Here we are, October 25th with two weeks of earnings reports in the bag. Many better than expected. 62% of companies are beating not only on EPS but on Revenue as well. Beating on EPS estimates can be done on cost cutting, but beating on revenue reflects an increase in business volume.
Even with all these good news the market traded in a range all of last week. We have not been able to pass S&P 1,100 and we are dancing around the DOW 10,000 level. Best of breed stocks have outperformed the market, a very good sign. By looking at price and volume charts of the major indices, it is possible to notice several days of institutional selling in recent weeks. Some of them however have occurred after a holiday, on option expiration day or were simply caused by monster volume in a few key stocks after the release of their earnings (look at Friday sell-off on the Nasdaq with high volume mainly due to MSFT). My point is that institutions are selling less than it appears.
We are now pretty confident that many businesses are doing well and the market always looks 6 months ahead. Money managers will buy any dip in the stock market and I would be shocked to see any correction larger than 5%. My advise is to continue to be long. On a technical side, if we break S&P 1,100 we go to 1,150 in no time.
LFT continues to outperform the market and this week showed some pretty good accumulation.
This week closing price was the highest in a year. LFT is only 6.5% below its 52-week high and I expect this stock to break-out ahead of its earning release on November 16%.
TechnicalTrader Market Direction breakout, GS, LFT, S&P 1100
Earnings from many benchmark companies are coming in better than expected. Tonight Apple and Texas Instruments reported numbers well above expectations, setting-up the major indices for a rally tomorrow. This market is moving higher even though volume is a little bit on the light side, a warning sign. However, I wouldn’t dare fighting the tape as it looks like we could easily move 5% or 6% higher from here. If money managers start chasing the market, we could go straight up as there is no much time left in the calendar year.
I am continuing to hold GS calls. The stock was neck to neck with AAPL in the race to the $200 mark. AAPL set a new all-time high in after-hours trading today above $204. I can see GS continuing to trade to the upside after reporting great earnings last week.
LFT is maintaining the $30 level. There is no much resistance left in the stock as the $32.94 high set a few months ago is the last target to reach. If the market continues to move higher, LFT will almost certainly take out that level. I am planning on holding my position until then and if I see a breakout above $33.04 in healthy volume I will hold even a little longer.
TechnicalTrader Market Direction aapl, breakout, celg, GS, LFT, texas instruments
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
Today I decided to close two trades that I set up a few weeks ago.
The first one was the Goldman Sachs trade played with deep-in-the-money calls. $140 October calls were bought at $31 each and sold today slightly above $50. I decided to close this trade simply because a 65% return in 3 weeks is very good and I don’t want to risk it going into earning season. The stock however is behaving amazingly well and there is no technical reason to sell GS even at this level. In fact, if GS drops down to the 10-week line, I will be the first one to buy it again.
The second trade I closed is the CTRP trade. This stock too was played with deep-in-the-money October $50 calls. I cashed in a 20% return. In this case the stock is struggling a little bit at the $60 level and I didn’t feel comfortable holding it anymore given the fairly weak price-action.
Tomorrow I am going to be looking for the next buy candidates so stay posted for another great recommendation.
TechnicalTrader My recent trades buy recommendation, ctrp, GS, huge profit
The market is behaving poorly lately. We declined 6 times out of the last 7 trading sessions. What do we make of such action?
Let’s start with the facts: if we observe the price/volume action of the last two weeks, we can clearly see at least some institutional selling in the market. Some leaders have been outperforming the major indices however when the market goes down, 75% of stocks will follow. The current uptrend is therefore under pressure. Technically speaking the market made a bearish reversal on 9/23 and the only up day in the last few trading sessions occurred in very soft volume. Now we are quickly approaching the 50-day moving average and also a key area of support around 1,020 in the S&P. If we hold, there is a good chance of a bounce; if we go through, I would recommend to close most of your positions as we can easily drop to 1,000.
Currently, I haven’t taken any action. I am really waiting to see what happens tomorrow. I would be encouraged to see signs of institutional buying in the case we trade to the upside. No buying conviction would be reason to sell into strength.
My current position in GS is still well in the green. GS has been trading very well lately but today was a bad day for the stock even if volume on the downside was contained. Technically speaking GS reversed from $188 to below $180, rallied back to around $186 and today dropped again below $180. It is now $0.51 below last’s week closing price. It looks like a mini double top pattern at this point and if GS closes below the recent low of $177.70 I am out of this trade.
Also CTRP has been trading well in this last market correction and it is only slightly below last’s week closing price at $57.17. Today’s decline came in volume 40% below average, a sign that the stock was only being sold by retail investors. When institutions are not dumping a stock, there might be a much greater upside potential if the market starts trending higher.
Summing up both of my holdings are outperforming the market this week but any sign of further weakness is a good reason to cash out.
TechnicalTrader Market Direction correction, ctrp, Goldman Sachs, GS, october, support
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.
TechnicalTrader Market Direction, My recent trades, Trading Ideas breakout, ctrp, GS, profit, V
Goldman Sachs
Closed the trading day at $177.71, up 1.72% and outperforming the broad market once again. By looking at the chart, I see possible resistance around the $190 level but for now it looks like the stock will continue to trade higher. Hold your position, today GS marked another 52-week high @ $177.90.
Visa
This stock traded higher as well today closing @ $72.87 and marking another 52-week high @ $73. There is still time to get in this trade as V is only slightly more than 1% extended from its buy point. The only red flag on this breakout is lack of volume during the upside move. I would very much like to see volume pick-up as the week progresses otherwise I might cut my position.
TechnicalTrader My recent trades Goldman Sachs, GS, profit, V, Visa
When the market wants to go higher, is somewhat easier to select profitable trades. You can’t afford not to invest right now. Opinions on where the market is headed are worthless, just observe the price action and trade accordingly. Of the last few trades I recommended lately, RHT is working GS is working, BIDU cleared resistance at $368.59 and V cleared resistance at $71.34.
I got out of RHT because of lukewarm fundamentals, GS looks like it will continue to go higher, BIDU is still very close to the buy point and Visa is just above its buy point as well. In fact yesterday afternoon I got into Visa with naked calls at the October $60 strike. I am not looking for much here, however if V has a good volume surge while increasing in price next week, I believe a 10% move in the stock is realistic. That will translate in a 70% move in the calls. If volume however doesn’t pick up by tuesday, I will close my position.
TechnicalTrader My recent trades BIDU, Goldman Sachs, GS, Red Hat, RHT, V, Visa
The opportunity to safely jump onto the GS train is almost over. The stock is currently trading at $176.60 and it broke out of a seven weeks flat base yesterday at $170.94. The stock is not quite extended in price but you have to jump in right of way as any level above $179 is riskier. GS is trading up on monster volume this morning, up almost 300% from average. My call options are already showing a nice gain of $6.50, slightly more than a 20% gain in two days.
I see no reason to take profits at this level as it looks like Goldman Sachs can easily trade near the $200 level.
TechnicalTrader My recent trades $190 level, breakout, earnings report, flat base, Goldman Sachs, GS
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.
TechnicalTrader Market Direction, My recent trades, Trading Ideas distribution days, fundamentals, Goldman Sachs, GS, market uptrend, Red Hat, RHT, trade