Well.. what a day. In some ways the events of the market today made me think the whole market was in the old TV show “The Twilight Zone”.
We started out in pre market with the futures up as was expected on a reaction bounce from yesterdays big down day which closed right at support on the DOW. So it was expected that we would have a reaction bounce. The question was would the bounce hold or would it fade and push us further down.
What we got was a day that went up well in the first hour and then it sold off quickly and took us into the red. Then we went back into the green to only be sold off again and end up in the red once again. By the end of the day the market made another try at going into the green and then as the day got close to the end the shorts started covering and we had a quick run up around 3pm. Which was also sold back down before the market closed. We did end the day in the green but it was not a healthy green in my view.
In the pre market we had good earnings from Boeing and that got the buying going early. Some even thought the comments from CountryWide Financial yesterday were “over done” and so the bargain hunting started. But each time the markets ran up there was someone waiting at the top to take their money and send it back down. That is what I did not like about today. Too many times the market would run up and then it would be cashed in an hour later and brought right back down. For me, today’s trading action represents “uncertainty” for the rest of the week. If anything will help the market going forward is the good earnings that came in after the market closed.
And speaking of earnings. Apple… all I can say tonight is that out there in the world tonight there are people who were short on Apple who are feeling tonight they were ripped off, and there are people out there that were long on Apple and are thinking they got away with something.
When the numbers from Apple crossed the wires they showed very good earnings and revenues for the quarter, but then the next line said they were lowering guidance for Q4. And it was a large amount that they were lowering by. I was watching the trading activity in the after market on Apple. It looked like total confusion at first. I’m sure there were traders saying to themselves “was that good or was that bad”. Then something happened (I don’t know what) but a short squeeze was underway and bingo… Apple jumps up to almost $150 in after market. Personally I had no position in Apple (long or short) and I still don’t. Normally when a company guides lower in a forward statement the stock will sell down. It is not “what have your done for me lately” that matters. It is “what are you going to do for me tomorrow” that is more important to the investor/trader community. So today’s price movement was really strange. In reading some of the news wire comments crossing the screen tonight I find that even the analysts that cover Apple full time are somewhat confused. I don’t think they know if they should upgrade it or downgrade it…
So that is the day. I sold my position in Western Digital (WDC) to lock in the gains and not risk it to a possible bad earnings which they are releasing tomorrow. (Today I mistakenly said earnings for WDC were today. I meant to say tomorrow after the close). And with the trading that was taking place today which was looking “unstable” I wanted to bank the profits today. WDC was a good swing trade and I will keep my eye on it for a future setup once the earnings are out of the way.
The swing trade on NightHawk Radiology (NHWK) I decided to keep through earnings as the first purchase price I made was close to support and the downside risk for an extreme loss was limited. So I decided to let NHWK ride. They released earnings and they raised their forward guidance so we should see NHWK trade tomorrow to the upside (as long as the overall market is healthy).
I was in the process of evaluating the downside risk in the GRP swing trade to determine if I wanted to sell all, part, or none at all going into earnings. But I did not have to make the choice because GRP had a big whipsaw at 10:45 and my trade hit the stop at $52.25 and closed. Because GRP never made it to the next buy point for adding the remainder 1/2 of the funds for this trade the loss was small as it was only on a 1/2 position size. I was disappointed in the whipsaw today but rules are rules and that is how we stay disciplined. If I get thrown from the horse I can just get back on again if it is still healthy. Because I still like GRP and I may re enter this as I see how it develops. I will post my intentions on GRP when I see what it does.
I have many charts on my wall with setups that I really find attractive. Yesterday put a big bruise in the middle of many of them. So I need to watch to see if the setups are now damaged or will recover and establish themselves again as valid setups.
I am watching carefully
SCUR. When this makes the move over the trend line in the chart I will be initiating a swing trade on that one. They report earnings tomorrow so that will be a catalyst one way or another on the stock. More charts and setups to come as soon as I can say they are still healthy.
See you all in the morning. Good night fellow Rebels!
P.s.: Michael, you are so correct “have a plan and trade the plan”. That is the only way to make money in the markets.
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The opening gains this morning are fading fast. Initial reaction on a reaction? Just does not look good. Confidence in the broad markets remains weak.
I don’t need to worry about GRP anymore. GRP hit my stop point and my trade closed automatically. So that takes care of that.
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Current swing trade GRP is set to report earnings after the market closes today. Normally I would sell any swing trade before earnings are released to limit risk. I am currently calculating the downside risk if I were to hold through earnings. I am expecting GRP to report in line or better than expectations based on previous press releases and business updates from the company. And that the energy sector has been good over the previous few months and this should be reflected in this quarter.
Before the day is done I will post an update on my GRP position and if I will sell or hold before earnings.
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This week we have numerous companies reporting earnings. This week will be driven by earnings and forward guidance expectations that the companies tell the market.
This morning we already have earnings from Merch & Schering-Plough. Both released good numbers and we will see a boost in the drug manufacturers sector today. Some of the big companies (or ones that will be watched closely) reporting this week are AXP, STLD, TXN, T, CFC, DD, LLY, JBLU, KMB, LMT, MCD, NOC, ROH, UPS, AMZN, BA, COP, GLW, HMC, BUD, AAPL, ESRX, BMY, DOW, XOM, F, ICE, DECK, ESLR, MCK, BHI, CVX. This list is of course only a small sampling of the companies reporting this week, but these companies I list here are ones that will have an impact on the market and/or sector they are in.
Early this morning RIG & GSF announced that they will merge. The off shore oil drillers should move in sympathy today. Over the weekend Investors Business Daily provided a boost to the RebelTrader play on GRP. GRP is still a good swing trade and I’m looking for some good moves in the coming days.
RebelTrader play BIG is getting old. If there is not a bounce in the retail sector soon I may close out BIG because it has been stalled too long. And stalled money makes no money. So we need to move it along. Does no good to have it sit in a sector that is flat lined at the moment. This week will determine the course of action for BIG.
I have a new watch list coming with many new stocks to watch. I want to present you with one here this morning. This one stood out because it shows a divergence of price vs technical indicators.
A divergence is a powerful leading indication of what is to come. When you look at a stock chart and see the price dropping but technical indicators are going the other way that is a ‘divergence’. And it can signal a pending change in the works. Acme Packet (APKT) is one of those types of charts. APKT went public last year and like many IPO’s they sell off to the level that the ‘market’ thinks they are worth. And in many cases the sell off is over done and it results in a period of settlement. In the settlement period the sellers and buyers reach an agreement on what the price should be. On the APKT chart you will see 3 point where the price hit a point and each time buyers would not allow it to go any lower. This happened 3 times at the same price point. This is significant in itself. But more important is the divergence in the technical indicators. Examine the MACD, RSI, and the CMF. Notice how they have been trending upward while the price was working downward. What this shows is that the market is starting to change it’s mind on APKT (in the case of the CMF indicator, even before the bottom was reached). When ever you come to a chart where you see a divergence of price vs indicators take notice! Something is in the making.
On the APKT chart you will see a white line plotted on the chart with the price. That is the “On Balance Volume [OBV]” The OBV is an indication of volume flowing in or out of a stock based on volume and price advance or decline. When you see OBV diverge away from the stock price it shows a change in the stock price will follow in time. As one of the technical analysis instructors pointed out a person can think of the OBV as a magnet. The stock price will generally be attracted to move in the direction of the OBV.
How would I play APKT. I drew two green lines on the chart. I will enter a 1/2 position on the move over the first line. Then the stock may accumulate a bit then when it moves over the second green line I will enter the remaining 1/2. APKT has a low short interest of about 9%. Which is an indication that most short sellers have cashed out because they see the same technical indicators that I am seeing. The chances of the stock going up is much greater than it going down any more.
Futures are up at the moment. Get set for a big week with lots of news crossing the wires as companies release earnings.
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A good day for the RebelTrader portfolio. This morning I entered a new swing trade on NightHawk Radiology (NHWK) at $19.40 (1/2 position to start with). NHWK continued upward throughout the day and closed the day up 7.4% ( up 3.9% from my entry point). I had NHWK on my watch list since Tuesday and today it performed very well and met my buy point. I will monitor NHWK for the next entry point for the remaining 1/2. With the big gain today I expect to see some pullback on profit taking but I don’t see that lasting too long before it continues up again.
Today I sold NetGear (NTGR) because I saw what was starting to look like it was topping out. That means that there just was not enough buyers left to out number the sellers and that we were going to end the day with a doji (doji: The name given to a chart pattern which signals indecision). With that trading pattern developing I decided to take the gains and close the trade. NTGR provided a 5.1% gain in 10 days. Remember that it is not important to squeeze every penny out of a trade, what is important is that you have more winners than you do losers. Don’t focus on how big the gain is, instead focus on keeping the losses small. The gains will add up.. Every gain is a winner!
I said this morning that I would watch PDGI to see if there was any chance of a recovery and the trading did not show it was going to recover so I closed the PDGI trade to keep the loss in check. PDGI closed with a loss of 6.2%. The sector just did not gain enough strength to lift PDGI.
Today WWAT continued strong buying in the morning on very heavy volume. But I know from experience that it would not be long before profit takers would step in. After a 25% advance in just two days there would be a lot of profit takers. So I waited for the buyers to continue to buy up WWAT in the morning and then I sold 1/2 of the position at $2.39. That was a 30% gain in 7 days from the first buy point I entered WWAT. The profit taking increased as the day went on and that is OK, that was expected. I am holding onto the remainder of the shares for the next buying surge. That may not happen right away but if it does then I’ll sell the remaining 1/2 on the next upward move. I have set a stop loss on the remaining shares at $2.15 (even if the price comes down to that point and my trade is closed it is still a profit on the remaining shares!). At the end of the day the remaining 1/2 of my swing trade is at 14% average gain.
My swing trade in GRP also advanced well today and that trade continues to do well. Same with WDC, and after the market closed today Seagate (STX) reported their earnings and they were good. This should lift the disk drive sector and WDC with it! WDC was trading up another 1.8% in after hours.
BIG finally got some buying today and started lifting that swing trade back up. I’m watching it closely.
Some news on the earnings front. Google reported their earnings after the market closed and for the first time ever they missed the analysts estimates. They missed by 3 cents on the EPS. This sent shock waves through the Google investors and a massive sell off took place. At one point Google was down almost $50 per share (8%). This is a large event, never has Google missed their earnings and this will certainly put the brakes on Google bulls. This will have a substantial impact on the internet sector. In sympathy with Google; Baidu (the Chinese search engine giant) (BIDU) was also trading down in after hours. What we are likely to see now is analysts will downgrade Google, this will further push the share price down in the near term I feel.
SanDisk (SNDK) released good numbers and investors were happy as in after hours the trading was up 6.5%. This will help the PC hardware sector, and may even rub off a little on my Western Digital (WDC) trade..
Microsoft (MSFT) released their earnings also and they were fair. The market responded with mixed reactions and in after hours was trading down 2%.
The financial sector today was still a speed bump for the bulls. Kind of like driving a car with one foot on the gas and the other foot on the brakes. That is what the rising oil prices is doing to the markets. We are now near $76.00 for crude oil/barrel.
I’m keeping my eye on SCUR. This is a stock I mentioned
yesterday. It is nearing a buy point when it crosses above the trend line.
On Monday I posted a chart for Apple saying that I feel the $140 price was going to be difficult to break. Today Apple tried to break above $140 but it could not hold the gains and came back down to close right at $140.00. And in after hours trading Apple is down to $139.00. If you look at a chart for Apple (candlestick chart) you will see what we call a gap up doji on lower volume. That is more often than not a signal of upward buying pressure being exhausted. In technical analysis the chart says Apple will pullback now. Eventually Apple will resume a new upward run but not right now according to the chart.
Good day to be a Rebel !
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Both posting additional gains for the Rebeltrader portfolio. BIG is trying to stay green. Not giving up on BIG just yet. GRP also posting more gains to the portfolio this morning.
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RebelTrader open swing trade received an upgrade this morning from Bank of America. They raised their rating to ‘buy’ and a new price target of $67.00
GRP is already performing well since I first entered the trade. This upgrade should bring some additional gains in the coming days.
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Right out of the gate this morning it was looking like it was going to be a really bad day. By 1pm the indices were down hard and it was looking ugly. The financial sector was a big killer of the market today and it was for the most part expected. That ugly sub prime issue was on the table again after that announcement late yesterday from Bear Stearns regarding two of their hedge funds being worthless. And some earnings from Intel and Yahoo were not great which put an ice cube into the hot tech sector. But by the end of the day the ice cube had melted and we had a fairly good recovery across the board in the last two hours. We still ended the day down but no where near the levels we saw earlier in the day. Financial stocks were still badly beaten down at the end of the day.
Oil hit $75.00 today and that did not help the overall market either. With that the energy sector was one of the few sectors today which saw buying interest. The railroad stocks were one of today’s winners after CSX topped expectations with their record revenues. Investors were also looking for Ben Bernanke to say something to lift their spirits but he only added more gloom by saying that the sub prime issue had deteriorated significantly.
At the end of the day the big money started buying into the beaten down prices in the hedge that today’s market drop will be short lived and we will once again resume an upward march.
Rebeltrader open swing trades GRP and WWAT saw gains today with WWAT getting 17% on news of a new solar array farm to be installed in Spain. I expect some profit taking on the WWAT surge tomorrow but that is to be expected on anything that runs up 17% in one day. I won’t panic if I see some early profit taking. I did say at the beginning of the WWAT play that it would likely experience some large swings and that is normal as it works it’s way up. I may sell half of the position tomorrow to lock in the gains and let the remainder ride for a while longer. But I will wait to see how the trading looks tomorrow before deciding.
One observation I have today is that I am seeing the number of “sell the news” reactions increasing. I am somewhat disturbed by that in that I sense some large money is taking their gains very quickly off the table these days. Almost like a squirrel will bury his nuts for the winter. Lets hope that the increase in “selling on the news” reactions I am seeing is not a sign of the bulls getting ready for a long winter. For now the charts say we are still bullish so bullish it is still, albeit cautious still.
After the market closed today Ebay released their numbers and they were solidly good. Also the numbers from IBM were good. If we can get the financial sector to recover then we will be on our way to green again.
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RebelTrader pick WWAT is doing great today on news of a solar energy project they are being awarded. The portfolio is gaining very well and is now up to a 14% gain today on WWAT !
Portfolio holding GRP is also making good gains today and is up over 2.5% today. So even with the entire market in bad shape today there is still money to be made.
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Sub Prime made the headlines again after the market closed. It is being reported that a comment made by Bear Sterns is that two of their hedge funds with ties to the sub prime mortgage business are now essentially worthless. Reportedly now worth less than 10 cents on the dollar. I said last week that we have not heard the end of the sub prime woes and I’ll say it again here. The sub prime problem has yet to fully propagate into other areas/sectors. There will be more headlines concerning sub prime in the months to come.
The financial sector needs to be watched closely as it is a heavyweight in the markets. Where the financials go the rest of the market follows in time. We must get some good earnings reports from the big finance giants in the coming days and weeks to lift the sector. Today there was profit taking ahead of what I see to be apprehension on the part of the traders of more bad news on the financial sector front.
Today On2 Technologies (ONT) hit my stop and my trade was closed automatically. I sold my shares at $2.55. A shame too, because I am still bullish on ONT. But rules are rules, discipline in trading is the ONLY way you will survive and win the game for the long term. If you never set limits (stop loss) for your investments then you are on the road to a financial disaster, for you are relying on hope and not a plan. All winners on Wall Street will tell you the same thing, they have a plan on when they exit their trades/investments, no ifs, ands, or buts. Preservation of capital comes first.
Remember that you have to earn more gains to make up for your losses. Lets say you have a stock that you bought at $20 a share last year, and the current price is $10 a share. You have lost 50% of your money on that investment. Now in order to get your money back (break even) that stock now has to increase 100%. That is why the experts and pros always cut their losses quickly and within a set limit. It is easier to make up for the loss if your losses are kept small.
RebelTrader portfolio swing trade BIG (retail sector) is lagging. But looking at the sector chart
I’m seeing what is looking like a bounce coming soon. So I’m still bullish on BIG as long as the sector is still bullish which it is, just in a pullback currently. The $RLX chart is telling me a rebound is near.
RebelTrader portfolio swing trade Western Digital (WDC) is in a good spot right now as that sector is in a breakout mode. Will keep
WDC for as long as I can squeeze a gain out of it. NetGear (NTGR)is also on a good run and will keep an eye on it so as to not let the gains slip away if the broad markets turn sour.
GRP, the oil service sector company is set to rebound according to the oil services sector chart. I’m watching the $OSX and I see a bounce from the moving average to be the most likely event
to happen.
The remainder of this week will be wild in the markets I anticipate. Be sure to have a seat belt on! Any bad earnings reports from large companies are going to be felt in the markets more than usual.
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The market was a bit tempered today but I feel that was due mostly to the surge in oil prices today. In spite of that the market still registered more gains and the Rebeltrader portfolio has done well today.
This morning I posted a chart for PDGI. I posted the chart because it had a good technical setup and I also felt it could “go any minute” so I wanted to get it out to my readers in case it reached the buy point today. And it did. Late in the day I entered PDGI.
Also late today I took an entry on BVF. I mentioned last night that BVF was nearing the buy point and today it hit.
In the afternoon CNBC’s Jim Cramer plugged my GRP pick and he called it the best oil play right now.
A full recount of the day when I post later tonight. Overall a good day for the portfolio.
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Update on Rebeltrader pick GRP. A short time ago Jim Cramer called GRP the best oil trade play now. Volume is coming into GRP now. The next buy point is the move to new 52wk highs ($60.00).
I may not be fond of Mr. Cramer and his TV show but it is nice to know he agrees with me that GRP is a good play… LOL
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A divergence is a powerful leading indication of what is to come. When you look at a stock chart and see the price dropping but technical indicators are going the other way that is a ‘divergence’. And it can signal a pending change in the works. Acme Packet (APKT) is one of those types of charts. APKT went public last year and like many IPO’s they sell off to the level that the ‘market’ thinks they are worth. And in many cases the sell off is over done and it results in a period of settlement. In the settlement period the sellers and buyers reach an agreement on what the price should be. On the APKT chart you will see 3 point where the price hit a point and each time buyers would not allow it to go any lower. This happened 3 times at the same price point. This is significant in itself. But more important is the divergence in the technical indicators. Examine the MACD, RSI, and the CMF. Notice how they have been trending upward while the price was working downward. What this shows is that the market is starting to change it’s mind on APKT (in the case of the CMF indicator, even before the bottom was reached). When ever you come to a chart where you see a divergence of price vs indicators take notice! Something is in the making.
Today I sold NetGear (NTGR) because I saw what was starting to look like it was topping out. That means that there just was not enough buyers left to out number the sellers and that we were going to end the day with a doji (doji: The name given to a chart pattern which signals indecision). With that trading pattern developing I decided to take the gains and close the trade. NTGR provided a 5.1% gain in 10 days. Remember that it is not important to squeeze every penny out of a trade, what is important is that you have more winners than you do losers. Don’t focus on how big the gain is, instead focus on keeping the losses small. The gains will add up.. Every gain is a winner!
I’m seeing what is looking like a bounce coming soon. So I’m still bullish on BIG as long as the sector is still bullish which it is, just in a pullback currently. The $RLX chart is telling me a rebound is near.
WDC for as long as I can squeeze a gain out of it. NetGear (NTGR)is also on a good run and will keep an eye on it so as to not let the gains slip away if the broad markets turn sour.
to happen.
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