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SH @ the close 5/18/12: Facebook fails to get traders to “like” market

stockhaven — Fri, 18 May 2012 21:21:50 +0000

There isn’t much to like about the market today, even on a day that the company that tells lets you choose to do just that completed the most talked about IPO in history. The market cracked below further support levels after struggling to stay near the break line thru much of the morning. The S&P500 broke psychological support at 1,300 and USO (the ETF that tracks oil) broke to another lower low. All of this as the VIX again rose to its highest level of the year, and finished up every day this week.

Friday seemed to be the explanation point bears were looking for as it capped what was the markets worst week of 2012 and worst overall since November. Oil has now closed lower 3 weeks in a row, something it hasn’t done since May 2010. The VIX meanwhile has closed higher 6 out of the last 8 weeks, something it didn’t even manage to do during the crash happy days of August and September. In addition, the last 4 days all saw the VIX go red at some point, only to finish the day in the green telling us there is a lot of demand for volatility protection on any dips lately.

We’ve been saying for the last couple of days that we’ve been due for a bounce and at times the market has almost done just that. However, now we have to question why the hell there hasn’t been any type of bounce? Each technical support level has just given way to the next one and so on and so forth, making it very difficult to place any bullish bets even though we’ve corrected 13% off of the 2012 highs.

SH @ the bell 5/18/12: Market looks for a “friend” in Facebook IPO

stockhaven — Fri, 18 May 2012 03:05:12 +0000

Facebook may be wishing they did held their IPO a month ago, when the S&P500 was above 1,400 and the NASDAQ was at 10 year highs. Instead of Facebook being the potential catalyst to push the NASDAQ even higher, now it needs to be the saviour the tech heavy composite desperately needs. Close to key support in the 2,780-2,800 range, a successful IPO performance for Facebook should be an excuse for a technical bounce in the index, and in turn the broader market. Given the action in the VIX though, any bounce may now be used as a selling opportunity.

On Thursday, the VIX closed at its highest level while in an uptrend since September 21st, and its highest level for the year in general. The current four day winning streak for the VIX is also only its 2nd since the following week during that month of September. Given that Spanish 10 year yields remain above 6%, and Italy’s look like they want to get there, Europe is likely to remain in the headlines. With Europe remaining in the headlines and these bond yields elevated, we’re not likely to see a meaningful drop off in volatility anytime soon. Not until the yields come down will the media stop making such a big deal out of Europe.

Getting back to Facebook and the state of the NASDAQ though, our outlook isn’t that bright. While we do believe a good portion of this pullback has played itself out, the action in tech leaders like AAPL, PCLN, CSCO, INTC, & MSFT has been dismal as all of them have broken below their most recent lows. Making matters worse, AMZN, which had been a strong performer and managing to stay above the base of its post earnings gap higher, violated that support on Thursday. So not only are we seeing stocks that were strong to start the year trade weakly now, but we’re seeing stocks that were strong just 1-2 weeks ago breaking support as well.

Therein lies the techincal problem for Facebook and the NASDAQ. Even if FB performs great, it will be doing so in spite of recently poor price action amongst its peers. 1-2 months ago had FB IPO’d and performed well we would have said it was doing so along with its technology peers. These are the types of characteristics associated with a market that is struggling to find its footing after downtrend. For some of our remarks regarding how to day trade FB, watch the video we put together here.

Stockhaven’s Classroom 5/17/12

stockhaven — Fri, 18 May 2012 02:56:28 +0000

Thoughts for day trading the Facebook IPO… Tickers reviewed: GWBU, SIRI, FFN, CMGO, BIEL, MELY, MSLP, SPY, PAPA, CHD, IZEA

(Please excuse the blip about 23 minutes into tonight’s classroom video that caused to have to break it down into 2 parts)

Part 1:

Part 2:

SH @ the close 5/17/12: Sell off picks up steam but there might be relief soon

stockhaven — Thu, 17 May 2012 20:01:49 +0000

The markets continued to fall with the Dow Jones breaking below its late January low and now finishing lower 10 out of the last 11 days. Off of their year-to-date highs, the market has not corrected between 9-11% depending on which index you choose to measure. While the technicals in the index only got worse today, for the first time this month we got a couple early signs that we could see a bounce. Those signs came courtesy of the action in oil and the dollar.

Today oil traded in relatively the same range that it traded in yesterday, suggesting the supply/demand equation is coming to balance after it has dropped 10 out of the last 11 days. Recent history tells us that oil tends to lead the market in both direction so the fact it traded flat while the market continued to sell off could be a sign broader market weakness could subside in the immediate term. We’re not calling the action in oil bullish, and its downtrend is in tact and has been very aggressive, but the action today could prove to have been telling this time tomorrow.

Similar to the way oil traded the last 2 days, the dollar also pretty much stayed in the same range today as it did yesterday. This coming after the dollar has rallied every day this month but it struggled to hold gains today. Like oil, this too could be a sign that the current trend in the dollar is ready for a pause. There’s no questioning the bullish trend the dollar is currently in, but a streak like this is due for a breather sooner or later, and the similar ranges of the last 2 days could mean breather is coming soon. The strength in the dollar has coincided with terrible weakness for our markets, so this could be another technical signal that a short term bounce may be coming for stocks.

SH @ the bell 5/17/12: Searching for strength in a weak market

stockhaven — Wed, 16 May 2012 23:50:54 +0000

The true test of one’s skills as a trader is if they can make money in both a rising market and a falling one. The easiest way to do this is by mastering short trading, be it thru put options or the stocks/index ETF’s themselves, but its not the only way. You can also search for stocks/sectors that are holding up well in the face of broader market weakness and trade within those trends. One of the ways to identify what those stocks/sectors might be, is by comparing the numerous SPDR ETF’s: XLY, XLE, XLU, XLP, XLV, XLK, XLF, XLI, XLB.

When evaluating these various sector ETF’s you should look for signs of strength. For example, the broader market has fallen below its most recent lows of April and March, so sector ETF’s that haven’t done the same could be revealing some underlying strength. Based on criteria such as the one cited in our example, XLY, XLU, XLP, & XLV are all showing signs of strength relative to the market. What’s especially interesting about this, is that 3 out of the 4 (all but XLY), we identified as being benefits of potential sector rotation back on April 5th. Here is a sample of our research from back then:

“Being that this week brought the start of a new quarter, we believe we might be observing some sector rotation right now. We’re going to start by analyzing the year to date gains seen in key sector ETF’s to determine what sectors have performed well so far in 2012:

XLF (financials) up 19.8% ytd
XLK (technology) up 17.6%
XLY (consumer discretionary) up 14.6%
XLI (industrials) up 10.8%
XLB (materials) up 10%
XLV (healthcare) up 8.7%
XLP (consumer staples) up 5.5%
XLE (energy) up 2.7%
XLU (utilities) down 1.6%

As you can see, financials & technology have been by far the best performing sectors of 2012, with consumer discretionary not far behind. Industrials, materials, & healthcare have performed solid. Meanwhile, consumer staples, energy, and utilities, have all lagged behind. Now let’s compare the lows in these ETF’s seen this week (first week of Q2), to their lows from last week (last week of Q1) – % difference in ():

XLF – $15.57 last week vs $15.51 this week (-0.038%)
XLK – $30.03 vs $29.91 (-0.04%)
XLY – $44.39 vs $44.42 (0.006%)
XLI – $36.75 vs $36.95 (0.054%)
XLB – $36.33 vs $36.48 (0.004%)
XLV – $36.81 vs $37.43 (1.68%)
XLP – $33.64 vs $33.98 (1.0%)
XLE – $70.17 vs $70.53 (0.05%)
XLU – $34.39 vs $34.93 (1.6%)

Do you notice what we notice? The two sectors that performed the best in Q1, have performed the worst vs their lows from last week so far this week. Meanwhile, the four sectors that performed the worst in Q1 have held up better this week vs their lows from last week. In addition, materials and industrials, which performed good but not great, are also holding up better vs their lows from last week during the market weakness.”
-SH @ bell 4/5/12: Are we in the early stages of sector rotation?

The fact that these ETF’s have held above their most recent lows and that they started to hold up well in early April when the market had in fact put in what we now know was its year-to-date high (so far anyway), leads us to believe these sectors are indeed benefiting from sector rotation. The charts on these ETF’s, with the exception of XLY which has a ominous volume pattern, look very healthy. Now its just a matter of identifying some stocks within those sectors that also have healthy charts.

In the consumer staples (XLP) space, KO actually managed to make new year-to-date highs this month while the market has sold off. KO has pulled back recently, but its still above its prior breakout high around $74. If KO is too boring for you, try a sexy name like WFM, which surged to a new all time high in early May. Like KO, WFM has pulled back more recently, but is still in a very healthy uptrend and has support around its prior breakout highs in the $84-$86 range. There’s also a name like KMB, which traded to a fresh all time high on Wednesday and looks extremely bullish on the charts.

We know that shorting can be an intimidating and sometimes uncomfortable market skill to try and master, but to not trade at all simply because the broader market is suffering just means your being lazy. If you really want to find good opportunities, you just have to do a little research. Maybe that means looking at more charts than you normally do each night, but if you’re trying to avoid the carnage the market has been going thru lately it is completely worth it. You can get full lists of all the holdings of the ETF’s we mention to help guide you in your trading by visiting this link.

Stockhaven’s Classroom 5/16/12

stockhaven — Wed, 16 May 2012 23:48:41 +0000

Topics include: How to adjust your trading once your trigger PDT, how to catch a bounce, criteria for setting up your watch list and acting on signals those stocks give you, why penny stocks move, how to manage a stock that has gap on the chart… Tickers reviewed: GOOG, VRNI, AXCG, ORYN, CBIS, MNGA, SBUX, ROSG

Below is a text version of the submitted questions (italics represent Stockhaven’s comments):

1.) I know this site is concentrated on trading.
But due to certain group killing me (and me being foolish for not getting out when there still was chance), I am now under pdt.
I am considering changing my direction to take a look at long term investment.
How are you approaching these methods?
Do you read balance sheet and invest?

2.) I have watched the video you on playing a bounce and tried to play one on LUXR when it dropped down to about 2.28 a few days
ago or so. I saw the big bid support and the ask thinning so I put a bid in above the ask at about 2.30 when ask currently was at 2.29. No fill
and it bounced up huge so I was wondering if you have any suggestions on how to get filled in these situations when buying and also selling on the bounce
without going to crazy above the ask and below the bid. Any advice would be much appreciated.

playing the bounce — http://www.stockhaven.com/live-trading-video-playing-the-bounce/

3.) What criteria do u use to have a stock on your watch list?
What main alerts do you use during market hours, and how do u know if there legitimate breakouts?

setting up your watchlist — http://www.stockhaven.com/stockhavens-classroom-5912/

video’s that help in terms of volume & price recognition — http://www.stockhaven.com/trading-university/trading-university-videos/

http://www.stockhaven.com/stockhavens-classroom-41012/

must watches:
a must know trading stategy — http://www.stockhaven.com/a-must-know-trading-strategy/

explaining how to identify support and resistance — http://www.stockhaven.com/explaining-support-resistance-a-must-watch-video-lesson/

setting up scanner — http://www.stockhaven.com/how-to-set-up-your-scanner/

4.) I’m getting confused on how penny stocks move

IZEA has great news but its down for the day, nice volume
SUNV keeps moving higher, great news on 5/3/2012

how to determine if a penny stock is being pumped or its legitimate.

Great call on GWBU, where do u post your suspicious penny pumps or anticipate a great move in a penny stock on the website.

5.) Why does what’s happening in Greece pull our market down so much? I really don’t understand it. Greece sneezes and our markets crash. If Rhode Island has a budget crisis… Europe is unaffected. So why does Greece have so much weight over us?

6.) when a stock needs to fill a gap, does it need to drop into that gap
area or is it considered filled if its just above it? Also how so you
know a stock has a gap to fill?

Was wondering if I concern myself too much with gaps being filled.
The one on GWBU for instance just bugs me so I stay out.

video’s pertaining to gaps and how to deal wit them:

http://www.stockhaven.com/dont-chase-why-you-must-exercise-patience-video-lesson/

http://www.stockhaven.com/stockhavens-classroom-5812/

SH @ the close 5/16/12: A market full of rotten AAPL’s

stockhaven — Wed, 16 May 2012 20:20:50 +0000

The bears continue to do damage with oil and copper continuing their fall to new lows. In addition, the VIX closed at its highest level on an up day of the year. The VIX also closed above 21 on three consecutive up days for the first time since 12/2-12/06 and is on pace to close higher on back to back weeks for the first time since mid-November. Not be outdone as a bearish catalyst in its own right, the dollar edged higher for a 12th consecutive day, the dollar hasn’t had a down day once this month. As a result of these bearish technical events, the markets continued to drift lower.

Most telling to us was the action today in stocks like XOM, JPM, and FCX. All three initially started out the day very much in the green. However, by the time the closing bell sounded they were substantially lower, with XOM being the only one still able to finish green. When market leaders like these can’t hold gains, then you can’t expect the market to. Hey speaking of leaders, did you catch the action in AAPL today? The biggest company in the country slid to fresh new lows as it again broke below its prior days low, something its managed to do 4 days in a row.

AAPL hit an all time high of $644 on April 10th, but that same day it closed in negative territory. Out of the 27 trading days that have taken place from the time AAPL hit its all time high (4/10 included), AAPL has finished positive 6 of them, or just 22%. With May off to a brutal start, AAPL is on pace to post 2 consecutive monthly losses for just the 3rd time since bottoming in January 2009. The most recent occurrence was August and September in 2011, when bulls will note that AAPL put in a short term bottom before rallying some 70% to its $644 high.

There’s a gaping hole in such an argument though. Following that August month, even though AAPL closed lower on the month in September, it managed to stay above its August low. This time around however, AAPL has already gone below its April low which is a distinct difference between the weakness now vs. then. Carry the weigh that AAPL does, and being the market index leader that the NASDAQ has been, the sooner AAPL establishes a new base the better it will be for the overall markets.

SH @ the bell 5/16/12: XOM suffers TKO

stockhaven — Wed, 16 May 2012 01:07:27 +0000

When oil sold off on 5/3/12 after looking like it was poised to break out to the upside we noted that it represented a serious cautious sign for the markets. On numerous occasions, we’ve pointed out that oil has led the market over the last few years, higher and lower. While oil has continued to downtrend, taking the markets with it, an even bigger concern of ours is Tuesday’s action on XOM. After staying stubbornly above its April 10th low even while plunged over the last week and 1/2, XOM finally gave way to this key technical level, and dashed any hopes for a “higher low.”

In regards to XOM we said the following on 5/3:

“The silver lining regarding oil and the energy space is that XOM is still near the top end of its most recent channel. At its lowest point today, XOM was still above its low from last week. This is a positive because last weeks low was higher than the previous weeks low so if today’s low holds XOM will have put in back-to-back “higher lows” on its weekly chart.”
-SH @ the close 5/3/12: Bears have to be pleased by action in oil

Well silver lining no more. Had XOM been able to stay above the low end of its channel, it could have been a sign that the sell off in oil was nearing its end. Now that XOM broke down though, it has to be considered as a real “tell” for the oil market. What we mean by that is XOM’s breakdown below its 4/10 low is likely signaling that oil has further to fall. The next clear level of support for XOM comes from its early December trading range between $78-$80. We’ll now be looking to see if XOM starts to experience between $82-$84 (the range of its 4/10 low or roughly thereabouts).

XOM isn’t the only one, just the latest. FCX, the largest copper miner in the world broke below its key support level on May 7th. Ironically, FCX failed to bounce even as copper experienced a nice pop from $3.60 to $3.80. Since that time, copper has fallen below its prior low and has nearly gone red for the year. The continued weakness in FCX could be suggesting that copper is on the verge of a further move lower towards $3.25.

Stockhaven’s Classroom 5/15/12

stockhaven — Wed, 16 May 2012 01:04:41 +0000

Topics include: What determines which stocks you trade options on? How might one’s strategy change during the summer? Discussion some options plays surrounding Facebook, explaining order entry’s for option trades, adjusting to smaller ranges in AAPL, breaking out of a trading slump… Tickers reviewed: LNKD, TRIDQ, DGRI, FFN, GWBU, ORYN, JBLU, RARS, HD, UVXY, SHLD

Below is a text version of the submitted questions:

1.) When it comes to trading options, are there certain aspects of the stock that you look at differently, then you would when your just trading the stock? For example when you trade options on AAPL, where it trades 25 million shares a day, as apposed to CRM which I’ve seen you trade a decent amount that on average trades 2.5 million shares a day. Not only is AAPL much more liquid, but its price is is just over 4 time greater. That would lead me to believe that AAPL’s options are also much more liquid then CRM, or similar stocks.

So what makes you say you want to trade options on CRM or AMZN? Or what makes you say you don’t want to trade them? Is it the same criteria as just trading the stock like price action, volume, near support or resistance, history of making a move in the direction you want it to go, etc? Or are there other things that you take into account when your trading options, that don’t come into mind when you’re deciding to play a stock itself.

2.) How does your strategy change for summer trading to be successful? Does that mean watching a wider range of stocks & looking for smaller gains?

3.) Would you mind covering what the different options orders are and how they work?
For example do you use “buy open” to purchase a call/put and then to close the trade use “buy close” or “sell close?”
If you could go over what each one is used for that would be very helpful.

“Buy Open” “Sell Close” ”Sell Open” “Buy Close”
buy sell shorting covering your short

4.) I enjoy day trading AAPL options because it has such violent momentum when it decides a direction for the day. However, I have noticed the past week or two that AAPL has had MUCH smaller body candles than in weeks past, often bouncing intraday many times. I find a lot of people are having more success playing the channel that AAPL sits in during a given day, but I find it hard to trade this since often times it will peek out of the channel (triggering a buy on a channel break with good volume) but then come right back down.

My question is twofold: First, is there a good way (without indicators – I find they make things a lot harder to read) to judge when AAPL is going to simply channel intraday vs. having a big move? Second, how can I better gauge when AAPL is breaking out of its channel vs. bouncing off it and coming right back down?

5.) I have been with you guys since January and have grown a huge amount since I did my 1st trade ever in February. I am in a horrible slump right now, any idea’s on how to get out of it? Basically I can’t make myself buy into stocks. I see it will be a good gapper based off of what I learned and the next morning it gaps up. I failed to get in however. I follow a chart and see a bounce play, I see the bottom and still I can’t force myself to get in. I hesitate and then by the time I try to enter the stock has already gone up and I don’t chase. The 1st month I made over 32 trades and now find myself lucky if I make 1 a week. I haven’t lost a huge amount or anything like that. Is the market being slow effecting my trades? I really want to try and force myself into GWBU for scalp trades tomorrow when I see good entry points. Any tips or idea’s to make myself play more? At this point I almost feel like I would rather lose money and play a stock then to just sit around watching anymore.

SH @ the close 5/15/12: Oil, VIX, dollar, AAPL continue to plague market

stockhaven — Tue, 15 May 2012 20:48:54 +0000

The VIX closed above 21 on back to back up days for the first time since December. That’s definitely a sign to be using further caution here in the market. As we pointed this morning, this market is due for a bounce but we assume they will start getting sold into since the technical backdrop has weakened so dramatically and there isn’t any nearby support. We saw our first sign of that today as the markets initially followed oil higher, which had been up over 0.5%. However, by 1:00 oil rolled over and the market soon followed suit.

Making matters worse, the NASDAQ which hadn’t yet closed below its March lows, did so today. Much to the pleasure of market bears has to be the action in AAPL, which has no officially given up 100% of its post earnings move higher. AAPL closed at its lowest level since March 12th, and the chart suggests it could be on the way down to the $515-$535 range (that was the range from its March 6th bottom). This bearish action in technology is likely to receive a short term boost from Facebook’s IPO. The problem though is that instead of Facebook’s IPO being a catalyst to push tech higher like it would have been 1 month ago, it now has to be the savior that keeps it from falling much lower. Quite frankly, we’re not sure Facebook will be able to handle that responsibility.

Lastly, we’d be committing a crime if we did not mention the action in the U.S. dollar. The dollar traded higher today for the 11th day in a row, finishing at its highest level on an up day since mid January. You may recall from this video, that a rising dollar has tended to have bearish implications for stocks. Given this inverse correlation, and the strength in the dollar to recently, it’s no wonder the market has fallen on hard times. 1,321 (2/2 low) is the next support to watch in SPX and today’s high (1,344.94) becomes resistance moving forward.