Thursday, December 29, 2011

Predictions for 2012

I have no idea how the markets will end in January, let alone 2012. If that seems like a funny way for starting a post titled "Predictions for 2012", then read on......In my humble opinion, all these year beginning predictions are good for is gloating at the end of the year in case they do come correct. As a short term trader, I don't care which way the markets head from here as long as I am on the right side of the trade, and so shouldn't you. Bull markets, bear markets, corrections etc are excuses best left for mutual fund managers and going by their recent records, even hedge fund managers. As short term traders, our job is to make money irrespective of the direction of the markets.

In fact, let me take this discussion a bit further by saying that all these yearly predictions do more harm than good. Suppose, I predict that Apple will hit 500 by the year end. As a result of this prediction and wanting to be proved right (who doesn't like being right?!), I will be looking at Apple through tainted glasses all year. Let's leave the yearly predictions to the economists (and recent times have proved how much do they know!). As short term traders, our only goals should be to try and become the best traders we can become. Let 2012 be a step in that direction!

Take care and good luck!

P.S.: You can follow me on twitter for latest post updates here.

Sunday, December 18, 2011

Airlines soaring

Sorry for the bad pun in the title of the post but I just couldn't help myself. Most of the airline stocks had a pretty good day on Friday, taking them above or just below key resistance levels. While some of the following stocks are a tad overextended and could do with a slight pullback, others are coming off periods of consolidation, making this the sector to watch out for next week in my opinion.

Take care and good luck!

Monday, December 12, 2011

Chart of the Day

When a very heavily shorted stock goes up over 6% on day when the market is down over 150 points, its gotta be on your watchlist. Short squeeze anyone?

Take care and good luck!

Sunday, December 4, 2011

Watchlist for next week

Here are few stocks I like heading into next week. The important levels are marked on the charts itself.

The following stocks have moved nicely since they were posted here on Wednesday and look good for more.

You can follow me on twitter and get the latest blog post updates here.

Take care and good luck!

Wednesday, November 30, 2011

Short squeeze candidates

All the following stocks have two things in common: (a) over 20% of their floats short (b) setups that can run from here. But do remember, as with all heavily shorted stocks, they can be highly volatile.

Take care and good luck!

Monday, November 28, 2011

Relief rally or something more meaningful?

The markets did finally bounce today, from the highly oversold conditions. The bounce indeed was very impressive but the question is whether this is just a relief rally, where we continue going down after a brief respite or something more meaningful that. Here are the levels I will be looking at to get the answer to this questions.

The very obvious level to watch out for is MA(50), which the market might tackle as soon as tomorrow. But the line in the sand, at least for me, would be the 1220-1225 zone. Of course, higher highs would be great but a move above the 1220-1225 zone is needed to show that this move actually has some legs.

Take care and good luck!

Sunday, November 27, 2011

Is it the righ time to start buying Indian stocks?

Enjoying the luxury of some rare free time this Sunday, I decided to work on a historic P/E ratio chart of the Indian stock market. For those of you who do not track the Indian sensex, it has been one of the worst performing indices in the world this year, being down over 20% YTD. It has lost over 11% this current month. So, the idea was to see where the indices stand in the historical context after this huge drop. Well, see for yourself......(Right click on the image and select "view image" for high resolution image)

Median P/E - 18.09
Average P/E - 18.05
Present P/E - 17.05

I would love to see it fall to a P/E ratio of 15 but that's me just being too greedy! Timing the markets exactly on the basis of charts like above is impossible but they do give you a very good idea of oversold and overbought levels. Inspite of the huge decline, the markets don't look as cheap as one would expect as they were overbought last year. I will try to do a similar chart on P/B ratio before the end of the day.

Take care and good luck!

Saturday, November 19, 2011

Are the markets oversold here?

With the market action that we have seen in the past few days, there has been a lot of talk about the markets being oversold. Well, that's not so, at least according to the McClellan Oscillator. And that's especially true in case of the NASDAQ as can be seen in the charts below. While the markets are close to oversold levels, they are not quite there yet.
Another one or two down days, and THEN the odds will start favoring the bulls. If you are long, what you dont want to see is consolidation at or close to oversold levels (compared to a decent move up). That would just give the bears a chance to regroup and hit back again.

Take care and good luck!

Tuesday, November 15, 2011

Stocks Watchlist update

Instead of putting up a new watchlist, I decided to go with an update of the stocks that I had put up on the weekend. Most of the stocks are in setting up stage, except for one big winner which was up 15% the very next day!
MRK - Has been consolidating nicely the last couple of days. Would like to see some more consolidation before it crosses the trigger line. In an ideal scenario, it would wait for MA(20) to catch up before making the next move up.

OPK - The big winner from the watchlist, being 15% up the very next day. Hope some of you played it!

V - Could very well trigger tomorrow. Like a stop a little below MA(20).

SPRD - Did trigger but would like to see some more volume come in.

Take care and good luck!

Sunday, November 13, 2011

Stocks Watchlist

Here are some stocks that I will be keeping an eye on next week. The important levels are marked on the charts itself.

Take care and good luck!

Sunday, October 30, 2011

Overbought markets and how to trade them

Its been a great month for the bulls and its now time to turn to McClellan Oscillator to see if the markets are overbought here. While an indicator that calls tops and bottoms perfectly does not exist and will never exist, McClellan Oscillator in my opinion, is fairly decent in determining overbought and oversold conditions. The overbought levels are marked on the Nasdaq and NYSE McClellan Oscillator charts below.

An overbought market can easily become "more overbought" just as an oversold market can easily get "more oversold", but the odds greatly favor a pullback or a period of consolidation here.

How to trade these markets?
(1) Don't go chasing momentum stocks now. Chances are you will be left holding the bag.
(2) Take partial profits from longs and let the rest run.
(3) Don't wait to sell at the top. Calling the top is a fool's game.
(4) If you want to go short, start with a small position. This way you can give it room to run instead of being forced to call the exact top. If the market indeed reverses, you will get plenty of chances to add to your positions later.
(5) Most importantly, keep your stops on all short positions no matter how confident you are of a pullback here. Remember, the markets can stay irrational a lot longer than you can stay solvent. The above assumes that you are rational in the first place :).

Take care and good luck!

The week ahead

Friday was the perfect day of consolidation for the bulls after the huge run-up the day before. The market bounced from close to MA(200), which is the immediate support level with 1300 being the next resistance level.

A few more sessions of consolidation or even a pullback would do the bulls no harm here. Let me rephrase that by saying that a few days of consolidation or a pullback is actually what is required now considering the overbought conditions the market currently finds itself (I will try and do a post on that later in the day). No harm done in either case as long as 1260 holds. So, the following are the important levels for next week:

Resistance: 1300
Support: MA(200), 1260

Take care and good luck!

Thursday, October 27, 2011

Chart of the Day

Today's Chart of the Day is ZAGG. Has already had over 40% move up this month, but this has been followed by a couple of weeks of consolidation, which means it is not overbought anymore.13.50 has been an area of tough resistance but it finally managed to close above it today.

Take care and good luck!

Wednesday, October 26, 2011

Short Squeeze play

A stock with 40% float short, yet to report its earnings for the quarter and a decent looking chart definitely has my attention as a possible short squeeze play. The fact that it just fell around 1% on a day like yesterday is not too shabby either. I am talking about Tesla Motors - TSLA. Below is daily chart which shows some decent consolidation after a big move up. A break of 29 could lead to another run up. Its not the best looking chart out there but for a stock with almost 40% short float, I would expect a much worse chart. Below are the daily and weekly charts. The volume pattern has been bullish for the last few weeks as can be seen from the daily chart.

The huge short float should produce some interesting action leading up to the earnings report (November 2).

A word of is important to stick to your stop loss points in any position you take, but it is especially true of short squeeze plays. Those who use fundamental analysis might have a very good reason for shorting the stock so aggressively, but as a trader who uses technical analysis, I dont care what that reason is, but that is true only if I always respect my stop loss. While short squeeze plays can reward one with quick and big profits, they sometimes offer no second chances if you disregard your stop loss.

Take care and good luck!

Sunday, October 23, 2011

Watchlist for next week

Following are some setups I like for the coming week. The important levels are marked on the charts itself. As always, it being earnings season, be sure to check when a particular stock is reporting before taking any position in it.

Take care and good luck!

S&P important levels

Sorry for having disappeared for so long but life has been hectic as usual and add to that, a fair bit of travelling and what you get is a lot more hectic than usual and no time to trade. However, this being a holiday week in India combined with the time change from Nov 6 means I should have a lot more time to trade in the near future (fingers crossed!). And that should also mean a lot more regular blog posts. Well, like I said, I havent got time to trade in the last few weeks, and also havent been following the markets much, so its time to get some homework done before market open on Monday. Let's get started by looking at the important levels at the S&P for the short term.

First thing that stands out, at least to me, is the heavy resistance we can expect at 1260. The erstwhile support level from both March and June has now become an important resistance level and should be a tough nut to crack.

It turns out that 1260 is also an important Fibonnaci level, adding further to its importance. Its amazing how these things play out!

Looking for support levels, Friday was a pretty important day for the markets with the index finally closing above 1230, the first time it has done so since early August. One could expect some support at this level.

Following is a 15 minute chart of the S&P that shows that 1220 is an important support level. So, 1220-1230 would be your support zone.

So, those are the levels to watch out for on S&P for the coming week. Above all, watch out for the news with it being an important week for the Euro. But then, which week isn't?

Take care and good luck!

Thursday, September 22, 2011

Chart of the Day

A stock that manages to not only close up on a day like today but also manages to close above an important resistance level, and that too on good volume, should be on your watchlist. And that is the case with PCYC which managed to close over the 12 mark today.

Take care and good luck!

Sunday, September 18, 2011

Stocks Watchlist

Here are some setups I like for next week. The important levels are marked on the charts itself.

ELGX: Weekly chart

Take care and good luck!