Thursday, June 25, 2009

Technical Picture - Short Squeeze

Futures dipped ahead of the open on initial claims, but after a minor dip, the markets quickly recovered. It felt like a short squeeze to me. At the EOD we have a WRB, a broken trendline, but low volume. We've retraced 40% of the slide and I suspect we are setting up for an ambush in the 50-62% area.

After hours POT lowered Q2 guidance to $0.70, down from $0.93, so the chart looks like this. Lots of sympathy plays in the sector - AGU, CF, MOS MON, IPI...

PAYX was an earnings gap down from the TI pre-market scanner. When a liquid stocks trades in a narrow range pre-market, I like to trade the open. The stop is the high/low of the PM range as depicted on the chart below. Although the fill wasn't great, it generated almost a pt, in 5 minutes.

CELG - bull flag, partial at recent range top and swing balance (as described in last night's post).

AMGN - IB forms below base we talked about yesterday, so take the trade.

SPY - low volume consolidation after early thrust sets up the second leg.

ABX - strong performer as gold reclaims its trendline. I suspect gold will pause to consolidate this three day upward move.


bl said...

POT-dissappointed about 100jan10 call. Maybe a snap back and fade, or just the reverse. Dangers of dovernight trading/options. Of course they adjusted to the Syngenta's downward earnings

Jamie said...

Yeah, the North American agchem companies are coming out, one at a time, to confirm what the German co. last week said was true.

anarco said...

Hi Jamie~
Could you please tell me how you set stops for entries like ABX? I understand the logic for entering the trade, but I cannot tell what is the most appropriate area to place stop.

Jamie said...

Hi Anarco,

I use the previous bar low plus a few cents as I did in the case of ABX. If the trigger bar is a NRIB, I use the outside bar as my stop, plus a few cents. And here I want to emphasize the difference between an IB and a NRIB. For example, on the AMGN trade I'm not using the outside bar as my stop. I'm using the trigger bar plus a few cents.

Cheers and good weekend!