Tuesday, April 28, 2009

Will BIDU's run be done in by sellers? Watch $200

Nice six month chart on BIDU huh? I think BIDU (the Chinese version of google) has been one of the strongest stocks on the NASDAQ over the last few months and it sports a narrow up channel. Since early February BIDU has been riding its upper (and rising) Bollinger Band and it has pulled it's 50 dma from $120 to $175 whilst rising 125%. That's a nice move for a ~$5B company. I'm sure option players are loving this one right now with so many strikes crossed recently. I bet some made a killing writing $100 puts this year!!

Anyways, all indicators continue to flash green signals and should the stock sell further it should find support at the bottom end of the channel around $200. BUT, the one thing I'd be worried about if I were long would be the volume. The volume has slowly declined since the double bottom in Nov/Dec 2008. That is, declined until today. After popping up to a new six month high at $236.62 early today on earnings, BIDU reversed course and closed red near the lows on 5M shares volume. That's about double the average volume. The up channel remains in place, of course, but if BIDU loses $200... Lets just say there are a lot of strikes in between $200 and $140, the next expected area of support.

The BIDU May puts today:
I'd also add that the heavy volume today wasn't just in the stock. The front month puts saw nearly the open interest on all the puts down to $190 and all the calls up to almost $300. If you included all the options volume you could effectively consider the "true" volume to be another 30% or so higher. Whats funny, and most of you would expect this i think, but both the puts and calls lost significant value today. The options sellers win as usual!!

The BIDU May calls today:

I have no position but this smells like a top to me.

Saturday, April 25, 2009

Saturday Rock Blog: Island in the Sun

CS pointed out this "floating island" pattern in the SPY chart. My response was that it was evidence of the incredible levitating market. Island patterns can potentially be bottoms or tops, but for now its just a potential. In such a pattern investors who entered long/short in the island get trapped when the stock gaps down/up to leave the island reversal pattern. Those trapped investors fuel the move as they exit losing trades. For now its just potential, there really is no sign of a top yet. That perfect looking wedge that I mentioned last week is starting to look more like a new up channel (see green lines below). We should know early next week where this market is headed. If its an up channel we should break $87.65 on the SPY, if its a broken wedge we should drop big Monday or Tuesday. For the island reversal to complete we'd need a big gap down below $82.75, which is, unlikely. The up channel would be violated at around $84.

Anyone else into Weezer? I just ran across some other great videos of theirs on youtube, think I'll post some this week. With charts of course!!

Thursday, April 23, 2009

The Federal Reserve struck it rich!!

In just six months the Federal Reserve's total assets went from around $900 billion to $2.2 trillion currently. That's almost a 150% gain in equity, way to go Ben Bernanke! Helicopter Ben, the best hedge fund manager to live! Hockey stick!

What bears do to bulls when bulls get greedy

Monday, April 20, 2009

Support for a broken IWM wedge (rut roh)

More lies... (despite Maria's aggressive questioning)

Is it just me or does Ken Lewis have "I'm about to loose my job" all over his face? Guess we'll find the truth out soon but he just seems like he's willing to say anything to come across as solvent and confident. Instead he winds up floundering there in the interview like a deer in headlights. And Maria, jeese, she sure laps up his lies like a good little puppy....

"Q: What about capital adequacy. Are you expecting to raise new capital?

Lewis: We are not expecting to need more capital. The issue of course - which was brought up today which is hurting all bank stocks - will some be required convert some of their preferred to common. We don't think we have an issue there. But that is now in the hands of the regulators, and we have not heard back from them at this point in time.

Q: What should we look for as far as the most important things to come out of the stress tests?

Lewis: I think it will be what requirements are there on what banks in terms of conversion of TARP preferred into TARP equity.

Q: You said you want to pay back the TARP money in 2009. Is that still on the table? Are you expecting to pay back that TARP that soon?

Lewis: Well, we would like to, and we would prefer to. But again that is now in the hands of the regulators and we will be in consultation with them as to what the best avenue will be in that regard."

From Calculated Risk.

Sunday, April 19, 2009

Rising wedges usually break down...

I know I promised gobs of charts tonight but I only got around to doing four. I'll try to do more this week. First off, as an update to last weekend's post, here is the S&P 500:

As I suspected, the market has continued to float higher on declining volume. In the process, the S&P and other indexes have shaped out a beautiful rising wedge formation and as you all know, those tend to break down before the apex. Now I'm not saying this bear market rally will end this week, 800 is likely to be strong support. But I am saying that if the market rolled over here I wouldn't be surprised at all. A break of 800 will confirm a resumption of the long term downtrend. This week we are going to see a flood of earnings reports and news on the bogus bank relaxation test. It is likely that the media will spin any move as being due to this or that headline but us technicians will look to the charts for guidance.

A couple of potentially bearish looking charts that I ran into tonight were V and GS. V recently broke out of major resistance but has since floundered. It currently lies right at the breakout price but some indicators are giving warning signs. If V does begin to slip and especially if it looses that rising green trend line, I could see a January-esq crash (circled in orange):

On GS, I feel like this is the one stock that you can't bet against because they run the universe, but the chart is tempting. Its got these declining trend lines from '06-'07 just above and it formed a reversal candle on huge earnings related volume last week. Will it get crushed to new lows? We'll see but that's a huge move if it does:

Good luck this week!

"The game is about to end" (love this)

I loved this pic from Tim Knight over at the Slope of Hope and wanted to pass it on. Now that another Spring op ex is behind us the bulls are out playing golf and it may be time for a return of the bear who has been hibernating. I'll get some more charts up tonight.

Dollars hanging low on the tree? (DLTR)

There seems to be decent support at $42 the failed breakout above is ominous. $45 is where the 2007 top was so there's good reason to think that the Dollar Tree's (DLTR) strength may be ending. I like how the 50 dma is inching towards a 200 dma cross over (cross of death) and also how the stochastics and CCI are giving sell signals. This stock is in the IBD 100 so if it starts to roll it may roll hard. I'd expect the 50 and 200 dmas to act like support but once those break the lower $30s are in store. Once/If the cross of death occurs we can start talking about a long term reversal here.

Disclosure: I own DLTR puts

Saturday, April 18, 2009

Saturday Rock Blog: I Wanna Be Sedated

I'll be posting gobs of charts later this weekend so check back.

Saturday, April 11, 2009

Saturday Rock Blog: My Hero

This one goes out to all the right minded shorts who are wrong about the tape. Keep fighting the good fight but there's no need to be a hero right now. Unfortunately for the bears (I have been one of them) the market grows technically stronger each day. The market flies in the face of a long term downtrend and dismal economic news that is continuously spun positive by the media. The government seems willing to do anything and everything to boost the market and its working. With the technicals improving as they are, I think its not the time to be a hero on the short side. I think this rally is about murdering shorts, don't be amongst the dead.

Here's a weekly S&P 500 chart, there are a lot of bullish signals and divergences there. The steep sloping downtrend that began in September 2008 has broken along with the key 800 level. There a pretty monster failed breakdown of the 800 area there on the weekly! I could see this market rallying up to the 200 dma and/or resistance at about 950. Just about the only obviously bearish quality to this chart in the intermediate term is the declining volume during this recent rally. The move looks like a text book bear flag but that's not to say that the market can't keep plowing higher on declining volume. I will be traveling for the next week, so don't expect much posting. Cheers!

Thursday, April 09, 2009

Gartman Goes Bullish

WFC, from bailout to record profits in months!!

Today the market is rallying on reports of record profits from Wells Fargo this quarter.  Does anyone really beleive them?  It was only a few months ago that they had to receive a bailout from the Treasury to the tune of $25B.  What is unlcear is if this "record profit" includes any writedowns associated with all the delinquent loans they have on their books.  But wait, ah ha, they got FASB to relax rules on writing down depreciated assets!!  FASB now alows them to value their assets how ever they want so its no suprise that they are now making gobs of money.  If the banks are now making record profits then can someone please tell me why we need to subsidize the banks even further than we already have with the toxic asset program and the other bailout programs?  Here is the CFO on CNBC, I'd note how CNBC is really asking the tough questions:

I love his response to the issue of stock issuance (which is obviously behind this pump), the weasel CFO said:

"We're raising more money everyday by making more money everyday"

Well, you jerk, if thats the case, then you can give back our $25B and you can forget about participating in any future government programs.  These banks are essentially getting money at 0% right now then turning around and lending it to the rest of us for 5% (on mortgages) or up to 10-20% (on credit cards).  So let me just add,  WFC, you can go F*%# yourself.

Wednesday, April 08, 2009

The Black Swan Dive

With all the big numbers getting thrown around these days its easy to loose context which is why I like this video. So how do we prevent this from happening again? Check out the ten principles of a black swan free world. I wonder how much more cash the feds have to print before inflation returns and runs away. Given the scope of it already, its sorta surprising that assets are still deflating.

More from Elizabeth Warren

Henry Paulson, liar.

Tuesday, April 07, 2009

Failed Breakout on the Q's

Inverted H&S on the Dow Jones

Anyone remember this old weekly chart below? Back then you had to be on weekly chart to see paterns with a 1500 pt range.  How times have changed... the original post is here.

Monday, April 06, 2009

"It is not necessary to hope, in order to persevere"

Is anyone else reminded of Paul Krugman by William Black? They both make excellent points about solvency of our banking system, they are both liberal critics of the Obama administrations, they are both economics professors and they both have beards of trust. The clip above originated here (+transcript).

Sunday, April 05, 2009

IBD 100 stocks that are looking kinda toppy..

This is something I used to try a few years back for mixed results. Tonight I did a quick scan of the IBD 100 for stocks that are up a lot but showing signs of weakness. The ones that jumped out at me with decent options liquidity are:


Many of those are stocks that have been counter trending and are in defensive sectors so its not surprising that they would show weakness as the broader market has rallied lately. Some of them have pretty nice failed breakouts, LFT and AIPC for example. There were other IBD 100 that looked more bullish like BWLD, ARO, V and MFE but I'm not looking for longs right now.

Saturday, April 04, 2009

Saturday Rock Blog: Fire on the Auto Zone Mountain

I found this clip in an article by Todd Harrison over at Minyanville, he seems to also enjoy mixing great music with financial musings. While he wasn't talking about AZO the video made me think of this top heavy stock because it dropped from an all time high on a surge in volume. That's the classic sign of a reversal. I don't want to make a big fundamental argument for or against AZO but I will say I don't buy the story. Also, as a counter trending stock I feel comfortable being short it in a market that's rallying. Anyways, here's the fire:

And here's the mountain:

Disclosure: I own AZO puts.

Thursday, April 02, 2009

Interesting symmetries on the IWM lately

This is what happens when you stare at a chart for too long. Lately it seems as though the IWM has been demonstrating some beautiful symmetries, the most obvious example is the v-bottom. The down move before the weekend of March 7th-8th mirrors the move up after almost exactly until after about 9 days:

Interestingly, when that symmetry ended another began. Then after another nine days we seem to be starting a new mirror image. The blue lines represent periodic axes of symmetry:

If this "trend" were to continue I'd expect the next two days to be red candles (we close lower than the previous close and the open). Then there'd be an up day followed by a big red candle. Does this really mean anything at all? Absolutely not. Would I trade based on this? No way. Is it a beautiful example of natural symmetry existing in otherwise chaotic markets? I think so.

The CNBC Wall Street cheerleaders...

...they make me want to vomit:





They did have one good reporter, but he quit last week.

Stocks, the corporate ATM

American Electric Power lowered its 2009 forecast and plans to issue more stock.

NBT Bancorp prices common stock offering, proceeds of the offering are expected to be used for general corporate purposes.

HSBC Raises $17.7 Billion in U.K.’s Largest-Ever Rights Offer