Saturday, December 23, 2006

Weekly Calls Dec. 16-29, 2006

On last week's trading calls and executions:

While the W/L ratio for the weekly calls came in below average at 1:1 last week, the ratio for the daily calls reached near 3-month high at 3.3:1. On the execution side, I started the week quite positively as I successfully overcome the "fear" factor on several occasions and made the right decision. However, the old problem regained its footing as the week progressed. The frustration further induced some mental mistakes late in the week and in the end turned a promising week into a disappointing one. Nonetheless, I did have some success in dealing with the "fear" factor this week, and each time I did it, it felt extremely positive. I will continue to focus on the issue in the coming days. In addition, I need to avoid some low-level mental mistakes. I plan to write up some simple trading guidance/rules that I can refer to before start of each trading session.

On the market:

The market fell pretty hard last week. The divergence between NASDAQ and SP500/DOW finally went to bears' way, as NASDAQ led the decline with a over 2.2% weekly loss. On the weekly charts, for the 2nd time in past four weeks, bearish engulfing candles were formed for both NASDAQ and SP500. Bearish divergences of Stochastic and MACD histogram are also clear for all major indices. The action in NASDAQ is particularly ominous for bulls as it failed to break the Nov. high again and now poised to test lower boundary of the 6 week trading range near 2388, as well as MA50 around 2391. On the daily charts, similar cases can also be made for all major indices, especially the NASDAQ which seems to form a double top. Some basic statements can be made here:
(1). the momentum for the 4 month long up trend continues to diminish for 4th weeks.
(2). bearish divergences for all major indices become rampant.
(3). As the market leader, NASDAQ seems topping out.
(4). The reversal of the up trend requires, at the minimum, that NASDAQ closed below it MA50, something yet to occur.

On next week:

The market dropped almost every day for last week, and I expect some kind of rebound in next week, probably aided by the notion of the "santa" rally. While it is possible that SP500/DOW may make new highs in the next week or two, such feat seems difficult, if not impossible, for NASDAQ. At this stage, the following strategy should be taken into consideration:
(1). Don't go long with the break-outs.
(2). Don't chase the bears just yet.
(3). Actively seek the short-the-top setups for stocks that attempt to rebound.
(4). Play long-on-bottom for some very strong stocks that have fallen to their key support levels, but be quick when taking profits.

Trading calls:

Group 1 -- The short-on-top plays (No long plays allowed for this group)

1. AAPL: No long plays until it approaches 78. S1 on top when it appoaches key resistances: 84 (MA50), 85.6 (MA10), 87, 89.5-90. It has droped on high volumes for 4 straight weeks now, there could be some rebound, but big-boys' view and action on this stock is pretty clear.

2. AFFX: S2 on top when it spikes towards 24.5 (both MA50 and MA10), with a tight stop just above that level, IT=20.5.

3. CHAP: S2 on top, entry point 1 around 45.2 (MA10), entry point 2 just below 47, IT=40. MA50=43.5.

4. EBAY: S2 on top if it spikes towards MA50=31.5 (MA10=31.6), IT=28.5.

5. ERTS: S1 on top if it spikes towards MA200=52.8 or MA50=54.5 use tight stops, IT=49.

6. JCG: S1 on top if it spikes towards 39.3/40 use tight stops OR when it breaks 37.4, IT=MA50=35.9.

7. SHLD: S1 on top, entry point 1=around MA50=170.8, entry point 2=around 174. Also consider S1 when it breaks 167, IT=164.

8. TIF: speculative S3 on top when it spikes towards 43, stop just above 44, IT=38.

Group 2 -- The long-on-bottom plays

1. ADSK: L1 on bottom when it sparks down towards 39 (MA50) (stop just below 39) or 37.4 (stop just below 37).

2. AKAM: L1 on bottom when it approaches key support levels at 50, 50.5 (MA50), 51, 52, 53; use tight stops if larger size is opened.

3. DVN: L2 on bottom if it spikes towards 65, use MA200=64.2 as stop references.

4. ESRX: L1 on bottom if it spikes towards MA50=69.9 use a tight stop. MA50=73.1

5. FFIV: L2 on bottom if it spikes towards MA50=69.2 or 68 use tight stops.

6. FMCN: L2 on bottom if it spikes towards 65.5 use MA50=65 as stop reference.

7. LRCX: L2 on bottom if it spikes towards 47 with a stop just below it.

8. MDRX: L2 on bottom if it spikes towards MA50=26.1/25.5 use tight stops.

9. MRVL: L3 on bottom if it spikes towards 18.3 use 18 as stop reference, IT=20.

10. NVDA: L1 on bottom if it spikes towards 35 use 34.5 as stop reference, IT=37.5

11. STP: L1 on bottom, entry zone 30-31.6, use MA200=29.7 as stop reference. MA 50=29.3.

12. TOMO: L2 on bottom when it spikes towards 14.8 with stop just below MA50=14.5.

13. UNH: L1 on bottom when it spikes towards 53, stop just below 52.5. IT=57. MA200=49.9.

14. WLT: L1 on bottom if it spikes towards MA200=24.9 use tight stop, IT=28.

Group 3 -- The range-bound CTT plays

1. BIDU: L1 on bottom only when it spikes towards key support around 106.6 (MA50), and 110 use key stops. Also consider S3 on top when it approaches key resistances around 115.5, 117 (MA50=116.9), and 119.5. Don't initiate any positions that are far away from key S/R levels.

2. CEPH: CTT between 67 and 71 (MA50) use tight stops. MA10=71.1

3. RIMM: CTT between MA50=124.4 and 140 use tight stops,

4. SONS: CTT between 6/6.1 and 6.7/6.9 use tight stops, MA50=5.9.

5. X: CTT between MA50=70.6 and 75 use tight stops. If it closes below MA50, it may test 68.

1 comment:

shortswings said...

Hi Man,

I bought 300 shares of SNDA before market close. Cell got my attention too, but for some reason I chose SNDA. Hopefully I made the right pick. Below is my comments on your calls.

As for broad market, basically I agree with your analysis. However, I am a bit more optimistic than you. I think that the market will stay the range for a while and possiblly break the up-range before heading down.

1 TIF It is in strong up trend. However the daily histogram show a possible bearish divergence. Short on top if the broad market is weak.

2.AKAM weekly histogram shows a possible bearish divergence. I would prefer short it around MA(10).

3. DVN weekly histogram show a bearish divergence. Prefer short on rebound.

4. NVDA weekly Histogram is ticking down, daily histogram shows bearish divergence. Short the rebounce if the broad market is not bullish.

5. ESRX weekly shows quite bullish, but daily histogram shows a tripple bearish divergence. I would go long after the divergence complete or it closes above 74.50.

6. TOMO Weekly shows bullish, but daily Histogram shows a tripple bearish divergence. Go long after that divergence complete.

7. WLT weekly chart clearly shows that it is in up trend. But daily histogram clearly shows a bearish divergence. Long after that divergence complete.

8. STP Global warming is a hot topic now. Renewable energy-green energy could be the hotest spot in the near future. STP is one of them. Weekly chart shows it is in up-trend. Daily histogram shows a bearish divergence, which prevent me from pulling the trigger. However, because it is hot and clearly in up trend, bearish divergence may fail. In other word, it is still worth to go long now. LONG if it breaks today' high and use a small size.

9. BIDU Weekly Histogram shows a bearish divergence. The main trend might have been reversed. Go short the rebound whenever the oscillator gives overbought signals.

Good luck!