Wednesday, June 23, 2010

Time to be Moving Back To Cash

Draw Your Line In The Sand - Place Stops To Protect Profits or From Losses

The market has provided us with the perfect line in the sand today.  Considering the intra-day volatility I would use today's lows as a great place to stop out positions.  If this is a tradeable rally, we should be able to hold these lows.  If not, the rally could be dead in the water.  We undercut the follow through day lows on all the indexes, except the DOW which missed by about 30 points, and that statistically leads to failed rally attempts the majority of the time.  They don't always fail immediately or fail all the time, but you need to proceed with caution here, or risk significant losses.

If $Market Can Hold - Long Swing $Trading Opportunities on the Long Side

Stick to the names everyone knows:


There are others, but too much going on to list.

Keep your stops tight.  If market fails to hold it could get ugly.

Good luck


$Market & $Euro At Critical Support Levels That Need To Hold

Monday, June 21, 2010

The Intra-day Volatility of the Euro Wreaks Havoc on the Market

Right now all that matters is what the Euro does.  Regardless of any good or bad news, once the market opens, it takes it cue from the Euro.  The good thing, the Euro on a daily chart looks like it wants to head towards its 50DMA.  That should bode well for the US stock market.  So even though hour to hour the market is gyrating, keep an eye on the Euro's daily chart.  That will keep you from panicking.

Thursday, June 17, 2010

Leaders are Acting Just Fine - Do Not Panic Sell - SNDK Reviewed

This market continues to be all about the Euro and The Headlines.  If you can't handle it, then you should be in cash.  Otherwise, the majority of leadership is acting fine and were due for a pullback.  If you were impatient and chased stocks, then you are probably feeling some pain.  If not, then make sure your stock is acting the way it is supposed to.  That includes pullbacks to levels of previous support or resistance.  Stocks do like to retest these areas, in many cases, before moving higher.

Lets take a look at the chart of Sandisk(SNDK) below.  The stock has been one of the best leaders of the entire rally.  It has continued higher even as the market has struggled over the past two months.  But it too cannot resist the gravitational pull of a market pullback.  So everytime the market enters a correction or pullback so does the stock.  But, as can been seen on the chart, SNDK maintains it's uptrend and finds support along its respective moving averages (green arrows).  As long as it maintains this character or does not exhibit some other sell signal it has to be held.  So a pullback into the 42 - 45 range (red circle) would be perfectly normal and acceptable.

Wednesday, June 16, 2010

Strong Breakouts and Leader Action Confirm Power of the Rally - Bullish

Look for tight action and pullbacks to enter long positions.  DO NOT CHASE!!!  Headline risk still a major problem for the market.  So use caution, but be patient.  NASDAQ currently stalling near 06/03/2010 highs.  Next level of interest will be the 50DMA.  Leadership will be narrow but obvious.  So go after the leaders known to the market.  New leaders should be exceptionally strong fundamentally to be considered.

Tuesday, June 15, 2010

Leaders Finally Acting Like Leaders - Unlike this Morning - Bullish

Don't Be Afraid to Trade The Long Side - Just Keep Stops Tight - Bullish

If the day continues, as is, we will get a follow through on the NASDAQ composite.  That would signal a confirmation of the rally attempt.  The only problem, the market is glued to the Euro and the headline risk associated with it.  If you compare the NASDAQ to the Euro, the two charts are identical.  Both look like they want to at least rally into their respective 50DMA's.  That would provide for some excellent swing trading opportunities, on the long side, in the already known leaders. 

But, until the market can stop trading tick for tick with the Euro, holding positions for too long will be too difficult.  If you don't mind swing trading, have fun with it.  If you're a more conservative investor, and the rally goes on to work, you will have ample time to participate.  For now protect your capital at all costs, even if it means you are under invested early.

Right now I am still on the long side, but with stops very close by.  I'd rather get stopped out and get back in, rather then lose profit or capital.  I do have a list of shorts, and if the opportunity presents itself will take the trades.  But even on the short side, profits have to be protected quickly.

The market is in uncertainty land and that's where it confuses everyone.  So either trade or stay in cash.

Good Luck

Use The Strength to Move to Cash - Too Much Unhealthy Action - Bearish

Caution is advised - Tighten Stops and Let The Market Move you to Cash - Bearish

The markets erratic behavior continues and this is bad news for stocks.  Right now the market is being driven purely by the movement of the Euro, which is a huge negative.  Unless you're willing to day/swing trade this market, your best place is to be parked in cash.  Otherwise watch your stock closely during the day and don't hesitate to punt if the Euro goes into another death slide.

Friday, June 11, 2010

Leadership Continues to act Well - Look to Buy- Bullish

Keep stops tight in case of a curveball.  Leadership held up strong over the last few days and during this mornings sell off.  They are also much more reactive to moves up then down.  This is the opposite of the last few days.

Leadership Stocks Showing Alot of Power Ahead of the Market - Bullish

Keep Your Eyes Open for Possible Long Entries

Don't get too invested, but if the market starts to turn positive one or two small positions will not hurt. Leadership has continued to hold up in the face of all the bad news and has now started to tighten up. Make sure to keep stops tight on any new buys just in case the market throws us a head fake. We will continue to monitor the long side until we finally see the leaders breakdown hard. Currently most should still be in cash.

Good Luck

Monday, June 07, 2010

No Need To Be a Hero

At this point you should be out of most, if not all of your long positions.  If you've held a stock for a very long time and it is still acting well that is a different story.  Probably, most got into the market recently just before or after the follow through day, and just don't need to give back more money then they have to.

What looked like a promising developing rally has turned into a big fake out.  As I stated in my friday blog, the combination of a day 2 distribution day and a close below the follow through day's low, is a deadly one two knockout combination for the market.  The lesson here for most is, when a market diverges from a precedent, you need to go on the defense quickly.  Hesitate, and it could get REALLY ugly.

This looks like it could be the third wave down of the first leg that started  04-26-2010 which generally is preceded by another rally attempt, of several weeks, that sets up a second, multi-wave, leg down.  Those rallies can be profitable as the market attempts to rally back to a key moving average.

I'd say to avoid the short side for those not able to monitor their stocks intra-day.  The setups that are out there may be good for a few hours or days, but need more time to setup the ugliness of a continued to downtrend.  So if you can't trade them, avoid them. 

Stay patient and keep your lists fresh.  You never know if the market has another diverging idea :o).

Friday, June 04, 2010

Cash is Now KING

If this turns out to be a shakeout I will be very surprised.  With an undercut of the follow through day lows and high volume distribution developing on the indexes so close to the follow through day, both of which have historically led to rally failures, you should be moving to cash. 

I drew my line in the sand at those lows and have now moved almost to cash.  I still have some early buys acting well, but the line in those stocks is now drawn too.  No need to give up all the profit.

Today should be a lesson in how quickly one must act in the market, especially aggressive investors.

Back to the drawing board.

Watch The Follow Through Day Lows

A violation, especially a close below the follow through day lows (NASDAQ - 2210.07), historically leads to failed rallies and a retest of recent lows.  Depending on when you positioned yourself in this rally, you have to make a decision on whether to try and hold through that test or move to cash.  The conservative play is to move to cash.  Many leaders are holding well, but that can end very quickly.

Look for Pullback Entries If Market Holds...But Keep Stops Tight on New Buys

Stay Patinet...Leaders Holding...Set Stops & Let Market Do The Work...Just Don't Panic

Wednesday, June 02, 2010

NASDAQ Follow Through Confirms Rally - 2007 Precedent Intact

The 2.64% move on the NASDAQ, on higher volume then yesterday, confirms the current rally attempt on day 5.  Two new breakouts, VIRL and THOR, joined the ranks of breakouts.  Further adding confirmation to our bullish stance since the market reversal on 05-25-2010.

Yesterday's sell off back to the 200DMA acted as another great shakeout. If you look at the 08-2007 chart (below) alongside the current NASDAQ, you'll see that the NASDAQ had a similar shakeout back to the 200DMA the day before the follow through day on 08-29-2007 (Black Arrows).

In the current environment you have to be looking to buy pullbacks as they start to turn up. Shakeouts after breakouts have become commonplace.  If you do buy a breakout, you might consider taking a smaller position and wait for the pullback to add.

Continue to keep in mind that this will be more of a tradeable rally then the start of a new prolonged move higher.  Stick to buying the high relative strength names with a proven track record of moving (APKT, NFLX, VMW, SNDK, AAPL, CSTR, ASPS, ISRG, etc...).

The market won't make this leg too easy.  Expect more shakeouts along the way.  Figure out your uncle points ahead of time and place your stops.  It is too easy to let a stop slip when they are held mentally. 

Stay calm and patient, and don't let those greedy emotions get the best of you.