, Inc.

This past Wednesday I shared five simple short ideas that I thought would work well even though most of the charts I saw were already past ideal shorting points.   Those stocks (shown below) all put in nice gains on the short side the past two sessions.   This past Sunday, I also shared 12 stocks (SOHU, SINA, SFLY, BHP, BIDU, MCP, RAX, CF, LVS, IPI, BEXP, FMCN) that I would be focusing on mid-to-late week for potential short entries and almost all of those tanked hard this week as well.  To be fair, some of those name never quite bounced enough to setup nice short entries, but many did and the bottom line is that if you didn't make any money off of this site this week, I really don't know what to tell you.

After finally going through all of my scans today (bullish and bearish), there are very few setups out there that interest me at this juncture, even on the short side.   Longs have been destroyed and it's going to take a long, long time for nice, calm, smooth bases to form from which stocks can really jump higher.   Most short setups I was watching have now been down two or three days in a row, so it makes it much harder to enter them with lower risk.  I am kicking myself for not being more aggressive Wednesday when I was staring at GMCR and passed, but in a market as choppy as this one, it is hard to be super agressive with anything.  If you didn't short earlier in the week, you may be stuck watching things from the sidelines (which is not bad in this market) or sticking to ETFs on an intraday basis. 

As for me, I am trying my best to hold and be patient with the shorts I entered Wednesday.  My account is actually at highs for the year following Friday's close and normally I would look to take those gains and run, but not now - not at this point.  It may be a mistake, but I think there is more downside to come. We are not really that oversold here and unless the market has a really awful one-day move lower of 3-5% in which to cover into, I think I will ride the shorts lower, tightening my stops as we go.   If the market bounces a little Monday, I think we'll roll right back over and the best setup may be a mini-washout early next week from which a relief bounce comes.   If you're not short yet, that's what you want to be hoping for - a sharp bounce (maybe lasts only a day).  

Overall, like the title says, I just don't see anything to be optimistic about right now.   The darlings of the 2009-2011 Fed-induced bull market (NFLX, GMCR, LULU, BIDU, etc.) broke down hard the past week or two, and intraday action has been awful.   If I had to guess about this week, I bet we do test and slightly break the August lows early in the week, bounce sharply for a day or so, and then roll right back over for more selling.  That's strictly a guess.  Personally, I don't think a bottom is right around the corner.   Remain careful.   Good luck next week and enjoy your Sunday.