Let's update our picks from yesterday.
If it feels like NEWMONT MINING is playing mind games on us, it's because the move up in gold and gold stocks is now registering ADX readings that are extreme for the symbols and timeframes on the weekly charts. The explanation for yesterday's scalp setup was complicated because the probabililty of "sudden death" is probably the highest it's been in a long time, and therefore we cannot expect buy setups to get to where they are
"supposed" to go.
For example, NEM did not get to the upside target of the December 2 swing high and went down yesterday. This might be the first signal that the quick and dirty small bull flag just doesn't have enough power to get there, and that a deeper pullback in the form of a classic bull flag or an ABC Correction lies in wait. If there is a meltdown, I will play it intraday.
You can see that the weekly chart has an ADX of 50, while last week's candlestick, for all intents and purposes, was a small doji after a big expanded range tall white candle. Remember, when the ADX is extreme for the symbol and timeframe, we are mindful of "sudden death" spike top sort of reversals, which we wrote about a month or so ago when we surveyed the weekly charts of many of the top NASDAQ stocks.
The buy stop on MERCK was triggered and the stop loss should be raised to around $42.90, which is the December 5 swing low. We want to see it have a followthrough day on the upside and see if it can upfill the gap left overhead. If it does manage to blast up and through, I will likely take my money on this trade before the day is out.
The buy stop alert for ORACLE is moved down to $12.93 and I will be using DECEMBER 12.50 CALLS should it be triggered, with an initial stop loss at $12.58. (I haven't forgotten about the article on how to use in-the-money options to swing trade...)
I really, really tried to find some good setups here, but the weekly charts suck so badly that I think it must have some sort of effect on the probability that the setups on the dailies -- particularly the ones that have been going up for months -- can even get to target. You'll see shortly when I post the weekly charts.
You know that we are surely scraping the bottom of the barrel when we have to go for setups like this, but there are a lot of biotech and drug stocks that are a little overdone on the downside, so they might be able to perk up here if there is rotation into these sectors. This is a test of bottom here on AMGEN and it's a test of bottom. We would be looking to see if some shortcovering can materialize, aiming for the 20-day EMA overhead in the $59.36 area. Using options, we would have to set the buy alert at yesterday's high of $58.50 and purchase DECEMBER 55 CALLS a few minutes after the alert is triggered with an initial stop loss at $57.22. I would like to see it close up on decent upside price action to at least confirm that something is happening, or it might be something that we would not take home overnight.
NEXTEL bull flag is trying to launch. My suggestion is to probably scalp this one intraday since the setup on the daily chart was already triggered when I saw this one.
There is a big potential spike top here on the weekly chart...
That's it for today.
03.12.09 07:03 #