Saturday, April 30, 2011

Technical Picture - Modest Gains on Higher Volume to End the Month

Markets opened somewhat mixed, with the DOW outperforming on the strength of solid earnings from CAT and MRK, whereas the NASDAQ lagged following disappointing reports from RIMM and MSFT. Still, we managed to close positive across the board on higher volume. Leaders included solars, semis, coal, GLD, MOO, airlines and energy. Biotechs saw profit taking after an extended run.



Some of the companies reporting earnings the week of May 2nd-6th:
  • Monday: ACV, AB, CPO, DISH, SATS, JKS, APC, DVA, DNDN, FMC, FST, HOLX, and NETL
  • Tuesday: ANR, ADM, AVP, BZH, BYD, BPI, CLX, CTSH, INCY, LM, MA, PCS, MYL, OSG, CBS, CEPH, CRL, CMCSA, DENN, GNW, KNXA, MAKO, OPEN, VCLK, WWWW, and AUY.
  • Wednesday: ASCA, AOL, CLH, GRMN, HNT, K, GAS, NUS, OIIM, PCG, SLGN, BEBE, CMO, CECO, CLWR, ERTS, GG, GDP, IPI, LEAP, PRU, SMSI, TSLA, and WFMI.
  • Thursday: CVC, CBOE, DTV, RAIL, GM, MINI, MNTA, OWW, PXP, RDN, SHOO, TBL, THS, VNDA, VC, WNR, JOBS, NILE, CQB, DEPO, FLR, HANS, KOG, JCOM, KFT, LLNW, PWER, PCLN, RNWK, V, WBMD, and WMGI.
  • Friday: CAS, DSX, ZEUS, PNM, UPL, WTW, and WCG.

The $USD is in a free fall versus GLD and SLV which are parabolic. We should get a technical oversold bounce in the $USD any day now. This is not likely a bottom because there's no positive divergence to indicate an imminent reversal.


By the same token, GLD is due for an overbought technical correction, similar to what we saw in SLV early last week.


Last week's correction in SLV provides us a preliminary support level.

Coal is breaking out of a tight congestion area.

Day Trades

OXY - HCPG pick - favorable earnings was the catalyst for this high volume extension. I waited for a NRB before jumping in.

DRIV - A narrow range coil triggers the short entry. Came within 5 cents of a stop out, but by EOD, my target was reached.


RIMM was a gap down on earnings warning. After the opening range, price couldn't move beyond the 50% Fib. retracement level and eventually broke the trendline for a low risk short.

I covered half when I saw some real size on the bid side at the $48.50 level.


AMRN printed NR7 on Friday. Watch for price expansion.

9 comments:

II said...

Hi Jamie
How do you deal with the uptick rule in RIMM?

Jamie said...

Hi II,

As far as I know the uptick rule was eliminated in the summer of 2007. It was re-instated for a few months for financial stocks during the financial crisis in 2008. I believe you can safely short equities and not worry about the uptick rule. I use stop limit orders to avoid too much slippage especially for stocks with a wider spread, but RIMM had a nice tight bid/ask for most of the trade.

II said...

It can't be true you didn't know a modified uptick rule was took effect months ago to protect stocks fell more than 10% for 2 trading days. AKAM BRCM RIMM were all under this restriction last week.

Here is a link I googled: http://dynamichedge.com/2011/02/25/rule-201-modified-uptick-rule-subject-to-circuit-breaker-takes-effect/

Maybe your broker doesn't have this restriction.

Jamie said...

II,

Thanks, I was aware of the modified uptick rule, but I wasn't paying attention. I guess my selective memory decided to ignore that rule.

I shrunk the symbol column so narrow, that I didn't see the red "R" beside RIMM in Esignal. I see it now, and all I can say is it had no effect on the trade. In fact, I shorted RIMM again today.

It will be problematic for stocks with wide spreads, but so far I haven't encountered any uptick related fill problems.

II said...

Thanks for answering my question.

It normally wasn't important. Just in some case stock dropped parabolically and you had to hit the bid to jump in cuz there wasn't any uptick move to get you filled. Let's say RIMM last Friday, I covered above .50 and never could short again. I knew it's very rare for RIMM but it happened, GO STRAIGHT DOWN.

Check AKAM out. Almost the same thing. Sized offer all the way down especially at the first.

Thank you again for what you have shared. I felt like you've given a million dollars because I learned from you since the very beginning of my trading. :D

jordan said...

Hi Jamie,
Its been a long time since I commented, but am still following your blog :) You talked abt some real size on the bid side at $48.5. Are you able to elaborate abit more on this? ANy books you recommend on reading level 2?

In terms of candle stick patterns, volume and level 2, how would you rate their importance in your trading? Thanks!

Jordan

Jamie said...

Hey Jordan,

There are two things I look at with respect to market depth: Level 2 and ECN (Total View). The ECN is where I check for large size. The large bid for RIMM was around 800,000 shares and that's why I took a partial when price approached $48.50. That type of size can result in a lengthy consolidation or a reversal. However, if the large bid is taken out, it results in a fast move lower because no one is sitting under a large bid of that size. Everyone who is interested in buying wants to front run size. Same goes for large sellers. Once they get taken out, we usually get a fast vertical move.

I use level 2 to gauge spread because I especially want to avoid stocks that aren't very liquid and have wide spreads.

ECNs work best for widely held names and momentum plays, preferably NASDAQ stocks.

Price and volume are the most important. Candlestick patterns are important too, but carry more weight on the longer timeframes - 15 min. and up. Market depth is important for entries/exits, scalping and micro managing the trades. I don't recall any books that put a lot of emphasis on level 2 and ECNs. The Cyber trading university guy uses them, but from his free webinar, I gathered he was just a very short-term scalper playing the ranges.

They are all important to my trading style, along with support/resistance.

jordan said...

Thanks for the explanation, Jamie. I usually only look at price action,support resistance & candle stick and sometimes volume. So I was wondering if I miss out something by not looking at level 2 or ECN.

Jamie said...

Jordan,

If you do a lot of scalping, you would be missing out by not watching market depth. Otherwise, if you are doing well in your trading, you probably don't need the extra information it provides.