Tuesday, October 14, 2003
Issue Contents:
| 05:16 | Good Morning... What's up on deck for today. |
| 05:20 | Headlines and Reaction The news never ceases to amaze. |
| 05:56 | Bookmarked Here's a site sent in by a subscriber. |
| 06:01 | [NASDAQ, Multiple TF] Market Internals This is an update of the daily and weekly charts. |
| 06:12 | [NYSE, Multiple TF] Market Internals This is an update of the daily and weekly charts. |
| 06:16 | Point to Ponder Food for thought. |
| 07:16 | Paul's Watch List Stock picks for intraday and swing trades. |
| 07:19 | [@GC, Daily] Gold Analysis of the daily chart of gold futures. |
| 07:23 | [$SOX, Multiple TF] Semiconductor Sector Analysis of the daily and weekly $SOX charts. |
| 07:36 | [KLAC, Daily] KLA-Tencor A look at the daily chart, along with a trade setup. |
| 07:42 | [$BKX, Multiple TF] PHLX KBW Bank Index A look at the daily and weekly chart of the bank sector. |
| 07:48 | [C, Daily] Citigroup Inc. A look at the daly chart. |
| 07:50 | [SPLS, Daily] Staples Inc. A look at the daily chart. |
| 07:51 | [XMSR, Multiple TF] XM Satellite Radio A look at the daily and weekly charts. |
| 08:08 | [AAPL, Weekly] Apple Computer A look at the weekly chart. |
| 08:12 | Note to Self... Thoughts generated by weekly charts. |
| 08:14 | [AMZN, Daily] Amazon.com Inc A look at the daily chart, and the swing trade setup. |
| 08:24 | [EBAY, Daily] Ebay Inc. A look at the daily chart. |
| 08:30 | [YHOO, Multiple TF] Yahoo! Inc. Drilling down from the weekly to the 15M chart, along with the swing trade setup. |
| 09:42 | [MOT, Daily] Motorola Inc. A look at the daily chart. |
| 13:59 | The Robert DeNiro Market Are you looking at me? |
| 14:20 | [NQZ3, Intraday] NASDAQ 100 Index Futures What happens after the squeeze? |
| 16:16 | 2003-10-14 Transcript for Real Time Trading Group Real time forum discussion transcript: 2003-10-14 Transcript for Real Time Trading Group |
We've got a light day ahead on the U.S. Economic Calendar, with all of the action over before equities trading begins this morning. The more exciting stuff is coming on Thursday and Friday. In the meantime, earnings announcements keep rolling...
Expecting numbers from INTC, JNJ, NVLS, BAC, FDC and LLTC, amongst the more notables.
Each morning, I scan the news. It's always a one-two sort of thing.
For one, the fact that the market has this most obvious sentiment cycle is just so annoying, because you can almost predict what they are going to do and say. We have to compare the price action against what's being written, and most of the time, it's even more annoying. Why? Because the time people want to buy the most is when there is euphoria from "fundamentals", yet as technicians we know that this means that it's much closer to the end of a move than the beginning - and no one wants to hear otherwise. And when it was time to buy, people sent email to tell us we are crazy, like back in February and March when we did it to the max. It's an eternal bum wrap. Let's see, if I were smart and wanted to sell more newsletters, I would give 'em what they want, as we learned in sales at the brokerage office...
You know they're all at it again, since my email box is filled with spam. We've finally reached the "rising tide lifts even leaky boats" point in the market. I am sure of it. Check out this piece of spam:
My specialty is identifying stocks or equities that are poised to "break out" or hit new 52 week highs on higher volume within 5 trading days. This is my true specialty !One stock ready to skyrocket in the short-term is Nortel Networks - NT on the NYSEThis tip will prove to be the best one you've had in a long time.Nortel is pennies away from hitting a new 52 week high and is in the process of "breaking-out" from a perfect ascending triangle. Take a look at NT's chart now !As you may know, ascending triangles are bullish chart formations that are excellent for short term trading. In fact they're among the best technical patterns in the markets."If" NT hits a new high Tues. or Wed., the stock should rise to US $ 6.25 or CDN $ 8.25.That's a 32 % return. A great swing trade with stock or call options!
Stocks hit 16-month highs as another dose of good earnings news, on top of last week's bullish economic news, spurred hopes for blowout earnings reports this month.
With most earnings news due out during the next two weeks, some skeptics warned the actual results may have trouble surpassing pumped-up expectations. But Monday, almost every stock group managed to rise amid widespread optimism in a day of quiet trading on the Columbus Day holiday.
Fidelity called for an end to the NYSE's specialist floor-trading system for auctioning stocks. The company instead is advocating a Nasdaq-style electronic system in which computers pair buy and sell orders without human go-betweens.
Woman Became Pregnant Through Egg Transfer Technique but Lost All Three Fetuses
Study shows group on low-carb plan could eat more and lose weight.
FullDisclosure.com has a very well laid out earnings calendar. Thanks to Dave B. for sending this one in!
[NASDAQ, Multiple TF] Market Internals
NASDAQ INTERNALS Weekly: You've seen this one before. At the summer highs, we saw that the number of new 52-week highs haven't been here since 1997. Not good or bad, but we know that this is a big extreme. If we take a look at the $VXN, the "fear factor" has not been this low in years as well.
NASDAQ INTERNALS Daily: We have a push down under the 30 line of the 5-day RSI and the $VXN touchs the lower Bollinger Band. Sellers will be looking for a daily sell signal to set up if the RSI uphooks back above and/or yesterday's high on the $VXN is taken out. Note interesting divergence between price and the number of new 52-week highs. We have a new high in price but not the number of new highs. I think it's to be expected, since at the end of a long move, most feel safer to be in the leaders, so leadership "narrows", but it is also a warning sign. If we had to summarize it, the operating word would be "alert for pending sell signal", even as they all scream "it's a breakout".
[NYSE, Multiple TF] Market Internals
NYSE INTERNALS Weekly: The number of new 52-week lows can be classified only as "in Nirvana". Can it get any better than this? Only TWO?!?!
NYSE INTERNALS Daily: Analysis is exactly the same as as the NASDAQ Internals. "Be cautious".
Now that the market is all exciting again, I feel like I have to cut in and do a "this is a test of the emergency broadcasting system" sort of reminder.
If you're playing the market by the moment, trading your way through and having fun, it's OK! Quite often, at the end of a big move, the market makes incredible up days where the risk justifies the reward. The trader buying high, selling higher to the next greater fool is fine, so long as the we remember that we are absolutely playing a game of musical chairs.
This brings up an almost ironic point. It's actually much easier to be a trader than an investor, since that latter requires one to buy low and sell high. In concept it's not difficult to grasp, but the emotional blocks to buying when there is no good news is just not doable for most, since people like to buy a sure thing, confirmed by fundamentals. And that's why tops never look like tops.
This is Paul's intraday and swing trade watch list for Tuesday. He will review the setups for the Real-Time Trading Group at around 11AM Eastern.
BUY SCALPS:
- SEBL - Looking for intraday buy setups.
SHORT SCALPS:
- ERTS @ 101.54
Prices above are used as ALERTS to look for intraday entries. If you need additional ideas, don't forget that we have automated Stock Scan Lists as well.
****
Even though the Dollar went to new lows on test of the bottom off the weekly chart, we do not have any corresponding new high on the price of the yellow metal itself. What we have here is a higher swing low on the daily chart, setting up a pennant (so far).
The gold indices look a little better than the metal itself, but it's still a warning sign that it might be getting a little tired. It needs the Dollar to continue moving down.
[$SOX, Multiple TF] Semiconductor Sector
SEMINCONDUCTOR SECTOR Daily: This is a page right out of the TrendVue Technical Trader's Handbook: ABC Correction into the 50-day MA hits Target 2, the swing high from whence the pattern began. The question now is can it continue upward?
SEMINCONDUCTOR SECTOR Weekly: Quite often, deep pullbacks such as the ones to the 50-day moving average register on the weekly charts too. In the case of $SOX, what we have here is a textbook 4-6 bar Bull Flag that has hit the first upside target. At this point, we do not know if it can continue, since it has reached a point where we know sellers have shown up before. Therefore, we call this a test of top; to be precise, this is an M Test of Top, the Trader Vic 2B type. Since everyone is excited about the upside, we have to watch for the surprise, which is failure to "breakout".
KLAC Daily: We see here that a Dark Cloud Cover (reversal pattern) has been set up. What's interesting is that this is a sign of sellers -- not just from anywhere -- but just under the summer high, where we know they showed up before.
As usual, Japanese Candlestick theory requires confirmation in the form of a down day. Intraday traders can have some fun with this if yesterday's low is broken. Aggressive swing traders can short it for in around the same area, looking for a one or two-day move, in case confirmation comes. The idea is that if it starts to move back down, we want to see a decisive thrust downward to "confirm" the Dark Cloud Cover pattern.
[$BKX, Multiple TF] PHLX KBW Bank Index
$BKX Weekly: It's interesting to see that the Bank Sector has been able to move up in a rising interest rate encironment. With consumers heavily in debt, it almost makes no sense, does it? Remember before the dot com boom, banks went parabolic due to "disinflation and falling interest rates"? But then again, it hasn't passed the test of top, yet.
$BKX Daily: I have to admit, that I have not been following this closely. It's a classic triangle breakout but at this time, it's almost reached the projected upside target, using the Edwards and Magee formula.
C Daily: As the Bank Index powers up, we find people piling into "safe stocks". Note the big move relative to the low volume. I know it was Columbus Day, but still. Anyway we know that weekly, it's a big test.
SPLS Daily: Yes, even staples looks exciting. Needs to stay above the pink line.
[XMSR, Multiple TF] XM Satellite Radio
XMSR Weekly: Even though satellite radio is a big fad right now, this chart is a good example of what we've been seeing on the weekly charts over and over. Last week, RMBS blew through it's own pink line on good news, and for the rest of them, these are the upside targets on the weekly chart.
XMSR Daily: And as the weekly reaches the upside targets, a.k.a. old resistance areas, we can see that the daily charts are taking a breather. For example, here we have an inside day. Trader's looking to buy will do it on break of yesterday's high, with the first upside target of last Friday's high. A break of yesterday's low will signal a pullback, the first bar of a potential bull flag. One of the things to watch out for is the fact that the cheap stocks are going to get the attention now, since many of the good ones are now in the stratosphere.
AAPL Weekly: Another example of the weekly chart reaching the high end of a trading range.
We have seen over and over that stocks are approaching what could be significant resistance levels on weekly charts.
What this really tells us is that when the pullback comes, we can expect it to be in the order of weeks in terms of time, instead of days, since we're seeing the patterns on the weekly chart. This also means that the daily charts will likely have a downTREND after a reversal, rather than just pull back to the 50-day MA.
AMZN Daily: What could potentially be an exhaustion gap needs to see a thrust up to scare sellers away, rather than make these two puny candlesticks drawn in last Friday's and yesterday's trading where volume contracted two days in a row. The ADX is extreme for this symbol and timeframe, telling us that we are in a parabolic move up with little room for error.
If you're trading intraday, a break of yesterday's low should see traders trying to push AMZN down into the gap from last Thursday. If the gap is closed by sinking under $56, sellers will be all over it. For aggressive swing traders, a break of yesterday's low will set up a one or two-day hit and run swing trade on the short side.
The reason most of the setups have been such quick ones is because we are attempting to pick SPIKE tops. If they don't collapse, they simply become pullbacks that other traders want to buy, hence the emphasis on the need to see THRUST to the downside. See yesterday's comments re: RIMM.
EBAY Daily: It's not the perfect example, but you can see here how on a test of a former swing high, EBAY did the big gap up last Thursday, and crapped backed under the old high. Interesting that by the end of the day, buyers came out to claw at it. You know the market is getting volatile and unstable when you see shooting stars and hammers formed just two days apart.
[YHOO, Multiple TF] Yahoo! Inc.
YHOO WEEKLY: See the theme over and over, weekly charts hitting what could be significant resistance overhead.
YHOO DAILY: At the same time, we've seen the huge gaps made on euphoria, with many of these daily charts reaching extreme ADX readings for the symbol and timeframe, telling us that there is no room for error. Here, we have two days that traded inside last Thursday's range, with a huge gap below. IF it reverses here, THEN we know it's going to be one that everyone can see from miles away. The a break of yesterday's high technically sets up a bull flag on this daily chart, while a break of yesterday's low target's last Thursday's low. Let's just call it "do or die", and traders are ready to play it both ways.
YHOO Intraday: You can see on this 15M chart that they are going to have the "it's a breakout" line drawn to intersect at around 43. The question here is if it will go up, "breakout" and then fail.
As for the upside target, you know the drill.
Headline from Yahoo! Finance is:
U.S. Stocks Close Higher as Honeywell, Motorola Shine
NEW YORK (CBS.MW) -- Major U.S. stock indexes closed higher Monday as Honeywell led the Dow Jones Industrial Average higher and technology issues got a lift from Motorola's surprising report of strong earnings.
MOT Daily: They never write things such as "ADX is at an extreme for this symbol and timeframe, on a 20-day high, a spike test of top".
We're back to the "New Era" way of trading. Everyone knows it's overdone on the upside, so each morning, we wait for it to fall. If it doesn't, I look at you and you look at me, and we say, "One, two, three, go!"
DJZ3 Intraday: And when they can't sell it down, it's squeezed up in the afternoon.
NQZ3 Intraday: Remember how it used to make a triangle, fake a ton of times, and then squeeze? It looks so easy in hindsight, but if we had been there to try for the breakout, it would have taken more tries than the old account could afford, I'm sure.
[NQZ3, Intraday] NASDAQ 100 Index Futures
NQZ3 Intraday: After the squeeze comes the moment of truth. Will the first pullback after the breakout confirm support above the breakout line? This is where the believers have to step up to the plate.
2003-10-14 Transcript for Real Time Trading Group
Real time forum discussion transcript: 2003-10-14 Transcript for Real Time Trading Group
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