Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
  Jeff Bailey   9/25/200,  6:09:10 PM
Late session selling it would appear to me that today's late session selling may have coincided with reports that a magnitude 7.8 earthquake rocked northern Japan. Reports say it took place at approximately 04:50 AM Japan time, which would be equivalent to 03:50 PM EDT.

The Pacific Tsunami Warning Center in Hawaii said the earthquake generated a tsunami. A warning is in effect for Japan, Russia, Guam, the Northern Mariana islands and Wake Island.

A Tsunami watch is in effect for Hawaii, Taiwan and the Philippines.

Here is a Link to the Pacific Tsunami Warning Center.

 
 
  Jeff Bailey   9/25/200,  4:19:27 PM
Did I miss anything? last thing I remember is ABMD alert at $9.64 then my computer froze up? Something must be wrong with my q-charts as everything is very red.

As I listen to the CNBC Democratic debate, I think I may have figured out why equities dropped quickly to the close.

 
 
  Linda Piazza   9/25/200,  4:01:29 PM
Swing Trade Recap- OEX/SPX/DJX/DIA/SPY
9/25: Entered a bearish OEX trade at OEX 507.17.
9/25: Profit stop at OEX 502.71.
Result for the day: +4.46 OEX points our favor.
Results for the week: +11.19 OEX points our favor.

 
 
  Linda Piazza   9/25/200,  3:59:29 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We exited our trade at 502.71, the OEX level when the exit hit the Monitor. (OEX went a bit lower afterwards, but is up again now.) We entered at 507.17, so were in the trade during a 4.46 move our direction.

 
 
  Linda Piazza   9/25/200,  3:57:01 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's exit now. I want you to have a chance to get your orders in.

 
 
  Linda Piazza   9/25/200,  3:49:52 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower stop to 504. If the OEX forms a double bottom here and tries to bounce, we'll get taken out.

 
 
  Linda Piazza   9/25/200,  3:47:11 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower stop to 505.

 
 
  Linda Piazza   9/25/200,  3:41:45 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower stop to 506. We'll be exiting at the close because of the important economic numbers tomorrow morning. I don't want to risk holding over with those numbers, and with the Nikkei already down intraday more than 900 points in a week.

 
 
  Linda Piazza   9/25/200,  3:38:12 PM
Here we go. Let's hope we get some momentum into the close.

 
 
  Linda Piazza   9/25/200,  3:23:52 PM
We came within one penny of being stopped on that go-around. Let's see what happens in the last few minutes of the day, but once again, I think I'll be closing this trade at the end of the day unless there's a strong downdraft that gets us under key levels and gives us some cushion in case of a bounce at the open tomorrow. We now have a stop near our entry, so should be okay into the close either way.

 
 
  Linda Piazza   9/25/200,  3:17:00 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I don't like today's trading action and will be lowering stops aggressively. Lower the stop to 507, near our entry.

 
 
  Linda Piazza   9/25/200,  3:13:23 PM
The OEX has just fallen out of the bearish rising wedge on the two-minute chart, depicted in my 15:10 post. We need to see the OEX fall swiftly now to believe that this is a valid bearish formation, and not see the sideways trending movement that we've often seen with these potentially bearish formations.

 
 
  Jeff Bailey   9/25/200,  3:10:40 PM
Holy bebuggers! ABMD $9.74 +41.8% hits target of $9.64.

 
 
  Linda Piazza   9/25/200,  3:10:33 PM
Here's an alternative way to draw what's happening on the short-term OEX chart, this time a two-minute one: Link

 
 
  Jeff Bailey   9/25/200,  3:09:41 PM
ABMD 5-minute chart. What do you think? Link

I did NOT take a bullish position in ABMD, mainly because stock is more thinly traded, and I do not take positions in more thinly traded stocks like ABMD when I make bullish profiles as it could be construed as front running a more easily manipulated stock. However, I discuss this so short-term day traders might get in mindset of what a market maker may be doing when surprising news (bullish or bearish) comes into a smaller to mid-cap stock.

 
 
  Linda Piazza   9/25/200,  2:57:17 PM
Here's the formation to which I referred in my 14:54 post. Link

 
 
  Linda Piazza   9/25/200,  2:54:34 PM
The OEX five-minute chart now shows an expanding formation, but I honestly don't ever remember seeing such a formation that slants down. An orthodox broadening formation usually has a horizontal axis. Is this a strange bull flag? It looks too broad to be a bull flag, although it did retrace 50% of the previous move off the day's low and then steady at that level. That's bull-flag type behavior. Whatever it is, the top of that formation cuts just underneath 508, which is the reason for the 508 stop.

 
 
  Jeff Bailey   9/25/200,  2:46:25 PM
ABMD $8.66 +27% ... looking for market maker to back off here and buyers to take higher.

Place a fitted retracement on stock with base at $3.00 and fit with 50% at $7.55. Gives 38.2% at $8.62.

 
 
  Linda Piazza   9/25/200,  2:43:01 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower stop to 508.

 
 
  Jeff Bailey   9/25/200,  2:42:23 PM
Day trade long ABMD $8.60 +26% on a trade at $8.66., stop $8.40, target $9.64 by close.

 
 
  Jeff Bailey   9/25/200,  2:37:23 PM
ABIOMED (ABMD) $8.50 +25% .... stock jumps from 12:00 level of $7.00 and making session high here. At 12:00 company announced it had received FDA approval to begin commercial distribution of its new AB5000 Ventricle.

 
 
  Linda Piazza   9/25/200,  2:35:10 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I don't like this action since entering this trade, either. Let's lower the stop to 509.

 
 
  Linda Piazza   9/25/200,  2:20:30 PM
Someone needs to issue an upgrade of all the semis so that they will turn down, too, and bring the SOX and the NDX down, too.

 
 
  Mark Phillips   9/25/200,  2:20:15 PM
Profit taking comes to the Gold sector. Gold futures couldn't hold their highs this morning and that has the XAU index getting hit for a 2.75% loss, falling back below $95. Our buillish play on AU is seeing some serious selling as well, with a more than 4% loss knocking it right back to the top of the 9/05 breakout gap. the 20-dma ($39.25) is helping to provide some support as well, but with today's large drop on heavy volume, things are not looking good for this play. Our stop at $39 has still not been hit, but based on the afternoon trend, it would not be surprising to see it clipped before the close. The dip does not look like a viable buying opportunity.

 
 
  Jeff Bailey   9/25/200,  2:20:09 PM
QQQ $33.40 +0.54% ... right back where it started the morning out and I struggle to see a trade entry here after seeing that intra-day reversal at WEEKLY S1 back to the downside. Can take trend from morning low to recent higher low, and downwrad trend from day's high to see wedge, where break of wedge could drive price to the close.

U.S. Dollar is flat as a pancake.

 
 
  Linda Piazza   9/25/200,  2:15:52 PM
Near 506 is the 50% retracement of this day's range. We need to see the OEX firmly below that level, or else we'll have to start worrying about a move back to the day's high again. A 50% retracement of a decline is just a run-of-the-mill everyday retracement amount, and not particularly bearish. The 30-minute oscillators haven't firmly committed to the downside yet, with 30-minute MACD sort of flattening, but with the histogram not yet below signal.

 
 
  Linda Piazza   9/25/200,  2:04:33 PM
The decline slows right where I'd anticipated exiting yesterday's bearish OEX position (although we actually exited a little ahead of that level). The OEX is now back to that descending trendline (or one version) that stopped its decline yesterday. It's obvious, of course, that this is a potential bounce point, but so far, this looks like a normal and to-be-expected measured distribution pattern. We need to get some downside momentum going again, soon, if the OEX is going to blow through this morning's low and the support at that level.

 
 
  Linda Piazza   9/25/200,  1:52:12 PM
My puppy was pretty smart to have dug up such a timely note, wasn't he, Jane?

 
 
  Jeff Bailey   9/25/200,  1:52:04 PM
Jonathan and I seem to be experiencing the same phase of the moon. I've been batteling some computer difficulties too.

01:00 Update now posted at this Link

 
 
  Linda Piazza   9/25/200,  1:50:17 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the stop to 510. I don't like lowering it so far below the 60-minute 130-pma because I'm still wary of a possible bump up to that level, but I can't justify a stop 5 points above the current position, either. Conservative players might want to set their stops just above today's high.

 
 
  Jane Fox   9/25/200,  1:48:14 PM
Linda maybe you only need to keep your dog around and forget the trendlines.

 
 
  Linda Piazza   9/25/200,  1:46:40 PM
You know the stories about the dog eating your homework? From somewhere or the other, probably from under the armoire that houses my computer equipment, my golden retriever puppy dug up an old 3M Post-It note and was chewing it. When I pulled it out, it read: Historical 15-minute, 510.90. Descending trendlines @ 511.60, 512.90. Also historical. It sounds as if we were watching these same levels sometime in the past. This is why I often keep old trendlines on my chart. Even though they seemed insignificant when first placed there, they sometimes come into play again.

 
 
  Linda Piazza   9/25/200,  1:38:21 PM
Remember that we're moving into the stop-running part of the day when markets are run up to next resistance or down to next support, with those levels being tested. We want to see resistance hold or support fail. Or both.

 
 
  Linda Piazza   9/25/200,  1:29:59 PM
Reader M. mentioned a few minutes ago a confirmed H&S on the NDX one-minute chart. The OEX also has a H&S-ish pattern on the one-minute chart, but as the reader and I were discussing, patterns discovered on one-minute charts sometimes don't fulfill their downside targets. The OEX looks to have done so, however, so now we can see that first sign of weakness in a bearish pattern confirming and then a second sign with the downside target being met. For a long time since this spring, we didn't see that happen often. Now we need to see more signs of weakness for our trade to work.

 
 
  James Brown   9/25/200,  1:24:01 PM
The afternoon's sector Winners & Losers:

-- Sector Winners --
GSO software index: +0.58%
DJUSHB homebuilders: +0.66%
IUX insurance index: +0.4%
BIX banking index: +0.52%

-- Sector Losers --
XAU gold & silver: -2.78%
DFI defense index: -1.65%
OSX oil services: -1.16%
Dow Transports: -0.79%

 
 
  Linda Piazza   9/25/200,  1:23:25 PM
The 50% retracement of the drop from yesterday's high to today's low, the flagpole drop, lies at about 509.95, so we now hope to see the OEX stay below that level. I've set our stop a point above that, with the stop still set at a somewhat risky level just below, not above, the 60-minute 130-pma. This morning, the OEX retraced roughly 38.2% percent of the flagpole drop before turning down.

 
 
  Linda Piazza   9/25/200,  1:17:21 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower stop to 511.

 
 
  Linda Piazza   9/25/200,  1:11:30 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We have a bearish OEX position from OEX 507.15, with a rather wide first stop at 512 and an initial downside target of 503. This doesn't appear to be a good risk/reward parameter, but I hope to be lowering the stop soon, and possible the downside target, too.

 
 
  Linda Piazza   9/25/200,  1:09:12 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Enter a bearish OEX position now. Initial stop 512. First target 503.

 
 
  Linda Piazza   9/25/200,  1:06:50 PM
It's getting close to time for us to consider switching sides, and entering an official bearish position on the OEX. Stay tuned. Entry upcoming.

 
 
  James Brown   9/25/200,  1:03:34 PM
eBay Inc (EBAY) ... I know Jeff was commenting on EBAY yesterday and the stock is grabbing buyers attention today. Shares are up 2.7 percent and are quickly approaching current overhead resistance in the 57.00-57.50 area.

 
 
  Jeff Bailey   9/25/200,  12:58:26 PM
Lucent (LU) $2.23 +1.36% ... Gets $230 million CMNA deal with China Unicom. Earlier this morning there was "rumor" that LU might have gotten this contract, but LU just now confirming. Talk of this deal had UTStarcom (UTSI) $34.21 -2.48% falling to $32, but Prudential and Merrill say LU's win is no big negative for UTSI.

 
 
  Jeff Bailey   9/25/200,  12:49:23 PM
Dell Computer (DELL) $34.41 +1.5% Link ... announces it will launch a new music service and begin selling digital music player, a flat pannel television screen, and a new handheld computer line of products in Q4.

Announcement from DELL may have brought some selling into Roxio (ROXI) $9.84 -4.9% Link and Apple (AAPL) $20.58 -3.56% Link in today's trade.

 
 
  Linda Piazza   9/25/200,  12:46:31 PM
I hope the OEX gets closer to 511 before rolling, for the benefit of those in the unofficial countertrend OEX long play but also so we have a sound entry on an official bearish play with a reasonable stop. If the OEX rises close to the 60-minute 130-pma at 511.27, we can place a stop about a point above the 60-minute 100-pma at 512.18, with the stop then just above 513, possibly at 513.50. That would be closer than our usual four-point stop when initiating a play. That may not happen, but it would work out well if it did. Of course, I'm still keeping an open mind about the possibility that the OEX could move up through both those averages instead of rolling down. That's why I want the close stop.

 
 
  Linda Piazza   9/25/200,  12:41:03 PM
The 30-minute RSI and CCI now begin to flatten again. If the OEX can't mount another new day's high, they're going to begin turning down. I'd still be considering exiting a long on a move beneath 507.50.

 
 
  Linda Piazza   9/25/200,  12:35:38 PM
The OEX bounce today came via the 50-dma, at 503.04, with the low of the day at 503.14. Currently, if the day were to end at this point, the daily chart would show the OEX springing up from that 50-dma in a small-bodied bullish candle, a possible reversal signal. It wouldn't be conclusive, though, because the OEX hasn't yet retraced more than 50% of the previous day's candle. That 50% retracement of yesterday's candle lies the 21-dma at 511.62, the 60-minute 21-pma at 510.89, the 60-minute 130-pma at 511.28, and the 60-minute 100-pma at 512.18. The 30-minute 100 and 130-pma's now join near 512.76. With all that resistance to face and with the behavior of the Nikkei and European markets as an example, it would seem that the OEX would have difficulty climbing above a 50% retracement of yesterday's candle, but I thought I'd point out the current possibly bullish look of the day's candle. I'm expecting it to look less bullish by day's end, but I'm also trying to preserve that neutral outlook when viewing the chart.

 
 
  James Brown   9/25/200,  12:22:00 PM
AutoZone (AZO) A reader asked me about AZO and if the pull back to $90 was an entry point for another bullish play (at least I assume they were looking for a bullish play). I can't offer individual advice but here are some of my thoughts on the stock.

The company just reported earnings on Monday of this week where AZO beat estimates in the $1.92-1.95 range with results of $2.29 per share. The big result appears to be powered by cost cutting and or higher margins because revenues dropped 0.8% to $1.83 billion. That right there should be a caution flag.

The initial reaction was positive and the stock ran from $90 to $96 in two days time bolstered by an upgrade at Piper Jaffray who raised their price target for AZO to $109 from $92.

AZO resisted the profit taking yesterday and today's drop could just be a delayed reaction. Shares have bounced off their lows today and remain above what should be new support at $90. Short-term traders might want to keep an eye on AZO for a continued bounce but I remain cautious.

Here's why. Chart: Link The long-term trend of higher highs is bullish for the stock but there is a very clear pattern of profit taking once it reaches these "peaks". An aggressive player could try and scalp a few points back towards $96 or even speculate on a move to $100. As Jeff likes to point out, many stocks that trade $90 tend to trade $100 before the profit taking sets in. Unfortunately, we can't know whether the Tuesday-Wednesday move was short covering on the positive earnings news or new buyers or both. Volume was certainly strong which should give the bulls more confidence.

Of course as I write this the bounce in AZO is picking up speed. If you're bullish, I think a play could be made with a stop under $90. Just be super careful to follow it and if there isn't any momentum behind the bounce today then I'd probably bail pretty fast instead of watching the stock fade back to $90 and then breakdown.

 
 
  Linda Piazza   9/25/200,  12:21:45 PM
If I were still in the unofficial OEX countertrend long trade myself, I'd probably be tuning to a one-minute chart, setting my stop on the previous one-minute low. That's too tight a stop for a normal trade, but this isn't a normal trade. So far, since 10:30 ET, the OEX has not violated a one-minute low, so this would be a change in pattern if it did so. The last one-minute low was 507.55.

 
 
  Jeff Bailey   9/25/200,  12:17:49 PM
German DAX 3,358 +1.56% .... volatile bugger today, but finishing with a gain.

 
 
  Linda Piazza   9/25/200,  12:15:35 PM
Those in the OEX countertrend long trade can thank me for the last push above 508. I chickened and bailed from my position, and the OEX immediately moved up above 508! However, there's more to my bailing than that. Sometimes I can't watch a trade as carefully as I want if I'm in it, too, and I was finding it difficult to monitor this countertrend trade because of my own position. As I mentioned earlier this morning, consider setting a profit exit ahead of an expected downturn on this position or else tighten stops quickly. Anywhere between 509-510 might be a good profit-target level to consider. I mentioned this need early, before the trade, so that daytraders could consider their option strikes to take advantage of a small expected move. There's still the possibility that the OEX could move up to 511 and even above that, of course, although that seems unlikely at this point. I'm trying to maintain a rather neutral bias, however, so I don't get trapped into believing something is going to happen without seeing the developments that might point an opposite direction.

 
 
  Linda Piazza   9/25/200,  12:04:44 PM
OEX 508 is proving to be a struggle. I'm personally going to exit my long trade just under 507 as I don't like giving countertrend trades much room. I'd expected a test of 509 and possibly all the way to 511, but that may not happen.

 
 
  Jeff Bailey   9/25/200,  12:02:42 PM
QQQ $33.65 +1.3% ... now higher from the chart I'm about to show, but try to explain potential need to have used three-levels of trade based on a rather tight 1st five minutes. This may be slight adjustment for day trader to make based on early morning observation of how many levels were traded early, looking for any pattern from levels of trade. Link

Saw 3-levels down, then 3 levels back up, then 4 levels down. For bearish pattern to have continued, would NOT have wanted to see more than 3 levels back up based on tighter range, and levels traded early. As such, bear may have placed a stop just above $33.36 after seeing $33.15 trade.

Those now bullish, can use to now think that QQQ should NOT trade more than 3 levels below a higher level of trade. From current $33.65, that would be $33.45.

 
 
  Linda Piazza   9/25/200,  11:47:47 AM
A new high of the day for the OEX. If in the unofficial OEX long trade, keep snugging up those stops. Remember that we're going to consider an official bearish trade if we see a rollover beneath 511.50, so be ready to switch sides if the OEX begins that rollover.

 
 
  James Brown   9/25/200,  11:41:15 AM
French Roast? Starbucks plans to open its first French store early next year. Looking at the charts on SBUX the long-term trend looks tempting for a LEAP play but short-term options would probably wither in the sideways consolidations this stock seems to produce. Hmm.. maybe it's a decent covered calls candidate. (LEAP investors should probably wait for a better entry point.)

 
 
  Jeff Bailey   9/25/200,  11:39:54 AM
QQQ $33.54 +0.96% ... late trade BEAR should be stopped out here, or just above $33.36. QQQ retracmenet is rather tight today on 5-minute bar, and $33.36 would have been 3-levels above RED #4.

Usually just give two levels of trade, but may make slight adjustment when we see 3-levels traded early in the morning (first 15-minute of today's trade), where that would be the pattern of trade. Will try and explain this observation in a minute.

Should now look for support to form intra-day near $33.36.

Stocks tend to trade a little better (based on my observation) on the 2-level system, but there the focus is on one stock, not 30 (INDU) or 100 (SPX/OEX) or 500 (SPX), which may sometimes (based on 1st 5-minutes) be rather tight.

 
 
  Linda Piazza   9/25/200,  11:34:50 AM
Hmm. Maybe OEX 507 was significant, too. The 30-minute OEX MACD histogram is now above signal, with CCI moving up toward zero. RSI flattens, however. Volume patterns remain negative. Anyone involved in this unofficial OEX long trade should be aware that this is (probably) a countertrend trade, with volume patterns opposing the trade. Follow the trade up closely with stops, perhaps currently considering a 504.50 stop if not a higher one. I would consider exiting ahead of 509.50-510, if the OEX should rise that far, or else tightening stops even closer as that level is approached.

 
 
  James Brown   9/25/200,  11:33:56 AM
Gilead Sciences (GILD) - Shares of GILD, a current OI put play, are up 32 cents to $56.50 after USB starts coverage on the stock with a "market perform" this morning. Shares are trying to break support at $55.

 
 
  Jeff Bailey   9/25/200,  11:31:42 AM
11:00 Update posted at this Link

 
 
  James Brown   9/25/200,  11:30:19 AM
Hopping on the Bandwagon... is Morgan Stanley who cuts the defense sector to "in line".

 
 
  Linda Piazza   9/25/200,  11:28:01 AM
Based on the way the OEX jumped once moving above its opening level (as seen on the one-minute chart), that move appears more important perhaps than the 507 level, but the OEX won't be out of the short-term congestion zone until it moves above 507.

 
 
  James Brown   9/25/200,  11:26:19 AM
BAC reduces Defense... following the Smith Barney downgrade for the Defense sector on Tuesday, now Bank of America is cutting the defense sector to "Neutral". BAC reduces L-3 Communications (LLL), Northrup Gruman (NOC), and Lockheed Martin (LMT) to "neutral".

BAC is slashing Raytheon (RTN) to a "sell". Shares are down 2.8 percent to $28.00.

The DFI defense index has fallen four days in a row. The move has broken its rising channel and the simple 50-dma.

 
 
  Linda Piazza   9/25/200,  11:07:52 AM
Swing Trade Signals
I'm not going to make this official because it's a countertrend trade and because volume patterns are bearish, but those who don't mind taking on a lot of risk could consider a long OEX trade on a move above 507, but I'd certainly consider an automatic profit exit at about 509.50 or 510 or else follow up with tight stops as those levels were approached. There's just too much opportunity for a turnaround.

 
 
  James Brown   9/25/200,  11:04:34 AM
Protein Design Labs upped again. ...PDLI receives its second upgrade in a week. Last week Fortis raised it to a "buy" from a "hold" and this morning CE Unterberg upgraded PDLI from "market perform" to "short-term buy" with a $25 price target. The stock is up 1.4% but remains under resistance at $15.00.

 
 
  Linda Piazza   9/25/200,  10:58:21 AM
The OEX has retraced more than half the first 30-minute candle. If we get a 30-minute close at this level or above, those two candles together may be signaling a possible short-term reversal signal. 30-minute CCI trends up and RSI is hooking up, too. 30-minute MACD lines try to touch again. There's no longer any divergence there, however, both price and MACD lows are lower. We might soon need to consider whether we're going to consider a countertrend long OEX play.

Complicating this picture are the bearish volume patterns and the VXO (old VIX) number. It's currently 23.51, with the VXO moving out of the congestion zone it previously occupied. (I think. Q-charts messed up the historical chart on the VXO, not transferring the old VIX values. I'm doing this from memory.) I believe that the VXO needs to move above 24-25 before it's completely out of that zone, but a move over 22 signified a move out of the worst of the congestion.

 
 
  Linda Piazza   9/25/200,  10:51:03 AM
The OEX daytrade based on Jeff's 5MRT would have just been stopped out, at the entry level. While an OEX daytrader would have paid the spread, or some portion of it, and commissions, the method still allowed a reasoned examination of entry and exit points, getting the trader out before suffering a big loss. Looks interesting. As Jeff commented in his original article, you wouldn't want to enter a trade based on this method if the first five-minute range was too small, as that wouldn't suggest a big enough range for the day. Maybe as we watch these trades set up (unofficially), we'll get a feel for how large the first five-minute range would need to be on the OEX to expect a reasonable chance to profit from a daytrade. I'll follow them as often as I can, although today I was able to do it only because the OEX wasn't at a point at which I was considering a Swing Trade entry.

 
 
  Mark Phillips   9/25/200,  10:49:28 AM
Fundamentally Flawed The negative news out of EK this morning is a strong reminder of why it is so difficult to trade fundamentals. I've had a very negative view of the company for the past few years due simply to what I believed was an unsustainable dividend and a flawed business model, where the company was still trying to win in the marketplace without seriously embracing the digital age. My beliefs were vindicated this morning, with EK slashing its dividend and announcing a new strategy to embrace the digital medium. It feels like too little, too late to me and apparently investors agree, as they are driving the stock to its lowest level since 1986. Link

What I think is important to note here is how difficult it is to trade fundamental data. I've been playing the downside in EK on several occasions over the past couple years, with limited success. The reason why is that the bearish fundamental picture that I saw had not been fully embraced by Wall Street and EK failed to trade new lows throughout the past 22 months. Bears that continued to short the stock on the fundamental information would have had to take a lot of heat over the past 2 years, while those that took advantage of technical information could have shorted at the top of each of the failed rallies would have fared a bit better. I think the point is that we can use fundamental data to form an overall view of a stock, but the execution of actual trades should be based on the technical picture visible on the charts.

 
 
  James Brown   9/25/200,  10:48:52 AM
Red Hat Inc (RHAT) get's tipped... lower as Deutsche Bank cuts the stock from a "buy" to a "hold". Shares are a bit too cheap to play options on but stock traders like to follow it. RHAT almost hit $11 yesterday but now look ready to retest the $9.00 level soon.

 
 
  Jeff Bailey   9/25/200,  10:47:36 AM
German DAX 3,311 +0.13% Link .... Deutsche Bank (DB) $61.61 -0.17% Link

 
 
  James Brown   9/25/200,  10:44:01 AM
Blame on the Lobster ...Darden Restaurants (DRI), parent company to Red Lobster, among other chains, reported earnings last night. The company beat estimates of 40 cents by a penny but guided lower for the next quarter. Management blames a poorly calculated "all you can eat" crab promotion for the weakness.

Both CIBC and Raymond James have downgraded the stock today and shares gapped down from $21.37 to 19.38. Shares currently down $2.33 or -10.9 percent.

 
 
  Linda Piazza   9/25/200,  10:43:50 AM
The OEX looks to be turning down just ahead of the downside #2 on Jeff's 5MRT. So far, the play would still have been active, with the OEX down about $0.80 since entry.

 
 
  Jeff Bailey   9/25/200,  10:40:42 AM
S&P 500 Index (SPX.X) 1,006.45 -0.29% .... just off session low of 1,005.02, which is too darned close to our "sliver zone of support" from last night's Index Trader Wrap.

I see too that QQQ $33.22 (unch) got a bounce from its MONTHLY 38.2% retracement of $33.09 at its current morning low.

With this observation, I will suggest QQQ BEAR from late yesterday afternoon's short, stick a bid out at $33.02 for a cover on weakness type of day trade closure. Then could look for rebound back near $33.36 for another entry.

 
 
  Linda Piazza   9/25/200,  10:30:18 AM
It certainly looks as if we should have stayed in yesterday's trade or perhaps entered on the break below this morning's consolidation zone. The OEX hasn't slowed its descent as it approached support near 502.50-504. It's within that zone now.

For those following Jeff's 5mrt on the OEX, the OEX just hit downside #4, so I believe the stop should now be lowered to downside #2, at 504.64.

 
 
  Jane Fox   9/25/200,  10:27:05 AM
5MRT - or 5 MURT - I like it and is so dubbed.

 
 
  Jeff Bailey   9/25/200,  10:25:16 AM
Per Jane's 10:17:42 ... How about 5MRT, pronounced "5-murt" for 5-minute retracement technique? One day, my trading buddy John Seckinger and I were sitting around, scratching our heads, and watching a sideways morning trade. We started playing around with retracement, in an attempt to find an intra-day level that might give a directional bias. I slapped a retracement on the first 5-minute bar, and for some reason, market really darted lower when a #2 level was traded. "This can't be so" we thought in unison. Then began backtesting on other days and found some very correlative trade take place on daily basis.

Started to make sense as it relates to how a market can trade levels.

Also turned us on to the pivot matrix analysis.

 
 
  Linda Piazza   9/25/200,  10:23:50 AM
Jeff's daytrading five-minute technique currently triggers a bearish play in the OEX, with a stop at about 507. The downside offered isn't enough for us to try this out on even an official basis, however, since we OEX-ers have to pay for those spreads. We already knew the downside might be limited because of our study of next possible support levels, too.

 
 
  Linda Piazza   9/25/200,  10:19:26 AM
The OEX now falls through this morning's support as well as through the supporting trendline (or at least one possible version) on the daily chart. The 30-minute indicators turn down again, too. I just don't have the courage to enter a bearish position here, right in front of OEX 502.50-504 and SPX 1005 and 1000.

 
 
  Jeff Bailey   9/25/200,  10:18:09 AM
Dow Industrials (INDU) 9,391 -0.37% ... session lows here. Can weigh on investor/trader psychology.

HPQ $19.64 -1.55% session low. Should bring selling toward QQQ.

 
 
  Jeff Bailey   9/25/200,  10:14:20 AM
Semiconductor Index (SOX.X) 440.43 +1.4% .... session highs here and using 5-minute retraceent would be just below BLUE #2 of 440.91.

QQQ trader might think break above 441 could bring bid to QQQ.

 
 
  Jeff Bailey   9/25/200,  10:09:47 AM
Russell 2000 Index (RUT.X) 507.19 -0.13% .... just sitting here at session lows. Has me slightly bearish intra-day on the QQQ $33.41 +0.54% gains right now. (day trader perspective).

 
 
  Jeff Bailey   9/25/200,  10:06:42 AM
German DAX 3,330.78 +0.71% holding a 23-point gain.

 
 
  Linda Piazza   9/25/200,  10:06:37 AM
Of course, "the bounce" had ended by the time I could send upload that last message. We're still in the chop, but there's now a touch of the 30-minute MACD lines. Be careful.

 
 
  Linda Piazza   9/25/200,  10:05:05 AM
We're getting the bounce that appeared to be in the works, at least from the outlook on the 30-minute MACD. What's unknown and extremely uncertain is how far that bounce will carry the OEX. We're still bouncing around inside the five-minute congestion zone that tops out at about 507, but I wouldn't be surprised to see either that retest of 511 or a downside move down to 502.50-504.

 
 
  Jeff Bailey   9/25/200,  10:04:00 AM
Dow Jones Home Construction Index (DJUSHB) 457.08 -0.36% is little changed, while PHLX Housing Index ($HGX.X) 306.33 +0.25% also little changed.

 
 
  Jeff Bailey   9/25/200,  10:00:48 AM
Housing data New home sales +3.4% to 1.15 million units, better than forecast of 1.123 million units.

 
 
  Linda Piazza   9/25/200,  9:57:39 AM
As Jim himself taught us to recognize, be aware that the first reaction to economic numbers is not always the final reaction.

 
 
  Jeff Bailey   9/25/200,  9:53:51 AM
QQQ 5-minute intra-day with WEEKLY levels overlaid. Link

Rather tight 1st 5-minutes, but using for retracement shown today. Yesterday we used 1st 10-minutes of trade.

Would continue to hold with stop just above at $33.56. Going to be close, but should be enough room into the 10:00 AM economic data.

 
 
  Linda Piazza   9/25/200,  9:40:48 AM
The OEX retraces more than 50% of the first five-minute range, a sign of early weakness, but the 30-minute MACD continues to curve up toward a bullish cross. It hasn't accomplished that bullish cross yet, and may not do so, but that's a warning to us not to jump too quickly into the bearish camp here. We're getting mixed signals. If it does cross, it's showing bullish divergence with price (subject to interpretation by different technical analysts). I'm not likely to enter a trade, particularly a bullish one, ahead of the 10:00 numbers, which may mean we miss our opportunity to participate in a first whoosh up to test support-turned-resistance, if that happens.

 
 
  Linda Piazza   9/25/200,  9:35:52 AM
The 50% retracement of the first five-minute OEX range lies at 506.37. Note that this technique of using the 50% retracement of the first five-minute range is different from and has a different purpose than Jeff's use of the first five-minute range to stack retracement levels to guide daytrades throughout the day. Watching how the OEX trades in relationship to the 50% retracement of its first five-minute range is meant to show early strength or weakness only, when we don't yet have much information about the market's behavior. According to candlestick theory, too, that level is significant only when a candle spans a larger-than-normal range. Today's first five-minute candle spanned a larger range than the previous few candles, so I think it's a viable premise to watch that level.

 
 
  Linda Piazza   9/25/200,  9:28:28 AM
Jane has just posted overnight highs and lows in the Futures Monitor. I was watching futures trading last night, too, and, in light of the Nikkei's continued sell-off last night, I was surprised to see our futures hold so steady. While the steadiness of our futures isn't proof, it did confirm my hesitancy to carry the bearish OEX trade overnight, as it seemed to hint that there was an attempt to steady our markets at this level, at least temporarily. Let's see if it holds past the first 30 minutes.

 
 
  Linda Piazza   9/25/200,  9:21:44 AM
Swing Trade Signals
The Swing Trade Model is flat today after closing our bearish trade just before the end of trading yesterday. Although Swing Trades are designed to be held for several days if the parameters are right, here's one reason I did not keep this trade open overnight, based on the daily chart: Link If that descending trendline is broken, the close proximity of OEX 503-504, Dow 9415-9420, and SPX 1000-1005 support cannot be ignored, either. The risks of holding overnight seemed to outweigh the likely gain before the indices attempted a major bounce.

Here's another reason, based on the 60-minute chart: Link The 60-minute chart shows how the OEX has traded in relationship to the 60-minute 100- and 130-pma's, perhaps in a closer relationship lately than to the respective 30-minute averages. Since falling through those 60-minute averages, the OEX has not retested the broken support, so we'll be watching for that to happen. We're going to hope for a bounce and then rollover somewhere under 511.50 or perhaps even under 513. Based on a long-term ascending trendline that has now been violated, it's even possible to see a retest up to 516 before the OEX finds its strongest resistance.

What about a long trade on a possible move from yesterday's close up to 511.50? With daily RSI punching through a rising trendline, daily 21(3)3 stochastics rolling down out of territory indicating overbought conditions, and daily MACD lines touching and curving down, that would likely be a countertrend daytrade that would have to be entered and exited at exactly the right points. We'll consider it, but I'm not sure yet whether I'll attempt such a trade on an official basis.

What if the OEX falls through 506 instead? With OEX 502.50-504 support close underneath and with the even more significant SPX round-number support at 1000 close underneath, too, I think we'll likely stand aside and watch, unless there's a break of those numbers. A test of and bounce from those support levels might make me more willing to risk a long play, however, as there might be more possible upside before we risk a rollover.

 
 
  Jeff Bailey   9/25/200,  9:19:11 AM
09:00 Update posted at this Link

 
 
  Linda Piazza   9/25/200,  9:15:37 AM
Good morning. The Nikkei opened sharply lower in Thursday's trading and stayed negative all day. At the 10,225.48 low of the day, the Nikkei had fallen more than 900 points from last Friday's 11,160 high. Worries over higher oil prices and the strengthening yen drove the index lower, but the Nikkei traditionally trades down in the 100 days after a general election such as last weekend's, so even without those worries, expectations had been for a decline beginning this week. The Nikkei closed down 192.25 points or 1.83%, at 10,310.04.

Most other Asian bourses traded down, too. The Taiwan Weighted fell 0.60%, and South Korea's Kospi fell 1.54%. Singapore's Straits Times lost a more modest 0.26%, and Hong Kong's Hang Seng fell an even more modest 0.08%. China's Shanghai Composite fell 1.29%.

Most European bourses also turn down as I type, with the exception of the DAX. This morning, the German September Ifo Business Confidence index was reported, with the number rising to its highest level in 2 1/2 years. The number rose to 91.9 from August's 90.8, with the rise surprising slightly to the upside. Some question whether the since-strengthening euro will undermine that growing business confidence, but the DAX nevertheless is one of Europe's few bourses trading in the green. Countering the hope engendered by the German number is information today says that the French 2004 budget deficit is likely to breach the limits established by the stability pact and the release of the Italian September Business Confidence number, which fell.

Currently, the FTSE 100 trades down 24.70 points or 0.58%, at 4211.70. The CAC 40 trades down 39.51 points or 1.21%, at 3224.27. The DAX has gained 19.76 points or 0.60%, and trades at 3327.10, near the middle of its range for the day.

 
 

Market Monitor Archives