On a Losing Streak - February 29, 2012

It's been a week since my last post so it's time for an update.  I haven't felt like posting new setups or commenting too much on the markets as I've been spinning my wheels.  Yesterday I was stopped out of yet another position, COCO at $4.71,  from a prior $4.95 purchase last Friday.  It was a nice setup in a tight flag, and it should have worked.

In reviewing my transactions over the last few weeks, the number of losers are greater than the gainers.  The only thing that has saved my account from a big setback is continually cutting losses very quickly and having a few decent gains like ALSK, VVTV, and NFG mixed in.  The setups I played that failed have fallen further from my sell price (HGSI, PIP, CIS, CALX, XCO, CECO, HNR, COCO), so I'm glad I didn't rationalize my positions and hang around.

Now I don't mind having a few losses mixed in with the gains, that's part of the business.  I've gone back and reviewed the setups, and they were decent plays.  So when a trader sees more and more setups that were working not too long ago now failing, that puts up a red flag. 

Despite the non-confirmation from the transportation index, and advance/declines lagging the Nasdaq composite recently, there seems to be an unending bid under the market.  So for me, I'll probably sit and watch for awhile, maybe look to tweak my entries a bit and focus more attention on taking only the highest quality setups.  

It may also be time for me to move away from the lower priced, riskier stocks.  Time to reassess...

Market Thoughts for Wednesday, February 22, 2012

The U.S. market indices finished mixed yesterday, with the DJIA briefly flirting with the 13,000 mark.  CNBC insisted on talking about that level all day long on every segment as if breaching that level will cure all cancers and bring forth peace and happiness for the entire universe.  As I have to do all too often, the TV was muted so I could maintain my sanity.

Greece got another reprieve as they agreed to yet another bailout from the Euro zone on Monday.  The can kicking continues with excess levels of sovereign debt on a global basis.  It is what it is and we must trade what is in front of us.  But it's not a sustainable situation over the longer term, in my opinion.

Of note was the weak action in the transports as the rise in price of oil persists with the price now over $105/bbl.  Last night on CNBC's The Kudlow Report,  Zach Karabell who is a Fast Money contributor was asked if $4.50/gal gasoline would have a negative effect on GDP.  His response surprised me as he posited that as long as gas at the pump rises slowly, that GDP would not be adversely effected, even if it were to rise to $4.50 in the next 6 months.  That would represent roughly a 20% rise from the current national average of $3.75/gallon.

To his credit he responded to me after I questioned him on Twitter.  His view is that companies have not been able to pass along price increases and have instead decreased their costs through increased efficiency and cutting labor costs.  That said, I do not agree with his view.  I think a quick rise in gas prices would put a serious crimp on consumer spending and adversely affect GDP.

Yesterday I was stopped out of 3 positions, something that hasn't happened in quite awhile.  CALX, CECO, and XCO all dropped enough to force me out with losses between 3-4%. 

During this straight line advance in  the markets over the last 9 weeks, every time it looks like we're about to see follow through on weakness, the market has a big up day to smash the bears.  So for now, the bias must remain to the upside (buy the dips) until we see important market leaders display more weakness.

Setups & Market Commentary for Tuesday, February 21, 2012

In going through the charts over the long holiday weekend, despite the persistent ramp up in the U.S. market indices, there remain some actionable setups.  Many of the inverse ETFs are showing positive RSI divergences after 9 consecutive weeks of underperformance.  So traders need to be careful not to chase stocks that are extended from a proper base or consolidation period. 

Several stocks from the education sector posted here last week, CECO, BPI, and COCO still have valid setups.  EPAX from that group already triggered last Tuesday and is +12.5%.  CALX, DVAX, and TXI  mentioned last week remain in tight consolidations, and should be monitored closely for possible breakouts.

ALWAYS use stops to limit potential big losses, particularly the falling wedge setups with RSI positive divergences that I post here frequently.  You must be quick to cut losses and get out if one of these setups rolls over into a lower low.  These are definitely riskier setups.   

So while some of the biggest gainers previously posted on this blog like HSOL, JASO, TAN, RIG, PACB, AA, CETV, BAK, PGTI, etc. all had the falling wedge formation, always remember there's probably a good reason they've been in long declines; tread carefully.  [By the way, @TraderStewie on Twitter was the guy who put my attention on to these types of setups, so many thanks to him.]

Risk management should always be foremost on trader's minds, especially given the extended nature of the current market.

Click on charts to enlarge view:

                         Transportation tracking index 

Huge short interest on this one:

Setups for Friday, February 17, 2012

Over the last 9 weeks it has not paid to be a bear, and it hasn't paid to hedge your longs.  Any weakness in the general market has quickly been followed by renewed buying.  During this impressive advance, more and more setups are emerging, which is exactly what we should expect from a bull market.  

Is this a new bull market?  For me, that question doesn't need to be answered in order to make money.  The trend is clear, so I'll go along for the ride as long as it lasts, as it never pays to argue with the market.  All this said, I continue to take partial profits as these setups trigger and move 6-7%, then hold the rest for further gains.  My holding period during this time period has been shorter than normal, so I've definitely missed some gains by not holding positions longer.

Here are a few setups for Friday.  ALWAYS use stops to limit potential losses.

Setups for February 14, 2012

The U.S. market indices finished yesterday solidly in the green after a gap up opening on Monday.  The S&P 500 finished +9.13 to close at 1351.77.  Professor Jeremy Siegel came on CNBC's Fast Money show after the market close and added to his Barron's weekend prognostications by saying that there's a 50/50 chance that the DJIA could hit 15,000 by the end of this year.  That would represent a further 16.5% advance from yesterday's close of 12,874.

Pre-market indicators point to a slightly negative opening for the U.S. indices with the S&P 500 -4.30 points.  Moody's downgraded 6 Euro zone countries yesterday, but the market seems to have factored in that kind of news.

Here are a few setups for today's trading.  The education stocks which are generally a heavily shorted group showed up prominently in my scans last evening.  There's a list of stocks at the bottom of the page as well. ALWAYS us stops to limit your losses.

Click on charts to enlarge view:

Some others:  AVNW, ARQL, CALX, ASIA, ANW, CAB, FNSR, GDP, GET


 

Setups for Monday, February 13, 2012

The pre-market futures indicator is pointing to a +7 point opening for the S&P 500.  Friday's weakness is being shrugged off, at least for the opening.  Greece apparently has agreed to cuts in wages and benefits to get another bailout, with a vote coming on Wednesday.  But there have been so many "deadlines" for that situation that nothing from that region can truly be taken seriously.

Barron's came out with a front cover showing a Dow 15,000 target.  For now, it appears the market wants to climb higher.  It's entirely possible the market works higher over the next few weeks and tags the highs from May of 2011 around 1375 on the S&P.  But as I pointed out last Thursday, my position sizes are smaller and the stops a bit tighter.

Here are a few stocks on my screen for today.  ALWAYS use stops to limit losses.

Click charts to enlarge view:

Some others of note:  PVA (previous chart posted 1/29), MEOH, MOBI, VDSI, XING, RNN, HEB

Setups and Market Commentary for Thursday, February 9, 2012

The U.S. market indices remain at elevated levels, trading inside a tight, parallel channel with hardly a hint of a pullback in the offing.  In the last 8 weeks the S&P 500 has only had 2-3 days of minor distribution, December 28, and January 26 and 31.  Given that, my time frame for trading continues to shorten, my position sizes are smaller, and my stops are a bit tighter.  

The lack of volatility and lopsided, upside bias of the market over the last 8 weeks is nothing but stunning, especially after the extreme intraday market swings we saw in the latter half of 2011.  It's as if the bears and sellers have been banned from the market.  Nonetheless, we always trade what's in front of us with a cautious eye and with prudent portfolio management techniques.

 

 So while I continue to play the market from the long side, know that this is most definitely NOT a time to be complacent or lazy in your trading tactics.  A correction can creep up very soon.  One small sign of weakness is the transportation index, which has not been confirming general market strength over the last 3 days.

There have been quite a few winners from previous setups mentioned in this blog.  ValueVision Intl. (VVTV) has been the most recent gain for me as I booked partial profits Wednesday morning in the low $1.90s from a $1.61 buy last Friday.  The stock finished strong to close at $1.97 on increasing volume.

Here are a few setups on my screen of stocks trading a minimum of 200K shares/day and priced under $10.  These low priced stocks offer big potential moves, but are also MUCH riskier to trade.  

Don't trade these stocks unless you understand risk management and use stops to limit your losses.  I use these setups for short term trading only, where I usually book partial gains after a 6-7% move, and then sell the rest when buying pressure abates.  ALWAYS use stops to limit your losses.

Click on charts to enlarge view:

Setups for Friday, February 3, 2012

A chart setup displayed on this blog back on January 16, and then mentioned again on January 26 was CETV.  Yesterday the stock broke through previous resistance and jumped over 10%, and is now up over 22% from the original trigger price.  These patterns repeat over and over again so here's a review of that falling wedge setup.  

Click on charts to enlarge.

Here's a small list of chart setups below are stocks priced under $10 with an average trading volume 200K shares and above.  Also watch the solar stocks today for further possible gains: TAN, LDK, JKS, WFR, etc.

ALWAYS use stops to protect from big losses.  Click on charts to enlarge view.

Midday Look at the U.S. Indices for February 2, 2012

The U.S. stock indices are trading mixed in early afternoon trading today with the DJIA (12,690) and S&P 500 (1323) trading down a bit while the Nasdaq Composite is +5 points.  

The steady, uptrending channels remain, but I'm noticing a few RSI divergences beginning to form.  This doesn't mean the indices will cascade lower from here, but some weakness could set in over the next week or two. 

Click on charts to enlarge: