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Tuesday, October 30, 2007

Day Trade: Oil Service HOLDRs (ETF) (Public, AMEX:OIH)


Above is 15 min chart of OIH. Entered Nov 190 Call options just before 12pm. Stop loss indicated by red dotted line and target in blue dotted line. Stop loss was adjusted to just below the next 15min bar after it was formed.

Reason for entry:
-Support around $192 region
-Gap (up) is closed
-The 11.00am hammer with heavier volume has shaken out the stops. Next two bars see declining selling pressure
-Breakout of the down trend line

The flip side to this trade is a string of MAs overhead. But the reasons for entering were quite compelling and I also liked what I saw on the 5 min chart. But most importantly, the risk was manageable. Target was hit later in the afternoon.

Related Post: Anatomy of OIH Intraday

I believe I have talked about OIH a few times in my blog. You can also type OIH in google to search "This Site" for more of my posts on OIH.


Monday, October 29, 2007

100% Chance of At Least 0.25% Fed Cut

After a nail-biting week, this coming week is another big one in terms of economic news. We've got the FOMC as well as the Unemployment rate. Speaking of the FOMC, traders are pricing in an 100% chance that the Fed will lower the Fed rate by at least 0.25%. This is based on Fri's market close for Nov '07 30-Day Federal Funds futures contract.

Mon:
Notable earnings: EOG, RSH, SOHU, VMC

Tue: Consumer Confidence
Notable earnings: BEC, BWLD, CRDN, CPO, RAIL, GPI, MLM, PG, SIRF, UBS, WYNN, WBSN

Wed: GDP, GDP Deflator, Chicago PMI, FOMC Policy Statement
Notable earnings: BYD, CCJ, CEDC, MTW, REG, SNY, RIG

Thurs: Personal Income, Personal Spending, Core PCE Inflation, ISM Index, Pending Home Sales
Notable earnings: BUCY, XOM, GYI, OSK

Fri:
Unemployment Rate, NonFarm Payroll


Tuesday, October 23, 2007

Is The Trend Changing?

There are some good comments from readers in response to Let The Charts Tell The Story. Specifically, double-top, candlestick pattern and trend change is being talked about.


One reader raised the possibility of double top in S&P 500. There is a possibility of this pattern forming, however, confirmation is required.
"Breaking support from the lowest point between the peaks completes the double top. This too should occur with an increase in volume and/or an accelerated descent"
In other words, we need to see a break of Aug low, accompanied by heavy volume to confirm this pattern.

Another reader talked about monitoring candlestick pattern before confirming trend change. Indeed, some candlestick patterns require confirmation, while others do not. Also if one finds confluence of candlestick pattern at some form of support or resistance level, then all the better! I would recommend Steve Nison's Japanese Candlestick Charting Techniques if you want to learn more about candlestick patterns. Last Wed and Thurs, the S&P 500 printed a spinning top and doji near the base on the uptrend channel. As we know, spinning tops and doji represent indecision. The bulls were basically fighting the bears to keep their territory after a few days of pulling back.

Then came the massive sell down on Fri. The bulls lost their footing. Short term up trend channel is broken. While this is a sell signal, does this means a change in trend? I would say no. Take a look at How to Identify a Change in Trend by Craig. In his post based on the book "Trader Vic - Methods of a Wall Street Master", there are 3 steps to confirming a trend change:
Step 1: The Trend Line Break
Step 2: Retest and Failure -stock fails to move above prior swing point high
Step 3: The Confirmation - stock moves below the prior swing point low
Essentially, we need to see lower high and lower low following the trend line break to confirm change in trend. Right now, we are at Step 1. We have to see how the index behaves as it approach the base on the channel. What is formerly a support will now act as resistance.

It is too early to say if we are at the start of bearish trend or this is just another blip. As a reader said, time will tell...


Monday, October 22, 2007

Earnings Galore

The markets took a big hit last Friday and both the S&P 500 and DOW has broken the short term uptrend line. So what's next? I'll talk about it later today or tomorrow.

Meanwhile, lots of companies announcing earnings this week. 123 Jump has a good section on earnings, divided into 4 sections:

-earnings news
-sector earnings
-earnings call summary
-earnings calendar

If you are an investor, you will find the earnings call summary very useful. I like the way it is being laid out.

And if you are into straddle plays for earnings, here's a list of most volatile stocks on earnings announcement, which can be found in MY DEL.ICIO.US

Mon:
Notable earnings: APOL, AAPL, AXP, CNI, CHKP, EXP, HAL, PETS, SGP, TXN, ZBRA, MRK, NFLX

Tue:
Notable earnings: CAKE, AMZN, BIIB, BNI, CE, CTX, COH, CYMI, ILMN, TRMB, POOL, JCI, JNPR, LXK, MICC, PNRA, UPS, PPDI, OXPS, UAUA, RVBD

Wed:
Notable earnings: AFFX, APD, ARG, AKAM, ATI, ACLI, ACL, PFCB, AMGN, BOBJ, CME, COP, FFIV, FORM, FCX, PCAR, GRP, LM, MDC, MER, MNST, MCO, NTRI, RYL, BA, NDAQ, ZMH, SYMC, SLAB, VMW, VAR

Thurs: Durable Orders, Existing Home Sales, New Home Sales, Fed Consumer Advisory Meets (to discuss mortgage regulation)

Notable earnings: EYE, AET, BIDU, BMY, ELN, GR, KLAC, MOT, PENN, VSEA, WEN, YRCW, DOW, POT, NTGR, LLL, HAR, IMCL, MFE, NIHD, VDSI, FLIR, BEN, CKFR, BOOM, DRIV, DO, CMI, BG, CELG, CENX, ICE

Fri:
Michigan Sentiment (rev)
Notable earnings: BHI, CFC, IR, MTH, TDW


Thursday, October 18, 2007

Let The Charts Tell The Story


Above is the daily chart of S&P 500. For the past two weeks since the Fed announcement, it has been tagging the upper end of the uptrend channel. Yesterday's aggressive pullback pushed it back to the lower end of the channel where it found support and bounced off strongly. While I wouldn't classify yesterday's candle as a hammer (the upper tail is too long) and the market to reverse and rise from here, support at around 1530 is quite clear.

The housing index is testing its low for the 4th time. This market is really in a depressed state and many analysts expect this to drag on until at least early next year. So while it is already at a low, there is no guarantee that it won't fall further. Same for LEN, a home builder stock.


Monday, October 15, 2007

Lots of Earnings & Economic Data Week

Coming week has loads of market moving earnings announcements as well as key economic data releases. What more, it is also options expiration week.

Mon: NY Empire State Index, Bernanke speaks (abt economic outlook)
Notable earnings: C, ETN, GWW, DNA

Tue: Industrial Production, Capacity Utilization, Trade Secretary Paulson speaks (abt housing and economy)
Notable earnings: YHOO, USNA, WFC, STLD, STX, JNJ

Wed: CPI, Housing Starts, Building Permits, Fed Beige Book, Fed President Hoeing speaks (abt economic outlook and monetary policy)
Notable earnings: ABT, MO, AMLN, CTXS, EBAY, ITW, MAN, JPM, NE, KO, UTX

Thurs:
Leading Indicators, Phil Fed
Notable earnings: AMD, BAC, COF, CAL, CREE, GOOG, GILD, LLY, CY, ISRG, NOK, PFE, UNH, UNP, SPWR, STJ, SNDK, LUV, RS

Fri:
Options Expiration, Bernanke speaks
Notable earnings: MMM, ACI, CAT, HOG, HON, OSTK, SLB


Sunday, October 14, 2007

New Source for Financial Links

In case you haven't noticed, I'd like to point you to this widget called Blog Rush, located at the right side of my blog.

It contains financial links from the blogosphere and the links are changed each time my blog page is refreshed. So what's the difference between Blog Rush and MY DEL.ICIO.US. MY DEL.ICIO.US are articles which I've personally read and feel its good enough to recommend to my readers whereas links in Blog Rush contains financial links from all over the place. That's right, all over the place. So it may contain junks as well as gems. I'm introducing this widget in my blog just so as an alternative source of reading for you, if you are looking for one.


Wednesday, October 10, 2007

Breakout Stocks & Potential Breakouts

These are stocks that may break out soon. Keep a tight watch.

GME

PCU

SNDA


These stocks have already broken out with good volume. Not suggesting you enter now, but you can watch for pullback for lower risk entry.

POT


GS



Monday, October 08, 2007

Start Of Earnings Season

The 0.5% Fed rate cut was a panic act by the Fed and the market cheered on the latest job data. I now wonder what the Fed will do to save face...

This coming Tue marks the official start of the earnings season. Stockbee shares how to trade earnings while Bespoke has a comprehensive earnings calendar.

Mon:
Notable earnings: YUM

Tue: FOMC Minutes
Notable earnings: AA, MOS

Wed: Wholesale Inventory
Notable earnings: MON, INFY

Thurs: Trade Balance
Notable earnings: PEP, COST

Fri: Retail sales, PPI, Michigan Sentiment, Business Inventory


Thursday, October 04, 2007

October Bulls Or Blues?

Thanks to Adam's discussion on Oct's volatility -Weekday At Bernie's, I get to see some historical data from Bernie Schaeffer which also confirmed my own findings. Bernie looked back at the last 10 years and excluding the 1987 Oct crash, Oct actually emerged as the 3rd best month in terms of returns and it has a record of turning in a positive month 68.4% of the time.

I'm not sure which index Bernie has used for his study as benchmark, but above is a 10 year monthly chart of S&P 500. I've highlighted the months of Oct and from there, you see only 2 red monthly bars out of 9 times. While I'm not saying that this Oct will also be a positive month and you go load up on Call options (there's no such thing as 100% guarantee in trading), statistics show that it has more than 2/3 chance of being so.

Candlestick patterns in the major indices are now indicating a reversal, so we may see more pullbacks ahead. Friday is a day to watch for the important unemployment reading as it may affect Fed's decision to cut rates further or stay put.


Wednesday, October 03, 2007

How To Participate In China Bull Run via Options

The bull run in chinese stock has no stopping. OP talked about a new China stock IPO on AMEX. Adam also discussed about China solar stock, CSUN.

Over here, I've gathered a list of chinese stocks which are optionable. A few of them are single digit dollar stocks and they have triple digit volatility(!)

The above list is not a recommendation but rather to provide you with a smaller universe to start your research with should you decide to option trade chinese stocks. Bear in mind that there is some element of speculation going on in some of these chinese stocks. So do exercise due diligence and as always, proper risk management.


Monday, October 01, 2007

Sector Rotation in Q3

The last week in Q3 2007 was wrapped up at best with a lacklustre performance. I would expect some portfolio reshuffling at the start of Q4 as portfolio managers position themselves in the tech and retailers group for the year end. Let's recap how the sectors performed in Sep, Q3 and Q2.

Q2 Sector Performance
Q3 Sector Performance
Click chart to view better. Some observations from the charts above:

-Energy sector remained the strongest sector, though its strength has waned somewhat in Q3

-Tech, Materials, Industrial and Consumer Staples sectors have caught up in Q3 with some nice growth

-Financials and Consumer Discretionary sectors continued to remain weak.


I have actually prepared the Sep month sector performance, but am having difficulties uploading in blogger. I just want to point out that in Sep, Materials growth has shot up considerably, outperforming Energy, while Financials and Consumer Discretionary weakness see some improvement in Sep. You can go to stockcharts.com sector performance to get these charts and find out more about the sector rotation model.

Related post: Where to Get Sector Rotation Information?


Mon: ISM Index

Tue: Pending Home Sales

Wed: ISM Service

Thurs: ECB President Trichet speaks following interest rate announcement
Edit: Notable earnings: RIMM

Fri: Unemployment rate, Non-farm payroll, Fed Governor Kohn speaks about economic outlook

All eyes are on the important Unemployment Rate reading this Friday. We'll see...