Thursday, March 31, 2011

Bullish day but still cautious

Despite the market ending pretty much at the lows of the day, the market action today was just what the doctor ordered for the bulls. There are two ways the market can work off overbought conditions - (a) sharp pullback (b) a period of low volume consolidation or sideways movement. And a few more days of the latter can just be good news for the bulls. That said, I still believe that caution is warranted here. The market is still a tad overextended and the S&P right at resistance level of 1331-1332. Even a pullback to MA(50) i.e. 1308 would be healthy for the bulls.

Staying true to the strategy I have been underlining in the past few days, I ended the day with a 70% cash position and positions in HERO and MCZ. Both these setups were from the watchlist I had put up last night. It was a good day for the watchlist with MCZ up over 15%, HERO and WTW up over 4.5% and GRS up almost 3.5%. Hope some of you readers benefited from some of these calls!

Take care and good luck!

Breakout candidates

The amount of setups that are out there are simply amazing. Following are some of the setups that I will be watching tomorrow. I don't have time to comment on all these setups individually but I would just like to point here that I am looking for quick trades here as the markets approach overbought conditions.

I hope some of you profited from the CLEN call earlier this week. It was up 10% yesterday.

Take care and good luck!

Wednesday, March 30, 2011

Are the markets overbought here?

Its been a great couple of weeks 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.

 While the markets still haven't reached overbought levels, another up day and we will be there. The Nasdaq oscillator, in particular, is at its highest levels since September.
Please remember that overbought is not the same as a top. An overbought market can easily become "more overbought" just like an oversold market can easily become "more oversold". Then why is it important to determine overbought and oversold conditions? The answer lies in risk management. Following is the link to a post I wrote last year on how to play overbought markets, which happens to be one of the most read posts of the blog.

Take care and good luck!

Tuesday, March 29, 2011


It was a one way street on Wall Street today. If it ain't broken, don't fix it. In that spirit, here are a few long setups that I will be watching tomorrow. Out of these, I took positions in CLNE and IRM today.
PNM - Nice bounce off MA(50). Watch out for break of 15.

CLNE - Volatile stock with high short float. Bullish volume pattern. My stop is below MA(200).

IRM - Showed signs of coming back to life today after two days of solid consolidation.

RYN - Basing for over a month now.

BGCP - 9.50 is the key.

BLC - Seems to have room for one more push.

LPSN - Close above 12.25 today was crucial. Like the volume pattern.

SLB - Watch out for break of 95.

SOHU - Watch out for break of 90.

Take care and good luck!

Sector analysis and startegy

The futures are up 44 points as I write this and after the market action last week, the bulls look back in control, but the sector charts after are telling a different story. Most of them look bearish signaling a move down. Here are a few of them.

XLF (Financials) - Presenting a bearish outlook, one has got to start with the Financials! They have been struggling with the MA(20) ever since the big gap down in February and today was no different. I wouldn't wanna be long this chart. Further resistance ahead in form of MA(50) and 16.75.

XLK (Technology) - MA(50) was big time support till February and now expect the same to act as resistance. Rejected here in the last two trading days. Can't ignore the bearish volume pattern.

XLE (Energy) - Tried to take on the resistance today, succeeded for a while before failing in the end, resulting in formation of a bearish doji. Also, a negative MACD divergence developing. Will tomorrow's action confirm the bearish signal being given by the doji or will the bulls fight back? An important day for the energy sector tomorrow in my opinion.

XLP (Consumer Staples) - Similar to energy sector.

XLU (Utilities) - Low volume move up after getting hammered during the move down. Rejected at MA(50) today. One of the most bearish sectors.

Undoubtedly, the bulls have made an impressive comeback and been in control during the last week or so, but at the same time, it's hard to argue with the bearish picture painted by the charts above. So, what to do? Here's what I am going to do. My account is close to its all time highs (reached there on Friday before giving a little back today) and I am in no mood to give back any of my hard earned gains to the market. That said, I am not going to short here just out of sheer respect for what the bulls have done during the past one year or so and what has happened to shorts at each and every pullback. The markets have reached that point where you have to be quick in taking your profits and even quicker in taking losses. There will a come a time when market will demand that we go all in but I believe, that now's not that time. If I had to sum up my stand on these markets in two words, it would be CAUTIOUSLY LONG.

Take care and good luck!

Sunday, March 27, 2011

Chart of the Day

Today's Chart of the Day is SGI. Breakout on good volume from MA(20) on Friday. MA(20) has provided strong support since December. Bullish volume pattern in the last couple of months. Looking for it to run after 20.

Here are some more setups for the coming week.

Take care and good luck!

Watchlist for next week

It was an awesome week for longs last week, no two ways about that. But during my weekend scan, I didn't find too many tempting long setups. That said, I am not going to short these markets based simply on the recent track record of the bulls. A bit of pause or consolidation, or even a slight pullback, is not going to do the bulls any harm here. Following are few charts that I like for next week. Here are the results from last week's watchlist and also some more setups.

SCS - Like the gap up above MA(50) which meets the criteria underlined in the post How to play gap ups. and the consolidation after that. A buy on break of 11.

YOKU - Nice move off MA(20) on good volume. New highs coming.

PANL - Bullish volume pattern. Like it more as a momentum play rather than a swing trade. Buy on new highs.

IRM - Nice narrow consolidation after the breakout. Look for volume to come in.

I will be back later with Chart of the Day.

Take care and good luck!

Saturday, March 26, 2011

Review of long setups

Last week was an awesome week if you are a momentum trader with breakouts abound. Personally, I had my best week of the year. But heading into next week, I hold around a 75% cash position. I had put up some long setups in last weekend's watchlist and I know most of them were doing well earlier in the week. I thought it would be a good idea to go back to those setups to see if there are any signs of exhaustion or profit taking. So, here are all the long setups posted last weekend.

ALSK - Broke the crucial 10.50 level this week. Nice follow through and a nice close on Friday. Still in play for next week. 11.25 strong resistance.

ARIA - Another nice mover. Broke out after forming a bull flag earlier in the week. Rejected at resistance on Friday and closed close to lows of the day. Out of the watchlist.

CMO - Still consolidating butt even great volume couldn't get it to move on Friday. Out of the eatchlist.

RES - A beauty! Broke out from the cup and handle pattern pointed out last weekend. I held it earlier this week, but sold out before the big move on Friday. Hopefully you readers played it better than me!

HOS - Still in play. Like it on break of 31.

KBR - Moved nicely but showing signs of exhaustion. Could do with a pullback. Out of the watchlist.

PBR - Like this as a breakout candidate for next week. Stop below MA(20).

Almost all of the plays pointed out last weekend did very well and I hope you readers benefited from some of these calls! I was expecting to see more signs of exhaustion but many of these setups are still in play. I will be back with a post on the overall markets and a new watchlist for next week tomorrow.

Take care and good luck!

P.S. Here is the watchlist for this week and also Chart of the Day.

Tuesday, March 22, 2011

Chart of the Day

I posted a a list of long setups earlier in the day today. Make no mistake, I am long on the markets here but there is something that makes me uneasy being overly long here. For some reason, I don't feel as bullish as I normally would after a day like today. I think that has something to do with the markets currently being driven by news. Bad news and these markets could turn 180 degrees in no time. So, in the spirit of being prepared, I decided to look for short candidates and the first obvious place to look was the long/short watchlist I had posted this weekend. 
Most of the short candidates bounced on low volume today, but what else would you expect on a 180 point up day. But there was one stock that stuck out like a sore thumb and that makes it our Chart of the Day for today. I won't ask you to guess the name of this stock as that would be a pretty lame pun. But its not good if an already broken down stock can't bounce on a day like today. I like it a short on break of Thursday's lows.

Take care and good luck!

Monday, March 21, 2011

Long setups

Following is an updated list of long setups that were posted on the weekend. Many of them had nice moves today, not surprising considering the market action, on good volume. All of them are still in play. Personally, I got in PNM and RES today. Hopefully, you readers were also able to benefit from these calls.

More charts later at night. Take care and good luck!

Sunday, March 20, 2011

Long and short setups - Part 2

Here are some more setups I like heading into next week. Like I said in the last post, the markets are currently still run my news rather than technicals, so I am posting both long and short setups to be prepared for any eventuality.
ELY - Weak bounce after a big move down. Resistance at 7-7.15 and support at 6.60. A short at test of resistance or break of 6.60.

GES - Another short play. MA(200) and gap resistance should be tough to break. Watch out for new lows.

HOS - Watch out for break of 30 with volume. MA(20) providing nice support.

KBR - Similar to last chart. Watch out for break of 36.

PAG - A short on break of MA(50).

PNM - Like it as a long here with a stop below MA(20).

RES - A cup and handle pattern. Watch out for break of 22.

Here are some more plays for next week.

Take care and good luck!