Hi, I'm a fairly new and definitely inexperienced trader with a quick question for some of you gurus. I am looking at SUNW from a technical standpoint. I have attached a picture of the candlestick chart I am looking at along with my trend lines and moving averages. Currently it is in a well established up trend and on Thursday broke the resistance trend line but then fell right back down below it on Friday. It has also extended well outside the bollinger bands I have set up on another chart. I got into a short position (swing play) at 6.08 and held it over night--hoping to make profits as it falls next week. Am I making the right play or should I be leary of the fact that it broke upper resistance briefly? Any help, tips, or advice would be appreciated.
Your chart is hard to see, but I think that if you redraw the upper channel line a little (reduce its slope) you'll find that it has closed outside the channel for two days.
Hi doli, Thanks for taking a look for me. I looked at the first image I posted and I noticed you can't see the upper shadows on the bars where it touches the line in the previous touches. I have attached a larger, more clear chart. Tell me if this changes things. And if not, if it closed two days above, do I need to get out first thing Tuesday morning, or wait for a bit and see what it does?
It looks like the last close was right around the upper channel line. The only other thing that's apparent is that it looks like price price recoiled from higher prices two days ago and recoiled from lower prices today (last day). In or out? I don't know, but it looks like there is some recent buying interest in tech and if a rising tide raises all boats, look out. Short term may make some money, but if the upper channel line does become support, then the opportunity won't last long.
Thanks man. I was only planning holding the short position for a couple of days. If you don't mind me asking, where do you get your information on buying interest in different industries?
Do you care to explain at all? I would like to understand why you say it isn't a high probability play.
It has seen significant accumulation the last couple of sessions, look at the volume about double the average and call buying has spiked almost 18 times the 10 day average. Someone was just soaking up all the supply in the stock. Look at its reaction to the MS downgarde, pretty much non existant. Look at end of day action, big block buying. Earnings hype starting for Jan 23rd followed by their big annual conference in Feb 06. They have been doing very well in Asia and you know how Asia has been doing and have benefited from the weak $. They have the best products in their class (awards winning) and from what I gather IT people are excited about them and preparing to upgrade. The money they have poured in to RD the last few years which has kept earnings down are is starting to pay off and they have cut some of the fat from the company (reduced sales teams etc) but with more still available to be cut. They could easily beat and my guess is that guidance is going to be very strong. This stock is coming off a long base and despite its recent move and large float has held up. All of the above coupled with the allocation back in to tech probably means that being long in to earnings and early Feb should work. I will probably sell or write some calls and buy some puts just before earnings as if they miss as they have many times in the past then we will certainly see a drop but it should be short lived and a buying opportunity. If you are hoping that it will see 6 again it probably will but the chances are far better that it will be higher by earnings if the market holds up.
Wow...thank you so much for the time and research you put into that response. Doing the fundamental homework is where I need to improve most as a trader. I tend to focus so much on the charts that I don't pay attention to everything going on outside of it. Is there a good website or other source that you recommend for doing fundamental research?
If you are a short term trader going for a few pennies here and there then fundamentals are really not worth bothering with beyong knowing what date earnings and important conferences are held. This info can be found on yahoo or the IR section of the company's web site. Even if you are a longer term swing trader then really the price and volume are still your most important tool but some idea of the techincals and the story are helpful. For retail guys there is no edge in the fundamentals because you will never have the access that the institutions do.