Monday, November 15, 2010

Technical Picture - Bears in Control

As you can see from the 15 minute timeframe of the SPY above, the bears are in control, keeping the bulls in check and not allowing price to break above the trendline, which has been in play since the sell-off began.

After hours, prices continued lower to ES 1188.50, currently tracking at 1194. I got a buy signal around 9:30 PM - positive divergence of RSI to lower prices, so I am long overnight using the trendline as my stop.

An oversold bounce is very likely tomorrow, but don't expect the rally to resume anytime soon. We've had institutional selling in many of the tech momo names and that money isn't coming back until prices correct at least 10%.

Talked about AMZN on the stream Friday. Narrow, bottom range trade Friday afternoon led me to suspect further selling despite the daily 20 EMA.

Shorted on breach of Friday's low. Took a partial at the 62% FE of the previous day's range. Stopped out on balance midday, but got back in for the swoon into the close.

If price has a memory, and I believe it does, $157.00 support, should see an oversold bounce.

As we can from the monthly timeframe below, the AB - CD move is complete. The impulse move from A to B retraced 78% to point C and then extended almost 100% to point D. It was a sweet ride, but now it's over.

Someone asked me to do chart analyses of AMZN, AAPL, GS, and MS. This is AMZN and I'll do the rest when I have more time. The only chart among them with short-term potential on the long side is GS.

P.S. Taking Tuesday off. ES trade stopped out for a small gain.


chin said...

thanks Jamie for your excellent review of the current market. Excellent trade on the AMZN. I had asked about GS, AMZN, AAPL and MA. These have had huge run ups but as you say, they will need a rest. Please do let me know your thoughts on MA as well as AAPL when you have more time.


DW said...

Hi Jamie,

Thanks for your great review. They are always helpful.

Could you please give some principles about reset stop to protect the positions. For example, I long URBN at 36.23(10:52) and the initial stop at 35.99(1min frame). Is the stop too small? At 11:25, I noticed the higher price with lower RSI. Should I rise the stop and to which price? Or insist the initial stop? How do you protect your position from fail BO?
Many thanks.


Jamie said...

Thanks Chin

Jamie said...

Thanks DW

When a gapper or news driven stock starts to print higher prices on lower RSI, it usually means time for prices to consolidate. I would take half off and move stop to intraday support. For URBN the support zone is between 35.50 and 36.00. If your entry is below or within the support zone, that works fine. However, if your entry is above the support zone, you might want to sell all and re-enter at lower prices. You can also sell half and re-enter half at lower prices, so you are in effect, lowering your average price.

Once the initial thrust is over, prices tend to consolidate for a long time, so it is dead money until the stock actually breaks higher. Usually, the third test of the highs result in a BO. In the case of URBN that happened EOD.

DW said...

Hi Jamie,

Thanks for your reply. PETD just print a NRB with high volume. Does it mean it get support at $32 and will resume uptrend?


Jamie said...


If you look intraday, you will notice that most of the volume was on the sell side for PETD. There are no guarantees with respect to support in a market correction. Cautious trading until the markets bottom.

Ken said...

AMZN 167 was a sweet call Jamie! Would have been nice to load the boat there and hold through yesterday!

Jamie said...

Thanks Ken,

AMZN $157 was a good call, but I think I'm one of the few who took the trade even though I wasn't home to watch it that day. The previous two red bars were too ugly, so most people took a wait and see approach. Unfortunately, I got out way too soon on the swing. Now it has extended 1.27% from the buy point.

Price has a memory and I remember trading the base BO from $157.00 on the way up, so I had a pretty good idea it would bounce from that spot again, unless there was some bad news story.