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Equity futures strong and bond YIELDS rising!

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Things look very good this morning for some bullish trading in stocks. Late yesterday stocks staged a comeback. Tech traders might want to focus in the semiconductors this morning. This is what I believe to be the "head of the snake" and the strongest group in technology. The "tail of the snake" is probably the telecom (IXTCX) and networking (NWX.X) so keep an eye on them. Bullish equity traders want to see them progress throughout the session. Currently, S&P futures are higher by 15, NASDAQ futures are up 46 and Dow futures are surging by 102 points.

Where did I go wrong?

This is a question that every trader should ask him or herself after every losing trade. Don't dwell on the loss, but try and find an explanation so you don't make it again. Two days ago I highlighted two bearish trades. Neither of them budged from our short point. The first was a bearish trade in Adobe Systems (NASDAQ:ADBE) at $32.75 and was stopped out for a loss at $33.75. I'll show you where I think I went wrong on this one. The second mistake was something that many subscribers may have questioned, but didn't ask the question (at least I didn't get any e-mails). Remember that bearish price objective we had calculated from the point/figure charts weeks ago indicating $41? While we shorted the QQQ's at $40.10 and were stopped out at $40.25 what we did right was having such a tight stop yesterday morning in the trade. Where I may have gone wrong was shorting so near a bearish price objective. Sure, stocks and indexes can go lower than there bearish price objective, but in such an oversold NASDAQ, even by bullish percent observations, the QQQs were better left alone. Now look at ADBE.

Adobe Systems Chart - $1 box

It took me two days to turn from a bear to a bull in shares of ADBE and it cost me $1 per share. As a good trader will do, he or she admits their mistake early, tries to figure out what went wrong, then gets back on the bicycle and rides for profit. Currently I'd like to see a pullback (what I was looking for in our short/put trade to $28) to $31 as an entry point. You can see from the above chart that a pullback could come all the way down to $24 without giving us a sell signal. A longer-term investor (a mutual fund manager) would love a risk/reward at $31 of $8 risk to potentially make $27. Maybe that's why this stock just wouldn't give up the $31 level when we were short!

Now your thinking and so am I!

Shares of Intel (NASDAQ:INTC) could be poised for similar results that we've seen in shares of ADBE. Not long ago we took some profits in a downward move in INTC and this stock too has recently hit a bearish price objective of $25. This morning, INTC is indicating $29.25 in the pre-market. I'd look to take a half position in the stock this morning at the open, but not higher than $29. Yesterday, the SOX.X got back above its longer- term upward trend and the group has looked strong. Shares of AMD look overextended compares to the technicals in INTC and I can use AMD's chart and future trading to my benefit for a sell decision later in the trade. Any bullish position will be followed with a stop just under $26.75. Targeting $32.75 short- term, but $35 could be achievable on a strong 2 or 3-day rally.

Jeff Bailey
Senior Market Technician

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