The Bottom in Solar Shares

Today the long awaited preliminary results of the US Commerce Department's investigation into unfair trade practices by Chinese solar companies were released. While the Commerce Department's investigation hasn't yet concluded, and a decision on the charges of dumping by Chinese solar companies hasn't been made yet, they said today that "countervailable subsidies are financial assistance from foreign governments that benefit the production of goods from foreign companies." You'd think this is a good thing for US solar companies, after all this should boost their margins as they see higher module prices in the US. You might think the beaten down, and heavily shorted, shares of FSLR and SPWR would squeeze on this sort of news. But in fact, just the opposite happened. Shares in Chinese solar companies (eg. STP, JASO, YGE) surged 10-20% on the news today while FSLR languished in the red and SPWR sold off 7.5%. Wall Street was clearly looking for larger tariffs on Chinese modules with one analyst claiming that the 3-5% tariffs are too small to be meanginful. I don't claim to know enough about the economics of solar to know whether 3-5% tarifs will be meaningful fundamentally, but psychologically this feels like a meaningful event. If this means that module prices will rise in the US, then great, anything that can stop the death spiral in solar panel prices is welcome. If US producers see higher contract prices going forward, then that will mean analysts will have to revise their earnings estimates higher, also good. Naysayers will say that this will dampen the US solar growth, but much to the surprise of those who follow the stock prices of US solar companies, the US solar market doubled last year. I find it hard to beleive that a 3-5% tarif on modules from China will significantly dampen growth. I could go on an on about how bullish I am on solar for the long run, but finally things seem to be starting to improve on the shorter term.

Despite the weakness in US solar shares, the solar etf TAN managed a gain today on more than triple the three month average volume. I see this as a sign that the tariff news is seen by the market, on the whole, as good for the solar industry. We can speculate as to why investors are buying or covering, but the price and volume action is how the market speaks. Should the strength continue, solar will have carved out a very solid looking inverse head and shoulders bottom. If the bears want to push their solar shorts further, they'll need to quickly reverse today's action. More later...
Disclosure: I am long FSLR, SPWR and JASO.

St. Patrick's Day Rock Blog: Kiss Me

Saturday Rock Blog: While My Guitar Gently Weeps

Fifth Wave?

Yesterday's breakout in the major indices brings into view the all time highs on the S&P 500 and the DJIA. As stocks continue to rally through new 52 week highs towards all time highs, investors should keep in mind that this is the third major multi-month push in the bull market that began in 2008. In terms of Elliot Wave Theory this would be the fifth and presumably final wave of the cycle. There's a very good chance that we will push up to those all time highs soon, testing the highs of the 2000 and 2007 bull market peaks (at ~1500 on S&P). While everything is 100% bullish in the short term, this fifth wave is likely going to be the end of the recent secular bull market. The direction is higher for now but I feel fairly confident that sometime later this year deflation will rear is ugly head. Be prepared.

Do or Die for the Dow

After breaking down out of a huge rising wedge pattern last Tuesday, the dow (dow tracking ETF DIA seen above) retraced back to the break point where heavy cumulative volume (see volume by price on the left) seems to confirm strong resistance near $130 (or ~13,000 on the dow). The multi-year uptrend is still clearly in tact, in my view, but stocks are positioned for a correction from here. In just glancing at this chart, a correction to 12,000 looks very reasonable and well within the scope of a longer term (~3 years) uptrend. If you zoom out further you see that stocks have been range bound for about 10 years, and we are near the top of that range. I wouldn't be surprised if something more serious developed than a 1,000 point correction but you can't make a technical argument for that here. I think even the most bullish of bulls would like to see stocks pullback to gain lower risk entries in overextended stocks. With the federal reserve meeting this week, the bears could finally get the catalyst they've been waiting for for the first real decline in stock prices this year.

However, should stocks push just a little higher from here, say above 13,060 on the dow, there could be a powerful squeeze as new shorts once again run for the exits. This would set up the dow for a test of the all time highs near 14,000. A correction to 12,000 might be just what the pulls need to muster the strength for a rally later this year towards those highs. We'll just have to wait and see how things play out but caution is warranted in the near term.

Sunday Rock Blog: Illegal Alien

Saturday Rock Blog: I'm a Believer

Saturday Rock Blog: ICE Smugglin'

Five Charts Suggesting a Top is Near

1. Key divergences on the S&P 500. As the index has made new highs recently, key price indicators such as RSI, CCI and MACD have made lower highs:

2. Apple has capitulated. The three year rally in AAPL shares from $100/share that has made the company the largest in the world appears to have ended with a blow off top:

3. The VIX broke out. Despite the recent rally in stocks, the volatitlity index has broken out and remains off the recent lows set a few weeks ago:

4. Bonds remain in a long term uptrend. Bulls want to see yields rise as investors favor stocks over bonds. Instead, bonds have held support recently and remain well above their 200 dma:

5. The dow transports are rolling over. Dow theorists will note that the transports are significantly underperforming this year, hinting at underlying weakness in the market:
It feels like most market participants are expecting a massive rally after Greece gets bailed out again and are afraid to sell. I don't claim to know how the market will react to the inevitable bailout news, but stocks are well positioned for a fall from here. I'm thinking that any push higher (perhaps on bailout news) from here provides a low risk shorting opportunity, at least in the intermediate term. So far I just have a few small shorts on but hope to add more this week.

Disclosure: I have no positions in the above stocks but am short IWM with puts.

Saturday Rock Blog: Get, get, DOWN.

Yes, I've turned bearish! More details to follow... tomorrow.
Disclosure: I am short SPWR, IWM and SWKS with more to come.

SP500 analysis

http://www.chicagostocktrading.com/index.php?option=com_easyblog&view=entry&id=58&Itemid=279

Saturday Rock Blog: Burnin' (S&P 500)

Saturday Rock Blog: Scarborough Fair

Sunday Rock Blog: Midnight in a Perfect World

There's no denying that this gold chart looks pretty bullish. After a six month correction, GLD has broken out and targets the low $200's (new all time high). This isn't terribly surprising because ANYTHING priced in US dollars has rallied lately and gold was well positioned for a technical move up. This action comes as GLD nearly confirmed a new primary downtrend with the 50 dma coming close to crossing the 200 dma (might still happen). So long as GLD holds above ~$162 the trend is bullish. However, if GLD trades below that level in the next week or two, I'd expect things to unravel extremely fast. Deflation or more inflation?

Some stocks are just falling up lately, but hitting resistance today

Saturday Rock Blog: Dow Golden Cross Positivity

S&P Golden Cross!! (bullish)

The golden cross (50 dma/200 dma) is a lagging indicator and it would be healthy for the market to pullback here. But damn, is this not a gorgeous chart?! If you leave out the prior ten years, this (six month) chart looks really bullish. We might be a little over extended in the short term but the 2008+ bull market seems alive and well. A violation of $125 (or ~1250 SPX) would convince me otherwise.

Sunday Rock Blog: To Love Somebody

How can you mend a broken chart? (BIDU)

Looking at BIDU's daily chart (above), all the signs of a long term reversal are there. In fact it looks rather close to the "proper" shorting point according to O'Neil (for a reversal). From a bear's perspective there's pretty much nothing to not like here. I'd be surprised if it saw higher than $135 and below $110 would be a very clear break. If it does break, the symmetric triangle targets a ~$60 move but I don't see any support on the weekly chart until about $40. People forget how many times BIDU split as its momentum carried it higher. I don't know anything about the fundamentals of BIDU (and I really don't care to) but this chart sure says something big has changed

Disclosure: I don't have any position in BIDU but am net short the market. I may buy BIDU puts next week.

Saturday Rock Blog: Nights on Broadway

Yeah, nothing like Bee Gees to start a Saturday morning. I'll get a few charts up later today and tomorrow and, maybe even some more Bee Gees to boot.

Golden cross on the Russel 2000 (IWM) soon?

Saturday Rock Blog: End of Line

AMZN is breaking out from support

I've been really lagging on the posts lately. If there's anyone who actually checks this blog on a regular basis, I'm sorry about that. One of my New Year's resolutions was to post more consistently. The market has really turned into a stock picker's paradise over the past year and I have plenty of ideas about things to post about. The S&P closed flat last year but there were stocks in the index up 100% while others were down nearly as much. One stock that moved a lot last year but didn't make much net progress in either direction was AMZN (Amazon.com). At it's high for the year (and all time), AMZN was up 30% yet it closed down 5% having "corrected" sharply since mid October. I don't want to get carried away with analysis on this one because the situation seems straightforward to me on a technical basis. I'll keep my opinions about AMZN's fundamentals to myself beyond saying that I only know a few people who didn't do more than half of their Christmas shopping on Amazon.com. So here's the chart:

Everything looks great up until late October when the stock gapped down $25 to below it's rising 50 dma. Even then, the stock was pretty well behaved. It bounced first at it's rising 200 dma and made two failed attempts to retake its 50 dma before rolling over below its 200 dma. As AMZN corrected with the rest of the market it traced out a very nice falling wedge consolodation pattern/flag on the daily time frame (blue). It has tested support at $177 from August multiple times and despite having broke for brief periods, AMZN bounced back each time. The most impressive false break of $177 occured on December 14th when AMZN formed a $10 hammer reversal candle for the day. Today, AMZN again broke back above $177 support and broke out of the falling wedge. While this pattern is stretching the limits of a healthy base/continuation formation, with the 50 dma/200 dma crossover that just occured, I really like the look of this chart.

AMZN still has a long ways to go before we can say the uptrend has been re-established. I'd like to see volume increase as it pushes higher. It needs to retake its 50 dma and after a few attempts I'd like to see AMZN decisively retake its 200 dma near $200 (a good first target). The CCI divergence is positive but it needs to get back above zero. I think AMZN has a great year ahead of it and I will be keeping a close eye on it.

Disclosure: I own AMZN calls but am short AAPL.

Saturday Rock Blog: C.R.E.A.M. (cash rules everything around me)

Saturday Rock Blog: Davyd

So much for posting everyday this week... I had less than time I thought, anyways here's another Pogo "mashup." Its produced from the film AI, which was oriringally a Stanley Kubric concept but got directed and produced by Steven Spielberg later. Its not perfect but a must see for sci fi fans (AI). Hope you all had a Happy Thanksgiving! After the worst Thanksgiving week since the 1930's, is it time for a ride in Santa's sleigh?

CVX at the top of its range, bearish signals

Disclosure: I have no position in CVX but might take a shot with puts if it holds below $100 this week.

Saturday Rock Blog: Mellow Brick Road

I just noticed Pogo has a bunch of new videos I haven't seen. This week I'll keep it mellow for the holiday and post a chart a day with a Pogo video. Happy Thanksgiving!

FSLR descending triangle coming to apex, big move expected

(click chart for higher resolution)

One great fundamental bull case for First Solar is outlined in this report by morningstar, just to quote a few lines:

"We expect an industry rebound will not occur until mid-2012 at the earliest. Solar demand growth remains promising in the long term, but near-term growth rates are going to be very modest...

First Solar is the only solar company whose shares have a clear near-term catalyst: its pipeline of utility-scale projects in North America. We project this business segment to constitute more than 70% of the firm's revenue and 35%-40% of production output in 2012, while also serving as the overwhelming source of near-term earnings beginning in the third quarter of 2011.

Pricing on First Solar's 2011-13 backlog of utility-scale projects was set before the industry downturn, and none are subject to renegotiation. These projects were priced using First Solar's 2008-09 project installation cost levels, which were 35%-40% higher than they are today. Also adding to the bottom line will be the reduction in costs of capital for the 1,070 megawatts' worth of projects that received Department of Energy loan guarantees, which allow the company to realize higher selling prices. Putting it all together, this book of business isn't just going to provide an earnings buffer, but will in fact mint the company a great deal of money...

The big risk to First Solar's longer-term story is what will happen to the company's profitability and returns when these lucrative projects are completed in 2013. Any new utility-scale deals will be signed at lower prices. Without another large reduction in costs, the company could encounter some major headwinds. But we don't think this risk will be influencing the stock for quite a while, as 2014 is a lifetime away in the solar sector."

To the best of my knowledge, First Solar presents the greatest long term (5-10 yrs) investment opportunity in the market today. Despite this, an obviously bearish descending triangle has formed in the daily chart appearing as a continuation to the long term downtrend. Unfortunately, with the broader market in bear mode, solar will continue to struggle despite soaring energy prices.

Is FSLR trying to fill the 2007 gap to $35?

Related post.

Disclosure: I am long FSLR stock and calls. I expect to continue buying FSLR for years to come.

Saturday Rock Blog: 'Round the Wheel

Saturday Rock Blog: Waste

AAPL year-to-date performance vs popular ETFs

Disclosure: No positions, but maybe soon.

Market retraces to its (declining) 200 dma

Back at the end of July, when the small caps first broke their (then rising) 200 day moving average (dma), I'm sure many hoped that the market would bounce back and rally to new highs. After all, a rising 200 dma should be a solid bastion of support/resistance in a secular trend. Since losing the 200 dma, the market leading small caps (IWM above) have been mostly range bound but ~25% lower than July prices. IWM did pierce the bottom end of the Fall range at the beginning of the epic October rally we just saw. In the final days of October, with the resolution (apparently) of the Greek problem with the default/bailout deal, the small caps broke up above of the Fall range. Will the breakout hold? Can the market retake and hold its ~200 dma? One thing is certain, the IWM 200 dma (and other index ETFs!) is now declining in value and as we approach it, expect resistance. Selling off from here would be characteristic of a bear market. In fact, many indications are the we began a new bear market in July/August. We shall see...

I have been too busy to monitor the market much lately (hence the infrequent posts), but one thing that has really caught my attention is the action in AAPL. Maybe its that the stock keeps pushing an eye popping $420 ($390B market cap) or just morbid curiosity following the unfortunate death of Steve Jobs. How much influence did Mr Jobs have on AAPL's stellar success of the past 7 years (4000% gain in the stock) and will his successors be able to keep up the growth? At any rate, a number of technical indications are looking bearish on the shorter term time scale while the long term uptrend clearly remains in tact. Note the rising 200 dma, which has acted like support. I wouldn't give shorts in AAPL much slack, $410-420 seems like a good line in the sand. Watch AAPL's behavior near its rising 50 day and 200 day moving averages.

Disclosure: I plan to initiate a put position against AAPL and perhaps IWM in the next few days.

Saturday Rock Blog: (No More) Bad Town

Saturday Rock Blog: Black

NFLX 50% retracement

The 50% retracement point (took under 3 months) should be good for a reasonable bounce, especially considering the (capitulation) volume NFLX saw late last week. Out of the next low its tough to say where NFLX is heading, volatility will probably remain elevated for some time.

Saturday Rock Blog: Come Monday

I'll post some charts later today.

Saturday Rock Blog: Back in the High Life Again

Saturday Rock Blog: You Can't See Me

Tupac this morning for no particular reason.

Double bottom, simple ABC correction or something far worse?

A simple ABC correction targets $106 on SPY or ~1057.5 on the index. If this is the beginning of a new long term trend, as the cross overs in the chart above suggest, then the bottom could be potentially much lower. However, I wouldn't be surprised to see Bernanke play some card up his sleeve and send us spiraling higher out of a double bottom. I am posturing bullish at the moment even though I don't think we've seen capitulation yet (on either side). I tend to think that the bull market isn't over yet and that we have one last big leg up, but honestly, these charts suggest otherwise. I'm leaning more towards a fundamental, longer term, argument that inflation should start creeping back up with rates at zero percent for two more years. So I'm not trying to trade these swings but nibbling when there's blood on the street.

Disclosure: Long IWM, LNKD, FSLR (broken charts, I know)

Saturday Rock Blog: Mojo Boogie

Sunday Night Rock Blog: Falcon Jab

Strange times call for strange music videos, enjoy...

LNKD Cup n' Handle

This cup n' handle looks pretty decent to me with a target that's $50 higher using the measure rule. The potential for LNKD to sqeeze is extremely high due to the small, overshorted float. This could start to fall apart if it got below $95 but above $110 it can soar. There might be a pause at $122.70, the IPO day high, but even with Bulkowski's conservative target, you get ~$135.

CAUTION: LNKD reports quarterly earnings tomorrow (after the close) for the first time since they went public. This report is likely to break the pattern one way or the other.

With the bollinger bands tightening I can't see a small move in the next few days. Most other indicators look bullish to me (RSI, CCI, MACD, stoch). Tomorrow we might hold mostly unchanged (as volume begins to swell) but I'd expect a large gap Friday.

Disclosure: I am long September LNKD calls.

Saturday Rock Blog: Right here, right now, You're not from Brighton

Saturday Rock Blog: Wildcat, Loud Pipes

Saturday Rock Blog: In Dreams

Saturday Rock Blog: Somebody to Praise

VXX hard to short? I'm not all that surprised..

From an awesome new feature on Yahoo Finance called Market Pulse:

LNKD isn't finished

Its a bit of a stretch to use a chart that only has 11 trading days of history for technical analysis but LNKD looks bullish to me. If we consider the LNKD IPO price ($45) as the bottom of the flag pole then the pattern fits an almost perfect tight pennant and targets ~$160. It may sound counterintuitive, but the fact that LNKD is such an obvious bubble (using any reasonable valuation metric) makes me even more bullish. It must be full of shorts by now and with its tiny float (50M)the upside could be swift. I wouldn't even remotely think about buying this .com for the long haul but I'd bet it rallies big after the broader market rebounds. Sure, we could very well be entering a new bear market on the S&P but we won't go straight down. At some point we will rebound (probably soon) and LNKD will lead the way up. I've seen it dozens of times (and been burned betting against stocks like this), the most ridiculously overpriced stocks go up the fastest and the most (eg CROX, RACK, DECK, BIDU, NFLX, CRM and so on).

Disclosure: I have no position in LNKD

Monday update: Bought a few front month 85$ calls at the open for a trade.

Saturday Rock Blog: Yar Mar

Saturday Rock Blog: The Revolution Will Not Be Televised, RIP Gil Scott-Heron

CREE

Disclosure: I picked up a few calls today.

The Japanese Bear Market

Disclosure: I own June EWJ puts that I plan to roll forward soon.

Saturday Rock Blog: Sneakin Sally Through The Alley

I'll get an EWJ chart up in a few hours, I have some puts.

That AAPL chart almost fits this perfectly:

AAPL: Continuation Pattern or The Top?

And how about some more Steve Winwood, because, why not?

Crude is hanging in there

First, the bull market in small caps (IWM)

Saturday Rock Blog: Higher Love

Sorry for the hiatus, I've been distracted by other things over the past few months. I've actually been watching a number of issues in the market, there's a lot going on right now. I'll post a chart a day for the next week or so. Enjoy!

Sunday Rock Blog: Kick Push

ICE Reversal?

ICE has been grabbing more headlines than usual lately after joining with NDAQ to bid for NYX. As you can see in the six month daily below, ICE had been behaving bullish until the bid was announced. Since the end of March ICE's 50 dma has acted like resistance and key indicators have turned bullish. Monday's reaction to the news that NYX has rejected the NDAQ/ICE bid will make or break this chart:

Disclosure: I have no position in ICE.

Saturday Rock Blog: Baby Bitch

I'll get some charts up this weekend.

Sunday Rock Blog: Inertia Creeps

MIND THE FEAR

Sunday Rock Blog: Punch You In The Eye (NES remake)

USO vs Oil

We all know that the commodity ETFs tend to vastly underperform the commodities they are supposed to mimic. Wall Street games them as they roll contracts, the fund managers take their fees and not much is left for the ETF investor. UNG is famously the worst of all in this regard but USO is pretty horrid as well. Take a look at US ovewr the past three years:


When an ETF consistently performs so poorly compared with the commodity (see light crude chart below) one wonders why any one bothers to invest in it at all. There were over 150 million shares traded last week. Sure, there are probably tons of shorts in USO who hedge with crude futures but not everyone can be short. The shorts have to borrow from somewhere. This all begs the question, why do these "investment" instruments exist and who would want to own them? Is it all just short term investors who only care about the day to day performance and don't care about weekly under-performance as is clearly evident in these charts?


Disclosure: No position in these.

Sunday Rock Blog: Growling Old Man and the Grumbling Old Woman

Saturday Rock Blog: Psycho Killer

This week in idiotic headlines: "Gold Loses Safe-Haven Appeal"

Saturday Rock Blog: Shine On You Crazy Diamond

Disclosure: I have no position in LULU but it looks pretty bullish.

Saturday Rock Blog: Do It Again IWM

Saturday Rock Blog: Meatstick > Auld Lang Syne

Happy 2011 all! I hope you all had as much fun reigning in the new year as I did (I was at this incredible show at Madison Square Gardens, NYC). I'll get back to posting charts soon.