NASDAQ Technical Picture - Channel Support Holds for Now

Despite the high volume, the NASDAQ ended the session just modestly higher than yesterday's close. The morning session was very choppy, followed by narrow range trade in the afternoon. It looks like the bears took the day off after all the money they took out of the market yesterday. All this to say that today was basically a consolidation day and I expect we'll get a few more as the market digests yesterday's losses.

Economic Calendar for Thursday, March 1st: Personal Income/Spending and Initial Claims at 8:30; Construction Spending and ISM Index at 10:00.

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

JOYG was an earnings gap on the open. It carved out a WR red stick on the open and then consolidated sideways for an eternity. The candlestick patterns were not helpful it determining if this setup would be a gap fade or a short. However, it did carve out several sticks with highs of $45.49-$45.50. After the third such stick, I made a mental note that $45.50 was a pivot point and if it remained the high of the narrow consolidation range by the time the down sloping 5 period ema came in, I would short just below. That happened on the next bar (6th stick). I placed my stop just 5 cents above the pivot point. The trade continued to consolidate sideways and even attempted to retest the pivot point. That 5th and final test proved to be the turning point, as JOYG finally settled into an orderly decent, followed by a small bear flag before the big swing lower. Just as things were getting really interesting, I noticed a huge volume spike. This is often a warning that a reversal is approaching, so I tightened my stop to $44.00 and I was stopped out on the next bar.

This is a low grade setup because the candlesticks don't tell us much except that there is a lot of indecision. However, the combination of the pivot point and the tag of the MA, allow for a low risk entry close to resistance. This was my only trade today. The market was too choppy, so I took it easy.

Dummy Trade of the Day - Apple Inc. (Public, NASDAQ:AAPL)

AAPL gapped down on the open due to delays in Apple TV and general market fears. It rallied towards its 200 MA and downsloping 10 period EMA as it attempted and failed to regain $87.00. I took a low risk, dummy short as AAPL fell out of its narrow trading range on an uptick in volume. AAPL quickly took out its OR low, followed by another lengthy consolidation. Selling picked up in mid-afternoon for another leg down. Around 3:00 I felt that AAPL was capitulating and would reverse so I covered and went long hoping for a bounce into the close. The long entry was traded on a 5 minute chart with a 30 cent stop. It started well and I kept tightening my stop accordingly. Unfortunately, my screen froze and my stop was not executed so I am looking at a loss on the late day long entry.

NASDAQ Technical Picture - Massive Selloff on Capitulation Like Volume

U.S. Markets sold off today following China and the overseas leads. Listening to all of the talking heads on CNBC has so far proven to be a waste of time. The only thing worth noting is the expectation of another gap down tomorrow based on the volume of unfilled sell orders left over from today's session. All sectors participated in the selloff. According to the NASDAQ P&F chart we sustained a double bottom breakdown today and the near-term target is 2310. A breach of the line marked support on a closing basis tomorrow will confirm a downtrend. The NASDAQ McClellan Oscillator is approaching oversold. From yesterday's close we lost almost 100 points on a huge volume spike ( over 3.0 bln ). The spikes in volume and VIX could suggest watching for a short-term bounce.

Economic calendar: GDP prelim and chain deflator 8:30; Chicago PMI 9:45; New home sales 10:00; Crude 10:30.

Sudden Decline in End of Day Trade Triggered by Computer Glitch

Sudden, sharp decline in DJIA around 3 due to tab delay, according to WSJ

DJ reports that the sudden, sharp decline by the Dow Jones Industrial Average shortly before 3 p.m. Tuesday was triggered by a tabulation delay by Dow Jones data systems, which calculates the average. There was a temporary lag in calculation of the 30 large-stock average due to a surge in order flows as the market continued to tumble in afternoon trading, much like a clogged pipe. Shortly before 3 p.m. Eastern, Dow Jones Indexes switched over to a backup system to calculate the average, which nearly instantly registered the huge move. The glitch wasn't the cause of the decline, but it did cause the drop to register far more quickly than it otherwise would have. Other indexes fell at the same time, but more gradually. Some traders noticed a discrepancy between futures contracts tied to the Dow industrials and the index, which directly tracks the stocks. Usually, the futures contracts closely track the overall average.

Courtesy of Briefing.com

On a personal note, my stop didn't trigger and my screen froze. I was long AAPL at $84.00 for a bounce in the last hour. At 3:45 I tightened my stop to $84.55. My stop didn't trigger. I'm still holding and currently looking at a small loss. It's hard to get rid of shares when something like this happens because all the bids dry up.

NASDAQ Technical Picture - End of Day Chart Damage Limited

Despite the 33 point drop from the OR high to the midday lows, the end of day chart damage is limited. The NASDAQ gapped up on the open and minutes later went into a free fall, taking out its trendline and ascending triangle support within the first hour. It almost reached the measured move target of 2490, before abruptly reversing at around 2493 and closing at 2504.5 which is just above the January closing high. Volume for the session was below average. The Fibonacci retracement from the Feb. 12 lows to last Thursday's highs fell somewhere between 38% and 50% at the session lows.

Going forward, I would like to see price regain its base around 2510, before getting optimistic again.

Tomorrow's economic data includes Durable Orders at 8:30, Consumer Confidence, and Existing Home Sales at 10:00.

Dummy Trade of the Day - Force Protection, Inc. (Public, NASDAQ:FRPT)

FRPT gapped down on the open and fell hard. Midday it consolidated sideways until the declining 10 period EMA caught up to price. Just before taking another dive, it conveniently carved out an NR7 stick. Short on a break of the narrow trading range. I took a partial at $17.00 as I noted it was a support area on the daily timeframe and I covered the balance into the close.

Victoria also traded FRPT on the 10 minute timeframe allowing for a more aggressive entry than mine.

UCTT was Friday's dummy trade of the day. Today it gapped up slightly and immediately pulled back with the market. It found support near the 10 period ema and attempted to rally. I decided to take a low risk dummy entry after the NR7 bar because I felt it could rally back up to its OR (opening range) high. Notice that the NR7 bar has virtually no volume and these generally are very effective in predicting price expansion. I closed my entire position as soon as it tagged the target.

THE gapped up on the open and rallied nicely. After an orderly midday swoon, price stabilized on the 10 period EMA. I took a low risk entry, hoping for a retracement back to the morning resistance level (blue line) and exited the entire position when the target was met.

Update - Varian Semiconductor (VSEA)

Varian Semi awarded largest service contract in its history by major U.S. logic chipmaker

Co announces it has been awarded two service contracts by a major U.S. logic chipmaker totaling more than $30 mln. Under terms of the contracts, Varian Semiconductor will provide comprehensive service and support to this customer covering a multitude of VIISta single wafer medium and high current ion implanters at a 300mm and a 200mm wafer processing fab. The contracts include world-class 24X7, 365 days-a-year support by VSEA's dedicated onsite engineers. (Courtesy of Briefing.com)

Currently gapping up to $51.05

Technical Trade Setup - Varian Semiconductor (Public, NASDAQ:VSEA)

Long above $49.70 on higher volume. A gap up on the open invalidates the setup and must be traded as a gapper dummy trade.

NASDAQ Technical Picture - Weekly Update

The NASDAQ ended the week on a consolidative note, peaking with Thursday's gap higher on the open. Since then we have successfully tested the January high as support twice. In so doing, we have carved out a series of lower highs on the 15 minute time frame above. We are about to test the trendline (red line) which has been in play since Feb. 12th. Moreover we are currently developing a descending triangle. If the trendline is breached and price falls below the January high (2509) on a closing basis, we could see a measured move lower to the green line 2490. This would bring us back to our phase 3 consolidation level. If, on the other hand the trendline holds, we could see the triangle break to the upside. Nothing too worrisome, just a time when we want to be selective.

Earnings of note in the coming week:

Mon. - XMSR, MRVL
Tues. - HANS, SIRI, ADSK
Wed. - JOYG
Thurs. - DELL

Dummy Trade of the Day - Ultra Clean Holdings, Inc. (Public, NASDAQ:UCTT)

UCTT gapped up on the open and rallied and pulled back to it base. With the exception of stick #5, it held the OR high as support on a closing basis. As price consolidated just above the rising 10 period EMA, UCTT printed a NRB at the base of resistance. I entered a low risk dummy long on a break of the NRB. My preliminary target was the thick blue line which represents resistance on the daily timeframe. I took a partial at the 62% Fibonacci extension (yesterday's low to the OR high) which was just 10 cents below the target because I didn't want to miss the exist over 10 cents. Price eventually hit the target and immediately pulled back to the rising 10 period EMA. Since I had already taken a partial, I stayed in the trade and price eventually rose above resistance. I exited the balance into the close.

Trade of the Day - QUALCOMM, Inc. (Public, NASDAQ:QCOM)

Last night I posted a bullish flag setup for QCOM. At the end of the post, I stated that a gap up would invalidate the setup and should be traded like a gapper dummy trade. This morning QCOM did gap up on some favorable news regarding pending patent disputes. However, it gapped too high and tanked on the open. It came back to its base and chopped around for a good portion of early morning trade. Finally, as price moved sideways towards the rising 10 period EMA, I noticed that it was setting up a base of support at the $42.90 level. Notice that three candles had lows of exactly $42.90 (red line which marks my initial stop). I took a long entry on a break of the 7th bar high with support from the rising 10 period EMA just below. I had two targets $43.40 which matched last Friday's high and today's OR high; and $43.60 which was a significant pivot point in pre-market trade (refer to chart below).

QCOM did a three bar vertical, hitting both targets for a partial and a complete. It then carved out a combined bearish tweezer top and bearish engulfing pattern ( bars 10 & 11). After a midday swoon it eventually came back up and tagged $43.60 level again. So $43.60 has become our new resistance level going foward.

As a follow up trade next week, I'd like to see a base and break play at $43.60.

Bullish Flag Setup - QUALCOMM, Inc. (Public, NASDAQ:QCOM)

Qualcomm (NASDAQ: QCOM) is in the process of setting up a bullish flag pattern. After a three day vertical move last week on increasing volume, it has spent the last three sessions consolidating its gains on declining volume. Notice that the consolidation is in the upper range resulting in a bullish flag pattern.

Today's session closed strong and therefore this pattern could break anytime. The next level of resistance is last Friday's high, followed by the two levels noted above. Long time readers may remember that I used to refer to this type of setup as a three day consolidation breakout. As always gap ups invalidate the setup and should be traded like a gapper trade. Basically, we are looking for a high volume break of the flag but we are cautious in the current market environment.

Good Trading!

NASDAQ Technical Picture - January High Tested as Support

After gapping higher on the open, the NASDAQ spent most of the morning in a free fall. It successfully retested the January high as support late in the morning and after a lengthy chop-fest, it managed to rally into the close. In so doing, it carved out a doji-like candlestick which is indecisive. I wouldn't be surprised to see some range trading between 2510 and 2530 over the next few sessions as the market consolidates its recent gains. However, at certain points in today's session, it felt like there was some programmed selling taking over. Just a reminder to be cautious with the doji stick in play!

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

AAPL gapped up on the open and immediately reversed. As it approached and tested its rising 10 period EMA and started to form a base, I was contemplating a long entry. However, a quick review of the 60 minute timeframe showed that the 10 EMA was still very far away and left me wondering if it could bounce from this level. As I waited for price to take out the third bar high on the 15 minute timeframe in order to complete the base, sellers came back in and drove price all the way down to $89.53 which ties in with yesterday's primary resistance level and the 10 EMA on the 60 minute timeframe. Notice that bars 9 and 10 on the chart above had identical lows of $89.53, forming a bullish reversal tweezer bottom candlestick pattern. I waited until AAPL formed a base and went long on the break. The base, as you can see on the 5 minute close-up below, coincided with a break of the 9th bar high on the 15 min. timeframe.

In order to determine a target level, I mapped out the Fibonacci retracement levels from the OR high to the low of the tweezer reversal bottom. I took a partial as price approached the 50% retracement level. After that it was a long choppy afternoon with the bears and bulls playing tug of war. AAPL managed to to rally a bit in the last half hour, but not before retesting the morning base and my entry point. Notice that we had a second tweezer bottom on the retest of the base.

Where to next for AAPL? Since AAPL has successfully tested former resistance as support and is close to completing a bullish base on the 15 minute timeframe, we can assume that it will continue higher. I've highlighted the upcoming resistance levels on the daily timeframe below for those interested in trading it in the coming days.

Late Postings Tonight

Only one trade today - Long AAPL on a pullback to former resistance. Charts later this evening.

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

The first two charts are before and after daily timeframes of the AAPL setup. AAPL was very active in the pre-market and seemingly not very mindful of the market pullback caused by the CPI data released at 8:30. I checked the daily timeframe and saw that it closed at an important pivot point as marked by the blue arrows. AAPL had been basing for a month and yesterday's close was strong. I wanted to buy on a break of yesterday's high, but I wanted to see and feel the open before pulling the trigger. I had two targets as marked by the black lines.

As you can see, I released my buy order seconds after the open. The volume was mega huge so I didn't have to worry about choppiness. AAPL did a four stick vertical, momo move and hit my preliminary target after about one hour, at which point I took a partial. I exited the rest of the position into the close. I was holding out for a tag of the secondary target, but it was a little too ambitious.

NASDAQ Technical Picture - Multi-year Closing High

The NASDAQ started weak but quickly found support, reversed and rallied to its best closing high since February 2001. This was accomplished on higher volume and now all three major averages are moving to the beat of the same drummer. The NDX 100, however, is still out of sync and raises a red flag. It should be noted that while the INDU and SPX are moving along at a much faster pace, it's due to the lack of any resistance as we keep taking out all time highs. The NASDAQ, on the other hand, has yet to retrace 38.2% of its fall from bubble highs. That milestone is still about 140 points away around 2650.

Economic calendar for tomorrow: CPI at 8:30; Leading indicators at 10:00; Crude at 10:30; and FOMC minutes at 2:00.

Dummy Trade of the Day - Force Protection, Inc. (Public, NASDAQ:FRPT)

FRPT was a failed gapper dummy setup. FRPT gapped up and carved out a bullish WRB. The second bar was bearish but held $20.00 as support. The third bar was NR and printed a higher low ($20.01). I took a dummy long entry on a break of the third bar high with the rising 5 period EMA comfortably close as support. I anticipated that FRPT would setup a u-shaped base and breakout for a vertical momo move. It did breakout, but unfortunately the momo quickly dissipated and it started to come back in. I reacted immediately to the failure by moving up my stop to $20.50 and was taken out.

Why did it fail? I usually check the daily timeframe before taking a position, but today I was too busy and neglected to do so. After exiting the position, I pulled up the daily and noticed that there was a clear line of resistance at $20.80. Had I checked this before, I could have at least taken a partial as price approached resistance. Notice how price did take out resistance briefly in the afternoon but quickly reversed.

Some readers have expressed the view that they can learn from bad trades, so this post is for your learning pleasure. Your critiques are welcome.

Trade of the Day - C.H. Robinson Worldwide, Inc. (Public, NASDAQ:CHRW) and NYSE Group, Inc. (Public, NYSE:NYX)

CHRW was a HCPG pick and it played out exactly as they expected and explained in their newsletter (Nice work guys!) CHRW gapped up and immediately started coming back in. It held support from Friday's afternoon low and started to move back up. It conveniently carved out a small stick prior to breaking through Friday's high on an uptick in volume. I set my stop just below the previous bar, entered a dummy long on the break, and watched it take off. I exited in early afternoon after it printed a long upper shadow and broke a three bar support level.

NYX was a Cup & Handle breakout on an uptick in volume. I have been watching this pattern develop over the last two sessions and my patience paid off with a 2 pt. move. I had checked the daily timeframe and new that the target was situated somewhere between the downsloping 10 day EMA ($91.66) and the bearish gap closure from Feb. 9th ($92.07). As it turns out, today's high was $91.98, very close to my exit. I exited shortly after NYX failed to take out $92.00.

NASDAQ Technical Picture - Weekly Update

All timeframes are synchronized. Will we take out resistance this week?

OPEX Friday left the market almost unchanged on lower volume.

Economic Calendar - Nothing scheduled for Tuesday. Earnings AH include CROX and HPQ.

Dummy Trade of the Day - IntercontinentalExchange, Inc. (Public, NYSE:ICE)

After a failed morning rally, ICE had an orderly pullback to its 10 period EMA. Since the EMA was fairly flat, it is important to wait for an actual break of the base because often times these setups just go into some sideways action and eventually fall over. The 5 minute timeframe below has a better view of the base. The entry was long on a break of a shallow base following an NR7 bar on support of the 10 period EMA.

The 5 minute timeframe below shows that there was actually a second base which formed late in the session. After retracing 62% of the move from the low of my entry point, ICE carved out a hammer-like bar which closed just above the 50 SMA signaling a potential reversal. It then formed another shallow base from which a second entry could have been taken for a momo move into the close. Unfortunately, I missed it on Friday, but in the future I will look for late day retracements using Fibonacci levels as my guide.

NASDAQ Technical Picture - Lower Volume Extension

We managed to hold and slightly extend yesterday's big gains. Tomorrow is OPEX and a good day to focus on gappers because everything else will likely be NR.

Economic calendar: Housing and PPI at 8:30 and Michigan Sentiment at 10:00.

Trade of the Day - QUALCOMM, Inc. (Public, NASDAQ:QCOM)

QCOM was upgraded from neutral to buy at Oppenheimer. That is a compelling upgrade and there was sufficient interest in the stock in pre-market for me to look at the daily chart for potential target areas as mapped out above. I also liked the fact that QCOM had been basing for many months tagging $40.00 several times along the way. The only caveat I had regarding this trade was yesterday's WRB and Friday's OPEX. But give me a compelling, low risk breakout play and I'm willing to take a chance.

The first chart below is the consolidation breakout trade which I executed minutes after the open on the 1 minute timeframe. My initial target was $40.00 and I was willing to stay in the trade as long as the 10 period EMA was not breached on a closing basis. QCOM broke out and rallied about $0.30 before coming back in for the obligatory retest. After that it moved slowly along the MA until it got its second wind. The second rally was small tight candles which are preferable and easier to manage than the wide sticks. It consolidated a bit at $40.00 resistance but kept going. I stayed in the trade into the next consolidation where I tightened my stop and was taken out.

The second trade was dummy entry executed off of a NRB on the 15 minute chart after price tagged the 10 period MA. I exited the trade as price tagged the second target $41.38.

NASDAQ Technical Picture - Broad Based Rally on Inflation Relief

Bernanke's statements regarding diminished inflation fears sparked a broad based rally across all U.S. markets. All tech sectors participated, paced by semiconductors. Resistance is just 12 points away, so I'd like to see a pullback to support on the 60 minute chart, before we attempt to take out 2500. I see a triangle forming here and I'm not optimistic that we will succeed at 2500 on the second attempt.

Tomorrow's economic calendar is loaded starting with import/export and initial claims at 8:30; industrial production and capacity utilization at 9:15; and Philadelphia Fed at noon.

Trade of the Day - Ross Stores, Inc. (Public, NASDAQ:ROST)

The first two charts are before and after daily timeframes. The first is a view of chart last night and why I had it on my watch list going into today's retail sales data. The second is the daily view after today's breakout to all time highs.

The first 15 minute bar was WR and closed near the high end of the OR. The second bar filled the shadow of the first bar and closed in line with the OR high. I took a low risk dummy entry on a break of the OR at the beginning of the third bar. My initial stop was just below the second bar. ROST rallied then consolidated in a narrow range, followed by another rally which tagged the 62% Fibonacci extension. Since the stock was trading in blue sky territory, I had no target and used the Fibonacci extensions as my guide. I took a partial at 62% and the balance at 100%.

I took a second low risk dummy entry in mid-afternoon, hoping for a retest of the morning highs, but it took too long to get going, however, it was a nice bit of icing to add to the morning trade.