Even if oil didn't bottom today HAL is running.

Did oil bottom today, on this last day in october? It did make a new low, but reversed and actually closed higher for the day. The chart above includes many striking features. I'll point out a few that you might find interesting. The 50 ema has never crossed below the 200 ema on any oil chart going back 3yrs until recently. Similarly, the RSI hasn't gone below 20 and the MACD hasn't seen as low as -3 on any chart I can find. These events occured in mid september right about the time USO made a new volume high above 3M shares traded and closed at the low of that day. Here we are today with a new low and a new volume high of almost 4M shares, but this time we had an up day. Both the RSI and MACD have bottomed and suggest that oil should be almost through. Today may be the capitulation needed. Take a look at HAL compared with the oil etf USO. It broke out last week as expected, then formed a bull flag and is now headed straight for that 200 dma just under 35. Note the price action relative to it's 200 ema (green line) compared with its 200 dma (red line). Also, fibonacci analysis of this move suggests a target near 35. Happy Halloween everyone!
This is what HAL looked like on my screen intraday when it broke out last tuesday, it was easy money from this point on. Happy Halloween everyone!

HAL Should Have a Great Week

Halliburton, the oil service company released earnings this Sunday that beat wall street expectations in both revenue and EPS(earnings per share). HAL said third quarter earnings were .58c per share on 5.8B in revenue while wall street expected .54c on 5.52B. This represents EPS growth of 22% and revenue growth of a 19%. Now there has been alot of talk lately about a rotation into more conservative large cap stocks out of smaller caps and commodity related companies. Well this 30B market cap has a PE of about 12 on 20% growth, a 1% divdend and a 2B$ stock buyback program. In other words I expect there to be some major fund buying in HAL next week after it has been neglected for months. Lets take a look at the chart:
As you can see, there is some pretty serious resistance just above HAL's closing price last friday. I would expect HAL to gap above this resistance around 30 and run all week heading for that 200 dma before a pullback.

For comparison, here is how HAL behaved last year on a similar earnings beat with around .40c in EPS. As you can see the opening price would have been a great place to go long even after a sizeable gap. The key is for HAL to gap close to or above and hold $30.30. I would consider the nov 30$ or 32.50$ calls, maybe the dec 35$'s depending on your time horizon.

Analyst Info

Looking for the Energy Bottom

With a so much credit for this bull market due to a major pullback in energy prices it will be important to keep an eye on crude in the coming weeks. A further decline in crude prices should fuel, no pun intended, further stength in the dow (DIA) and S&P 500 (SPY) while a reversal would have the opposite effect. Currently light sweet crude is in a decending broadening wedge. This weekend I found a very useful site run by Bulkowski based in his books, check it out. Watch for that upper trendline to break, thats when i would look at longing some beaten up oil stocks like ADM or the OIH, not they have already begun to moke back up.

There is no denying the magnitude of the bull market in stocks we have right now. Here are a few awesome looking breakouts in stocks that surprised me:



At some point patient traders will make a killing shorting this buying frenzy. One stock that is looking a little top heavy is Energizer (ENR). If you spot a confirmed reversal I think it could give back much if not all of this recent parabolic move:

Time to load up on Gold?

So, it looks like North Korea may now be among the nuclear weapons club. While it has yet to be confirmed, this is still going to be all over the news tomorrow and I expect we will see "official statements" about it all day long. Its hard to estimate exactly how serious this news will be for the markets but we did have clear signals from China, Japan and North Korea last week that a nuclear test would be "untolerable." Yes, China. While I wouldn't expect this news to plunge Asia into a war it certainly does increase the instability in the region and worldwide. Now I am no commodity expert but I can see the obvious connection between global instability and gold. In general gold is considered a very safe place to put money, especially instead of say South Korean currency in the event of a war. So my money hungry mind pulled up this 1 year gold chart (etf):
Gold is currently in a downtrend being below it's 50 dma, 200 dma and declining trendline. However, gold did find strong support last week and apears poised to at least test that trendine. The technical picture coinciding with the North Korea news may bode very well for gold. I wasn't surprised to see gold up very strongly overnight in Hong Kong and Sydney exchanges. To play this on a US exchange you can either trade the gold etf GLD or I would recomend considering a beaten up gold procucer like Goldcorp GG. If gold begins a new uptrend GG should move up fast. Recent aquisition issues have made GG cheap, AUY is also good if you preffer.
Is it time to load up gold, in my opinion: YES!

CROX, CREE and SHLD

Last week was great for the fad shoe company CROX. Not only did they get pumped by cramer multiple times but they were added to the S&P SmallCap 600. This action has taken CROX almost up to the previous high that was made on a very sharp reversal day when they last raised guidance. I suspect many have been buying in anticipation of a similar raise in guidence this quarter by the ugly shoe company. And then what? Last time they did that CROX gave up all the gains and then some followed by a sharp decline. I think most would agree this compnay is going to be a fantastic short but the problem is in deciding when to enter. The stock is already heavily shorted and it nearly at the highs. Short squeeze aside I think now is the time to enter CROX shorts. Set a tight stop loss at 35 and ride this one down to at least 30 in the short term.

CREE is a stock that I have follwed for a while and shyed away from after the company repeatedly disappointed me. I was always excited about the short squeeze that never happened and I eventually realized they were right all along. I know a fair amount about the company and their technology so let me know if you want more background. I bring CREE up becuase it is at a pivot point. Most people would probably look at this chart and say you should long it for a gap fill, but keep in mind that gaps also provide support/resistance. The recent run is encouraging for longs but in the context of a broader rally in semiconductor stocks it has actually underperformed. From here at the upper end of it's range I think you could get at least a few points out of a short perhaps more if the support at 18 fails and it has twice recently. Set your stop just above entry and be mindful of the possibility for a quick gap fill up to 22 (an even better place to enter or add).


And another double top in SHLD. Ride it down to at least the upsloping trendline and set your stop around 165.
By the way, what I am calling double tops could quickly become double top breakouts. If these stocks start making new highs on above average volume be sure to cut your losses short. At these pivot points you have a low risk entry. Also, GS has not been able to move higher since last week but has not reversed either. It takes courage but I think it is going to be a great short when the wind comes out of the financial sector's sails. NVDA has confirmed the top on volume and has started moving back down. If you went short last week you are making money.

disclosure: I have CROX Oct 30 puts

Double Tops Galore

If these stocks can move much higher I would suggest going long or cutting short losses. But now might be a good time to enter shorts at least for a swing in GS and NVDA. There is a plethora of potential double tops out there see SPY for example.

I will add more double tops here later in the week, happy trading!

OIH Broke But is Due to Bounce

My braoder market view still holds, see the long term weekly chart in the S & P 500 tracker above. While there is some room for the overall market to move higher, I suspect not much. The dramtic fall in oil has caught me off guard and so I am very cautious in this market. A safer play would be to short the oil and commodity stocks on a bounce. I do feel that the energy stocks have moved down too quickly and playing a bounce long might be worthwhile. The OIH (oil services index) seems to have found some support at 124 and a throwback to the breakdown point is common. In this case that would take the OIH back up to 130 which is the ideal point to enter shorts.
I like CVX for a bounce play because there is a gap that needs to be filled and you will have a tough time finding an unfilled gap in CVX.
Also, my opinion of TIE still stands, if you went short last week above 25 you are in a great position in my opinion. As far as CME, the gap caught me by surpise as I'm sure it did many. While the recent action in the broker/dealer sector (see ICE, BOT, ISE) does have me concerned I plan on holding my CME puts at least a little longer.

disclosure: I hold CVX oct 65 calls and CME oct 440 puts

TIE Just Ran Into an Asteroid

I normally don't post on mondays but I feel bad having not spoken more about TIE in this weekend's post. As I suggested it might, TIE broke support today (following it's failed breakout) on strong volume and closed very poorly. I think this is easy money which is hard to come by on an options expiration week. Fortunatly, I already had Sept 25 puts from last week which I quickly took profits on when TIE found support at 25. However, it had broken its 200 dma for the first time in years so i watched it closely all day until it re-tested and broke 25. When this occured I did not hesitate to buy back my puts higher and I may even jump into 22.50's tomorrow depending on how it opens. This sets up TIE for a move to at least 20 most likely much lower. If you think the short juice has been squeezed out of TIE already just take a look at this logrithmic 2 year chart. I don't think so!
Ps. For those who know what I am talking about when I refer to TIE as if it were a space vehicle, tomorrow the original trilogy FINALLY comes out on dvd. Yes, the Solo shoots first, CG free, proper ewok finale version is set to be released tomorrow. You can guess where some of my TIE profits will be going!

Its Time to Enter Long Term Shorts (and a few ideas)

Well, the rising wedge in the S&P 500 I spoke of last week did break to the downside on the return of volume as expected. With the return of volume I have seen many previous breakouts return to or below their breakout point (TIE for example) . Other stocks are hovering at support but are not oversold on their relative strength (CME for example). We have what looks like a long term top in all the market averages coupled with a seasonally weak period for the market. Most previously leading stocks are off their highs but can move potentially much lower without falling much from their current levels (by breaking support). In short (no pun intended) the market averages look like houses of cards ready to make a substantial move lower. I believe support levels will be broken in the next two weeks, most likely after the triple witch (op ex) friday. But I wouldn't discount a meltdown next week even though there may be a fair amount of end of quarter support (many funds would like to see their books show the recent gains). I have talked alot about GRMN and CME lately, lets take a step back and look at their weekly 2 year charts (like the SPY chart above):
As you can see in both of these charts there is massive potential downside in these former IBD favorites that have put in a top. I will be looking for opportunities to add to my long term short positions in both of these next week. The ideal entry in CME is 450-460$, for GRMN anywhere up to 45$ is good. Based on their charts I think the time is right to enter both of these for the impending bear market.

A Few Good Longs and a Wedge

While the S&P 500 (above) seems to be tracing out a textbook rising bearish wedge with volume decreasing as the range converges many stocks look to move higher. I share a similar view on the market as market observations. Mainly I will wait for volume but this rally feels like one last squeeze on the shorts and an opportunity to trap longs before the bear market sets in. I'm looking for an obvious double top in the SPY with some captulation at the highs. I don't expect the NASDAQ to make it that far. Some decent looking stocks that I would long while the market tries to follow through in the short term are TIE, CME and CAT.

Major Money Outflows in GRMN and CME

Note that while CME has broken support and big money has clearly been dumping it lately, the candlesticks alone suggest a reversal on the daily. If I were ignorant of the volume action in CME I would say buy it for a swing trade. I suspect the action early monday morning will set the standard for the week.
*You can always click an image to enlarge.

Breakout!

Stocks defied all odds last week and broke out of a 4 month long downtrend led by strength in the nasdaq. The lower volume aside, it sure APEARS as though the broader markets wil at least re-test the highs. The rally was more or less based on investor optimisim derived from the perception of a "soft landing" for the economy as opposed to a full blown recession. As sure as everyone seemed to be that the markets would turn lower last week after a selloff on the fed pause, the nasdaq broke it's 50 dma and a downsloping trendline:
Right now, we have a major breakout on lower volume in a slowing economy. The chart says we go higher and so I would recomend looking for breakouts on individual stocks. Some that I will be following early next week will be LMS, FMD, TNL, GRMN, NITE, DRIV, TRMB, ISE & ICE. Yes that is a long list but there are alot of nice charts right now. As a technical trader I have to look for long set ups in this market, but I will be quick to sell as fundamentally we should break the last few weeks lows in a slowing economy. It may be smart to either hold a large amount cash or hedge your long positions as this breakout could easily fail and reverse. As a possible hedge you might ant to look into VIX (volatility index) calls, this is a bet on a major market decline. Also, histoically the VIX has not been much lower than the levels is at now(which suggests we may be on the cusp of a major decline).

Broad Market Decline Coming

I see the market averages at a very important pivot point right now with a high downward bias. We have seen strong opens get sold and lower volume on the days when the market closes up, strong indications that institutions are pulling money out of the market. The nasdaq tracking QQQQ have been in a severe decline ever since breaking down in early May. The S & P 500 tracking etf SPY looks a little better but is at strong resistance right now (below).
What does this mean? For one thing I would be very careful on the long side and preffer shorts. Staying out of the market entirely may be a good idea until new direction is found. Many would argue that when/if the fed pauses in their interest rate hike campaign the market will rally, but I would say that it is just plain stupid if the market rallies because the economy is doing so poorly that the fed has to stop tightening. If there is a pop I would be shorting into it and I bet many pro's would too. For that reason I suspect a fed pause to be just another case of buy the rumor sell the news. But this time sell the news then sell with both fists because we are headed into a economic slowdown.

GRMN behaved true to form an sold off all day friday until finding support at 85 at which time i exited my put position (at a nice profit). Then after rallying about 1.5 points they announced a 1.5M share buyback(on 110M shares outstanding which is nothing even when compared with the 1.9M daily average volume) and the stock ran into the close. My personal opinion is that this will present a great shorting opportunity next week when the stock tops out short of 100 (again). AS I said before the GRMN chart reminds me of HOM (now HSOA) just before it craterted 50%. More on GRMN later...

I like IOTN and MOVI long for earnings this week. They do not trade with the market. Happy trading!

The GRMN Party is Over

On blowout earnings GRMN gapped higher this morning reaching as high as 105 in the premarket. But as soon as the market opened the selling began in volume and did not abate. GRMN turned out to be a good trading stock with substantial moves all day long but the trend was decisively down. Having bounced twice off the closed gap at 90 GRMN broke that in the late afternoon touching 86 and closing near 88. I will not speculate on reasons for this aggressive distribution I will however speculate that GRMN goes alot lower from here, 80 is still the first target. Here is an hourly 10-day chart to keep the recent action into perspective, note the money flow and engulfing nature of today's trade.

For those interested in options here is today's data for one of the options I traded (aside from selling calls this was the most profitable way to trade the action):

GRMN Aug 2006 $95.00 put (GQRTS)

Last Trade: 8.50
Date: Aug 2
Prev Close: 8.50
Open: 3.20
Bid: 8.50
Ask: 8.90
Day's Range: 2.50 - 10.20
Contract Range: 2.40 - 9.30
Volume: 3,628
Open Interest: 2,088
Strike: 95.00
Expire Date: 18-Aug-06

Disclosure: I currently hold August 90 puts and may purchase some 85's tomorrow.

GRMN in focus

As a followup to last week's post about the weakening of GRMN I would like to focus on the GPS technology company this week for earnings wednesday. Last week I said that I expected the stock to head lower after it closed out the previous week just below it's 50 dma which had been compromised twice recently. Well the stock bounced monday and looked to head higher off of the 50 dma, but check out what happened next, and especially note the action thursday and friday:

Of course it is important to be aware of the context. GRMN announced a new GPS plane navigation system last weekend which justified monday's bounce then we had major rallies in the broader markets albiet on lower volume. Nonetheless GRMN took a beating after trying to lead like it has been. They post earnings on wednesday morning (11am ET) and I see two factors that could be driving the heavy selling going on in GRMN. The first would be a general fear that GRMN may dissapoint even slightly and get punished like other would be leaders RACK and SWIR on friday. The second is genuine smart money selling ahead of a bad report. Either way (or perhaps others) it will be very interesting to watch GRMN next week and see if the technicals correctly predict a plumit wednesday.

Lets take a quick look at a longer term chart to see how far it can fall in the event of the catastophe I see coming in the chart:I see the first stop at 80 but with a really nasty break GRMN could spend some time in the 60's. I will post updates on GRMN's progress this week. Cheers!

Double top in CME, Pullback in CVX and Cracks forming in GRMN

Getting back from vacation I was not surprised to see many ugly charts. Investors are becoming more aware of a global economic slowdown that doesn't exclude the US coinciding with a panic over the middle east and stocks are being punished. Many stocks are broken, having been heavily sold and now the only ones left to fall substantially are the fund favorites. While one might think a bounce should be here soon and that the markets are "oversold" almost everything I see says sell. I noticed a potential double top in best of breed name CME.
CME closed below its 50 dma with an ugly low of the day close friday. However, support is just below at 440 which is a good short term target. Then after some consolidation I would expect CME to head to 380. Recall it was an earnings dissapointment that led to the first failure at 500. CME posts earnings on Tuesday.

CVX has been outperforming the market on the rise in oil prices and acheived a new high early last week on the recent push. Compare CVX to XOM or the oil service etf OIH and you will see just how strong CVX has been. However, the recent rise has been unchecked and this blue chip is due for a pullback. Fibonacci retracements have worked in the past for CVX so I would target somewhere in the range of 60-61 before the next leg higher.

I especially like CVX longer term because I would expect funds who are not allowed to hold lots of cash to rotate money out of less conservative stocks and into high dividend blue chips and there isn't one better than CVX. You can expect to see more on CVX here in the future.

Another popular stock that has been highled for months in the IBD 100 is GRMN. I do not know much about the business of GPS devices but I know the stock has been weakening lately. There seems to be alot of resistance above 100 and has dipped as low as 80 recently. Now may be a good time to jump in for a quick ride to this area potentially targeting the 60's if 80 can be breached. On Friday GRMN closed just below its 50 dma and I would expect this one to head lower.


I will try and do updates on previous picks in the comming weeks and get back into posting at least weekly. Enjoy!

-pyth

Has GME's time come and gone?

GME's stock has been a favorite of wall street for a few years now after they aquired their main competitor electronic games boutique (EB). It has had a decent run and hit a high at 50 recently. Take a look at this two year weekly chart, notice a previous price channel:GME is the dominant player in the brick and morter video game retail industry and sells through gamestop and EB locations. The video game industry has been growing steadily over the years with the success of the playstation 2 and xbox and is likely to grow further with new systems comming out this christmas. Many have wondered not if, but when video games will begin being sold and downloaded online. When this transition occurs the brick and morters who are not ready will be hit hard no unlike the bankrupt musicland and distrubuters like Navarre. Nintendo recently announced their new wii system will be able to download games from any previous system online directly from them for 5-10$ a pop. This is bad news for gamestop because not only will it hurt sales of new games, but the re-sell portion of their business should also hurt. Many will say that nintendo is a smaller player, but they are quickly taking market share away from the competitors and the new portable nintendo DS is becoming a pop icon like the ipod. This is purely speculation but I suspect the era of game downloading to home systems will begin as early as next year. This is certainly a gradual change and not abrupt, but from a trading standpoint the top where funds and the stret begin to dump is lucrative. Also this could potentially be a very long term short given the horizons. Take a look at this 6 month daily chart:

From a technical standpoint the stock has been taking on water ever since it touched its 50 on a few gap an runs. This follows the 6 months of channeling leading to the breakout. Since the decline began GME has followed a trendline down with the lower BB through support around 38 and through both moving averages (50 and 200 dma). This has occured on increasing volume and I suspect that institutions are begining to take profits on GME. The ideal entry would be at 38 or higher with an initial target around 33 where a gap becomes closed from there GME may trade in the old range for an indefinate period of time before the big collapse. I suspect when all is said and done this decline will look alot like MOVI's.

There are alot of factors to keep in mind. The new nintendo DS lite is selling out like crazy right now along with the games. But I suspect this may hurt GME because the system only sells for 130$ so if it is being bought instead of the PSP at 250$ or xbox live at 500$ then GME may miss out on some profit. GME apears to be aware of this and is trying to make up for the cheaper system by selling in house accessories and system bundles. Also nintendo's new system wii coming out this christmas will be much cheaper than the competition. Again this is just speculation but I think nintendo is going to come out way ahead in all this stealing market share from it's competitors with innovative ideas like touch screens and motion interactive games, not to mention much lower costs.

I will follow this one for a while as I suspect there may be alot of downside comming for GME. There will be more later as the situation develops. For now go try out the new nintendo DS and ask yourself if nintendo is once again about to rule the world.

More here.

NOTE: I will be on vacation for the next two weeks so there won't be much if any posting during this time. The other members may post if they want. I will be back online in the swing of things mid july. My current holdings are long: IOTN, MOVI, HOM, short: GME. Have a great summer!

Is this TIE gonna get shot down?

Shorting this stock might make you feel like Han Solo with a ticker like TIE. The titanium producer primarily sells to companies like Boeing who use the strong and lightweight metal for aerospace. If Boeing was building tie fighters they would certainly use titanium for the frame.
The stock has pulled back considerably from it's highs about a month ago when the stock split, but its still holding above it's 50 dma after a few bounces and a pierce last thursday. Compared with any other mining stock this is a considerable feat. Last week I had been buying puts looking for a big drop when it broke it's 50 dma for the first time. It broke it's 50 dma on thursday only to reverse intraday on high volume and close alomst breakeven. This was the stock's chance to reverse and head higher, however Friday much of this effort was negated when TIE closed almost at its daily low down 5%. It has now formed a slightly widening down channel on the daily and I think its ready to re-test the 30$ low monday or tuesday. The support there won't be as strong this time because last time it was there the 50 dma was just above 30. Also note there is alot of room to fall once the 50 dma is breached and 30 is broken (forming an ABC continuation pattern). Furthermore, on the weekly chart TIE actually did close just below it's 10 week average (~50 dma) for the first time since this parabolic move began over one year ago.
I think the fundamentals are on your side too because metal prices are declining after a couple year parabolic, speculation induced move (especially in Ti). Furthermore, Russia is producing more and more Titanium and recently signed a major 18B$ deal with Boeing to sell them Titanium. I'm not sure how much market this will take away from TIE, but it can't be good for them. In addition, TIE trades at more than twice it's peers valuations.

TIE's PE: 38
ATI's PE: 14

I also thought the recent activity of these Japanese Titanium companies was interesting, but I'm not sure how good of an indicator this actually is. They have been getting hit hard as of late and now lie well below their 50 and 200 dma's.

I'm sure you can find more reasons why TIE should fall, like BA's poor performance recently.
My only concern is that we have options expiration this friday and TIE has one of the highest implied volatilities out there. It is certainly a very good canidate for a max pain pin because of the large interest in selling TIE options. Max pain currently lies at about 30 but as I learned last month it can change rapidly as the option volumes spike towards the end of the week. By the look of the chart I would guess there will be more of a tendency towards 32.50 or 35 due to options but clearly this stock wants to go down and it may be impractical for the option writers to try and hold it up here.

The Market Observations blogger has nailed the TIE short in the past. He literally called the top and got me looking at TIE to begin with about a month ago. After some consolidation he is bearish on TIE once again.

This article on titanium process technology might be worth a look. Aparently a new company out of MIT has a way to cut the costs of titanium processing from about 40$ to 3$ per pound.

DAKT Top?

For aggressive traders DAKT appears to be ready for at least a short term decline. Today it formed a long tail on very high volume that matches with previous tails. I think this should be good for a short term drop down to at least 48, maybe 47.Depending on how it behaves it's self there could potentially be a very large decline as it DAKT could be forming a long term top with such heavy volume in this 52-week high territory. Its certainly worth keeping an eye on. I have no position currently but will prob try and short it for a one-two day trade. Note, this stock is the strongest stock (not too many bearish indicators) I have mentioned as a possible short since this sites inception and it is the most risky. However, I have found the first few drops in a reversal to be the most profitable if they can be timed correctly and I smell a reversal comming in DAKT.

As an update to previous posts, I am now out of DRIV but I think it will fall further. See the HOM comments for how my position progressed there. I have added MOVI Sept 7.50 calls and I now have a fairly decent position in TIE puts, see my market vibration post for more info.