Market overview for March 31

The market gapped up this morning on no particular news. Financials were strong again and led the gains in the market along with big cap techs. My feeling today was that there would be some profit taking as it is the end of quarter and it felt like institutions might lock in some recent profits in an otherwise horrible quarter. So, I had a bias towards shorting the market but was waiting for confirmation all day.

My first trade of the day was indeed a Long in SDS at around 10:45 after the first reversal from the very important psych 800 level on the SPX. The trade was good for .50c where I sold half. The other half was stopped out at entry.

The market was choppy and meandered most of the morning and early afternoon in a very tight range around that 800 level in SPX. However, after getting a signal to go long just before the 800 level was to be tested for the 5th time, I decided NOT to take the signal thinking it would reverse again. Bad mistake, as the market surged past this level and SDS would have been good for at least a 2.00 gain.

As usual, the final hour provide some fireworks again. The market lost most of its gains in the final 30 minutes of trading on heavy volume. I was able to go long SRS which was good for 1.20. I was also long ERY before the selloff started, but was not patient with the trade and sold it for B/E. I also took a short in POT as it did not participate much in the rally and had come in just prior to the selloff. that was sold for a 50c gain.

Tomorrow, I am expecting the selloff to continue, but as usual, I will wait for the setups and confirmation in the charts before committing.

Update on APOL: earnings are out this evening and although they beat estimates, the market reaction is not good and the stock is down post-market. This might setup as a short on a move below 75.

Good luck!

Market overview for March 30

Futures we horrible this morning following GM's news and we gapped down pretty big. President Obama was scheduled to make a speech at around 11:00AM, so it was a choppy morning to trade.

My first signal to short the market was around 10:15 when the SPY was rejected at the VWAP. Instead of trading SDS Long like I normally do, I decided to go with a long in SRS. I was a little early on the call and was stopped out for .50c (I think my stop was too tight and something I need to rectify).

My next signal was around 1:00PM, again to short the SPY. I did not take the signal and was willing to sit on the sidelines as the market was holding support at the 780 level on SPX.

I think we are at an important juncture for the market this week. SPY is holding the 200MA on the 60Min Chart (with a Stochastic Buy setting up) and if we hold 76-77, especially on lower volume, then I think the chances are pretty good we move back up next week. We'll see how the market unfolds and I hope to be ready take advantage. Other than my daily signals, I'll post what signals I get for a short term (multi-day) move for the SPY on Twitter.

All the stocks I highlighted over the weekend gapped down (as did almost all stocks today) and continued moving down most of the day.

Good luck!

How I use earnings in my trading, and a look at MON and RIMM

Someone said that the we have had the "largest three-week move in stocks since 1938". Wow - that's quite amazing. Does this signal the all-clear? I don't know, but I sure hope so. I would much rather go long than short, but I'll take my setups either way.

With earnings season coming up, I wanted to share some of my thoughts on how I use earnings along with chart setups to build a watchlist of stocks to trade. I am not a big fan of holding stocks into earnings announcements. Even though that's how I made most of my $$ a few years ago - anyone who remembers Forward Industries (FORD) and Dynamic Materials (BOOM) knows what I am talking about. I remember riding these for 200% and 300% gains (among others) - aaah, the good old days!

But knowing HOW to trade a stock prior and post earnings takes out the 'unknown' factor and gives you a much better advantage to trade. In general, I usually look at 'whisper' numbers for a stock that interest me at a site like EarningsWhispers.com about a week or so prior to earnings. Knowing if a stock is overbought or oversold prior to earnings, combined with analyzing the whisper number and then finally when the earnings result comes out, gives a trader many ways to trade a stock prior and post earnings. For example, if a stock is overbought into earnings, the whisper is below consensus, and the earnings are not good - definitely a very strong candidate to short after earnings.

Keeping in mind that we are in one of the worst bear markets ever, momentum type trades are almost non-existent (some exceptions include AMZN and NFLX). So I would definitely NOT be chasing any strength in this market (yet).

Looking at MON and RIMM, both are reporting earnings next Thursday. Like many stocks, both are over-extended in the short-term.

MON is sitting right around resistance at 87-88, with the 200MA lurking above around 90-91. I believe it is too late to go long here, and the stock is definitely primed for a pullack. I am expecting good results from MON and I believe a close above the resistance levels would push this stock back towards 100.






RIMM gave a warning back in February, and after an unbelievable run in January, dropped like a rock. So, even though the bad numbers might already 'baked' in, the stock is still overbought going into earnings and looks ready for a pullback. It is late to go long here, however, if the stock pulls back to around 40, holds and then cracks 46-47 again after earnings, then look for the gap in early Feb to be closed with a move back to 60.

Update on APOL - will be releasing earnings on Tuesday (thanks Crazycolo1).

Good luck!

Building a watchlist of potential shorts? Some ideas...

There is a plethora (I love that word) of stocks showing up as possible short candidates for next week. First off, many financial stocks are a) overbought and b) showing tight consolidation patterns over the last few sessions. A look at XLF shows that a move towards the lows of this week will most probably invite a wave of profit taking and a resurgence of wounded (or hibernating) bears. However, a break of the highs around 9.70-10 and this rally may have some legs. Potential names with weaker charts include BAC, C, AXP and WFC.

Steels and some weaker energy names also look vulnerable here as well. STLD, X and CLF are sitting right along the 50 day MA (like soooo many other names as well), not to mention right at the 38% Fib retracement level. Other energy names include D, COP and GMXR.

APOL setup discussed earlier is looking ready to setup for a short below 75.

Good luck.

Have we bottomed? Does it really matter?

When I first started day trading, I used to let my 'swing trading' instincts guide the way I treated the market on a day to day basis. That thinking left me vulnerable to missing out on some huge moves during this past year. Why? Simple: Markets tend to go much lower or higher that one might think. Especially in a bear market! The science (or art :-)) of picking a bottom is simply a waste of time in my opinion. One can try justify the (many) reasons for the call - whether it is technical analysis, fundamental, astronomical or whatever, one simply does NOT know what will happen tomorrow or next week. I would much rather let the market play itself out and show its hand BEFORE I react. So, my preference is to react and NOT to anticipate.

If one is an investor, or a swing trader, then in my opinion, it is more important to know that the bottom (MAY) have happened (like we have now) and use it to make their trading decisions. In other words, I would prefer to get CONFIRMATION of the move instead of guessing when it will happen.

Which brings me to the other point - as a day trader, it should not matter whether or not a bottom (or top) is in. It may give you bias as to the direction you want to go in, but should NOT determine your trades. A day trader needs to be nimble enough to adapt to market conditions that change very quickly during the day and trade based on setups, news, whatever, to gain an edge. If you have a set of criteria (such as MA crossover, MACD, Stochastics, whatever) that you use effectively, and you get a sell signal in a down market - a day trader should not be afraid to take the signal just because the market is "down too much already" and will surely turn soon. The key is to KNOW your criteria for taking a trade, such as support/resistance zones, profit target, and most importantly, a logical place to put your stop (i.e. your risk).

So, come Monday morning, everyone and their brother is expecting some kind of pullback in the market (myself included). But if we don't go down, and go up instead - then you follow the trend (until you are proven wrong).

Good luck with your trading.

Market overview for March 27

Friday was a very choppy session and we spent most of the day meandring between the opening range low and high. I took a long in SRS around 10:00AM in anticipation of a continuation of the gap down in the market, but after scalping .50c for half, I was stopped out at entry for the balance as the market could not decide which direction to move. The indexes finally closed the day at the lows of the session.

The TA system I use for signals on SPY did not generate any buy or sell signals today, which is just as well as it was a difficult session to trade.

APOL Possible Short

APOL is setting up as a possible swing short in the next few days. It currently sits at the 62% Fib retracement from the swing high/low and setting up beautifully on a stochastic overbought indicator. Last few sessions volume has been drying up too.

I'd be looking to short on a move down below $75 (yesterday's low).