NASDAQ Technical Picture - Gap Fade

The A List tech stocks such as AAPL and AMZN got pummeled today and that brings the NDX 100 into the same technical space as the other major indices. Tech stocks led the selloff today and everything closed near the lows.

Tomorrow is the start of a new month and that could bring some new money. I'm not holding my breath, just taking it one day at a time.

Dummy Trade of the Day - Amazon.com, Inc. (Public, NASDAQ:AMZN)

The first chart is the daily timeframe for AMZN. After last week's earnings gap, AMZN carved out a bearish tweezer top candlestick reversal pattern. I've been waiting patiently all week for a chance to short AMZN and today was the big payday.

Yesterday AMZN gapped down but had a relatively orderly, NR day. Today it gapped up on the open, and like the markets, it was a fade. The WOR held support of yesterday's lower base. It consolidated in the lower portion of the OR and set up a perfect dummy short before falling like a hot knife through butter. There was a brief moment where I thought this was a head fake. After breaking down close to a dollar, AMZN snapped back and rallied all the way back up to the BO point. It numbed me briefly and I thought I would be stopped out. But after a quick retest of the breakout point, it fell down as planned. Whew! It fell four points in less than 45 minutes before capitulating on huge volume.

As indicated on the 15 minute chart, I used the high of the tweezer top as the high for my Fibonacci extension and the ORL as my base. I wanted to use the Fibs as my guide even though there is no gap down per se. Based on my analysis of the daily chart, the tweezer top seemed like the most logical starting point.

There is still more opportunity here as AMZN has yet to fill the earnings gap, after which, I fully expect it to bounce.

NASDAQ Technical Picture - Bargain Hunters Wade Back In Cautiously

Trading the Watch List

Over the weekend, I spent some time going over my watch list of usual suspects paring down and segmenting the names into three categories. The A List comprises stocks still trading above all of the MAs including the10 DMA after last week's free fall. The B List are stocks that closed below the 10 but above the 50 - technically, these stocks are still solid as long as they stay above the 50 on a closing basis. The C List, you guessed it, are gutter stocks trading below their 200 DMA.

A List - AAPL, AMZN, AMAT, BIIB, BIDU, CELG, CMI, CROX, FFIV, FSLR, IBM, VSEA;

C List - AKAM, CAL, JOYG, MNST, NTAP, NTRI

My trading plan for the open was to concentrate on the A and C List stocks. I was looking for gap downs below Friday's low from the A list and gap ups or signals of strength from the C list.

Three stocks met the gap criteria - BIIB, and IBM gapped down below Friday's low and MNST gapped up above Friday's high. While I was waiting for the gappers to develop on the 15 minute timeframe, I looked to see if I could find some orderly setups from the other names on the list.

JOYG was carving out a bullish rounded bottom with good volume, so I decided to go long on a break of the ORH. Here is the 3 minute chart of my entry and exit.




Getting back to the gappers, IBM moved too quickly and did not meet my criteria for a low risk entry. MNST was just plain ugly. BIIB set up a nice inside bar just below the down sloping 5 period ema. The target was the 38% Fibonacci extension of the previous day high to the ORL. The entry bar was WR and closed near its low which for me, is a true indicator of the potential for success.





In the afternoon, the market started to show a little more promise so I scoured the watchlist for some B&B patterns. I love rounded bottoms because they impy that demand is greater than supply. Every time sellers try to push price lower, buyers step in creating a rounded base.

FSLR made a beautiful rounded bottom with a few NR bars just before the break - price/volume contraction before expansion.



We'll look at the B List on another day. Categorizing the watch list makes it easier to work with during the trading day, but its much more work to maintain the list. For example, at the end of the day, some B list names have to be transferred to the A List and JOYG has recaptured its 200 DMA.

NASDAQ Technical Picture - Bearish Momentum Intact Despite Oversold Conditions

Friday's late session weakness was not inspiring if you're looking for opportunities on the long side. The NASDAQ 100 is still above water in terms of technical damage, but if the bears maintain control, it won't be long before our beloved, big tech growth stocks fall down too.

The McClellan oscillator is in the extreme oversold zone so I'm betting on a relief rally early in the week. I won't put any real money to work on this bet unless I see some solid signals that money is coming back into the market. So my strategy for next week will be the same as this past week - keep my open positions on a tight leash and don't try to be a hero.

Dummy Gapper Trade of the Day - ArthroCare Corporation (Public, NASDAQ:ARTC)

ARTC - Classic Trader-X style - gap - consolidate - base and break of ORH. It was slow until it took out $50.50 and then it moved like a gapper should move. After taking out the 38% Fibonacci extension of the previous day low to the ORH, I though it might go to 62%, but it was exhausted so I closed the position as soon as the 2nd last candle started printing red.

NASDAQ Technical Picture - Bears Own It

BEAR ATTACK

U.S. markets cratered including an aggressive sell-off that whipped the Dow down almost 450 points in the afternoon. The main take-aways are the extreme volume levels and disparity between the Advancers and Decliners - NYSE Adv: 290. Dec: 3071 and NASDAQ Adv: 541.. Dec: 2562. This disproportionate spread between adv./dec. often accompanies market turns.

The technical damage includes a broken trendline, loss of the 50 MA, and 38% retracement of the March - July rally in just five sessions. With just three trading days left in July, we are technically oversold and due for some sort of relief rally.

Economic Calendar: GDP, Chain deflator in pre-market and Michigan sentiment at 10:00.

Dummy Gapper Trade of the Day - Joy Global Inc. (Public, NASDAQ:JOYG) and Continental Airlines, Inc. (Public, NYSE:CAL)

Due to a bad tick, it was impossible to view the 15 minute timeframe for JOYG through Esignal in early trade today so I actually had to use stockcharts.com to see this chart correctly and map out the setup. My favorite shorting setup is an inside NR red bar. This one was perfectly placed at the base of yesterday's pivot low and in close proximity to the downsloping 5 period ema. Pivot point breaks generally result in vertical moves so you want to see the breakout bar close at or near its low. Since I couldn't draw any Fibs due to the bad tick, I used yesterday's Fib. calculation of $48.00 as my target.

With $77.00 oil, I decided to look at CAL for potential weakness. After gapping lower and attempting a reversal, CAL managed to retrace up to the downsloping 5 period ema. Another red inside bar just below the 5 period ema - it doesn't get much better than that. The middle blue line is the pivot low from the most recent dip and I kept a tight stop as price tested that area. My target was the lower pivot line. As you can see CAL carved out a double bottom, so it may try to rally back up to fill the gap. We'll soon see.

NASDAQ Technical Picture - Modest Recovery

As you can see from the NASDAQ intraday chart, we gapped up into pivot point resistance from yesterday's morning swing low. That was a gap fade begging to happen. Despite some intraday breaches of the PP low, we still managed a modest recovery with some signs of positive divergence of the RSI.

Most major tech sectors ended the session in the green paced by biotechs and internets, but networking was a loser again today. Decliners edged out advancers by a margin of 17:14 and new lows outpaced new highs 257/85.

Tech heavyweights BIDU and AAPL performed in AH on the earnings front so we may see some momentum from that tomorrow. NB: AAPL closed AH at $150.00 despite lowered guidance. Must have been an interesting conference call.

Economic Calendar: Durable orders and initial claims in pre-market and New Home sales at 10:00

AAPL - Up 12 Pts. From Today's Close

Apple Inc. (NASDAQ: AAPL) - Earnings Headlines

AAPL was halted ahead of earnings so you might be wondering what's going on. After the initial wild swings price is sort of edging above $141.00

Here are the headlines:

Apple beats by $0.20; guides Q4 below consensus; sold 270k iPhones - Stock is halted (137.26 +1.76) : Reports Q3 (Jun) earnings of $0.92 per share, $0.20 better than the Reuters Estimates consensus of $0.72; revenues rose 23.8% year/year to $5.41 bln vs the $5.29 bln consensus. Co issues downside guidance for Q4, sees EPS of $0.65 vs. $0.82 consensus; sees Q4 revs of $5.7 bln vs. $6.03 bln consensus. AAPL reports Q3 iPod shipments of 9.815 mln vs roughly 10 mln street expectation; reports Mac shipments of 1.76 mln vs 1.7 mln street expectation; reports gross margin 36.9% vs roughly 32.7% street expectation. Apple sold 270k iPhone in the last couple days of Q3. Steve Jobs said, "iPhone is off to a great start -- we hope to sell our one- millionth iPhone by the end of its first full quarter of sales -- and our new product pipeline is very strong."

Dummy Gapper Trade of the Day - Biogen Idec Inc. (Public, NASDAQ:BIIB)

After yesterday's sell off, my strategy for today was "don't be a hero". Tight entries with tight stops and take profits early - manage the trades on the 5 minute timeframe as opposed to a 15 minute chart.

BIIB set up a nice B&B long. As you can see from the chart above, I moved my stop below the previous bar low and was taken out before the extension was reached. But on the pullback, BIIB held support of the narrow B&B pattern and proceeded to move back up. It tested the morning swing high and setup a second B&B. The second move was momo indeed, extending beyond the 62% Fibonacci extension of the previous day low to the ORH. Again, I took my stop as planned. In early afternoon, BIIB set up another longer B&B, but this one failed so I took a scratch. No harm done, but the late day rounded top at the base of the 62% ext. level signified that there was too much supply.

The chart above is the daily timeframe of JOYG before today's gap down. The blue line is pivot point support from May. When I calculated the Fib. ext. for JOYG, I had a target of $48.00 (38%) and I said no way.

The next chart is my JOYG trade, again using the 5 minute chart and the PP target of $50.45.

NASDAQ Technical Picture - High Volume Drubbing

Well airlines ($XAL) were up 0.31% today! Other than that it was a sea of red. Briefing is sighting numerous reasons from sub-prime woes to a longer than anticipated housing correction, but let's face it earnings-to-date can't support these lofty levels.

Going over the watch list and most of my recent hot stocks are trading with the market which means that many are below the 20 day MA heading towards the 50 MA. The 50 MA will be the real test.

We are in the oversold zone. QQQQs are trading up about 20 cents in AH. AAPL recovered a couple of points and AMZN has taken out resistance and trading like its 1999 ($84.00 in AH).

Economic calendar: Existing home in pre-market; crude at 10:30 and Fed Beige book at 2:00 EST.

Pivot Point Trade - Energy Conversion Devices, Inc. (Public, NASDAQ:ENER)

I had a decidedly bearish bias on the open but everything I tried to short was unavailable or not immediately available (standby) through IB. Seems that it is getting increasingly difficult to short since they changed the uptick rules. Some of the names I tried to short were NFLX and MICC. After getting over my frustration, I looked to the long side. I had put ENER in my gapper list after reading a positive note on Briefing.com.

Energy Conversion unit signs three-yr agreement with Advanced Green Technologies for $108 mln of photovoltaic products (28.70 ) : United Solar Ovonic, a wholly owned subsidiary of ENER, announces that it has signed a 3-yr distributor agreement with Advanced Green Technologies for $108 mln of Photovoltaic products.

After reviewing the chart, I suspected that a successful break of yesterday's high would generate a momo move to the next PP level. I used a 20 cent stop because these setups don't usually have much in the way of retesting. Price consolidated in an orderly fashion at the $30.00 resistance level and then continued swiftly towards the target. I exited my full position at the target but left some money on the table as price did move higher.

I had better luck finding shares for shorting the big tech names this afternoon AAPL and AMZN. AMZN beat earnings expectations and is trading in the $78.00 range in AH.

Today's Trades

Feeling under the weather. The charts are self explanatory but I'll try and update this post with commentary later this evening.

NASDAQ Technical Picture - Weekly Update

A gap down on weak tech earnings with solid follow through until noon, when the NASDAQ came into pivot point support at 2675. The bulls stepped up once again, as they did on Wednesday, and prices rallied 20 points back up to the prior pivot, before waning into the close.

No economic data until Wednesday, July 25th.

A big earnings week ahead will likely lock in direction more decisively, notwithstanding a mixed bag.

NASDAQ Technical Picture - Another Bullish Gap

I'm feeling a little negative divergence creeping into the scenario. If we gap down tomorrow, we may have a bearish island reversal. We'll see. Tomorrow is options expiration and that's always tough to daytrade.

Base & Break Trade - TBS International Limited (Public, NASDAQ:TBSI)

I first profiled TBSI as a watch list stock on June 18th when it was setting up a nice base and break pattern on the daily timeframe. It has since rallied 10 pts. Today it opened strong and tagged the PP setting off my alert.

The first chart is the 15 min. timeframe which shows my entry and trade management using Fibonacci extensions as the guide because this stock is trading in blue sky territory.

The second chart is the 5 minute which shows my entry at the base.

The third chart is the wide view of the 15 minute which shows the pivot points.

The last chart is the daily.

The main strategy for trading the PP B&B pattern is to set an alert 5-10 cents below the PP and keep the alert active so you don't miss the move. The third test is usually the successful one. Don't trade a PP break if the stock has just rallied from far away ie. the bottom of the trading range. Using the lower timeframe, look for an orderly base and a low risk, entry point. The break should be accompanied by very high volume which results in a vertical move.

NASDAQ Technical Picture - Gap Down

INTC earnings disappointment, sub-prime worries and Fed talk kept the bears in full control until midday. That was followed by a choppy afternoon snooze fest. Despite a very late session push, we have bearish gap resistance over head.

Economic Calendar: Intial claims at 8:30; Leading Ind. at 10:00 Philadelphia fed at noon and FOMC minutes at 2:00 EST.

Hoku Scientific, Inc. (Public, NASDAQ:HOKU) - Chart Analysis

HOKU has had a nice run since mid-June. After topping up last week, we've had a 50% retracement of the last leg up. Today's hammer closed on the rising 10 DMA and could foreshadow a reversal back up. Support levels include the gap between the two blue lines, followed by the $10.00 pivot point (green line). This week's retracement was on declining volume which bodes well for a retracement versus a reversal.

It will be important to monitor price and volume on the next leg up - a lower high would signify a prolonged consolidation or possible reversal.

Q2 earnings are scheduled for July 24th AH and, will no doubt have an impact on share price going forward.

Pivot Point Gapper Short - McDermott International (Public, NYSE:MDR)

MDR was my gapper long on Friday and it was sweet. Today it was a perfect PP gapper short. They say price has a memory and that came through in spades today with MDR.

I've color coded the pivot lines on the chart above so it easy to understand. Just click on the chart to enlarge the view.

The blue line has held as pivot support over the previous two sessions. Today's gap open breached the PP, but price quickly reversed in an attempt to regain it. The retest ultimately failed and presented a dummy shorting opportunity on the 5th bar. The red line is Friday's ORH and I used that level to lock in some profit as I knew it was significant and would likely provide some support. Price bounced from this level but could not close above the declining 5 period ema. The pink line is Friday's ORL and I covered the balance of my position as price swooned into this level. The green line marks the gap fill from Thursday to Friday of last week. Move stop a few ticks above the last red WRB on short positions and below last WR green bars for long until price approaches target.

After filling the gap, MDR carved out a perfect hammer and set up a long entry. The reversal rallied almost all the way back to the primary PP.

NB - The 38% Fibonacci extension of the previous day high to the ORL lines up nicely with the gap fill level.

NASDAQ Technical Picture - Semis Pace the Way

Impressive performance by the SOX helped the NAZ post solid gains as it sprinted to new 6 1/2 year highs in the afternoon. Underpinning this group was an encouraging outlook from NVLS (+11.2%) prior to the open and midday commentary from KLAC (+8.9%) at the SEMICON West conference. Also, much anticipation of an earnings beat by INTC. The latter did not deliver and I expect some profit taking tomorrow in this sector. If you were not in this sector today, you might have found the day a little disappointing and somewhat choppy.

Economic Calendar: Pre-market CPI and Housing; Crude Inv. at 10:30

Dummy Gapper Long - LKQ Corporation (Public, NASDAQ:LKQX) and Applied Materials, Inc. (Public, NASDAQ:AMAT)

Got a late start to my trading day and most of the good gapper setups passed me by. However, my scan came up with LKQX which was basing at the ORH on huge volume. I decided to place a buy stop order above the third bar high when the rising 5 period ema seemed close enough for this thing to take off and just after NR7. It didn't quite go as planned, but the next red consolidation bar held the ORH. It finally took off and made a nice move towards the 38% Fibonacci extension of the previous day low to the ORH. It stalled about 10 cents shy of the target and started printing red so I closed the position. The rationale for closing the position is that a normal retracement of 38% would bring price very close to my entry.

AMAT was trading in sympathy with NVLS on its strong earnings as were several leading semi stocks ahead of INTC earnings.

After retracing just less than 38% of the ORL to the morning swing high, AMAT carved out a perfect green hammer, signaling a reversal was imminent. I took a dummy long above the red line. After taking out the morning swing high, AMAT picked up the pace, and eventually reached the 100% Fib.extension of the PDL to the ORH. I closed my position as price came into the $22.00 level.