The price/action of the last few days has been very positive. With the DOW Jones hitting a new high above 10,000 the market resumed its confirmed uptrend. Many important earning reports were better than expected with good improvements on both top and bottom line. We did see a little bit of “sell the news” type of reaction especially in names like INTC and GS.
Because of this picture, I started 3 new positions this week. A speculative one on Celgene, ticker CELG. They are set to report earnings next thursday. I am playing this event with out-of-the-money November $60 calls which already increased in value due to a small move up in the stock since I bought them.
I also initiated a new position in GS when the stock dipped to the $184 level which has acted as decent support over the last few days. With the numbers that Goldman reported I am looking at a price target of $200. The “sell the news” price/action is a great opportunity to establish a new position in GS.
Lastly, I established an aggressive position in LFT, Longtop Financial. This stock is working on a base-on-base price pattern. On Wednesday the stock moved up $1.61 in heavy volume and kept most of its gains in the next two sessions with yesterday decline happening in very low volume, a sign that institutions are holding onto the stock. If LFT shows more signs of accumulation next week, there is a very good chance that the stock can pass the $32.94 high set on the last attempted breakout on 8/10 which later failed. Bottom line, buy LFT above $30 if the stock gains in good volume and look for a breakout above the $33.04 level.
TechnicalTrader My recent trades, Trading Ideas celg, celgene, Goldman Sachs, GS, intc, LFT, longtop financial
Tessera Technologies designs smart/micro optics and chip-scale, multi-chip, and wafer-level packages for semiconductor manufacturers.
The stock, ticker TSRA broke out of a consolidation yesterday with a buy point of $29.35. TSRA is currently 2% extended in price but it is still in safe buying range. Volume on the breakout has been impressive, a sign that large institutions are buying shares.
Today I initiated an aggressive position with deep-in-the-money November $25 calls. We shall see if this breakout continues to work.
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A market correction becomes obvious when leaders start to break down. It is very normal to see stocks of bad companies taking huge hits when the market corrects; good stocks however tend to be more resilient and ultimately they are the ones that can keep an uptrend going. Look at Apple and Goldman Sachs for example. In a very bad tape this week where the S&P closed down 20 points or almost 2%, AAPL managed to log in a gain of $2.50 and GS managed to close pretty much unchanged at +$0.11. These are some of the leaders of this market. When they roll over, everything else follows.
Today’s action was pretty encouraging. We declined on lower volume and we also bounced back from the key support level @ the 50-day moving average. My point is that considering that market leaders are acting well, key technical support levels are holding and selling pressure does not point towards heavy institutional selling, I believe that this uptrend has still legs and it could resume as early as next week.
As always, I can only make a prediction based upon facts, therefore if the market starts behaving differently than what I believe, I shall be the first to change my strategy.
Have a good weekend everyone and best of luck with your trading.
TechnicalTrader Market Direction, Trading Ideas aapl, correction, correction 50 day moving average, gs. leaders, key supoort level
Last week the market suffered two days of professional selling which raised the question: are we due for a pull-back? Though to say. By keeping an eye on the market we can tell if it is time to hedge long positions or to add to our existing trades. Yesterday we gained almost 2% in lower volume.
Two weeks ago I closed my Visa trade because the breakout was working on low volume, a sign of weakness. In fact the stock sold off in the next few days and is trading now around $71, below its buy point.
Goldman Sachs hit a 52-week high of $188 last week and then reversed lower to close at $179.50, not a good sign. Volume was unimpressive however. Today GS is back around $183 and if the market doesn’t start a correction I will continue to be long GS calls for the time being.
CTRP briefly dipped below its buy point last week without a significant correction however. This week the stock is charging higher in healthy volume, a sign that institutions are fueling this breakout. Resistance area for CTRP is the May 2008 absolute high around $70. I expect CTRP to test that level in the coming weeks. It is still not too late to jump into this trade.
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Today the major indices reached new highs for the year and closed higher in good volume. The Nasdaq outperformed once again the DOW and S&P. The market health is improving with some fairly old distribution days losing relevance as time goes by. Today I closed my position in RHT however given the somewhat lukewarm fundamentals of the company. The stock broke out of a consolidation at $23.82 just a few days ago and I decided to take small profits today at the $25 level given the lack of conviction in upside trading.
On the other hand I initiated a position in Goldman Sachs based on the impressive volume on the upside in the last 20 minutes of trading. I am playing the stock with naked calls at the October $140 strike. Goldman sliced through the $170 level which previously in the day acted as resistance. I will closely watch the stock tomorrow to see if it faces any additional resistance at the high of the seven weeks consolidation @ $170.94.
Given the exposure that call options provide, I will be very fast at closing this trade if Goldman Sachs falls more than 1% from my purchase price. That will translate in a 5% loss on the options trade. If the market trades well tomorrow and GS breaks through the $171 level, then I see no reason for closing the trade anytime soon.
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The Red Hat trade I recommended is working. We are trading $0.80 above the buy point at $23.82 in almost double average volume. Currently the stock is only extended 3.5% from its buy point so there is still time to jump in. I will update the status of this trade but I won’t be hesitant to take profits if I see weakness in the stock or the overall market. Good luck.
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The market has been sending mixed signals over the last couple of weeks. Weakness is in the air and any new buys should be done very carefully with tight stops. Of the two buy recommendations that I made last week, RHT did brake above resistance at $23.72 and I did initiate a small position in the stock. My loss tolerance in this case is going to be less than 4%.
Expect the market to trade mixed in the next few days, a little bit up and a little bit down. Signs of weakness indicate that we have a good chance of a small correction coming. I doubt that the major indices will drop like a rock, however we can expect a 10%-15% pullback which is going to be a great buying opportunity for what I believe is going to be an end of the year rally in November-December. Of course I can be wrong, so I shall update the market outlook as we move forward.
Now I believe is a great time to raise cash and add cash to the trading account if possible. A new good buying opportunity will present itself soon and you don’t want to be left out.
One possible trading recommendation for next week, in addition to RHT which is now in buying range, is the best of breed Goldman Sachs. The stock has been trading in a tight range over the last 7 weeks building a flat base. If the stock breaks above the high in the base $170.94 in good volume, then I would buy. GS is not a small cap growth stock, so the risk is going to be fairly low and the move up is not going to be violent.
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We experienced a little bit of churning in the market last friday because of fairly high trading volume combined with no significant price movement. I am not necessarily saying that this is good or bad, but it’s certainly worth keeping it in mind when trading in the weeks ahead. That said, I have a couple of stocks on my watch list that are approaching interesting levels.
The first one is BIDU:
As you can see from the graph, the stock behaved very well in the past few months and is now consolidating in a base which is now 6 weeks old. The resistance level is the late July high of $368.49 which is also the 52-weeks high for the stock. If BIDU breaks above that level in volume, then it is a buy for me.
The second stock I want to recommend watching is RHT:
Just like in BIDU, this stock is forming a flat base that dates back to the end of July with a 52-weeks high of $23.72. If RHT breaks above this level in good volume you can buy with a stop around $21.70.
TechnicalTrader Trading Ideas BIDU, breakout, Red Hat, RHT, stop loss, trade suggestion
This week’s market action was the demonstration that any pull-back is being heavily bought. Too many institutions have missed a big part of the current rally which reached today a +51.7% from the March lows. What is happening is that any time there is a pull-back, big money investors are coming in and buying the dips.
This action allowed all the major idexes to set new highs for the year, with the S&P closing at 1,026, up 48 points from Monday’s lows.
I have always been skeptic of the correction started after Monday’s action, however I had to listen to what the market was telling me at the time. After today’s action (follow-through day of a new rally attempt) I can more safely suggest to buy this market because the odds are we go higher before we head south again.
Most leading stocks have held their test of the 10-week line after a breakout and that’s your second buying opportunity. Sometimes buying at the 10-week line support is more rewarding than buying a straight breakout off a base. In fact your buying range is between support and new high price.
Let’s make an example. LFT broke out of a base on 8/10, marked a new high at $32.94 and reversed lower all the way to $24.21 on Wednesday 8/19. While approaching the 10-week line, LFT showed increased institutional buying and closed the week at $28.05, up almost $4 from the lows just two days ago. On a weekly chart this price-action confirms institutional support and the stock is now again in buying range bewteen the 10-week line (around $26.50) and the previous high ($32.94). Of course you have to keep a close eye on the stock as it already failed once and it could do it again.
TechnicalTrader Market Direction, Trading Ideas breakout, bull market, institutional support, rally, S&P, support 10-week line
I hope you took my recommendation to buy UTA on weakness. If you did, you are now sitting on a nice profit already. Today the stock moved 10% in higher trade when the major indices were having a bad day. The good news is that the sell-off in the market came in much lower volume than friday which tells me that we are going to enjoy nice profits in the coming days. Today was a sell-off day for the retail investor and a hold and see day for big money.
The next resistance level for UTA is $17 which also is my first profit target level.
Today I also initiated a position in Longtop Financial, ticker LFT. The stock cleared a consolidation with a $30.57 buy point in monstrous volume, +343%. That is a clear indication of heavy buying from institutional investors. I purchased the stock right at $31. Today LFT closed at $30.82. I wouldn’t be surprised if this stock rallies big ahead of its earnings report on 8/18. I would advise to buy at the open tomorrow.
TechnicalTrader Market Direction, My recent trades, Trading Ideas UTA Universal Travel Group profit