Thursday, December 30, 2010

Little volatility

One of the least volatile day I remember, only 4 points swing and, as expected, on very low volume. Nobody wants to make a big move before the New Year. The Bollinger Bands are narrowing especially on QQQQ (Nasdaq 100) that also shows a neutral DMI in sharp contradiction with the other major indexes, including Nasdaq that shows a very bullish daily DMI. This is a good time to buy some "straddles" if you are interested in "options", you are both long and short at the same time (one put and one call) and in order to make a profit you need the underlying stock to make a big move. The beauty of a straddle is that it doesn't matter if your underlying stock moves sharply up or down. A good candidate is QQQQ, of course. Also F, IBM, EEM show little volatility according to Bollinger Bands and they qualify as good candidates for a straddle. After the New Year the market will probably go back to normal, at least in terms of volume.

In terms of individual stocks there are plenty of opportunities around but they are riskier that ETFs since huge moves could happen over night. FCEL, MBI, has caught my attention in the last few days, ICO looks like is trying to fill the gap. The way I am trading individual stocks is to find those with very strong momentum, join them for a few days then exit. This is very risky since you are buying stocks that have already advanced or plunged a lot.

Happy New Year!

Monday, December 27, 2010

Lowest volume YTD

Another flat day with volume at its lowest level year to date on SPY. As I said I don't expect too much action this week, the real action is going to take place after the New Year. 

Meantime I am enjoying my "quick kill" trading. I closed a very bullish one today, PIKE but I may re-enter soon since the momentum is fantastic. The reason I closed is because there is very good volume just ahead and it may come down from there. 

A stock I couldn't get today, also with a good momentum is HR. Maybe tomorrow!

I bought CSCO today. As you know this stock was "killed" just a few weeks ago but it looks like people are felling in love again with this stock. Daily DMI just turned positive. There is a huge gap between 24 and 21. I plan to close around 21. 

If you're not scared by the financial stocks, have a look at VPFG. Very nice momentum, both daily and weekly DMI are extremely positive. It has a lot of room to move up, at least to 12.3 where the SMA 200 is now but most likely to 13, the beginning of the gap. 

I am still holding CMN, very good stock in my opinion, and have an eye on ETM and VNDA for a possible re-entry.

Again, I am playing these stocks with little money since there is a good chance to wake up next morning and see that one of these stocks plunged big time over night. I am much more comfortable with ETFs but with this low volume I decided to take a break from them.

Friday, December 24, 2010

Fourth bullish week in a row

Another good week for bulls, granted on a very low volume but that it was expected since that's what happens before major holidays. SPX managed to stay above both EMAs on hourly chart, it is now 8 points above EMA 50 and 20 points above SMA 120 so even a 20 points drop it won't affect the bullishness of the intermediate time frame trend. Last year we had a few good weeks when market traded in range it spiked up in January 2010 just to plunge no less that 100 points after that. It doesn't mean will happen again but just a thought. Usually, this is the time of the year you are supposed to be invested, then in April-May you are supposed to sell ("sell in May and go away"). I don't necessarily follow this advice since market differs from year to year but there is some truth in it. Market tends to be bullish from September to May then tends to be down during the summer. This is important for "buy and hold" crew but not too much for momentum traders who don't care which way the market goes.

Market remains bullish on all time frames, still a little overbought on short term time frame but the gap between price and SMA 120 went down from 35 to 20 points.

We are slightly above September 2008 level when the scary plunge took place. Plenty of trapped bulls will be relieved to "get even" and sell their longs here so market may find it difficult to advance. However there is still room for the upside, another 50-70 points perhaps since "volume at price" indicator over the last two years indicate a very good volume in the 1220-1320 area. From 1320 to 1380 there is not too much volume then we can find another area as a potential resistance level, 1380-1480.

Next week we are probably not going to see too much action either, little volatility and very low volume. When volume is low a lot of weird things happen such as a direct correlation between gold and dollar that happened a lot this week, on Thursday both of them went down after going up in tandem the other days.

Merry Christmas!


Tuesday, December 21, 2010

Higher high on decreasing volume

Not too much drama today. SPX added 7 more points but the volume is decreasing which makes the short term time frame even more vulnerable to a possible small correction. 

SPX is now 10 points above EMA50 and 27 points above SMA 120. Market usually touches these moving averages so even a 27 points drop it won't change the bullishness of the intermediate time frame. 

Dollar continues to rise with the gold and the market. Most of the time dollar moves in opposite direction with the general market and there is almost a perfect correlation between gold and the dollar. Not this time! Even more confusing is that VIX went up today instead of going down. This is a sign that market  doesn't behave properly, probably due to the very low volume. On low volume anything is possible. 

My gambling on individual stocks paid off. I had a few good winners, MOH, MRDN, MDVN, DFS (on the short side) and especially VNDA that made me a very nice profit today, a "draw" SMSC and a loser, PERY (I shorted this one). I am still holding ETM (4% up since yesterday), CMN that moved against me today but the momentum is very bullish and RSYS, a crappy stock that I did short yesterday but it didn't move down as much as I expected. 

Trading individual stocks is time consuming and nerve wracking, that's why I am playing with very little money. If you're interested in some good candidates for a short "kill" let me know. There are plenty of stocks with very nice momentum out there but you should do the homework and carefully chose them and even more important look at the fundamentals. For the 2-4 days I am holding these stocks I don't bother with the fundamentals, the technical part is more than enough to let me make some money but keeping individual stocks longer than 2-4 days is risky without paying attention to fundamental data. With ETFs I am comfortable applying technical analysis only but not with individual stocks.

Have a nice evening!


P.S. A few stocks on my "buy" list for tomorrow. 

Monday, December 20, 2010

Everything went up today...

...dollar, gold silver and the stock market. Volume on SPY was low today and is most likely going to remain low for the rest of the week. Santa's rally is already here, but bulls may gain a few more points this week on a weak volume. SPX tasted 1250 for the first time in two years. It remains to be seen if this level is going to give bulls headaches or not in January when market will come back in force, with a decent volume.

Market is pretty quiet lately, not too much volatility, but it's still moving up. Twelve out of the last 14 trading days were bullish and no wonder DMI looks so bullish both on daily and weekly charts. SMA120 is now around 1225, the November high, this level being the most obvious support level for SPX. 

Otherwise, plenty of opportunities in individual stocks but they are risky and you need to have a good stomach if you decide to play them. Here are two suggestions of stocks with a nice momentum. I am going to post more tomorrow morning. Let me know what are your favorite stocks.

Very bullish stocks

Since I am on individual stocks right now I scanned about 4,000 of them over the weekend and ended up with a list of stocks that didn't care too much about the ups and downs of the general market and went up all the time ( least in the last couple of years)

All are weekly charts. Please pay attention to the DMI.

There are many others, of course. Do you have any suggestion? Leave me a message.

Saturday, December 18, 2010

Quiet week

After two extremely bullish weeks bulls pushed SPX up just a couple of points. Not too much intra-day volatility either, the maximum was around 10 points. It looks like market still looks for some serious news to figure out what way to go. The easy money we made from 2009 until now are not going to be made so easy anymore. Market filled the huge gap down that followed the Lehman bankruptcy. "Volume at price" indicator shows a huge volume in the 1220-1350 area which could act as a resistance level. There is also a decent volume in the 1400-1450 area over the past 4 years when market was exactly at this level.

Momentum continues to be bullish, DMI is positive on both daily and weekly chart. However, the daily DMI looks a little bit "tired" after this flat week. Market is still overbought on short term since price continues to stay above both EMAs on 60 minutes chart. 

Dollar and precious metals moved up yesterday, a pretty unusual move since they tend to go in opposite directions. 

Next week is probably going to be a flat one, again. Bears are too timid and too wounded to try something here and bulls are getting nervous since market reached a fresh two year high. We need serious fundamental news to get a decent move either up or down.


P.S. since it's weekend I thought you may enjoy playing a game. Be careful it's very addictive :)

Thursday, December 16, 2010

A fresh higher high...

... not a big one, just one point above December 14th high but the idea is that bulls keep pushing the index higher. Volume on SPY is increasing and today has touched the 50 days SMA. DMI on the other hand has "cooled off" a little bit showing that momentum is not that bullish anymore. Once again price is above both EMAs on hourly chart. Market is at pre-Lehman level and as I said before from now on is going to be harder for the market to advance.

Dollar and gold moved down today but silver climbed a little bit.

I don't feel particularly venturous at this point, I took a small profit on TNA and try to play some individual stocks for the rest of the year. Individual stocks are riskier, of course, but I am moving very fast and have tight stops. I'll be back in ETFs next year.


Tuesday, December 14, 2010

Another flat day

No drama today, SPX moved up a few points in the morning and closed flat, the same move we saw yesterday. Market remains bullish on all time frames but it looks overbought in short term. I expect SPX to come close to EMAs soon. It doesn't necessarily mean market will plunge, even if it holds still the EMAs will intersect price soon since they are rising.

SPX came closer to EMA25 today but is still too far away from SMA 120. Volume was not great on SPY but it touched 50 days moving average for QQQQ. By the way QQQQ (Nasdaq 100) has reached the 2007 top! 

Looking on longer time frames, weekly chart, I notice that SPX reached the September 2008 level. You remember those terrible 3 weeks when SPX plunged 350 points, don't you? Well that huge gap is now officially closed. From now on SPX will have more trouble advancing since the volume between 1250 and 1550 is pretty impressive. It doesn't mean market won't advance, it just means that the economical news need to be more bullish than they were from 2009 until now. 

All the best!


Monday, December 13, 2010

Bulls take a break

Pretty quiet trading day with SPX advancing 4-6 points in the morning them giving everything back in the last hour. Market is ahead of itself, is 30 points above SMA 120 and 10 points above EMA 50. As I said on Friday there is plenty of room for SPX to go down without affecting the intermediate time frame uptrend. Volume is still low, 30% bellow 50 days moving average.

The dollar went down quit a bit today, on high volume, and closed exactly at the SMA70 on daily chart, the moving average that functioned as support during the December-June rally. EMA15 is still above EMA30 but daily DMI has turned bearish. A weaker dollar is going to help bulls.

Have a nice evening!