Short these!

Yes, I am serious. As the market goes insane and the IV totally exploded, it is time to play safe. With the account going up for another 1k today (flipped CLF calls and still have winning SQNM NOV30 calls), it is time to relax a bit. Will consider shorting the following puts for the remaining of the week.

1. AAPL: Oct. 95 puts $6.5 or better
2. BIDU: Oct. 200 puts $8 or better
3. CLF: Oct40 puts, 4 or better
4. FCX: OCT50 puts 5 or better
5. MA: OCT140 puts 6 or better
6. POT: OCT120 puts 8.5 or better
7. SPWR: OCT55 puts, 3 or better
8. SQNM: OCT 22.5 puts 1.25 or better
9. UYG: OCT 15 puts 1.5 or better
10. WLT: OCT35 puts 2.5 or better
11. X: OCT 65PUTS 5.5 or better
12. CF: OCT75puts, 5.5 or better.
12. DVN: OCT80 puts, 3.5 or better
13. GOOG: OCT350puts, 12 or better
14. FSLR: OCT165puts, 11.5 or better
15. MON: OCT90puts, 5 or better
16. CME: OCT290puts, 8 or better.

And yes, I am fully prepared to end up with those shares that much cheaper than the current levels.

Save them to save us?

Well, looks like the Wall Street is only going to get a half-assed rescue for now, and with that, the major indices may spend a bit longer time at bottom searching before turning up. Right now I am only comfortable about two plays:

1. Short UYG OCT17 puts if the market gaps down at the open tomorrow.
2. Short SQNM OCT22.5 puts and start to build long positions in SQNM or buying its Jan09 30 calls.

The broad commodities are oversold and I am eyeing plays for a technical rebound, however, I might have to be patient until I see how US$ and global recession outlook affect them, right now it hurts my head trying to figure that whole thing out.

Now what?

The market may have reached momentum bottom last week, but a retest of the bottom and consolidation are likely for the next week or two before another counter trend rally can materialize with force.

Key Indices Assessment

Monthly – bearish (straight down MA10, closed below MA50), not quite oversold yet; but may bottom-fish because of uprising MA50

Weekly – the bottom might be in, but more volatile side-way chopping expected.
** MA—all closed below MA10, but they are flattening or turning up; MA50 all solidly trending down
** MACD/histogram: neutral, either way
** Candle formation: indecisive with huge up/down shadows with slightly bullish white bodies

Daily – rally facing formidable resistance
** MA—short-term MA in bearish order; all closed above flattening/curing up MA10s; all failed MA50
** Candle formations—clearly bearish despite of Friday’s historic volumes.
** Stochastic/RSI all favor more near-term upside; MACD Hist still negative;
** Lots of overhead resistance, the gap will be filled soon.
** QQQQ is the weakest of all, facing formidable resistance zone from 44-46, with MA50 around 45.2.

US$– more downside to MA50 around 76 likely before resuming uptrend?
Weekly— key resistance around 80 in play; MA10=76 and MACD/histogram bullish; stochastic points to overbought pullback in early stage
Daily-- recently reversed long term trend still intact; MA10=79, increasing MACD histogram, stochastic all suggestion more downside; but RSI2 in oversold; a test near the previous consolidate zone and MA50 (76-77) inevitable.

VIX—consolidation going forward
Weekly—more upside likely as every indicator except RSI2 are bullish.
Daily—parabolic ascending in correction, some pullback/sideway movement likely in near future.


Weekly Swing Trading Calls

Tech sector (bearish bias, Q3 ER outlook gloom?)

1. AAPL: Q-S2, 146-152, IT=135; S1, 158-162, IT=146
2. AMZN: Q-S2, 84-92, IT=72
3. GOOG: CTT, 410/430—480/510
4. RIMM: CTT, 90/92—112/116; bearish bias
5. SOHU: Q-S2, 68-72, IT=60

Coal, energy, solar sectors (watch US$ and oil movement for necessary adjustment)

6. ACI: Q-S2, 45-50, IT=38; S1, 54-57, IT=42
7. CLF: L1, 64-71, IT=84
8. CLR: L1, 33-37, IT=50
9. CNX: S2, 68-72, IT=58
10. ENER: S2, 73-83, IT=60
11. JRCC: S2, 36-45, IT=28
12. MEE: S1, 49-56, IT=40
13. OIH: L2, 158-161, IT=175
14. RIG: L1, 112-121, IT=130/132
15. USO: CTT, 78/81—89/93
16. WLT: CTT, 55/62—78/85

Metals and other commodity sectors (watch US$ movement for necessary adjustment)

17. ABX: S2, 40-45, IT=32
18. AEM: S2, 64-72, IT=55
19. GG: S2, 36-42, IT=32
20. CF: L2, 105-111, IT=130
21. FCX: CTT, 62/67-85/95
22. PCU: CTT, 20/23—30/33
23. MON: L2, 102-112, IT=122/130
24. POT: L1, 158-168, IT=185
25. X: L1, 81-92, IT=118

Financial and related sectors
26. BAC: S2, 42-45, IT=36
27. CME: L1, 345-375, IT=450
28. COF: S2, 62-70, IT=50
29. GS: S1, 144-162, IT=110
30. MA: S2, 239-260, IT=210
31. SKF: L1, 71-81, IT=115
32. WFC: L1, 32-36, IT=45; S3, 45-50, IT=38.
33. XLF: L1, 18-21, IT=25,
34. RKH: CTT, 110/113—132/138

Go finishing!

OK, now is the time for any who wants to be a bull to dig out all the fishing gear. I am going to say this tonight: I expect a short to intermediate term bottom this week, could be as early as tomorrow if the market gaps down for another 2-3%.

Good luck!

Weekend notes

Well, I got it half right in my last weekend notes: I thought most people would have held on to the belief that the decline commodity is good for the market a bit longer, guess by now many have started to see the gloomy outlook for the global economy.

As the Fed running out of the ammunition, Uncle Sam steps in this time to try make yet another artificial bottom here. The major indices will rock higher tomorrow, but I seriously doubt that rebound will have the staying power.

The precipitous drops in the last several days prompted me to get in a bunch of long positions late last Thursday (all Oct. calls), I exited half of those late last Friday (MEE, CNX, CF, WLT), and will exit the rest (QQQQ, AKS, X, FCX) on Monday/Tuesday. Have been too busy to do any trades for a while, and felt happy with this round, should all be decent winners.

Not a whole lot of setups for the next week, which will be extremely volatile, but my overall strategy is closing all the long positions into the rally, while start to look for short setups (especially in financial, retailer and tech sectors) once the rally starts to losing steam). For tomorrow, I will keep close eyes on SKF, will consider long if it can spike towards 90.

Weekend notes

The actions of the low-volume days last week did not change my overall views of the market as stated in last weekend’s note, in fact, the near-term outlook becomes even cloudier as the weekly and daily technical indicators flashing conflicting signals. However, unlike last week, in the face of several key economic reports, I expect the back-from-vacation big boys will start to make up their mind in the coming days, and all we should do, is trying our best to read whatever hands they show, and then play along.

My gut feeling is that, as US $ strengthens further and global economic outlook turns bleaker, oil will lead the energy/commodity related sectors to the second leg down, which will likely drive the rest of the market up to extend the now 8 weeks-old counter trend rally. Historically, September is the cruelest month for the bulls, and I am not sure if the election will affect that.

Really not many setups for the short week:

1. CF: S2, ez1=153-158, stop just above 160, ez2=165-172, stop just above 173, IT=128.
2. CME: L2, ez=310-322, stop just below 310 (may re-enter around 280 or 300 with stops just below), IT=370.
3. CRM: S1, ez=59.8-64, CS just above 62 with bullish candle, IDS just above 65, IT=54
4. GOOG: S2, ez=480-500, stop just above 500, IT=420
5. ILMN: S2, ez=88-91, CS just above 90 with bullish candle, IT=78.
6. WLT: S1, ez=95-100, stop just above 100, IT=84.
7. GS: CTT between 158 and 178, quick on profit taking.
8. POT: S1, ez=177-185, IT=160.

Weekend thoughts and calls -- Aug. 24, 2008

Just some quick thoughts and calls:

Major indices are at a very tricky point: they may roll over right here, or there might be another leg up before the counter-trend rally eventually ends. The movement of US dollar and oil could drive the market direction for next week or two.

We are seeing the technical rebound of the extremely oversold energy/commodity/metals sectors. The rebound is yet to run it course, consequently, for this week, any dip towards the lows of the last week can be bought with stops just below. On the other hand, it is very likely that the mid-term trend of these sectors have been reversed, therefore, short-the-rebound setups should be considered in the coming weeks.

1. ABX: S1, 38-41, IT=34

2. CF: S1, 158.5-168, stop just above 173, IT=130

3. CLF: S1, 110-116, stop just above 116, IT=100

4. CME: L2, 330-350, stop just below 330, IT=390

5. CRM: S1, 60-62, closing stop just above 62, IT=54

6. FCX: CTT between 80-100/105

7. GS: Quick-swing L2 if it spikes towards 140, closing stop just below 140, IT=160,

8. JRCC: S1, 49-51, closing stop just above 51, IDS just above 52.5, IT=40

9. MA: S1, 255-258, stop just above 260, IT=221.

10. MOS: S1, 120-128, stop just above 130, IT=100

11. POT: CTT between 166/71 and 200/205

12. USO: CTT between 88/89 and 102/105

13. WLT: S2, 99-109, stop just above 110, IT=85

Weekend notes -- August 17, 2008

Got a few moments at hand so here we go:

Major Indices Assessment

Weekly – more upside possible, but may consolidate first.
** RSI2--clearly overbought for all
** MACD histogram: turned positive for NASDAQ, growing (3rd week) for Russell; poised to turn positive for DOW/SP500.
** Russell on 6 week winning streak with volume spike but backed off from the June high, stochastic near overbought; COT show increasing commercial shorts in Russell.
** VIX MACD histogram just flipped to the negative side.

Daily – rally overstretched but no clear reversal yet.
** Well defined ascending channel for all.
** Extended period of positive momentum for all but stalled
** Overbought for both NASDAQ/Rut, which are also over-stretched and crashing the Bollinger bands
** VIX breaking down
** MA50 and MA200 all with clear bearish slopes.

Weekly Swing Trading Calls

** Calls should be seriously reconsidered when there are major company-specific material events.
** All long calls for the energy/commodity/fertilizer sectors are primarily technical driven at this stage.
** Once again, EZ are set conservatively. Entries above the EZ can be used, but position sizes might need be reduced to manage the risks.

1. ABX: L1, 27-30, IT=35/38

2. ACI: L1, 37-44, IT=55

3. AGU: L1, 65-73, IT=88

4. CLR: L1, 37-42, or when it closes above MA10, IT=55/60.

5. CNX: L1, 50-58, IT=68/72

6. ELN: L1 if it spikes towards 12, IDS<11, CS>12, IT=18.

7. EWZ: L1, 60-66, IT=75

8. FCX: L1, 69-81, IT=90

9. MOS: L1, 82-93, IT=110

10. OIH: L1, 170-173, IT=190

11. POT: L1, 142-160, IT=183/190

12. RIG: L1, 110-121, IT=132

13. SLV: L1, 10.5-11.7, IT=13.7

14. USO: L1, 85-88, IT=95

15. X: L1, 111-121, IT=140/150

16. IWM: quick swing (1-2 wk), S1, from 76-80, IT=72

Back from the future...

Before I knew it, I have not posted anything for like 10 days, just got too many things going on latterly

Allow me to post some of my thoughts about the market as well as some trading calls, I hope they are good for at least a week or two.

Thoughts and observations about the current market conditions and outlook for next 2-3 weeks:

1. More and more people are now in the camp of “global-recession-here-we-go”. The crowd obviously believes the “demand destruction” due to the upcoming recession, and they probably have been selling energy/commodity/materials/agriculture sectors hard. I pretty much agree with them to this point.

2. But the crowd went on to buy all other sectors and started to think that a new bull market is coming. To that, while I think the market will overall trend up in next couple of weeks, I find it is kind of amazing that one could actually put both “upcoming global recession” and “a looming new bull market” in the same sentence.

3. My target zones for the ongoing counter-trend rally: NASDAQ: 2470-2560; SP500: 1320-1400; DOW: 12000-12700. As far as I am concerned, as long as the major indices stay below these zones, the primary trend is down.

4. While I will look for short setups in tech and other rallying sectors once the major indices approach the aforementioned zones, I will start to look for long setups in the hard-beaten energy/commodity/materials/agriculture/solar sectors in coming days. The bottom fishing is mostly technical driven at this stage.

5. As for the argument that the commodity bull market is over, while I am yet to really figure it out, I will say this now: if the commodity continues to fall, Fed will lean to rate cut, and that will drive the commodity right back up.

6. I am looking for oil to pullback to around 100, which should be a likely turning point for some decent rebound for oil and other energy/commodities.


Trading calls for the next 2-3 weeks:

Unlike before, the proposed holding time for most calls could be as long as 2-4 weeks if their IT don’t get hit within the first week or two. The calls obviously don’t take possible ER/analysts/other company specific material events into consideration so be careful. In addition, many ez are set very conservatively, up-adjustments can be made if some major signals favor (watch for the end of 1st round of oil pullback).

For most setups, the lower end of the ez is for intra-day spiking down. IDS should be at most 1-3% below the lower end, while CS should be a bit higher than the lower end of ez on bearish candle/volume.

List 1—Energy/coal related sectors.

1. ACI: L1, ez=36-43, IT=55
2. APA: L1, ez=80-95, IT=120
3. ATW, L1, ez=30-35, IT=48
4. CLR, L1, ez=30-39, IT=55
5. DVN, L1, ez=70-81, IT=100
6. RIG: L1, ez=90-111, IT=140
7. WLT: L1, ez=65-75, IT=95
8. OIH: L1, ez=150-162, IT=200
9. USO: L1, ez=80-85, IT=100

List 2—Materials and other commodity sectors.

1. ABX: L1, ez=28-32, IT=38
2. FCX: L1, ez=66-76, IT=94
3. AKS: L2, ez=40-46, IT=62
4. X: L1, ez=116-127, IT=155

List 3—Agricultures/fertilizers

1. AGU: L1, ez=60-72, IT=90
2. CF: L1, ez=100-121, IT=150
3. MON: L1, ez=88-96, IT=110
4. MOS: L1, ez=72-91, IT=120
5. POT: L1, ez=135-161, IT=190

List 4—Solar and other alternative energy sectors.

1. AMSC: L1, ez=16-21, IT=30
2. FSLR: L1, ez=200-222, IT=260
3. CSIQ: L1, ez=18-23, IT=30

List 5—other long setups.

1. DRYS: L3, ez=50-61, IT=70
2. MA: L1, ez=180=211, IT=238
3. SKF: L2, ez=90-101, IT=130

List 6—Short setups

1. RKH: S2, ez=120-130, IT=105
2. LVS: S1, ez=60-70, IT=45

That’s it folks, should keep you all busy for next week or two :) Share your views, and do let me know if you make any money on any calls, otherwise, I might just take a hiatus for now.

Another counter trend bull run coming?

Today's strong market action favors another counter trend bull run, which may last as short as 2 days (if this Friday's July job report coming in with well above 100k losses), or as long as a few weeks. But it will not be a smooth one for sure as it will run into heavy resistances almost every steps up.

In anticipating such move, I would overweight the tech sector on the long side, while shorting commodity/energy/metal materials related sectors (oil,coal,agriculture,fertilizers and steel) if those leaking ships also get lifted up near their recent highs or important resistance zones.

Just found out the ELN went down over 30% in AH, and was really upset because about 2-weeks ago, I had plan to create a strangle play in anticipation of the month-end drug study news. Got too busy lately, and got lost....

Good luck all, and share your views if they are very different.

Melt up!

Oh, boy, can it get more bullish than this? Almost every piece of crappy ER turned out to be a good buying opportunities. The funny thing is, believe it or not, Big Ben is probably the most bearish person walking around. With now concrete evidences of worsening consumer spending and no signs of housing bottom whatsoever, I have no doubt that the beatings the bears have been taken in the past few days will be returned soon.

I will keep my eyes on:
RKH (S1, ez=112-120, stop just above MA200, IT=95).
SKF(L1, ez=100-110, stop just below 100, IT=135).
BAC (S1, ez=34-38, stop just above MA200, IT=28).

Got different views, share with me!

What's your conviction?

Wow, take a look at the AH drops of AAPL, SNDK, AXP, and TXN, all well over 10% on pretty heavy volumes, and together, they are sending one loud and clear message: consumers are crapping their pants. I could imagine that many of you probably feel missed-out last week's dramatic rally and are anxiously waiting for a pullback so that you get in from the long side, it sure looks like that you will get exactly that tomorrow. So the questions I have for you all is that if you have the conviction of the bottom and the balls to buy the pullback? Please take a stab on the survey on the left side of this post.

If you ask me, FA wise, the bottom is not in yet, but TA wise, a tradeble bottom could be in once NASDAQ follows DOW/SP500 to successfully test its Jan/Mar'08 lows, which may well happen in coming days.

I have to say that AAPL's outlook surprised me a bit here, I would not be shocked if it tests a key support around 140 tomorrow morning, which would at least a good DT long setup.

On hold...

Sorry for not posting anything lately. Got a raise last week along with a couple of projects that would get my hands full in coming weeks, as the result, I won't be able to post as much for a while, but will certainly do my best.

As for the market, while I have already seen lots of commentaries claiming that the bottom is in, I am far from being convinced. While the market will have a upside bias for the next few days, the volatility could through anyone off the wagon. ERs may significantly shape up the path for the major indicies this week, particularly tomorrow's BAC and AAPL's ERs. If both of them coming in worse than expected, I would expect NASDAQ lead the market to re-test the lows.

One more thing: AAPL, AMZN, ISRG, BIDU, and NFLX may offer pretty good ER straddle plays this week.

Bulls skating on the thin ice!

Dreaming of a re-run of the Mid-March post Bear Stearns bailout rally, the (retailer) bulls jumped in at the open today on the news of Fed's rescue of F2, only to fall right into a swirling water fall as the smart money dumped what they loaded up last Friday in anticipation of the over-the-weekend Fed's rescue. You got to admire the big boys, who learned from the BSC event and executed the play to the perfection. Today's gap-and-crap action also made it clear that the market has lost faith in the Fed. Speaking of the Fed, it is probably down to the last bullet (rate cute) in its gun, which if used would be suicidal at this point.

Bears still did not show any killer instinct, which ironically may not matter much right now as bulls started to show real hesitation and fear today. As the major indices are drifting down through the 2-week mid-point consolidation zone, bulls better hope that there will be some real good news and soon or we could see the second leg down in next day or two.

Just went through my list and could not find any good swing long setups, rather, I will look for swing short setups from the following stocks: APA, DVN, JRCC, MEE, ANR, OIH, PCX, WLT.

I will also keep an eye on GS, which is on the verge of completing a head-n-shoulder formation on the daily chart. I may scale in if it spikes towards 166-168 in the early going tomorrow, with intra-day stop just above 171, closing stop around 168 and initial target around 150.

The Feds strikes back, again!

I am going to be brief for this weekend’s notes on the market. Instead of going through detailed TA examinations of the major indices, I am going to just present some distilled observations and thoughts on the current market conditions and near-term outlooks:

1. Despite of the oversold conditions on all major time frame, the weekly momentum/candle/volume patterns still favor further downside in coming days. VIX chart also favors such scenarios. There are, however, some developing bullish divergences on the daily/60 min charts.

2. The losing streak is now at 6 straight weeks, the longest since September 2002. As the overall volumes shoot up to multi-month high, the fear is growing, but it is far from panic.

3. Despite of having all the winds behind them, bears are having troubles to finish the bulls off. On the contrary, bulls have been buying in their orderly retreat as if they are convinced that the bottom is very near. If the bears continue to show such lack of killer instinct by failing to push the major indices breaking down through the 2-week trading range (by close), they will be gored by the bulls very soon.

4. I have been waiting for a big downside move to initiate some long SW positions, however, I am now start to consider the possibility that if the major indices do break down the 2-week consolidation range, they could incur another quick 5-10% loss in a week or two time frame. In such scenario, building up SW long positions at the end of the first breaking-down day may not be such a good idea.

5. On the same topic, all major European stock markets broke through their week and half long consolidation range on the Friday, and I will keep a keen eye on them to see if the size of the second leg down is comparable to the first leg.

6. The Q2 ER season kicks into high gear next week, bulls have high hopes, especially for the tech sector, that it will provide positive catalyst to at least stop the ongoing slide. I have serious doubts on such notion, considering recent movement in MSFT, CSCO, INTC, NVDA.

7. This Friday’s takeover of IndyMac by the Fed could mark the beginning of a string of high profile bank failures in coming weeks. This, together with dire distresses in Freddy and Fanny, makes the hill much steeper for bulls to climb.

As I am finishing this, the news of the Fed rescue of Fannie and Freddie just came out, and the indices futures point to a big jump tomorrow. I am pretty sure that bulls are hoping that is will be a re-run of the March counter trend rally that started with the BSC bailout and lasted over 2 months, we will see how things play out this time around.