No Trades Today

I couldn't find any quality setups as the market turned into a real snooze fest shortly after the opening range.

Watch List - AAPL, BRCM, ENER, FFIV

Bullish Setups

Click on charts to enlarge.

NASDAQ Technical Picture - Narrow Range Trading

Another NR day as Wall Street waits for a catalyst to push the DOW 30 to its milestone high. Meanwhile the NASDAQ carved out a hammer type bar which could turn into a hanging man. Well, that was my best scenario until I saw RIMM's earnings and guidance after the close. RIMM is testing all time highs in after hours trading at $103.00. PALM is also up in sympathy. So the wireless sector will be hot tomorrow. The SOX snapped back today and we have some potential breakouts lining up again in the semi sector.

The NDX winners today were EBAY, AKAM (another multi-year high) and BRCM (poised for a 3 day consolidation breakout). The losers were QCOM, CHKP and ATVI. I'm still cautious hoping that the achievement of the much anticipated and overrated milestone does not signal a massive selloff.

Trade of the Day - Energy Conversion Devices, Inc. (Public, NASDAQ:ENER)

Both of last night's watch list picks were invalidated by analyst interference: AMD was downgraded by ThinkEquity to sell from buy and upgraded by Caris to Above Average from Avg.; AMGN was initiated as Underperform by Credit Suisse and FBR was concerned about negative headwinds. Both stocks gapped down too much, thus invalidating my setups.

With no other plan in mind, I decided to look for a good gapper play. ENER was up on good volume in the pre-market on news of an Intel deal. I placed an out of the money order just above $35.00 in pre-market, but unfortunately it was too low and did not get filled. It posted a red candle in the opening range, so I decided to wait for a better setup. In the meantime, I ran some scans, but ENER clearly had the type of volume I look for on a gap up play. I waited for a low risk setup which finally came after lunch. It tagged the rising 10 period EMA carving out a NR doji. As soon as price took out the high of the doji, I went long. I booked 50% of my profit as price approached resistance. ENER consolidated for close to an hour before spiking higher into the finish. Having closed above resistance on the daily timeframe, I'm optimistic for some further upside and will be watching ENER closely.

Watch List - AMD, AMGN

NASDAQ Technical Picture - The Hype is Overdone

After all the hype on CNBC, this session was doomed to fail. (I agree with Trader Mike - the CNBC hype is misguided). And thus, we had a very choppy morning followed by profit taking in the afternoon. The tech sectors were mixed with the SOX down and biotechs up. The daily chart of SOX appears to be carving out a lower high and the biotechs ($NBI) are now poised to breakout. We might see a little sector rotation going into October. Let's face it, we've had a nice run off of the July lows and now its time to pullback and digest.

Trade of the Day - Apple Computer Inc. NASDAQ: (AAPL)

All the hype on CNBC this morning was making me nauseous so as soon as the durable orders came in surprisingly low, I decided to take a short position. I had to go with AAPL because of liquidity at that hour of pre-market. My stop was the pre-market high which was 50 cents away (ouch), so I was praying as I clicked my mouse on the entry. Except for some choppiness on the open, the trade went according to plan and paid off nicely, coming within pennies of my $76.00 target. High Risk and only recommended for people who are tired of hearing that "bad news is good news".

No Watch List Tonight

I'll be looking at possible gapper plays tomorrow.

Hansen Natural Corp. (Public, NASDAQ:HANS)

Chart Analysis Request - Is HANS a swing short candidate?

After rallying from recent lows, HANS is consolidating its gains and trying to reclaim its 50MA. If it succeeds, it could attempt a gap fill in the $40.00 area. I wouldn't short unless it it broke the trading range to the downside (below $32.50) on high volume. Support at $32.50, $30.00 and $27.50.

NASDAQ Technical Picture - Another Test of Resistance

The NASDAQ tested last week's high on stronger volume, but for some reason I'm not feeling bullish. You can't fight the tape, but it doesn't feel like we can move much higher, without some sort of pullback. The SOX and software consolidated today leaving the field open for internets to take a leadership role. JOYG, EBAY and ATVI were the big NDX winners today. ADSK, and BEAS along with a bevy of semis - BRCM, MRVL, NVDA, MXIM - were the day's big NDX losers. I'm cautious going forward but if the D+ line crosses the ADX line we could get another break higher.

Trade of the Day - Joy Global Inc. (Public, NASDAQ:JOYG)

Goodbye EXP, Hello JOYG!
It's not unusual for a stock to retest its breakout point after a significant break. JOYG opened strong and consolidated its early move midday, forming a small triangle pattern. I was cautious and waited for confirmation before going long, but there was a noticeable uptick in volume as the break occurred. I closed the position as price rallied in for a retest of last week's breakout point.

Missed Opportunity - Eagle Materials, Inc. (Public, NYSE:EXP)

As per last night's watch list, I thought that I had a great long setup when I was able to pick up EXP as it climbed towards resistance after a weak open. After wasting over an hour with it, it failed and I took my exit with a minor gain. I was disappointed and decided to move on to greener pastures so to speak. I thought that EXP's failure was due to poor market conditions. Little did I know that it was about to go into a free fall and that the company would warn on upcoming earnings later in the session, after all, the Chairman had just recently disclosed the purchase of 400k shares...????

Watch List - Semis and Software

SEMIS

The breakout candidates in the semi sector are very well covered at High Chart Patterns.

I'll just add that last week it was hard to find more than a few nice charts in the sector and now its hard to find more than a handful of bad ones. In addition to the breakout candidates, I also like CREE and NVDA.

SOFTWARE

Software has broken multi-year resistance.


ADBE has the best looking chart in the software group.

CTXS looks well positioned to break resistance and head towards $38.00, followed by $40.00.

This is a weekly chart of ORCL which is breaking out of a multi-year base. Near-term target is $20.00.

This has nothing to do with semis or software, but I'm also planning to go long EXP on a high volume breakout:

NASDAQ Technical Picture - Tech Outperforms Again

The NASDAQ gapped up on the open and fading was the only way to go. I saw lots of black candles on my opening range stockcharts.com which almost always favors the short side. We retested Friday's lows and then pivoted into a huge rally. As I mentioned on the weekend in this post, the SOX was easing into its trendline, so it shouldn't have been such a surprise to me that we rallied. The NASDAQ clearly outperformed the other markets again. Check out the NDX 100 heatmap - a few of this blog's favorites are in the top 10 (AKAM, AAPL, and NVDA). Will we get follow through tomorrow? I still favor a pullback but we closed near the highs and volume was up.

Trade of the Day - Eagle Materials, Inc. (Public, NYSE:EXP)

As per last night's watch list, long EXP on a channel break as well as a break of Friday's late day, narrow trading range. I sold the position as price came in to test last Wednesday's high.

SNDK gapped down on a Merrill downgrade so I didn't chase it. I shorted JOYG shortly after the open. I booked 50% of my profit after a 1 point gain and was stopped out on the balance. Here is the chart.

Pre-Market

CIBC upgrades Lam Research (LRCX 41.36) to Sector Outperformer from Sector Performer with a $52 tgt, as channel checks suggest near-term upside to Street as shipments continue to ramp to set record levels in Mar '07 on share gains at Taiwan DRAM makers and commercial traction in new wet clean business with a repeat order from TSMC.

Merrill Lynch downgrades SanDisk (SNDK 55.38) to Neutral from Buy

ThinkEquity raises Apple (AAPL 73.00) tgt to $100 from $90, based on the following catalysts: Additional accelerated back-to-school CPU share gains, retail Store traffic and Beyond-the-Box unit shipment momentum through springtime, software-related revenue and earnings upside surprises in 1H07 and a move into the enterprise in 2H07

ThinkEquity recommends taking profits in semi stocks, citing a looming inventory correction. Firm says that during their quarterly tour of Asian electronics supply chain participants, they have found a preponderance of pessimism and lack of any recovery.

Watch List - Eagle Materials, Inc. (Public, NYSE:EXP)

EXP soared Wednesday on disclosure that the CEO had recently purchased 400k shares. It has since retraced 50% of that move. I'm going to buy EXP on a high volume break of the down trend channel on the 30 minute timeframe. My near-term target is $47.50.

Review of this Week's Long s - NVDA and NDAQ

NVDA's ADX and RSI are signaling weakness, however, it is still holding its breakout point and its trendline. So we can't short it until we get an actual break.



NDAQ has retraced 62% of its last leg up and in so doing successfully retested its breakout point. Long on a break of $31.25

Review of this Week's Short Trades - JOYG and SNDK

JOYG is consolidating its losses in the lower end of Thursday's WRB which bodes well for the bears. Short again on a break of Thursday's low. This could take another day or two.



We don't want to touch SNDK while it consolidates last week's loss. We want to wait until it breaks the narrow trading range $56-$55.25 to the downside. Our preliminary target is $54, followed by $52.50.

NASDAQ Technical Picture - Breach of 200 MA

The NASDAQ breached its 200 MA on a closing basis Friday by three points. The next level of support is 2200. The SOX which has lead the way down this week, is coming into its trendline and looks to be easing up somewhat on the selling. The GSO (software index) broke through a multi-year resistance level on Wednesday (ORCL) and appears to be coming back in for a retest. Friday's big NDX loser was SNDK, down 4%. Other semis that gave back on Friday were NVDA (profit taking) and MRVL (slipping back into the gutter).

Trade of the Day - SanDisk Corporation (Public, NASDAQ:SNDK)

As per last night's watch list, both FLSH and SNDK took a tumble on the open. The move happened so fast, it was hard to get in. I switched over to the five minute timeframe to get a better picture of how SNDK was consolidating its gap down and I was able to establish a fairly low risk trading range shortly after the open. The stock consolidated for about twenty minutes before crashing again. The move was swift and on very high volume. I thought that it had capitulated so I covered my entire position right away. The rest of the session was extremely narrow range and both stocks closed near their lows. I only managed the one trade as it would have been too hard to try to get in both at the same time. If you compare both charts side by side, you will notice that they traded like twins.

Watch List - SNDK, FLSH

Same bearish setup for both FLSH and SNDK - double rounded tops with negative divergence of the RSI. The second rounded tops on both charts made higher highs than the first, however, the second tops are wider and indicate that there is far too much supply at these lofty prices. These types of patterns generally have deep pullbacks.

NASDAQ Technical Picture - Bearish Engulfing Pattern

Around noon, the NASDAQ tested its opening range high, but failed to take it out. What followed was a very orderly pullback with very little bounce into the close. Expect more profit taking because this pullback is overdue. Our first area of support is the 200MA and this may hold into the close tomorrow, but will undoubtedly be taken out next week. Today's action resulted in a bearish engulfing pattern, usually a strong reversal signal particularly when positioned at the top of a multi-wave move. The SOX is leading the way down but all tech sectors participated in the afternoon profit taking.

Trade of the Day - Joy Global Inc. (Public, NASDAQ:JOYG)

As per last night's watch list, I shorted JOYG on a break of yesterday's low. I covered 50% of my position at $34.00 and held the balance until the close. I risked 60 cents and my average reward was $1.20 for an R of 2. The afternoon swoon was especially nice as there was no overlap of the real bodies of the candlesticks making it much easier to manage than the morning session. I thought I was going to get stopped out around noon because I had moved my stop to 10 cents above breakeven. Luckily, I wasn't taken out!

Watch List - QCOM, JOYG

Click on charts to enlarge.

NASDAQ Technical Picture - Bulls Getting Cocky

The market gapped up about 15 points on ORCL's stellar earnings and guidance report. From there it managed to add another 15 points in a somewhat choppy session given the Fed policy statement in mid-afternoon. The software sector was the easy winner on the session and the SOX was a bit of a disappointment. However, all major tech sectors participated in today's rally. The NDX leaders were all software names - ORCL, BEAS, CTXS and the loser was JOYG which breached support into the close setting up a nice short trade going into tomorrow.

The weekly timeframe (below) shows that we are trading into a former conjestion area. I still feel we need to consolidate or pullback in order to properly digest this recent swift ascent.

Trade of the Day - NVIDIA Corporation NASDAQ (NVDA)

A general lack of good setups in the morning kept me out of the market until after Fed speak. Around 2:30, I spotted a low risk setup on the NVDA chart and went long. My exit was into the close for a $0.45 gain.

Watch List - NIHD, NDAQ, NVDA, AKAM

Click on charts to enlarge

Other recent watch list names that are still in play - AMGN and GILD are still hugging breakout resistance. FFIV is still making its way back to the broken trendline and remains a potential short candidate.

NASDAQ Technical Picture - Markets Sell Off on YAHOO's Warning

The NASDAQ had a very strong recovery off of the midday lows which is a good sign for the bulls. The selloff was in reaction to YHOO's earnings warnings, more specifically they said that earnings are expected to come in at the lower end of the guidance range. Within 30 minutes or so, YHOO had lost virtually all of the gains it had made since the mid-July low (a stark reminder of the pain of the aftermath of the internet bubble). However, the NASDAQ which shed more than 30 points intraday, managed a respectable close with a loss of just 13 points.

The markets are volatile and managing risk is very important. Tomorrow's economic data include oil inventories at 10:30 and the FOMC policy statement at 2:15.