This post is just a market commentary!

Wow is all that I have to say. Myself and every bear that I know and read are amazed that there has been no development in support for the S&P. It is amazing that everyday we grind lower and lower. Specifically GM and Ford have been getting utterly HAMMERED.

As far as support goes well that 950 level I talked about as my initial stoppage point for the S&P remains in effect... We will probably get there sooner than later and then we'll see if we hold. I'm not going to hold my breath this market makes no sense!

Jason

S&P Analysis for this week!

My was it another interesting week on "Wall Street". Bailout plan was passed and the markets dropped.. WEIRD... huh... NFP came out and it was crap showing that the economy still sucks... People I think are starting to realize that we are getting ourselves into tons of debt to save a bunch of cronies on Wall Street but that isn't going to save main street or the economy and frankly is going to make things worse in the long run. But with that said LETS LOOK AT THE CHART!



Okay so what we can see here is that obviously not much has changed from when I did my post on the first EXCEPT we made a new low but the 1100 level again held. The next big level of support should be the fib level at 1077 so IMO it looks like we might be in for a bounce. The RSI has hit oversold for the first time in a long time and the MACD is about as low as the previous huge low. I'm looking for a retracement at LEAST up to the bottom of the channel at 1150 or up to the fib at 1170 (which is a very strong resistance level now) and then we should resume the downward trend. This was a HUGE down weak for the market down almost 10% in a week there HAS TO be a retracement back up but we live in crazy times so who the hell knows.

Long term: Going lower breaking Fibs
Short term: Going back up to the 1150/1170 level as the 1077 fib level should hold to get us back to the downward channel.

Strategy: Buy puts on a bounce and wait for the VIX (chart below) to come back in line (a little bit)

VIX:


The VIX is a measure of the CBOE option volatility and is a general indicator of overall market volatility. When the VIX is high option premiums are high when it's low premiums are low. The VIX is basically a measure of fear and thus when the vix makes highs the market is down big when it goes lower it's going up.

Looking at the VIX it can be seen that it is at levels not seen since the last bear market. It's just crazy volatile and options are very expensive with implied volatility >70% on most near term expiry dates on INDICES! not even stocks on the S&P russel 2k WOW. What I'm looking for is for the vix to come back down to less than the green line at about 30 which should coincide with the market coming back up to the channel/fib I discussed earlier. If the market keeps going lower the VIX is going to shoot to the moon.

TA does not work on the VIX never play the VIX (learned this from the guys at Think or Swim THANKS!)

Overall: Look for an up week on the market to calm people down a bit maybe even an up 2-3 weeks but then look out!

Jason

Post for Grant

Okay Grant here is my analysis of all of the symbols along with their charts.. Hope you like it! (Although I doubt it cuz I'm shooting down everyone of them as long :-p)

AUY:
RSI: trending downward
MACD: trending downward
Broken all fibs and significant support, trendline and channel

Prognosis, Short or wait til bottom at around 4... Wait to break downward trendlines

MFN:
I really liked this chart it was very clean (besides the lack of a good trendline I guess I could go farther back but I don't carry as much weight into trendlines of stocks <10). onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGWZvwP6iwEE69OaSKC6qFPYITX9buXvG9qhoOOwqpncvqSgbQCjeohj15ksPh2sKgug1Sp_P0MR_eHmu1ExpfPgfa5OIlxNrdvyMqV787UTZORAYKAPdR_mxfBIlFuUfNhDMGP9AdkOI/s1600-h/svm.to.10.05.08.jpg">This was the ONLY security that I looked at that I thought was even close to find a bottom (although I still think that it looks bearish).

Fibs: All broken
MACD: downtrend but looking at maybe finding a bottom?
RSI: downward trend BUT oversold AND almost breaking the trendline upward (not yet though)
Trends on the chart: up trend broken
Prognosis: neutral I wouldn't really like this as a short unless it gets all the way back up to 5 but I don't like it as a long until we see some more positive divergences on the RSI and MACD! But of all of the charts I looked at this is the most promising long position

USO:
Okay so I lied this is the only other chart that has prospects for long positions but I'd be EXTREMELY cautious and have my stops very well in place

1. RSI: broken up-trend and now down-trending after going overbought (bearish)
2. MACD: broken up-trend and has gone negative (bearish)
3. FIBS: still has 1 fib not broken at 71 and also has support at 75 from the previous resistances in 2006
4. Chart: Up trendline still intact at around 75 but dangerously close to breaking this
Prognosis: Go long BUT either have a stop below the trendline or below the fib at 71. Personally I would say below the fib since the price action has already broken the 75 level but just keep in mind that that I really do not like the indicators for this chart. RSI is bearish, MACD is bearish, 50 and 200 day moving averages just crossed. Truthfully I would say to wait for a bounce up to the downward trendline at 80 and to that fib and then short or buy puts... and ride it all the way down to 45.
Overall: I would stay away from it because of the MACD and RSI it just looks too bearish and like it's just begun a big move downward!

SLV:
This was also an interesting chart:

1. Fibs were all broken but now above the 61% fib
2. RSI: downward although almost breaking the trendline
3. MACD: downward
4. Moving averages: Are extremely disparite therefore a lot of this move might be done?
5. No real trendlines on the graph and can't really go back farther (look at that volume in early 05/06 yeah right charts won't help there)
6. Support at 11 Resistance at 14
Prognosis: Hasn't shown that it's found a bottom yet as there are no positive divergences but again kind of close and could go long here with a stop at 10.50 (the 61% fib level)

GLD (FINAL ONE):

Again another interesting chart.
1. Fibs: Held perfectly at the 50% @ 72 and are now above all but the 100% (normal for retracements) (bullish)
2. MACD: Broken uptrend and new downtrend (bearish)
3. RSI: Broke support at 50 and right below 50 but is now back above it? Down trend (bearish?)
4. Chart itself: I personally think it again looks bearish. Look at the volume on these weeks there has only been ONE week where an up volume day was bigger than any of the down volume days in the previous year! That to me suggests a bigger thing than anything on the chart can tell you. IMO it looks bearish but I would not want to initiate anything here.

Prognosis: Short near 100 with a stop just above the high. long near 73 with a stop at 72.5. Also if you look at the previous 3 week candlestick analysis that's a bearish reversal pattern with an up white candle followed by a gap up doji (cross) (reversal signal pending reserval on next candle) and then a down candle. So with that said I'd even say screw long even gold is a viable short but not at these levels

Let me know what you think Grant sorry I can't really help you out with any of these as potential longs but IMO none of them look that great. And you better appreciate this cuz this took about an hour :-p

Jason

A long play! (for those that don't like the idea of shorting)

It has been no secret that I have a very negative view for where the stock market is going (950 on the S&P). There are only 2 types of equities you should consider going into and those are: Consumer Staples (Wal-Mart, Kroger, etc) and Healthcare (with no debt, tons of cash because of the credit crisis). Now I know that this is supposed to be a technical analysis blog but those are the only types of companies I will look at going long in this extremely hostile environment. With that said here is my long play that I've mentioned on this blog before that I've followed for several years now:

Viropharma (VPHM): currently they make Vancocin(R) the only treatment for a life threatening hospital infection called C-Diff. They were initially brought down because the FDA said that generics could come to market sooner and 2-3 years later there are STILL no generics on the market for this drug! They have tons of cash and have recently purchased a new pharmaceutical company I'm assuming to bolster their pipeline. These are the reasons why I have loved this company since the beginning they've been beaten up several times and have found bottoms both times. Now onto the chart:


The important points I want to show here are that the most recent high stopped at the 50% fib level (black circle) and then shot through the 38% level. This means most likely that VPHM is going to come back down to test all of the trend lines. The RSI is close to it's trendline and the 50 level. The MACD has a long way to go down to come near it's trendline and as long as the 10 level holds (there is that upward trendline and the support level at 10 (blue circle).

The reasoning for me thinking that this is a bottom for the stock is because of the other 2 circles (orange and purple) both of the lows are at exact the same level (approximately 7). This is considered a double bottom (IMO). The most important thing on a double bottom is an appropriate volume pattern. In March 06 (the first huge drop) volume was up in the 60 millions, on the second huge drop (April 07) volume was only 30m! Furthermore on the first bottom in July 06 volume was roughly 20m then in the bottom in November 07 the volume was less than 20m (which makes sense because if it really is a bottom the selling pressure should be less).

Now here is my gameplan for this security:

1. Wait until bailout happens
2. Wait to see how badly it tanks (probably down to the trend/support at 10
3. Make sure it holds this level
4. Buy calls and then ride it up to about the 17 level as that would make a new higher high with lower lows water fall sell out of the call and then wait until it falls back to the trendline/fib level
5. Make gobs of money!

We'll see how this plays out but this might be ready to be played in a few weeks!

Jason

Anatomy of how I pick the stocks (and how it played it out)

Okay guys just to give you my formula to learning when is right to start to short a security let me first give you the things I look for:

1. Trend-lines, channels, support, resistance. These are fairly straight forward and I hope that just by looking at a chart you can tell what is what.

2. Chart patterns and Volume. Chart patterns are extremely useful (such as bottom tops/bottoms, triple tops/bottoms, head and shoulders and many many others) and then their accompanying volume patterns (which are EXTREMELY important). If a trend line is broken on not very high volume you should consider that break suspect because of the low volume (for example).

3. Moving average crosses for weekly charts I use 10 week and 40 week averages (50/200 day moving average cross) which is a big lagging technical analysis long term indicator.

4. Divergences on the Moving Average Convergence/Divergence (MACD) and Relative Strength Index (RSI). The MACD will always appear at the bottom of my charts and the RSI at the top. The MACD uses 2 moving averages (for my weekly graphs they are the 12 week and 26 week) and subtracts the difference between the two and then graphs them along with a 9 day exponential moving average . Here again trend lines and cross overs are very important. The relative strength index simply takes the number (14 periods is the standard) and says this percentage of periods were up greater than 70 is overbought and less than 30 is oversold. Now with this indicator it is important to realize that just because it goes above 70 or below 30 doesn't mean you should be a contrarian immediately (as will be seen from this example).

With all of that said here is the chart:

Now the first thing it's obviously easier to look at things in hind-sight but I did want to invest in puts in POT earlier this week but unfortunately as can be seen I need to wait for a retracement. So firstly what do we see? Well we see that for the past almost 2 years there has been a very strong uptrend going from around 20 all the way up to 200! What a run up! The blue trend-line is the major trend that needs to be broken. The very interesting thing about this chart is that there is really no topping pattern at the top but that doesn't mean that there wasn't some hints that the run up was due to correct. First look at the RSI. About half of the way the RSI was almost 90 and never peaked above that. This in turn formed a negative divergence on the RSI as shown by that trend line. Now when the MACD is considered that trend line was never broken until the green vertical line. Furthermore an even better approximation of te top is where the MACD has the cross over roughly in July. Also the RSI never crossed below the 50 line (which is a line of support) until the MACD trendline and the chart trendline were broken. Finally look at the volume on this week as can be seen when this crossed through the trendline this was on a high volume day compared to the average.

So with all of this is how I came up with my notion that Potash was in for a fall. Now we get into the hard stuff which is the entry and exit points. First I need to again mention fibonnaci retracements. You take the low of the move to the high of the move and that will give you your fibonnaci levels. As can be seen the 140 fib level was a very important level as it bounced off this firmly several times and then broke through it this week on huge volume. The best shorting opportunity with the best risk reward is generally shortly after a breakout of a range/trend line. Generally the price breaks through hits support/resistance and then retraces back to test the old level. If it holds (as in this case it did as can be seen from the black circle) this is the best spot to engage in a position. For this case getting in anywhere above 160 is a good deal. The best place for a stop loss is about the 195 level or if you waited for it to test the level then come back down the the previous high (which is about 189/190).

Now for exit points well generally you should use support/resistance lines and fib levels. So here you could have either chosen the 50% fib at about 140, 61.8% at about 115 or since this move had been a 10 fold move maybe you just wanted to hold it for a long time but imo this isn't the correct play (although in hind-sight yeah it is but the odds of this play being this great are very small *although most of my picks recently have been*)

This move used with a January put option at a rough guess of 175 would have cost you about 20$ and currently the put is over 80$.. Not too bad a 4 fold profit. Also if you drew a downward trend once the trendline was broken this can also help determine entry points as shown on this daily graph:

As can be seen the downward trendline an the line of support match the spot where it is best seen to get into the position in middle september around 175.

Now with an example gone through I'll hopefully just start posting charts that I find interesting and then we can actually see how some of these play out! If you have any questions please feel free to leave a comment or get a hold of me somehow!

Jason

Not in a good mood

On Friday I was musing that I was getting really excited because I was funding my new account to trade options so that I could go on the short side of stocks and one of the stocks that I am currently looking at is Potash (POT).

Friday 160
Today after hours 117...

Damnit! I'm going to bed now because I have to get up for work in 6 hours but I will actually start posting some stocks and levels that I really like to get into stuff at!

Musings on where the market is and where it's going

It is my opinion that currently I am going to wait to get into any positions until this whole bailout thing is done and over with. I have a sneaking suspicion that some form of the bill will be approved and thus will cause a massive rally in the broader indices and thus I want to stay out of way of that. Plus it will also bring about better levels to buy puts and will also bring down the CBOE VIX (options volatility which will make options premiums cheaper).

The problem with the U.S. is not just with the banks and the credit crisis it is that the economy is complete crap too. Some people are predicting unemployment by next year will be 7.5% compared to the current 6%! GDP is looking to go lower year over year and thus will present even more bearish opportunities!

With that here is the chart of the S&P:

Monthly:


Okay so firstly I zoomed out to a 20 year monthly chart and I noticed that there is a 20 year trendline that stops at that previous bear market and will continue. In today's terms the trendline stops at 950! Anyways as can be seen from this 15 year graph it shows the previous bear market and when the MACD crossed over the zero line that was about 50% of the move. If we extrapolate this to where the S&P is where it crossed the zero that roughly puts us around 900 (pretty cool how they all end up at the same place). Also as can be noticed the fibonnaci retracement level (78.696%). The big levels on the S&P are: 1260, 1170, 1070, 1000 (mental), 940, 775 these are the fibonacci levels. For those that don't know Fibonnaci levels are based off of the Fibonnaci numbers which are seen prevalent in nature, mathematics and obviously the stock market.

So that's the big picture as to where we are most likely going. The market hasn't found a bottom there are no characteristics of a bottom yet (there are never V bottoms in a bear market there has to be a retest of the support level at least 1 time and maybe 2 times to form a double or triple bottom respectively). As far as the length of time that this might take... if you use the same length that the previous bear market took sometime next year.

Here's a shorter term perspective of the S&P:

So here is a "shorter" term chart of the S&P as can be seen the S&P has been in a declining trend channel since October of last year. The most important thing to notice is that the trend is DOWN and that we are also at the lower end of the range. I am going to say that we are probably going to have a bounce off of this trendline (and we probably will be having a bounce once congress approves the bailout) and that we will go up to the important resistance between 1230 and more importantly 1260. This is where I am looking at getting into the puts is after this bounce back. Furthermore as can be seen the MACD is clearly on a downtrend as is the RSI. The important thing of note is that the RSI has not poked through the 30 level yet on the weekly nor on the monthly.

So in conclusion we'll probably see a bounce after the bailout with the S&P going back up to test the 1260 level and then will quickly fall back to this level. Look to get into options at these price levels as the VIX will have dropped and the options will be less pricey!

Good luck!

Jason

For the new people

Welcome to my blog. The first thing that you will notice is that I haven't posted in a while (since May of this year). At that time I was busy looking for a job trading and I found one in Chicago in June and started working in July. So I've been pretty busy and with the market the way it is I didn't really have time to learn my job and to blog. But now I'm ready and frankly there are way too many opportunities for me to not comment on and to take advantage of.

Also, I just opened up a new brokerage account with Thinkorswim so now I can purchase options (mostly puts) so that I can take advantage of shorting companies without having to find the shorts (which is a problem I had when i wanted to short BIDU at 370 they couldn't find me the shorts and therefore I couldn't "invest" in BIDU *it currently resides in the 200's *sigh*).

Most of the strategies that I will be talking about in today's current climate will be shorting opportunities since I still think that there is a ways to go in the market. I will be doing an updated post on the broad market in general every sunday and I will mostly focus on equities during the week.

If you have any questions/comments please feel free to write it up in the comments or to send me an email at bouje13@gmail.com. Let's try to keep this site about investing/trading and making money. Also, if anyone has any ideas for posts that they would like to know more about (most likely a beginners section) I can do that to kind of explain terminologies and exactly what I am looking for when I'm looking at equities.

I think that that is all ENJOY!

Jason

Ideas for this week:

Again I really have to say that I'm loving the action on ICE. Here's the chart:

I know I called this one a few weeks ago but it is going so great I just had to bring it up again: As can be seen good h&S top pattern with a good volume pattern. RSI and MACD are all showing a bearish-divergence. Looks good down to 120-130 area!

IP: has done really well and will definitely suffer some pullbacks since it's gone all the way up to 28/29. A good indicator that it will do well in the long term is that Cramer bashed it in the lightning round so that's always good for business :-p

AA:
So from this chart of alcoa you can see that there is strong resistance at 48 that was established in July of last year. The next thing that can be noticed is that there is an upward trendline (green line). It was broken in early 08 but has since recovered above it. The MACD and RSI have the same trend and were also broken at the same time. The interesting thing about this chart is that AA looks to have form an inverted H&S with a neckline (in purple) at 39. My guess is that this is going to go up hit the resistance come back down to the neckline and then go back up to test that resistance. So we'll see what happens with that more of a watch and wait with this one...

ATI:
This chart isn't set up as well as some of my others but... here goes.

Trendline was broken. Strong resistance at 86. RSI bumping up against the 50 mark and also the downward trendline. Should go down to about 70 but if it breaks 60 it will go down a LOT farther!

SOPW:
DISCLAIMER: I currently own SOPW and this is more for the people that have invested in SOPW with me...
Now let's look at the chart..

Positives: To me it looks like SOPW has found a bottom. It has held support at 1.16 and the MACD has shown a positive divergence through the down-trend-line, ditto for the RSI. Furthermore it broke the down-ward trend-line in mid april.

Negatives: There is a LOT of overhead resistance. First the stock has NEVER been above it's 50 day Moving Average so just getting above that is going to be a real chore (as evidenced by it bumping up against it every time and going lower). But we are reaching a spot where it's going to go over the 50 day MA or it's going to roll-over dead (I hope it's the former and I think it should be the former since it looks like we got a bottom). Secondly right at 1.99/2.00 there is going to be a ton of resistance.

All in all I think that we'll be trading above the 50 day MA shortly and then also below the 2.00 line for the near term (unfortunately).

That is all for today guys I'll try to do some more different stocks tomorrow!

Ideas for the near future:

I wished that I had posted these first two yesterday as they had huge gains today. But c'est la vie!

FCX:

Short: As can be seen the major trendline is currently at around 75 (blue line). There is resistance at 120 (teal line) and the orange line above it is where I would personally put the stop loss (around 124). Now what is interesting that that there was an inverted H&S formed but the volume pattern was not correct and then the subsequent break-out was on lower volume. Thus to me it looks like a failed bullish breakout that hit resistance at 120 and then will fall below the neckline. Furthermore the MACD Histogram seems to have leveled off. I entered a position at 118.5 and will ride it down (unless my stop loss is hit) until about the 100 area when I will take out some profits and then take the rest of the profits at 90 or so. Oh yeah and it could also be construed as a double top... (it fell almost 3% today from the 118.5 mark)

IP:

Long: To me it looks like a double bottom could be forming in this company at $25.00. The MACD trendlines need to break through the trend-line to really get this security But the MACD Histogram has started to show a positive divergence upwards toward the zero line and thus makes this a good opportunity. Now as far as the trend-lines go it looks as if it is in a bearish trending channel but since it is at the lower trend-line again it is another good buying opportunity. Since today it ended up around 3.5% my price target is about 26.5-26 depending on how things are shaping up for the stock and the dow in general over the next couple of days but my ending target is around 29 with at stop loss below 25.

KRY:

This is an extremely risky play but I really like it. First the weekly:

What needs to be noted here is the down-ward channel that the stock was trading in and then the subsequent down-ward break-out of the channel on huge volume for the stock. The only other things of note are the RSI and MACD trend-lines which look to be holding.


Now these are the trend-lines from the first graph. The upper trend-line for the channel isn't as important as the bottom which I made sure was a very good trend-line. What is EXTREMELY interesting is where the 3rd up-day's high was after the bottom. It stops RIGHT AT the bottom trend-line which is now resistance. That held on very large volume.

From here I think that KRY will eventually get back down to the .6/.5. Stop is obviously above the bottom trend-line I think I might try to get in tomorrow around 1.10-ish or so

That is all for tonight more to come tomorrow

Ideas for this week:

As stated before:

Long CF

Short XOP, ICE

Now for some new analysis:

COP:

As can be seen from this chart it looks as if COP has made a triple top on the weekly graph. The MACD is still showing a negative trendline as is the RSI. Furthermore on a daily chart there is a hammer candle on Friday and a bearish doji on today's chart. So the thoughts on this one are:

Short at: 88.25
Cover at: 90.00
Profits: 76.00

Positions

Currently to do my trading I am doing a simulation using www.updown.com

The website currently is not real-time and thus is not very good for day-trading but will work for swing trading. Currently over the time that I have been trading on this "account" of a starting value of $1,000,000 since April (I didn't trade much in April) my return is over 7%.

Currently in my portfolio I have (symbol, position, price paid, stop price, profit price)

CF: Long, 134.00, 134.5 (moved up the stop price because of the 10 day MA that seems to be holding), 155.00

ICE: Short, 161.00, 165, 135

XOP: Short, 62.78, 64, 55

Some of my biggest wins have been:

Long: Pot, Mon

Short: Bidu, FSLR

I'll be working on keeping my portfolio up to date:

Currently I have a limit order to short COP at 88.25 (which should get filled tomorrow) (I will talk about this in the next post)

I am going to look through my securities list and see which companies also look good as potential candidates.

Market this week

So here is what we're looking at as far as the broad markets go:

Dow Jones:

So again it looks like the Dow Jones is still in a downtrend but this week will be affected a lot by the earnings reports coming out. The MACD still is showing a negative trend-line and so too is the RSI.

S&P 500:

Now this down-trend seems to be a bit more valid as it has 3 points on it. Furthermore it looks like the histogram has leveled off and the MACD has not gone above the down-trendline, and again the same is true with the RSI as with the Dow Jones.

It looks as if both indices will go back down to test the 1350 area for the S&P and the 12,500 area for the Dow Jones.

If either breaks above that down trendline decisively then the bulls might have a case that the "bear market" is finally over but that would take a decisive down-turn for crude oil.