Weekly Calls: Sept. 18-- 22

Reflections on the trading calls for the past 2 months

** On major indicies

I have been stubburnly bearish for the past 2 months, obsessed by the sharp decline and repeatedly failed rebound between mid-May and end of July, and perhaps over-confident about the historic seasonal patterns. The fact is that the major indices advaced substantially in the past 8 weeks, especially the NASDAQ with a nearly 10% gain. Therefore it is clear that my overall assessment of the market trend has been wrong, especially considering that my trading time frame is mostly 1-5 days.

** On the short-on-top approaches

In the past 2-month, I have made lot of short-on-top calls on those stocks that were in clear down trend (below MA50, MA200 etc.). Most of those calls would have been losing trades if the positions were held longer than 2-3 days. The take-home lessons are:

** when the market is in clear up-trend, trading against the trend, even conforms the primary trend of the underlying stock, is risky. Quick profit-taking is needed for such trades.

** When trading against strong overall market trend, short-on-top when a strock is approaching strong technical levels (such as MA50, MA200) using a tight stop without clear bearish signals is very risky.

** Trading against sector trend must be avoided even if the trades conform the primarily trend of the targeted stocks (case in point, the retaily sector, such as COH, SBUX, etc.).

** Trading against both the market trend and the stock trend, even if with the support of some technical indicators must be avoided, because you are fighting the tides, and you are more likely to be swept away then catching something big.

On the market for the coming week

The last week's action moved the major indices just below their critical levels: both DOW and SP500 are only a stone-throw-away from their multi-year high, and NASDAQ closed just below the low boundary of the Jan-May trading range. On the weekly chart, they are all poised to gain more ground, on the daily charts, however, last Friday's action left bearish a candle formation and some bearish reversal signals for all major indices. Looking ahead, next Wed's FOMC decision is likely to impact the near-term trend of the market. My gut feeling is that all the bullish factors on interest rates are now priced in, and all bearish factors on the possible recession are mostly dismissed, therefore, I don't see FOMC decision fuels more upside movement, on the contrary, it might be a sell-the-news event. The down side risk for the next week or 2 is further increased on the major indices advanced a great deal in the last 2 months, and vulnerable for profit-taking to say the least.

Based on above analysis, I have a bearish bias towards the market for the next week, in particular, I will look for short set up on the stocks whose primary trend is bearish, AND, whose daily charts start to show bearish top-reversal signals. To be caustious, I should use small positions to begin with and implement tight-stop, however, when the trend-reveral is confirmed, I may add more to the winning positions.

1. ADBE: S1 either when it approaches 38 use 38.2 as stop, OR when it breaks 36.5 use 37 as stop, IT=34.5.

@@ B

2. ADI: S1 on top when it approaches 32, CS=32.1, IDS=32.6, IT=30.

@@ A

3. AEOS: currently in short around 42.4, IDS=43. S2 on top when it approaches 42.9 or when it breaks 41.8 or closed below 42 with a bearish candle, IT=40.5. This stock has gained over 15% in the past 5 weeks, however, it clearly under-performed the market and the sector for most of the last week, with clear selling pressure just below the all time high near 43. Tremendous insider sells in the recent weeks, especially a nearly 2 M share dumping by its CEO in the past week. I am playing for a quick pull-back here to possibly as low as 38.5.

@@ F

4. AKAM: it gained near 15% for the past week along on a couple of upgrades, and it becomes a clear momentum play. The stock is clearly overbought, wait for a bearish reversal on top (possible around 50?), and a quick pull back to 42.

@@ C

5. AMD: CTT-ready, S1 on top or when it breaks or closes below 26.36 with a bearish candle, CS=27, IDS=27.7, IT=23.5. It has gained over 40% in the past 8 weeks! too fast too much?

@@ E

6. BIDU: S3-on-top, look for a speculative short position (100 share) as it approaches key resistance zone between 90-94, IT around 82. it has gained nearly 20% in the past 8 weeks.

@@ A

7. CHRW: S2 on top when it approaches 47 or when it breaks/closes below 45 with bearish candles, IT=42, CS=46.7, IDS=47.5.

@@ B

8. COST: S2 on top when it approaches MA200=51.5, CS=MA200, IDS=52.5, IT=48.5.

@@ B

9. ESRX: consider CTT whenever it approaches the boundaries of its 5-week tight trading range (80.4 and 85), BUT trade along the break-out when it moves out of this range. It is showing some early bearish signs.

@@ A

10. MOT: highest 52-wk close and poised for more gain, but how much more before a quick pull back to at least 24?

@@ C

11. NTAP: S3 on top when it approaches 34.5, IDS=35, IT=MA200=31.9. It has noticebly underperformed NASDAQ in the past 3 weeks and signs of top in this region.

@@ F

12. NTRI: CTT-ready. CS=61, IDS=62.5, IT=MA50=55.

@@ F

13. SBUX: may consider S3 on top when it approaches 35.5, CS=36, IDS=36.7, IT=31.30.

@@ B

14. SNDK: is it putting on the short-term double top around 59.65? Take a small stab near 59.5? CS=59.7, IDS=60, IT=53.6.

@@ E

15. TIBX: is it putting up another top just below 9? S2 on top around 8.65, CS=8.8, IDS=9.01, IT=8.

@@ F

16. TIF: Is it turned around here? may consider S3 on top when it approaches 36, use 36.5 as stop reference, It=34, MA200=34.1.

@@ C

17. WFMI: S2 on top, IDS=59.25, IT=54. or be more patient, when it approache MA200=61.2.

@@ B

18. WLT: S1 on top when it approaches MA50=51.6, IDS=MA200=53.5, IT=46, and could be a lot more if the commodities are really breaking down.

@@ C

19. WMT: CTT-almost ready, S3 on top when it approaches 48.6 use 49 as stop, IT=MA200=46.4. BE more patient if the GAS/OIL continue to decline.

@@ F

20. WSM: CTT-ready, S2 on top, CS=32.6, IDS=33, IT=29.5.

@@ B

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