Sunday, October 03, 2010

Technical Picture - Sector Rotation


A handful leading tech names (AMZN, NFLX, PCLN, BIDU) slid on higher volume and closed near the lows of the day. Apparently, institutions are dumping some of the end of quarter window dressing names and rotating to other sectors. More likely, they are lightening up, hoping to average in at better prices.

One name that looks vulnerable to more selling is AAPL. It held support on Friday's inside day, but the 15 min. timeframe is basing and ready to break. If it can't hold the round number $280, it will likely swoon in the area of the daily 20 SMA.


Oil has benefited from sector rotation and is now approaching resistance as depicted on the chart below.


Gold has extended 50% since breaking out of its base. Gold acts as a hedge against the falling $USD which is currently testing a support zone. The USD may pause here, but I don't foresee a huge bounce based on the oscillators.

Gold, on the other hand is a concern because most large cap gold names are not keeping pace with GLD. The GDX broke out and stalled. What's up with that? Is this an interim top?

$Euro testing resistance.

The strongest sector from the July lows has been Agribusiness. As you can see from the chart below, the steep trendline has been broken after price tested yearly highs. Crop futures such as corn are correcting in a big way, so we expect further pullback for Ags.


DE and AGCO are pulling back to trendlines.

POT is pulling back towards Gap support.

MON is bear flagging and looks like it wants to retest the July lows.

Financials are still lagging, but the broker dealer chart below is setting up nicely. I like how the MACD is on the neutral line, coiling before a potentially big move.

5 comments:

Banenga said...

hi

today 9:45-10:00

stock symbol F printed a doji/hanging man (certainly not a bullish candle) therefore I lost my focus and didnt bought a smaller timeframe bounce.

I wonder, what are your thoughs when u see such a candle in the morning run

Jim said...

Hi Banenga,

First, what is the context?

Daily: Gap up with big volume out of multi-day consolidation above all key MAs (20, 50, 200). Taking out 9/21/10 high PP. The tricky part is the exact gap fill from 8/10/10.

Intra-day: Very strong OR (first 15m) with great relative volume, good price movement, and closes on high. 2nd 15m candle is a doji with long upper wick. Note that it is pulling back to test the 9/21/10 BO zone.

Given the positive context, look at a shorter timeframe for more clues. Looking at the 5m chart, the light relative volume in the 9:55 pullback bar, following by the 10:00 hammer-like bar says the first pullback is a buy.

In general, when you see this kind of positive context, look for an excuse to buy the first pullback.

Jamie said...

Hey Jim,

Thanks for keeping the comment section going. Now that I've signed up to Twitter @traderjamie, I keep forgetting to come back to the comment section of the blog.

Jim said...

Hey Jamie,

Are you tweeting your analysis & trades real-time or it is for communication outside of the trading session?

Jamie said...

Jim,

It is virtually impossible to tweet all of my trades especially in the first hour of the trading session. As you know, trade management is critical when volatility is high.

The main reason I signed up was to follow HCPG, Trader Stewie, Steven Place and LDrogen and others from Stocktwits. However, if I spot an interesting setup other than those described on the blog, I try to tweet about it.

Checking the charts of all the stocks tweeted about and responding to all direct questions is a lot of work if you work alone. But, it's great to see what everyone else is focusing on.