Sunday, November 30, 2008
Thursday, November 20, 2008
Tuesday, November 18, 2008
Member's know that one of my current FOREX positions is short the CHF which is way over-bought with the dollar. Surprisingly, this pair didn't adjust the last time the dollar weakened, so I have tight stops just in case it rallies.
Monday, November 17, 2008
As far as currencies, the GBP sure showed some strength after my post today, increasing nearly 100 pips in a matter of minutes. I still think this pair is over-sold and due for a nice counter trend rally here soon. What we would need to see is strength in the equity markets for this to really be a winner. So, until we get clear direction, I would have very tight stops on this going forward.
As I've been saying for a while; the dollar will weaken eventually and all these commodities are too over-sold in the short term. Since I like to explore new ways to play the commodities and forex markets, I think that the XME is a great way to play miners and metals. I don't have a position in this right now but any weakness tomorrow will make me seriously consider taking a long position with a target around $35.
Continuing on the dollar weakness play, OIH is forming a very nice base on its Fib retracement and fan support levels. Moreover, the volume has been better than usual and the three lower shadows are forming a rough inverted head-and-shoulders pattern. Neckline confirmation would be around $100. I currently have a long position in OIH (JAN Calls) which I've had for a while. If oil keeps falling of a cliff this week, I will more than likely add to this position.
Whatever today brings, I'm sure it will be exciting. Again just so everyone is clear, I currently have no index positions (either long or short). I am waiting for a clear direction before I jump back into these. Trust me, there will be plenty of money to make once we know the new direction. Happy Trading!
Sunday, November 16, 2008
Now, having said that, if we start to see the market tank next week, I think it's time to really start slowly buying up stocks for the long term. I am not say that this is the time to throw all your money in, but you should start to "nibble" slowly IF we go lower. Let's face it, you really can't make money shorting a stock, because the most you can make is 100% of it goes to zero. However, if you have a $5 stock that used to be at say $30, you could make nearly 200% over a couple months if it goes up to $15. Regardless of whether you think the bottom is in (which I don't) or not, its time to start thinking long term on some stocks...
Saturday, November 15, 2008
Most people know that stocks are 70% driven by institutional buying and selling, whether that's hedge funds, mutual funds, etc. As such, these large institutions have the same exact charts to look at as we do. So, they are placing the same type of automatic stop orders and buy orders around the same prices that we do (just about anyway).
Now, when the markets hit these levels (either rallying up or sinking down) all these orders get triggered. The problem is that most of the orders coming in are not "limit" orders meaning that they wont take just any old price. Instead, the orders are "stop" orders which means that once they are triggered they become market orders and are filled at the next available price (bid or ask). So, when all these stops get triggered at once, they compound on each other and drive the market up or down very fast. This is one of the main reasons (not the only of course) we have been seeing such huge volatility.
If you take a look at the DOW over the last five days, you can see that there have been some huge swings and people have both made and lost fortunes just in these five days. Thursday and Friday set in a fairly important line of support shown below. A break below this would spell disaster for the bullz. However, it also serves as a support line being as its the mid-point of the bullish engulfing pattern from Thursday. Either way, it should move very quickly next week.
On the S&P we continue to be caught between support and resistance. I closed out of my SSO calls after the huge rally yesterday at very healthy profits and intend to stay out of any index ETF's until we either break below or rally above these lines.
Oil is still getting hammered on demand concerns, but it's getting a little ridiculous. Think back to the oil "boom" (if you even want to call it that) and how everyone was saying that oil was going to $200 a barrel. Well here we are all the way down below $60 and now everyone is saying that it will be at $50 or even $40 a barrel. Well, I think that its all a bunch of non-sense. I think in the short run (a couple weeks or months), oil will be back around $80 or higher.
The Morgan S. commodity index shows just how much things have fallen. These trends are not realistic and will break sooner than later at these levels. If a base is forming here, it could head back up to 600 over the next month or so. A break below would take it around 300 or lower.
One way to play the commodities is through the DBA powershares. Notice how there is a nice inverted head-and-shoulders pattern forming. If this breaks above the neckline around $27.50, it would be a great buying signal.
ADM still remains my favorite short right now. It continues to run up but has yet to close above the recent highs. Moreover, all the long upper shadows tell me that this stock is rejecting higher prices. My stop is above the highs from today and I'm looking for this to break its short term trendline and head to $20 or so. Also, in the context of the overall market, this stock has risen when the market falls and if we are in deed in for a rally anytime soon, this should be one of the first to fall.
CMI is shaping up to be a good long candidate. It's sitting nicely on Fib retracement levels and is way over-sold (for good reasons in this economy). Again, if we do get a nice rally, then CMI could enjoy a quick run to $30 before resuming the downtrend (which I think is the LT fate of this stock).
Finally, my CAL short call last week was great. I'm just upset that I sold out too early and left tons of money on the table. I bought puts the day of the blue oval and sold out at a nice profit when the stock was south of $15. Wish I could have held on longer...
Okay, that was an amazingly long post today. I hope next week is a little more clam but I'm sure it wont be. I hope everyone has a great weekend!
Friday, November 14, 2008
The market put together a very nice bounce and re-test of the October lows yesterday. In addition, all the charts showed another huge bullish engulfing pattern (see chart below). From here I hope we just keep moving up, as I am getting whipsaw from all these daily moves. 9,500 should be a safe up-side target over the next couple of weeks.
As far as the GBP long play I have, I'm still holding on tight. It's just gotten creamed over the last month or so and frankly its due for at least a modest bounce. The hammer pattern yesterday I think set in the short term bottom and I'm looking for this to make its way back to 1.53 at the very least. Granted we will also probably need some upside moves in the equity markets to help, but if it goes lower I will just add to my position.
Thursday, November 13, 2008
Wednesday, November 12, 2008
Tuesday, November 11, 2008
Oil and Gold continue to get hammered but are showing signs of firming up a bit. The commodity index has just been crushed over the last couple of months. Still, I think we should wait until we see a clearer road (though you could start selectively buying some of these while keeping cash in case you can get better prices later). If we see a strong rally, getting to the 600 level should be no problem at all.
The DBC Tracking Fund is a good LONG play right now. I bought calls today as I think this will head back up to the $30 level over the next couple of months.
Monday, November 10, 2008
In addition, the dollar has shown some more weakness this morning, helping oil and gold push to higher levels. I think we are slowing putting in a base in these areas and its time to start buying up great over-sold securities (OIH, GLD, GDX). If we hold the lows of October, we could see a very strong rally through December and into 2009. I still remain sceptical of this possibility with the buffet of bad news out there, but things may already be priced into the market. Let's see how the week goes. Happy Trading!
Friday, November 7, 2008
With this said, the markets have always been prone to change directions when all feels lost (i.e. when we all are yelling SELL, the markets take off!) If you notice on the graph below, the DOW is sitting directly on its Fib retracement levels. If we break below this level, the next region of support is around 8,000. If on the other hand we see a sustained rally, we could be back up to the highs of the week very soon.
FOREX markets tell the same story; indecision. However, some currencies look like good short term trades. The AUD/USD has had a big run up and is hovering around its Fib levels. I think this could get back down to the .65 level if the markets continue to fall next week.
Likewise the GBP/USD could fall more but has already moved back to relative lows and is sitting above some Fib support levels. Long-term I think the dollar will weaken (as I have stated for a while now) and this should be a good buy against the Pound. I would keep your stops tight around 1.53.
Another way to make money on dollar weakness is this UDN Dollar Bearish Fund (i.e. when the dollar weakens UDN goes up). It trades with great volume in the market and is way over-stretched just like the dollar. For traders with a more conservative risk structure this may be safer way to short the dollar indirectly.
CAL is becoming a wonderful trade. I alerted this one to members a while back and it has begun to really pay off. With the dollar weakening and Oil likely to see some sort of short term increase, airlines will get slammed. Like I have said before, I'm expecting this to more back down around the $10 level as it moves away from its 200-day moving average.
Hope everyone wasn't shaken up by the big swings this week. It's important to keep a level head during these times and not get persuaded by the media and other news commentary. Don't rush to pick the bottom or top; there will be plenty of profits left after a clear direction is established. Have a great weekend!
Just so everyone is clear, I don't suggest either going long or short these types of stocks. The simple reason is that each day could shoot it higher or send it lower. Someone said that they wanted to buy it at $4 because "it can't go lower than that." What I'm saying is that IF it goes go to $2 (which is very close and easy to get to) then you would have lost 50% instantly. Don't speculate with these stocks right now...things are way to uncertain and the risk/reward is not clear.
Thursday, November 6, 2008
Wednesday, November 5, 2008
WYNN was an amazing short term trade. It may go lower tomorrow on continued weakness but I was not greedy with a 100%+ return on my puts. Many of my members made a pile of cash just on this one trade alone. Notice how quickly it ran up to $60 (when I called the short) and how quickly it fell right back down to the $45 range.
In the FOREX markets, the GBP still looks like a great long candidate, but I am waiting until the interest rate meetings in Europe this week. If they cut rates this thing may move lower and present an even better opportunity.
The CAD has been an amazing trade as well. If you dont remember I advised everyone to short this one at virtually the exact highs last week. I think its fallen to fast and is due for a very quick rebound (if any) before continuing the slide. A note to my memebers: I know I havent been active in the Forex markets lately and its because I think we can get better prices on these trades. We should all wait until we know where interest rates are going before we make a decision to go long or short.
I am still ga-ga about MMM. It tried to breakout of its Fib levels today an failed miserably. Additionally, it showed us a great shooting star pattern. I have puts on this and am looking for it to fall near the $57.50 level before I close the trade out.
During the rest of the week I think we are going to see continued selling pressure. If we do make another run higher, look for the highs yesterday as areas of resistance. Let's make it a great final week of trading!