Todays Markets 12/07/10

December 7, 2010 Leave a comment

Trading this morning was difficult as the SPY gaped higher above yesterdays trading range make new 52-week highs around the 124.00 level. While the longs have been the better trade over that past few weeks in this strengthening market, it was important to be patient during the open and wait for the proper signal to execute trade ideas during the first pullbacks, due to the near one hundred point gap higher at the open. Unfortunately as the morning pushed forward the markets continued to push lower making it harder to justify longs and to distinguished between risk only trade and trade that actually had a high probability for follow through.

On the flip side while long were not working out it was difficult to load up on shorts due to the recent strength in the market during this past few weeks. While it was prudent to wait for conformation on short ideas this could have resulted in missed entries and difficulties managing shorts.

In the afternoon trading we started to make a move to the highs of the day but could not hold the rally as we sold off hard into the close breaking lunch time lows and closing inside yesterdays trading range. In the markets today we did not see performance from the energy or technology sector which has been pushing the market higher. Both the oil service (OIH) and the semi-conductors (SMH) and its components has unenthusiastic performance in today’s trading.

A few trade ideas that worked out well for Keystone traders today was a short in United Airline (UAL). A short below yesterday lows was the entry area as we were below the 15 min ORB and below the 50 sma on the daily charts, which provided momentum as the stock pushed lower. The stock traded a dollar-plus below the entry area (shown in the charts below). The price action also provide a great exit signal in form of exhaustion on the five minute chart with the huge increase in volume near the 25.50 October support area. This increase in volume was a perfect clue to tighten stop or get out of the short position altogether.

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Market Action

December 2, 2010 Leave a comment

The SPY had a strong buying yesterday as we broke above two week trading range, closing above the daily 20 sma resistance level.  Good economic data out of the U.S. with the FED Beige Book reporting improvements in the manufacturing sector and good global economic data help support the market rally.  If SPY price action can hold above 20 sma and not fall back into trading range the next move is to test the November highs of 122.95. 

The technology sector did well in relation to the semi-conductor space as many of the major components of the SMH had strong buying during the open. ALTR presented a good momentum long in the morning trading coming off a pullback on the daily charts.  The price action gapped above yesterday’s highs and immediately continuing higher on good volume, with the 15 min chart creating higher high into the lunch time period. 

Commodities moved higher with the Euro bouncing off its daily 200 sma sending the dollar lower.  This resulted in the oil and oil service sector to continue higher with BHI, HAL, and SLB making new monthly highs and XOM trading back above it 20 sma n the daily charts.

Yesterday Trading

November 30, 2010 Leave a comment

With the markets trading sideways yesterday between the 20 and 50 sma on the daily charts follow through is limited until price action can break through support or resistance level. Looking at the hourly chart we can see intra-day there are a lot of support and resistance levels that need to factored in trading decision and game plan.

With this being said, it is very important to focus your game plan on the best sectors and stocks to achieve the highest probability for follow through. Having strong trade ideas long and short will give you great flexibility to take advantage of opportunity in the choppy market.

Yesterday the majority of Keystone traders made money on the short side as the SPY pushed lower during early morning trading which was supported by a rising VIX and weak tick reading, but continued sideways into the lunch hours. The afternoon trading provide a good opportunity as the SPY pushed higher. The Euro was able to break out of it small trading range which provide a nice long opportunity in commodity stocks, which was supported by the rally in the markets.

What’s in the News

November 28, 2010 Leave a comment

Over the past few months the dollar has been on steady rise against most major currency pairs. With the debt crises emerging again with Ireland accepting bailout funds from the ECB and with the continued concern of the debt crises spreading to other European countries such as Portugal and Spain many investors have been flocking to the dollar and gold as a safe haven. The 10-year bond spreads of Portugal and Spain against the German bond are near their highest levels since the Euro inception. With the increased yield investors are demanding to hold Portugal and Spain debt against German bonds signals the lack of confidence the EU will be able to contain the debt crises.

The dollar has also been rising constantly against the yen over the past four weeks. As military tensions between North and South Korea escalated this past week putting increased pressure in the regions.

As we can see from the daily SPY of the past week price action has been trading sideways between the 20 and 50sma with the 20 sma as the resistance level.  From my perspective trading will be very limited until we are able to pick a direction above or below the simple moving averages to expect some follow through or trade ideas.

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Update

November 24, 2010 Leave a comment

Well the SPY did not hold the 20 sma on the daily charts. price action declined sharply during the better half of Monday morning when the new of Ireland receiving 90 billion euro bailout from the ECB was announced. This led to a sharp decline in the SPY while the dollar pushed higher against the euro, sending gold higher throughout the day and depressing commodities. We did recover most of the decline in Mondays afternoon trade, just to open lower on Tuesday morning with no real follow through in either direction throughout the day.

Even though we open lower Tuesday morning, it felt like the longs were playing out much better that shorts ideas. BRCM and ALTR both discussed in the Keystone morning meeting played out well through the morning. ALTR within the first 15 min closed above Mondays highs of 34.00 witch provided an solid support area for the next momentum move higher. BRCM had a similar story pushing above yesterday highs within the first 20 min of trading and continued to push higher failing to produce a lower low on the 15 min. chart until the early lunch period.

You did have to be patient with the stocks as bias was skewed to the shorts, but both of them showed relative strength as he market was declining within the first hour. Once the market selling subside both these stocks provided good momentum opportunity.

The next support in the SPY is 117.59 which is practically the same level as the daily 50sma. If price action breaks below these level it could fuel a momentum push lower

Looking Forward in the Week

November 22, 2010 Leave a comment

Looking forward this week, if the SPY can hold its daily 20sma would give me greater confidence that we trade higher to test 123.00 resistance level. With the Thanks Giving holiday coming up this Thursday I would not be surprised if there is light volume trading this week. With that said, it is important to focus on the right stocks/sectors and good risk/reward trade scenarios so we can have the highest probability of follow through for our trade ideas.

One stock in particular that I will be watching is LVS, which seem to want to re-establish its trend to the upside. This past Friday price action traded back and held above the daily and hourly 20 sma. What does concern me about a potential continuous move higher is the increased volumed that occurred with the pullback over the past two weeks. The higher volume could be a forecast that the sell off could continue further.

I am also looking for the oil services sector to continue higher, particularly XOM and HAL.. Both of these stocks have been very strong in the last few weeks. I am looking for XOM to test the 72.00 resistance level and looking for HAL to continue to make new monthly highs. Both these stocks have strong hourly charts to support the strong daily price action.

Chart Talk

November 15, 2010 Leave a comment

 

Todays morning price action was a bit uneventful as the market did not follow through in one direction. Coming into the day I was looking for XOM, HAL and JNPR to continue there strength from last week and push higher. When the market opened, JNPR immediately started to push lower.The first level of support was on the hourly chart near the 35.00 level; because of how strong JNPR was at the previous week I planned on entering the first swing low on the 5 min chart.

Generally this setups provide a good risk/reward. Friday highs was the first profit target and possibly looking for a move higher. We can see on the chart below JNPR formed a swing low entry. Unfortunately the trade did not follow through as the SPY was breaking below 15 min ORB, ended up taking a small lost. But the setup was a great idea which provided great risk/reward and should be taken ever time.

As we see on the HAL chart the exact same idea/ trade setup (strong stock, weak open, swing low entry) worked out great, providing a nice .40 cent trade going into the lunch hours.

The afternoon trading was a little easier because we had a nice sell off for the last few hours of the day. ABT provided a nice short trade in the morning with 15min ORB and in the afternoon with a breaking the morning lows of 48.45 for about .30 cent.