Welcome to Stock Geometry! This casual music and financial blog typically involves posts of music videos and candlestick stock charts looking at intermediate term trends. Think MTV meets CNBC. My positions fluctuate, but I’ll always disclose positions in posted stocks. You are responsible for your investments! – Dr. pythagoruz
I've got one more summer trade for you. JWN appears to beginning the 5th wave down of the downtrend that began in early 2007. As you can see in the weekly chart below, JWN recently bounced off its declining 200 dma, broke back below its 50 dma and really has the "horse in a burning barn" look to it. If you used the 3rd wave down as a guide then we should target around $20. Maybe btb will shares some thoughts on shorting JWN.
Ok, I'm off to sail the Caribbean Sea for a few weeks. Hope you all have a relaxing and profitable summer. See you on the other side.
A year ago I did a post titled "summer trades" with the idea of finding some simple trades that require little attention. Like last year, I'll be heading out on vacation next week and I won't be able to monitor positions carefully or do much posting. So here are a ideas for tha summertime.
Last year my favorite trade was JASO long, after buying it myself I suggested it at $8 (split adjusted) shortly after the IPO. The chart developed nicely over the past year and is now in a well established long term uptrend (see weekly chart below). JASO went to $27 and now after a long period of consolidation the weekly looks ready to make the next big leg higher. I think you can be patient on this one looking for buying opportunities under $20. Both the 50 and 200 dma's are rising and should both fail $18 is big support.
IBKR is another one I have liked for a while, it appears to be more urgently breaking out of a nice cup n' handle formation. The rules on this one are simple, buy a break of $33, place a stop at about $31 and target $45.
On the short side, HD looks alot like JASO upside down. After a period of consolidation HD could be ready to resume the long term trend lower. What isn't there to like about this chart with downward sloping moving averages, a CCI crossover and a recent bounce off the 200 dma. Its formed a pennant so I'd wait for a break of $26 before trying to bet against it.
I'd like to take this moment to thank my friends Ian (indigo-alien) and Vince (betweenthebars) for helping keep this blog together. With this 300th post I wanted to share a little about the traffic that you guys have helped create over the past few years. Here is what the last two months have looked like:
We have had visitors from all over, a total of 17,342 from 96 countries. Every continent except Antarctica has been represented as you can see in the map below.
Here are the top ten key words for the site, the "subprime cartoon" was apparently a big hit. "Vince betweenthebars" was the next most popular, btb you fans demand more posts!
Anyways, its been fun and profitable so thanks guys. See you at the 500th post!
I was scanning over a number of daily charts this morning when I came across this lovely GOOG chart. If you saw my rock blog last weekend then you know I'm bearish on the weekly time frame based on the retrace back to the apex of a broken rising wedge. So far that idea has been profitable and there were a few other interesting qualities I wanted to point out on the daily time frame.
First of all, you can see the symmetric triangle clearly on the daily. After riding across the upper end of the triangle for a few weeks GOOG now seems headed back down to test the lower end around $475. Thats where came up with my "short for an easy $100" target. The CCI gave a sell signal this week on the daily time frame and you can see the negative divergence on the RSI so things are shaping up for the bears. If we ignore the triangle for a minute, GOOG had a clear breakout above the all so important 200 day moving average in late April. After stalling up there for weeks the stock then plunged back below the 200 dma this week. This is what looks like a failed breakout, something I have blogged about at length. The usual case is that failed moves lead to fast moves. And it just so happens that this effect would be greatly enhanced due to a very large gap in the chart that exists in the chart at about $540. If GOOG enters that gap I would bet it drops like a hot knife through butter as the gap gets filled and the failed breakout makes it's "fast move" lover. One word of caution, the stochastics are showing GOOG is short term oversold so it might take another week or so for GOOG to make the anticipated move. The real question is if the symmetric triangle will break to the down side or not, doing so would foreshadow a bona fide bear market for GOOG.
This one goes out to Google for providing this blogspot free of charge. Make what you want of the chart below, but to me this looks like a low risk place to short GOOG for at least $100. One would expect serious resistance at $600 based on the stock geometry so thats a good area for a stop.
About what, you ask? Well, the posts with no trade!
I read several very good bloggers daily. One of the benefits of my time zone is that I have time most mornings, long before the markets open, to read the daily reviews and commentaries from the previous trading day. And I have to say much of it is either repetitive, or so obscure as to fall into the "interesting but useless bit of knowledge" category.
Take Felix Salmon, for instance. He is knowledgeable and well connected. He writes for portfolio.com and is a regular feature on SeekingAlpha.com. What I don't understand about his writing though, if he's going to spend the time to put out a clearly written article on some topic, why is there no focus "on the trade"? Take his recent bit on AIG head Martin Sullivan.
Felix Salmon quotes the Wall Street Journal, and then provides a couple of sentences of his own, another link, and not much more;
Until late February, DBA was in a very strong uptrend. As you may have noticed on TV or at the grocery store, agriculture prices have gone up substantially in the past year. The exchange traded fund DBA represents a composite of Sugar, Wheat, Corn and Soy Beans so it has captured much of the recent move up in edible commodities. However, in late February DBA made a new high and has been consolidating ever since, just look at the descending triangle above.
I always thought of the descending triangle as a bearish pattern but according to Bulkowski, "if price rises into the pattern it breaks out upward 73% of the time." Clearly, DBA was rising before this pattern formed, and the consolidation looks healthy. Using Bulkoski's measured rule (and statistics) this pattern has a target around $45 but if that hits a much larger breakout will be in place (so it should go up much more). I'd conservatively shoot for the highs ($43.50) and set a stop at the bottom of the pattern ($35.35). Thats a very high reward/risk ratio if you can get in under $36. If you buy in to Jim Roger's thesis then it seems like a good time to be buying DBA.
One major reason why FSLR's rapid growth in earnings and market capitalization has been so huge: perfect timing. Whether by chance or pure skill, First Solar came to market when a surge in German subsidies for photovoltaic energy went into effect. As a result of the increased solar cell demand, Silicon prices surged as the semiconductor became scarce. Since First Solar does not depend on Silicon they were able to pump out their cells in higher volumes and at lower prices. A big part of this growth has come from Germany where FSLR does most of its business. Germany is leading the way with huge incentives to construct solar energy infrastructure. In fact, the world's largest solar power system, Waldpolenz Solar Park, is being constructed in Germany and boasts 40MW using 550,000 of First Solar's thin film CdTe modules. Recall FSLR only expects "$975 million to $1.50 billion" in revenues in 2008 (compared to a $22B market cap). There is little question of the importance of German subsidies for FSLR's huge run.
The planned 40 MW solar generating park in eastern Germany will occupy a space equal to 200 soccer fields and feature 550,000 PV thin-film modules. Construction on the project is expected to be completed by 2009.
By the way, Germany is experiencing its own economic problems and I wouldn't expect those government subsidies to last with energy prices soaring (making solar more competitive). In the very least they could reduce the subsidies now that the market has provided an increased incentive via higher energy prices. As it turns out, recently the German ministry of economics released a report stating that "subsidies for the [solar] industry are too high and need to be reduced drastically." In fact, Germany's ruling party proposed on Monday to follow the advice of this report and slash subsidies by 30%. I haven't done the homework to know exactly how much of First Solar's sales are due to Germany, but I know its a very large portion. Maybe a reader can help me out with this. I think this is clearly a new downside risk to the stock and yet another reason to watch the FSLR bubble.
While I have my reasons for being bearish on FSLR longer term or until the valuation (stock price) drops significantly, the daily chart suggests the potential for short term capital gains. It recently broke out above its all time high at $283 made in the final days of 2008. FSLR then made slow progress eventually trading as high as $308.24 before quickly reversing back below $283 in the days after earnings last Wednesday. There was heavy volume traded above $283 which tells me a bunch of big boys sold their FSLR to new holders that are now under water. If it becomes clear that this FSLR breakout has failed, the stock could drop very far in a hurry. The only thing keeping this $22B bubble going for the past year and a half is incredible momentum. If that momentum is over...
One potential area for support is the rising trend line (in blue) which matches the 50 dma at around $245 . Then the $200 level has proven to be very significant over the past six months. Finally, the rising 200 dma has never been tested and currently lies at $183. Those would be areas I would be taking profits and making re-entries. The $285-$295 area seems good for a stop since FSLR is known to overshoot exact prices like $283 which is where I want to be buying puts. Click on the chart above and you can see nice bearish signals on the stochastics, rsi and cci. Also note the interesting price behavior (bearish) relative to the middle bollinger band line (green circles).
There are breakouts galore right now and many stocks look poised to run like hell. You know how I feel about this broad market breakout, and that it is basically creating many amazing selling opportunities. But some stocks are legitimately continuing long term uptrends, stocks that are really running like hell. I'll be adding what I think are bullish breakout charts to this post over the weekend so check back. To start with lets just take a look at this gorgeous pattern on DRYS:
Nice call btb, Dry Ships is really running now! It broke $90 in the after hours yesterday after a big run through Feb resistance during the day. I maintain my longer term target at $155 based on the symmetric triangle breakout and a conservative measure rule. There's a good chance of a throwback to the $88 level or maybe slightly lower in the next two weeks before it really rockets higher. So if you aren't in yet, I would watch for an entry near $88.
Here's another nice looking weekly chart on Chevron:
After consolidating for 9 months, CVX broke out to new all time highs last week despite the weakness in oil. I could talk about how CVX earnings were great and how they may be coming back into favor as the multinational oil company of choice over Exxon. Instead, I'd rather focus on the long term uptrend in that stock and how the recent breakout has a short term target of around $115. I especially like how the 50 dma crossed over the 200 dma recently (golden cross) and both are increasing. On a cautionary note, if oil weakens further, if the market tanks or if the tax-big-oil rhetoric intensifies, CVX may loose $95 in which case I would exit and try again at the 200 dma near $88. If it can hold $95 though, CVX should really run like hell.
Another beautiful uptrend on a weekly time frame is DECK, the makers of UGG, Teva and Simple shoes:
This one has been running like hell for years now and sadly I remember buying it sub $20 pre-split (but took quick profits). Earnings last week broke this stock out of a symetric triangle with a price target "way up there." Depending on how you want to define the pattern I get a first target around $170 but then that will be a break out to new highs which gives a measure rule target in the mid 200's. Any way you slice it, DECK appears to be continuing its long term uptrend and headed much higher.
I was going to save this post for the weekend, but "we've arrived". I'm talking of course about the Euro and our favorite FXE chart. Have a look...
The PSAR that we've been following has finally flipped. That is our best indicator to get long the Euro and I'll probably purchase June or July XDE calls early next week. Volume here is notable as well. There has been a large scale disposal of Euros, despite the Fed cutting rates by a quarter percent, and the strong stance by the ECB.
Other notable event risks today include Non-Farm Payrolls. There have been many companies recently announcing layoffs, and we need to keep in mind that the US economy must create 150,000 jobs per month just to keep up with population growth. Another month of job losses will be adding to the train wreck.
The only question is, which train will wreck first? The US economy, or Amy Winehouse. Because you know it's going to happen.
This is the type of headline I've been waiting for before getting short again. I think now is the time to get aggressively short. I particularly like QQQQ and WMT puts and own both, other ideas? I'm looking for this breakout to fail followed by a fast drop.
