Rush-Red Barchetta

It has come to my attention that a new tax on trading is being proposed….

 ”U.S. Congressman Peter DeFazio, introduced H.R. 1068: “Let Wall Street Pay for Wall Street’s Bailout Act of 2009”, which aims to impose a 0.25% transaction tax on the “sale and purchase of financial instruments such as stock, options, and futures.”

This tax is on the TRANSACTION AMOUNT, regardless of profit or loss. 

So let’s say you day traded AAPL.  You are in an out a few times during the day, with average size of 500 shares.  Three round trips, and 3000 total shares, for a transaction amount of roughly $270,000.  You would then pay $675.00 in tax, no matter if you MADE OR LOST MONEY.

Suffice to say this tax would basically kill active traders, kill liquidity in the market, and basically, kill the market.  It is hard to believe that any idea this crazy could get any traction, but why take the chance.

Please sign this online petition:

http://www.rallycongress.com/no2tradertax/1536/

Please contact your local senators and voice your disapproval:

http://www.senate.gov/general/contact_information/senators_cfm.cfm

Please contact your local Representatives and speak your mind:

http://www.house.gov/house/MemberWWW.shtml

A while back I did a post about the possible direction of AAPL, and I thought I would take a chance to update it.

As you can see from the chart below, AAPL is still in a large descending triangle, that has taken four months to create.

On a technical basis, we have some contradictory info.  The stock has made six progressively lower highs, which is bearish.

But it has dropped below the base twice and come back into the triangle, which can be bullish.

Price is sitting above the 50 MA, which is bullish (although it has done it twice before).

Prices is sitting below the 90 MA, which is bearish.

Some fundamental info is shown on the chart at these points.

• (1) Steve Jobs not to attend Mac World
• (2) Steve Jobs issues letter saying he has a “hormone” problem.
• (3) Steve Jobs issues letter saying he is taking a leave of absence.
• (4) AAPL issues record earnings (but weak guidance)

So what does this tell us?  Here is my take.  The chart is bearish, record earnings could not break them out of the triangle, and their CEO may be very sick.  Any other stock would already be down much more, but AAPL is unique.  It is a LOVED stock, and I mean LOVED.  People have an emotional attachment to this stock and do not trade it like other stocks.  It is also very widely held by institutions.  It think the key is the overall market.  If we break to new lows in the markets (as I think we will) I think AAPL will finally break down.  There has been a lot of false hope holding it up, and if it goes, it will go fast.  The measured target is $50.00, but is may take some time to eventually get to that price.  I know….$50.00!  Crazy isn’t it?  But $120 when it was $200 was crazy too.  And it breaking $120 after it went back up to $190 was crazy too.

But here is a trading tip, last time I wrote a post like this, AAPL popped up.  If it does this time and breaks the down-slope of the triangle with some volume, it will probably make it back up to $120.00.

APA gaped up, but immediately sold off.  It bounced in a congested area, and on the second trip down to that area it put in a hammer right on support, on the 1-min chart.  I entered on the break of the high of that candle.  I covered half at a minor high and the rest on a failed breakout of a consolidation range.  Good for 5R.

I was light on posts last week because most of my trades at the end of the week just went nowhere.  From reading some other blogs, they confirmed that it was a very choppy week, and thus my results were choppy at best.  One area I have to work on is to better recognize when the markets are not ripe to trade.  When they go sideways, I always seem to think I am “missing” set ups, and thus invariably “force” one (or two) that doesn’t work out.  What I have to do is trust myself more, and understand that if I am not seeing good set ups, then the market is probably moving sideways, and I should just take a pass for the day.

Hoping to see some better trending in the rest of this week.

Did not trade today, as I was too wrapped up in the inauguration day coverage.  First I have to say, no matter what party you belong to, it is a magnificent sight to see the peaceful transfer of of power in the greatest country in the world.  Secondly, I have to say that it really looks as if Obama and Bush like each other.  The exchanged laughs, handshakes, and back slaps that went beyond the traditional “graces” between ingoing and outgoing presidents (Truman and Eisenhower did not even talk to each other during Ike’s Inauguration).  Next I have to say that Keith Oberman is so low class, it is hard to believe.  He could not keep from sniping at President Bush all through the coverage.  He will never get past his bitterness about Bush, and it will always haunt him that Bush made it for two terms.  I am sure the former President thinks about Oberman about zero times a day.  Lastly, there was an interesting contrast.  President Bush was in front of 2 million people who really hated him, yet he looked cool and relaxed, and later in the day at his Waco barbecue looked downright happy.  Yet when they showed Clinton today, he really look bitter, even though most would say his presidency was a “success”.  Perhaps it is because Bush has his own values and integrity, and does not depend on the approval of the masses to make him feel good about himself.  He is very centered, and a happy person inside.  However, Bill was always looking for approval from others, and now the he has been marginalized, and more importantly, his presidency has been marginalized forever by the real first black President, he has no light to bask in.  My prediction is that the Bush presidency will be remembered much more kindly in the future, noting the world changing times it occurred in, and the Clinton presidency will be forgotten as one that occurred during smooth sailing, when no hard decisions had to be make, and the president just had to make sure not to “upset the apple cart.”

In the end, I wish the best for president Obama.  I have high hopes that he will govern from the middle, and not give in to the secular left wing his party.  He is starting off on a good foot.

I was not paying attention as much as I should have today because I “assumed” nothing would happen due to OEX tomorrow.  Because of that, I missed some good, profitable, and easy set ups.

AAPL make a green hammer type candle that closes above the 5 MA (after a long basing period), on the the 13th candle.  Enter on the break of that candle’s high.  Close at the ORH or higher.  By the way, AAPL made a nice comeback after the Steve Jobs news last night.  A move back above $85.00 with some volume might make it a trade for a move to $90.00-$92.00 area.

BAC gaps down, bounces, and bases for a while.  The 15th bar is an NR7 bar (although it is below the ORL).  Close position higher.

Tomorrow I REALLY don’t expect much action, but this time I will keep my eyes peeled and pay attention.

Not feeling well so not much analysis.  FWLT short, but realized I was right above the Fib after entry, so closed it at that point.  Scalps on AAPL.

For more on what might be happening starting tomorrow in AAPL, see my recent post here.

I have been making a point of writing out notes on all my trades at the end of the day.  My notes on AAPL from last night said, “watch for AAPL to run up to today’s (1-12-09) breakdown point (ORL), and fail, for short entry”.  Unfortunately, you actually have to follow your notes for a trade to work.  AAPL did in fact run right up to that ORL and fail, with a long upper shadow.  The next bar was a weak red doji that closed below resistance.  The entry should have been the break of that bars low, which I passed on for some reason.  Another possible short entry was after two weak doji’s right on support at bars eleven and twelve,  although it was above the ORL and had some support from the previous day.  Anyway, AAPL continued down past the ORL and the day’s low, but there was not much pick up in volume.   Price just gently floated down.  AAPL felt as if it was due for a reversal as often happens with this stock towards the end of the day.  The 18th bar was ambiguous, and if you broke it down to the 5 min level (see chart inset), there was an opportunity to try a long entry, with the ORL the target.  I was not sure if I should close the trade at the low of the previous day or try for the ORL.  I watched price closely, and got out at the ORL, although in retrospect, on a scalp type trade like this, it may have been foolish to try for the extra 30 cents.  Good for almost 3R.

Rarely if ever do I trade the Q’s, however the overall market was looking weak after the morning high, so I pulled the chart up to watch.  QQQQ had failed to get past a down-sloping trendline on the 15 min chart, and then made a lower high.  I won’t try and rationalize the set up, other than to say the the market felt as if it was “rolling over”, and when the 13th bar ended weak, and just off the morning low, I used it’s low as the trigger for a short.  The target was the previous day’s low, which it hit on the 18th bar.  Good for 2R+.

I have been trying to make trades like WLP lately, where price gaps down (or up), reverses, then fails and continues in the direction of the gap.  I have only been semi-successful, and WLP was not one of the successes.   WLP gaped down, and immediately began to reverse and climb back up.  A hanging man formed at the declining 5 MA, which often signals the end of a move.  I shorted the bottom of that candle.  Price moved in my direction , but paused, and then reversed at the ORH.  It attempted to rally, but failed, and then just basically went flat-line for most of the day.  I pulled the trade for a .50R loss when the chart became “ambiguous”.  I think I need to fine tune these type of entries.  First off, a first large red bar (or green for gap ups),  price rallying back to the ORH on weak volume, then printing a signal candle (hanging man, doji, inverse hammer), with the 5 ma overhead is probably a better set up.  Even better would be price rallying back up and printing a signal candle at previous day’s resistance.  In the case where the rally is on WRB’s, I think I need at least three before the signal candle.  I will have to work on this one.

Friday I caught some quick moves on AAPL, but nothing worth posting.  Today I had one winner and two scratches.

AKS gaped down, and pulled back to the ORL on decreasing volume.  At that point it printed a NRIB that closed below the ORL and had the 5 MA right on top of it.  It looked as if it was the perfect set up.  I shorted the low of the 6th bar.  Price moved slowly at first, but then accelerated down.  It paused however just below the low of the day.  It printed an red inverse hammer, which I thought primed it for a break below the day’s low on the next bar.  Unfortunately, it worked it’s way back up to the ORL and stopped me out.  There was another opportunity to go short again below the doji of the 18th bar, but it closed just above the ORL and above the 5 MA, so I passed.  The trade ended up being a scratch.  I could have closed it out when it pulled back from the day’s low, but I didn’t have much of a profit, and decided that it was worth the chance to see if it would break back down, knowing it would not be worse than a scratch trade.

SU gaped down with a nice red bar, consolidated, and printed a nice red inverse hammer doji.  Price closed in the lower 25% of the OR, and printed two inside bars.  Once again, looked like the perfect set up.  I went short the break of the low of the 3rd bar.  Price initially moved in my direction, but then came back up into the OR.  I watched it climb right back up and take my stop out, just below the 5 MA.  This looked suspect.  I am not a “Market makers take out the stops type of guy”, but this just smacked of it.  I almost immediately went short again as it turned back around, and sure enough it fell straight down, then below the ORL, printing a red inverse hammer on the 7th bar.  I thought it was poised to break the low, it did, but went nowhere, and it ended as a scratch.

Winner, winner, chicken dinner.   AAPL gaped down, tried to rally, but was penned in by the 5 MA.  The 3rd bar was long, red, and weak, bouncing off the ORL.  The next bar broke the ORL, and two IB’s formed, the last being a marginally hammer doji.  I entered on the break of the 6th bar low.  Price fell nicely towards the Fib extension.  I thought I might have blown it when it bounced off the round number on bar eleven, but it was unable to close above the midpoint between the ORL and the Fib, as well as staying below the 5 MA.  It based for a couple of hours, and then dropped to the Fib extension.  I closed it on the way back in on the 22nd bar (87.65), instead of when it hit the Fib on the bar previous, becuase I thought there was a decent chance it could keep going, as it had been basing below the number.  Good for 4R.