I've been updating the trade list, adding some of the featured trades as well as updating stops and the newer ideas. I'll be posting more ideas on the list as I make my way through the scan candidates. Please take a moment to check out the list. If you have trade that you'd like updated with stops or just analyzed, go ahead and email me.
There will be 1 more post tonight.
Monday, January 24, 2011
Last Market Update
Last noght I mentioned oversold, which would mean a bounce which is what we got today. This does not mean strong trend/strong market. We have to see what this bounce can do and what kind of follow through we get. The end of the day is when most Wall Street transactions take place so there's an emphasis on trading near the close. Here are the SPY afternoon charts..
The 1 min went divergent in the early afternoon and headed down by 2:30-ish. IT hasn't gained much upside traction, but is more in line right now. It's not a particularly strong close.
The daily chart shows this to be thus far just a bounce, volume is not heavy and the % gain is around half a percent. We may be seeing a triangle configuration forming which would make sense with advance GDP coming out this Friday.
More to come in a bit.
More to come in a bit.
ADDING KO TO THE TRADE LIST
I think there's a chance of a small bounce. You could scale into the position or just add it here-I prefer to scale into it.
Chart Request -DUG
DUG is an inverse ETF which if bought log gives you short exposure to the Oil and Gas Services industry.
The Charts...
DUG 3C daily chart-there's a price pattern called a bullish descending wedge in the white box, the same place there's a 3C positive divergence suggesting accumulation has been ongoing into lower prices.
The divergence in June shows price making a higher high and 3C failing to confirm that high.
The 5 min 3C chart also looks bullish. Note the different divergences both positive (white) and negative (red) and the resulting price moves. Right now the 5 min is in the strongest type of divergence and that is a leading divergence as 3C makes new highs despite the price not doing the same.
I don't know what happened with my text box, but it's a long trade stop using the trend channel, it should say $34.40, although since there hasn't been a breakout of the wedge yet, I might consider a wider stop. The trend channel has worked well with DUG-if you initiated a short trade at the small red box, you'd still be in the trade as there have been no false stop out signals and you'd have a profit of 17-19% assuming you didn't add to the position.
You may wish to enter the trade or phase into it in this area, but the breakout of the wedge will occur around the $35.40 level and $36.40 will take out the first zone of resistance. The implied target is a bit above $44.00, although that's just the target from the wedge, it could certainly run higher.
I like the positioning in this area. A word of warning though, these wedges have been forming bases after breaking out. This one may be different as it is related more closely to commodities, it's for this reason that I'd consider a wider stop or you may want to chose the tighter stop and be able to give the trade a few shots until you get the right positioning. Pro traders will often take 4-5 shots at the same trade and then get good positioning, all while keeping losses small. Amateurs loose too much on their first shot and then walk away from a good trade.
The Charts...
The divergence in June shows price making a higher high and 3C failing to confirm that high.
I like the positioning in this area. A word of warning though, these wedges have been forming bases after breaking out. This one may be different as it is related more closely to commodities, it's for this reason that I'd consider a wider stop or you may want to chose the tighter stop and be able to give the trade a few shots until you get the right positioning. Pro traders will often take 4-5 shots at the same trade and then get good positioning, all while keeping losses small. Amateurs loose too much on their first shot and then walk away from a good trade.
Market Update
Like last week, the Dow seems to be tipping its hand first
DIA 1 min-this divergence may be enough to turn the tide to the sell-side.
The QQQQ is just starting to show the same, not to the same extent. The SPY is still pretty positive, but should follow the other two averages.
Market Update
Last night I said this about the market,
"As I mentioned in my last post, there's fewer bullish looking charts right now then bearish (at least per my crossover scan-with very recent results) however, that is often a sign that the market may be overextended or oversold. We saw a very mixed market on Friday with the Dow performing the best at +.41%, the S&P at +.24% and the NASDAQ 100 which was the most dominant in terms of percentage change coming in at -.78% so the market may in fact be oversold and divergences between the 3 averages of this magnitude rarely last long."
Today, here's what 3C is looking like on the 3 major averages thus far.
DIA 1 minute shows a small negative divergence, there may be some loss of momentum, but it's not large enough in my opinion to create a reversal as of yet.
The 5 min 3C chart on the DIA is confirming price's trend this morning.
The QQQQ is showing near perfect confirmation, already up by .90% it seems last week was quite oversold.
The 5 min Q's chart, again near perfect confirmation.
The SPY 1 min is showing a small negative divergence, but agin, not strong enough for full reversal yet.
The 5 min chart has good confirmation.
As of now, the averages are looking stable. There is the inherent breadth weakness as I highlighted earlier with GOOG/BIDU and others, but nothing goes straight up or down. Whether this is a move of consequence or not, we'll have to see how 3C holds these gains.
"As I mentioned in my last post, there's fewer bullish looking charts right now then bearish (at least per my crossover scan-with very recent results) however, that is often a sign that the market may be overextended or oversold. We saw a very mixed market on Friday with the Dow performing the best at +.41%, the S&P at +.24% and the NASDAQ 100 which was the most dominant in terms of percentage change coming in at -.78% so the market may in fact be oversold and divergences between the 3 averages of this magnitude rarely last long."
Today, here's what 3C is looking like on the 3 major averages thus far.
As of now, the averages are looking stable. There is the inherent breadth weakness as I highlighted earlier with GOOG/BIDU and others, but nothing goes straight up or down. Whether this is a move of consequence or not, we'll have to see how 3C holds these gains.
Municipal Bonds -A Theme Investment for 2011
I've highlighted MUB several times in the last month or so. MUB is an ETF covering national municipal bonds. With government aid to states set to expire mid-year and the housing crisis and demand for extended state benefits for the unemployed, the funds for state and local governments are still very under capitalized.
The recent trend in dumping municipal bonds is getting worse and the S&P rating service announced they expect to downgrade more municipalities this year. As investors pour out of these funds, the yields rise which makes repaying the debt obligations a heavier burden as well as issuing new debt obligations. It's a catch 22, the states need help now more then ever, and they are facing higher costs pushing them closer and closer to default.
MUB is one investment vehicle to play this trend on a short trade.
Daily chart of MUB
Daily 3C chart of MUB with a negative divergence at the top.
The green arrow shows the trend channel holding the uptrend for 3 months, and thus far it's held the downtrend for 3 months. The current stop is about $99.49 and MUB is rallying today, the closer you can enter MUB on a short trade to the stop, the better the risk:reward ratio will be.
There are many other bond funds/trusts and even a few state specific like California and New York. If you are interested in some others, feel free to email me.
The recent trend in dumping municipal bonds is getting worse and the S&P rating service announced they expect to downgrade more municipalities this year. As investors pour out of these funds, the yields rise which makes repaying the debt obligations a heavier burden as well as issuing new debt obligations. It's a catch 22, the states need help now more then ever, and they are facing higher costs pushing them closer and closer to default.
MUB is one investment vehicle to play this trend on a short trade.
There are many other bond funds/trusts and even a few state specific like California and New York. If you are interested in some others, feel free to email me.
GOOG/BIDU
At lot of you don't have time to look at charts all day, I do. So you may be focused on what the averages are doing, but there's a slew of stocks that are bellwethers that give a more internal set of metrics. Looking at two of them this morning, GOOG and BIDU, both are showing deep problems.
BIDU 60 min chart-note the volume.
BIDU 60 min 3C chart, note the negative divergences at the top.
GOOG's 15 min 3C chart, over the last to days it's lost about 37 points.
Looking at the same GOOG 15 min chart (this is why you compare as many charts as you can-you're looking for that which others miss) note the tweezer top candlestick formation/reversal formation in the red box. Also note the volume.
Check out this Heiken-Ashi price chart with Volume at price and Bollinger bands. The yellow arrow candles are indecision candles, much like traditional candlestick charting, they often serve as reversal candles. The red candle is a very strong down trend candle. Unlike candlestick charting where a long lower wick can be bullish, in Heiken-Ashi charting, the lower the wick, the more bearish the candle.
I'll be checking more charts and answering your emails, but these two market leaders are looking pretty bad right now.
GOOG's 15 min 3C chart, over the last to days it's lost about 37 points.
Looking at the same GOOG 15 min chart (this is why you compare as many charts as you can-you're looking for that which others miss) note the tweezer top candlestick formation/reversal formation in the red box. Also note the volume.
Check out this Heiken-Ashi price chart with Volume at price and Bollinger bands. The yellow arrow candles are indecision candles, much like traditional candlestick charting, they often serve as reversal candles. The red candle is a very strong down trend candle. Unlike candlestick charting where a long lower wick can be bullish, in Heiken-Ashi charting, the lower the wick, the more bearish the candle.
I'll be checking more charts and answering your emails, but these two market leaders are looking pretty bad right now.
