NASDAQ Technical Picture - Post FED Pullback?

We could sell-off in the aftermath of the FED policy and the possible end of rate cuts unless earnings overshadow. Several aspects of the chart highlight a potential pullback including today's bearish engulfing on high volume. If you look at the intraday Qs, you'll see that most of today's volume kicked in after the statement. We also have a bearish tweezer top from last Thursday's high and today's high. Failures often result in fast moves, so it shouldn't come as a surprise if the bears gain some traction here. Also, within the tweezer top we've had a three day period of price/volume contraction which usually leads to expansion.

Dummy Pre-FED Trades - Short All Round

RSTI showed up on the TI pre-market scan - very active just ahead of the open on this wide gap. I almost gave up on this one after the wide 5th bar, but then I noticed 2 NRIBs and a nice NR setup taking shape on the 5 minute time frame below.

If it wasn't for the FED, I could have stayed in this one all the way back down to the ORL, but my rules don't permit any open trades when the statement is issued.

FWLT, from the WL - continued weakness from yesterday. 3 IBs below yesterday's lower range sets up the entry.

SOHU, from the WL gapped down and set up 2 IBs just below yesterday's trading range. My sell stop didn't trigger and I forgot about it until I heard the beep as the trade executed much later. By the time I got to it, it was well in the money.

Post FED Policy Trades - Buy Gold, Sell the Market

Observation: the USD falls when interest rates decrease and gold falls when the USD rallies and vice versa. So based on that logic, and the consensus quarter point rate decrease, I set up this long entry on ABX going into the policy statement. It was basically a no brainer because ABX, was anticipating the move prior to 2:15 EST. That's approx. 2R on the extension to R2. The intial stop is wide (red line segment) because of anticipated post FED choppiness.

As you can see from the 1 min. chart of the QQQQ above, the initial FED reaction was very choppy. But as I said in last night's NASDAQ post, the consensus 1/4 pt. rate cut with potential pause going forward would not result in a market rally. After a lot of back and forth, triangle type action, I shorted the Qs and added to my position on a mini bear flag a short time later. I covered as a base started to form at the $47.20 level.

NASDAQ Technical Picture - Narrow Range Ahead of FED

Another choppy, mixed day ahead of the FED. Experts are calling for 0.25 BP cut and a statement discussing potential pause. I don't expect markets to rally on that news, but we'll soon see.

Cup & Handle - Reasearch In Motion Ltd. (USA) (Public NASDAQ: RIMM)

RIMM from the WL formed a C&H base. Cautious trading ahead of the FED. I waited until price took out the topping shadow and the round $ number $125.00. Low volume as the handle formed led to price and volume expansion on the BO. I took a partial after 3 consecutive WRBs and I was stopped out a while later as the markets started to sell off late in the session.

FWLT from my WL and a HCPG pick, gapped down and carved out an IB that closed at the base of the ORL and just under S2. My target was the daily reaction swing high from early April. Since the market was so weak, I took a partial at that level and moved stop to BE. Didn't get much more out of it.

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

BIIB was very active in pre-market (Trade-Ideas pre-market scan), however, it almost put me to sleep midday, as I waited for my sell stop order to trigger. BIIB could not close above the pre-market high (upper blue line) or the 10 period EMA (pale blue line). I set my sell stop order below the narrow base. My target was the ORL.

NASDAQ Technical Picture - 2 Inside on Declining Volume

Anemic volume ahead of the FED on Wednesday. Minor gains were wiped out in late session profit taking.

5 Minute Inside Bar - QUALCOMM, Inc. (Public, NASDAQ:QCOM)

I'm replacing SIGM with QCOM in the WL. 5 minute IB (I like it when it's inside the shadow of the previous bar). Long break of outside bar resulted in a vertical move up to daily resistance at $44.00.

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

QCOM was an earnings play. Long on a B&B above the previous day highs.

VDSI was a gap down and a long wait until the bear flag broke out, similar to my ABX trade yesterday.

I'm taking Friday off. No Pre-Market Post tomorrow.

Gapper Bear Flag - Barrick Gold Corporation (USA) (Public, NYSE:ABX)

ABX from my WL, gapped down on the open near the lows of its recent daily trading range. It formed a bear flag over the course of the morning. A slow mover, but it eventually got the job done.

ESRX formed a C&H, or so I thought. I entered as price broke R2. It started out well, but then came the retest after which I expected it to move like a C&H should move. But no, it stalled and I decided to partial out at the 25% Fib. extension of the ORL to the base, and move the stop to BE.

Trade of the Day - DryShips Inc. (Public, NASDAQ:DRYS)

High Chart Patterns Pick from last night's newsletter. They've done a complete analysis of the trade in tonight's letter, which is also posted on their their blog. GOOD READING.

My only comment is Thanks! And secondly, I traded this cautiously because the market was so bearish. When I do that I get stopped out, and inevitably end up getting back in at almost the same price I was stopped on. C&H on break of morning base high with a 62% Fib. extension of the morning swing low to the base.

The thick black lines on my chart are the previous day high and low. Noticed that Harvey Walsh uses these to plan his entries. Also noted them on Anarco's blog. Big time saver.

Gapper Trade of the Day - BJ Services Company (Public, NYSE:BJS)

BJS from the Briefing.com gapper list was very active in pre-market. I use Trade-Ideas to scan pre-market and break down the high volume gappers from the noise.

Short the bear flag which rises into the down sloping 5 period EMA. As you can see from the chart, everything was going perfectly. No partial required until a volume spike foreshadows the end of the move. That usually works well, but here we got an analyst upgrade in the middle of the day from a third tier firm. Needless to say, that killed the trade.

Cup & Handle - Apple Inc. (Public NASDAQ: AAPL)

This is how a C&H pattern should expand. I extended my Fib. lines from the ORL instead of the morning swing low. This is probably wishful thinking, but it worked. Notice price and volume contraction as the handle forms, followed by expansion on the BO of the base. I exited on strength as price approached the $168.00 level. AAPL is a WL stock and also included in HCPG newsletter.

Gapper Dummy Trade - Amylin Pharmaceuticals, Inc. (Public, NASDAQ:AMLN)

AMLN, from the WL and the Briefing.com gapper list, didn't look compelling at the outset, but just before noon, it set up 2 NRIBs (NR7), so I took it short. I had planned to take a partial at the 38% Fib. extension of the previous day high to the ORL, but I sensed it wasn't over because there was no volume spike, so I held until the next bar which had a more meaningful burst of volume. I covered the entire position, because the move was small and I didn't want to risk giving anything back.

NASDAQ Technical Picture - Bullish Week

A strong end to a firmly bullish week. Markets gapped up on strong earnings from GOOG, CAT and C. But momentum faded into the second half of the session. I'll be watching gap support tomorrow, but doubt it will hold unless we get a catalyst early Monday.

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

AMZN, from the WL got a nice boost from GOOG earnings. The lengthy base that formed at $79.00 acted as support during the afternoon retracement and offered a low risk, tweezer bottom reversal for a late day pop.

ALTR, a gapper I traded on Thursday, gapped up and retraced back to Thurs. afternoon resistance (former resistance acts as support) which held as support for a second trade.

GRMN, from my focus list gapped up, retraced to Thursday afternoon resistance, which now acted as support. A perfect IB hammer set up a long entry. I got stopped out prematurely as this one was a short covering rally.


ESRX, from the focus list also found support near previous day high, and set up a low risk entry at my number $68.00. Was hoping it would set up a C&H later in the session, but R2 held as resistance,

Watch List - April 2008

My Watch List of Usual Suspects:

AAPL, ABX, ACI, AKAM, ALXN, AMZN, ANR
BIDU,
CAL, CELG, CEPH, CF, CNQ, COG, CREE, CROX, CY
DRYS
ESRX
FAST, FLS, FSLR, FWLT
GRMN
HANS
JASO, JOYG
LEH, LRCX
MANT
NIKE, NVDA
PCLN, POT, PRGO
RIMM,
SIGM, SNDK, SOHU
TBSI
V
X

Charts of Interest for Friday - ESRX, FAST, and GRMN. Click on the charts to enlarge. BO price is on the blue base. ESRX and GRMN look the best. FAST is quite extended, but if it sets up a low risk entry at the base, I'll take it.



LEH is an example from today. We had a shallow rounded base at the cusp of the three month trend line. I was looking for a setup at $42.00.

Placed an alert on the inside of both of the blue lines.

I didn't like the initial break because the bars were too wide and there was no real setup, so I passed. Eventually, LEH carved out a bullish pennant and I took it long. It was a bit choppy so I didn't go overboard on risk and size. It worked well and I even added more as it paused to consolidate.


These are base & break setups. High Chart Patterns are the experts in B&B. Their service is very affordable and I highly recommend it.

Gapper Cup & Handle - Altera Corporation (Public, NASDAQ:ALTR)

ALTR, an earnings gapper from the Briefing.com list, carved out a C&H pattern after a retracement to R2. The base of the C&H pattern set up right at the $21.00 point and the trigger bar closed on its high. Can't ask for more than that. At the $21.50 level it carved out a tweezer top and I tightened the stop to $21.45 based on the strength of the move thus far. C&H patterns usually have more momentum and I just wasn't feeling it here.

High Chart Patterns Picks - CONSOL Energy Inc. (Public, NYSE:CNX)

Hats off to the team at High Chart Patterns for some great picks. HCPG's nightly newsletter includes a chart and a target entry price (blue line on my charts) for each pick. Both CNX and SID were on today's trading list along with some other winners that I didn't get to (FTEK, CSX).

The CNX number was $82, but I saw an opportunity just above $81. Exit as price approaches R2. The SID number was $42 and set up very early. Nice IB on 5 min. Once price closes above a whole $ amount, I don't like to give it back.

HANS is one of my usual suspects. The number was yesterday's low. After taking a partial I was stopped out. But if you stuck with it, you could have made much more money.

BG is a HCPG usual suspect. The third test of $116 finally succeeded. I had to leave for a dentist appointment so I missed most of the move.

It's so much easier to work with a short focus list. If the intraday chart is orderly going into the trade, it's more likely to result in an orderly trade. A choppy setup is riskier than an orderly setup, everything else being equal.

Bear Flag - Sigma Designs, Inc. (Public, NASDAQ:SIGM)

A bear flag is a continuation pattern, so if you see a stock swoon, look for a possible bear flag to form as price consolidates the last leg down.

Characteristics of the flag pattern - sideways consolidation on declining volume. Bear flags often slant slightly upwards like this one. Volume often diminishes just before the break and expands as the selling continues in earnest. I've added the 10 EMA here to show that as the 5 and 10 come closer together, it's time to start planning the entry. Make sure to include lower shadows when you draw the lower flag line so as not to jump the gun.

When the selling momentum really picks up and volume spikes, start planning your exit, as this foreshadows the end of the move.

This is SIGM from the Briefing.com gapper list this morning.

Failed Pattern - ManTech International Corporation (Public, NASDAQ:MANT)

The first chart of MANT is the daily timeframe. The main take away here is the failed triangle pattern which resulted in a fast move lower. The longer term trend line held as support in early trade this morning so I took it long.

The 15 minute chart shows a bearish pennant on Friday. Lots of slippage as this stock is not liquid. This morning's tweezer bottom was an invitation to go long as it lined up nicely with the longer term trendline on the daily chart. It carved out a C&H pattern midday, but failed.



CNQ, from my watch list was a HCPG newsletter pick. Lots of winners from last night's letter. IB just above R2 - long on break of outside bar. I didn't manage the exit well here because I was trying to do two things at the same time. I ended up missing my short on RIMM and botching my CNQ exit.

AFFX earnings warning hit the wires seconds after the close. A big winner for me AH. CROX also warning AH (stock was halted so no trade) and could test all time lows very shortly.

NASDAQ Technical Picture - Bearish Rising Wedge

An ugly end to a bad week for the bulls. King Kong's (GE) big earnings miss and lowered guidance sent the markets lower Friday. The rally looks dead for now as the rising wedge pattern could lead to lower highs and lows. But Friday's volume lacks conviction. Focus on earnings.

Companies reporting earnings the week of April 14th-18th include: Monday: ETN, GWW, ELS, INFY, and STLY... Tuesday: ADTN, FRX, GMTN, IIIN, JNJ, MTB, MI, NTRS, PII, RF, STT, USB, CHB, CSX, INTC, RLRN, STX, and SORC... Wednesday: ABT, AMB, BMI, KO, ITW, JCI, JPM, NITE, LUFK, MTOX, EDU, PJC, STJ, WFC, WWW, ATLR, ATR, AVCT, CAVM, CNW, CCK, DTLK, EBAY, GILD, GKK, IBM, ISIL, KNL, LEG, PLCM, SPSN, and UFPI... Thursday: AMFI, BK, BAX, BBT, CHKP, CIT, CMA, CY, DHR, FCS, HOG, HNI, RX, IGT, MAR, LSTR, KEY, MER, NYT, NOK, NUE, PFE, RS, SLM, LUV, SPWR, SVU, AMTD, UTX, AMD, COF, CBST, ETFC, ESLR, GOOG, ISRG, SNDK, SYK, TPX, ZION and WSO... Friday: CAT, C, HON, MAN, PRSP, SLB, WB, WL, and XRX.

Stocks over $5 posting the largest percentage loss over the last five sessions include: PTRY -38.7%, DCR -34.1%, TWB -27.3%, PMII -27.3%, RIV -27.2%, NKTR -25.1%, CIT -21.8%, SMCI -21.2%, FMCN -20.7%, XXIA -20.6%, PRO -19.9%, BZ -19.2%, VCBI -19.1%, CALM -19.1%, SCSC -18.7%, AMIE -18.7%, WH -18.4%, AIR -18.2%, MKTX -17.9%, LNG -17.9%, FED -17.8%, SDXC -17.6%, SSI -17.3%, TONE -17.3%, GRMN -17.1%, INTV -16.7%, SVVS -16.6%, LEN -16.5%, PLCE -16.5%.

Stocks over $5 posting the largest percentage gain over the last five sessions include: MLNM 50.9%, CVP 39.2%, FCSX 33.6%, DXCM 31.1%, NOG 25.5%, GENC 25.1%, IKN 24.1%, ICXT 23.9%, APOG 23.6%, PDLI 22.5%, NTRI 20.5%, TITN 19.7%, BEXP 17.8%, PODD 17.7%, SYNA 16.9%, NWA 16.8%, LIFC 16.8%, CLR 16.5%, TZIX 16.2%, DAL 15.8%, OSTK 14.9%, TRA 14.5%, LAYN 14.1%, IMMR 13.6%, CRY 13.4%, DPTR 13.1%, DMLP 12.6%, AIRV 12.3%, FEED 12.3%, FCFS 11.5%, ENG 11.6%, LNDC 11.2%, UCR 11.2%, ISLN 10.8%.

The co's that beat February Same Store Sales estimates include (listed according to the magnitude of the beat): Buckle (BKE) +20.9% vs. +12.5% consensus, stock gapped up 2.9% to open at $46.25 and closed up 0.4% to $45.15... BJ's Wholesale Club (BJ) +6.0% vs. +2.9% consensus, stock gapped up 1.9% to $36.00 and closed up 4.0% to $36.76... Costco Wholesale (COST) +7.0% vs. +5.5% consensus, stock gapped up 0.2% to open at $66.17 and closed up 0.7% to $66.52... Aeropostale (ARO) +2.5% vs. +1.1% consensus, stock gapped up 0.5% to open at $26.28 and closed up 6.5% to $27.85... Hot Topic (HOTT) -3.5% vs. -4.3% consensus, stock gapped up 0.2% to open at $4.41 and closed up 9.5% to $4.82... The co's that missed February Same Store Sales ests include (listed according to the magnitude of the miss): Gap (GPS) -18.0% vs. -8.1% consensus, stock gapped down 0.2% to open at $18.85 and closed down 2.2% to $2.70... Stage Stores (SSI) -10.3% vs. -2.5% consensus, stock gapped down 8.4% at $14.05 and closed down 8.5% to $14.00... Saks (SKS) -2.9% vs. +3.5% consensus, stock gapped down 1.8% to open at $12.30 and closed up 1.5% to $12.71... Pacific Sunwear of California (PSUN) -8.0% vs. -1.7% consensus, stock gapped down 2.3% to open at $12.30 and closed up 2.4% at $12.89... Chico's FAS (CHS) -20.7% vs. -14.5% consensus, stock gapped down 0.8% to open at $6.35 and closed down 0.6% to $6.36.

Courtesy of Briefing.com

Gapper Dummy Trade - General Electric Company (Public, NYSE:GE)

The first chart is the monthly chart for GE. A quick look at long term support levels, and it was clear that the maximum move on this gapper was in the area of the March low as this level had held over several years.

The second chart shows the pre-market action. After the initial dive, $33.00 was a consolidation point and could serve as resistance should GE attempt a retrace after the open.

Trade that level with confidence after it carves out a spinning top with long upper shadow at the former support zone which will now act as resistance, even though the down sloping EMA is still far away.

Edit: This strategy works best with highly liquid, large cap stocks. I wouldn't attempt this unless there was a lot of volume in pre-market.