Trading Ideas/Potential Trades

Since we have established that last Wed. was a reversal day in the Nas, and the action leading up to that could have been a bull trap, it comes as no surprise then that Monday's action came with rising volume, indicating distribution is taking place.

Therefore, from a trade perspective, the opening gap up in the Nas, should it hold until the open (which is 2 hours and 40 minutes away from this writing), presents us with a good opportunity to fade.

One's level of aggressiveness on the fade depends on individual profile, but I for one am coming in aggressive, with my first target on the Nas at 1940, which is fairly strong support on the daily. If it is broken however, the next natural support area is at the round.

But 1940 has multiple converging lines, so I expect a solid bounce to ensue unless there is a major earnings miss this week, which the odds are high for one, resulting in a gap down through this level, setting off a flurry of protective stops. We need to flush these stops out before we can go any higher. Stop accumulation underneath is extremely high right now, from what my ears are picking up, and the bears are gunning while the bulls are stepping aside and letting it happen because it is long-term healthy.

Pejman Hamidi
 
BRCM: Stock has retraced to the neckline of a massive, H&S top. The 200-day MA converges with the line for added resistance. This looks like a good area to short, especially with a gap up opening on Tuesday.

See Chart for BRCM

CIEN: Quickly approaching Sept. lows. Sell on a gap up on Tuesday, target 12.

FTE: France Telecom has completed a bearish retracement and looks like it broke down heavily on Monday. Short a gap up opening, target 25-30.

GLW: Corning broke below its long-term trendline last year and has since consolidated in the form of a bearish rising wedge. It looks ready to make an attempt at continuing the bear trend after having tested the long-term trendline for resistance confirmation. Target is 6.

JDSU: The stock has formed a H&S top dating back to last October. It is very close to breaking the neckline around 8.25. Target is a test of the Sept. lows.

JNPR: Juniper is also near a major neckline to confirm a H&S top dating back to October, with a target around 10. Volume on Monday's sell-off was rising and indicative of heavy distribution. Gap up is a good selling oppty, but be prepared for violent shakeouts.

MOT: Motorala set off a bull trap in November, after faking out a breakout from a reverse H&S pattern. It now appears that the pattern from established all of last year was a symmetrical triangle consolidation of the bear trend. The lower boundary has been violated on rising volume. A rally to 14.50 would be a good selling oppty, but watch for whipsaws.

LONG:

QCOM: This could be setting up the pivot for the right shoulder to a massive reversal. If the market gives any indication of a pending rally, Qualcomm should be the first tech stock purchased. Volume around this area has been very high after a steep correction from the December highs of 62.


CLICK HERE to view additional charts to above stocks


Pejman Hamidi
 
We got to the lower band of our upside retracement, nailing 2012, followed by a new low. The low resulted in a confirmation of a bear flag consolidation, with downside target of 1980 hit.

Next target is 1955, then 1920, then the round.

BRCM, JNPR and CIEN great short oppty's, high risk = small size.
 
Nas retracement low was 1882, which nailed a heavy accumulation of stop orders. Support from 50% fib line of May high to Sep low.

Today's high around 1922 nailed the short-term down trend, as well as the previous low from Monday.

Volume on Tuesday's decline picked up to distribution levels, not climactic.


1850 strong possibility with earnings bias turning negative from extreme positive.

A break through 1850 will take us to 1790, which should put the brakes on this slide. However, it may be tough for bears to get below 1870, as it will be heavyily defended.
 
Pejman,

What exactly does this mean? (taken from one of your previous posts)

"So small traders should be sidelined and remain patient."

Why do you qualify who should be in the market and who shouldn't?
 
Wed's action occurred on rising volume. There is a greater than 60% probability that we've seen a short-term low. Note that the rally stopped directly on a convergence of heavy resistance, as discussed in my previous post.

This has resulted in a valid test of the upside breakout from early December. However, the 200-day MA is starting to roll over as well as the 50-day MA, with the 18-day already coming down. The 50-day is very close, so if prices get through this resistance area, the 50-day is another obstacle.

Early session weakness on Thursday will be used to cover remaining short positions, and I will look for indications to get long the market. I am inclined to get long in anticipation of a short-term bounce to the 2000 level. However, any long positions will be extremely short-term in nature, with no desire to hold over weekend. Because of the lower low, I will be looking to reload on the short side around 1980 - 2000, scaling in with a maximum exposure of 40% of overall profile. Only thing that qualifed Wed's action as short-term bullish was the rising volume. Other than that, it was purely technical with very little additional implications beyond the day's action. But with the rising volume, we could profit from a short-term bounce, and also get the chance to reload covered shorts at good price points.

Technically, this retracement couldn't hold the previous low, which diminishes bullish indications. This could be a prelude to a lower high and a failed rally, resulting in an intermediate term decline to the 1760, or even possibly 1625.

Short-term strategy is to use early weakness to cover remaining shorts and begin rotating into leading stocks. Do not buy into weak stocks. The stronger ones from the last rally should be the entry point into the market, but I am not expecting more than a 2 day bounce before we see some more testing. This lower low is troubling, and overhead resistance from multiple variables is a significant obstacle for any bulls, and quite the deterrent.

1980 is extremely heavy.
 
So, anyone else notice the almost perfect (not entirely perfect form-wise due to a slightly lower low on Wed than the low on Tuesday) Bullish harami that formed on the daily NASDAQ chart that was confirmed today?

Ik
 
You must log in or register to reply here.
Back
Top