EURO...en fuego!

Well so much for a EUR resistance area and pullback as highlighted with this post Watch your Euro.  It just doesnt seem to be happening as originally thought.

And that leads me to this post and chart...a weekly of the EURO now that it has cleared resistance at 1.34/1.35. It appears off to the races. Notice that momentum on the lower portion of the chart is also moving up nicely.

While the first real resistance area is around 1.42, a measured move from here on the inverse head and shoulders break UP is to 1.45. That move would pull US equities to new highs and a huge continuation of this bull market.

AAPL...dont say I didnt warn you.

I have been harping on AAPL's technical weakness for some time now, originally getting bearish up in the mid $600, and with the most recent post on November 8th "AAPL...the pain isnt over yet" suggesting support doesn't exist until the $460 area then a much lower gap zone for possible support, followed by the ultimate line in the sand of $400. Well, for those of you who have been trading with the trend (i.e. DOWN) then you will be rewarded with lower prices from a weak after hours earnings announcement at the worlds most loved company.

For some time now institutional selling has been relentless and every bounce has been sold. Todays collapse of 10% after hours, and the early weakness that is sure to follow tomorrow on the opening, may (I SAY MAY, Foghorn Leghorn) finally rid the stock of all those institutional sellers who werent smart enough to take my advice (or just the simple advice of the AAPL chart many, many dollars ago) to sell.

Price doesnt lie...it is fact!

Price action doesnt lie...it is fact!

Volume doesnt lie...it too is fact!

Charts paint a picture of the psychology of holders and traders. Plain and simple. Anyone who is keen enough to look at the simplest painting on a wall and have an opinion is also keen enough to see a weakening price, on a pick-up in volume, as institutional holders look for the exits. This alone - not the hope of a forecast, not the hope of higher sales or the hope of a new product launch, not the hope of an analyst upgrade - is reason enough to sell, and keep selling on bounces. The hope trade doesnt work and this may be the best example in recent history from such a beloved company.

At some point AAPL will bottom. To flush out any remaining weak holders, the stock needs panic selling. And with panic selling comes massive, MASSIVE volume to an important support level. I dont know if that day will be tomorrow or sometime in the near future, but if you are looking to buy, as I am for a powerful counter-trend swing trade, then look for the volume mentioned above at an important level. If you are into candles, then also look for a reversal candle around the same time.

Eventually - and reading the chart for hints of a psychological shift will give us clues - the stock price will make a double bottom or a higher low from which to build upon. At that time, AAPL will be provide more than a swing trade bounce and possibly allow for some long term holders to prosper handsomely. After all, this company is about innovation and making things that people want...for example, the iMac I am typing this post from.

As a quick side note, there have been some very good calls recently (breakouts in BAC and FRP, as well as a timely short in MSFT come to mind) as well as some not so good (SHCOMP is a thorn in my side. Hats off to Tom Demark for calling that bottom!). But as a swing trader trading with the trend (mostly), it is all about risk management. Let your winners run and cut your losses.

As always, comments welcome...and keep the personal emails coming. I dont mind talking outside this medium.

Watch your EURO...

The weekly chart of the EURO below shows some impressive strength from mid 2012 to now, rising from 1.20 to currentl levels near 1.33. But as it approaches some major resistance in the form of moving averages and its reaction high from early 2012, as well as its extended momentum gauge as shown on the bottom, it is more a time to be cautious than outright bullish for US equities. Since this is a weekly chart it is not an exact level for today, or this week, but an overall level from which the currency should pull back..and lead a drop in US equiities.

Well, this is a healthy rally…NOT!

90% up days on the NYSE and higher prices all around prevail. But for some reason I just cant get my head around a continuation of this rally.

What are the building blocks of a 5% move in the first week of trading?

Where is the euphoria coming from to have everyone buying stocks again?

From what I can tell this rally is suspect at best as seasonality typically helps the market early in the new year as well as beginning of each quarter when mutual funds put inflows to use. This rally is no surprise, but its not healthy. If you look at large well known companies like WMT, MCD, etc they are just not participating. But high short interest stocks out of China or crap like ZNGA and DRYS are rallying hard. Does this support a continuation of the recent rally?

SPY is +4.9% since 12/31 lows...the s&p500 high beta index is +7.4% over the same time. This data shows that this is a high beta rally where crap stocks are leading the charge.

Also, the ratio of s&p 500 stocks to s&p500 high beta index is at the same level from April 2, 2012 when the market made an intermediate term peak at SPY $142 before falling to $136 (4%) in 2 weeks.

F bombs...???

Ford has had a hell of a run recently.  Just a short while ago in mid December it was gesting $11 and now the stock is over $13. Look back into late October and the stock was just $10. So given the 20% gain over the past 2 weeks and 30% gain over the past 2 months, I view todays near doji as a blow off top.

Longs will be looking to lock in those tasty profits and I believe shorts will be all over the name on a high volume close below $13. If that occurs, look for a 38% - 50% retracement towards the $12 area where buyers will likely defend the name.

The stock has been in a bull market since the July/Aug lows so a short is definitely countertrend and not for the faint of heart. Given the recent strength, most people would be looking to enter from the long side so be nimble on a cover and use stops above according to your risk tolerance.

HAPPY NEW YEAR

HAPPY NEW YEAR ALL!

THANK YOU FOR FOLLOWING.

Time to be careful!!!

President Obama comes back early from holiday and everyone "hopes" this means a deal is imminent. But the market is a psychological machine that currently has all this euphoria adding up to +3handles yesterday morning and -5handles on the day…because of that news? The early morning strength just didn’t  add up if youre not wearing the christmas-rose colored glasses.

Technically the broad market suffered some real damage last week. Friday 12/21 was the heaviest volume selloff in the SPY since the reversal bottom on 11/16. High volume is typically a sign of a reversal especially after a strong selloff (sep 14th to nov 16th selloff was 8%) or after a strong rally (nov 16th to dec 18th rally was ~8%). My take, looking through monetarily or psychologically unbiased glasses, is that the broad market is in trouble. Anyone in this business for a while knows the "hope" trade never works and reality is what you see...not what you think.

Having said all that on the day after christmas (sorry to be such a scrooge) it is clear to see i am leaning very bearish. The announcement of a fiscal cliff deal, in my view, will be one of the biggest "sell the news" events of the year. On the way down, 1400 will be good psychological support and the first battleground followed by 1370/80 and then the area surrounding the November lows near 1340/50. The only thing that will change that view is a high volume broad market rally over the September highs of 1452.

Gun makers oversold rally

Since the elementary school massacre in Newtown, CT gun makers (RGR and SWHC) and sellers (CAB and DKS) have been getting smoked. Actually, starting a little before the shootings the stocks were under pressure and then those horrible events accelerated the selling pressure. But when stocks get hit for 30% in a very short period of time there is often a relief rally...and the action yesterday in the names mentioned above are doing just that.

As you know I believe the best way to play a stock is in the direction of its trend - and these trends are to the downside. So if you want to play for a countertrend bounce which may reap some nice percentage gains, I would suggest you be careful and be out on sharp moves. But if you are looking for a bigger swing trade move and not just a scalp, then look for areas of overhead resistance (like $9-9.50 SWHC, $45, then $46-47 RGR) to play from the short side. (CAB and DKS may also fit this scenario but I believe pure gun makers will be hurt much more than sellers because CAB and DKS have so many other products in their revenue mix).

Ultimately SWHC may go to $6 and RGR may see $35 or as low as $30. Stops above according to your risk tolerance.

T - looking iffy at these levels.

Like a lot of high dividend paying stocks and closed-end funds, AT&T is just not acting well these days. Its relative underperformance to many other stocks and its benchmark has been very apparent recently as the stock continues to struggle below its 200 day moving average. Needless to say, this type of underperformance should put  it on traders short radar.

The bear flag just below the 200day moving average looks very similar to the bear flag below its 200day during the summer of 2011. Back then, the stock failed after a headfake close over the 200day and fell a quick 10% before recovering. The action since the October high seems very similar. The stock got hit hard off its highs and fell right to its 200day. Now its in a bear flag just below the 200day as the 50day comes down to cross the 200day...any day now.

Aggressive traders may want to enter a short here and look to cover near or below $32. Although I am looking for a repeat of the action from 2011 into year end, watch volume and price for hints of a change in direction as a close over its most recent closing high near $34.75 will get it moving higher again.

Watching X...

Watch US Steel this week. Moves like that from friday usually have follow thru...especially for stocks that have a high 25% short interest . (chart from fridays close).

I would expect the stock to move to $25 in the near term, possibly higher. Any light volume pullback towards its 200day moving average should be monitored closely. If it holds then that would be a good sign for an extension...if not, use that as a sell stop and get out.

S&P 500 most Overbought / Oversold

Bespoke has a list of the most overbought and oversold stocks in the S&P 500 that i thought would be worth reposting HERE or here http://www.bespokeinvest.com/thinkbig/2012/12/12/most-overbought-and-oversold-sp-500-stocks.html

Note that tech stocks make up 9 of the top 20 stocks that are overbought. This fits into my recent post that Im not feeling the love in  XLK.

WMT - Christmas season bringing the company some coal?

So many charts look like this WMT chart these days...a collapse from its October highs to its mid November lows on the 200day moving average, and now a rally back to its flat/descending 50day and 100day  moving averages . This is not necessarily a "dead-cat" bounce in one of the worlds largegst and most successful retailers, but it is nearly a textbook example of a high probability short.

Trade premise:

Enter short somewhere between $71.50 - $73 and cover near the 200day moving average currently near $68.50 (unfortunately I wrote this midday when the stock was trading near $72 - but the analysis still holds). Those less averse can start covering near $70 while those more tolerant can cover some on the 200day moving average and keep some on if the broad market collapses and WMT follows it lower towards $65. A prudent stop would be over the 100day moving average currently near $73.25 (or according to your own risk tolerance).

 

Micro-cap stock worth watching (FRP)

Fairpoint Communications (Symbol: FRP) is a $205mm microcap company that has been gaining lots of traction over the past 7+ months. And although a nearly 100% gain over that time should put it on the radar of many, chances are its still not a household name at the local after work (or after internet chatroom) watering hole. "Hey Sally did you see the action in AAPL today? It was horrible." "Yea Steve, your right. But Ive been watching FRP lately instead." ...is a conversation that is probably NOT happening. But that is a good thing. Because sometimes the secret sauce of making money is discovering something before someone else does.

That seems to be the case for FRP. Not many know the name or realize its technical breakout potential. Although there are some large and well known institutional holders of the name, it just doesnt get the play it deserves because of its tiny market cap (and probably some other fancy four letter fundamental terms we wont get into here...like debt).

Anyway, here is the short story...the stock has been trading along a steady bullish trendline over the past 7 months where there is CLEARLY consistent buy interest...and someone big enough to not have it broken. That trendline (green dashed line) currently sits near $7.50 and continues to rise. As you can see from the horizontal red line, $8 is the near term resist and the top of a multi-month ascending triangle. An above average volume break over $8 resistance will get the stock moving as institutional buyers get more aggressive and possibly some momentum players jump on the name. This would also get the 18% short interest more involved as they need to assess and manage their risk in this thinly traded stock. Such a close over $8 would get the stock moving at least $1 higher near term, but considering where the stock came from over the past year+, an extension could be much higher towards $10/12 or above.

There are 2 ways to play this one. Either buy it on weakness towards or on its bullish trend line OR buy a high volume break over $8. Sell stops are always according to your own personal risk tolerance and should NEVER be moved lower. 

Comments, other input, or agree/disagree arguments are always welcome.

Tech (XLK) - just not feelin the love...

I just cant get behind tech. I know a lot of people that like it and there are some diehard believers of companies like CSCO, INTC, MSFT (MSFT recently mentioned as an excellent shorting opportunity into the Surface release with THIS POST), but it just doesnt get my bullish juices flowing.

If you want further proof, take a look at the XLK (SPDR Tech ETF) chart, below. To me, this screams TREND CHANGE!

*Broke below its 1year+ bullish trendline in October

*Below all 3 of its major moving averages and currently struggling at its 200day sma

*Underperforming the broad market from the September highs on a relative basis by approximately 5%

*Could be in the midst of forming the right shoulder of a large Head & Shoulders which, if true, would lead to much lower prices.

Every cloud has a silver lining and the XLK silver lining is 2 fold...it held its June lows on a mid November test and has bounced strongly since,  and its also below the March reaction high near $30.50 which on a bounce would not only be a much higher H&S top, but it would take price back to the underside of the bullish trendline setting up for a much nicer shorting opportunity.

Having said all that, I believe shorting between $29 - $29.50 presents a high probability risk/reward opportunity to see price revert back to the mid to low $27s over the short/intermediate term - approximately $2 lower - while using a tight stop on an above volume close over $30. If the broad market breaks down hard and XLK fails to holds $27, then a test of its 2011 lows near $23 is highly likely.

BAC...an opportunity

There are a number of bullish technical developments in BAC that have been occurring throughout the course of 2012. The numbers below correspond to the numbers on the chart.

1) BAC has been in a bear trend for a number of years. It is seen more clearly from the action over the past 2.5years or so. Using the most recent primary peak after the 2009 low, seen here as early 2010, and connecting the highs we can see that the stock crossed above this bearish trendline recently in early September.

2) Since bottoming in December 2011 the stock has been in an intermediate term bullish phase. A series of higher lows with constructive volume and moving average support has lead to improving price within an ascending triangle. This ascending triangle is highlighted by the green up-sloping line and the red horizontal line. Ascending triangles are bullish, but a break below can be violent - more on that later.

3) This line represents the target zone once a breakout over $10 occurs. This area represents not only a measured move from said breakout, but also the support/failure level from April 2011 when the stocks tumble started to accelerate.

Conclusion:

Depending on your investment/trading style, there are 2 ways to approach this...

1) The high probability trade, and text book way to play an breakout from an ascending triangle, is to buy a high volume close over resistance - in the case of BAC that is $10.

2) The other way to play a possible breakout is to buy on light volume weakness into areas of support.  First support is the 50day ma currently near $9.33 followed by $9. If the broad market happens to fall hard and take BAC with it, much stronger support exists near the 200day sma currently near $8.37 followed by the ultimate line in the sand for the ascending triangle, the ascending green bullish trendline which is currently near $8.

The caveat is a break below the ascending bullish trendline. A high volume close below can lead to a violent move lower as all those longs from inside the triangle have to manage their risk which puts pressure on price. If that happens, the bullish trade/breakout scenario as outlined above is off.

Ultimately, a high volume close over $10 is likely to lead to a measured move rally up into the low $13 area which represents an approximate 30% gain. If buying into areas of support and THEN the breakout occurs, returns would obviously  be much greater.

Shanghai noon...can you see where we are headed?

Watch China.

I have beat this drum in the past but now that the SHCOMP (Shanghai Composite Index) closed below 2000 for the first time since early 2009 it has to be on traders radar. Stocks to watch include, but are not limited to, SINA, SOHU, BIDU, RENN, DANG, etc.

If the Index doesnt recover the 2000 level in the next few days then look for the slide to continue all the way down to its long term bullish trendline in the mid 1600's. Additionally, each time the oscillator turns down from a low position the index comes under pressure (see red circles)...and that is happening now. With that, additional pressure on many Chinese stocks, including the ones above should be coming.

Remember the SINA post here from November 2nd? Although there is always the possibility of a violent bounce in these Chinese names, SINA included, that thought on where this stock is headed  still stands, and applies to the others as well.

As stated previously, play from the short side until the signs tell you otherwise!

 

 

 

AMZN - on the lookout for some trouble.

Its cyber Monday and the stock is only up $2...what gives?

Actually, I guess those with good enough timing to get in near the 200day moving average near $220 cant complain with the stock trading near $242. But AMZN is in an intermediate term bear market...so longs need to be wary here.

Technically, there was a short term buy signal on November 19/20th (along with many other stocks) that may have more legs. But, as the saying goes "Buyer Beware". There are 2 warning signs looming after the latest 10% bounce...first, the 50day moving average sits just above at $243...second, the 61% Fibonacci retracement level of $245 (measured from the Sep highs to the Nov lows) is a formidable foe for any bear market bounce.

If looking for short exposure put this one on your Christmas list. First level of support on the downside near $235 followed by the gap near $227...while another test of the 200day ma will be very interesting. Stops according to your risk tolerance but a higher closing high around $247.50 will likely be a spot for many.

 

Continue to be BEARISH and defensive!

Did I mention the market is turning lower? Oh yea, see this post BE The Bear from nearly one month ago on October 23rd. 

Since then bearish posts on C, SINA, MSFT, AAPL, GOOG have been spot on!

It helps when the entire market turns south but the signs were, and still are, there. All major indices are below their respective 200day moving averages and many leading stocks are also below. That, needless to say, is unhealthy.

And with tax increases coming in 2013, why WOULDNT people want to sell in 2012. I dont see much relief for the rest of the year. Playing from the sell/short side is likely the smart side until 2013.

AAPL...the pain isnt over yet.

Now that AAPL is down 20% from its highs many will be talking about the bounce opportunity, and there may be one in the short term. But the short term and intermediate term trend has changed to bearish (not yet below its long term bullish trendline so primary trend still bullish).

I have touched on this stock a few times in the past and now would be a good time for an update.

*Stock below all 3 of its major moving averages

*The fall from it 100day break to its 200day was telegraphed

*Institutional sellers remain vigilant about unloading their shares

Where does it stop? Not anywhere soon. Look for big levels like $550 and $500 to act as big psychological support but real support from the nearly 4 year bullish trendline doesn't come until the $460 area. Another level to consider is the $420 - $445 gap zone and the very large support level of $400.

Do I think it will get that bad? Yes...maybe not $400 but I would expect the bullish trendline from the March 2009 lows to be tested if not this year than early next.

MSFT - The Surface isnt The Savior

MSFT has been struggling since the spring - falling approx 10%. But the recent release of its tablet, the Surface, has put some juice back in the stock. The Surface has put some pop back into a dead stock with a rally of $2 last week, and appropriately right off the nearly 4 year bullish trendline from its March 2009 lows.

Quick and dirty opinion - sell the news.

The tech sector has been struggling and MSFT stock price is no exception. This news related pop into an area of resistance near $30 is an excellent opportunity for longs trapped at poor prices over $30 to sell for a small loss, and for shorts looking for downside exposure to get a good risk/reward entry. Watch for the stock price to revert back towards its long term trendline near $28 in the near term. Then watch for an eventual break of said trendline for support near the $25 zone.