Thursday, March 10, 2011

Technical Picture - Bears Own It

The index futures rolled over night amid disappointing data from Japan and China, as well a debt downgrade in Spain. Above consensus initial claims exacerbated the situation and we opened with a huge gap down. The first hour pushed prices low and the next hour established a floor, from which some buyers stepped in. Prices slowly recaptured the ORH and then we fell back down as the afternoon headlines - Saudi violence, spiked oil prices. We closed near the LOD and below the 50 day SMA, something we haven't done since last September.

Looking forward, we have gap support coming into play as depicted on the SPY chart below.

QQQQ filled the remaining portion of the gap and held today.

The $USD finally got a bounce.

I see a lot of gaps above and below price which can be very constructive in establishing support and resistance. I also see a lot of commodity play breaking below their lower BB as we can clearly see on the POT chart above. The MOO chart below is coming into support from the Nov. - Dec. base. We can see that many charts are technically oversold and want to look for key areas of support.

As a side note, Cramer advised one of his lightning round callers to hang on to POT despite the house of pain he's in, and add to the position after POT corrects an additional 10% from today's close. Ouch!

Reports of high inventory levels in the semi space have investors bailing on high volume.

JDSU briefly breached gap support on the open and reversed just above the 50 day SMA.

Easy trade if you were watching because last night I discussed the importance of the $21 and $22 price levels. Long above $21 to target $22.00. After that it formed a handle and I went long again as it broke $22.00, but that trade stalled at the exact level I shorted it yesterday and the trade was scratched.

Also note the wide gaps above and below price on the daily. These gaps are in play and we want to be in on the action.

GMCR was at the top of the Esignal hot list and I wanted to get in rather than try to catch the falling knives from the usual suspects list. I hesitated when it printed a hammer reversal stick right above the rising 5 EMA and decided to wait for NR7 or NRIB. Exited too soon at the round $ level $60.00. Looks like GMCR wants to run higher. The huge volume foreshadows higher prices - add to momo focus list.


Ashish said...

Hi Jamie,

How did you place a stop for the Thursday early morning JDSU trade (break of 21)? I see the stock was pretty volatile on the 5 min timeframe. In fact, I don't see a viable stop down until 2 min timeframe.


Jamie said...

Hi Ashish,

I used the 1 minute timeframe for the stop which I set at 20.79. When stocks breach support on the open and reverse, I want to see a fast move in my favor.

On Friday's JDSU short trade, I used the 5 minute high as my stop. I was expecting a lower high, but it went straight down.