On Friday all was rather flat. The Nasdaq had
dropped to its 62% retrace from this year's run up and then put
in a bit of a rally.
We have seen many times in tech that the hope and
wish is that a rotation into the sector will be the start of
something big. The memory of the run to 5,000 maybe still is in the
back of folks heads so when money starts going into the sector it
can move too fast. This month the Nasdaq was the leader so it
seemed until this week. In Russia we get the European broadcast of
CNBC and at USA EST of 5:00pm they broadcast Jay Leno and not Jim
Cramer (probably better that way) so I did not see but heard that
Jim said to sell tech as it is the time of year to do so. Seems
those who do watch the show were happy to oblige and tech got
whacked. Selling the news during earnings season can often take
place and we saw it this week with AAPL IBM and INTC.
Could this be the start of a much bigger market correction in which
the broad market follows tech down? It could be but it was also
options expiration week and many more earrings and reactions are to
come. In the next week YHOO ands MSFT report and
either could be a market mood changer.
We mostly scan for long picks as we are still in a
bull market and longs make more money than shorts. We featured
CVDT Friday morning in the
Morning Video as a
reversal play. It did very well up 15% at the high but the chart
shows why longs make more money in a very general way. CVDT as an
example had a late November break out at about $2.50 and ran to $5
making 100% in that move. This is quite common as so many stocks
double in a couple of months. It virtually never happens though that
anyone makes 100% going short. Maybe they couldn't as if the company
went out of business how would they cover? The point is that going
long with a plan on making 100-200% or much more on your money is
quite common. Going short though has much smaller goals. CVDT had
run from roughly $3 to $5 in a month so around 70% gain for
longs. Then if anyone shorted at $5 recently and covered at the $3
support they made only 40% on their trade. Same move down as
up but up mad 30% more profit.
So we have not especially scanned for shorts right now but
will be ready to add some if a market correction does develop
but not all people can short stocks as some accounts limit it
and many do not feel comfortable with short positions. The main
thing though is that our long plays keep working. This week with
the 2% dip of the Nasdaq (the worst since July) we had 16 stocks
on our list hit their buy points and all of them made profits
and this was a short week! (funny)
Here are the the major indexes since December 28 and even with
the decline this week the Nasdaq 100 is still the clear leader.
Here are the top and bottom sectors of this week.
The full Nasdaq chart shows the drop
below support at 2470 on strong volume. This general set up often
resolves with a rally back to the broken support then a renewal of
the shorts. The shorts however have been very weak as a group and
never seem to follow through even when they have super setups. Why
they did not jump in and at least push the Nasdaq down to the 50-day
on Friday shows their weakness or maybe it was the result of the
last day of options. Regardless, at the moment the price is only
back to its Nov-Dec trading range.
On the 60-min chart we have put the
Fibonacci retrace
lines. Using the double bottom as the base you see that Friday
the Nasdaq got down exactly to the 62% retrace then rallied up from
there to the 50%.You can also notice how the stochastics at the
low then went above the 20 line. This was a low risk setup to go
long if you play futures or a tracking stock for the Nasdaq. We
mention this type of thing often in the morning video when we see a
possible setup. Also note that the RSI was way oversold under 30. In
trading the e-minis one way to be much more successful is to not
necessary trade each day but to wait for trades such as this to set
up where you go long when there are such oversold conditions at
support or you go short on overbought conditions at resistance or
breaks of support.
The other chart that supported
this sell off was how the ratio chart as we mentioned last week may
do, rallied back to the trend line and then sold off and stochastics
dropped below 80 at that time.
The S&P 500 failed the attempted break out and also pulled back a
bit this week but really no damage yet.
Transportation closed where it was still close to a possible break out.
The media is not in favor of showing broader indexes but the NYSE
sure shows no signs of weakness as it closed up this week.
The number of stocks on the NYSE above their 200-day is also back near
their high.
And our Value Line monthly chart is slow but looks fine.
Commodities on this monthly chart shows the
support that so far has held. I would prefer it to use the next
couple of months and continue the correction/consolidation and to
get to the 50% retrace and support near the 270 area. They have made
a huge move since 2002 so to take some time now would be
constructive as this rally in commodities may last another decade.
Oil is now just under the
200-week EMA and hopefully on the way to the 62% retrace near $45.
This chart looks kind of sloppy
but last week we said to expect it to rally to the trend line then
fall back. So far the that is what happened. It is above the 50-day
so it may continue but we are not convinced it is time for a big
move yet.
The weekly chart shows that it would need to break above the trend
line to make things more interesting again.
The weekly economic calendar
from briefing com looks very light so the home sales will be watched
closely.
Our two long term picks have seen some interest recently.
NNRF will likely file with the SEC this month then become fully
reporting so they may apply for listing on the OTC market. On Friday
it broke out of the trading channel on increased volume though
closed below it. Remember that they are also setting up a fully
owned subsidiary in Russia so they can then list it on the Russian
stock exchange. The subsidiary will be used for their electric filer
sales.
GRSR broke above its downtrend in late
December and closed back above $1 or up over 65% from the many
month's long support at $0.60. Several people wrote when the stock
broke $1 the last time recently to ask if I had sold any. No as
this one is a long term hold and I look for dollars not pennies so
do not pay too much attention to the daily or weekly moves as long
as all company situations are on track. The listing move from the
pink sheets to the OTC could happen at any time and may help the
liquidity as many cannot or will not trade pick sheet stocks.
Now some additions for our watch list. We have
many new subscribers each week and remember that we are not
recommending these stocks as they are but we wait to enter when the
buy price is reached and if the volume is very strong then we are
much more encouraged to take larger positions though sell at least
part on the first day to lock in gains. Sometimes a stock could
reverse intraday so you need to keep stops to protect that
possibility though that has been very rare in the last 7 months.
As an example of high volume is CDIC from Friday. In
the first few minutes the stock already had about 600% of its normal
volume and was trading below our buy point so we alerted all to this
in the chat room for an easy entry with generally a much higher chance of a larger
gain as volume equals force. You can see it closed up 18%.
TRMM is one we traded recently at a break of the
consolidation and ran up nicely. It pulled back the next day
and is now back near the break out line so could be bought with a
stop under or wait for a new break out back over $2.50 again with
increased volume.
ECIL tried to break this
trend line Friday but not enough power yet. Perhaps this week. Buy
between $8.80 and 8.90.
DTC from Sydney - break
over $8.60
HURC could buy at bottom
trend or on break out above $32.90.
SGF simple play above
$16.27
DSTI has been a good
trader last week. I think it will test the 50-day EMA. Needs to get
going again and you could scale in or buy over the recent high or just
at trend. On volatile stocks that look like they may move higher,
scaling in can work pretty well as you buy a little at one price
then if it drops you add some more and it it breaks out you add some
more. (it it fails you cut you losses as you do not have a
full amount)
CHCI this is a nice chart
and I hope it breaks out as would hate to see those 7 days up in a
row wasted.
BCSI this has a nice little
level at about $24.60 then a full break at $26.50
CPY at $51.00
SSTI has a little shelf at $4.90 the a break out at $5.03
A gray day and actually some
snow flurries while some boys in a neighborhood play football
instead of the usual hockey for this time of year.
That's a full lid - will see you
during the week.
Only 10 voting days left this month- Vote often - once a day
on the words
"Vote for It!"
Check the
current
Earnings Calendar
on all overnight holds.
