ShadowTrader Focus Report_2008

The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month


Good Morning, Traders. ZZZZZZZZZzzzzzzzz. Snoozy, but bullish. Check your <i>Focus Report</i> of Wednesday and look at the closing figures on the market internals and then compare them with the figures below in today's edition. You should see a huge improvement in them but at the same time you should note that the market double bottomed, with Wednesday's lows being just as low as Tuesday's lows. This is postive divergence.

In the spirit of the bullish mood, let's look at a few possible stock plays in depth with <i>eight-by-ten colour glossy photographs with circles and arrows and a paragraph on the back of each one...</i>

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081211WMT.gif">

The first one is <b>WMT</b>, above. As you can see the stock trades "choppy". This can be a blessing or a curse. The way you want to play this is to pick a spot and just let a limit order buy or sell get taken out. It tends to move fast at pivot areas so putting out the limit is your best bet especially if you cannot watch all day. The circled area represents a trendline support area and should be a buy. Besides that, the new <b>AC/DC</b> album, Black Ice, is only sold exclusively there. Peter would buy the stock just on that alone, but that's just him.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081211MIR.gif">

Utility stalwart Mirant Corp. <b>(MIR)</b> has a pattern going on called "ascending triangle". In a nutshell its when the resistance is constantly the same, forming the base, while the lows keep getting higher, forming the hypotenuse. It's a powerful pattern because the series of higher lows just builds up more and more pressure for the ensuing breakout over the base. We've tested the just over $20 area five times now.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081211SSO.gif">

Last item up for bids is <b>SSO</b> which is the Ultra ETF for the S&P. This means that it moves at two times the beta of the broad market. It has no relation whatsoever to the <i>Ultramagnetic MC's</I> which were a rap group from the late eighties. If the market is going to resolve this three day "doji-doji-doji" (still love the sound of that) consolidation to the upside, what better way to play than with a juiced up, fuel injected, <b>automatic, systematic, hydromatic</b>, big beta player like this. When the range is tight, which puts a very defined stop not too far away, go for the gusto.
 
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month

Good Morning, Traders. Trading is all about when to get in and when to get out. Sometimes the best laid plans just don't work out. It's simply the nature of the beast that we call trading. Today we are going to analyze one such example from our own live trades that happened yesterday. In hindsight we would like to say it was one of the better trades we have made recently, even though it was a loser. Let's look at all the components that went into the trade so we can all learn from it.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081212AMGN.gif">

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081212SPY.gif">

While we don't have a chart above of the daily on <b>AMGN</b> that led us into the trade, we know that the setup was very bullish even at the open of the market yesterday as bulls pushed prices off of the $56.80 - $57.00 area for three days in a row and closed prices at the high each day. The chart of it above is an intraday hourly that shows the stock breaking out of its consolidation far ahead of the market. We got long 300 shares in the blue circled area.

The chart below that is the same days, same timeframe in the <b>SPY</b>. We put this chart directly below the one of AMGN so that you can compare where AMGN was in relation to its consolidation range. The fact that its breaking out ahead of the broad market shows excellent relative strength and confirms the entry. Soon after the entry, the S&P starts to make thrusts over the 900 area which leads us to believe that the consolidation is going to resolve itself to the upside.

So what happened? Well, it failed. The broad market was not able to close any hourly bars up over that 900 area and began to fall apart very quickly after that. Soon after 2pm, we decided to scratch the <b>AMGN</b> trade for a very small loss (about $50). There are a number of lessons that can be taken away from these recent events.

1. When an area of indecision stretches out for multiple days, you must be very nimble to get out of positions immediately when its apparent that what everyone expects is not going to happen.

2. Most stocks (about 85-90%) will follow the broad market, so keep rule #1 in mind at all times

3. Enter overnight trades only on triggers that represent some sort of confirmation. Usually this would be a breakout over a trendline, consolidation area, or prior daily high. Don't anticipate the break and try to get a "better price" by entering early. Lots of people made this mistake yesterday and paid dearly for it as the market fell apart in the afternoon. Note how <b>AMGN</b> set up perfectly and confirmed so we took the trade. However, <b>SSO & MIR</b> did not so we didn't. <B>EQ & CTL</b> which were listed this week as <i>Bulls & Bears</i> picks are also excelent examples of stocks that never made it to their trigger area. No harm, no foul, no confirmation, no entry, no tickee, no washee.

Although we fully stand behind our earlier analysis in this space that the move should have been up, its obviously not. Futures are currently down 20 afterhours as of this writing. This morning will bring us <i><b>PPI at 8:30am EST</b></i> and Preliminary Consumer Sentiment at 10:00am EST as well. Both are expected to be market movers, especially the first one. As such we are not listing any <i>Bulls & Bears</i> plays below. Today will be spent watching the market closely. The Model Portfolio is now fully back in cash and looking for the next setup.
 
this week's video

Russell 2000 should lead us higher. Also, this video is abbreviated, there is a second part which you can see at our
site under archives section. Second part deals with four picks on stocks under $10 that have strong balance sheets.

<object width="425" height="350"> <param name="movie" value="http://www.youtube.com/v/-9lVoOTXWG4"> </param> <embed src="http://www.youtube.com/v/-9lVoOTXWG4" type="application/x-shockwave-flash" width="425" height="350"> </embed> </object>

enjoy
 
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month

Good Morning, Traders. A surprise comback off of a large gap down on Friday was positive for the markets. Not because they went up, because they igonored bad news. When news is no longer bad or good, and just becomes "news", then the market may be starting to tread on firmer footing. To be sure the loss of the uptrend (since mid November) via the gap down and then subsequent close back up over is slightly puzzling, but the most important number of any bar is always its close.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081215SPY.gif">

As shown above, the wedge pattern in the broad market is still intact with the aforementioned close above the lower trendline. Please keep an eye on the upper line as well, as its the kickoff point where the market would really start to move harder to the upside.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081215IWM.gif">

Assuming that the market does continue higher, one thing we noticed on Friday was serious relative strength in the <B>IWM</b> which tracks the Russell 2000. As we always like to remind the media how much they miss the point, it was typical when the <i><b>CNBC chair thrower</i></b> screamed that the Dow was up 65 points in his Friday evening rant. No mention of the fact that this was exactly 3/4 of one percent, while the Russell piled on a whopping <b>3.82%</b>. That's huge. They say the <i>January effect</i> which seems to help small caps out more than big caps comes earlier and earlier every year. Regardless of the reason, if there is a broad market play here long, bet on the lead horse which in this case is <b>IWM</b>

We are still cautiously bullish here and will be favoring the buy side as long as we hold Friday's lows. In a nutshell, you can think of it this way: If you see the glass as half full, then you are focusing on the strength in the Russell and thinking that it may lead the others higher. If you see the glass as half empty, then you are focusing on the fact that Friday's action in the Dow and S&P did little more than fill the gap. Given the time of year and the propensity for the markets to have an upside bias into the holidays, we are in the first camp.
 
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month

Good Morning, Traders. Call it pre-fed jitters or whatever you want but the market certainly acted weird yesterday. Strange slow grind sideways to lower inside of the prior days range, punctuated by an almost 175 point Dow run after 3:30pm EST that seemingly came out of nowhere. Have no fear, however, because where there is chop, there is opportunity. <b>Here's exactly how to play the Fed tomorrow:</b>

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081216IWM.gif">

Even though the prior day's relative strength was mirrored by extreme relative weakness in the Russell yesterday, we're going to still assume that if the market is going to go up that this index will outperform into the end of the year. Hence we chose <b>IWM</b> above. The analysis and setup is pretty simple. If the high of the higher circle (1) is taken out, the market should be a buy at that point, with a stop under the lower circle (2). The thinking is that a move over the high would be what we call a <b><i>big body violation</i></b> to the upside and be very bullish. Large bodied candles show great emotion and when price moves back up through them it tends to leave a lot of traders shellshocked and they must reverse their position quickly.

As today is a Federal Open Market Committee meeting on interest rates, there should be a large amount of volatility just after 2:15pm est. If the market is trading somewhere near the high of yesterday before the meeting, we may be looking to set some buy stops on major average ETF's just over that high and let the post-fed momentum trigger them. If we decide to take this action today we will send an email alert of a "setting buy stop" rather than just buy in real-time as price is crossing. Stay tuned.
 
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month

Good Morning, Traders. The simplest tool in your toolbox often has the most import. That is certainly the case today as we call upon the trusty old trendline to tell us that the bear definitely up against the ropes. Perhaps not officially dead yet but seriously wounded. Let's let the charts do the talking.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081217SPX.gif">

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081217INDU.gif">

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081217NDX.gif">

The first two "majors" above are well on their way to test the downtrend, but more importantly the <b>Nasdaq 100</b> has already broken trend and is now in an <i>intermediate uptrend</i>. This is very typical in markets that are "turning the corner" so to speak where you will see tech stocks leading the charge. Basically, its a good sign. Most situations of being led out of darkness have been done by the Nasdaq first.

Although we didn't want to get too aggressive ahead of the Fed (anything can happen with that beast), we took a small <b>IWM</b> yesterday. Again the Russell was up more in percentage terms (+6.69%) than all of the other majors, including the $NDX. If you are long equities here, hold 'em until we see the S&P and Dow go to the targets annotated on the charts above.
 
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month

Good Morning, Traders. As we have said many times in past commentaries, the best barometer of a market is scanning a large universe of stocks and seeing how many bullish or bearish patterns jump out at you. Having just finished such a scan we can honestly say that there are very few in the bear column. Things are just not looking bearish here at all. Yesterday's pullback was nothing more than a double top at the <b>highs of 12/9</b>. We anticipated that this could be resistant and as such liquidated our "quickie" <b>IWM</b> trade right on cue at this target. Does this now mean that the play is short? Perhaps, but only for those with a very small timeframe. When the scans come up with very few bearish patterns we see it as a signal that to get short would be to fight the current tide and you never want to do that.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081217DIA.gif">

We chose the <b>DIA</b> for our chart today, but all the majors have the same look to them with the slight backing away from the 12/9 prior swing high. Again, although there may be some backing and filling here, note that the chart is probably too bullish at this point to create any real momentum to the downside that would allow you to take healthy profit out of shorts. Feels like sideways to higher for now. Remember, the key to successfully swing trading over time is to always be in sync with what the broad market is doing. With this wind at your back you will score a higher percentage of winning trades than if you are going against the tide.
 
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month

Good Morning, Traders. Slightly stronger selling than anticipated yesterday but until uptrends are violated, we must assume all is well in S&P land. Lets look at a trendline first, then check <i> under the hood</i> to see if things were really as negative as they seemed.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081219SPY.gif">

Until the red circle is violated, we must assume that the market grinds higher. Market internals are a great way to gauge the strength of the selling. Yesterday's decline was really not that powerful internally.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081219ADD.gif">

Advancers minus decliners on the NYSE were positive most of the day and finished up about 500 below the zero line.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081219VOLD.gif">

The "breadth" or relationship between up and down volume on the NYSE was also not overly bearish. The declining volume was only about 3 times the advancing volume. You can see from the <i>Under the Hood</i> section below that the breadth ratio on the NYSE was about 24 which as we know has registered as low as single digits in powerful bear runs.

While all of the above tells us to continue to look for long setups, we also know <i>when to hold 'em and when to fold 'em</i> so to speak. In a conversation that we had yesterday at the ShadowTrader HQ <B>(look for the big "ST" up in the sky)</b>, we were discussing the importance of being in the market when its actually doing something as opposed to all the time. You want to time your long trades at the start of bullish moves in the S&P and your short trades at the beginnings of bearish moves. Most stocks simply follow the market. Right now, the market is showing a bit of mixed signals. But have no fear, in this environment that changes on the hour.

We remain bullish unless that trendine in the first picture is violated. Today is options expiry Friday which is also a <B>quadruple witching day.</b> Expect some weirdness. Yet another reason to be in cash until Monday if you are a swing trader.
 
This week's video:

<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/fyIeXpcj4pI&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/fyIeXpcj4pI&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>


Enjoy,
Shadow
 
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month

Good Morning, Traders. Friday, being <i>quadruple witching</i> is to be taken with a grain of salt as far as its contribution to the <i>big picture</i> of where the market is headed. What we have going in our favor is the weekly chart below where the market has now had three full weeks to make up its mind and has firmed up the right shoulder of this <b>inverted head & shoulders</b> pattern. See below.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081222SPY.gif">

The above chart is saying a lot, the problem is what its saying could be interpreted two different ways. The inverted H&S pattern is definitely bullish, but one must also note that it could be simply a broadening bottom which would be the flag to the pole that was the straight down decline. The bear flag would of course be more bearish than bullish. We'll simply use the red and green circles as our guide to know if its higher or lower from here. If a weekly bar closes in either of these areas this week, the odds are very strong that the move will be in that direction for some time to come.

If the move is up, we'd like to point out that <b>GS</b> has been acting quite hunky (to quote our hero from <i>Reminiscences</i>) and is honestly one of the best looking charts out there.

<img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081222GS.gif">

The green circles represent areas where Goldman has tested resistance multiple times. There is also a recent trendline break which is currently holding. The volume pattern circled in the bottom right is very bullish as well, with a lot more volume going into the stock on its up days as opposed to its down. The double dojis provide a low risk entry with a tight stop if we can trade above their range.
 
You must log in or register to reply here.
Back
Top