The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good morning, Traders. In stock trading, we like to think that there are only two types of trades, basically. Either you are going with the trend, or against it. The trade that goes with the trend of the stock or sector generally has a longer timeframe than the trade that is counter-trend. This makes sense because the counter-trend trade is just that, <i>counter-trend</i> so its going to be shorter. Now the counter-trend trade sets up differently from the trending trade. The trending trade is breaking out to an area where there is no resistance on a long or breaking down to an area where there is no support for a short. The counter-trend trade does the opposite, in that its initiated right at a strong area of resistance for a short or a strong area of support for a long. This is a key point because there is a huge difference between shorting a stock just because its been up X days in a row or X%, and shorting a stock that has gone up a number of days in a row right to a strong prior resistance area. The former can get you in trouble to no end and we'e seen it happen often. Newer traders tend to think that charts have "gravity" and that what comes up must come down. Nothing could be farther from the truth, as stocks that have broken out into clear territory often just consolidate their gains and go higher. Scanning sectors in the evening to see if any have moved to pivots is one of the best ways to identify the short term counter-trend type of trade. To that end, take a gander at the chart below of the Software Index, which we watch using $DJUSSW, or the etf <b>SWH</b>. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080812DJUSSW.gif"> As you can see the software index has rallied like mad as of late and has run itself right into an area where there was an obvious brick wall of resistance which is the circled area on the left of the chart. The 200 period daily moving average is also there and tends to knock prices backwards. This looks like a recipe for a counter trend trade. Step two, look at a bunch of stocks inside of the index and see if any are also up sharply into areas of strong prior resistance. scanning...scanning...scanning.....hmmm....<b>ADBE</b> no, <b>SYMC</b> maybe, <b>TTWO</b> no...oooh wait <b>INTU</b>, wow, lot of green bars, yes that will do. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080812INTU.gif"> So what you want for the counter-trend type of stock first is to make sure that its not some sort of breakout to new highs. <b>INTU</b> is certainly not that as its weekly above clearly shows the stock is just in a range between roughly 26 and 32 for some time now. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080812INTUD.gif"> So, <b>INTU</b> rather catches ones eye because of the sheer number of days that the stock has rallied. If you look back at its prior history to take its pulse, temperature, and blood pressure, you'll note that the behavior is not typical of the stock. This is no IBD 100, low float, growing revenues at 400% per quarter story, this is just <b>INTU</b>, stalwart member of the Nasdaq Composite, NDX platoon, software division. So we're thinking that bullish players are being lulled into a false sense of security because the stock is printing green on a daily basis. Let's look closer to see if there is any trendline break that might get a few bulls to peel off some shares.... <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080812INTU60.gif"> The hourly above does indeed have a nice trendine back from 8/5 that would change the tone a bit if broken. To recap. You must do this type of trade in a "top down" manner. That means that it was the $DJUSSW chart that is the starting point of the whole thing. Just shorting stocks that have been up X number of days in a row is amateurish and does not work over time. There has to be a catalyst in the sector to make the stock come down. Secondly, make sure your counter-trend candidate has actually rallied into some prior area of resistance or at least congestion. You don't want the stock to have just broken a downtrend for instance and be shorting it on the second day of its rally when it has a long way to go before the next pivot. Thirdly, remember its a rather quick type of trade for a smaller target than you would hold for if it was with the trend. You are looking to take a $0.50 to $1.00 bite out of the stock. Finally, don't forget that Fibonacci retracements always make great targets. Above all, have fun!
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080813SPX.gif"> So the gameplan is still to try and get more longs unless we get a close below that 1274. Any shorts should be of the counter-trend variety (yesterday's <i>Focus Report</i>) or in sectors or stocks that are showing extreme relative weakness like <b>LEH</b> which we shorted at the open yesterday and closed down over 12% while the S&P only fell 1.2%! Conversely, we are long <b>AVCT</b> which lost .18 cents yesterday or a drop of 0.74%, showing relative strength. On the near term watch list is <b>MHS</b> long which we are still looking to setup with a confirmed break and hold above the 49.25 area, a long reversal in <b>CVX</b> which still could happen as the $XOI didn't get as hammered as other sectors yesterday but we are just waiting with an alert set. <b>BIIB</b> no longer a short and is actually a long now for a "disappointment" play. <b>AXYS</b> broke out yesterday out of nowhere late in the day and any pullback there should be bought up. The software sector drop discussed yesterday has not happened as of yet but still could. We still like the <b>INTU</b> idea but no hourly trendline break has occurred just yet. To that end, a number of Nasdaq sectors like $SOX and $DJUSSW look like they could retrace backwards a bit which would take some steam out of the still strong Nasdaq which has still barely pulled back at all. This is generally a bullish sign as we would want the Nasdaq to be leading if indeed this rally is firmly underway. As long as we hold that 1274, lets assume it is.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Picture perfect trendline bounce in the S&P yesterday should be setting us up on the long side again. Yesterday's report mentioned a 1274 pivot in the S&P multiple times and the low of the day in the benchmark index was 1274.86. So, for now the trendline support has come in perfectly which has made some sectors look very buyable off of hammer reversals or just plain old bull flags as some of these sectors have refused to come off of recent highs. Others seem to be holding at similar uptrend lines as the S&P. It's not all roses out there as financials are still creating a drag on things, although we think that some firming in energy stocks could be happening if yesterday's crude run-up wasn't just a one day wonder as has been the modus operandi with that commodity as of late. There's still a number of mixed signals out there and the market is still in this "go up for a day and a half and then fall back down to retrace about 90% of the upmove" mode. So all we're saying is we're taking it one day at a time, although still bullish. Seeing that the Nasdaq and $NDX are acting downright priapismic right now and refusing to go down at all, we thought it was a perfect time to visit the <i>Four Horsemen</i> and see if there are any buy points flashing on these $NDX generals. If you aren't familiar, the horsemen are <b>AAPL, AMZN, GOOG, & RIMM</b>. <b>BIDU</b> sometimes rides out as a fifth member but has been relegated back to the stables as of late with a lame leg after its ugly gap fill back down to $300. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080814AAPL.gif"> <BR><BR> Apple has no buy point as its been up for seven days in a row. Doesn't mean its a short, just means whomever buys it now is probably going to be left holding the proverbial bag for now. Any pullback to the 50ma daily is probably a buy though if the market holds up. Keep it on pullback alert. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080814AMZN.gif"> Amazon has come in a bit on lighter volume after its explosion of three days ago. A break above yesterday's high would snap the downtrendline of the pullback and bring in more buyers. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080814GOOG.gif"> <BR><BR> The "mighty Google" was a daytrade for us on Monday, netting a fast 9 points. After that the stock did nothing then collapsed yesterday with the market back down to the backside of the trendline which turned out to be a good pivot as traders snapped it up from there, creating the strong close that resulted in the bottoming tail hammer circled above. (That was a really long sentence). A re-entry over the top of yesterday's high would not be too shabby. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080814RIMM.gif"> Similar setup to <b>AMZN</b> on <b>RIMM</b> but the former looks a lot "cleaner" with that big body, high volume advance.
We may have been the first ever swing trading newsletter to use the word "priapismic" to describe an index and not a single comment... ok Anyways, here's the free section of tomorrows report. No major change out there, advance on lower volume today as we continue to grind sideways to up. Nasdaq stuff continues to show dominance and is a buy on any pullbacks. -Shadow The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Defense sector is one that we don't talk about much but the current chart is worth a closer look to try to find some relative strength names to trade. The index is called the "Spade Defense Index" and contains companies that provide electronics, equipment, and other doo-dads to the defense industry. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080815DXS3.gif"> Uptrend in play on the defense names with the green circle denoting the pullback entry point. One way to play these sector moves is to simply set audio alerts on your thinkorswim platform and then have the list of stocks at the ready and then click through a bunch of names that you may have preset in a watchlist. <b>NOC</b> and <b>RTN</b> currently have some bullish hammers on dailies working, and <b>TDY</b> we've listed in <i>Bulls & Bears</i> this week and continues to tease up near the highs indicating a breakout soon. Optimally the play would be the move in the sector chart back down into the circled area, but the hammers at the prior highs are a sign as well that it might not wait. Either way, you have good, defined stop area by using that uptrendline. As for the broad market, no change. Continues to be tricky and gap down at the most inopportune times, then rally straight up. The slow grind upwards continues as strong/weak sectors duke it out with each other. Nasdaq remains king and still shows now signs of abating, even with the extreme overextension from the 20ma daily at this point. Trail stops tight in case tech all of a sudden falls out of favor or gets tired. Yesterday's action just put us right back to Wednesday's close which is still bullish considering the gap down was negated. Breadth was so-so however at 2:1 NYSE, and please note in <i>Under the Hood</i> that overall volume was down by a good clip on both exchanges, thus failing to register further accumulation. Today is options expiry so expect the usual increase in overall volume and probably flat afternoon.
this week's video -still cautiously bullish but mixed signals abound.... -crude is coming close to $107 now which is key trendline support. Will this put the kibosh on the "rally"? <object width="425" height="350"> <param name="movie" value="http://www.youtube.com/v/uDb3SL256tY"> </param> <embed src="http://www.youtube.com/v/uDb3SL256tY" type="application/x-shockwave-flash" width="425" height="350"> </embed> </object>
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Yesterday's commentary started with a mention of a "slow grind upwards" which as most of us know is often the scenario that precedes large moves down like we saw in the markets yesterday. The ones that seemingly come out of nowhere and last all day. Although overall volume was light yesterday the market internals were decidedly bearish with both TRIN readings registering over 2.0 into the close and breadth ratio's sub 20 on both sides. Advance decline totals on the NYSE moved below -1500 which is a definitively bearish read. We like to remind readers to always read the <i>Under the Hood</i> section carefully to note these figures. In a nutshell, the numbers in that section tell you whether or not institutions are really involved in the move or if its just Aunt Mabel from Wichita picking up 100 shares of <b>AAPL</b> because she just loves to listen to audio books on that new fangled iPod thingy. Although the above information is important to make note of, remember that its only half the picture. The other half of the puzzle is when you put it together with technicals on the charts of the major averages. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080819SPY.gif"> <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080819DIA.gif"> As you can see in the major average family album above, the <b>SPY</b>ders and <b>DIA</b>monds have now closed daily candles below the shaky uptrend that has been in place since the 7/15 low. We feel this is of note because you can see that since that low (and crude oil high) was put in, the market has bounced perfectly off of the trendline every time while slowly making slightly higher swing highs. Last week was the first time that we failed at a higher swing high which is causing the rounded topping action you see above. Obviously this pattern is not yet complete but its important to be on top of these things when they start to develop. So, is it all out bearish now because of these trendline closes? Maybe. The strength of the Nasdaq Composite is still a wild card in the deck. While the S&P and Dow were grinding slowly upwards, the Nasdaq was rising with much more force and as such is only starting a pullback now which by all accounts still looks buyable, although the recent failure to breakout of the strongest patterns such as <b>QLGC, QCOM, IVGN & ILMN</B> are also contributing to possible erosion of trader/investor confidence. (The aforementioned <b>AAPL</b>, however still looks bulletproof.) Due to this divergence and the sensitivity of the S&P to crude prices (check this past weekend's <i>ShadowTrader Video Weekly</i>), we expect some chop back and forth now with a slight bias to the downside unless the S&P can rally back to recent swing highs on a strong increase in volume and market internal readings.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month <div align="right"><div align="center"><div align="left"> <!-- leave these style definitions here --> <style> a.st { color:#ca2f35; } table.shadowTraderTable { font-size:9pt; font-family:verdana; line-height:14pt;width:600px;text-align:left;} div.footerStyle { font-size:7pt; font-family:verdana; line-height:11pt;padding-top:30px;} table.shadow {font-family:Verdana, Arial, Helvetica, sans-serif;font-size:xx-small;width:600px;} table.shadow th {width:7%;background-color:#CCCCCC;} table.shadow td.fullBorder {border-right:1px solid #CCCCCC;border-bottom:1px solid #CCCCCC;vertical-align:middle;height:40px;text-align:center;} table.shadow td.leftSide {border-left:1px solid #CCCCCC;border-right:1px solid #CCCCCC;border-bottom:1px solid #CCCCCC;vertical-align:middle;height:40px;text-align:center;} table.shadow td.positions {background-color:#eeeeee;vertical-align:middle;height:20px;text-align:left;font-weight:bold;border-left:1px solid #CCCCCC;border-right:1px solid #CCCCCC;border-bottom:1px solid #CCCCCC;} table.shadow td.noBorder {border:0px;vertical-align:middle;height:40px;text-align:center;font-weight:bold;} table.shadow td.comments {vertical-align:middle;height:40px;text-align:center;border-right:1px solid #CCCCCC;border-bottom:1px solid #CCCCCC;text-align:left;} table.shadow td.arrow {vertical-align:middle;height:40px;text-align:center;border-left:1px solid #CCCCCC;border-bottom:1px solid #CCCCCC;text-align:left;} table.simpleTable {width:100%;font-size:9pt;} table.simpleTable th {text-align:left;} table.simpleTable tr.headerRow {height:40px;background-color:#ca2f35;color:#FFFFFF;} table.simpleTable td {text-align:right;} table.simpleTableNoAlign {width:100%;font-size:9pt;} table.simpleTableNoAlign tr.headerRow {height:40px;background-color:#ca2f35;color:#FFFFFF;} table.simpleTableNoAlign td {padding:15px 0px 15px 10px; } span.smallText { font-family:Verdana, Arial, Helvetica, sans-serif;font-size:xx-small;} span.blue { color:blue; } span.red { color:red; } h1 { border-bottom:1px solid #ca2f35;font-size:9pt;padding:20px 0px 0px 0px;margin:0px; } div.redLine { border-bottom:1px solid #ca2f35;font-size:9pt;height:2px;margin-bottom:20px; } </style> <table class="shadowTraderTable" border="0" cellspacing="0" cellpadding="0"><tr><td> <strong>ShadowTraderPro Focus Report for August 20, 2008</strong> The <strong>ShadowTraderPro Focus Report</strong> is your every morning dose of market reality brought to you from the resident geniuses at ShadowTrader. Overseen by Chief Equity Strategist, Peter Reznicek, each issue contains a full report on the prior day's action, including market internals, technicals, and what sectors were hot and cold. Each issue also includes the ShadowTraderPro Model Portfolio, which updates members on what stock plays STPro is currently engaged in officially, as well as provide a daily list of long and short setups for more self-directed traders and investors. If you have any questions regarding commentary or plays in this newsletter, please email to <a href="mailto:focusreport@shadowtrader.net" class="st">focusreport@shadowtrader.net</a>.<br/><br/> <!-- charts measure 569 x 684 pixels when measured b4 snapshotting --> <h1>The Big Picture</h1><br> Good Morning, Traders. With the S&P clearly breaking uptrend support we are carefully monitoring the recent pullback action in banking stocks and the recent selling in the brokers to gauge the health of the current rally. These stocks have been a leading indicator for broad market action since last October and will continue to set the tone. Any hope of a prolonged market rally will more than likely do down the drain if these two key groups once again break down to new 52-week lows. The Banking Index ($BIX) has pulled back to the prior swing low in the chart below. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080920BIX.gif"> We can expect to see some type of temporary undercut/shakeout below 167.00, but the action should hold around the prior low for the bulls to remain confident. If the low holds we could potentially see the $BIX settle into an intermediate term trading range from 160 to 200. A sharp breakdown from this level would eliminate any doubt of where the broad market will be heading in the near future. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080920BAC.gif"> <b>BAC</b> is also at a logical area of support with the prior low and 50ma lining up near 28.00. Other key banking stocks such as <b>C</b>, <b>WB</b>, and <b>WFC</b> share the same pattern while <b>JPM</b> has already undercut a key support level at 36.00-37.00. Brokers continue to slide as <b>LEH</b> has cracked once again. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080920LEH2.gif"> <b>LEH </b>continues to break each support level with ease and could possibly be sitting at new 52-week lows within the next day or two. This pattern is showing a ton of relative weakness to the S&P. Just as stocks with relative strength lead the market in an uptrend, we also see stocks with relative weakness lead the way to the downside. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080920GS.gif"> Looking at the chart of <B>GS</B> above we see the recent breakdown below a clear support level at 160.00. The shakeout in mid-July should have been the catalyst to lift the stock higher for the next few months, however, each rally attempt meets heavy opposition around 185.00. If <b>GS</b> is unable to recover back above support we could easily see a sharp sell-off to the 52-week lows. The majority of yesterday's loss in the S&P arrived via the gap down with the action basically chopping around all session. As we mentioned yesterday, there is no reason to get excited about the S&P while it remains below the uptrend line. We see very little in the way of quality buy patterns in groups or stocks belonging to the S&P, as the action remains on the Nasdaq. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080920COMPX.gif"> The chart of the Nasdaq above is a great example of relative strength for those who are just learning the concept. While the S&P has failed to hold the recent breakout above the 7/23 swing high, the Nasdaq has extended well above it. The recent pullback in the Nasdaq looks to be a quality buying opportunity for bulls as there is support from the uptrendline and the uptrending 20ma. If there is any buying to be done one should focus on Nasdaq strength and shy away from buying weakness in the $SPX.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Since the mid-July bottoming action, the market has struggled to develop solid leadership with biotechs being the only sector where we see strength in numbers and stocks in well defined uptrends. Over the past week biotechs have pulled back off the highs but appear to be coming into or bouncing off of support. Lets begin tonight's tour with a daily chart of the $BTK (Biotech Index) below. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080822BTK.gif"> The $BTK formed a bullish reversal bar yesterday after coming into strong support at 840.00. In late June 840.00 was resistance that eventually gave way to a bull flag breakout on 7/31. Note the successful tests of the prior breakout pivot on 8/4 and 8/7. Look for the biotech sector to test the prior highs from here and potentially move out to new 52-week highs with a little help from the broad market. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080822CELG.gif"> Biotech leader <b>CELG</b> also formed a bullish reversal hammer yesterday after bouncing off support near 70.00. A move above yesterday's high should attract some buying interest and push the stock to test the prior swing high. Continuing with our biotech pullback bonanza we submit a daily chart of GENZ below. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080822GENZ.gif"> <b>GENZ </b> has pulled back to support of the prior breakout level at 80.00. Strong stocks will often breakout and extend higher before pulling back to test the breakout before resuming the uptrend. These pullbacks should occur on light to average volume. Avoid pullbacks where the volume is well above average for two or more days. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080822SQNM.gif"> The last biotech chart of the night belongs to <b>SQNM</b> which has been consolidating in a tight base during the past six weeks. Look for a heavy volume breakout above the downtrend line to establish a long entry. This stock has great potential to be a big mover judging by the last breakout from June to July. <b>AAPL</b> still looks like a solid long entry above yesterday's high, as does <b>ISRG</b>above 306.50 (Larry Williams setup). Other strong charts are <b>AUXL</b> , <b>COV</b> , <b>and CNQR</b>. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080822COMPX.gif"> After a late morning shakeout that undercut support of the 20ma and the two day low, the Nasdaq was able to recover in the afternoon and close the session back above the 20ma. It was a constructive day for the bulls, as the price action in the Nasdaq failed to make significant progress to the downside. Shakeouts often serve as the catalyst for a reversal, so lets see if the $COMPX can build momentum to the upside over the next few days. While the S&P showed a bit more strength yesterday, it still must work through resistance from the 50ma and the uptrend line it recently cracked.
Not much happening out there Still a few trading ideas in this week's vid <object width="425" height="350"> <param name="movie" value="http://www.youtube.com/v/xqhA7W-EovE"> </param> <embed src="http://www.youtube.com/v/xqhA7W-EovE" type="application/x-shockwave-flash" width="425" height="350"> </embed> </object>