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
Taking a look at the (market leading) small caps (IWM), its pretty clear that something violent has just happened. Stocks were in the midst of a healthy correction (pennant pattern) and finding support at the rising 200 dma in late October. After a shaky bounce IWM got slammed through its 200 dma but ultimately reversed in a V-bottom-like pattern retaking its 200 dma. Recently the CCI and stochastics have given buy signals and now that IWM has regained its 50 dma I see nothing but pain ahead for shorts in the coming weeks:
While most people point to the poor performance of former market leaders (like AAPL and GOOG) new leaders are emerging. Take a look at FB over the past few weeks, the rally is relentless and on strong volume. The ~3.5 month base is really paying off now:
Whether they are new leaders or just heavily shorted stocks getting squeezed (shorts fear higher taxes in 2013), 100%+ gains in popular stocks like FSLR, GMCR, and RIMM over the past six months makes for some very positive sentiment. FSLR seems to be just getting started after breaking $26 last week. It should see ~$32 by Christmas:
Shorts seem to be panicking on GMCR as it has soared 100% on huge volume spikes:
RIMM, the stock that everybody loves to hate, bulls sure aren't hating it right now. Volume has been through the roof as RIMM surged above its 200 dma (declining):
The point is, despite all the negative press lately about the "fiscal cliff" stocks have rebounded very strongly from the November lows and appear to be starting a new leg up. While many stocks have struggled lately, others have been exploding higher (see above). I'd be surprised if we don't see a continuation of the recent rally to new 52 week highs on the indexes by the end of the year. Happy holidays to all!
Disclosure: I am long IWM calls and FSLR stock.
PS. I see all solar rallying strongly here (I am long TAN, SPWR, JASO, ASTI, ENPH, MCP also)
Research in Motion, maker of the Blackberry, pleased wall street with earnings yet again today and the stock is approaching the all time high at $137. There is absolutely nothing bad to say about this weekly chart. RIMM has been running since mid 2006 when it was in the low 20's (pre-split). After forming a deep base the stock looks poised to do what it did when it broke $30 and $50 for the first time (go up alot more). IBD will be all over this stock so watch for a violent move to the upside soon. Na na na na na na naaa naaaaa.... RIMM's gettin jiggy with it...
In a bout of perfectly lucky timing I will be on vacation next week. The markets look poised to stay in the recent range by drifting higher next week ahead of the February options expiration. Even with Thursday's big rally, the S&P 500 closed the week down a whopping 4.68%! On Tuesday morning we saw a sobering ISM report which led to most of the weeks declines following the bullish euphoria the week before over lower interest rates. Looking at the charts, the market seems to be doing pretty much the same thing it did last time the fed cut rates as scheduled:
As you can see above, the market has moved into what looks like a pretty reliable channel downwards. In particular, I'd like you to note what happened the last two times the federal reserve had a scheduled meeting where they cut interest rates. The market rallied up to the event (blue lines), popped on the news, then began the next leg lower. In fact, if you shorted stocks into the rate cuts you would up huge in the last few months. However, given last Thursday and Friday's action it appears as though we will drift higher back up to the upper end of the channel next week. The chart appears to be shaping up exactly like mid December (see orange circles) when there was a relief rally after the initial decline following the rate cut. Once that upper trend line got tested in December, the market sold off hard and made big declines to new lows. I have also noted in the chart our target below the recent lows of $126.
Thats a long winded way of saying I am expecting SPY to rally up to around 136 next week or about 12,500 on the dow, maybe a little higher. This will be a much safer area to re-enter or add to shorts before the next big decline. Personally, I am still short with some hedges because since I'm going skiiing next week I won't be able to play any upside moves. Furthermore, the downside opportunity greatly outweighs the possibility of getting in at better prices. Now for a few individual charts that have been on my mind lately.
Last Wednesday I began to get bearish on RIMM after the CSCO ceo said he had "confirmation of a continuing stream of data points we've gotten in the past two months that business is decelerating." This can't be a good sign for the RIMM which has made a name for itself supplying the savy businessman a smart phone. Ok sure, we knew that consumers are hurting and that side of RIMM's business would probably take a hit. That explains part of the recent decline in RIMM's share price. But now that business spending is slowing too, that could really do some damage to RIMM's bottom line. I'll be sure to do a bigger post on RIMM at some point. For now, just check out the chart:
I want to congratulate UpNorth for making a great call in chat on Friday for a strong close on RIMM, nice one! To me the chart has clearly topped and I thought that the break of it's 200 dma would lead to a sharp decline late last week. But RIMM found support in the $80 area (and at its 200 dma) and was able to run following the CSCO earnings report Thursday despite the obviously bad news. I think there is a decent chance that RIMM could rally back up to strong resistance around $100 where it will be fantastic short in my view. But once again, in my view the downside (my target is $60 in the chart above) greatly outweighs the upside or the potential to get short at better prices.
Right after I discovered the stock's downtrend and started getting bearish on it, Wall Street firms began to pump it like crazy. There were upgrades and all sorts of bullish articles on yahoo that began appearing so I lost money and go out. By the way, SIRF makes GPS chips for hand held devices like car navigators and blackberrys (RIMM). Anyways, I learned a couple of things from this situation:
Never underestimate the stupidity of wall street analysts
Stocks can fall much further than most expect
Be patient
The device stocks are in trouble (RIMM, GRMN, AAPL, etc)
Ok, thats most likely the last post from me for a week but we'll see, I might be inclined to do a post if something big happens. I'll be in Jackson Hole, Wyoming surfing the snow and hoping to forget about the markets. Good luck out there!
