Sunday, October 11, 2009

Technical Picture - Retracement of Last Week's Sell-off

Despite last week's sell-off, prices managed to retrace most of the damage. The retracement took place on lighter volume and that is a bit of a red flag. Going into earnings season, we need to see some really stellar results and/or some uplifting guidance going forward.

From the weekly NASDAQ chart above we see some formidable resistance in play. However, as noted in last week's IBD, "historically, the first run-up after a bear market has gone for months without a 10% dip in the NASDAQ. After the bear markets of 1987, 1190 and 2000-03, the NASDAQ rose 22, 16 and 10 months respectively, before making a correction of 10% or more." We are now in month seven following the 2008 bear market and as noted, we are testing strong resistance.

And speaking of IBD, the current status is "market under pressure". Since the recovery off of the March lows, this is the fifth time that IBD has flagged the "under pressure" label. The previous four times, the market resumed the the uptrend within 4-8 trading days. Monday will be the eight trading day following the current label status.

Reporting this week -Tuesday: JNJ, ALTR, CSX, and INTC... Wednesday: ABT, ADTN, CBSH, HST, JPM, PFR, GWW, ATR, CCK, LSTR, SPTN, SLY, WDFC, and XLNX... Thursday: APH, BAX, C, CY, DRH, FCS, GS, HOG, HOMB, KNL, NOK, PII, PPG, SWY, UTEK, UMPQ, USAK, WGO, CBST, CYT, GOOG, IBM, MTG, PBCT, TPX, and UFPI... Friday: AOS, BAC, FHN, GE, GPC, HAL, MAT, PRSP, and SXT.

$USD holding support, but for how long? If $USD doesn't hold at this level, it could easily slip to $74.00.

Gold providing clear leadership on the weak greenback.

Transports are lagging - not a good sign.

Despite the Baird upgrade to outperform on Friday, RIMM still provided a decent shorting opp. As noted in the comments on Thursday, RIMM's retracement had been on very light volume, so it was ripe for shorting.

RIMM gapped up, but the momentum died after the first 20 minutes or so. The second 15 min. bar was very bearish. A lengthy sideways, deadzone type trade, eventually succumbed to the bears. NR7 was the trigger after price closed below 5 EMA. Buyers stepped in at whole $ level, but that retracement was on declining volume, setting up an ambush.


Day Tradr said...

Hi Jamie:

Sorry to hear that you had pneumonia. Hope you are feeling better now. Great call in RIMM and excellent trade. Thanks for the detailed weekly analysis. Appreciate it.

Day Tradr said...


Any stocks on your focus list for Monday? For your TCK swing trade - do you have a target for TCK?


Jamie said...

Day Tradr,

TCK - prelim. target is $35 because there's resistance at that level.

I like Jim's pick SNDA short after Friday's NRB. RIMM will likely retest lows so lots of room to rum lower this week. POT also weak. MA NRIB, will follow V back up. AMGN - not so sure but could be a bearish flag (hard to tell from the volume) ESRX basing at $80, GRMN at $38. But I'll also be focused on earnings.

Day Tradr said...

Thanks Jamie.