1111111111
Thursday, April 06, 2006Short Apple
I believe it's time to short Apple Computer (symbol AAPL). Close out any position if the price crosses above $73.
Below is a chart of Apple's entire trading history since their 1981 IPO (adjusted for splits, of course). I have highlighted in green five discrete "hyperbolic rallies", the most recent of which is the most dramatic and peaked last January 12th.
http://photos1.blogger.com/blogger/4311/970/400/0406-AAPLLongTerm.jpg
I'm not an Apple-basher, by the way. I bought my first Macintosh early in 1984, shortly after it was introduced. I worked at Apple for nearly three years in the late 1980s. And Steve Jobs has been my personal hero since I was a kid. So Apple is a great company with wonderful and well-polished products.
But their stock is atmospheric at this point. I would characterize the five tinted "hyper-rallies" as follows:
[*]1982-1983 - General high-tech rally; anticipation of Lisa & Macintosh[*]1986-1987 - Post-Jobs ouster recovery and popularity of Mac as desktop publishing tool[*]1990-1991 - Post-Kuwait tech rally and popularity of faster Macs, such as the IIfx (Multimedia)[*]1998-1999 - Jobs influence on product line improves earnings and reputation[*]2004-2005 - iPod rally, earnings momentumYou can clearly see what happened after each of these five hyper-rallies. The stock fell, and it fell hard and fast. The stock already started doing this over the past 10 weeks, although the past couple of days have pushed the stock up to a much safer level for bears. Here's the entire "iPod rally", where the stock went up more than ten-fold.
http://photos1.blogger.com/blogger/4311/970/400/0406-aaplipodrally.jpg
Taking a closer look at recent history, you can see the Fibonacci retracement closely aligns to the price behavior. Indeed, today the 50% retracement was nailed to the penny. I'd say this is a relatively safe high reward/low risk trade.
http://photos1.blogger.com/blogger/4311/970/400/0406-aapl-fib.jpg
at 4/06/2006 8 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
Newer Posts Older Posts Home
11111111
Wednesday, April 05, 2006Bullish Charts for a Bullish Market
Maybe you think you're on the wrong blog, since I actually have some "buy" recommendations today. But if you can't beat 'em, join 'em, and I'm sick of fighting the upward tide.
The Dow Jones Composite hit a lifetime high today. It is currently 12% above its peak during the Internet bubble. The Dow Transports also hit a lifetime high today, and it is 23% above its bubble high. The Dow Industrials is still about 400 points below its lifetime high, and it needs to cross above 11,335 before that becomes a possibility.
One compelling chart for a bullish case is this one of the NASDAQ Composite. It sort of kind of has an inverted head & shoulders pattern. Not textbook, by any stretch, but it keeps pushing its way into relatively clean territory.
http://photos1.blogger.com/blogger/4311/970/400/0405-compq.jpg
The Gold market is one which seems clearly past its peak. The chart below shows nearly twenty years of data for the $XAU, and it seems to have hit a major top for the third time in a row (see circled prices).
http://photos1.blogger.com/blogger/4311/970/400/0405-xau.jpg
First recommendation is NWRE (stop price: 21.53; in all cases, the stop price cited means any price below this should generate a sell @ market order).
http://photos1.blogger.com/blogger/4311/970/400/0405-nwre.jpg
Second is Prudential Financial (PRU, stop price 74.52). I suggest waiting for a breakout to a new high before pursuing this one.
11111111
Second is Prudential Financial (PRU, stop price 74.52). I suggest waiting for a breakout to a new high before pursuing this one.
http://photos1.blogger.com/blogger/4311/970/400/0405-pru.jpg
Radyne (symbol RADN stop 12.68) is next:
http://photos1.blogger.com/blogger/4311/970/400/0405-radn.jpg
SCMR (stop 4.46) has been struggling for years. It needs to clearly break above this saucer, but if it does, it could mean a major move.
http://photos1.blogger.com/blogger/4311/970/400/0405-scmr.jpg
Lastly is TradeStation (TRAD, stop 13.33) which not only has had great price action lately but also a sensational increase in volume. Always a powerful combination....
http://photos1.blogger.com/blogger/4311/970/400/0405-trad.0.jpg
at 4/05/2006 8 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
1111111111
Tuesday, April 04, 2006Going Nowhere Fast
Yes, I know the market was up some today. And it was up some yesterday. But the fact is that this market is stuck without any clear direction - either up or down - and it's maddening.
Here is a chart of a true trending market; this was back in 1995 and the first part of 1996. The market pushed higher, virtually uninterrupted:
http://photos1.blogger.com/blogger/4311/970/400/0404-INDU.jpg
Here, on the other hand, is the recent history (intraday) of the S&P 500. Up. Down. Up. Down. Churn, churn, churn. It's going nowhere fast.
http://photos1.blogger.com/blogger/4311/970/400/0404-SPX.jpg
Why is this? Well, one reason is that in spite of all the talk of "5 year highs", the market still has a fair bit of overhead resistance to conquer. Even the Dow, which is nearer to historic highs than any other major index, isn't out of the woods left. Notice the highlighted area representing overhead resistance, and it's no wonder earnest attempts to push higher get repelled.
http://photos1.blogger.com/blogger/4311/970/400/0404-InduOverhead.jpg
The market hasn't had any reason to move up or down in a meaningful way. Even though I'm a technician, I admit that earnings do drive share price, and there will be a lot more clarity in the coming weeks whether the market is going to shake off the doldrums and blast higher or if it'll succumb the the pressures of a tired bull market. In the meantime, feel free to share your own views and specific recommendations in the comments section.
at 4/04/2006 10 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
Monday, April 03, 2006Rally Gets the Wind Taken Out
The market took off like a rocket this morning, with the Dow up over 130 points. But, as is so often the case lately, the market can't seem to make up its mind. Only about 30 of those Dow points survived to the end of the day, and some indices actually fell. The NASDAQ composite is a good example, exhibiting a bearish engulfing pattern for the day (the open is higher than Friday's close and the close is lower than Friday's open). I'm not sure how much longer the bulls can keep this up. Where else is the steam going to come from?
http://photos1.blogger.com/blogger/4311/970/400/0403-COMPQ.jpg
Hopefully as earnings season cranks up in a couple of weeks the market wil get some clarity as to its direction.
at 4/03/2006 6 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
Newer Posts Older Posts Home
1111111111
Monday, April 03, 2006Couple of New Short Ideas
The market is soaring this morning (Dow's up over 100 points). In the face of this, I offer a couple of relatively low-risk short ideas (note to the bulls out there: how about you offer some specific stock recommendations, including stop-loss prices, since you seem convinced of your stock-picking acumen?)
First is Avalon Bay (AVB), which is in the overheated REIT market. This is a hyperbolic stock which has a stop-loss price of 110.65.
http://photos1.blogger.com/blogger/4311/970/400/0403-avb.jpg
The second is Health Net (HNT), which I'd give a stop-loss of 51.03. It broke a major ascending trendline and has retraced to an important Fibonacci level. Again, this is a low-risk, high-reward trade since the stop-loss is so close.
http://photos1.blogger.com/blogger/4311/970/400/0403-HNT.jpg
at 4/03/2006 6 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
11111111111
Thursday, March 30, 2006Topping Out Continues
I was delighted, of course, that my prediction the fall would resume today materialized. That validates that the prices were simply retracing to resistance. I'm anticipating further descent tomorrow.
Here's a few favorite shorts, including stop prices. Maybe I've mentioned a couple of these before. The stop price is, by the way, the price above which the position should be closed. As always, click on the image to see a much bigger chart.
ACI (stop: 78.60)
http://photos1.blogger.com/blogger/4311/970/400/0330-aci.jpg
ESRX (stop: 91.64)
http://photos1.blogger.com/blogger/4311/970/400/0330-esrx.jpg
FLR (stop: 88.50)
http://photos1.blogger.com/blogger/4311/970/400/0330-flr.jpg
HP (stop: 72.74)
1111111111
HP (stop: 72.74)
http://photos1.blogger.com/blogger/4311/970/400/0330-hp.jpg
MCK (stop: 53.11)
http://photos1.blogger.com/blogger/4311/970/400/0330-mck.jpg
UBB (stop: 86.64)
http://photos1.blogger.com/blogger/4311/970/400/0330-ubb.jpg
UTH (stop: 112.88)
http://photos1.blogger.com/blogger/4311/970/400/0330-uth.jpg
at 3/30/2006 10 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
Newer Posts Older Posts Home
11111111111
Wednesday, March 29, 2006Retracing Back to Resistance
Today's action seems to have elicited a lot of "Take THAT, bears!" from both the media and the readers of this blog.
Simply stated, I think today's retracement is to be taken in stride. Look at the graph below, which is a minute-by-minute graph of the $INDU for all of 2006. The upper trendline, briefly conquered, now represents resistance. Today was a retracement back up to that line, and I suspect tomorrow we'll start to see prices sinking again. Click on the graph for a much bigger view.
http://photos1.blogger.com/blogger/4311/970/400/0329-INDU.jpg
at 3/29/2006 10 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
Fibber Island
Just a single quick suggestion (the meaty stuff is in last night's post - see below). GOOG is approaching Fib resistance once more. Puts on this look good with a contingent stop order at anything above $397.54
http://photos1.blogger.com/blogger/4311/970/400/0429-goog.jpg
at 3/29/2006 16 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
111111111
Tuesday, March 28, 2006Fifteen Steps and a Stumble
The Fed announced their fifteenth consecutive rate hike today (I'm really glad I have a fixed rate on my house.....) and stocks - finally! - did the right thing and tanked. It's about time.
One blog reader wrote to ask me about the Fed Funds rate. You can get this from Prophet with symbol FF9413 (use a line graph, since it's one data point per day). Just for fun, I charted all our history on this versus the S&P. The correlation is bizarre. For a while they were inversely correlated. Then they seemed to be random. And recently it seems positively correlated! (Today notwithstanding). Anyway, draw your own conclusions (blue is S&P 500; black is the interest rate):
http://photos1.blogger.com/blogger/4311/970/400/0329-FFversusSPX.jpg
The breakout of the Dow I mentioned recently is now moot. Prices have fallen below the resistance line, so there is no breakout. In fact, this line is getting to be just noise at this point, so I'll probably chuck it soon.
http://photos1.blogger.com/blogger/4311/970/400/0329-DowFailure.jpg
Likewise the potential breakout on the Major Market Index ($XMI) I mentioned last Saturday didn't materialize (thank God) so, again, this is a bullish move that simply isn't going to happen.
http://photos1.blogger.com/blogger/4311/970/400/0329-XMIFail.jpg
What is happening, and what I did predict quite some time ago, is the Utilities are starting to fall to pieces. The best options I've found on these is on the UTH, but the bid/ask is big enough to drive a truck through. I've drawn two necklines for this head and shoulders pattern. It hasn't quite broken through the lower neckline yet, but if it does, you can see the target I've drawn here is a nice fat distance away.
http://photos1.blogger.com/blogger/4311/970/400/0329-UtilTarget.jpg
What we're looking for, people, is directional change. Nothing beats a stock that has been going up for years (and has the corresponding high price) which fundamentally changes direction. Below is CLF. You can see where it broke its upward trendline. And I've drawn a downward-sloping channel. There are not that many price points to support this channel yet, but it's not bad, and it illustrates the ship changing course from up to down. That's the kind of issue in which we want to buy puts.
111111111
What we're looking for, people, is directional change. Nothing beats a stock that has been going up for years (and has the corresponding high price) which fundamentally changes direction. Below is CLF. You can see where it broke its upward trendline. And I've drawn a downward-sloping channel. There are not that many price points to support this channel yet, but it's not bad, and it illustrates the ship changing course from up to down. That's the kind of issue in which we want to buy puts.
http://photos1.blogger.com/blogger/4311/970/400/0329-DirChangeCLF.jpg
One developing H&S I've had my eye on is iShares Latin America (ILF), but it's relatively thinly traded, and the options on it are terrible (super thinly traded, huge bid/ask spread). Plus the pattern isn't complete.
http://photos1.blogger.com/blogger/4311/970/400/0329-ILF.jpg
However, a major component of this security is symbol UBB, which has completed breaking an H&S pattern (strictly speaking, the right shoulder is higher than the left, which isn't textbook perfect - - but I'll take it). I'd look to buy puts on this on any pullback to the neckline. It's a lovely chart.
http://photos1.blogger.com/blogger/4311/970/400/0329-UBB.jpg
I'll close with APC - - the OIH has been pushing higher lately, but I think it's going to soften very soon, and APC behaves very well. What I mean is that when OIH is weak, APC is especially weak, and when OIH is strong, APC isn't quite as strong. I like the puts on this, which are fairly heavily traded.
http://photos1.blogger.com/blogger/4311/970/400/0329-APC.jpg
Continued good luck, everyone.....nice to see some sense returning to the markets.
at 3/28/2006 10 insightful comments
http://www.blogger.com/img/icon18_edit_allbkg.gif Links to this post
Newer Posts Older Posts Home