Thursday, March 10, 2011

Technical Picture - Inside Day

Another inside day amid choppy trade. The Nasdaq is still under-performing. Today's weakness was due mainly to TXN FNSR earnings which pummeled semi-holders and optical fiber stocks. As depicted on the chart below, the SMH broke its trendline with a spike in volume.

Now is a good time to be thinking about hedging the portfolio with something like the QID (inverse ETF) which is basing nicely with Two inside bars.

Futures are weak with the NQ e-minis trading 10 pts. below today's cash market lows.


As discussed last night, I wanted to trade the optical space on the heels of FNSR's disastrous guidance. JDSU had the cleanest chart. As we can see from the daily chart above, $22.00 was the gap open on 02/04/2011 and $21.00 was the gap day low, give or take a few pennies. So I was looking for a narrow setup at $22.00 with a 1 point target.

It set up almost perfectly, but stalled at the ORL, so I had take a partial.

URBN was a gap down continuation play from yesterday.

IBM was a missed trade, but I did manage to trade a couple of scalps within the upper range.

My stock focus list includes three biotech bull flags ALXN basing at $100.00 and printed NR7 today; ITMN NRIB; BIIB regular bull flag. I also like TBL and EL for longs. APOL looks very weak - also NR7 today; AKAM 2 inside, could go lower.

4 comments:

DW said...

Hi Jamie,

If you trade IBM yesterday morning, would you use ADX, SPY or other indicators to make decision? Or just depend on the patterns?

Thanks a lot!

DW

Jamie said...

Hi DW,

If I had been watching IBM when it formed the high, tight flag, after the open, I would have traded it long above the blue line. No need to to confirm with other indicators, except volume. But it is always good to check the news. IBM targets were raised by two analysts, hence the big move despite a weak market.

This a good example of a stock that makes a strong impulse move with a spike in volume and consolidates that move with a low risk handle (flag). These are the best setups for momentum traders.

DW said...

Hi Jamie,

Great explanation! Thanks.

I am afraid I have not got the key about how to use the news. Every morning I just pickup gap up/down lists from Briefing.com and then leave it. Recently I found it is hard to get a good candidate from this news list. I do not know whether I am using it in a wrong way? I make another list by scan the market at 9:45 to find the stocks gain/loss > 2% since open.

DW

Jamie said...

Hi DW,

I also run a scan at 10:00 looking for stocks with momentum.

I scan for stocks trading above previous day close by 1.005% with volume tracking at 1.5 times previous day and daily RSI > 60.