AKAM ER Play

Just got in for the ER play, neutral to slightly bullish bias, doubt it would move a lot after ER, but I guess I need to learn something here, so here it goes:

Long Straddle Strategy
** Bought 5 May 35 put -$750 ($1.5)
5 May 35 call -$1200 ($2.4)
Total risk: -$1950

we'll see....

FOMC decision

I was a bit surprised that the Fed actually expressed their concerns on inflation, and I think that could put a cap, at least temporarily, on the 6 week long rally.
Took at DT-short on AAPL at 177.88, and covered at 175.11. Also glad to got out the BWLD play earlier. May consider some SW-short position on some tech names, such as AAPL and BIDU since the stops are not that far, we will see...

Position update

BWLD straddle play: Closed with a net gain of just over $1400. Feel a bit weird as I was like day-trading option now, but an overnight 92% profit is just irresistible. The funny thing is that for the second time, had I taken the approach that I played MA the day before (sell May 30 put and buy May 20 put), I still would have made a decent profit (close now for a few hundreds or hold to May expiration for bigger the initial credit) even though it broke out to other extreme of what was expected, hmmm...

Thought about placing some short positions as the market is rallying before the FOMC decision, but decided to wait and see..

Ever seen a blind cat caught a dead mouse?

Well, folks, that was what happened to me today as the PRICELESS moment turned into a WORTHLESS one, well, almost! Thanks to MA's big move to the upside, I actually have a decent chance to pocket the $460 initial credit by the time the May options expire. So much for my gut feeling!

Learned my lesson and took a long straddle on BWLD today for its ER play:
** Bought 5 May 25 put -$750 ($1.5)
** Bought 5 May 75 call -$850 ($1.7)
** Total risk: -$1600
We'll see how this one fares today as it jumped over 10% in AH following the ER. While I am on the topic, with tomorrow's FOMC, today actually could be an idea day to play straddles, but frankly, and I got a bit scared of the idea that I might make some easy money just like that, say, anyone has a "when a perfect straddle play went wrong" story to share?

Some nightly thoughts:

** FOMC decision: I think there will be a 25 bp cut, especially if tomorrow's GDP number is weaker than expected. I don't think Fed will say anything close to "inflation is gaining traction" even if they know so, and as the result, the market may rally after the rate decision, which might provide a short-window for short plays.

** The high fliers of the commodities universe, such as AGU, APA, DVN, FCX,ACI, WLT could be shorted if they rebound towards MA10, but also could be longed if they spike down towards MA50+other key support.

** POT: I shorted just above 210 last week, and covered the next day just above 190 for 20 point gain even though I planed to cover near 180/185 so I would have a trade comparable to Razor's drys trade, but it is not even close. Where is the gut feeling when I need it?

** PXP and RIG are worth a shot from the short side if it rebounds tomorrow.

Waiting for Godot?

Well, I am waiting for my PRICELESS moment tomorrow, better not turn out to be a crappy one that ruins my cup-of-joe time! Some nightly thoughts here:

** AKS: not sure if anyone acted on my weekly call, if you did, you are 5-6 points in green. I missed it in my hectic Monday morning ritual, but if it rebounds again tomorrow on X's ER, might take a shot at it.

** AUG, MOS, POT: they are now formally on my topping-watch list now.

** DVN, APA: on my tradable-top list now.

** ANF: probably worth a take a shot on the short side if it spikes towards 80 before close (ER in AH).

Since my gut feeling is something money cannot buy....

Cost of last weekend's fun: $110
1 MA May 250 put: $1680 (sold)
2 MA May 230 put: $1220 (bought)
The initial credit: $460
Max potential profits: unlimited (yeah, right)
Max potential losses: too busy to figure that out (duh!)
The way I would feel about my gut feeling looking MA charts If MA drops after its ER tomorrow:
PRICELESS

and oh, "Wherever it takes you, the future takes Visa" and V is down in AH after its ER :)

Normally I will never play ER, but just cannot help it this time :P

Weekly Trading Calls -- April 27, 2008

Overall Trading Strategy for the Next Week

As I stated in my “Weekend Notes on the Market”, technically, the path of the least resistance is now up. However, the market fundamentals as well as the inter-mediate term direction could be changed next week by such major events like the FOMC rate decision on Weds and Q1 GDP/April job report later in the week. These key events, along with continues pouring of ER, will bring a lot of volatility next week. It is prudent to establish SW position later in the week when the market direction/underlying fundamentals become clear.


1. AAPL: CTT between 158/160 and 190, bullish technical bias;

2. ACI: SW-S2, ez=59.8-63, stop just above 63, IT=55

3. AKS: SW-S2, preferably ez=68.5-69.50 with stop just above 70, but could enter at higher level on daily chart over-bought conditions. IT=MA50.

4. CF: SW-S2, ez=154.5-159, stop just above 160, IT=MA50/130

5. CTRP: speculative SW-S3 if it spikes towards 63, IDS just above 64, CS just above 63 on bullish candle, IT=58.

6. FCX: SW-S3, ez=119.8-123, stop just above 124, IT=MA50

7. FSLR: SW-S3 if it spikes towards 300, stop just above 310, IT=265/MA50

8. ISRG: It is trying to bottom here, but if it breaks/closes below 270, it may quickly run down to 250/230.

9. MA – ER on April 28 (V’s ER on April 27): for reason I stated before, I may consider a speculative put position if it runs close to 250 or higher before ER, IT=220.

Weekend notes on the market -- April 26 ,2008

Hidden bear crunching bull?

With most of ER came in no worse than expected, bulls bought every dip and along the way not only defended last week's big gains but also posted the second winning week.

On the weekly charts: all major indices posted highest close of 2008; positive momentum on the rise; most indicators bullish for the near term; overall volumes remain light for 5th straight week; candle body length/weekly ranges at the lowest in nearly 2 months;

On the daily charts: momentum stalled but remained positive; short-term MAs in bullish trend formation; both stochastic and RSI(2) in/near overbought; candle formations for the past few days reveal both overhead resistances and clear presence of buyers below;

Thoughts and observations about the current market conditions and near-term outlook:

1. The psyche of the market has turned very bullish last week as buyers came in on every dip. The prevailing view that the worst is over and the second half recovery is in the cards are gaining tractions in light of overall ER picture of the past week. Given that, it seems that the path of the least resistance is now up, and all major indices are poised to challenge their MA200.

2. The counter-trend rally since the mid-March bottom has been five weeks long now. While the gains are pretty decent, they came in on light and diminishing volumes. The lack of big boys' active buying will make the on-going rally increasingly vulnerable to sizable profit-taken pullback or even trend-reversal as the market continues to climb and further stretched to the upside.

3. Next week's FOMC rate decision will be paramount to the market direction in the coming months. Right now, the market has basically priced in a 25 bp cut AND the signals of rate-cut pause in the future. I think the key will be Fed's view on the inflation picture. If the small-cut and pause are primarily out of the inflation concern, I suspect that the market will have a hard time to further rally, to say the least.

4. Next week's Q1 GDP and more importantly the April job report are critical to fundamental views of the market's inter-mediate term direction. If both come in much worse than expected, the fear that this is going to be a deeper and prolonged recession could put a top on the ongoing rally.

Crunch time, but for bulls or bears?

I bet you that you feel it: bulls are really pushing it, and they got really close (SP500 near 1398) before some sell-off in the last hour or so. With MSFT down over 5% after its ER in AH, we will find out how strong bulls are tomorrow. Some random thoughts:

** APA: SW-S2, ez=135.8-137.8, stop just above 138, IT=128/MA50.

** BEXP: SW-L2, ez=8-8.55, stop just below 8, IT=9.5/10

** BIDU: not a lot of volume/action after ER in AH, might consider CTT between 320 and 380.

** CF: dropped nearly 6% after ER in AH, boy, which I had acted on my gut feeling when it was near 160 earlier this week. May consider DT-L2 if it spikes towards 120, or SW-S2 if it spikes towards 144/147, stop just above 149.

** DRYS: SW-L2, ez=70-76.2, stop just below 70, IT=88

** FCX: DT-L2 if it spikes towards 105, stop just below 104, IT=110.

** GS: SW-L1 if it spikes towards 182/183 in the early going, stop just below 179, IT=MA200.

** MA: I have a funny feeling about it, it has been crawling up in the last 4-5 weeks as volumes become lighter and lighter, and little bullish enthusiasm as it slowly breaking to the new highs, a very good ER next Tuesday? just suspicious. I might take a small put position if it spikes towards 250 or higher tomorrow!

** MOS: DT/SW-L2 if it spikes towards 110/MA50 in the early going tomorrow, stop just below 110, IT=120

** POT: DT-L2 if it spikes towards 180 with a stop just below; SW-S2, ez=109-205, stop just above 207.

Position update

Just covered ACI at 55.22, POT at 190.22, still holding FCX, and will re-enter if ACI, AGU, POT etc. rebound here. Pretty happy about the over 20 point gain on POT, but then it again, still not close to what Razor does, and if it tanks to 185 today, I will feel like a jerk again.
All the high flying commodity names are rolling over, finally.....

Conviction needed!

Bulls have been hanging tough just under the key resistance zone, they are looking for new catalysts or fuel to break through because they don't really have the conviction here. Ditto for the bears! Some random thoughts:

** AAPL: huge amount of calls bought today before ER, if it is indeed that big boys wrote most of the calls, AAPL will have a tough time to stay at the current level, let alone go up. I am looking at CTT between 145/152 and 175/180, no mid-range play here.

** Many hot commodity names, such ACI, POT, AGU, FCX, are flashing topping signs. Many have had ominous bearish engulfing candle on pretty strong volumes either today or yesterday. I look for an initial pullback to at least their MA10s. Obviously too early to call any real inter-mediate term tops here, but if the pullback volumes really spike, bears will feel more comfortable when they rebound.

** AKS: SW-S2, ez=66.7-69.5, stop just above 70, IT=MA50

** AMZN: DT-L2, ez=70-72.2, stop just below 70, IT=76

** BX: SW-L2, ez=17.5-18.05, IDS just below 17, CS just below 17.5 with a bearish candle, IT=20.

** DRYS: will keep an eye on 88.5 level, maybe it will pullback here to even form a cup-n-handle formation before eventually break out?

** FSLR: bulls are tired but bears may be too scared, watch for a bearish close below MA10 on good volume.

Tradable overbought pullbacks?

Took several initial short positions (1/4 of full size) earlier this morning:
FCX at 120.88,
POT at 210.88,
ACI at 58.88,
stops all just above the 2-day high.
All these stocks have seen a lot of gains in recent days and signs of short-term topping are developing. Obviously I have not learned much from the pain of shorting the tops, there are just too many lines of evidences suggesting at least some kind of tradable short-term tops/overbought pullbacks. Of course if FED goes easy with the rate cut next week, we might see some sizable pullback in the commodity sectors..

(Minor league?) bulls marching on!

Big boys mostly continue to sit tight (though once again there were some serious sell-into-strength going on in SPY for the second day in a roll), while retailer bulls are momo-traders are having their day in the sun for sure. Some random thoughts:

** AAPL: looks like it may really hit 175 before the ER, and if it does happen, it will be tempting to take a put against the ER.

** AIG: might be a good short here, every time when it has a bearish-engulfing candle at the tops, it goes down for 10% or more, think the tide has turned now it has broken the down-trend channel?

** BIDU: If it hits 380/400 before ER, you got to take a shot with a put here.

** CF: over 50% rise in 3 weeks? I am curious what kind of ER surprise it needs in order not to have a post-ER sell-on-news?

** CME: It will either hit 480 or 580 after tomorrow's ER, my guessing...

** COIN: used to be a momo darling, and has been acting very poorly lately, another oversold rebound maybe around the corner, but short near MA50 might be a good play.

** WLT: a busted call on me, lesson? when the market gets this bullish, no topping signs are reliable, and that's why you would need a stop!

Weekly Trading Calls -- April 20, 2008

Overall Trading Strategy for the Next Week

For the reasons I stated in my “Weekend Notes on the Market”, while technically it may be the time to trade from the long side for the next few weeks, entry on the pullback makes more sense, which could occur early next week.

1. AAPL – ER on April 23
Last Friday’s action completed the “cup-n-handle” formation, but its ER could smash this nice cup or make it into a text book example. I am expecting it to either test 175/180 or 145/140 after its ER.
** Might consider a small option play right before the ER, still undecided on which direction to bet on, but if it spikes towards 175 or higher before ER, might consider 150/160 puts.

2. BIDU – ER on April 24
** Might consider a small put position right before ER IF it spikes towards 380.

3. GS
For the first time, it closed above the well-defined 6-month long downtrend channel that started last Nov.
** SW-S3, ez=170-173, IDS just below 170, CS just below 171 with a bearish candle, IT=190/MA200

4. ISRG
** SW-S1, ez=295-310, IDS just above 316, CS just above MA50 with a bullish candle, IT=MA200 (near 267 now)

5. SPWR
** CTT between 71/MA50 and 95/100, don’t trade the middle range.

6. WLT
** SW-S3, ez=70-72, IDS just above 73, CS just above 72 on bullish candle, IT=62.

Weekend notes on the market -- April 19 ,2008

Bulls in marching order, finally?

By shrugging off the continuously dire economic news and embracing better than expected ER from tech heavyweights INTC/IBM/GOOG and other major companies, the bulls rallied for the week to not only recover all the losses of the previous week, but also push the major indices to their upper boundaries of the 2008 trading range.

On the weekly charts: all major indices posted a bullish Marubozu Candle; momentum turned positive for the first time since last November; MACD crossed up and turning up for the first time since last November; Stochastic in full swing of over-sold rebound process; MA10s curved up; overall volumes remain relative light for the forth straight week.

On the daily charts: for all major indices, momentum once again turning positive after a short sting in the negative side; candle formations overall bullish for recent days; RSI(2) in short-term oversold; MA10 pointed up while the short-term MAs forming bullish order; overall volumes continue the light pattern started since the rally off the Mid-March bottom.

Thoughts and observations about the current market conditions and near-term outlook:

1. Both momentum and MACD changes on the weekly charts since last November may signify a significant turning point for major indices, putting down a high probability of overall uptrend for the coming weeks.
2. As of the Friday’s closes, DOW led the market with a close above the Feb/March highs, while both SP500 and NASDAQ just inches below their 2008 highs. While it becomes increasing clear that the market has seen its inter-mediate term bottom, the ongoing rally has to take out the heavy resistance zone just above before any talks of new bull market can be substantiated.
3. The big boys have been sitting tight ever since the Mid-March’s huge rally off the bottom, and that remained unchanged in the first week of high ER season. The impact of their lukewarm participation in the ongoing rally can also be seen in the post-ER run of some major companies with better than expected results/outlooks (INTC/IBM/GOOG). Additionally, there are signs of big-boys selling in to strength.
4. While technically, it becomes compelling to join the bulls march, as long as the inflation/housing pictures remain dismal and big-boys sitting tight, the rally will be choppy and vulnerable to profit-taking whenever there are not-so-great ERs from major companies.
5. As the major indices at the top of the 2008 trading range with 2 gaps-up this past week, I expect the market to take a breath in early part of the next week before any further meaningful movement.

Raging bulls, no?

IBM behaved well, even MER did well, but bulls barely moved today, and the overall volumes, oh well. If, with over 17% jump of GOOG in AH following its ER, bulls still could not muster a serious challenge of the key R zone tomorrow, what else could power the major indices through the ceiling? Tomorrow is option exp day, wonder what will be destroyed the most, calls or puts? Some random thoughts below:

** AAPL: a break/close above 160 would complete the "cup-n-handle" formation, but the overall volumes of the ongoing 4-day winning streak have been light, DT-S2 if it spikes at the open using 160 as stop reference might be worth a try, but be quick at taking profits.

** GOOG: tomorrow's post-ER huge gap will be filled, but that probably won't happen before it touches 600/620 first.

** ISRG: probably worth a shot from the short side if it spikes towards 330/340 in the early going, or more conservatively, when it closes below MA50/300 near the close with a bearish candle, IT=MA200.

** SPWR, STP, and to the less extent FSLR: worth a shot here from the short side using today's high as stop references.

** Other topping suspects: WLT, AGU, POT

To bulls: if not now, then when?

With VIX completely broke down and major indices are approaching the key resistance zone just above the Jan'08 high for the forth time so far this year, you got to wonder if anything can hold the bulls back this time, especially IBM's ER in AH gave bulls another shot in arm. Some random thoughts:

** INTC's post ER day was a distribution day with relatively so-so volume, I will be curious if IBM will do better tomorrow.

** APPL: I mentioned last week of the possible formation of the "cup-n-handle", you think the handle is almost completed?

** BIDU sure has a pretty bullish chart, should buy any pullback with stop just below 300, IT near 350. But GOOG ER on tomorrow is a wild card.

** Why I feel the bearish urge to act if MA spikes up in the early going tomorrow morning?

** POT: it sure will break through 200 tomorrow morning, but how long do you think it would take for it to back fill the gap here?

** SGR: looks like a pretty classic short-term 2B formation here.

** SPWR sure looks like having a killer ER tomorrow, doesn't it?

** X/NUE/AKS: cost of coal is spiking, but the steel makers are able to pass it on by raising the price, then about slowing demand? I really have my doubts, but arguing with the tape/charts now just cannot make me look smart? then again, maybe tomorrow's NUE report will vindicate my vision :P

Can we go up now?

We already know what GE did for bears when it missed ER number and lowered the outlook, we will find out what INTC can do for bulls tomorrow. Personally, I will question all the strong bullish scenarios if INTC boost merely provides another sell-into-strength opportunity.

Too late to do a complete homework, but just saw some topping signs in MA and POT, hmmm

The unbearable lightness of bullishness?

Another low volume down day, and the overall volumes are so light, the bulls might just call it victory. As indices/many stocks are very oversold on the 60 min charts, fading the gap if there is one tomorrow morning seems just logical. On the other hand, since the momentum for major indices and many stocks just flipped to the negative side, you got to wonder if any sizable gains can be sustained.

The long setups are the best when the market gaps down big in the open tomorrow morning:

1. BX: DT/SW-L1, ez=16-16.82, IDS just below 15.9, IT=18.

2. GS: DT/SW-L3, ez=155-160.2, IDS just below 155, IT=167/170.

3. ISRG: DT/SW-L2 if it spikes towards 305, IDS just below 300, CS below 305, IT=315/325.

4. BEXP: buy any pullback above 8, IDS just below 7.6, CS just below 8, IT=to the moon :P

Weekly Trading Calls -- April 13, 2008

Overall Trading Strategy for the Next Week

For the reasons I stated in my Weekend Notes on the Market, I think the market will be range-bound between Jan/Feb high and March low for the time being. Given the kind of ER we saw from FedEx/UPS/GE, I also suspect the coming ER season will be a rocky one with overall bearish tone. Considering all the turmoil and volatility, the prudent strategy will be CTT using key R/S as entry/exit references levels and overbought/oversold as entry/exit triggers, and it makes sense to shorten the holding time frame until the overall market trend becomes clear.

1. AAPL
** SW-L2, ez=MA50-141, IDS below 130, CS below MA50, IT=155
** SW/DT-S3, ez=150.4-155, IDS just above 155, CS above MA200 with bullish candle, IT=145.

2. ABX
** SW-L2, ez=38-41.5, IDS just below 38, CS below 39 on bearish candle, IT=45

3. AMZN (for Mon/Tues only)
** SW-L2, ez=67-70.2, IDS just below 67, CS around 69 with bearish candle, IT=74

4. CRM
** SW-L2, ez=54-58.2, IDS just below 54, CS below MA50 on bearish candle, IT=64/66

5. GS (for Mon/Tue only)
** SW/DT-L3 if it spikes down towards 160/163, IDS just below 160, CS below 163 on bearish candle, IT=169.

6. ISRG (ER on Thursday)
** (before ER) SW-L2, ez=MA50-316, IDS just below 300, CS just below MA50 on bearish candle, IT=MA10.

7. RIMM
** SW-L1 if it spikes down towards MA50/107, IDS just below 100, CS just below MA50 on bearish candle, IT=118

8. FFIV
** SW-L2, ez=18-19.1, IDS just below 17.7, CS below 18.5 on bearish candle, IT=20.8

Is the rally over?

After several days’ futile low volumes attempt, bulls’ hope to extend the rally by clearing the key resistance zones got squashed on the Friday when the perennial beating-estimates-by-a-penny global conglomerate GE missed ER estimates AND lowered outlook. The steep sell-off on the Friday sealed a losing week as the major indices gave back two thirds or more of the gains from the week before.

On the weekly charts: all major indices posted a dark-cloud cover candle formation; the momentum either turned positive (SP500 and DOW) or poised to flip to the positive side (NASDAQ); MACD is poised to cross up and turning up; MA10s flatten while the short-term MAs remain in confirmed bearish formation; overall volumes remain light for the third straight week.

On the daily charts: for all major indices, the 3-week running positive momentum dissipated and on the verge of turning negative; stochastic indicative an in-progress over-bought pullback while RSI(2) suggesting short-term oversold; broke and closed below MA50s; candle formation bearish with clear signs of the strong resistance zone; overall volumes remained light for recent days;

Thoughts and observations about the current market conditions and near-term outlook:

1. Overall, the big boys have been sitting tight ever since the Mid-March’s huge rally off the bottom. Without their active participation, the market is likely to be range-bound between the 2008 high and low. However, this may change starting next week as the ERs flood the Street.
2. The huge sell-off (over 366 million shares) of GE on the Friday suggests that at the current level, the major market participants have NOT fully priced in weak outlook for the coming Qs. GE’s warning, along with earlier warnings from FedEx and UPS, does not bode well to say the least, for the Q1 ER season which kicks in full gear next week.
3. Judging from the overall market volumes and VIX of the Friday, fear is mild at most despite of the ominous action in GE trading.
4. Technically, bulls are at a critical point where they can still resume the rally, but they must do it very soon because another sizable decline from the current levels would put the 2008 bottom in jeopardy.
5. The market will be driven by the ERs/inflation reports next week, given what we have seen from GE/FedEX/UPS and the dismal macro-economic conditions, I feel that downside possibility outweighs the upside one.
6. I might consider aggressively long ONLY IF the major indices spike towards the 2008 bottom on modest volumes.

Position Update: I closed all my positions by Friday. The loss on FSLR (cover the remaining half near 266) and SPWR basically offset all the gains from JASO (shorted at 23.88 and covered at 21.22) ,WLT (shorted at 67.8, covered at 65.11), and other profitable flipping of BIDU, FSLR, and I have nothing to show for the last two weeks. The lesson? When you short momo high flyers like FSLR based primarily on extended and deep overbought signals, the timing has to be perfect (I was wrong by one day) or you won’t see a dime before the migraine takes over.

The unbearable lightness of volumes-Day 2

Bears got the candle, but no volumes. As the major indices are poised to test their MA50, why I feel that bears might be more nervous than bulls? I might cover some short positions if the market gaps down sizable at the open tomorrow. Lots of half-assed setups, I might well just shut up here.

The unbearable lightness of volumes

Well, the yesterday's setups were spoiled as the market gapped down at the open. Bears got to be disappointed as the promising sell-off proved to be shallow and short lived. As the overall volumes continue to dwindle, my gut feeling is that big boys are sitting tighter than ever, and the trading public along with the under-water shorts are doing most of lifting here. Personally, I want to see a big-volume up day that breaks the 5-day top before commit to the long side.

Could not find any solid long setups because the general overbought conditions with stochastic flashing sell-signals. On the other hand, I become a bit wary about all the short setups mentioned last night, despite of concrete technical reasons behind them, something just not feel right, kind of the feeling you got when you short a strong bull market.

Can you say bull?

Monday, Monday!

Well, the overbought pullback signals are pretty much here, but in the last several weeks, Tuesday has been bulls' favorite orgy day, you think it is gonna be different this time?

Evening Notes:

1. AAPL: I feel it will pullback any day now to 140/145 to form a cup-n-handle, today's doji is the first sign of hesitation on the bulls part; both stochastic and RSI(2) deeply overbought; 60 min chart shows bearish divergence in money flow and momentum. For aggressive plays tomorrow, either short it when it fails to break today's high or when it open high but then breaks today's low. DT-IT around 150.

2. AKS and X: they are very close to the 25% gain following the breakout, need to see the momentum stalled, but if there is a big gap up, especially for X, might consider a small initial position.

3. FSLR: pretty classic distribution today, but it is not done yet. I need another gap up, but no higher than 300!

4. MA: should've acted on my weekly call on it, if it opens high and then breaks 226 with some volume, could be a good short with stop just above 234, r/r not that good since IT might around 210. a bit too close to oversold on 60 min.

5. SPWR: dark-cloud cover! STP: the cloud is even darker! YGE: bearish-engulfing. so in conclusion, it might be the time to dip in if they gap up again.

6. WLT: acted on the weekly call, should touch MA10.

Now, only one thing can spoil the above setups, please, please no gap down tomorrow!

Weekly Trading Calls -- April 6, 2008

Overall Trading Strategy for Next Week

Even though the major indices are yet to give a solid confirmation, there is a growing consensus that the market has seen its inter-mediate bottoms, and the underlying bullish tone is indisputable in recent days. On the other hand, facing a well-defined resistance zone while in over bought conditions, the market is likely to consolidate and pullback before it can gather enough strength to advance further in a meaningful way. Given all of that, it seems that right now the best strategy is SW from the long side when the consolidation is over. DT or SW short setups may be consider to play the overbought conditions in the early part of the week, but tight stops must be honored and profits must be protected or taken quickly.

I am considering some changes in how I do the trading calls. Except of a few regular names, I will shift focus to the setups that would generate at least 10% potential profits with reasonable risks in 3-10 days time frame. I will also reduce detailed technical analysis for most of the setups. In addition, I may post setups during the weekday evenings if I have time and see any compelling ones.

1. AAPL
** SW-S2, ez=158-168, stop just above 170, IT=145
** SW-L2, ez=140-145.5, stop just below 140, IT=158

2. APOL
** SW-S1, ez=52.5-56, stop just above 57, IT=45

3. BIDU
** SW-S2, ez=319-329, stop just above 330, IT=285

4. CME
** CTT between 475/480 and 535/550, don’t trade the mid range.

5. CRM
** SW-L1, ez=58.5-60.5, stop just below 58.5, IT=70

6. FCX
** SW-L2, ez=96-101, IDS just below 93, CS just below 96, IT=118

7. FSLR
Ten consecutive up days with 40% gain, in overbought for a week now, but it might have a bit more to go as the positive momentum is still rising. Early signs of possible exhaustive/capitulation move coming. Current short position will be stopped out around 285, and will re-establish the position if the momentum stalled AND there are other concrete signs of topping (especially the candle formation), IT=MA10-255.

8. JASO
** SW-S2, ez=23.8-25, stop just above 25.5, IT around 20

9. LDK
** SW-S2, ez=41.8-46, stop just above 47, IT=MA50/30

10. MA
** SW-S1 when it closes below MA10 with a bearish candle, IT=MA50/210. May consider a speculative small SW-S3 position from 230-234, stop just above 235, and add to the position when it breaks MA10.

11. SGR
** SW/DT-S2 if it spikes towards 58, IDS just above 58.5, CS around 58, IT=53.

12. SPWR
Acted like FSLR, but fundamentally/technically weaker. Consider a speculative position from 98-110, and add more when there are concrete signs of topping, IT=MA10/80.

13. STP
** SW-S2, ez=53.8-58, stop just above, IT=MA50/40

14. YGE
** SW-S2, ez=24.5-26, stop just above, IT=20

15. WLT and X
DT/SW-S2 whenever the previous day’s low is breached, stop just above the previous day high, IT around MA10.

Bears out, bulls in?

Unfazed by more negative headlines, bulls mustered a big up week and on the verge of making a higher high since last November, which will produce the first solid technical indicator to confirm Jan’08 lows as the bottom and lay down a foundation for a possible trend-changing rally.

On the weekly charts: for all major indices, the momentum is poised to turn positive for the first time since last November; stochastic shows clear and early signs of oversold rebound; MACD is poised to cross and turn up; MA10 turning up while the short-term MAs remain in confirmed bearish formation; candle formation bullish; overall volumes remain light for the second straight week.

On the daily charts: for all major indices, the positive momentum stalled as they lingering in the overbought conditions; solidly above MA50 and approaching the corresponding Feb/March highs; overall volumes light for recent days; short-term MAs turning up; overall candle formations in recent days bullish;

Thoughts and observations about the current market conditions and near-term outlook:

1. It is impressive that the market shrugged off several big negative news this week, including the March employment report, to keep the big gains in the early part of the week intact.
2. The overall volumes during the last 2 weeks’ rally have been light, suggests the lack of full-hearted participation of the big institutions. Given this, the bulls may struggle to keep advancing as they approach the key resistance zone while in overbought conditions.
3. The market has priced in a quick and shallow recession scenario, and fully expected a second-half economy rebound this year. The monthly job loss numbers so far support the “shallow or mild recession” notion. But I think the upcoming earning season may provide a better indicator for the coming months, and we are yet to see if that would be in-line with the current prevailing view.
4. While there is a clear bullish tone in the market and the major indices may overall trend up in coming weeks, as long as the underlying macro-economic conditions remains dire, a strong and straight-up rally from here is not likely.

The turning point or the point of no-return?

As the major indices are approaching the Feb/March highs, tomorrow's market reaction towards the March employment report may determine the overall market direction for the coming months. Will there be another huge rally to bolster the bullish case by posting the first higher high since last Nov thus confirming the intermediate bottom, or will bears be able to smack the bulls down to keep the the possibility of the second legs down alive?

Judging from the deep overbought conditions across the board and the oversold VIX, I might bite the bullet by going short if the market gaps up big. My short list: AAPL near 160, FSLR near 264, JASO near 22, SPWR near 87, STP near 50, V near 69 (stopped out just above 65 today), YGE near 24.5, BIDU near 300/305/325, and WLT near 75/80 as speculative play. On the other hand, if the market gaps down big at the open, unless the overall volumes really spike, the sell-off might be short-lived, and buy at bottom might be considered though will be risky if the market cannot recover late in the session. In either scenarios, it is prudent to be nimble when taking profits, especially on the short side.

The calm before the storm?

Please take your position, bears and bulls, for the crucial battle coming this Friday, and no, it is not too late to switch sides, change hearts, or just hide out.

Solars are on fire for sure, and my short wabbit tail got burned a bit today, but no probomo, I will once again aim on FSLR, STP, SPWR tomorrow. Others on the short list are CME, BIDU, and WLT as a speculative play. Obviously all the setups require a key R as the stop/entry references, and the ideal trigger is a big gap-up or early spiking up in the morning. AAPL is a CTT play between 145 and 154.

Good luck all!

No country for the April bears?

Not sure why bulls picked today as the date to get serious, but they sure did mean business. Somehow I sense this very intense, genuine, and almost uncontrollable bullish urge, it feels so inevitable and self-evident, that I start to suspect on, hmm, I don't know. Maybe I should follow what Livingston often says, that you just have to bet to find out if you are right or wrong. Yeah, maybe I would...

Short candidates: V, SPWR, STP, FSLR, RCL
Long candidate: SGR

I guess the market will consolidate until Friday when bears and bulls battle out the job report.