Saturday, November 25, 2006

Weekly Calls, Nov. 27 -- Dec. 1, 2006

On last week's trading calls:

For the 3rd straight week, there was basically no A calls (weekly and daily). The daily calls were good as there was no losing call, but the weekly calls were sub-par (3 F calls out of 17 calls).

On the market:

Both DOW and SP500 were down slightly while NASDAQ registered another winning week. On the weekly charts, all major indices seem to be poised for more gains or at least NOT appear in danger of imminent sizable pullbacks. The daily charts, however, show signs of top-reversal, especially for DOW and SP500.

On next week:

After 4 months of big rally and 9 straight sessions of new highs (before this past Friday), the market is way over-due for a technical pullback. The persistent and overwhelming bullish sentiment also suggest upcoming bearish action from a contrarian’s point of view. In addition, more news and signs are suggesting that the US economy may be weaker than expected. All of these factors favor a pullback coming as early as next week.

Due to the seasonality, the pullback could be limited, but on the other hand, the lack of any consolidatoin on their ways up in the past 3 week mean that the market could fall quite a bit before they meet the support levels (NASDAQ around 2375, DOW around 12100, SP500 around 1380).

For next week, swing longs should be avoided unless they are initiated at key support levels following a sizable pullback. On the other hand, swing shorts with excellent risk/reward ratios should be actively sought.

On next Monday (Nov. 27) action:

I expect the action on next Monday will set the tone for the rest of the week. The general plan for Monday will be: (1). if the market gaps up, be ready to fade the gap, or more safely, initiate short positions once the market/stocks fall below the opening prices; (2) if the market gaps down, don't chase them down right away, instead, wait at least 30 - 60 min to see if the gap holds firmly. In the second scenario, which is more likely as WalMart's Saturday report suggests a weaker holiday season, consider entering swing-short-positions near 4 pm in stocks that display solidly bearish candles and technicals. One thing needs to be particularly careful about is going long in the early stage of market pullback as one never know the size of the pullback.

1. AAPL: DT-L2 on pullback when it spikes down towards support levels around 82.5, 84.5, 87, use tight stops. DT-S3 on top may be considered using 93.1 as stop. The bias is on the long side.

2. AEOS: SW-S2 if it breaks down 46.9 with volume or closes below that with a bearish candle, IT=MA50=45, stop just above 48.

3. AKAM: CTT between 45.5 and 52, don't trade the mid-range. Notable support zone between MA50=47.5 and 48.

4. ANF: SW-S1 on top, entry zone 71-74, stop just above 74, IT=MA200=64.6. Notable support zone from 68.9-69.7. It appears to be topped out in near-term.

5. BRCM: SW-L1 on bottom if it spikes down towards 31, stop just below 31, MA50=31.2, MA200=31.6.

6. CEPH: SW-S1 on top, entry zone 75-76.5, stop just above 78.4, IT around 69. MA50=69.4.

7. DVN: CTT between MA50=67.1 and 72 use tight stops. the bias is on the long side.

8. ENER: S2 on top if it spikes towards 40, stop just above 40.5, IT=37.2 (both MA50 and MA200).

9. FMCN: DT-CTT between 66 and 70.5 use tight stops.

10. LRCX: DT-L2 on bottom if it spikes towards 51.7, stop just below 51.5.

11. SONS: SW-L1 on bottom, entry zone 5.71-5.9, IT=6.5. DT-L1 on bottom, entry zone 6.01-6.03, stop just below 6. May also consider DT-S1 on top if it spikes towards 6.4/6.5 use very tight stops.

12. TXN: SW-S1 on top, entry zone 30.2-31, CS=30.6 (MA50), IDS=31 (MA200), IT=28.5.

13. WLT: SW-S1 on top, entry zone 44-44.6 (MA50), stop just above MA50, IT=41.

14. X: DT-CTT between 70 and 76.2 use very tight stops, don't trade the mid range.

1 comment:

shortswings said...

Hi Man,

Excellent analysis on the broad market, sound trading strategies for next week, clear and concise language! Man, you are absolutely thinking ahead of crowd, like a pro. Below is my comments.

1. AEOS I agree with your plan, however it is in holiday season, the retail sector may be very volatile. I was wondering if it is a bit early to establish a short position now.

2. ANF Nice plan! It looks like in support level now. I was wondering if we can go long (day trade only)here and sell around MA(10)and go short for swing.

3. WLT Agree with your plan. It is in support level. However, the long term trend reversal is in the making . I would like to play long side after the reversal complete.

Have a great trading week!

shortswings