Tuesday, November 09, 2010

Technical Picture - Profit Taking

The markets gapped up and were quickly faded. Price consolidated near the flat line until wholesale inventory data provided a catalyst for bulls to push prices higher. As the SPY rallied to retest last week's highs, the $USD was making its way higher for the third consecutive session. Something's got to give and the SPY gave way to the greenback as commodity/energy stocks headed south. At EOD price closed back within the Bollinger bands.


After three consecutive higher closes, I expect the USD to consolidate the move for a day or two.

GLD carved out a wide bearish engulfing stick today as participants took profits. We may have a H&S top developing as we see a lot of negative divergence in the RSI to higher prices. We'll follow this closely.

Financials fell back to the base, so we need to see some strength here tomorrow, otherwise, we have the potential for a failed BO.



I decided to scale into a short SPY position, when it stalled on the retest of recovery highs. The 5 minute topping candles with long upper shadows were bearish, but the markets have been so strong, I didn't want to go all in until further confirmation.

Price finally formed a flagging base which begged for more. I covered my position and went long at the 62% Fib. retracement (ambush) of the range since last week's mega gap. The rally attempt was lame, so I exit and re-entered on the short side on a trendline break. Price proceeded lower for a full retracement. Long into the final 10 minutes of the session.

The SPY chart below depicts the entries. It's a wide range view, to show how perfectly the Fibs worked. Today's low is gap support. We need to see a sustained move above the intraday trendline, in order to stabalize the price action.

The gap will be filled sooner or later, so keep the key fib levels in mind.


PRGO was from my NR7 scan last night. Yesterday we had NR7 within a bull flag for SOHU that worked perfectly. Today we had NR7 within a bear flag with PRGO.

PRGO is not as liquid as SOHU, so it was a bit tricky. I entered short, on the first pause after the flag broke. My target was $60.00 support as depicted on the daily above. Things got a little choppy midday, but price eventually reached my target. The bounce off of daily support was really lame, and turned out to be just a pause in the selling, as PRGO wanted lower still.

AKAM gapped down on earnings, found solid support after holding ORL on two tests. I entered long for a target trade to SMB Capital's inflection point tweeted in pre-market.

Daily NR7 scan - APOL, CECO, MA, CRM, FSLR, OTEX - the list of NR7 scan results is too long, but these names are widely held.

7 comments:

DW said...

Hi Jamie,

Thanks for your great posts. I realize the power of daily NR7 by recent examples like SOHU, VMC...

I just check my Trade-Ideas software and only find the alerts of NR7 by 15mins and 30mins without daily NR7. Do you scan daily NR7 by TI? Many Thanks.

Regards
Dongbo

chin said...

Thanks for sharing these wonderful market insights.

Regards

chin said...

$ is racing quite a bit this morning.

chin said...

Hi,

1203.77 seems to be a solid support for S&P. Whats your take on this ? Do you see a quick bounce back for the markets ?

Thanks

Jamie said...

DW

I use stockcharts.com to scan for NR7. Stockcharts allows me to write my own scans.

Jamie said...

Hi Chin,

SPY has extended its slide to the 1.27% Fib. extension in early trade. $121.20 holding as resistance on two tests.

If we do break through resistance, we then have to test downsloping trendline.

I do not see a quick bounce back. We need to fill the gap IMO.

chin said...

got it. excellent !! thanks