Some big movers and shakers today out there today. Right now CREE a stock that has been on our radar list for sometime is up $9.00, AAPL down $4.30 after a big rally yesterday. For you penny stock players take a look at DEAR, this thing is blowing up today. It closed at .61 cents yesterday and traded as high as $2.13 today on heavy volume. The company late Tuesday reported fourth-quarter earnings of 55 cents a share, swinging from a year-ago loss of $3.77 a share. Watch for BRK.B to split tomorrow, this could be opportunity for a lot of people to jump into this stock since it’s a $3,466.00 as of right now. Effective Thursday morning, the split will cut the price of these shares to around $66 a share. Ford (F) is making a nice pull back after its recent run up. I have been watching Ford for a correction since I missed the last run up. Now it’s all about patience. I would like to see the market pull back for a couple of more days. I see a lot of trends that are over extended and need a correction before moving higher. We just jumped into the earnings season and that could cause a lot of volatility over the next several weeks. So keep your stops tight and do your homework on the stocks you are trading. Its important that you know when they announce their earnings, that should be an important part of everyone’s trading plan.
The market is showing a little weakness this morning after AA reported earnings after the bell last night. The Diamonds (DIA) have recovered some of its losses this morning trading down 25 points. Also the Spiders (SPY) is also trading lower after making new highs yesterday down about .65 cents this morning. Alcoa Inc. (AA) is still sitting on its morning lows down $1.43. It has made a nice base around this $16.00 level which could make for a nice active trade long if we get the market to rally back into the green. I have also been watching for a pullback on Ford (F), the stock has been rocking for the last 7 trading days closing yesterday above $12.00. I would like to see it pullback another day or two and time my entry off of the next buy signal on the daily chart. Right now it looks as though Ford is trying to fill in the gap down for a nice active trade off of the morning lows. Be patient and don’t forget to stick to your plan.
The year is off to a strong start, albeit one day and on relatively lighter trading volume. As indices go the biggest gainer today was the Russell 2000 followed by the Nasdaq and the SPX. Breaking it down further the biggest sector movers were Materials, Energy, and Materials. With the apparent follow through of the major indices today, continued positive economic announcements, and a looming earnings season beginning on January 11th with Alcoa, the question remains "Where is the market going?"
For now, it seems that in the short to intermediate term (1 to 3 months) the major indices will continue to follow the same track that they have been on for the last 9 months. As of January 4th the price levels for the SPX that I am watching to indicate a slowing of momentum are the most recent swing low on the daily chart dated December 08th and 9th 2009 at 1085.89, and prior to reaching that level it has to pass through 1121 which is the 50% retracement level of the entire bear market decline (to date). The SPX did manage to break through this level going into the close on Friday, but clearly this was most likely motivated by year end tax selling, and the desire to not hold positions over a holiday weekend. Another set of data I follow to filter trends is a set of moving averages which are the combination of the 12 and 26 period exponential moving averages (or EMA for short). On the daily chart these two moving averages continue to demonstrate a positive relationship to one another, meaning that the 12 Day EMA is above the 26 Day EMA indicating that the short to intermediate term trend is still up. Should price fall back below 1121, or the 12 and 26 Day EMA create a negative cross (12 Day EMA crosses below 26 Day EMA) then momentum would signal a negative turn, and attention would have to be paid to the lower boundaries that the market has tested over the last 3 months most notably 1085, and 1030.00.
As for technical areas above the current market that could act as headwinds, I have noted that there are many. The first level to note is the swing low of 1136.15 from the week of April 18th 2005. The second level is 1145 which is a 61.8% retracement of the May 2008 to March 2009 decline (a smaller, yet more forceful portion of the overall bear market). Beyond these two levels two more swing lows at 1168 from October 2005, and 1221-1223 from June and July 2006. An important factor to consider about the 1221-1223 level on the SPX is that it also coincides with several other Fibonacci levels; also know as a Fibonacci or Fib Cluster.
Ultimately the general consensus is that the SPX is in a cyclical bull market, and historically they tend to last an average of 15 months, which means that we could see the SPX continue its advance for another 6 months. As the market continues to march higher institutions will continue to weigh the potential reward versus risk in the market, and "fundamentally speaking" as long as the interest rates remain low, there is no clear and present danger in holding equities, nor does a "better" opportunity present itself institutions will most likely continue to pump up the market.
The Dow Jones Industrial Average has seen a nice move up for the past 6 days in a row with a breakout above the 52 week high the past 2 days! Although the trends have remained fairly strong through this "V bottom" recovery, we have seen the Dow and the S&P 500 stuck within a tight range for the past month. Investors have been looking for a big breakout or break down from this channel! Typically when you get a breakout, it occurs on heavy volume. At this point I am not seeing much conviction to this move. Plus, you have many big Wall Street traders on vacation this week. I know it’s easy to get excited when you see the markets moving, but I would remain cautious until we are through the first week of the New Year. At this point, even though we have technically “broken out” of the channel, I am not calling this a “breakout” just yet.
I was writing this blog a little earlier but my computer crashed and I lost all my documents that I was working on. That was about an hour or so before the fed spoke. I was asking the question was the Fed news going to push the market above 10500 on the Dow or was the Dow going to push lower and test support around 10200. We neither one of those things happened,it was a non event. With 10 minutes left in the market we are down 5.50 points on the Dow and up 5.83 points on the NASDAQ. We are going to end up flat today...After all that all i got was this stupid t-shirt. Even though the market is flat GS is having a good day, GS trading up $2.50 on the day. This is a short blog but i will be back tomorrow to check in and see if we are selling off and testing those lows of the channel we are in.
Until then,
Happy Trading.....
I happened across AMZN the other day and noticed that there is a Head and Shoulders pattern on the short term chart. If you are not familiar with this reversal pattern, here is some information to consider. In my classes I teach traders about the four basic tenets of reading charts. The definition of a bullish trend is one of them. This definition says that a bullish trend is a series of higher highs and higher lows. If a chart shows higher highs and higher lows, in order to continue the trend it must establish higher high after higher high. If at any point the stock cannot create a higher high and instead establishes a lower low, then the bullish trend is over. These concepts are the reason a head and shoulders is a reversal. The top of the head represents the highes high. The right hand shoulder represents the fact that the stock could not establish a higher high and instead establishes a lower high. The big "GO" moment signal in all of this is when the right hand shoulder breaks below the previous support (collar or neckline). When that takes place the trend has, by definition, ended and the possibility for reversal exists. A head and shoulders pattern not only gives you a "Go" for entry, it will also provide a potential target. Here is how you can determine the target on a head and shoulders. Take the price at the top of the head, and subtract the price at the bottom of the right collar. Now take that number and subtract it from bottom of the right hand collar. That is your target. As an example, today AMZN has a head and shoulders pattern on the daily chart. the top of the head is at $145.91. The bottom of the right hand collar is $129.82. The difference between the two is $16.09. Now if we subtract $16.09 from $129.82, your downside target would be $113.73. Most traders who work with these calculations would certainly not be greedy and try to capture the entire $16.09 move. I hope this helps your understanding of the head and shoulders reversal. If you would like to see this pattern and others like it traded, sign up for my Trade With Me Webinar series.
I read this morning that GM is going to repay their TARP money sometime this summer. Sounds like good news for the auto manufacturer and Howe Long! They are following in the long line of financial institutions that are paying back their loans. This sounds like a pretty good thing all in all but I was wondering about something. The banks want to pay back to loans for one main reason - to get control of their own destiny again. With the money came restrictions and expectations. No bonuses, no jets, no fun stuff. The expectations were that the banks, no longer in danger of going under, would start loaning to businesses again to get the economy going. When the money is paid back, no restrictions, and no expectations. I am not a big government guy, and I believe that businesses are in business for the purpose on making money and the government should not impose restrictions on how much any one person can make. With that said it is obvious why TARPies would want to pay the money back. As this happens it seems that President Obama has become more aggressive in his language. He invited the so called "Fat Cats" to a meetings to "encourage" them to start lending again. Unfortunately - he now has no leverage.
The Dow Jones Industrial Average ($DJI) is still holding onto support around the 10200 level. Looking at the Wizetrade charts, I keep seeing the green and red lights flip flopping back and forth on my minute time frames. That’s because the market has been trading in a really tight range today. The lows so for today on $DJI are 10235.78 and 10263.14 with the daily high being 10328.29. It looks like non eventful day in the market, but if you look a little deeper there are some stocks making moves today. POT (up $2.43), AGU (up $1.64) and CGA (up $1.17) are leading the run on the Ag side with MON (up.63) and MOS (up.10) not really doing a whole lot today. But all 5 stocks are green across the board today with some looking stronger than some of the others. So check your charts before you enter and trade your plan.
The Diamonds (DIA) has been trading in a tight range for the last 18 days. Back on 11/12/2009 the Diamonds (DIA) hit a low of 101.90, yesterday we hit an intra day low of 101.75 and then bouncing to close at 102.94. So we held support and this morning the Futures are pointing higher with the Diamonds trading at 103.22 on the ask.
Market is holding its own with the Dow up 44.89, Q's up 2.53 points. I have GLD (Spiders Gold Trust) on my screen which has rallied off its morning lows and is now trading in the positive up .20 cents. The low on GLD this morning was $111.44 and it is now trading at $114.00 on 33.8 million shares trading hands so far today. We are still bumping up against some major resistance on the Dow and the S and P right now. It looked like the Non Farm data that came out Friday might push us above the 10500 level but the market sold off shortly after the open as the Dollar rallied. Looking at the mid term trend on the Diamonds (DIA) the trend is flat and moving sideways. That is because we are trading in a tight range on the short term trend. Once the market breaks a support or resistance level, that mid term chart is staying flat and sideways. With the overall bullish trend on the Diamonds we might look for a break out above the 10500 level. I would wait for the break out before timing my next entry long on the Diamonds.
Lets get back to Gold for a minute, If you watched us this morning on the Opening Bell you might have heard me talking about Gold selling off and GLD gapping down at the open. GLD gaps because it is a stock traded on an exchange, Gold does not gap becuase it is a Commodity and trades 24 hours a day. I saw that the short term chart on GLD was bouncing off a support level set back on 11/20/09 of $111.54, today's low was $111.44. Since the open GLD has filled that gap and has traded positive to a day high of $114.22. Not to bad for an active trade.
Happy Trading....
