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Wednesday, August 27, 2008

What's Next for Energy Sector?

Last week, I talked about expecting a quick rebound in energy. The next day, Energy Select Sector SPDR (AMEX:XLE) broke through $70 support but closed above it, washing out existing buyers who had stops at $70. It then staged a strong rebound, up almost $7 in 3 days, gapping up 2 of the 3 sessions. I hope you have taken advantage of this rebound. Energy (& commodities) are always very volatile, and it is best to take profits especially with such a good move over such short period of time. On top of that, we are trading against the downtrend.

I would not initiate any new trades on energy sector at this point as I noticed the pullback last Fri and this Mon was on much lower voluume and its possible there could be another leg up. When in doubt about the direction or the trade, DON'T TRADE. There are always better opportunities out there.

Monday, August 18, 2008

Expect a Quick Bounce from Crude Oil?

Crude Oil

Crude oil ended the last session with a hammer candlestick near the 200 simple moving average. $110 appears to be a support level, if you look back at April/May this year. The last few sessions also saw the crude unable to close below $110.

Energy Select Sector SPDR (AMEX:XLE) is also finding support at $70. See the the longer tail of several candlesticks in recent sessions near $70. If it breaks and close below $70, then all bets are off. Likewise, United States Oil Fund LP (AMEX:USO) at the round number $90 and approaching the 200 simple moving average.

So don't be surprised you see a bounce soon in the energy sector. But the general trend is still down and the bounce should be short-lived.

Earnings season is rounding up soon and there is no major economic data this week.
Notable earnings: BHP, LOW, TSL

Building Permits, Core PPI, Housing Starts
Notable earnings: ADI, HD, HPQ, MDT, NVTL, SOL, TGT

Notable earnings: BYI, BJ, EV, GYMB, LTD, ROST, PVH, STP

Thurs: Initial Claims, Leading Indicators, Phil Fed

Fri: Fed Chairman Bernanke to speak about financial stability

Monday, August 11, 2008

How to Go Through Your Stock Watchlist

I took slightly longer than expected for me to settle down and adjust to the time zone, hence no blog post last week.

Today, I'll like to talk about how to go through your stock watchlist. Many traders often wonder where to start. With so many stocks available for trading, even after filtering for respectable stock prices, volume and whether its optionable, the list is probably in the thousands. How is it possible to go through them without spending too much time?

Step 1:
I like to do a top down approach when looking through my watchlist, i.e. I go through a lists of key Spyders sectors like XLF, XLE, XLB, XLU, XLK, XLI, XLV, XLY and XME. Non spyders sectors that I also watch are SLX, MOO, KOL, TAN etc. If you're wondering what these symbols stand for or what specific stocks are held in these ETFs, a good source is ETF Investment Outlook.com. Type in the ETF symbol at the top right corner and then select holdings to see specific stocks under ETFs. While MSN Money also has similar function, it only gives the stock company names and not the ticker symbols. ETF Investment Outlook.com shows both the company names and ticker symbols. Here's a sample of SLX holdings (not full list)in Investment Outlook.com:

Step 2
After going through the sector charts, the process gives me a flavour of what's weak and strong. I also look out if certain sectors are forming patterns like bear flags, ascending triangle etc. I will take of these in my notebook. Then I will zoom in on the stocks in these sectors. Most of the time, you'll see that they are showing similar trends or patterns as well.

Step 3
Next step is to go through my own personal watchlist of stocks. This could be gathered from stocks with huge gaps in recent earnings report and you watch them closely for follow through actions, or they could be stocks which you obtain from screeners base on your own set of criteria.

*TIP: If you have many stocks in your watchlist, I recommend going through them with thumbnail charts, i.e you're able to view several charts in one screen, instead of 1 chart per screen. This helps to save alot of time and also aid in seeing patterns across sectors in a glance. If you're using thinkorswim prophet charts, you can use the grid chart funtion which allows you to view 4 charts in a screen.

Step 4
Having gone through the lists of stocks, you would have a shortlist by now. I usually have a "HOT" list which is ready to take execution as the pattern has confirmed. Another "WARM" list is for watching closely in the following days as pattern or setup could confirm soon.

Hope this will give some of you a better idea of how to go through stock watchlist and feel free to drop any comments if you have other ideas to share.

Here's the week ahead:

Notable earnings: EXM, FLR, LDK, MDR, PBR

Tue: Treasury Budget
Notable earnings: CREE, FOSL, JASO, NVDA, MBT, UBS

Retail Sales, Business Inventories
Notable earnings; CTRP, DE, NTES, NTAP, LIZ

Thurs: CPI, Initial Claims
Notable earnings: ADSK, CCJ, WMT, EL, KSS

NY Empire State Index, Capacity Utilization, Industrial Production, Michigan Sentiment, Options Expiration
Notable earnings: ANF, JCP