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.

Technical Picture - Constructive Price Action

IBD is changing their market outlook from "Market in Correction" to "Market in Confirmed Rally" based on the out-performance of the Nasdaq today, despite the lack of volume. The logic is that prices have moved high enough above 50 SMA. The next hurdle will be to get above 2800, which should take time as there is a lot of resistance.

As we can see from the 60 min. SPY chart below, we briefly fell out of the rising wedge on late day weakness yesterday, but managed to hold in early trade today and recover by the end of the session.

If copper is a leading indicator, it may be premature for the bulls to reclaim victory, as copper has slipped back below both the 50 and 20 MAs.

Leading stocks are performing well. A few examples include SOHU and UA strong performance today as depicted in charts below. LULU strong performance yesterday with follow through today.

Day Trades

SOHU was on my focus list. I entered small size on break of weekly R1. I added when price held R2 and formed a bull flag. Exit at daily resistance. I missed the UA trade because it didn't show up on my momo scan which has a criteria for min. RSI of 60.

APA was a HCPG pick for target trade back to resistance.

APOL gapped down on weak earnings. I shorted it when it breached it's base, but the trade was slow and lacked volume. I covered on the first signs of a reversal. I entered long when it consolidated back at the original base. Exit at daily resistance.

RIMM set up a long entry on third test of resistance, but wasn't able to follow through after the initial thrust.

Technical Picture - U.S. Markets Rebound from Japan Meltdown

The U.S. markets gapped aggressively lower on the Japanese meltdown overnight following nuclear power plant fires. Buyers stepped in as the S&P came close to 1260 support, a key level I noted in my last post. This level corresponds to the 2010 highs, an area we based at for the last seven sessions of 2010. Volatility spiked as depicted below.

Swing Trades

Buying support on the open isn't easy, so I decided to to take some of the nail biting out of my support strategy by trading from my swing account rather than my day-trading account.

HCPG gave us POT $51.00 and I also liked POT $50.00, so I wanted to buy somewhere in between.

In the end, I hesitated and decided to go long weekly S1 which is much closer to $51.00. I took a partial midday.

I was looking to hold my partial swings overnight if we made a higher high than yesterday on decent volume, otherwise we're just on a path of lower lows and there's no point in taking the extra risk of a swing. So POT took out yesterday's high intraday, and we'll see what happens tomorrow.

I'm three for three with SU, but still not holding overnight because we keep printing lower highs and/or lack of volume.

TCK breached my initial, narrow support target on the open, so I decided to put this name aside and wait to see how things develop.

I took TCK long on a NRB, low risk, entry as depicted below. I took a partial at resistance, but it just kept on going on accelerating volume, which was perfect for my swing strategy.

Dummy Day Trades

For daytrades, I've been trading the old standby - low risk, dummy trades over the last two days. I look for stocks that gap with volume. Not too hard to find these days.

SHAW is a contractor with several nuclear power plant contracts set to begin in the U.S. and China. Following news of the Japanese nuclear disaster is gapped down wide on Monday. Two really nice trades yesterday and one today as depicted below.

I take all the high volume pre-market gappers and first hour pt. gainers/losers that catch my attention and create a symbol list in my Trade-Ideas scanner which I run the 15 min. NR7 scan. NR7 signifies price/volume contraction (narrowest price bar over last 7 bars) and foreshadows expansion. For longs I want price, to close above 5 EMA (pink line) and for shorts, below 5 EMA.

MCP printed a few NR7s and carved out a NRIB (narrow range inside bar). Took it long on break of small handle or base. My target was a retest of the intraday high. Not very fond of MCP as it can get really erratic at times, so just take the money and run.

Also traded PEP ( not pictured) NR7 plus hammer, but it went nowhere for a scratch.

Technical Picture - Small Caps Lead as Markets Extend Rally

Small caps recently corrected to 50 SMA. Friday they provided leadership. As noted on Thursday, the situation in Egypt would affect trade. After testing and holding support, the markets retested resistance and rallied on news that the Egyptian President had stepped down.

On the Emini futures chart above we see that the uptrend continues after two tests of the trendline on Thursday and Friday.

On the SPX chart above we see that our measured move target was met on Friday. I've adjusted the pivots to take into account Thursday's dip. The new target would bring us to the 1342 level.

JDSU - huge volume on this extension. Keep on the WL. Shallow pullbacks are good buying opps.

I missed the early run, but managed to catch the last leg up on Friday as JDSU consolidated a printed NR7.

TUP was on our focus list. Price gapped and retested the base, so I entered long. Choppy until it formed a handle and extended higher. Hard to move the initial stop until the handle broke.

GMCR, another runner, flagged for a low risk entry point.

CELL - I felt that I had traded this one badly, but I think it was just a failed BO. Best not to trade small caps on 15 min. timeframe.

ISRG was a HCPG pick and it worked perfectly. For momentum stocks, I recommend using weekly pivots as opposed to daily pivots, to avoid folding too soon.

Add to Momentum WL - ARMH - bull flag

RL - Coiling after huge earnings beat.

Other earnings gaps on WL include AKAM, BWLD DIS, OTEX ATML.

Technical Picture - Markets Mixed (Snooze Fest)

We opened strong but faded right on the open. Strength in precious metals was not enough to carryover momentum from yesterday's recovery. Tech weakness weighed in the early going, but by the end of the session the DOW managed to join the S&P in notching new intraday recovery highs. The Compq and Russell didn't confirm.

Lackluster trading as depicted in the three stocks traded today. MON broke out of a high,tight flag and floundered.

PCLN was basing on $405.00, setting up for a fast move lower, but turned into a big disappointment.

TCK was a HCPG pick at $58.50, but I didn't like the opening range, so I put it aside. Eventually, it formed a solid base at $59.00 with NR7 as the trigger.

The Ag sector is well positioned to move higher, but needs to time to consolidate recent gains. I like AGU and POT going forward, but I want to see some sideways action for the next few days, as we are too extended here.

FFIV is coiling in a bearish inverted saucer pattern. 1st target is $130.00.

LVS is in a down sloping channel. The MAs are converging over price signaling more downside to come. I suspect we'll go back and completely fill the gap on the 15 min. timeframe below.

FCS could BO anytime.

Also watching high,tight flags AGCO and TSRA, but need to see market strength before jumping into longs.