Short note -- Monday, Dec. 17, 2007

About the weekly trading calls

Sorry that I did not get time to do it this past weekend, and I probably won't be able to until after the holiday season -- will spend time with several friends who will be visiting during the holidays.

On the market

In short, the market has been acting pretty much like what I predicted in the Dec. 8 weekly calls. As the major indices and many stocks approach oversold on both daily and 60 min charts, I expect their initial tests of the previous lows likely to be successful, even triggering some Ho-Ho-Ho rebounds:P But in my view, last week's Fed action and maybe more importantly, the inflation signs, are fundamentally changing the psyche of this lasting bull market. Even though it might still be a bit too early to build up short positions, it is high time to reduce long positions on every rebound from here on.

On Ameritrade's StrategyDesk

I have been back-testing some trading strategies, and when I get chance I will post some of the main findings here.

Link for RSS subscription
I figure some readers might like a RSS subscription link here, so I decide not to wait for the Blogger.com to formally roll out this feature -- I just add it using a free service from Addthis.com. Let me know if you have any problems/coments.

Until I resume the regular weekly trading calls, I will try my best to at least post some short notes like this a couple of times per week if not more.

Happy holiday and best wishes!

fw

Weekly Swing Trading Calls--Dec. 10-14, 2007

On the market – Searching for the golden compass

With now the US government joining the subprime mess rescue forces, bulls continued their march and closed week with all major indices gaining 1.6% or more and reclaimed some key technical levels along the way.

Weekly charts for all 3 indices are mildly bullish with indicators point out to further up side move; daily charts are even more bullish as they charged into overbought region on increasing positive momentum. The only thing that bears may take into comfort is that the rally came in on significantly reduced volumes, signaling that many major players are not ready to put on their bull costume and join the parade, which makes perfect sense as the market prepares for next Tues FOMC rate decision.

The market has now priced in all the good news: US Government is on their side, the job growth is not too bad which may help to avoid recession, and FED will cut 25 bp for sure. So what else is left in bulls' tank? A 50 bp cut? possible but less likely with the Nov. employment report we had. Santa? As reliable as the Santa rally has been, without a 50 bp cut, will the mighty Santa be able to help bulls to challenge the double-top formations of almost all 3 indices? And in case the market does get the 50 bp cut, how long the fuel will last?

I think market's reaction to FOMC decision next week will be a telltale sign of the market direction for the coming months. In my view, if the market sell-off hard and falls once again below the key technical levels (SP500 around 1490 and NASDAQ around 2630), a retest of the recent lows will be sure on the way. If the market rallies on light volumes, I myself will start to build up short positions, with some patience and all the respect to the Santa, and get ready for a brand new year!

The bottom line: generally speaking, at this stage of bull cycle, easy money on the long side has been made, but bears are still looking for the gold compass to find out if their time is finally coming.


Weekly Trading Calls

I am going to be brief as I try to spend some time to back-testing some trading strategies using the latest of version of the StrategyDesk.
Many trading calls (notice the word spikes) only apply when the market moves violently following FOMC decision.


1.AAPL – the forbidden fruit, for bears!
Weekly chart: bullish all around, now looking at it, in the past 3 months, it only had 2 losing week!
Daily: solidly broke into new high on increasing momentum; entering overbought region.
60 min: staying in overbought and bulls not worried about..
** SW L1 if it spikes towards key support at 180, 175, and 170, IT=200.


2.COH – current shorted at 37.38
Weekly: the 3 week rebound came to the end, stochastic no long oversold, negative momentum continue to diminish, still solid down trend
Daily: mildly bearish, both volume and momentum are contracting, sellers evident just below MA50.
** for current position, IDS around 38.5, CS just above 38 with a bullish candle, IT=32
** SW S2 if it spikes up on FOMC decision, entry zone 40.8-44, stop just above 44, IT=38.


3.DHI: bottomed out, for now
Weekly: solid up week with solid bullish candle, MACD histogram confirming trend reversal, stochastic points further oversold rebound
Daily: closed above MA50 for the first time since June, bullish bow-tie formation developing
** SW L1, entry zone 12-12.52, IT=15, stop just below 11.7.

4.DVN:
Weekly: the bullish engulfing candle formation signals a typical new highpullbackresuming primary up trend setup
Daily: bull rip through key 84 resistance and closed week above MA50.
** SW L1 if it spikes towards key support near 80 and 84 use tight stops, IT=91

5.DRYS:
** CTT between 81 and 100 using tight stops, bearish bias, keep an eye on MA50, don’t trade the middle range.

6.EXM:
** SW S2 if it spikes towards 59, IDS just above 50, CS=MA50.
** SW L3 if it spikes towards key support near 40 and 44, using tight stops, IT=50

7.FSLR:
There are some bearish divergences, but it is still a solid bullish case no matter how do you look at it.
** SW L2 if it spikes towards key support at 200 and 210 use tight stops, IT=235.
** speculative S3 if it spikes towards 280 with a tight stop, IT=230,

8.JCG:
Bullish all around after a much-better-than-expected earning report, but as a part of the retailer sector, there is a ceiling under current macro-eco conditions.
** SW S3, entry zone=53.8-56.5, stop just above 57, IT=48.
** SW L3 if it spikes towards 47, stop just below 46, IT=52

9.LDK: bulls finally came through!
Weekly: super bullish engulfing candle, stochastic ready to rebound out of the deeply-oversold area.
Daily: EMA10/10/30 bow tie formation developing, closed above MA50
** DT L1 if it spikes towards 40, stop just below, IT=45
** SW L1 if it spikes towards 37, stop just below 36, IT=50.

10.NVDA:
** Currently shorted at 34.38, IDS just above 35, CS above MA50=34.7, IT=31.


11.PFCB: can you say bottom?
Weekly: still a clear-cut bearish case, stochastic suggests further rebound out of the deeply oversold territory.
Daily: 6 consecutive up days and closed just above MA50
** with a down trend like this one, I just don’t trust the true bottom can be formed without re-testing. SW S2 if it spikes towards 30, stop just above 30, IT=26.

12.RIMM: trend reversal developing?
Weekly: MACD histogram crossed below zero line for the first time since late May, signaling the momentum switch which often is followed by trend reversal. Most indicators point to further downside movement. Notice that unlike other big tech stocks such as AAPL, its only had one up week since late Oct, and all down weeks came on good volumes.
Daily: bearish bow-tie formation developing, support near 100 very strong.
** SW S1 if it spikes towards 118, stop just above 120, IT=100.
** DT/SW S1 if it breaks 98, CS just above 100, IDS just above previous day high, consider adding more position if it breaks 96, IT=86,

13.SLB:
Weekly: it looks like a resuming primary trend setup, but other indicators may yet to run the bearish course
Daily: 7 straight up days stalled last Friday and closed the week just below MA50 near 99, momentum still on the rise but stochastic is in the overbought area.
** DT S2 with a stop just above 99.11, IT=95
** SW L2 if it spikes towards 91, stop just below 90, IT=100
** SW L2 if it breaks 99, CS near 97, IT=110.

14.STP: refer to FSLR
** SW L1 if it spikes towards 72, stop just below 69, IT=98.

15. FNM:
** SW S1, entry zone=42-48, IDS just above 50, CS above 48, IT=33.

16. FRE:
** SW S1, entry zone=41.8-46, stop just above 47, IT=30

Weekly Swing Trading Calls--Dec. 3-7,

On the market--Deja Vu all over again?

For a while, it appeared that bears were in firm control as bulls failed to mount any kind of sustainable rebounds despite of the deeply-oversold conditions and the favorable seasonality. Then came the FEDs, who had a change of heart, not only signaled the rate cuts but even went on to say that the irresponsible risk-taking behaviors should not be punished if such punishment will cause recession. Emboldened bulls promptly went on all-out assault, leaving bears dazed and confused.

All major indices scored 2.5% or more gains this week. On weekly charts, all major indicies posted a bullish engulfing candle formation with indicators showing diminishing downside momentum. On the daily charts, all major indices reclaimed MA200 but failed the test of MA50; with indicators show increasing positive momentum.

With market now fully expecting a 25 bp rate cut or even 50 bp if next Friday's Nov. employment report comes in weaker than expected, is this going to be a carbon copy of last Aug's rally? My view? possible but unlikely. Why? First, unlike last Aug, the economy is in worse shape and may well get even worse before getting better; second, unlike last Aug, the room for further rate cuts is simply smaller. Furthermore, the unintended negative impact of rate cuts will not only increase but also show up faster in a material way.

With the above considerations, I view the ongoing rebound as a good opportunity for setting up swing short-on-top trades. The key, however, is patience. Aside from watching key resistance levels of major indices (DOW 13750, NASDAQ 2700-2720, SPY 1490-1500), it is crucial to wait for the rebound to run its course and use previous highs as stop references.

My feeling for the next week is that it is going to be a range-bound market until the Friday's employment report. With the rate cut expectation already baked in, bulls will be hard-pressed for more sizable gain, in fact, presence of sellers were evident this past Friday. Bears, on the other hand, will find it extremely difficult to regain the control as long as the possibility of 50 bp rate cute remaining in the card, let along the bullish seasonality. In a bigger picture, bears are probably holding on to the belief that FED is forced to cut rate because macro-economy outlook is much worse than most expected, and the market just cannot make new highs with such outlook hanging over head, let alone the unpredictable and potentially catastrophe negative impact of further rate cuts.

Count me in that camp, for now.


Weekly Trading Calls:

1. AAPL: Re-loading for the new highs?
Weekly: bullish but weaker momentum
Daily: bullish with increasing momentum, but sells start to come out as it approaches recent high.
60 min: declining out of overbought conditions is running its course.
** SW L2 if it spikes down towards 175/176, stop just below 175, IT=188
** SW L1 if it spikes towards 170, stop just below 169, IT=180

2. ARO: the end of rebound?
Weekly: bearish candle formation along stochastic poised for retreating from the over-bought conditions, but momentum is still positive and strong
Daily: top-looking candle formation, momentum shifting to the down side, indicators point to more slide.
** SW S2, entry zone=26.4-28, stop just above 28.5, IT=23

3. BIDU: onto new highs?
Weekly: evening star candle formation? indicators mostly bullish
Daily:increasing upside momentum, but sells came out after 6-straight up days;
60 min: mildly bearish as over-bought condition works it out.
** SW L2 if it spikes down towards 340/350, stop just below 340, IT=390.
** Speculative SW S3, entry zone=410-420, stop just above 430, IT=330

4. C: Dead cat bouncing?
Weekly: bullish engulfing candle, oversold and diminishing down side momentum
Daily: oversold rebound running the course on increasing positive momentum, but up volumes notably lighter.
** SW S1, entry zone=35.8-37.5, stop just above 38, IT=31

5. COF: what's in your wallet?
Weekly: in oversold region, spinning top candle formation, clear and confirmed down trend
Daily: versold rebound running the course on increasing positive momentum, but sellers are lining up.
60 min: neutral
** SW S2, entry zone=56-59, stop just above 60 or MA50(currently 61.7), IT=50

6. COH: luxury on the run?
Weekly: 3 straight up week on significantly lighter volumes, oversold rebound running the course, negative momentum continues to diminish, clear and confirmed downtrend.
Daily: un-abating positive momentum, approaching overbought, heavy resistance zone ahead.
60 min: mildly bullish.
** SW S1, entry zone=39-40.5, IDS just above 40.5, CS above MA50 with a bullish candle, IT=34.

7. DHI: is the bottom finally in?
Weekly: continuous bullish divergence, heading out of oversold region, again!
Daily: another oversold rebound on the way, but is this finally for real?
60 min: retreating from over-bought
** SW L1=2, entry zone 11-11.5, stop around 10.7, IT=13.5.
** SW DT L1 if it closes above MA50 with bullish candle, IT=15

8. DRYS: smooth sailing again?
Weekly: bullish-engulfing candle with volume following 4 straight down week, indicators still show negative momentum and implications from the precipitous decline.
Daily: powerful oversold rebound, while some indicators suggest more gains, candle formations point out increasing seller activities.
60 min: poised for further retreat from short term overbought conditions.
** SW DT S2, entry zone=98-105, IDS just above 105, CS just above MA50 with bullish candle formation, IT=85.
** SW S1, entry zone 110-120, stop just above 120, IT=95.

9. EDU: learn to profit from volatility!
Weekly: bullish engulfing candle and clear up trend
Daily: oversold rebound seems to more room to go,
** SW L2, entry zone=74-76, stop just below 73.5, IT=84
** Speculative S3, entry zone=87-91, stop just above 92, IT=74

10. EXM - refer to DRYS
** SW S1, entry zone 57-60, stop just above 60, IT=44

11. FMCN: bulls die hard!
Weekly: momentum is on the verge of shifting to the down side, alternate loss/gain week for the past month, the down volumes and candles outsized the up ones.
Daily: oversold rebound may have more room to run
60 min: overbought and staying overbought.
** SW S3, entry zone=58.8-60, stop just above 60.5, IT=52.

12. GRMN: navigating out of woods?
Weekly: bullish rebound, but negative momentum may slow its upside move
Daily: increasing positive momentum, approaching overbought, able to stay above MA50, but failing to clear resistance just below 109.
60 min: mildly bearish.
** SW S2, entry zone=115-117, stop just above 117, IT=100.

13. NVDA: turn of the tide?
Weekly: long shadow highlighted selling pressures near key resistance, increasing down side momentum, still ways to go before being oversold
Daily: Oversold rebound may have ended with Friday's big black bearish candle.
60 min: very bearish but in deep oversold region
** SW S1, entry zone1 32.8-34, stop just above 34.2, IT=29.

14. RIMM: up trend ending?
Weekly: momentum is poised to shift to the downside, downside volumes outpaced up volumes in recent weeks, stochastic points to further slide,
Daily: the overbought rebound came to an abrupt end with Friday's big black bearish candle
60 min: bearish but in oversold region
** SW S2, entry zone=116-120, stop just above 120, IT=100

15. TBSI: Refer to DRYS
** SW S2, entry zone 45-50, IDS just above 50, CS above MA50 with a bullish candle, IT=36.

16. VMW: on the second wind?
Weekly: bullish-engulfing candle but diminishing momentum, will it be able to test the classical evening-star top formation?
Daily: oversold rebound well on the way, but candles on both Thurs/Fri show increasing selling pressures.
60 min: mildly bearish, overbought decline is emerging
** SW S1, entry zone=99-104, stop just above 105.5, IT=80.

17. X: when steel meets stiff resistance!
Weekly: indicators mostly point to more slide, bow-tie formation developing
Daily: oversold rebound running its course, increasing up momentum, but sellers step in around MA50 MA200 convergences (around 101.4) on the Friday.
60 min: poised for overbought decline.
** SW DT S2, entry zone=99-101.5, stop just above 102, IT for DT=93, IT for SW=87.