Wall St. Warrior

Oversold Bounce - Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

2009-11-03T21:29:00.003-05:00

Last night we said that yesterday's downgrade resulted in a mini capitulation for RIMM. Today, the stock was bid up sharply on an oversold technical bounce.

I started scaling in as price crossed the base, and added to the position as price broke its consolidation zone after the first leg up. Set the stop just below the lowest point of the consolidation zone. Trending stocks will make higher highs and higher lows, so the stop placement allows you to stay in the trade as long as the trend continues.

On the daily we have a WRB with volume. I'm placing my fib retracment lines from the earnings gap to yesterday's low and looking for an ambush type bounce back up to the 50-62% level.

We talked about gold maintaining its bullish bias over the weekend. Today GLD broke above its trading range and most gold stocks participated. I'm staying away from AEM after recent weakness, but GG and ABX traded sharply higher.

Can't Keep a Good Scan Down

2009-11-03T21:27:00.005-05:00

I get an extra boost of confidence when a stock that I have recently read about (from technical trading blogs that I follow) hits my RT scanners. Often these stocks are already on my watchlist. Such was the case today with RIMM (Jamie's post here last night) and AU (HCPG blog a couple of days ago). The fact that the stock is being noticed/discussed elsewhere implies move potential in either direction - I simply go with the NOW moment flow.

Also from the scanner, UNP had a very nice gap up and consolidation setup. The snapshot below captures some key scanner hits today and 15min charts for RIMM & UNP with the associated NR7 bars highlighted. I just love it when a scan, I mean plan, comes together.

Technical Picture - Support Zone

2009-11-02T22:28:00.004-05:00

The 60 minute timeframe of the SPY above, shows that we started to bounce off of the $103.00 base (blue box) of the October lows. We also see some positive divergence of the MACD and RSI to lower prices. This usually foreshadows a bounce. The price action of the last few days looks like a bullish wedge is developing. However, I'm not sure if we will get much of a bounce given that the FOMC is on Wednesday. So the bears still have time to try to push price to the lower end of the support zone at $102.00.

Some idiot at Citigroup downgraded RIMM from a buy to sell and revised the target from $100 to $50. WOW, talk about about kicking someone when they're already down. Anyway, that nonsense gives us a hammer-like stick on high volume and suggests a mini capitulation within a longer downtrend.

Technical Picture - Market Correction Approaching Support Zone

2009-11-02T04:27:00.010-05:00

The consecutive monthly win streak, as measured by higher monthly closes, has come to an end at month 8 for both the S&P and the NASDAQ. The DOW stalled in month 4 (June).

From the weekly chart we note that the correction is occurring on higher volume, so we can expect it to continue. In other words, this isn't just a minor pullback, but rather a retracement of the some of the gains to date, before we resume the uptrend. I still believe we are on track to reach full extension of the inverse H&S bottom by Apr./May 2010. A correction at these levels is healthy. However, we continue to monitor it closely.

The SPY is in support zone of the August highs and October lows. I've set an alert at $103.00 which is the base that formed off of the October lows. Once we find support, use a Fibonacci retracement tool to help set targets for the dead cat bounce.

RIMM, one of my watchlist laggards provided another good shorting opp. on Friday. From the daily chart below, we see that gap support is in play.

AMGN - gap fill support in play.

GLD still holding gap support with relative strength in market correction.

AMZN - bullish flag developing on declining volume.

Technical Picture - Another High Volume Distribution Day

2009-10-29T00:00:00.004-04:00

Sellers are in control, however, we should get some sort of bounce, likely a dead cat bounce, as prices test support at these very oversold levels.

Transports are a good leading indicator, so keep an eye on the chart. Judging by how the transports are setting up, this correction will be a lot deeper than the other corrections we've experienced since the March lows.

Today we had lots of good, low risk entries on the short side.

Gap Support/Resistance - Baidu, Inc.(ADR) (Public, NASDAQ:BIDU)

2009-10-27T21:00:00.003-04:00

Last night we talked about BIDU. This morning I mapped out former gaps as areas of potential support/resistance. The lower gap dates back to Sept. 8th and the upper gap dates back to Oct. 6th.

In pre-market sellers were pushing prices lower and eventually reached and probed the Sept. 8th gap at $350 - $343. Buyers stepped in at $350 in pre-market and when the market opened BIDU carved a wide opening range. The bulls were in control and sold into strength as the October 6th was filled.

Mapping out gaps of widely held names is a good way to spot good trading opportunities.

Last night we anticipated further downside and weak consumer confidence data triggered the first short. A fast move lower, but buyers stepped in too quickly and I tightened the stop to 1725. After a quick retracement, prices started to drift lower and finally setup a low risk entry just below S1. This time we reached S2. The SPY didn't confirm a lower low in the afternoon, so it was time to get long.

Last night we anticipated GLD would hold gap support. Now it looks like it might form a base at $102. If it retests today's lows and holds, that's another way to trade it.

The markets have had three consecutive lower closes, and conversely, the greenback has three consecutive higher closes. Prices are closing in on the 50 SMA on the dailies, so we do expect some retracement to come into play at those levels.

Keep a close watch on economic data at 8:30 - Durable orders; 10:00 new home sales; and crude at 10:30.

Technical Trade - Short Qs on Failed Retest of Recovery Highs

2009-10-26T21:22:00.005-04:00

The first chart is a 15 min. NQ futures chart, where we see that the attempt to take out last week's highs fails. The 5 minute chart below with daily pivots shows how failure to hold R1 as support led to a fast trade all the way back down to S1.

The failure of the market coincided with a BO in the $USD. Use the ETF UUP as a proxy for the $USD.

Gold and the $CAD fell, as anticipated on $USD strength. Lots of good shorting opps in gold stocks today. But watch the bullish gap to see if it provides support.

Agchem - failed BO.

Internet was a bright spot amid the market drubbing, but after hours BIDU got crushed so expect a retest of gap support.

What to Anticipate for Tomorrow -

Futures look weak following BIDU earnings so despite oversold technicals, we may go lower tomorrow. The SPY has some unfilled gaps which can act as support. So watch the pink lines as potential support areas.

Technical Picture - Rally Stalled

2009-10-25T20:58:00.004-04:00

The top of the Lehman gap which was tested Wednesday morning, is holding as resistance thus far. Despite some better than whisper number earnings reports from tech heavyweights such as AAPL, AMZN, and MSFT, the Nasdaq can't break resistance.

IBD notes that 6 distribution days for the comp and 8 on the S&P would, in most circumstances kill an uptrend, but they also note that the worst bear market in 120 years doesn't qualify as "most circumstances". We'll soon see.

Couple of trades on the SPY setup.

1. Technical trade on Lehman gap closer. It started off good, but eventually felt like it might fail, until WFC was downgraded late in the session by key bank analyst.
2. Next day buyers stepped in to buy the dip - C&H formed with 3 consecutive NR7s in the handle.

Agchem sector breakout is tenuous.

Transports breach trendline support and could be a leading indicator for the rest of the market.

$USD edges lower but feels ready to retrace anytime.

Meanwhile $CAD coming in for a retest of the base.
Gold still strong and basing, but could falter if $USD pops.

Internet sector still bullish.

Failure of Daily Setup - AGU

2009-10-23T21:59:00.006-04:00

AGU has been on my WL since I traded the BO trend day a few days ago (from scanners). Coming into today it appeared to have a daily long setup on/at support. It gapped down (profit warning) and formed a bearish intraday pattern right at the daily support level. Typically the failure of a setup leads to a significant move in the opposite direction.

Gap Fade - Caterpillar Inc. (Public, NYSE:CAT)

2009-10-20T21:43:00.004-04:00

CAT gapped wide on earnings and immediately started to fade. Support from the rising 5 EMA initially looked promising, but price got stuck inside the second 15 min. stick. After NR7 completed, it started to look like a bearish h pattern was developing, so I shorted the break of NR7.

Took a partial at the 50% extension and rising 20 ema. I covered the balance as price crossed back above the 20 ema.

CNQ - Sell break of support as oil stocks finally succumb to some profit taking.

Good Daily Charts to Study

2009-10-19T22:21:00.005-04:00

Jamie mentioned POT (top chart) in his Technical Picture post last night. It broke through resistance right on que today. AGU (bottom chart) is in the same industry group - agricultural chemicals - and also broke out with a trend day. Compare and contrast the two charts. Both were excellent daytrading opportunities today.

Edit: Note that POT reports on Thursday.

Technical Picture - Divergence

2009-10-18T21:33:00.004-04:00

Despite the fact that the SPY was able to carve out new highs this week, the RSI continues to print lower highs, thus negative divergence of the RSI foreshadows that the rally may soon stall. Also, note that the $USD is starting to show some positive divergence to lower prices. The Lehman gap fill is $110.34, another important technical level to keep an eye on going into next week.

Earnings this week - AAPL, STLD, AMZN, AMGN, SNDK, BRCM, CAT, EBAY, POT, BTU, FFIV, GILD, GENZ, TXN.

One chart that I found significant this week, was tech bellwether, INTC (not pictured), which had good earnings and favorable guidance, yet it was a fade. Are we selling the news?

POT which has not participated in the last couple of legs of the rally, appears to be setting up to BO of this narrow trading range. But keep in mind earnings are on Thursday morning.

Positive Earnings

2009-10-14T21:37:00.006-04:00

Based on positive earnings news from companies reporting yesterday and today (INTC, CSX, JPM, ABT, etc.), the market appears to be anticipating more positive earnings going forward. I followed the trend and focused on the top %changers from my core WL. FWLT gapped up, attempted to fill the gap, and then formed a small C&H. The C&H pattern is clearer on a 5min timeframe. I managed the trade and exits - partial at test of previous PP and remainder near EOD - as shown on the 15min chart below.

Short Side Vigor

2009-10-12T16:32:00.007-04:00

Overall volume was light today (Columbus Day) as the S&P tested recent highs. Per recent comments, I have been favoring the short side at these levels. Yesterday I tried a short in NTES and ended up scratching. Today, my short side trades showed a bit more vigor. NTES responded much better than I expected. BIDU had a nice matching congestion pattern (looks like small H&S, but not at top of recent price action) that was good for a quick downside pop. Note that the first hour or so in NTES was also a matching congestion with yesterday's action.

Technical Picture - Retracement of Last Week's Sell-off

2009-10-11T13:50:00.007-04:00

Despite last week's sell-off, prices managed to retrace most of the damage. The retracement took place on lighter volume and that is a bit of a red flag. Going into earnings season, we need to see some really stellar results and/or some uplifting guidance going forward.

From the weekly NASDAQ chart above we see some formidable resistance in play. However, as noted in last week's IBD, "historically, the first run-up after a bear market has gone for months without a 10% dip in the NASDAQ. After the bear markets of 1987, 1190 and 2000-03, the NASDAQ rose 22, 16 and 10 months respectively, before making a correction of 10% or more." We are now in month seven following the 2008 bear market and as noted, we are testing strong resistance.

And speaking of IBD, the current status is "market under pressure". Since the recovery off of the March lows, this is the fifth time that IBD has flagged the "under pressure" label. The previous four times, the market resumed the the uptrend within 4-8 trading days. Monday will be the eight trading day following the current label status.

Reporting this week -Tuesday: JNJ, ALTR, CSX, and INTC... Wednesday: ABT, ADTN, CBSH, HST, JPM, PFR, GWW, ATR, CCK, LSTR, SPTN, SLY, WDFC, and XLNX... Thursday: APH, BAX, C, CY, DRH, FCS, GS, HOG, HOMB, KNL, NOK, PII, PPG, SWY, UTEK, UMPQ, USAK, WGO, CBST, CYT, GOOG, IBM, MTG, PBCT, TPX, and UFPI... Friday: AOS, BAC, FHN, GE, GPC, HAL, MAT, PRSP, and SXT.

$USD holding support, but for how long? If $USD doesn't hold at this level, it could easily slip to $74.00.

Gold providing clear leadership on the weak greenback.

Transports are lagging - not a good sign.

Despite the Baird upgrade to outperform on Friday, RIMM still provided a decent shorting opp. As noted in the comments on Thursday, RIMM's retracement had been on very light volume, so it was ripe for shorting.

RIMM gapped up, but the momentum died after the first 20 minutes or so. The second 15 min. bar was very bearish. A lengthy sideways, deadzone type trade, eventually succumbed to the bears. NR7 was the trigger after price closed below 5 EMA. Buyers stepped in at whole $ level, but that retracement was on declining volume, setting up an ambush.

Gapper - Teck Resources Limited (USA) (Public, NYSE:TCK)

2009-10-08T20:23:00.003-04:00

Last night I mentioned in the comments of the previous post, that TCK was a focus list long. As you can see from the daily timeframe above, it had carved out a solid base. Yesterday's NRB was the perfect pause before expansion. This is a high volume BO and I'm holding for a swing in my retirement account. The day trade in my trading account is outlined below.

This morning TCK gapped up with bullish opening range. Price retraced to the 5 ema on declining volume. Enter on break of ORH. Take a partial after 3WRBs as price approaches whole $ level. Exit balance as price approaches full extension.

Intraday Box Trade - Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

2009-10-07T07:39:00.003-04:00

EOD POT looks well positioned to form an inverse C&H. If not, I'll be watching for a double top as this stock is still weak (IMO) despite yesterday's gap.

Gapper - Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

2009-09-27T23:41:00.003-04:00

RIMM - Contraction precedes expansion.

2009-09-27T19:39:00.000-04:00

Technical Picture - Bears Own It

2009-09-24T21:01:00.005-04:00

A sharp bounce in the $USD and much weaker than expected existing homes sales data, gave the bears the fuel they needed to push prices lower on high volume for a second consecutive session. Next support level around $104.00 - will it hold on closing basis tomorrow?

After hours, RIMM beat by $0.03 and issued in line guidance. As noted last night, that wouldn't cut it this time round and the stock was crushed after hours, leaving the daily chart completely broken.

$USD versus $CAD

DOW transports approaching critical test of trendline near-term.

Technical Picture - Sell the News - FOMC Policy

2009-09-23T21:29:00.006-04:00

The FOMC finally came out with a more optimistic statement regarding the recovery "economic activity has picked up following its severe downturn", but market participants reacted by selling the news.

The daily SPY chart signals that despite numerous attempts, we can't close above the Lehman gap open. Bearish gaps act as resistance and this one is typical thus far. Today's close is the first close below the daily 5 EMA since early September. The post FOMC sell-off was decisive, so expect that correction I've been anticipating to start now.

The weak dollar has been the major catalyst behind the last leg of the rally. The chart above and below foreshadow a pullback. The dollar looks like it wants to bounce here.

If the $USD bounces, oil will fall out of the box.

Textbook shooting star reversal on the SPY post FOMC. Notice how it retested last week's high, carved out a shooting star and swooned on accelerating volume. Sweet!

RIMM was an ambush setup following early strength (TI momentum scan).

RIMM reports earnings after the bell tomorrow. These are highly anticipated since it broke out of a symmetrical continuation triangle earlier this month. However, the BO volume is lame.

RIMM needs a big beat to justify current price. A big beat will likely complete the gap fill, however, just meeting the expectation will result in a failed pattern.

Technical Picture - Lehman Gap Still Holding as Resistance

2009-09-22T21:36:00.004-04:00

Lehman gap is still holding as resistance as we head into the FOMC interest rate decision tomorrow.

AIG was forming a bearish h pattern when I spotted NRIB NR7. Price started to retrace when it retested the morning lows, but the move turned out to be an ambush - 50% retracement of last leg down. Finally, in the last hour it ripped lower on a rumor of a secondary offering.

CNQ gapped and formed a mini inverse H&S pattern. I pulled my stop on the second half at the last minute because the rising 50 SMA was just below. It held as support and price rallied to new session highs, but failed to reach full extension despite the daily breakout to new recovery highs.

Super Trader by Van K. Tharp

2009-09-20T18:47:00.008-04:00

Super Trader - Make Consistent Profits in Good and Bad Markets by Van K. Tharp is a four step program to help traders develop a business plan that will allow them to make profits in any market environment - bull, bear, and sideways.

The four step program involves:

self assessment of personal beliefs that will determine your personal trader psychology;
developing different trading systems to suit your personal trader psychology under different market conditions;
understanding and incorporating position sizing into the trading system in order to manage risk; and
developing a personal business plan to guide your trading success.

That may sound pretty simple however, in order to maximize trading performance under different market conditions, we need to track setups(systems) in a vigorous fashion. Do you have any idea what the ratio of expectancy to the standard deviation of R for each of your trading setups? Yeah, exactly. And how could knowing these stats make a difference in your trading? Well, if we take any random setup, we might determine that the setup has a much higher expectancy in strong bull trends, but a very low expectancy in sideways markets. So we want to develop different trading setups for different market conditions. Tracking market trends and applying the right setups will greatly enhance trader performance.

The book emphasizes matching trading setups with individual trader psychology. What does that mean? If your primary objective is capital preservation and you have a low tolerance for losses and draw downs, you'll want to focus your trading on setups with higher expectancy which will mean fewer trades. In order to develop a workable business plan, traders have to do the exercises in the book, including tracking setups with live trades in order to develop meaningful sample data. Once the business plan is complete, the trader has a road map to success.

Highly recommended!

Potash Corp./Saskatchewan (USA) (Public, NYSE: POT) - Revised Guidance

2009-09-20T17:52:00.000-04:00

Potash shares (POT 93.34, -3.80, -3.91%) dropped 4.2% to $93.05, while Mosaic (MOS 52.95, -1.30, -2.40%) fell 3% to $52.60 in late trading.

Potash said late Friday that it expects fiscal full-year earnings of $3.25 to $3.75 a share, down from a previous forecast of $4 to $5 a share. Analysts polled by Thomson Reuters were forecasting $4.16 a share for the year.

"The change primarily reflects lower than forecasted potash sales volumes due to continued slow demand and limited restocking by fertilizer distributors around the world," Potash said in a statement.

Potash also expects third-quarter earnings to come in at the low end of a range of 80 cents to $1.20 a share. Analysts are looking for 93 cents a share from that period.

Edit:

I've added the 15 min. charts for POT and MOS below with support/resistance levels (blue lines). If a low risk entry sets up at or near the S/R levels, I'll take the trade. MOS is more likely to trade in sympathy with POT than the other names in the agchem space. An entry for MOS would be between $53 and $52.50.

OPEX Trades - VistaPrint NV (Public, NASDAQ:VPRT)

2009-09-18T16:30:00.007-04:00

The first chart is a stretch version of our gap resistance which we noted over the last couple of posts. We'll monitor it daily to see how it plays out.

OPEX is notorious for chop, so if at all possible, we want to focus on stocks trading outside of the previous day's range. Both VPRT and ILMN printed on the TI momentum scan in early trade.

VPRT was not obvious at first because it had so much congestion at the top of yesterday's range, but when we formed a base at that level, it looked compelling as an extension trade. The thick red line is the all time high prior to today.

If we consolidate in the upper range, we may get more mileage out this name. I'm adding it to my focus list.

ILMN - basic low risk entry , but not enough volume after yesterday's big move for a full extension.

CLF is one of my usual suspects and depicts typical OPEX trade - within a narrow range for most of the session. Last hour these usually break one way or the other.

The wider range view of CLF shows a H&S top after a sizable run. Could be a good candidate for next week.