Once that 10:00 ET selling hit, there was no turning back until the market had made its way back into Tuesday's lows. The major indices didn't even stall enough at 5 minute 20 sma support to form more than a cursory continuation pattern with an inside range bar and then a return of the bulls at 10:15 ET. The momentum increase somewhat as the previous lows approached and finally formed an exhaustion move as the 10:45 ET reversal period hit. This corresponded nicely to the previous day's lows in the Nasdaq Composite, but was a slightly lower low in the Dow and S&Ps. The result was a 2B reversal in those indices and a double bottom in the Nasdaq which eventually took the market back to the 15 minute 20 sma resistance that had held earlier in the session.
http://tradingfrommainstreet.com/images/FocusLetter/20070726sp.gif
After heavy volume throughout the morning, the volume finally died down a bit mid-day. After hitting the 15 minute 20 sma, the momentum within the indices also began to turn back over. The market pulled back off the resistance into noon and then hit the 15 minute 20 sma again around 12:30 ET, but this time at a much more gradual pace than before. This upside into the resistance occurred on the lightest volume of the session so far, which indicated a lack of truly dedicated buyers and after a small pullback into 13:00 ET, the selling increased for a second time on the day going into 13:30 ET.
As in the morning, this low held the previous one in the Nasdaq Composite, but the Dow once again saw a slightly lower low, creating a second 2B low in that index. The slight flush into this low, but on lesser volume than into 10:45 ET, showed us that while the bears were still unsure about buying, they recognized the support and were hesitant to break it. After a brief pause when they contemplated the level, the market popped quickly back to the 5 minute 20 sma resistance zone. This pushed the indices into a sloppy range along that level into the 14:00 ET correction period, at which point the resistance broke and took the indices back into the 15 minute 20 sma for the third time.
Typically a third test of support or resistance is the one most likely to break. The market had not broken the third test of lows because in the Dow each low was slightly lower than the last, hence creating more of a rounded appearance. Each test of lows was also at a more gradual pace than before, leaving less momentum to push through the support. As a result, in this case the third test held. On the upside, however, the resistance became closer and closer each time, so the market had less and less work to do to make it into that level and the slowing downside momentum meant that more steam was available for the bulls. The indices broke through this 15 minute 20 sma resistance when the 15:00 ET correction period hit. This happened after it hugged it for about half an hour beginning just before 14:30 ET with lighter volume throughout that congestion.
The indices rallied sharply out of 15:00 ET and within only a few minutes they were all the way back into the congestion from the opening prices. This stalled the buyers, but the pace was so strong that it was difficult for the market to simply turn back around. Instead, the 5 minute 20 sma support held into the close, even though this close still left the market looking weaker on the 5 minute charts by hugging that 5 minute 20 sma instead of bouncing right back off it.
http://tradingfrommainstreet.com/images/FocusLetter/20070726dow.gif
Although I had a slew of stocks on my watch list which gapped strongly into the open on Wednesday, many of the gaps were too extreme for decent momentum continuation moves and they spent the day stuck in choppy trading. On the upside these included CB, PLT, AMZN, EGLE, and PRAI. Chubb Corp. (CB) gapped on earnings that were up 19% from the previous year, adding 6% by the end of the day. In Plantronic Inc. (PLT) its rally was another earnings move in which it gained 11.3%. Amazon.com (AMZN) made headlines when it reported earnings that more than tripled in the second quarter and sent the stock higher by 24.4% into the closing bell. Eagle Bulk Shipping Inc. (EGLE) rallied 15.4%, all of it with the morning gap, when it announced plans to acquire a fleet of ships from a Greek company. PRA International (PRAI), on the other hand, saw its 7.8% rally resulting from plans to be taken private.
A very important thing to look at when determining whether or not to take a setup or not is to look at it from several points of view. In the market these are called Time Frames. The ones that are the most pertinent to you will depend on your objective as a trader. For instance, let's say you are a swingtrader. Your primary focus is going to be to look for patterns on the daily charts for buying or shorting opportunities. Once you have a list of stocks that caught your eye, however, it is usually so many that you then need additional means for trimming down that list. One of the ways to do so it to look at those symbols on several other time frames.
For a swingtrader for instance, it is helpful to look at a weekly chart. This will show you where your pattern is at in the larger trend. If you have a bull flag on the daily, but on the weekly you can see that the stock is coming into very strong resistance, such as an equal move from the last weekly breakout, then the odds for success on your swingtrade are going to be lower. This is because, with the weekly so extended, you are nearing the probable end of that swing upwards on the weekly chart and more likely to start to see reversal patterns begin to form. Now let's say you still have a pretty decent list to choose from. Most of your daily charts still had room to move on the weekly as well.
What you want to look at next are the smaller intraday time frames. For a swingtrade, these will be the 15, 30 and 60 minute charts. What you want to watch for are smaller buy patterns on these time frames as well that can lead into a trigger on the daily chart. If you have a bull flag on the daily, look on a 30 minute chart for a base along the highs of the trend channel in the bull flag. As that base breaks, you can use that as your entry trigger, instead of having to wait for the daily breakout, which might not occur until the pace and volume in the market have already picked up and are moving strongly higher. If that is the case at the time of your entry, the odds of you getting in near a short term top are much higher. What this does is make it easier to mess up your trade by getting scared out of the position on a rather significant intraday pullback well past your entry point.
If you are a daytrader only, the weekly charts won't matter as much to you. Even if a stock is at weekly resistance, you can still get a nice upside move intraday. On the other hand, the smaller intraday charts like a 5 minute or even a 2 minute will matter. They will be like the 15-60 minute charts for the swingtrader. You can use these smaller charts to help time your entries.
The same can be done with exits. As a stock is coming into a target level and you want to look to get the most out of it without having to hold through any more pullbacks, you can use the patterns and action on the smaller intraday charts to help you time an exit. This is where the multiple time frames really come into play: as a way to manage and reduce risk, as well as increase your reward potential.
You want to be very careful, however, to pay attention to the time frame you took the pattern on. If you took a daily bull flag, you don't want to use a 15 minute chart halfway to your target for anything other than assistance on trailing stops. Just because you see resistance on a 15 minute chart doesn't mean that the daily rally is over with. More likely, it will just lead to a temporary correction before moving higher again. Too the room for free without the mIRC registration.
The room will remain completely free, but to keep it from getting too crazy and out of control and to be a place where everyone feels welcome and comfortable participating. So, please observe the following...
1) Clean family-style fun only… i.e. no cursing (or mock cursing), excessive/undeserved trouting (deserved trouting still approved)
2) Everyone knows how difficult trading can be at times, so let’s keep all posts positive and encouraging… discussing difficult issues with trading is encouraged, but avoid unconstructive complaining
3) Only post stocks and setups which are similar to those you see posted by Toni (mwah). This way even newbies will be able to catch on easier to the style traded here.
4) If watching a security for a trade, post the symbol ahead of time when possible, as well as buy/short and the general type of trade, i.e. breakout, 2t, etc. There will be times we will post missed setups though in order to expand our familiarity with certain patterns and learn from them.
5) For stocks which fit the criteria of the room’s style of trading, you are welcome to post these in purple to make it easier to follow the setups and pick them out from the rest of the chat dialogue. You can do this by typing for example “/me watching XYZ.” (without the quotations), which will post “watching XYZ.” in purple as an action. I will use similar commands on the setups I am watching as well.
See you
Good day! Tuesday was quite similar to watching a train wreck where you see the stalled vehicle on the crossing, but no one is able to control the outcome. The day started on a sour note for the bulls, giving way to the Nasdaq's rounded highs and bearish bias in that index. The indices slid lower throughout the wee hours of the morning, gaining momentum as the opening bell approached. The NQ, which is the Nasdaq 100 Emini futures contract, opened lower by 14.50 points. The ES (S&P 500 EMini) opened lower by 9.75 points. The YM (mini-sized Dow) lost 86 points by the time it opened. In the indices themselves, The Nasdaq Composite ($COMPX) lost 25.40 points (-0.95%) by 9:45 ET, the S&P 500 ($SPX) had fallen 14.25 points (-0.9%), and the Dow Jones Ind. Average ($DJI) was already down by 121.6 points (-0.87%).
As I've discussed in the past, when the market has an extreme gap, it tends to try to close that gap in the morning and into the early afternoon. The two main exceptions are when there was already another similar gap the day before or when the market is at a major turning point. Due to the large daily resistance with the Dow 14k and all of the extended weekly and monthly charts, it is quite possible that the latter exception was the case on Tuesday. As such, I was not as aggressive on buying the gap right away this time around.
http://tradingfrommainstreet.com/images/FocusLetter/20070725nas.gif
The indices immediately showed greater difficulty in attempting to fill that gap by falling into a trading range for the first hour of the day. This range did develop a bullish bias into 10:30 ET when the market began to hug the upper end of the range on declining volume. This created an upside breakout, but it lacked volume confirmation and the momentum was not sustainable. When the 11:00 ET reversal period hit at about the Nasdaq's 15 minute 200 simple moving average resistance, the indices rounded off at highs and pulled back into noon.
Strong price support hit in the indices when they retested the zone of the morning congestion, but they did not bounce right away. Instead the market slowed, congested a few minutes and rounded off at the support on the 1 minute time frame before pulling higher again. The Nasdaq was displaying the best relative strength by this point by closing a greater percentage of the morning gap and retracing off the highs by a lesser degree. The Dow and S&Ps, on the other hand, had almost returned to the morning lows on this pullback.
http://tradingfrommainstreet.com/images/FocusLetter/20070725sp.gif
When the market bounced, it was much easier for the Nasdaq to establish new intraday highs, whereas the Dow and S&Ps ran into resistance from its previous highs at 12:30 ET. The Nasdaq strength surpassed the others to the extent that it even managed to completely close the morning gap with a move equal to its first intraday rally, but that price resistance hit right at the same time as the 5 and 15 minute 200 simple moving averages. In the Dow the 5 minute 200 sma and 15 minute 20 sma hit at the same time. and the S&Ps also ran into their own 15 minute 20 sma. All of these levels hitting at once halted this second upside move dead in its tracks.
Seeing the slowness of the Dow and S&Ps and general lack of decent intraday buy setups, I became very hesitant to buy anything into the afternoon. There was still the potential that the market would hug the 15 minute 20 sma and then break higher, although the trend placement was certainly not ideal for it. When that resistance had hit, I immediately favored the bears. The indices were back to the lower trend channel intraday by 13:30 ET. They then based there along the support with almost no price reaction, confirming the odds for a breakdown into the afternoon.
http://tradingfrommainstreet.com/images/FocusLetter/20070725dow.gif
Once the 15 minute trend channel support did give way the indices barely cast a backward glance. All the typical support levels like 5 minute equal move, previous lows and moving averages stalled the moves, but we never got any decent 5 minute bear flag or base for the best types of continuation patterns. Instead they stalled only slightly at each support and soon continued lower. This selloff remained in play all the way into the last 15 minutes of the day when the market stalled again at daily price and moving average support.
By the end of the day, the Dow had lost 226.47 points (-1.6%), the S&P 500 lost 30.53 points (-2%), and the Nasdaq Composite fell 50.72 points (-1.9%). While the indices are now a bit extended on the downside intraday, it's now going to be difficult for the market to break to new highs without at least falling into a larger daily trading range. That would require a very rapid bounce on Wednesday. Moves like this usually do retrace somewhat the next day, although they can continue a bit into the open. I would expect the overall correction to any of this selling to be a lot more gradual overall than the selling itself though. The 30 and 60 minute 20 simple moving averages are the main resistance levels I would watch for.
posted by Toni Hansen @ 8:13 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Famous Quotes
I always love a good quote, so here are some of my favorites:
I don't measure a man's success by how high he climbs but how high he bounces when he hits bottom. -George S. Patton
In order to succeed, your desire for success should be greater than your fear of failure. -Bill Cosby
A man may fall many times, but he won't be a failure until he says that someone pushed him. -Elmer G. Letterman.
If you believe you can, you probably can. If you believe you won't, you most assuredly won't. Belief is the ignition switch that gets you off the launching pad. -Denis Waitley
Each morning when I open my eyes I say to myself: I, not events, have the power to make me happy or unhappy today. I can choose which it shall be. Yesterday is dead, tomorrow hasn't arrived yet. I have just one day, today, and I'm going to be happy in it. -Groucho Marx
There are no great people in this world, only great challenges which ordinary people rise to meet. -William Frederick Halsy, Jr.
Someone's sitting in the shade today because someone planted a tree a long time ago. -Warren Buffett
The tragedy of life doesn't lie in not reaching your goal. The tragedy lies in having no goal to reach. -Benjamin Mays
Many of life's failures are people who did not realize how close they were to success when they gave up. -Thomas A.
Labels: famous quotes
posted by Toni Hansen @ 4:28 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, July 23, 2007Indecision Permeates Monday's Trading
Good day! The market was all over the place as we kicked off the new week. Mondays can often be a bit more hesitant and this time around there was again a very discernible difference in market strength. The Dow Jones Industrial Average ($DJI) rallied from the start with a modest upside gap into the open. The intraday trend was ugly, but the Dow managed to add 92.34 points (+0.7%) to close at 13,943 with 22 out of 30 securities advancing on the session. In the Dow Jones Composite ($DJC), AMR Corp (AMR) (+1.96), Merck (MRK) (+3.31), Procter & Gamble Co (PG) (+1.19), and Exxon Mobil Corp. (XOM) (+1.50) were among the top leaders. Conway Inc. (CNW) (-2.02) and Hunt JB Trans Svcs. Inc. (JBHT) (-0.87) were two of the top percentage losers.
The S&P 500 and Nasdaq Composite did not fair quite as well. The S&P 500 ($SPX) added 7.47 points (+0.5%), but the Nasdaq Composite ($COMPX) only managed to tack on 2.98 points (+0.1%). A number of stocks moved strongly on the day on merger and acquisition news. The biggest of these was news from Transocean Inc. (RIG) and GlobalSantaFe Corp. (GSP) that they were now planning to merge. Additionally, United Rentals Inc. (URI) announced their buyout by Cerberus and Hewlett-Packard Co. (HPQ) is purchasing Opsware Inc. (OPSW), which makes automation software. A larger mover was Tellabs Inc. (TLAB) (+3.0%), gapping and moving higher by as much as 15% into the open when it became known that it was a potential target for a buyout by Nokia Siemens Networks. It was unable to hold most of those gains, however, and sold off steadily throughout the session.
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Even though I found a couple of really nice setups intraday on Monday, I also found it very difficult to stay motivated and mainly ended up flipping through what I considered to be garbage as I was scanning for intraday setups. The indices themselves split right away out of the open with the Nasdaq opening into Friday's afternoon highs and the S&P 500 opening right at its 15 minute 200 simple moving average resistance. The Nasdaq reacted very sharply to this resistance and closed the gap within only about 15 minutes. It then based into 10:00 ET and fell back into Friday's late day lows. The S&Ps did pull back a bit as well, but didn't even come close to closing its gap, instead hitting support at the 5 minute 20 sma at the same time as the Nasdaq was finding support. The Dow was stronger though, and it held the zone of its first 15 minute lows even when it retested those lows at about 10:10 ET.
One of the strongest trends intraday in the market began when the market reacted to this mid-morning support. After a small 15 minute bounce, congestion set in. When this broke, however, out of 10:45 ET, the momentum increased a great deal. The Nasdaq had managed to move all the way back to its morning highs about 10 minutes later and the Dow and S&Ps were breaking to new intraday highs. The resistance then hit at the 11:00 ET reversal period and the volume, which had not been particularly strong to begin with, declined steadily into mid-day.
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Over noon on Monday the volume was back to levels similar to Thursday's mid-session trading and a similar market reaction resulted. The indices rounded off a the highs with more gradual upside and more rapid downside within the range before it finally broke lower out of the 13:00 ET correction period. A second wave of selling on the 5 minute time frame followed into 14:00 ET that dropped both the S&Ps and Nasdaq back into zone of the morning lows. The Dow hit support at the same time at its 5 and 15 minute 200 sma zone and the indices were able to establish a pivot that led to a retest of the highs in the Dow. The market turned back around once again despite the attempt at stronger upside momentum and another two waves of selling took the indices back into the previous 5 minute support at lows before the closing bell.
http://tradingfrommainstreet.com/images/FocusLetter/20070724dow.gif
I don't have a strong intraday bias into Tuesday. My intraday strategy is going to depend a great deal upon what happens into the open. A larger market correction would have been better off had the indices, particularly the Dow, not pulled up quite as much intraday on Monday. Right now we have a trading range in play on the 60 minute time frame, but it lacks a strong breakout bias. The S&Ps and Dow are looking a bit more bullish thanks to the narrow intraday range along the 60 minute 20 sma, but the Nasdaq more bearish on that time frame due to the rounded highs.
posted by Toni Hansen @ 9:59 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, July 22, 2007Subprime Woes and Lukewarm Earnings Give Way to Selling
Good day! The market had a rough session on Friday. The weakness we were watching for heading into the open was strong enough that the indices were quickly trading under Thursday's lows. The inability to show any strength out of the open when these previous lows hit soon led to panic. By the 9:45 ET reversal period the market was breaking the opening lows and gaining momentum on the downside. This wiped out any chance the market had at making new highs on the last daily upside move. This selling continued to gain pace until the Dow Jones Ind. Ave. ($DJI) hit its 15 minute 200 simple moving average. The Dow, as well as the Nasdaq Composite and S&P 500 all came into congestion from Wednesday on this drop and it stalled the decline temporarily.
http://tradingfrommainstreet.com/images/FocusLetter/20070723nas.gif
Unlike the previous several days of trading, the market reacted very little to the support levels throughout the entire morning on Friday. They barely retraced in terms of price and instead just fell into sideways congestion. At about 10:00 ET the selling resumed, but it was a bit early for a decent 5 minute breakdown, so the 10:45 ET correction period held and pushed the market into a longer congestion zone until
about 11:15 ET when the 5 minute 20 sma zone held and led to another larger breakdown. This second move within the congestion itself allowed the market to gear up for a more decent decline. This type two-wave correction or congestion is actually what I like to look for to lead to some of the best continuation moves.
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The second move on the 15 minute charts continued steadily lower throughout the morning and into 12:00 ET, which is a huge correction time when the market has been in a trend all morning. This decline came up a bit short in terms of the 15 minute 200 sma in the Nasdaq. In order to turn around into the afternoon the market increased its pace on a bounce into the 5 minute 20 sma at 12:30 ET and then had another decline and flush on somewhat lighter volume than on the 12:00 move going into 13:00 ET. This led to a better test of the 15 minute 200 sma in the Nasdaq and a test of the 20 and 50 day simple moving averages in the Dow. It resulted in a nice 2B type of setup whereby the indices established a very slightly lower low to create a trap type of double bottom.
Since the move into 13:00 ET was not a lot slower than the first drop into 12:00 ET, however, the afternoon bounce was a choppier one with more overlap from bar to bar on the 15 minute time frame, even though the overall pace was similar on that time frame as compared to the second morning decline. This similar momentum meant that the start of that previous drop would serve as strong resistance. It hit right at the end of a three-wave uptrend move on the 1-5 minute time frames. The smaller trend completion and the corresponding resistance served as a nice trigger for another reversal into the final 90 minutes of trading.
http://tradingfrommainstreet.com/images/FocusLetter/20070723dow.gif
Friday ended with a loss of nearly 150 points in the Dow, about 19 points in the S&P 500 ($SPX), and just over 32 points in the Nasdaq Composite ($COMPX). Weighing heavily in the minds of many market players lately has been the plethora of negative news surrounding subprime mortgages. Citigroup (C) joined the fray on Friday when it warned that it could be stuck holding leveraged loans for corporate buyouts when it failed to sell debt to investors on four separate occasions last quarter, which means that it has taken a hit in revenues as a result. Shares of Citigroup (C) fell 0.8% on Friday despite a positive open. Meanwhile, Bank of America (BAC) fell 1.9%, J.P. Morgan (JPM) slid another 2.2%, and Wachovia Bank (WB), which beat earnings estimates, dropped a whopping 3.2%. Other financial-related stocks, such as Merrill Lynch & Co (MER) (-3.2%) and Goldman Sachs Group (GS) (-2.7%) also Thursday, July 19, 2007Dow Closes Over 14K
Good day! The market posted some strong gains once again on Thursday with a large gap higher into the open following a round of strong earnings and continued follow-through from the late day reversal on Wednesday when the market took off into the close after a great deal of weakness earlier in the session. Leading the rally based on earnings was IBM (IBM) after it reported its strongest quarterly performance since 2002. It gapped higher, continued to run for about 15 minute and then held a trading range for the remainder of the day. By the closing bell it had added 4.78 points and 4.3%. In other news, Juniper Networks, Inc. (JNPR) rose 3.33 points, or 12.5%, following an upgrade by Goldman Sachs from neutral to buy.
By sector, one of the top movers were metals and mining stocks. The index itself climbed 2.4% on the day. One of my favorites was Freeport-McMoran Copper & Gold (FCX). It had pulled back nicely into the 10 day simple moving average on Wednesday and then gapped up slightly on Thursday. After a small 15 minute rally it caught my eye when it fell into a range throughout most of the morning. It took off after hitting the 5 minute 20 sma at the 11:00 correction period and climbed throughout the remainder of the day.
Although the market had more than its fair share of upside breakouts, a number of stocks found themselves facing quite a bit of pressure. Alcoa Inc. (AA) fell sharply after an announcement by BHP Billiton PLC (BHP) that it is not longer considering Alcoa as an acquisition target. Qualcomm Inc. (QCOM) also took a hit when Broadcom Corp. (BRCM) and Verizon Wireless (VZ) announced a licensing agreement that will allow Verizon to sell mobile phones which contain a chip made by Qualcomm which was banned by the U.S. International Trade Commission last month. Verizon announced that as a result, it would cease efforts to overturn the ITC ban.
Other stocks which found themselves under water on Thursday were the financials, which continued to feel the strain of subprime woes. Standard & Poor again downgraded more than 400 mortgage-backed securities. Goldman Sachs Group Inc. (GS) fell 1.5%, Morgan Stanley (MS) dropped about 1.4%, and Merrill Lynch & Co. Inc. (MER) shed nearly 1%.
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After the strong open, the market had a really difficult time establishing an intraday bias. The result was that even though the indices are still seeing a bit more upside, the range is essentially still in play on the 60 minute charts and our bias has continued to hold well. A great deal of divergence existed on Thursday between the indices themselves. The Nasdaq Composite held the greatest relative strength, forming a nice breakout setup coming out of 12:00 ET, but the Dow was favoring the bears throughout the mid-day when it failed to break higher with the Nasdaq at noon. The S&Ps leaned towards the Dow's bias.
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In the end, all three indices had their way. The Nasdaq broke higher while the Dow and S&Ps still based with slower upside. Then at 2:00 ET the FOMC Minutes were released. The result was a sharp move lower, which broke the Dow and S&Ps out of their range. They fell sharply into the morning lows and the 5 minute 200 simple moving averages. The S&Ps found support at the morning lows, but the Dow moved slightly under those morning lows before it hit its own 5 minute 200 sma. In his release, Federal Reserve Chairman Ben Bernanke told member of the Senate Banking Committee that the pangs felt from foreclosures and delinquencies will "likely get worse before they get better."
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After the minutes were released the indices switched roles. The Dow and S&Ps climbed into the close, but while the Nasdaq did pull up somewhat, it stalled shortly after 15:00 ET and fell sharply into the bell. Even with the struggle for upside though, the market still has room on the 60 minutes charts to continue to press the highs. They do look to head slightly lower into the open though, so given the added chop this week, I'll be focusing mainly on the news plays intraday for setups on Friday.
posted by Toni Hansen @ 8:24 PM 0 Comments
Market Correction Gains Momentum
Good day! The market was pretty choppy throughout the entire day on Wednesday. The session began with a larger-than-average downside gap which opened at Tuesday's lows in the Nasdaq Composite ($COMPX) and under those lows in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX). By the end of the day the indices had not moved far from those levels. The Dow lost 53.33 points, while the S&P 500 fell 3.2 points and the Nasdaq Composite shed 12.80 points. This was well off the worst levels of the day, however, when the Dow was down more than 140 points.
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After the weak open the market attempted to pull higher initially, but the S&P 500 only managed to come within a few ticks of the previous day's close before turning over and making its way back to the intraday lows. I found very few setups in individual stocks that caught my eye early on, but found the indices themselves very methodical and easy to trade throughout the entire morning. There were a number of very nice pivots or reversals on the 1-5 minute time frame with strong follow through for those time frames no matter which direction the market was heading.
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The momentum throughout the morning began to favor a bearish bias early on by pulling up more gradually from the lows of 10:15 ET on declining volume. Just before they hit the 5 minute 20 period simple moving average, the market stalled and broke to new intraday lows. Even though the Nasdaq was hit hard by Yahoo (YHOO) when they cut their earnings outlook for the year, the Nasdaq still tried to hold onto its recent daily gains.
http://tradingfrommainstreet.com/images/FocusLetter/20070719dow.gif
Wednesday's gap and continued intraday weakness confirmed the rounded highs we have been following in the last couple of sessions and it allowed for an increase in the selling pressure. That pressure slowed when the market flushed out into price support from several days back. The momentum on the 15 minute decline was a sloppy one and not above average. When that downtrend channel broke around 12:45 ET, then the bulls began to raise their heads out of the sand again for a bit. Even though there was another decent correction off highs when the indices hit the 15 minute 20 sma, the pace increased sharply when the 15 minute 20 sma broke. This is confirming a larger trading range on the daily and 120 minute time frames. The range has room to continue into Thursday, but the larger daily time frame still appears to have more room to play around with at the highs.
posted by Toni Hansen @ 2:50 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, July 17, 2007Dow Hits 14,000
Good day! The market on Tuesday was one of those days where anything goes. There were a lot of stocks heading lower, a lot heading higher, and many just looking at each other confused and shrugging their shoulders. Despite the lack of strong bias, there were a number of really great setups on the day, particularly in the afternoon. Many well-known names made the gainers and losers lists, which is always a good sign for ample opportunities.
The top stocks to start the day were Novellus Sys. Inc. (NVLS), Sandisk Corp. (SNDK), and LAM Research Corp. (LRCX). The semiconductors as a whole had a stellar session. NVLS had beat second-quarter earnings and revenue and KLA-Tencor Corp. (KLAC) later soared when it announced early in the afternoon that bookings for the quarter rose by more than 2%. VSEA, LKQX, VCLK, FORM and GMKT were the other major Nasdaq players. Top stocks on the NYSE included AXP, ROH, CIB, DHR and LEA.
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The indices climbed higher right out of the gate on Tuesday as earnings news drew the bulls back into the fray. All was not peachy, however, and some of the popular stocks lately, such as NYX and ICE were having a more difficult time holding up. When the Dow ($DJI) finally smacked into the 14,000 level, the bears were able to take the lead briefly and the market pulled back into the opening price zone. This price level hit at the same time as the S&P 500 and Nasdaq Composite hit the previous day's highs. Even though the drop was on the strong side in the S&Ps and Nasdaq, it was not extreme and the support level held well, corresponding to the 5 minute 20 period simple moving average and the 10:15 ET correction period.
http://tradingfrommainstreet.com/images/FocusLetter/20070718sp.gif
The indices fell into a trading range on the 5 minute time frame throughout the remainder of the morning. Volume declined and the upside momentum slowed compared to the earlier selling. This created a bearish bias into noon. Market volume hit its lightest levels of the day as the 12:00 ET correction period approached. The S&P 500 was showing the weakest performance by hugging its 5 minute 200 sma, while the Dow and Nasdaq Composite each formed 5they hugged the 5 minute 20 sma within a larger Head & Shoulders pattern on the same time frame. When the moving average gave way it triggered a short which slid the indices lower mid-day.
http://tradingfrommainstreet.com/images/FocusLetter/20070718dow.gif
The S&Ps experienced the greatest decline into the afternoon, breaking through the 5 minute 200 sma and 15 minute 20 sma. Within 30 minutes the S&Ps were back at previous 15 minute lows. At the same time as the S&Ps were finding support, the Dow and Nasdaq both had established equal moves on the 5 minute time frame as compared to the 11:00 decline and were retesting the 10:15 ET price support. The combination of support levels across the broader market created a mid-day pivot low that ended up holding throughout the remainder of the day, although this was barely the case in the Dow and S&Ps.
The momentum began to pick up almost immediately in the indices on the upside, but slowed with minor congestions into 13:30 ET at the 5 minute 20 sma resistance. When that resistance level broke,
posted by Toni Hansen @ 7:28 PM 0 Comments
Market Correction Gains Momentum
Good day! The market was pretty choppy throughout the entire day on Wednesday. The session began with a larger-than-average downside gap which opened at Tuesday's lows in the Nasdaq Composite ($COMPX) and under those lows in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX). By the end of the day the indices had not moved far from those levels. The Dow lost 53.33 points, while the S&P 500 fell 3.2 points and the Nasdaq Composite shed 12.80 points. This was well off the worst levels of the day, however, when the Dow was down more than 140 points.
http://tradingfrommainstreet.com/images/FocusLetter/20070719nas.gif
After the weak open the market attempted to pull higher initially, but the S&P 500 only managed to come within a few ticks of the previous day's close before turning over and making its way back to the intraday lows. I found very few setups in individual stocks that caught my eye early on, but found the indices themselves very methodical and easy to trade throughout the entire morning. There were a number of very nice pivots or reversals on the 1-5 minute time frame with strong follow through for those time frames no matter which direction the market was heading.
http://tradingfrommainstreet.com/images/FocusLetter/20070719sp.gif
The momentum throughout the morning began to favor a bearish bias early on by pulling up more gradually from the lows of 10:15 ET on declining volume. Just before they hit the 5 minute 20 period simple moving average, the market stalled and broke to new intraday lows. Even though the Nasdaq was hit hard by Yahoo (YHOO) when they cut their earnings outlook for the year, the Nasdaq still tried to hold onto its recent daily gains.
http://tradingfrommainstreet.com/images/FocusLetter/20070719dow.gif
Wednesday's gap and continued intraday weakness confirmed the rounded highs we have been following in the last couple of sessions and it allowed for an increase in the selling pressure. That pressure slowed when the market flushed out into price support from several days back. The momentum on the 15 minute decline was a sloppy one and not above average. When that downtrend channel broke around 12:45 ET, then the bulls began to raise their heads out of the sand again for a bit. Even though there was another decent correction off highs when the indices hit the 15 minute 20 sma, the pace increased sharply when the 15 minute 20 sma broke. This is confirming a larger trading range on the daily and 120 minute time frames. The range has room to continue into Thursday, but the larger daily time frame still appears to have more room to play around with at the highs.
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Tuesday, July 17, 2007Dow Hits 14,000
Good day! The market on Tuesday was one of those days where anything goes. There were a lot of stocks heading lower, a lot heading higher, and many just looking at each other confused and shrugging their shoulders. Despite the lack of strong bias, there were a number of really great setups on the day, particularly in the afternoon. Many well-known names made the gainers and losers lists, which is always a good sign for ample opportunities.
The top stocks to start the day were Novellus Sys. Inc. (NVLS), Sandisk Corp. (SNDK), and LAM Research Corp. (LRCX). The semiconductors as a whole had a stellar session. NVLS had beat second-quarter earnings and revenue and KLA-Tencor Corp. (KLAC) later soared when it announced early in the afternoon that bookings for the quarter rose by more than 2%. VSEA, LKQX, VCLK, FORM and GMKT were the other major Nasdaq players. Top stocks on the NYSE included AXP, ROH, CIB, DHR and LEA.
http://tradingfrommainstreet.com/images/FocusLetter/20070718nas.gif
The indices climbed higher right out of the gate on Tuesday as earnings news drew the bulls back into the fray. All was not peachy, however, and some of the popular stocks lately, such as NYX and ICE were having a more difficult time holding up. When the Dow ($DJI) finally smacked into the 14,000 level, the bears were able to take the lead briefly and the market pulled back into the opening price zone. This price level hit at the same time
http://tradingfrommainstreet.com/images/FocusLetter/20070718sp.gif
The indices fell into a trading range on the 5 minute time frame throughout the remainder of the morning. Volume declined and the upside momentum slowed compared to the a short which slid the indices lower mid-day.
http://tradingfrommainstreet.com/images/FocusLetter/20070718dow.gif
The S&Ps experienced the greatest decline into the afternoon, breaking through the 5 minute 200 sma and 15 minute 20 sma. Within 30 minutes the S&Ps were back at previous 15 minute lows. At the same time as the S&Ps were finding support, the Dow and Nasdaq both had established equal moves on the 5
Monday, July 16, 2007Market Creeps Higher, but Shows Exhaustion
Good day! The market opened a hair lower on Monday, showing pressure from the slow down of last week's rally and the hangover it has left in its wake. As I talked about yesterday, the momentum in the indices had begun to wane in Friday's session, but had yet to display any real advance of a bearish bias to correct from that move. The pressure continued to build throughout Monday morning and the indices fell into a choppy trading range in the first half hour of trading, but managed to break higher into the 10:15 ET correction period.
The volume on the 5 minute charts failed to increase with the breakout, indicating a growing concern amongst the bulls over just how long they could hold up without a decent correction on the larger intraday and possibly even daily time frames. I caught a bit of this move in the Dow, which greatly outpaced both the Nasdaq Composite and S&P 500 in the mid-morning ascent, but the increasing risk of rapid flushes as a result of the pace kept me focusing on scalps as opposed to longer intraday holds. This caution became even more important over noon when the pace on the upside slowed even more and began to hug support moving average support levels even as they pushed higher.
http://tradingfrommainstreet.com/images/FocusLetter/20070717nas.gif
The Nasdaq was the first to give way. It broke lower on an Avalanche pattern on the 5 minute charts shortly after noon and pulled back in to the early morning congestion. The S&Ps joined in with a channel break at noon, whereby it also fell under its 5 minute 20 sma support. The Dow still logged a new high, pressing for that 14,000 level and nearly succeeding with a high of 13,989.11. When the Nasdaq and S&P hit their 5 minute 20 sma, however, at about 13:00 ET after climbing on declining volume, the Dow found itself also under a strain and the market fell quickly for several minutes. It ran into congestion when the Nasdaq and S&P hit the morning trading level again, but that soon gave way to a second decline into 14:00 ET. At this point the volume increased on the 5 minute charts as the indices hit support from Friday's session. The ES (S&P EMini) also came into moving average support from the 5 minute 200 sma intraday. All of these support levels hit at the exact same time as the pivotal 14:00 ET correction period and a nice correction was soon under way to trigger a nice buy in the indices.
http://tradingfrommainstreet.com/images/FocusLetter/20070717sp.gif
Up to this point in the session, our expectations heading into the day held very well, beginning with the creeping move higher to the sharper 15 minute corrections off those highs. The rest of the day simply followed suit with a more gradual rally in response to the rapid afternoon decline. The decline was not extreme, however, so the indices did manage to retrace a good chunk of that afternoon selloff, even though it took longer to regain the ground lost than it did to loose it in the first place. The 15 minute 20 sma became the main resistance, much like the 5 minute 20 sma one had been at 13:00 ET. It held perfectly in both the S&P 500 as well as the Nasdaq Composite and the market fell as the closing bell approached, but stalled in the final 15 minutes of trading to hold the ES's 5 minute 200 sma a second time.
http://tradingfrommainstreet.com/images/FocusLetter/20070717dow.gif
The Dow Jones Ind. Average added another 43.73 points by the closing bell and ended the session at 13,950. The S&P 500 and Nasdaq Composite, on the other hand, both posted losses. The S&P 500 fell 2.98 points to close at 1,549, while the Nasdaq lost 9.67 points and closed at 2,697. Declining issues beat out gainers by 11 to 5 on the NYSE and 19 to 10 on the Nasdaq.
In the Dow, 18 out of 30 of the stocks rose on the day. Verizon (VZ) led the pack with early morning gains on the heels of speculation of a takeover by Vodaphone Group (VOD). Vodaphone denied such an interest. Con-way Inc. (CNW), a major trucking company, also made headlines with an announcement on Monday to buy the privately held Contract Freighters Inc. for $750 million. In continuing the surge of buyout speculation, CNW is also considered to be a possible buyout target by DHL. It reports earnings on Wednesday. Dow components KO, INTC, and JNJ all report on Tuesday.
On Tuesday I'm pretty much up for anything. The markets are still showing exhaustion so it appears most likely that we'll continue to see more of a response to this resistance level, particularly since the volume is rather light. There is not enough of a change in momentum yet, however, to confirm the start of any larger pullback and higher highs this week are still quite plausible.
Labels: CNW, market outlook, market wrap-up, VOD, VZ
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Sunday, July 15, 2007Market Rallies into Record Highs
Good day! The market had a really nice run while I was away! That "bit of strength coming in" turned out to be a wee bit more than just a "bit"! The indices broke higher out of the daily range early on in the day on Thursday after a nice momentum gap. Higher-than-anticipated sales numbers from retailers such as Wal-mart (WMT) and Costco Wholesale (COST) helped quite a bit with the upside. Thursday's gap itself had brought the market into previous highs, so that created some congestion out of the open, but that range was soon breaking to new highs in the latter half of the morning. The trend then continued throughout the remainder of the session, gaining momentum in the final 90 minutes of trading. This momentum continued somewhat into Friday morning for the first 15-20 minutes of the day.
http://tradingfrommainstreet.com/images/FocusLetter/20070716nas.gif
Things did slow down a bit on Friday though after the opening action. The market had become very extended after putting in the strongest upside move of the entire month. The indices fell into a range just as it had the previous morning as volume declined into the 5 minute 20 simple moving average. This range narrowed as it approached that support level and the volume in the market hit its lightest level of the morning just before the indices again broke higher. The S&P 500 and Dow Jones Industrial Average led the move and moved on to record levels, but the Nasdaq, which had formed a lower level congestion, had a difficult time with the initial morning highs and this resistance held all three of the major indices in and led to a second correction coming out of the 10:45 ET correction period.
Market volume declined a great deal over noon on Friday. The second pullback in the market was much more significant than the first, allowing the indices to pull back into the 15 minute 20 simple moving average. When the 12:00 ET correction period hit it held perfectly, pulling up into the 5 min 20 sma with a marked change into momentum, albeit on just a very small intraday time frame. This change in momentum was confirmed, however, by a choppy base for the next 45 minutes of the day, eventually breaking higher around 13:15 ET . Although this breakout lacked the strength of the move into Thursday afternoon, it was nevertheless a steady one, holding the 5 minute 20 sma well into the final half hour of trading. The Dow and S&Ps did break that support in the final minutes of trading, but the Nasdaq spent the afternoon attempting to make up for the ground it had lost earlier in the day and closed within a few ticks of the day's highs.
http://tradingfrommainstreet.com/images/FocusLetter/20070716sp.gif
By the end of the session on Friday, the Dow Jones Industrial Average ($DJI) had made a new record closing high at 13,907.25 (+45.52 points). It ended the week up by 1.8% and is rapidly coming into the 14,000 price resistance level. The S&P 500 ($SPX) gained 1.3% last week, adding 4.80 points on Friday to close at 1,552. This also marked a record closing high. The Nasdaq Composite ($COMPX) had the smallest percentage gain on Friday, but outpaced the S&Ps on the week with a gain of 1.4%. 5.27 points were added to the index on Friday and it closed at 2,707.
Financials such as Merrill Lynch & Co. (MER: +1.2%) and JP Morgan Chase and Co. (JPM: 1.0%) performed very well into the weekend despite a rather wicked start to the week. Nearly all of them jumped sharply on Thursday after turning around on Wednesday off lows and this momentum moved the sector higher into Friday as well.
There was a lot of talk hype week regarding the merger talks between Rio Tinto (RTP) and Alcan Inc. (AL), which it hoped to acquire. Alcoa Inc. (AA), which was viewed as a rival, announced on Thursday that it was withdrawing its bid and the stock rose 4.5% on Friday following the news.
Some other names which made substantial gains on Friday were AAPL, RIMM, PAYX, PDLI, GOOG, WFMI, and SIGM. The market can still creep higher on Monday as some additional follow-through on these gains, but with momentum slowing and several days of upside already under its belt, it's going to be more difficult to sustain the buying and some rapid pullbacks are now a risk on the 5 and 15 minute time frames.
http://tradingfrommainstreet.com/images/FocusLetter/20070716dow.gif
Economic Reports and Events This Week:
Monday, July 16, 2007
8:30a.m. July NY Fed Manufacturing Index. Expected: 17.50. Previous: 25.75.
KMGB has a lot of nice examples of this setup... I printed up the best one and have posted a chart of it below... It is text-book perfect! Thanks for the heads-up!
http://tradingfrommainstreet.com/images/trades/123pattern_KMGB.gif
posted by Toni Hansen @ 9:22 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
posted by Toni Hansen @ 8:42 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Bounces Back Tuesday, Dollar Remains Weak
Good day! Volume picked up very slightly overall as compared to Tuesday, primarily in the Dow Jones Ind. Average, as the indices attempted to retake the ground they had lost in the previous session. The market had sold off quite a bit after Moody's Investors Service downgraded nearly 400 subprime residential mortgage-backed securities and the Standard & Poor's dealt a sharp blow to more than 600 of them as well.
The weakness actually continued into Wednesday morning, gapping slightly lower and then selling off again into about 10:00 ET. The drop was enough that it created an equal move on the 15 minute charts as compared to the first breakdown on Tuesday afternoon to provide a nice exhaustion move. I was able to pick up the NQ (Nasdaq Emini) at 9:56 am ET at 1985 on the 5 minute 2B when the market came back into some premarket support as it completed the 15 minute decline. Notice that this also corresponded to daily moving average support on both the Nasdaq and Dow with the 10 day simple moving average. The reversal held well and these early morning lows proved to be the lows of the day, kicking off the retracement of Tuesday's selloff.
http://tradingfrommainstreet.com/images/FocusLetter/20070712nas.gif
The market bounced back quickly after 10:00 ET despite my initial concerns heading into the day that this would not be the case. It did not take long to break through the lows of the first afternoon decline on Tuesday which were established at 14:00 ET. The sharp morning rally then stalled as the market came into the congestion that was a part of the correction from initial drop on Tuesday. It was also the Nasdaq Composite's 15 minute 20 simple moving average and the Dow Jones Industrial Average's 15 minute 200 sma. This stronger pace created the odds that, instead of seeing another downtrend day, the market would be more likely to fall into a range on the 30-60 minute charts.
I tested out a small short position on the NQ at that time due to the upside exhaustion going into the 10:15 ET reversal period, but didn't have much luck with it and ended up with a gain of only a few ticks. Instead of seeing much price correction, the index fell flat along the resistance. This was not too surprising given the momentum, but usually there will be some sort of price reaction off the resistance level, so it's not very high risk to attempt such a scalp given that often in the worst cases the market ends up with this type of sideways move.
I actually would have been a bit better off if I had gone with the S&Ps (ES) or Dow (YM) since both of those pulled back a somewhat greater percent in terms of price into the 10:45 ET reversal period. This was a bit of a mistake on my part since the Nasdaq was the index with the sharpest upside move, but it's what I was still watching the most closely since I had just closed it out on the earlier reversal. It had also hit the 15 minute 20 sma resistance exactly, so it was fairly simple to identify the resistance level.
http://tradingfrommainstreet.com/images/FocusLetter/20070712sp.gif
The market began to climb again going into 11:00 ET, but it lacked the earlier enthusiasm. Trading became choppy with a lot of overlap from bar to bar on the 5 and 15 minute time frames and risk slowly increased while the volume dropped off. The "mid-day doldrums" had officially begun. I hate trading within those type of market conditions, so I was in and out of the office throughout the next several hours taking care of the fun clean-up from my recent plumbing fiasco... now known as "The Great Hansen House Flood." (I figured it needed an official name =).
The market continued to display an upside bias mid-day, but without any setups that stood out throughout most of that time. There was a small scalp on the 5 minute charts at 13:30out the mid-day range, but the indices promptly hit resistance again and fell back into 14:00 ET. This correction continued with a second wave into the 15:00 ET reversal period, which then kicked off the final intraday pivot and the last decent setup of the day.
http://tradingfrommainstreet.com/images/FocusLetter/20070711nas.gif
Although it didn't quite have the same momentum as the morning rally, the indices managed to steadily make their way back into the zone of the day's highs by the closing bell. The Dow Jones Industrial Average ($DJI) rose by 0.6% (76.17 points) on the day. The S&P 500 ($SPX) also added 0.6%, or 8.6 points. The Nasdaq Composite ($COMPX) came in close with a move of +0.5% (12.6 points).
Although Bear Stearns (BSC), Lehman Brothers (LEH), and Goldman Sachs (GS) still spent the day reeling from the previous session's losses, other financials managed to recover fairly well. JP Morgan Chase (JPM) rose 1.3%, while Citigroup (C) even closed above Tuesday's intraday highs with a gain of 0.8%. It was still about 20 cents shy of Monday's close though.
On the merger front on Tuesday, Alcan (AL) made headlines on an unconfirmed story that it has begun negotiations to merge with Rio Tinto PLC (RTP). Alcan had rejected an unsolicited offer of $27 billion by Alcoa (AA) earlier in the year, but while things seem to have taken a bit more of a serious turn recently with regard to RTP, its still up in the air. AL climbed 4% on Wednesday in the U.S. market and RTP rose 2.8%.
As a whole it still seems likely that the market is going to continue to try to correct off these levels on the monthly time frame. There's a bit of strength coming in that can push it to new highs over the next week or two if earnings go well, but the time it has taken to correct thus far from the earlier rally this year is not enough to typically sustain an upside breakout at this point, so my concern is that it would roll over quickly, much like it did on the early breakout attempt intraday around 13:30 ET on Wednesday.
In the currency market the dollar continued to slide against the pound after a sharp decline on Tuesday and is near an all-time low against the euro. Many believe that this will compel the Federal Reserve to begin cutting interest rates. Currently (11:00 pm ET) the euro stands at $1.3756. I would not be surprised if we continue to see more negative news on credit ratings and this is going to keep the pressure on the dollar, even though many key Fed officials keep saying that all is "just peachy". Due to the momentum on the euro's rise against the dollar, it is not likely to retrace easily. The euro is starting to become a bit extended on the 8-hour time frame, however, so I don't think it's the best buy at this time. The pace would actually have to slow and round off at highs on that time frame though for us to see any strong correction. Otherwise a range is more plausible.
News: I will be traveling this weekend for a presentation in Denver and as I result, I will not be publishing my daily column tomorrow. I will return on Monday though! Feel free to drop by if you are in the area!
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Tuesday, July 10, 2007Trading Picks Up as Market Corrects
Good day! The market had a bit of a tough day on Tuesday after hitting strong daily resistance at previous highs in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX). By the end of the session the Dow had lost 148.27 points (-1.1%), while the S&P 500 fell 21.73 points (-1.4%). The Nasdaq Composite ($COMPX) dropped 30.86 points (-1.2%).
Broker/dealers were among the hardest hit on Tuesday, falling 2.9% as a whole. Lehman Brothers (LEH) lost 5%, Bear Stearns Companies Inc. (BSC) fell 4.1%, and Goldman Sachs Group Inc. (GS) lost 2.8%. All three of these had gapped somewhat lower into the open along with the rest of the market, but after falling into a trading range on the 15 minute charts they all trended steadily lower throughout the afternoon. Even though this sector was at resistance and underperforming the overall market in recent months, the fact that Wall Street's two largest credit rating agencies downgraded billions of dollars of subprime residential mortgage-backed securities was not particularly helpful.
The day really got off on a bad footing right away. The market gapped significantly lower into the open on Tuesday. In and of itself this is not necessarily an indication that the day as a whole will be a weak one. In fact, many such gaps will actually be followed by an upside trend day and nearly all of them will fill the gap in the morning and into the early afternoon. The main exceptions are when there was already an extreme gap the day before that had filled, particularly if there have been two days in a row, and when the market is at a major resistance level on the monthly time frame. The second one was the case on Tuesday, but I was still leaning towards at least the fill of the Nasdaq gap, which was the least extreme of the three indices.
http://tradingfrommainstreet.com/images/FocusLetter/20070711nas.gif
In terms of equities there was not a lot on the radar out of the open since so many stocks had gapped lower, but had done so to a point that they were exhausted. With a daily pivot in play, however, it made buying the top gainers a lot higher risk than usual. This is where focusing on the futures is the way to go and after making the mistake of trying the YM (Dow) first and only making a few points, I quickly moved over to the NQ (Nasdaq) to focus on for upside.
http://tradingfrommainstreet.com/images/FocusLetter/20070711sp.gif
The Dow and S&Ps barely got off the ground on Tuesday morning, but the Nasdaq rallied higher out of the 9:45 ET reversal period. Most of the gap had closed within about 30 minutes, hitting the 5 and 15 minute 20 simple moving average resistance at the 10:15 ET reversal period. After a less-than-ideal correction along that resistance into 10:45 ET the gap finally closed at about 11:15 ET and the upside momentum slowed as the 15 minute 20 sma remained strong resistance
When the 12:00 ET reversal period hit the bears began to show a desire to take over the lead. Federal Reserve Chairman Ben Bernanke spoke early in the afternoon, but the market wasn't sure at first what to make of it. With no real insight given on the central bank's interest rate plans, the bears finally took over and the momentum on the selling increased a great deal into 13:45 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20070711dow.gif
When the 14:00 ET reversal period hit the market took a bit of a reprieve. I had caught the NQ a few minutes earlier and the slight 2B on the 1 minute chart led to a decent bounce back into the 5 minute 20 sma resistance before the market again turned around off the highs and sold off into the close. My last trade in the futures ended up being the 14:35 pivot off the resistance. I should have held on a bit longer than I did though! The market ended the day in the zone of the intraday lows. This correction on the daily time frame still has plenty of room to continue this week, so I will be treating upside setups on just a daytrade/scalp basis at this time.
posted by Toni Hansen @ 9:44 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
The other top Dow movers were American Express Co. (AXP) at +1.5%, Caterpillar Inc. (CAT) at +1.3%, Intel Corp. (INTC) at +1.1%, Exxon Mobil Corp. (XOM) at +1.1%, and General Motors (GM) with a gain of +0.8%.
Johnson & Johnson (JNJ), another Dow component, rose 0.9% on news of a share repurchase program. While not in the Dow, ConocoPhillips (COP) also made headlines intraday when it surged at 2:30 ET on news that it planned to buy back up to $15 billion of its shares through the end of 2008. One attraction of these buybacks is that since they reduce the number of shares outstanding in a stock, they will tend to give per-share earnings a nice boost. Buybacks in the S&P 500 hit a record monetary level in the first quarter of this year of $117.1 billion. This is a 17.5% increase as compared to the same period last year.
Even though Nasdaq as a whole did not make many waves on Monday, some of the largest gainers in the overall market were not in the Dow, nor the S&P 500, but rather the Nasdaq. Among the strongest intraday movers were Taser Intl. Inc. (TASR), Amazon (AMZN), Sandisk Corp. (SNDK), Crocs Inc. (CROX), First Solar Inc. (FSLR), Isis Pharmaceuticals Inc (ISIS), JA Solar Hldgs (JASO), and my favorite stock of the year... Schnitzer Stl. Inds. (SCHN). Each of these had at least a very strong morning, and the majority had a very nice trend day on Monday.
http://tradingfrommainstreet.com/images/FocusLetter/20070710nas.gif
Despite some really great moves in equities, the overall market was not terribly exciting. A slight gap higher was followed by a couple of small pivots back and forth in the first hour of trading. The Dow and S&Ps had ran into the previous highs, which we had been watching for resistance, and the rally from the previous afternoon served to exhaust the buying
even though the market made a second attempt at highs into the 10:15 ET reversal period intraday after a somewhat faster drop out of 9:45 ET. Volume was lighter on the second bout of intraday buying on the 5 minute time frame though, and shortly after 10:30 ET the downside momentum increased, leading to new intraday lows and about a 50% retracement of the previous day's range in the Nasdaq and S&P 500.
http://tradingfrommainstreet.com/images/FocusLetter/20070710sp.gif
The price retracement and support, combined with the Dow's 15 minute 20 sma support and an increase in volume exhausted the sellers into 10:45 ET. I picked up the NQ (Nasdaq EMini) at 2003.25 at 10:46 ET for a pivot trade. The momentum was also slowing and rounding off at lows in the Dow at the same time. I choose to buy the NQ first because it showed the greatest exhaustion. I added the YM (Mini-Dow) soon thereafter at 10:55 ET. I had to hold through a very slight flush of a few points, but the rounding off continued and the 11:00 ET reversal period held the Dow as it completed its closure of its morning gap and soon the three major indices were all heading higher.
The late morning bounce began quickly enough, moving nicely into the 5 minute 20 sma, but after taking back about half the earlier losses they ran into trouble. The daily charts were still very extended and the morning decline was simply too strong to sustain decent upside momentum on Monday. While I continued to favor the bulls, trading became very sloppy in the indices and it was necessary to just hold on and trust my bias since there were very few "pattern" setups throughout the remainder of the day. The uptrend channel on the 5 minute broke lower for about 30 minutes at 2:00 ET, but soon reversed back to the upside and was retesting the morning highs by the 3:00 ET reversal period. The sloppy action then returned for the final hour of trading with the 15 minute 20 sma serving as support.
http://tradingfrommainstreet.com/images/FocusLetter/20070710dow.gif
Although we don't really have any reversal pattern triggering at this point on the larger intraday and daily time frames, the upside momentum has me concerned because the types of declines we experienced mid-morning on Monday are very common with this type of buying. It simply does not take much for the bears to grab hold. I am not going to be very aggressive on the short side just yet though, and will likely treat those setups that I do come across intraday more as daytrades than swings. Exceptions would be setups such as Panera Bread (PNRA) on 6/6 and Genzyme Corp. (GENZ) on 7/6. These types of gaps tend to have continued selling and are nice for swings when you catch them early on.
http://tradingfrommainstreet.com/images/FocusLetter/20070710gaps.gif
Labels: AA, BA, buy back, COP, earnings, JNJ
posted by Toni Hansen @ 8:49 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sleep Deprivation and Rebooting Your Brain
As many of you who have known me for quite some time are aware, I tend to have bouts of insomnia. It is not so much that I cannot sleep, since when I actually do get to bed I am often out before I can so much count to 10. The problem is that I tend to simply not feel tired at night. I am very much a night owl, doing most of my work, my writing, and my reading in the wee hours of the morning. I also like to do my market research at this time.
Ironically, I have found that on nights where I get very little sleep, I often have some of my best trades the next day. It seems to create an emotional detachment of sorts whereby I do not end up overanalyzing and instead act more on my instincts, which after all these years tends to be correct more often than not. I think that when I first began trading this would have been devastating, but now it works in my favor...
For most traders, myself included, emotions play a huge roll in their success or failure. I'm often asked about different methods to try to work through emotional setbacks that a trader has. I honestly believe that many of the problems traders experience in terms of their emotions affecting their trading comes from a lack of confidence in their system and that with experience it becomes easier and easier to act and respond appropriately. The problem is that most traders simply don't keep the right types of journals that allow them to develop as a trader. Hence they never really develop a great system that fits their personality.
The more you understand the dynamics at play in the market and how patterns develop in the first place, the easier it becomes to follow it... easier still if you aren't too hyped up in the morning and are in a more relaxed frame of mind. Now I am certainly not endorsing getting 3-4 hours of sleep a night as a successful trading strategy! It was a bit of an unexpected side effect though that I felt was intriguing to note.
So, what are some of the healthier means of achieving this same state of mind? The most obvious is relaxation exercises. These include things like yoga and visualization techniques where you picture different trade scenarios in your mind and walk through the correct ways to handle them, much like a football trader would study different plays and the other teams strategies to give them a heads up before the big game.
Although I certainly support both of these and have practiced both on and off over the years, I admit that I am a bit lax and will go for weeks on end without doing either. I really admire those who are more diligent than I at these techniques.
One of the mini ways I achieve the same type of thing is to just make sure I get up and walk around throughout the day, making sure I am not stuck in my chair all day. It gives me a breather, refocuses my thoughts, and often I come back, flip through my charts and suddenly things just pop up. A lot of my greatest setups are found like this. I like to think of it a bit like a computer reboot... If you go for too long without restarting, your computer slows down. Merely rebooting it helps speed things up!
For those of you reading this, I'd like to encourage you to send me your comments about how you "reboot" and what works for you to help block out all those crazy irrational thoughts that can throw you off track!
posted by Toni Hansen @ 5:11 PM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, July 8, 2007Markets Creep Higher in Light Holiday Trading
Hey gang! I hope you had a good week last week despite the slower than average trading where each day the volume came in at a bit less than half of the average day from the previous week. Even with lighter than average volume, the session saw some major stand-outs. There has been a lot of excitement this week with buyouts, mergers, and rumors thereof creating some nice moves. Among the top names on Friday were CME, BOT, M, and TGT. The Chicago Mercantile Exchange Holdings (CME) raised its offer for the 3rd time for CBOT Holdings (BOT) to $11 billion. Macy's (M) shares also climbed in the session, moving higher by 5.6% on buyout rumors. Then there is Target (TGT). It's stock rose 6.1% on Friday over speculation that increased pressure by a major stock holder will lead the company to shed its credit card business.
In addition to the buyout news, gold and mining stocks also saw some nice moves. Newmont Mining Corp. (NEM) and Anglogold Ashanti Ltd. (AU) in particular performed extremely well. Other top movers were Raymond James Financial Inc. (RJF), American Capital Strategies (ACAS), Baidu (BIDU), Apollo Group (APOL), Infosys Tech. (INFY), and Cognizant Tech. Solutions (CTSH).
Not every sector and stock kept up with the overall market. Utilities, estate investment trusts, and biotechs all lost ground. Among the stocks which were hardest hit were Parametric Technology Corp. (PMTC) due to significant losses in licensing revenue, Genzyme Corp. (GENZ) thanks to poor trial results for its drug tolevamer, Healthway Inc. (HWAY) on news of a pilot program with the Medicare system, and Host Hotels & Resorts Inc. (HST) which gave up some of its previous day's extreme gains made in sympathy with the Hilton (HLT) buyout news.
http://tradingfrommainstreet.com/images/FocusLetter/20070709nas.gif
After a strong intraday trend move into Thursday's close throughout the afternoon, the market was a little bit exhausted at the beginning of the trading day on Friday thanks to three small upside moves on the 5 minute charts. This small uptrend broke lower right away into the opening bell with a modest retracement in the first 15 minutes of the day. At the 9:45 ET reversal period the momentum slowed and the indices rounded off at support at the 15 minute 20 simple moving average intraday, price support from the previous session, and the Dow's 5 minute 200 sma. Small 2B patterns on the 1 minute charts soon turned things back around. As I mentioned in the morning commentary, the overall bias remained more on the bullish side and at 10:00 ET the bulls once again took the lead coming out of this minor reversal pattern.
http://tradingfrommainstreet.com/images/FocusLetter/20070709sp.gif
Although the initial buying in the indices was rather strong, there was little change in volume as compared to the downside and once the market retook the previous day's highs the enthusiasm began to wane. A short base along the highs followed, while volume continued to decline. A third test of highs on the 1 minute time frame within this base led to a second wave of buying on the 5 minute charts, but the market barely even came into the equal move zone as compared to the first move higher before it began to correct once again.
even though the market made a second attempt at highs into the 10:15 ET reversal period intraday after a somewhat faster drop out of 9:45 ET. Volume was lighter on the second bout of intraday buying on the 5 minute time frame though, and shortly after 10:30 ET the downside momentum increased, leading to new intraday lows and about a 50% retracement of the previous day's range in the Nasdaq and S&P 500.
http://tradingfrommainstreet.com/images/FocusLetter/20070710sp.gif
The price retracement and support, combined with the Dow's 15 minute 20 sma support and an increase in volume exhausted the sellers into 10:45 ET. I picked up the NQ (Nasdaq EMini) at 2003.25 at 10:46 ET for a pivot trade. The momentum was also slowing and rounding off at lows in the Dow at the same time. I choose to buy the NQ first because it showed the greatest exhaustion. I added the YM (Mini-Dow) soon thereafter at 10:55 ET. I had to hold through a very slight flush of a few points, but the rounding off continued and the 11:00 ET reversal period held the Dow as it completed its closure of its morning gap and soon the three major indices were all heading higher.
The late morning bounce began quickly enough, moving nicely into the 5 minute 20 sma, but after taking back about half the earlier losses they ran into trouble. The daily charts were still very extended and the morning decline was simply too strong to sustain decent upside momentum on Monday. While I continued to favor the bulls, trading became very sloppy in the indices and it was necessary to just hold on and trust my bias since there were very few "pattern" setups throughout the remainder of the day. The uptrend channel on the 5 minute broke lower for about 30 minutes at 2:00 ET, but soon reversed back to the upside and was retesting the morning highs by the 3:00 ET reversal period. The sloppy action then returned for the final hour of trading with the 15 minute 20 sma serving as support.
http://tradingfrommainstreet.com/images/FocusLetter/20070710dow.gif
Although we don't really have any reversal pattern triggering at this point on the larger intraday and daily time frames, the upside momentum has me concerned because the types of declines we experienced mid-morning on Monday are very common with this type of buying. It simply does not take much for the bears to grab hold. I am not going to be very aggressive on the short side just yet though, and will likely treat those setups that I do come across intraday more as daytrades than swings. Exceptions would be setups such as Panera Bread (PNRA) on 6/6 and Genzyme Corp. (GENZ) on 7/6. These types of gaps tend to have continued selling and are nice for swings when you catch them early on.
http://tradingfrommainstreet.com/images/FocusLetter/20070710gaps.gif
posted by Toni Hansen @ 8:49 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sleep Deprivation and Rebooting Your Brain
As many of you who have known me for quite some time are aware, I tend to have bouts of insomnia. It is not so much that I cannot sleep, since when I actually do get to bed I am often out before I can so much count to 10. The problem is that I tend to simply not feel tired at night. I am very much a night owl, doing most of my work, my writing, and my reading in the wee hours of the morning. I also like to do my market research at this time.
Ironically, I have found that on nights where I get very little sleep, I often have some of my best trades the next day. It seems to create an emotional detachment of sorts whereby I do not end up overanalyzing and instead act more on my instincts, which after all these years tends to be correct more often than not. I think that when I first began trading this would have been devastating, but now it works in my favor...
One of the mini ways I achieve the same type of thing is to just make sure I get up and walk around throughout the day, making sure I am not stuck in my chair all day. It gives me a breather, refocuses my thoughts, and often I come back, flip through my charts and suddenly things just pop up. A lot of my greatest setups are found like this. I like to think of it a bit like a computer reboot... If you go for too long without restarting, your computer slows down. Merely rebooting it helps speed things up!
For those of you reading this, I'd like to encourage you to send me your comments about how you "reboot" and what works for you to help block out all those crazy irrational thoughts that can throw you off track!
posted by Toni Hansen @ 5:11 PM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, July 8, 2007Markets Creep Higher in Light Holiday Trading
Hey gang! I hope you had a good week last week despite the slower than average trading where each day the volume came in at a bit less than half of the average day from the previous week. Even with lighter than average volume, the session saw some major stand-outs. There has been a lot of excitement this week with buyouts, mergers, and rumors thereof creating some nice moves. Among the top names on Friday were CME, BOT, M, and TGT. The Chicago Mercantile Exchange Holdings (CME) raised its offer for the 3rd time for CBOT Holdings (BOT) to $11 billion. Macy's (M) shares also climbed in the session, moving higher by 5.6% on buyout rumors. Then there is Target (TGT). It's stock rose 6.1% on Friday over speculation that increased pressure by a major stock holder will lead the company to shed its credit card business.
to poor trial results for its drug tolevamer, Healthway Inc. (HWAY) on news of a pilot program with the Medicare system, and Host Hotels & Resorts Inc. (HST) which gave up some of its previous day's extreme gains made in sympathy with the Hilton (HLT) buyout news.
http://tradingfrommainstreet.com/images/FocusLetter/20070709nas.gif
After a strong intraday trend move into Thursday's close throughout the afternoon, the market was a little bit exhausted at the beginning of the trading day on Friday thanks to three small upside moves on slowed and the indices rounded off at support at the 15 minute 20 simple moving average intraday, price support from the previous session, and the Dow's 5 minute 200 sma. Small 2B patterns on the 1 minute charts soon turned things back around. As I mentioned in the morning commentary, the overall bias remained more on the bullish side and at 10:00 ET the bulls once again took the lead coming out of this minor reversal pattern.
http://tradingfrommainstreet.com/images/FocusLetter/20070709sp.gif
Although the initial buying in the indices was rather strong, there was little change in volume as compared to the downside and once the market retook the previous day's highs the enthusiasm began to wane. A short base along the highs followed, while volume continued to decline. A third test of highs on the 1 minute time frame within this base led to a second wave of buying on the 5 minute charts, but the market barely even came into the equal move zone as compared to the first move higher before it began to correct once again.
even though the market made a second attempt at highs into the 10:15 ET reversal period intraday after a somewhat faster drop out of 9:45 ET. Volume was lighter on the second bout of intraday buying on the 5 minute time frame though, and shortly after 10:30 ET the downside momentum increased, leading to new intraday lows and about a 50% retracement of the previous day's range in the Nasdaq and S&P 500.
http://tradingfrommainstreet.com/images/FocusLetter/20070710sp.gif
The price retracement and support, combined with the Dow's 15 minute 20 sma support and an increase in volume exhausted the sellers into 10:45 ET. I picked up the NQ (Nasdaq EMini) at 2003.25 at 10:46 ET for a pivot trade. The momentum was also slowing and rounding off at lows in the Dow at the same time. I choose to buy the NQ first because it showed the greatest exhaustion. I added the YM (Mini-Dow) soon thereafter at 10:55 ET. I had to hold through a very slight flush of a few points, but the rounding off continued and the 11:00 ET reversal period held the Dow as it completed its closure of its morning gap and soon the three major indices were all heading higher.
The late morning bounce began quickly enough, moving nicely into the 5 minute 20 sma, but after taking back about half the earlier losses they ran into trouble. The daily charts were still very extended and the morning decline was simply too strong to sustain decent upside momentum on Monday. While I continued to favor the bulls, trading became very sloppy in the indices and it was necessary to just hold on and trust my bias since there were very few "pattern" setups throughout the remainder of the day. The uptrend channel on the 5 minute broke lower for about 30 minutes at 2:00 ET, but soon reversed back to the upside and was retesting the morning highs by the 3:00 ET reversal period. The sloppy action then returned for the final hour of trading with the 15 minute 20 sma serving as support.
http://tradingfrommainstreet.com/images/FocusLetter/20070710dow.gif
Although we don't really have any reversal pattern triggering at this point on the larger intraday and daily time frames, the upside momentum has me concerned because the types of declines we experienced mid-morning on Monday are very common with this type of buying. It simply does not take much for the bears to grab hold. I am not going to be very aggressive on the short side just yet though, and will likely treat those setups that I do come across intraday more as daytrades than swings. Exceptions would be setups such as Panera Bread (PNRA) on 6/6 and Genzyme Corp. (GENZ) on 7/6. These types of gaps tend to have continued selling and are nice for swings when you catch them early on.
http://tradingfrommainstreet.com/images/FocusLetter/20070710gaps.gif
http://tradingfrommainstreet.com/images/FocusLetter/20070709nas.gif
After a strong intraday trend move into
http://tradingfrommainstreet.com/images/FocusLetter/20070709sp.gif
Although the initial buying in the indices was rather strong, there was little change in volume as compared to the downside and once the market retook the previous day's highs the enthusiasm began to wane. A short base along the highs followed, while volume continued to decline. A third test of highs on the 1 minute time frame within this base led to a second wave of buying on the 5 minute charts, but the market barely even came into the equal move zone as compared to the first move higher before it began to correct once again.
On this second correction off higher following the 10:00 reversal, the market pulled into the 5 minute 20 sma support zone. Instead of bouncing back up into the highs as they had at 10:45 ET, the market instead just slid higher along the support on very light volume. This created a 5 minute Avalanche pattern which gave way to a nice scalp setups as a short out of noon.
http://tradingfrommainstreet.com/images/FocusLetter/20070709dow.gif
Often corrections will come in two waves before a trend resumes but while this was true on Friday as well, the pivot off the second low was accompanied by a continuation of the light trading as well as lighter momentum. This opened the door for the potential of a 15 minute Avalanche, but the trend placement on the larger time frames suggested that the indices could very easily just creep higher off the 15 minute 20 simple moving average throughout most of the afternoon. This confirmed when the second small bounce off mid-day lows at 13:00 broke higher into 14:00 on slightly higher volume.
The main concern with this type of trend move is that it can reverse quickly if the trend just continues to climb with a great deal of overlap in prices from bar to bar on the 5 and 15 minute charts. In order to catch the move once it's underway a trader must enter on very minor corrections into the lower trend channel.
The best guess for a target on such an entry is just the upper end of the trend channel, although if the trend is fairly new there is of course the potential for more. If the security or index cannot seem to let go of the lower trend channel line, however, then watch out, since a breakdown is typically pending. This was the case on Friday going into the last 30 minutes of trading when the 15:30 ET reversal period hit and traders offset positions going into the weekend. Both the Dow and the S&Ps were back at their 15 minute 20 sma support within a mere 15 minutes of trading, taking back an hour's worth of gains in a matter of minutes.
The week ended with a gain of 1.8% in the Dow ($DJI), rising 45.84 points on Friday to end the day at 13,611.68. The S&P 500 ($SPX) rose 1.8% for the week, adding 5.04 points on Friday to close at 1,530.44. The Nasdaq Composite ($COMPX) had the largest weekly percentage gain of 2.4%, closing at 2,666.51 with a gain on Friday of 9.86 points.
Heading into Monday and the onset of earnings season, the market remains bullish. The highs from the middle of the month last month in the Dow and S&Ps will serve as resistance. Currently the momentum continues to cause added concern for sharp 15 minute corrections off the highs. Some of the major names with the potential to move the market this week on earnings include AA, GE, YUM, PBG, MAR, MTB and DNA.
Note: Charts provided by Townsend Analytics, Ltd.
Labels: 2B, avalanche, BOT, CME, GENZ, HLT, HST, HWAY, INFY, M, mergers and acquisitions, reversal periods, RJF, TGT, three tests, three waves, trend channel, two waves
posted by Toni Hansen @ 2:58 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Economic Reports and Events July 9-13, 2007
Monday, July 9, 2007
3:00p.m. May Consumer Credit. Previous: +$2.6B
Tuesday, July 10, 2007
7:45a.m. ICSC Chain Store Sales. Previous: +0.1%.
8:55a.m. Redbook Retail Sales Index. Previous: -1.1%.
10:00a.m. May Wholesale Trade. Previous: +0.3%.
5:00p.m. ABC/Wash Post Consumer Confidence: Previous: -7.
Wednesday, July 11, 2007
7:00a.m. MBA Refinancing Index. Previous: -2.6
Thursday, July 12, 2007
8:30a.m. Initial Jobless Claims. Previous: +2K.
8:30a.m. May Trade Deficit. Previous: $58.5B.
10:00a.m. DJ-BTMU Business Barometer. Previous: Unch. n/a Chain Store Sales.
2:00p.m. June Federal Budget Statement. Previous: -$67.7B.
Friday, July 13, 2007 8:30a.m.
June Import Prices. Previous: +0.9%.
8:30a.m. June Retail & Food Sales. Previous: +1.4%.
8:30a.m. June Retail & Food Sales, Ex-Autos. Previous: +1.3%.
10:00a.m. Mid-July Reuters/U Of Mich Sentiment Index. Previous: 85.3.
10:00a.m. May Business Inventories: Previous: +0.4%.
posted by Toni Hansen @ 2:54 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Friday, July 6, 2007Key Earnings Next Week
Monday: NUHC, SCHN, AA, QMED, WDFC
Tuesday: AYI, CHTT, EMMS, ETP, GBX, HELE, ISCA, PBG, RAME, INFY, ZZ
Wednesday: AIR, ACGY, HITK, IGTE, WWW, CHAP, DNA, RECN, RT, YUM
Thursday: FAST, FLE, MTB, MAR, METH, PGR, TXI, BYI, CAMP, CTAS, CREL, EDIO, UWN
Friday: GE
posted by Toni Hansen @ 10:13 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Stock to Watch : GENZ for Continued Downside
Genzyme Corp. (GENZ) made headlines on Friday after a late-stage trial showed its drug tolevar (which was hoped to be a treatment for bacteria-induced diarrhea) was not any more effective than what is already in use for standard treatment. I'd been keeping an eye on GENZ for a few weeks now for a longer term short because it's already had a couple of tests of the lower end of a larger weekly and monthly descending triangle and this news now creates a third test and the most likely breaking point.
http://www.tradingfrommainstreet.com/images/trades/20070706GENZ.gif
Labels: GENZ
posted by Toni Hansen @ 9:53 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Uptick Rule Repealed
Just a reminder to all you short sellers.... Beginning today (Friday, July 6th)traders will NOW be able to short all securities on an up, down, or zero tick. This marks the end of that dreaded "uptick rule" whereby shorters could only short a position on an uptick. This meant that if a stock traded at $50 and you wanted to short it, then you would have to at $50.01 if it ticked higher or wait for it to trade under $50 at $49.99 for instance and then back to $50.
Of course, you still have to find shares available for shorting! So, in reality, it's possible this might make it a bit more difficult to short since it will remove some of the inhibitions many traders have about shorting in the first place... I guess we will just have to wait to see about that one...
For more info on eliminating the "Tick Test" which once required an uptick for shorting, go to http://www.sec.gov/news/press/2007/2007-114.htm
As a bit of background, the "tick test" rule, as it's called, was implemented in the 1930s following the market crash as a means of preventing market participants from singling out a particular security and driving down its price. At the time the market was not very transparent and not as efficient. The thought is that now, in addition to stronger regulation, average investors would not support such an attempt and that this concern is no longer valid.
posted by Toni Hansen @ 8:28 AM 1 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, July 5, 2007Strong Divergence Coming Out of Holiday Trading
Hey gang! After a series of slow trading days, volume remained light on Thursday as market participants extended their holiday, but underneath it there was still quite a bit to take note of. Perhaps the most apparent was the action in hotels. This sector surged following the $26 billion deal Blackstone made for Hilton (HLT). It seems like all the major hotel stocks took off well before the open with monumental gains in HST, HOT, MAR, MGM, LHO and many more. Casinos and other investment property types of companies followed suit.
Despite the fact that most of the well-known hotel names are on the NYSE, it was the Nasdaq Composite that had the greatest relative strength. While the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) fell for a few minutes out of the open, the Nasdaq not only held up very well, opening above Tuesday's highs, but it was soon making new highs on the year. The divergence became even more pronounced as the day progressed. The three indices fell into a trading range throughout the morning, but the range narrowed in the S&Ps the most, forming a triangle on the 5 minute time frame before breaking lower on a third test of the lows of the triangle at about 10:45 ET. Both the Dow and Nasdaq returned to morning lows at this time and found support at the 11:00 ET reversal period. This also corresponded to the 5 minute 200 sma and 15 minute 20 simple moving average in the Nasdaq.
http://tradingfrommainstreet.com/images/FocusLetter/20070706nas.gif
The Nasdaq retraced nearly all of its prior decline out of 11:00 ET, but the S&Ps and Dow only managed to regain about 50% of the losses. This was followed by another triangle on the 5 minute time frame and second breakdown into the early afternoon which took the S&Ps and Dow to new intraday lows. The Nasdaq continued to hold up very well, however, and could not break the lows of the day which hit again at the same time as the S&Ps came into price support from last Monday and the Dow came into price support as well as its 5 minute 200 sma at 12:30 ET. This completed three waves of selling on 5 minute time frame in the S&Ps and made it highly probable that the market would experience a more significant correction off support into the afternoon as compared to the earlier ones which lasted only about 75 minutes each.
http://tradingfrommainstreet.com/images/FocusLetter/20070706sp.gif
Even though the S&Ps and Dow got off to a slower start, all three of the major indices did a fine job of holding the mid-day lows. Volume continued to drop into the afternoon, however, which was a bit of a concern as the indices tested resistance on the 5 minute charts at about 13:30 ET. It remained light on the pullback off those highs though and the slower pace combined with the 5 minute 20 sma support led to a nice upside continuation out of the 14:00 ET reversal period. The momentum actually increased on the upside coming out of this setup, and while the volume did increase, it still remained lighter than average as the Nasdaq soared once more to new highs.
http://tradingfrommainstreet.com/images/FocusLetter/20070706dow.gif
After putting in an equal move and then some as compared to the 12:30 ET rally, the market again hit a snag. The S&Ps ran into the middle of the range from the morning as price support and the 5 minute 200 sma resistance. The Dow stalled at the previous highs from the morning and the Nasdaq EMini came into the zone of price resistance at 2000 (with a high of 1999). I went ahead and shorted the YM at 14:54 ET off a 1 minute 2T since it had the strongest resistance. As those of you who read the blog earlier will note, I made a bit of an order entry mistake on my exit (whoops), but the pullback was decent, falling back to the 5 minute 20 sma before putting in a third and final 5 minute rally into the final 30 minutes of the day.
http://tradingfrommainstreet.com/images/FocusLetter/20070709dow.gif
posted by Toni Hansen @ 10:13 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Stock to Watch : GENZ for Continued Downside
Genzyme Corp. (GENZ) made headlines on Friday after a late-stage trial showed its drug tolevar (which was hoped to be a treatment for bacteria-induced diarrhea) was not any more effective than what is already in use for standard treatment. I'd been keeping an eye on GENZ for a few weeks now for a longer term short because it's already had a couple of tests of the lower end of a larger weekly and monthly descending triangle and this news now creates a third test and the most likely breaking point.
http://www.tradingfrommainstreet.com/images/trades/20070706GENZ.gif
Thursday, July 5, 2007Strong Divergence Coming Out of Holiday Trading
Hey gang! After a series of slow trading days, volume remained light on Thursday as market participants extended their holiday, but underneath it there was still quite a bit to take note of. Perhaps the most apparent was the action in hotels. This sector surged following the $26 billion deal Blackstone made for Hilton (HLT). It seems like all the major hotel stocks took off well before the open with monumental gains in HST, HOT, MAR, MGM, LHO and many more. Casinos and other investment property types of companies followed suit.
Despite the fact that most of the well-known hotel names are on the NYSE, it was the Nasdaq Composite that had the greatest relative strength. While the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) fell for a few minutes out of the open, the Nasdaq not only held up very well, opening above Tuesday's highs, but it was soon making new highs on the year. The divergence became even more pronounced as the day progressed. The three indices fell into a trading range throughout the morning, but the range narrowed in the S&Ps the most, forming a triangle on the 5 minute time frame before breaking lower on a third test of the lows of the triangle at about 10:45 ET. Both the Dow and Nasdaq returned to morning lows at this time and found support at the 11:00 ET reversal period. This also corresponded to the 5 minute 200 sma and 15 minute 20 simple moving average in the Nasdaq.
http://tradingfrommainstreet.com/images/FocusLetter/20070706nas.gif
The Nasdaq retraced nearly all of its prior decline out of 11:00 ET, but the S&Ps and Dow only managed to regain about 50% of the losses. This was followed by another triangle on the 5 minute time frame and second breakdown into the early afternoon which took the S&Ps and Dow to new intraday lows. The Nasdaq continued to hold up very well, however, and could not break the lows of the day which hit again at the same time as the S&Ps came into price support from last Monday and the Dow came into price support as well as its 5 minute 200 sma at 12:30 ET. This completed three waves of selling on 5 minute time frame in the S&Ps and made it highly probable that the market would experience a more significant correction off support into the afternoon as compared to the earlier ones which lasted only about 75 minutes each.
http://tradingfrommainstreet.com/images/FocusLetter/20070706sp.gif
Even though the S&Ps and Dow got off to a slower start, all three of the major indices did a fine job of holding the mid-day lows. Volume continued to drop into the afternoon, however, which was a bit of a concern as the indices tested resistance on the 5 minute charts at about 13:30 ET. It remained light on the pullback off those highs though and the slower pace combined with the 5 minute 20 sma support led to a nice upside continuation out of the 14:00 ET reversal period. The momentum actually increased on the upside coming out of this setup, and while the volume did increase, it still remained lighter than average as the Nasdaq soared once more to new highs.
http://tradingfrommainstreet.com/images/FocusLetter/20070706dow.gif
After putting in an equal move and then some as compared to the 12:30 ET rally, the market again hit a snag. The S&Ps ran into the middle of the range from the morning as price support and the 5 minute 200 sma resistance. The Dow stalled at the previous highs from the morning and the Nasdaq EMini came into the zone of price resistance at 2000 (with a high of 1999). I went ahead and shorted the YM at 14:54 ET off a 1 minute 2T since it had the strongest resistance. As those of you who read the blog earlier will note, I made a bit of an order entry mistake on my exit (whoops), but the pullback was decent, falling back to the 5 minute 20 sma before putting in a third and final 5 minute rally into the final 30 minutes of the day.
Silly Mistake
Today was one of those days where I didn't find a lot of setups, but I did find a couple really great ones such as TNE at 10:00 ET. Nevertheless, there was one really silly mistake I made which was annoying!
I was scalping the EMinis this afternoon and caught the YM short at 14:54 ET. I had been watching the 1 min 2T setup (type of double top) and I hit the bid price to get a fill at 13654. Since I was looking at it as just a scalp I went and was looking at 13645 for a target based upon the place it broke out from around 14:30 ET. I don't trade a lot of quick scalps like this so I often place my target order in ahead of time to just have the best chance of getting a fill. Since the indices were at a lot of resistance on the 15 minute charts I figured it would be an easy move.
Unfortunately, when I went to place the order at 13645 I had gone in to change the limit order to that price and hit 13655 instead! argh! They filled me immediately of course since the YM was trading at 13651 on the ask. The low before it popped a bit was 13644, so the only validation I had was that I had at least wanted the right price! (ok... so that really doesn't help, but hey...)
Granted, it could have been worse... It could have been trading at 13655 when I did it! Of course when I go and here that ding right away when I pushed the trasmit button I knew I had messed up and got that sort of "deer in the headlights" reaction until I realized what I had done... Another reminder to always double check your prices! In any case, here is the chart of the setup with where I had THOUGHT my exit order was placed at! :(
http://www.tradingfrommainstreet.com/images/trades/20070705_YM.gif
posted by Toni Hansen @ 12:29 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Speaking at the Denver Trading Group
I'm heading out of town next weekend to spend a few days in Denver where I'll be speaking on behalf of the Chicago Board of Trade for the Denver Trading Group.
It's on Sat., July 14th at the Radisson Hotel Denver Southeast (Jefferson Room).
It's located at 3200 South Parker Road, Aurora, CO. I speak from 9am-1pm mountain time.
The fee is a mere $25 for members of the DTG and $35 for non-members.
Topic: "Trading Made Simple... No Indicators Necessary"
Things I'll be covering:
· Learn the building blocks of pattern development without having to learn a single indicator.
· Develop an understanding of the ebb and flow of market moves.
· Why do some seemingly “perfect patterns”, such as flags or cups with handles fail while others work perfectly?
Hope to see some of you there!
posted by Toni Hansen @ 7:02 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, July 2, 2007Holiday Trading Slowdown
Hey gang! It was a slow first day back to trading for me after getting back from Iowa! I missed the first hour or so of the day playing catch-up. It seems like for every day one takes away from home and work, it then takes three days to make up for it! =) Most of the activity in the market on Monday took place before 10:00 ET. After flipping to move higher into the final 30 minutes of trading on Friday, the indices continued the momentum into Monday morning with a gap higher. The move stalled at some previous highs on the 15 minute charts before resuming to the upside out of the 9:45 ET correction period for a rapid 15 minute rally. June's ISM Manufacturing Business Index came out at that time, but had very little impact on market direction. The data came in a full point higher than the previous month, at 56.0%. This was 0.9% higher than expected and indicates the highest level of production since July of 2004. The report also suggested that core inflation is moderating, so it has increased speculation that the Fed will soon lower interest rates.
http://tradingfrommainstreet.com/images/FocusLetter/20070703nas.gif
With little news generated from earnings results and earnings warnings, much of the momentum at present is from stock buyouts and mergers. On Monday the most notable of these was an agreement by AT&T (T) to buy Dobson Communications (DCEL) at $13/share. BCE Inc. (BCE) also received a strong boost when a group led by the Ontario Teachers Pension Plan reached an agreement to purchase it for $40.13/share. Manor Care Inc. (HCR), which has been a favorite stock of min in recent years, had a much more subdued reaction due to earlier hype back in April of a pending buyout and was nonplused by the official announcement for a buyout from a private-equity firm for about $6.3 billion. A huge drawback to merger and acquisition news is that once a price has been agreed upon, the takeover stock often has very little intraday price change and is not a great candidate at that point for daytrading. The best movers on this type of news are when the first waves of speculation hit, but before a price has been settled upon, and that was not the case with Monday's announcements. http://tradingfrommainstreet.com/images/FocusLetter/20070703sp.gifAfter the market hit strong resistance from the highs of last week, trading slowed a great deal. The market fell into a narrow trading range and the volume dropped off to levels similar to last week's pre-Fed trading on Thursday with similar results. The momentum began to turn over somewhat as the afternoon progressed, and even though the market overall did not make any notable gains, a few select individual stocks managed to shine. EXC, CLF, NOV, DO and CMI were among the top NYSE performers, while BIDU, JASO, FWLT, and FSLR were some the strongest late day leaders in the Nasdaq Comp. RIMM, however, outshone these in terms of overall daily performance thanks to a strong morning move on the heels of Friday's stronger-than-expected Q1 fiscal results that had boosted the stock by more than 20% in that session alone.
http://tradingfrommainstreet.com/images/FocusLetter/20070703dow.gifThe market closed on a positive note at the end of the day on Monday with all three indices winding down the session at the day's highs. The Dow Jones Industrial Average ($DJI) posted gains of 126.81 points, while the S&P 500 ($SPX) rose 16.08 points and the Nasdaq Composite ($COMPX) added 29.07 points. The closing action is most favorable for more upside on Tuesday, and the narrow range throughout most of the session on Monday leaves room for some greater swings intraday on Tuesday, but overall I expect trading to remain on the light side and that we will find relatively few momentum movers given that the holiday will also mean very little news to drive anything. Many of the traders I spoke with Monday afternoon expressed their intentions to not even show up to trade and to begin their 4th of July holiday a day early since the U.S. markets will be closed for trading on Wednesday.
posted by Toni Hansen @ 9:01 PM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Pics from Chicago
While up north, I took my kids to Chicago and the Field & History Museum. Lexie loves Egypt and mummies and Brandon is obsessed with dinosaurs, so it was an obvious choice! Here are a couple of our pics!
http://www.tradingfrommainstreet.com/images/tonimisc/chicago200706e1.jpg
http://www.tradingfrommainstreet.com/images/tonimisc/chicago200706d1.jpg
posted by Toni Hansen @ 7:46 PM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
First Trade After My "Vacation"
Wow.... The last two weeks have just flown by! I got back home to a COMPLETE MESS! My pipes had ruptured and the house had flooded just hours before I had to leave FL to catch my plane to Iowa so after dragging a plumber over I had them repipe the house while I was gone and got home to everything covered in plaster dust, all the stuff out of the cupboards, and a mysteriously missing toilet tank lid of all things... Not to mention the mess from having cats left to their own wiles for that time!!!! UGH!!!!
So, of course to relax in between slowly making my way through the destruction, I popped in for some trading today... not that this was particularly exciting given that it's a holiday trading week! I did catch a nice little scalp though in MTW (Manitowoc, Inc.). It ended up being the only trade I took and doesn't even come close to covering the huge plumbing bill I now have, but at least it is a start!!!
I will be using this blog to not only post my daily market action report, but also to share with you some of my trades... the good, the bad, and the occassional ugly! MTW was a so-so trade. I had started watching it around 13:00 ET but it was after that little pop at that time, so I put it up in the corner of my screen to look for a secondary setup. I missed the trigger though by just a few minutes. $82.72 at 13:46 is where I SHOULD HAVE taken it, but wasn't looking at the chart at the time and forgot to set an alarm... drr... Then when I went to execute it I put $85.90 instead of $82.90 in my order and got a fill at $82.92... At least I didn't do that mistake in a stock with a huge spread!!!
So, anyway, it wasn't realy a great start, but I felt confident about the position overall and it was one of those that won't hurt you too badly for making mistakes, which is why I chose it as my first trade and had passed on a few others.
I put an exit order on the books at $83.45, expecting $83.50 to be the resistance to watch for, but the market overall was exhausting itself heading into the 14:00 ET correction period and since I was only wanting to take that first move on MTW to get a good trade under my belt, I went ahead and took my modest gains on MTW with an average exit price of $83.25.
I could have finessed the exit a bit more since my anxiousness at the market hitting resistance led me to not pause for just one more minute which is when it popped up another 10-15 cents. Since the market did stop at about the same time I got out though, I think this decision was not completely unjustified, since many stocks will in fact stall at the same time as the overall market, especially when it had been behaving in much the same manner as the market up to that point in the day, which was certainly the case in MTW....
A chart of MTW can be seen below. The chart is from Townsend Analytics, Ltd. (www.realtick.com):
http://tradingfrommainstreet.com/images/trades/breakout_mtw.gif
posted by Toni Hansen @ 6:52 PM 0 Comments
Thursday, August 30, 2007Afterhours Trade : 2-Wave Buy
just 'cuz trading only during regular market hours would not make me enough of an addict.....
http://tradingfrommainstreet.com/images/FocusLetter/20070831d.gif
posted by Toni Hansen @ 10:08 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Trading the Wedge
Hey gang... I am gone for the holiday weekend, so enjoy the extended weekend and the lesson below and you'll hear from me again on Monday evening!
All my best,
Toni
Trading the Wedge
Description: This is a specific type of triangle that has a noticeable slant to it with higher highs and higher lows for an ascending or rising wedge or lower highs and lower lows for a descending or falling wedge. The characteristics detailed below apply to a rising wedge for a short setup, but can be easily reversed for a falling wedge buy setup. The wedge formation is typically a reversal pattern, meaning that the trend within the wedge itself will reverse when the trend breaks, although it can serve as a continuation pattern if the trend is new. For the purposes here, however, it will be discussed in terms of a reversal, with a rising wedge viewed in terms of a break lower and a falling wedge breaking higher.
Criteria: Uptrend with higher highs that break by a lesser degree than before, while the higher lows are still separated by greater differences in price, creating a triangle that slants higher when the upper and lower trend lines are drawn.
Entry: When the lower trend line breaks. Alternate entries are when the last uptrend within the wedge breaks lower or drop down to a smaller time frame and watch for a 2T or Avalanche and utilize those entry criteria.
Stop: Over the highs of the rising wedge, or over the highs of the base on an Avalanche formation if the wedge begins to hug the lower trend line after pulling off the highs before breaking lower.
Target: The target on the wedge depends on where it occurs in the larger trend. The main support levels in a rising wedge will be at each of the pivot lows within the wedge itself. When a downtrend is new and the rising wedge is a continuation pattern, then an equal move out of the wedge as compared to the drop into the wedge is the larger target.
http://tradingfrommainstreet.com/images/FocusLetter/20070831a.gif
Ideal 5 Tech Tools Traits:
Pace: Above average pace heading into the start of the wedge, followed by a slower trend for the wedge itself. In the case of a rising wedge this means a strong drop lower, followed by a slower rising wedge. Within the wedge itself it helps if the pace slows on the upside as the wedge nears completion. The best circumstance is when the security pulls strongly back into the lower trend channel from the wedge and then hugs that support just prior to breaking down out of the rising wedge. The reverse applies to a falling wedge.
Volume: The volume will ideally increase heading into the start of a rising wedge formation and then decline as the wedge progresses. If the wedge hugs the lower trend line from the move higher just before breaking, then that volume should be the lightest of the entire wedge.
Correction Periods: Higher changes for success when the highs of the wedge correspond to a correction period or the trigger for the wedge corresponds to a correction period.
Support/Resistance: In a rising wedge, it is good to have strong upside resistance, followed by a pullback to the lower trend line. The security then has higher odds for a strong follow through when it hugs that lower trend support just prior to breaking down. A lack of significant support, such as a previous low or congestion zone that would hit right away will also increase the odds for a successful move.
Trend Placement/Trend Development: A rising wedge is common in a downtrend as a correction within that larger bear move. It can also be located at highs as the last move up within a larger uptrend before a larger correction off highs takes place. A rising wedge is higher risk as a short setup when it occurs at the beginning of a new uptrend, since momentum can be building and any break lower at that point out of the rising wedge can easily be just a small base before the wedge then breaks to new highs.
Rising Wedge Examples
Example #1: Occidental Pet. Corp. (OXY) Rising Wedge – A Short Setup
http://tradingfrommainstreet.com/images/FocusLetter/20070831b.gif
© 2007 Chart provided by Townsend Analytics Ltd.
Pros on Rising Wedge in OXY:
1. OXY made only slightly higher highs, but significantly higher lows as it rose, creating a narrowing channel for the wedge formation.
2. After taking only 15 minutes to drop off the 10:30 ET highs, it then took three hours to return to that level.
3. The prices from the start of the 10:30 ET decline created a strong price resistance level.
4. Volume was the strongest at the start of the rising wedge and then declined throughout most of the upside move.
5. The rising wedge had three waves of upside within it, which is typical of an exhausted uptrend, making is easier for the stock to form a larger correction on a pullback following the third waves of buying that took place coming out of 13:00 ET.
6. The third move higher was much choppier than the prior two and began to hug the lower trend line and test it repeatedly while starting to avoid the upper end of the channel.
7. Volume increased as the wedge broke lower, providing confirmation to the setup.
Cons on Rising Wedge in OXY:
1. The move out of the rising wedge did not correspond directly to any correction period even though the 14:00 ET one was approaching.
2. OXY is a more volatile stock with a lot of overlap from bar to bar which created a somewhat larger stop since a trader could not drop down and short an Avalanche on a smaller time frame as the trigger to the wedge breakdown.
Example #2: ES Rising Wedge Pattern Intraday – A Short Setup
http://tradingfrommainstreet.com/images/FocusLetter/20070831c.gif
© 2007 Chart provided by Townsend Analytics Ltd.
Pros on 2 Minute Rising Wedge in the ES:
1. The large momentum heading into the wedge was on the downside. It then took 90 minutes to just regain the losses from the gap and immediate selling out of the open.
2. The rising wedge had three waves of buying in it, which is typical for a trend development, creating an exhausted trend before the wedge broke lower.
3. The volume decline throughout the rising wedge and did not increase at all coming out of the last pullback into 10:45 ET, indicating that despite the strong upside, there were not a lot of determined buyers present.
4. The second high in the wedge was only slightly higher than the first and the third high was comparable to the second, whereas each low was significantly higher than the last.
5. The final pivot high within the wedge took place heading into the 11:00 ET correction period.
6. As the wedge hugged the lower trend line leading into the second setup, the volume declined even further, despite the correction to the selling into 11:00.
7. The pace of the moves out of 11:00 and then along the lower trend line indicated a bearish bias since the upside was much weaker than the downside.
Cons on 2 Minute Rising Wedge in the ES:
1. The momentum within the wedge did not slow on the upside until the stock had already traded under the lower trend line, so those taking a trend line break as an entry would have had to have sat on the position for awhile before the stronger selling continued.
2. Volume did not increase much on the selling coming out of the wedge to provide strong confirmation for the breakdown.
posted by Toni Hansen @ 9:53 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Gaps to Watch
Here are gaps I am watching for continuation patterns in the direction of the gap into the open.
Up: SIGM, VIP, TIF, FCEL
Down: ACH, UBS, FRE, KG, CIEN, CWTR
posted by Toni Hansen @ 6:10 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, August 29, 2007Market Reverses Sharply on Light Volume
Good morning! The market was substantially stronger on Wednesday than I had been expecting heading into the session. While the volume had been light on Tuesday, suggesting that the market would have a difficult time breaking the previous lows, I was still looking for things to remain weaker ahead of the holiday weekend. Once the session began, however, very little weakness manifested itself.
http://tradingfrommainstreet.com/images/FocusLetter/20070830nas.gif
The indices opened higher to begin the day and then fell into a slow decline with the 5 minute 20 sma serving as support before breaking higher out of 10:15 ET. The buying began slowly, but picked up a great deal into 11:00 ET when the first resistance since the open hit at the same time as the reversal period. This resistance was based upon the mid-day congestion from Tuesday. It was the lower end of the congestion in the Dow Jones Ind. Ave. and S&P 500 and the upper end of it in the Nasdaq Composite. A slower continuation took the Dow and S&Ps to the upper end of it just before noon.
http://tradingfrommainstreet.com/images/FocusLetter/20070830sp.gif
The slowdown in the buying into noon created the only real bearish activity of the day. The market rounded off a bit and corrected off these highs into the early afternoon, falling slowly into the 15 minute 20 simple moving average support. The indices then began to hug the
upper end of the descent from about 13:45-14:00 ET and when the 14:00 ET reversal period hit the bulls returned with greater conviction than seen throughout the morning's upside. Each of the waves of buying was brief, but 15-20 minute bases consistently led to breaks to new intraday highs throughout the afternoon and into the close.
http://tradingfrommainstreet.com/images/FocusLetter/20070830dow.gif
By the end of the session all three of the major indices had closed the gap zone from the previous session. The Nasdaq closed the gap completely, while the Dow and S&Ps were very close. The Dow ($DJI) added 247.44 points on Wednesday (+1.9%). Top gainers included General Motors (GM) (+4.8%), Intel (INTC) (+4.7%), and Home Depot (HD) (+4.3%). The S&P 500 rose 31.40 points (+2.2%). The Nasdaq had the largest percentage gains of 2.5% (+62.52 points).
Among the top performers on Wednesday was Apple Inc. (AAPL) (+5.7%) after it raised Q1 earnings and revenue forecasts. Nokia Corp. (NOK) rallied with the launch of an iPhone and BlackBerry rival product. Compuware Corp. (CPWR) and Medicis Pharmaceutical Corp. (MRX) rose on buyback news. Additionally, Big Lots Inc. (BIG), Dycom Industries Inc. (DY), Dollar Tree Stores Inc. (DLTR), and Williams-Sonoma Inc. (WSM) leapt higher on earnings. On the downside, top losers were PDL BioPharma Inc. (PDLI) and The9 Limited (NCTY).
These light volume back and forth moves leave me with very little bias heading into Thursday since they are indicative of a trading range. As of now, the range is not favoring one end over the other, so I don't have a lot to go on to suggest what direction it will ultimately break. Instead it seems wise to mainly focus on daytrades the remainder of the week and watch the market intraday for the momentum plays.
posted by Toni Hansen @ 10:55 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, August 28, 2007Market Trips After 6-Day Rally
Good morning! After rolling over in Monday's session with the three indices each forming 60 minute short patterns, the selling accelerated into the next day. As I mentioned yesterday, the S&P 500 ($SPX) had fallen on Monday morning and then had a slightly lower high in the afternoon with a base along the intraday lows. It triggered a 60 minute short pattern shortly before the close. The Dow Jones Industrial Average ($DJI) and Nasdaq Composite ($COMPX) had also formed reversal patterns with double tops on the 60 minute charts. The significance was the slower momentum and volume into the second high as compared to the first highs which took place on Friday.
http://tradingfrommainstreet.com/images/FocusLetter/20070829nas.gif
The initial follow-through on the 60 minute breakdowns came in the form of a rather large gap down in the overall market. Typically the extreme gaps such as this will attempt to fill in the morning, so while most of the daily setups I was seeing into the open were on the short side, I was leery to initiate much on the downside right away for fear that the indices would quickly reverse and fill the morning gap zone.
At 10:00 ET all hopes for the gap to fill were decimated by the release of the latest economic data. The consumer confidence reading for August fell from 111.9 in July to 105.0 in August, although this was still slightly above expectations. Also released was news on I/S/ home sales from the Standard & Poor. Sales prices fell 3.2% as compared to a year ago, making it the largest year-over-year decline in the 20-year history of the index. The selling did not resume right away at this point, but the market had hit support and instead of bouncing off that support, the data held down the market. This led to a low-level intraday base which was followed by a break to new lows into 10:45 ET. Volume had declined throughout the congestion and increased to confirm the breakdown once the support level gave way.
http://tradingfrommainstreet.com/images/FocusLetter/20070829sp.gif
The morning breakdown continued steadily into lunch, sliding into 15 minute 200 simple moving average support in the Dow and Nasdaq. At this point the market again began to congest on lighter volume, hugging the support level into the afternoon. The 15 minute 20 sma served as resistance and it hit at approximately the 14:00 ET correction period. This also corresponded to Fed news with the release of the Aug. 7 minutes from the FOMC's policy-setting meeting. In it the Fed reiterated its focus on inflation. It is expected that the Fed will cut its fund rates by a quarter-point next month.
http://tradingfrommainstreet.com/images/FocusLetter/20070829dow.gif
The afternoon combination of the low volume base at lows, the intraday resistance, the daily pivot and the Fed news kicked off a very strong continuation on the downside in the market. The indices broke lower out of the range and this selling continued into the close. There was a smaller base that began at about 14:45 ET, but the selling resumed at a faster clip again around 15:15 ET. The session ended within a few ticks of the day's lows. The Dow lost 280.28 points (-2.1%), the S&Ps fell 34.43 points (-2.3%), and the Nasdaq dropped a whopping 60.61 points (-2.4%). The financial sector was again one of the worst-hit after Merrill Lynch cut its rating on Lehman Brothers (LEH) (-6%), Bear Stearns (BSC) (-3.4%), and Citigroup (C) (-3.5%). All three were downgraded to neutral from buy. (Why on earth would anyone have wanted to buy any of these for investments in recent months? I have no idea! They are a wee bit late!)
While there is some support at the lows from the 17th and 20th, the door is now open to retesting price levels from the 25th-16th. I am not expecting an easy retest of the exact lows though. Volume was not that much stronger on Tuesday that during the upside and the last low was an extreme exhaustion move so support will tend to occur a bit above those lows, such as the opening prices from the 16th.
posted by Toni Hansen @ 10:07 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
babies come from Walmart....
hey gang.... going to be an aunt again and it's another girl! looks like my brother will continue to be outnumbered...
brandon (my 5-yr old) asked if this meant they didn't want amanda (my neice) any more and if we could buy her. i said no, that i didn't think she was for sale. brandon asked my brother where babies come from and he told him "the store"... so of course brandon wanted to know which store... my brother replied "walmart"... well...
next question of course was "mom, can we go to walmart and buy a baby brother for a hundred dollars?" (not sure where the price came from but it's the biggest number he knows so i guess he figured baby brothers were not cheap....)
i told him that i wasn't sure they had any available at this time and that they probably had to restock them since i didn't see them the last time i was there. he then asked where the store got them. i told him to ask grandpa....
so he called my dad who told him "china... everything at walmart comes from china"... then followed a long conversation on how he could get to china to buy a baby brother... i heard something about a boat...
brandon then holds the phone away and asks if babies really come from china... i agreed that they did... which sent lexie into a fit about me lying to brandon.... so i had to explain that no... some babies do come from china and it's not a lie... she said... "not all babies come from china!" i countered with "i never said they ALL come from china..." (mainly she was jealous to have not been participating in this extremely extended debate and was getting very annoyed by that fact)
after hanging up the phone brandon asked me "did i come from china"... i said "no, you didn't" he then asked if i bought him in iowa... i laughed said "yep" "did you buy me at walmart?" lmao... "nope, i didn't" he then rambled on for another 10 minutes about being an iowa baby and not from china hahaha
p.s. he wants to name his baby brother he plans on buying from china "miguel" hehe
p.p.s. on a more serious note... walmart (wmt) is not looking that hot on the weekly time frame and is actually forming a short pattern after having fallen throughout 2004-2005 and then based since then. on the daily chart it's now basing at those lows as well. the con is that volume increased throughout the weekly based instead of decreased, but part of this was due to the gap a few weeks back. this still has a lot of room to move ont he downside. conservatively, i would say to about $35 before it sees decent support again on the weekly time frame.
http://tradingfrommainstreet.com/images/walmart.gif
posted by Toni Hansen @ 9:49 PM 1 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, August 27, 2007Housing Data Dampers Market
Good morning! The market was extremely choppy on Monday. After trending strongly to end the week, the indices were all over the place at the beginning of the new one. The market opened slightly lower into the lower end of Friday's uptrend channel and the Nasdaq pulled higher to attempt to close the gap, while the S&P 500 could not shake the open and fell into congestion right away. At 10:00 ET this uninspiring trading became a bit more lively with the release of the housing data. The number of unsold homes hit a 16-year high last month and within a few minutes the market was making new intraday lows.
http://tradingfrommainstreet.com/images/FocusLetter/20070828nas.gif
Despite the stronger action out of the open in the Nasdaq Composite, the indices diverged in the opposite direction following the 10:00 ET data. All three indices flushed lower at 10:00 ET, but the Nasdaq and S&Ps then based and continued lower again while the Dow Jones Ind. Ave. held that low and fell into a more bullish congestion and trading range. It was not until the 11:15 ET reversal period that the rest of the market also began to turn back around and those reversals were not terribly pretty. The Nasdaq and S&Ps flushed into 12:00 ET, and while the momentum was strong, the move was brief and the volume was light. This meant that the selling, while steep, was not much of a concern and did not have a lot of players.
http://tradingfrommainstreet.com/images/FocusLetter/20070828sp.gif
Momentum turned over into the early afternoon, moving higher with several steady moves on the 1-5 minute time frames. The cleanest trend was on the Nasdaq Composite, where a nice three-wave trend move took the market back into the opening congestion. The Dow, as a result of its greater strength in the latter half of the morning, was able to close its morning gap with this rally, closing it coming out of the
13:00 ET reversal period. Another three-wave trend followed, but this time it was on the downside into 14:00 ET on the 1 minute time frame. It took back a huge chunk of the early afternoon buying, but the momentum was not extreme and a second test of intraday highs took place shortly after 14:30 ET when the Nasdaq broke the highs of that early afternoon level and retested the morning highs, which were slightly above the early afternoon ones.
http://tradingfrommainstreet.com/images/FocusLetter/20070828dow.gif
Whenever the market establishes a very slightly higher high after pulling back by 50% or more, the risk is higher that the market will form a 2T pattern, which is a type of double top with a very slightly higher high. The slightly higher high creates a bit of a trap and can lead to some strong selling as long as the upside on the second high is slower than the first. This was not really the case on Monday afternoon, so the market found support in the zone of the 14:00 ET zone. The momentum did change after this second test, holding the 5 minute 20 sma and the market was able to sell-off again into the close. The end result was a loss of 56.74 points in the Dow, 12.58 points in the S&P 500 and 15.44 in the Nasdaq Composite.
The afternoon selling in the indices triggered an Avalanche short pattern on the S&Ps and a 2T/double top on the Dow on the 60 minute time frame. The slowing and rounding off at highs on this time frame has opened the door on Monday to further downside into the morning on Tuesday even though the daily charts still have room to wiggle. I want to be very careful to not just assume that because there is some room to move that it means it will. The continued weakness is more plausible given the intraday action going into the morning.
Economic Reports and Events This Week
Monday, August 27, 2007
10:00a.m. July Existing Home Sales. Previous: -3.8%.
10:30a.m. Aug Dallas Fed Mfg Production Index. Previous: -9.7.
12:00p.m. Chicago Fed Midwest Mfg Index. Previous: Unch.
Tuesday, August 28, 2007
7:45a.m. ICSC Chain Store Sales Index For Aug 25. Previous: +0.2%.
8:55a.m. Redbook Retail Sales Index For Aug 25. Previous: -0.7%.
9:00a.m. Aug
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Sunday, August 26, 2007Market Continues to Advance
Good morning! The market experienced its strongest uptrend day in a number of months on Friday, climbing throughout the session in a narrow trend channel with the 5 minute 20 simple moving average serving as support throughout the session. The day began rather unexceptionally, but at 10:00 ET the July home sales data was released and the indices surged to new intraday highs thanks to an expected jump in sales last month. A number of housing-related stocks have been showing downside exhaustion the past couple of weeks and while things still don't look very peachy for the likes of Countrywide Financial (CFC) and a number of others, but I think that a lot of folks will be doing a bit of dumpster diving at these levels in over the next few weeks. Home price data on Tuesday with the Case-Shiller index and then on Friday from the Office of Federal Housing Enterprise Oversight will be watched by many closely monitoring this sector.
http://tradingfrommainstreet.com/images/FocusLetter/20070827nas.gif
The market fell into a slow correction off highs soon after 10:00 ET, but the volume declined throughout the pullback and the pace of the move was very gradual into the 5 minute 20 sma. The range continued on light volume as a triangle formed and then shortly before 12:00 ET the indices again began to advance. At about 12:15 ET they popped sharply through the intraday highs and out of a small 1 minute base. The Nasdaq Composite and Dow Jones Industrial Average both retested Thursday's highs on this breakout and the S&P 500 came very close before the three again fell into a level of congestion along the highs of the day and again on light volume.
http://tradingfrommainstreet.com/images/FocusLetter/20070824sp.gif
One of the most interesting things to me on Friday was that whilst the market again broke higher out of the 14:00 ET correction period, the overall volume throughout the session was lighter than it had been all week and even all month. This seems to indicate a bit of hesitancy and confirms the cautiousness of the optimism that has been attempting to build ever since the Fed's surprise rate cuts the week before. At least the lightest volume was during the correction moves on Friday and it would then increase a bit with each break to new highs. Since most of the day was spent in corrections with shorter, but stronger rallies, the lighter volume is not really that surprising. I think that if we had seen longer bases at highs with stronger breakout that the overall volume would likely have been higher. Instead the market resembled a staircase of worn out steps as the buyers continued to push again into the closing bell.
http://tradingfrommainstreet.com/images/FocusLetter/20070824dow.gif
By the end of the session the Dow ($DJI) had risen 142.99 points (+1.1%) and closed at 13,378.87. 29 of its 30 stocks posted gains. Top advancers included Exxon Mobil Corp. (XOM) with a gain of 2.3%, Home Depot Inc. (HD) with gains of 1.9%, and Boeing Co. (BA), which climbed 1.8%.
The S&P 500 ($SPX) rose 16.87 points on Friday (+1.2%) and ended the day at 1,479. The Nasdaq Composite climbed 34.99 points (+1.4%). It closed at 2,576. Apple Inc. (AAPL) helped a great deal by gaining 3.2%.
Other top gainers were Mentor Graphics Corp. (MENT), Biogen Idec Inc. (BIIB), Blue Coat Systems Inc. (BCSI), National Oilwell Varco Inc. (NOV), Ann Taylor Stores Corp. (ANN) and Nucor Corp. (NUE). The financials remained among the weakest, pulling lower off 10 and 20 day simple moving average after taking back some of its sharp losses earlier in the week.
I again remain bullish this week, but expect a lot more choppy trading to continue with days like Friday remaining the exception. The indices are also still subject to the price resistance from a highs few weeks back, which is also the 50 day simple moving average level in the Dow and S&Ps. As the week progresses, keep in mind that next weekend is going to be a three-day weekend due to the Labor Day holiday, so expect volume to decline a great deal on Friday. This will be particularly true after the first hour of trading.
posted by Toni Hansen @ 7:49 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Friday, August 24, 2007Buying Slows as Congestion Gets the Best of the Bulls
Good day! The market opened strongly higher again on Thursday, but it's been a tough road for the bulls. Despite the strong open, the market has been moving upward for a number of days and after such a sharp decline just a week ago, it's been hard to maintain strong upside momentum. While the market has given us the gains we were looking for, on Thursday they failed to hold onto those gains. Right away after the gap higher things began to sell off.
The first support in the market hit at the 5 minute 20 simple moving average in the Nasdaq Composite and S&P 500. While this stalled the sellers, it provided very little relief and before long the market was again heading lower. The Nasdaq led the bears, giving up its recent relative strength. It broke down out of 10:15 ET, while the S&Ps and Dow Jones Ind. Ave. managed to hold those lows.
http://tradingfrommainstreet.com/images/FocusLetter/20070824nas.gif
At about 11:00 ET al three indices did give way to stronger selling, breaking to new intraday lows and then continuing only 15 minutes later into about 12:00 ET. At this point the market was coming into even stronger support. This was the previous day's lows in the Nasdaq and the 5 minute 200 simple moving average in the S&P 500. The Nasdaq displayed the greatest correction off this support, but it failed to gain momentum as compared to the previous selling and the volume remained on the lighter side as compared to recent activity.
Before long the market was again testing lows. These hit at the 13:00 ET correction and it was this support which held throughout the remainder of the day. The 13:00 ET lows hit at about the same time as the previous 15 minute lows in the S&P 500 and the 5 minute 200 sma in the Nasdaq Composite. Support from the prior lows in the Nasdaq also remained in play at this time.
http://tradingfrommainstreet.com/images/FocusLetter/20070823sp.gif
The morning's decline was not an idyllic one. There was a a great deal of hesitation and second guessing throughout the move and I lost a bit of money trying to play support given that the support levels generated very little upside or corrective action before giving way to further selling. Even after bouncing at noon, the market had a difficult time holding onto gains and the upside.
Wednesday, August 22, 2007Market Posts Gains After an Intraday Struggle for Control
Good day! Well, we got our additional upside finally on Wednesday! That was the good news and those who have been holding longs all week were no doubt very happy with the day. Unfortunately, this upside initially came in the form of an extreme gap in the indices. As I've discussed numerous times in the past, extreme gaps in the indices have a VERY difficult time holding the gaps, let alone continuing in the direction of the day. Instead, they prefer to close the gap zone on the day of the gap itself.
On Wednesday, to give the bulls some credit, they did a fair job of holding things up throughout the beginning of the session. While the market managed to hang onto most of its gains, it was again extremely choppy. After repeated attempts to break the highs of the congestion, the market fell quickly lower when the 11:00 ET correction period hit.
Even though it tried, the market simply could not take back the upside momentum to regain control. The indices did move back into highs and even into slightly higher highs shortly after 12:00 ET in the Dow, but ultimately the slower upside wore the bulls down and a second and more extreme selloff began only a few minutes later. Within half an hour all three of the major indices were at new intraday lows. The Nasdaq Composite found support at its 15 minute 20 sma, while the S&P 500 closed the gap zone by pulling into the afternoon highs which occurred just prior to the end of the day on Tuesday.
http://tradingfrommainstreet.com/images/FocusLetter/20070823nas.gif
After a brief respite, the market again headed lower into 13:00 ET. The correction off the 12:30 ET lows was not long enough to sustain as significant of a move lower, so the indices only barely penetrated the previous lows and did so at a much more gradual pace than the initial afternoon decline. Shortly before 13:30 ET they were again heading higher and climbed steadily back into the previous highs. While the reversal periods did not hold very well on Wednesday, the support and resistance levels did. This back and forth action continued throughout the remainder of the daily with nice pivots until around 15:00 ET. At that time the volume dropped off a bit more as the indices pulled back slowly. This change in momentum was all the market needed to make a break to new highs and many stocks closed near their intraday highs, while the overall market came within a few ticks of doing the same.
http://tradingfrommainstreet.com/images/FocusLetter/20070823sp.gif
Among the top intraday and daily gainers on Wednesday were Blue Coat Systems Inc. (BCSI), Dryships Inc. (DRYS), and Bally Technologies (BYI), all of which came to my attention early into the open due to their favorable upside gaps and corresponding daily charts that supported a great deal of room for further upside. BCSI, however, greatly exceeded my expectations. Other notable gainers included China Mobile Limited (CHL), McDermott Intl. Inc. (MDR), Apple Inc. (AAPL), Express Scripts Inc. (ESRX), and Sina Corp. (SINA).
By the end of the session, the Dow Jones Industrial Average ($DJI) had gained 145.27 points (1.1%), the S&P 500 ($SPX) gained 16.95 points (1.17%), and the Nasdaq Composite ($COMPX) gained 31.50 points (1.2%). While they didn't get far past the early morning trading, MGM Mirage (MGM) and Nymex Holdings (NMX) were both also at the top of the gainers lists. MGM climbed 8.9% on news that Dubai World would be acquiring a 9.5% stake in the company and NMX rose 6.1% after announcing talks with potential investors and its intended cost-cutting measures.
http://tradingfrommainstreet.com/images/FocusLetter/20070823dow.gif
Heading into Wednesday's close, the market still remains more bullish. I wouldn't bet on the rumors circulating that this is all there is to it and that the market is going to again be able to break to new highs on the year. This is the second flush already on the weekly and monthly time frames and each time it becomes more and more difficult for the bulls to regain control. It is not looking, however, that we are going to get another extreme downside move beginning just yet, but other than swingtrades and daytrades, I am investing very little in the market at this point and my focus on the larger time frames is merely managing the ever dwindling position trade positions I still have open.
posted by Toni Hansen @ 6:52 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Triangle Breakout SLG
I know, I know.... Why would I trade something like SLG with the spread that it has? Sometimes it's about 20 cents. That did cause me to pause. I could have gotten an entry easily at $114.10 but instead got $114.24 by waiting for a little more confirmation. Basically on a trade like this I constantly have my hand on the trigger button so that when things start to change I can bail quickly. I did figure I would have about 10 cents slippage, but the reward compared to the risk was still greater since this setup will nearly always retrace at least back into the zone of the morning highs. I used a target of the $115 zone since I figured that would be the easiest, although I think there is room it can move a bit more as the day progresses. I put my order on the books to take gains nearly right after I got in it at $114.94 to best guarantee that I would get filled since on a stock that does have a wide spread it might only trade at the resistance a tick or two and then fall. It does have a high shown of $115.15 on this chart but that was only one tick with all others at $115 or lower....
http://www.tradingfrommainstreet.com/images/trades/trianglegap_20070822slg.gif
Update: It is ot 10:56 and in fact SLG is not hitting higher highs again with $115.44. Should I have held partials? Maybe... but with something like this I often just like to take my gains and move my attention elsewhere instead of having to monitor something like SLG where I pretty much have to keep an eye on it at all times. Even that $115.44 only hit once. Most trades near highs on this continuation have been the $115.20 area.
posted by Toni Hansen @ 7:52 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, August 21, 2007DKS 2-Wave Breakout
One of my favorite gap setups... Two wave pullback then continuation.... Notice the light volume on the second drop... No real selling!
http://www.tradingfrommainstreet.com/images/trades/2WaveGap_20070821DKS.gif
posted by Toni Hansen @ 6:35 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Nasdaq Gains Ground, but Dow Struggles
Good day! It was a mixed session for the market on Tuesday. While I managed to find some great setups in individual stocks such as Dicks Sporting Goods Inc. (DKS), the overall market had a tough time making any headway. Even though the market had some core setups in terms of the 5 and 15 minute time frames as you can see on the charts shown below, the main problem was that in forming and following through on the setups there was a great deal of chop and overlap from bar to bar. This would have made it easier for many to time entries and exit incorrectly and get flushed out on minor moves before the larger target levels hit. Although I saw some nice setups in the afternoon that would have worked out quite well, I ended up staying away from them for this very reason. I have not yet decided if that was a good or bad choice on my part since this time it obviously cost me a lot!
http://tradingfrommainstreet.com/images/FocusLetter/20070822nas.gif
The day began on Tuesday with a bit of downside as the market continued to correct off Monday afternoon highs. The back and forth action created a bull flag and trading range on the 15 minute time frame in the indices with the 15 minute 20 simple moving average serving as support. The pace turned over within the range with a base along highs from about 10:45-11:15 ET. The range broke upwards out of that final morning correction period and within a few minutes the Dow, Nasdaq and S&Ps were all at new intraday highs and following through with my expectations for upside on the day, although only the Nasdaq really mirrored my expectations.
The rally continued throughout the remainder of the morning and into the early afternoon with a final push out of the 12:00 ET correction period. This time the momentum was slower, and while the Nasdaq was free and clear of intraday resistance, it did have the 10 and 100 day simple moving averages to deal with. The Dow had even stronger resistance intraday. It had ran smack into the previous afternoon's highs and held them perfectly. The slowing momentum on this last push higher in the Dow and S&Ps allowed the market to pivot sharply off the resistance into 12:30 ET. The Nasdaq fell back to its 5 minute 20 sma, but the Dow and S&P 500 both plunged back into the morning congestion where they finally found support.
http://tradingfrommainstreet.com/images/FocusLetter/20070822sp.gif
Throughout the first half of the afternoon following the market's initial decline, the indices fell into a narrow trading range as volume dropped to one of its lowest levels in a number of weeks. The upside momentum was very slow and at 14:00 ET the support began to break. Keeping in line with its choppier trading activity, however, it took a bit more time before the selling began to increase.
As the market descended there was a still a lot of overlap from one bar to the next until the indices hit equal move support as well as price as moving average support around 14:45 ET. This was where previous lows intraday hit, as well as the 15 minute 20 sma in the Nasdaq. In the Dow and S&P 500 the 5 minute 200 sma was tested at this time and in the Dow this also corresponded to the 15 minute 200 sma. The pivot off this merger of support levels was one of those "Duh, Toni, you should have traded it" setups where I had the order up and ready, but didn't push the button. It triggered at the same time as the 15:00 ET correction period as well and the market made its way back into its earlier afternoon congestion before stalling a bit again into the closing bell.
http://tradingfrommainstreet.com/images/FocusLetter/20070822dow.gif
By the end of the day the Dow Jones Industrial Average ($DJI) lost 31.49 points. Among the weakest stocks were United Technologies Corp. (UTX), which fell 2.4%), and Exxon Mobil Corp. (XOM), which lost 1.6%. Top gainers were Home Depot Inc. (HD) and Verizon Communications Inc. (VZ). In the other indices, the S&P 500 ($SPX) gained 1.57 points, while the Nasdaq Composite ($COMPX) led with a gain of 12.71 points, or +0.5%. Broker dealers, financials, and airlines were leading sectors on the day, while oil and gold struggled.
My bias heading into Wednesday could be labeled "cautiously bullish." I do still feel there is room to continue to rebound this week and I am most comfortable given the current daily dynamics to take positions in that direction. I am aware, however, that the bullish sentiment is paper thin and it would not take a lot to create another panic move intraday, even though I think that we are probably going to see a much longer correction off recent lows over the next couple of weeks. Whether this ends up being a decent correction in terms of price or remains a choppy, range-bound type of correction is yet to be seen since both scenarios have approximately equal weight at this point.
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Monday, August 20, 2007Market Posted Minor Gains, but Congestion Prevailed
Good day! The market did things a bit backwards on Monday as compared to what I had been expecting going into the day. I was expecting upside in the morning and then a late day reversal. Instead the market displayed greater weakness throughout the morning and turned around into highs in the afternoon. All said, however, it was still the choppier type of indecisive trading that we HAD been looking for. This was particularly the case throughout the first half of the day.
The indices gapped very slightly higher into the open on Monday, but while many individual stocks did gapped higher, they also hit resistance with the gap. As they pulled back, so did the overall market and the gap was quickly squelched. Support hit close to the 9:45 ET correction period and the market began to move up off the early morning lows, but the momentum in both the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) were slower than the earlier selling. The Nasdaq Composite ($COMPX) managed to make its way to new intraday highs, but all three indices turned over once the 10:15 ET reversal period hit and were soon back at the earlier support levels.
http://tradingfrommainstreet.com/images/FocusLetter/20070821nas.gif
At that point the volume was showing a great deal of wariness. It dropped off as the indices hugged support, favoring a late morning breakdown. The financials and broker/dealers led the selloff, falling very sharply to new intraday lows. Goldman Sachs (GS), Bear Stearns (BSC), Capital One Financial Corp. (COF), and Prudential (PRU) led the fray. These sectors were not the only ones feeling the sting. Retailers also had a hard time. Target (TGT) kicked off an new intraday downtrend that would last throughout the remainder of the session and Kohls Corp. (KSS) and Penney J C (JCP) also had strong selloffs.
http://tradingfrommainstreet.com/images/FocusLetter/20070821sp.gif
Despite the great show of weakness as the market fell sharply from its morning congestion, the indices were unable to maintain such momentum once they ran into support from Friday. Keep in mind that despite the selling, the larger daily bias was still in favor of some additional upside. The market again began to congest along intraday lows over noon. The upside was a bit more than before and the market broke down too early to sustain another sharp decline. For the bears to have regained real control, the market would have had to have based along the lows into about 14:00 ET. Instead the market broke down into 13:00 ET and created only a slightly lower low, allowing the pace to turn over into the afternoon as the choppy trading formed rounded lows mid-day.
http://tradingfrommainstreet.com/images/FocusLetter/20070821dow.gif
The market showed some gumption shortly after 13:30 ET originally by popping quickly back to the highs of the mid-day congestion. The bias really began to look favorably upon the bulls on the pullback that followed, however, when the indices pullback back into the lower end of the range and continued to round off. Since I had missed the morning drop by taking lunch just a few minutes too soon, this was my first futures trade of the day. I picked up the NQ at 14:20 ET at 1886.25.
The first resistance on this late day turn-around was just above the previous 5 minute high and then the market based slightly into the 15:00 ET reversal period before heading into the second and more substantial resistance at the morning highs. The pace slowed at this level and the market spent the rest of the day pulling back with continued selling after the bell.
Going into Monday, I had anticipated greater overall strength and a stronger push into the daily resistance from a few weeks back. The Dow did gain 42.27 points, but the S&P 500 lost 0.39 point and the Nasdaq Composite only added 3.56 points. This means that the market still has that overhead room to move on Tuesday, whereas a stronger upside on Monday would have made it more likely for the market to have fallen on Tuesday.
posted by Toni Hansen @ 7:13 PM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, August 19, 2007Fed's Surprise Rate Cut May Have Had Little Effect
Good day! I know what you are saying... The market closed quite a bit higher on Friday, with gains of 233.30 points (+1.8%) in the Dow Jones Ind. Average ($DJI), 34.67 points (+2.5%) in the S&P 500 ($SPX), and 53.96 (+2.2%) in the Nasdaq Composite ($COMPX). Given that the highs of the day on Friday were shortly after the open following the Fed's surprise rate cuts of 50 basis points, why would I then say that the move may have had very little effect upon the market? It seems like a simple case of cause and effect. I disagree.
The market established a fairly strong downside exhaustion day on Thursday. Volume hit record highs and after strong selling throughout the morning the indices bounced back sharply into the close. A reversal like this on substantially higher than average volume will typically see more upside following through into the next trading day. Did the Fed help things out? Sure. The market had not been doing much at all in the premarket before the Fed news hit. Then shortly after 8:00 am ET the news hit the wires and the futures surged. I believe that what this news did was simply let the buyers gain a hold earlier than they would have otherwise, but that they still would have gotten their on their own.
Unfortunately, the result of the premarket move is that it did circumvent the momentum the indices had been building into the day and left it wondering just what to do once the opening bell rang. Those who would have otherwise been willing to view Thursday's close as a buy opportunity into the next day were nervous by the gap higher after so much weakness and volatility. The open itself took place into a great deal of resistance on the 15 minute charts. In the Dow and S&Ps it was the 15 minute 20 sma, while it was also price resistance from earlier in the week in all three of the major indices.
http://tradingfrommainstreet.com/images/FocusLetter/20070820nas.gif
Typically a larger-than-average gap in the overall market will close on the morning of the gap, or at least into the early afternoon, in at least one of the three indices, if not all of them. It's very difficult for the market to continue to move in the direction of the gap past the first 15 minutes of the day. It is true that the extreme upside gaps can hold better than the downside ones in the indices, but the bias still remains in favor of a closure of the gap. Friday's trading was a great example of the rule as opposed to the exception. By the 9:45 ET reversal period the bears had begun to regain control and the market swiftly turned and began to head lower.
This initial wave of selling on the 3 and 5 minute time frames experienced the sharpest momentum. A second continuation took place coming out of the 10:15 ET correction period. This one broke to a lesser degree, but a second base or correction followed and a third wave of selling closed the gap zone in both the Dow, as well as the Nasdaq. There was also price support in the S&Ps at this time, and the Dow hit its 5 minute 200 sma support. All of these came together with the 10:45 ET correction period and since typical trend moves last 2-3 waves, this meant the trend intraday was now exhausted as well and due for a larger correction intraday off the support.
http://tradingfrommainstreet.com/images/FocusLetter/20070820sp.gif
When the market did turn, it was a choppy reversal. The momentum picked up, but it didn't sustain itself. The descent off the morning highs was simply too strong to allow for a rapid reversal and although the market went for a continuation at 11:30 ET, it didn't make it past some of the early congestion levels from the intraday downtrend and the overall upside was quite a bit weaker than the decline had been. This allowed the market to move lower at a more rapid pace into the 12:00 ET correction period, even though it held the support from the price congestion between 11-11:30 ET.
The pattern which developed mid-day on Friday was one of my favorites. After the sharper pullback, the indices moved fairly well to take back more than 50% of the losses from the 11:45-12:00 ET move. The lighter volume during this action then declined further as the market based and the 5 minute 20 simple moving average served as support. When this base or slower pullback breaks higher it triggers a buy. This took place out of the 13:00 ET correction period on Friday and led to another nice daytrade or scalp move higher.
http://tradingfrommainstreet.com/images/FocusLetter/20070820dow.gif
Despite the buy setups, the larger trend was still slower than average and much slower than the morning drop. This more gradual pace continued throughout the remainder of the day. After the early afternoon breakout, another correction followed with the market pulling back a bit more quickly into the 14:00 ET correction period and then slowing to form a longer correction until about 15:00 ET. Once again this correction period held as well and another move higher on the 5 minute charts took the Nasdaq nearly back into the opening price levels on both the Dow and S&Ps where they held throughout the remainder of the day.
I am expecting the bulls to again attempt to peek their heads out on Monday, however the typical action following a daily move such as we have seen over that couple of weeks would be for a narrower range to occur with a lot of indecision intraday. Barring news, an upside gap would be common. Morning upside intraday, however, can more easily give way to a reversal in the afternoon. The 20 day sma will be strong resistance.
posted by Toni Hansen @ 8:04 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, August 16, 2007Market Recovers After Nearly a 350 Point Loss in the Dow
Good day! I have one word to describe Thursday's session: Yikes! Ok, so we were looking for more downside ahead of the weekend, and we weren't looking for support until the price congestion from late last year and early this year hit. Nevertheless, seeing it follow-through with our bias and the wickedly volatile trading that accompanied it was quite something!
The market began the day with a downside gap into the open. This was a logical extension of Wednesday's late-day selloff and I took it as more of a non-event. The gap quickly closed heading into the 9:45 ET reversal period, but when that resistance hit the sellers returned. The momentum which accompanied the morning descent was comparable to that of the prior afternoon and the trend channel already in play at that time held. Two waves of intraday selling led to a pivot low at about 10:30 ET.
This 10:30 ET low was the first level intraday where the market had a chance of holding and establishing a larger correction off lows on the 15 minute time frame. Even though the market did bounce here, however, the pace on that bounce was still more gradual than the morning decline. In order to really gain momentum on the upside we would need to see at least some sort of rounding off at lows to allow that momentum to turn over. Instead the market moved slowly higher on a break in the 5 minute 20 sma after a brief stall and ended up forming a bear flag on the 15 minute charts.
http://tradingfrommainstreet.com/images/FocusLetter/20070817nas.gif
A large intraday downtrend followed the 15 minute bear flag on the 5 minute time frame. The trend began coming out of the 11-11:15 reversal zone and an initial move took the market into morning lows. The first continuation took place at noon after a base on the 5 minute charts. Volume declined throughout the base to uphold the bearish bias and increased once the support gave way to confirm it. A second correction leading into a third wave of selling formed into 12:30 ET. Once again the volume declined throughout the base at lows and once again increased when the base broke lower.
Trend moves often last for three waves, so this paved the way for an afternoon correction off the mid-day lows. The momentum was still quite extreme to the downside, however, so an initial stall at support at 12:45 ET had a rough time holding and another test of lows into the 13:00 ET reversal period gave the market that rounded low that it was lacking earlier in the session. It established a very slightly lower low to form a 2B type of double bottom and the reversal period itself also pointed towards an afternoon reprieve.
Once the buying got under way, it did so very quickly by popping up to the 5 minute 20 sma in a matter of minutes. Instead of forming any strong 5 minute base and continuation, the market only stalled at the sma for about 15 minutes before it continued the new intraday uptrend. This created a trend channel not unlike that of the prior afternoon's selloff. Corrections within the trend move itself only allowed for setups on a 1 minute time frame and not on anything higher. The rally lagged a bit in the Nasdaq, but the S&P 500 and Dow Jones Industrial Average maintained an overall pace on the upside move that was more rapid than the decline and made it likely that the indices would hold the 13:00 ET lows throughout the remainder of the session.
http://tradingfrommainstreet.com/images/FocusLetter/20070817sp.gif
After losing about 340 points at lows in the Dow, the market regained the majority of the ground it lost as it rallied into 14:15 ET. The indices had a bit of an exhaustion move on a 1 minute time frame (hard to see here), where the pace spiked. This is common at highs and the indices pulled sharply into the lower end of the uptrend channel. Upon breaking out of the channel, the market began to hug the 5 minute 20 sma, forming an Avalanche setup which triggered in the final hour of trading.
The afternoon selling nearly took the market back into its mid-day lows, but the support held as the market hugged its 15 minute 20 sma and then turned around again to rally into the close.Thursday was the highest volume day of the year to date. Amazingly, the Dow ($DJI) managed to close with only a loss of 15.69 points. JP Morgan Chase (JPM) was one of the top gainers on the day, adding 5.7%. Citigroup Inc. (C) also had a great day, adding 4.3%. The S&P 500 ($SPX) had such a strong recovery that it added 4.57 points before the close, while the Nasdaq Composite ($COMPX) lost 7.76 points.
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Thursday was an exhaustion day for the market. I expect to once again see some corrective action off the daily support heading into next week for a few weeks, but the odds are again high that such a correction will be choppy with more overlap from day to day. The 10 and 20 day simple moving averages will serve as resistance. I am expecting to take Friday very slowly. It has been an extreme week and folks will be positioning themselves ahead of the weekend. My focus will be on scalps and shorter time frame daytrades.
posted by Toni Hansen @ 8:53 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Premarket News - Stocks of Interest
· CAI up 1.7% - this Q comes in better....they reit F08 outlook
· CRM - this Q comes in better, raise F08 outlook.....the low-end of FQ3 is below Street
· TMA Price Target to $7 from $19 at DB
· INTC - coverage transferred at CSFB and stock upgraded from underperform to outperform
· NTAP up 5.4% - this Q inline w/warning...the Oct Q outlook is "better", but prob. inline
· AMGN announces restructuring on lower Aranesp revs -- cuts '07 EPS view and '07-08 CapEx, reduces workforce by 12-14%
· VITL Vital Signs Buys Fluid Warming Technology
· BZH up 4.5%, files 8K
· KOSN up 3.7%, files $75M mixed shelf
· AMFI up 2.8%, names Donald Wilson Pres/COO
· USTR up 2.6%, ups stock repurchase authorization by $200M
· HOC up 2.6%, Navajo refinery unit back online
· CGNX dn 7.7% Cognex Tops Q2 Estimates But Sees Q3 Below Forecasts
· LDG Longs Drug Tops With EPS, Revenue Shy as Guidance Straddles
· NTAP Network Appliance Tops Q1 Estimates, Sees Q2 in Line to Above, OKs Buyback MN Sets $50 Mln Stock Repurchase Program
· PETM PetSmart Beats on Earnings, Meets on Revs, Sets Guidance MN 08/15 16:19
· CPWR says Won't Take On Debt to Buy Back Shares Due to Mkt Condition
· NOIZ Micronetics' Q1 Results Down Vs Yr Ago
· DITC Ditech Networks Misses Q1 EPS Estimate, Sales Meet, Q2 Sales Seen In Line
· CRM Salesforce.com Down 3%, Reports Improved Q2 But Updated Guidance is Mixed
· COP Conoco Phillips Unit to Pay U.S, $97.5 mln for Fraudulent Underpayment
· UTSI dn 1.8%, gets Nasdaq Notice Due to Late 10Q Filing, Requests Hearing
· LMRA --Lumera CEO Resigns, Names President and Interim CEO \
· PLAB Photronics Q3 Results Down vs. Year Ago Levels, but Beat Estimates
· SPWR SunPower Inks Long-Term Supply Pact with SMA Technologie AG –
· CXM --Cardium Therapeutics Files Up to $50 Mln Shelf Registration With SEC
· IMOS up 1.3% - ChipMOS Firmer - Q2 EPS In Line, Guides for Revenue to Miss
posted by Toni Hansen @ 6:26 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, August 15, 2007New Monthly Lows for Dow, Nasdaq and S&Ps
Good day! The market remained under pressure on Wednesday as heavy late-day selling once again bombarded the bulls. The Dow ($DJI) closed under the 13,000 level for the first time since April after losing 167.45 points. It ended the session at 12,861 with a loss of 1.3%. The S&P 500 ($SPX) lost 19.84 points (1.4%), and closed at 1,406.7. The Nasdaq Composite ($COMPX) ended the day lower by 40.29 points (-1.6%), at 2,458.8. One of the top losers was Countrywide Financial (CFC), which fell 3.17 points, or 13%, after it was downgraded from buy to sell status by Merrill Lynch. Another stock which has been extremely hard-hit by the fiasco with sub-prime mortgages was KKR Financial Holdings (KFN). It fell another 31.2% on Wednesday after announcing the sale of $5.1 billion in residential mortgage loans and suffering a downgrade from Lehman.
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Wednesday's economic data had very little impact on the day's activity. During premarket trading the Labor Dept. reported a rise of 0.1% in July in the Consumer Price Index. This serves as a measure of price inflation on food, energy, and consumer products. The core consumer price, which excludes the food and energy portion, increased 0.2%. Both of these numbers were in line with expectations. The Empire State Manufacturing Index, which also came out at 8:30 a.m. ET and measures manufacturing activity in the New York area, slipped lower to 25.1 in August off the 26.5 level in July. This index had been expected to fall to 19.0.
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Although the end result of Wednesday's session was a marked decline on the day, intraday things got off to a sloppy start and patterns throughout the day were less obvious than usual. What I mean by this is that there were fewer clear-cut setups and trend moves were hesitant at best. Even the start of the late-day decline was not overtly suggestive that such a move would take place because the move began after an increase in upside momentum when the market rallied back into its morning highs. Once the uptrend channel broke, the market sold off without any real correction to catch a continuation move on anything other than a 1 minute chart throughout the remainder of the day. The trend channel was narrow and steady. Typically a late day trend will at least have a bear flag or such on a 5 minute time frame. Not this time!