Playing the Trend, but Keeping Guard Up
Weekly Wizards for Tue March 1st 2011
Jack Steiman, www.SwingTradeOnline.com, on Playing the Trend, but Keeping Your Guard Up
The market could definitely use more selling across the board to unwind things on those oscillators to oversold. No guarantee we get it, but the line in the sand is clearly drawn here. The Nasdaq is being protected by the 20-day exponential moving average down to the 50-day with gaps as well to help out while that huge open gap down at 2808 is capping things on the way up.
In other words 2715 to 2770 is protecting the downside from getting out of hand, while 2808 is putting the breaks on things. So how does one play such as market? Well it's pretty simple really. The closer you get to support, and as long as the oscillators align properly, the easier it is to go long. You don't really want to short very much, if at all, because the primary trend is higher. The closer we get to 2808 the more you lighten up on old plays and refrain from taking on new ones. Only a strong, clear above 2808 changes that picture. Buy weakness. Lighten up at resistance.
Will this market ever have a stronger pullback? Very possible, and still in play for sure, but when studying the charts, you can see why that's been a hard thing for the bears to accomplish. There are so many open gaps on the way up along with those strong moving averages that it's going to take some outside event unforeseen to get this market to take out some of those support areas. It can be the Jobs Report this Friday. It can be some civil unrest from overseas. No way to know for sure, but this market won't just quit for the sake of being overbought, it appears. It's going to need a strong outside catalyst.
If the market would allow at least the Nasdaq to break decently below its 50-day exponential moving average now at 2720, the bears would be able to rush in and take things down faster and harder. This would set up a much better, more aggressive buying opportunity. This market could use a healthy dose of fear, but who knows when we'll get it. We'll get it, but does it come from here or Nasdaq 3000? No one knows for sure, but we have to be on alert since it could come at any moment. Play the trend in place, but never let your guard down.
When looking at the next big move to come you have to recognize where the critical junctures are. There's no question it's the 50-day exponential moving average on the Nasdaq. Sure, the 20-day exponential moving average is first in line at 2771. Then the gap at 2751. But in truth the bears will have done nothing if they can't take out the 50-day exponential moving average. That's always the line in the sand. So if you're bearish, there's no reason to celebrate if you can remove 2771 on a closing basis. Only 2720 will do that trick.
For the bulls, only when we can blow through 2808 can you start to feel you have something to get excited about. But that's just step one. That's the bottom of the gap and not the top of the gap. Ultimately, the top of the gap will have to be taken out. The bottom is important because it was on such a huge gap down, and we did fail ten points below that level today. However, the top of the gap is at 2833. Like I said, a huge gap. Everything in between is noise. Again, buy on weakness. I wouldn't short much right here near the top because we're in that primary bull market -- thus, adapt to where we are and play appropriately and you'll do just fine.
Jack Steiman is author of SwingTradeOnline, a journal of his market analysis and stock trading alerts. Jack had 94 winning trades out of 145 2010 (171% total return)! Sign up for a Free 21-Day Trial!
Mike Paulenoff, of www.MPTrader.com, on Oil vs. S&P
Apart from everyone's fixation on Bernanke's Congressional testimony later Tuesday morning, which certainly has potential to be a market moving event, let's notice the patterns that have developed in WTI and Brent nearby oil futures.
Both price structures have carved out sideways coil-type formations since last Thursday, which could represent either bullish or bearish continuation patterns. In that the coils have emerged well below last week's highs, my inclination is to treat them as potential bearish continuation patterns, which by definition should break to the downside, violating key near term support at $95 (WTI) and at $109.60 (Brent).
Such a scenario presumably will have a positive impact on the S&P 500-- all else being equal. That said, however, in the geopolitically charged world in which we currently find ourselves, anticipatory pattern analysis goes just so far. If circumstances in Libya or elsewhere in the Mid-East suddenly flare up, and oil hurdles key near term resistance at $100 WTI and $115 Brent, then we should brace ourselves for a run at the prior highs, and that likely will have a negative impact on the S&P.
Yes, lots of moving parts out there today which will require us to be watching and listening closely in the upcoming hours.
See chart on oil futures vs emini S&P.
Mike Paulenoff is author of MPTrader.com, a diary of his intraday chart analysis and trade alerts on both ETFs and key ETF component stocks. He had 162 winning trades out of 260 in 2010 (125% total return)! Sign up for FREE 15-Day Trial!
Sinisa Persich, of www.TraderHR.com, on Free Stock Pick: VZ
Verizon Communications Inc. (VZ) today broke out of a bullish pennant formation on a record one-day gain this year of 2.64%. The stock had been in consolidation for nearly two months after a fantastic performance in December.
Today's move initiated new momentum which will probably test the 52-week high in the 37.50 area. It's also likely VZ will see a move even beyond that level to the next resistance area, which is set at 38.50.
Preferred entry (buy stop) price is at 37.10, with a stop-loss price at 36.25.
Sinisa Persich is a technical analyst and author of TraderHR, our newest AdviceTrade service, featuring his daily, small-cap, swing trade set-ups for yielding profits in both up and down markets. He has 45 winning trades out of 60 since AdviceTrade re-launched the site in early November (+72% total return). Sign up for a Free 15-Day Trial!
Harry Boxer, www.TheTechTrader.com, on 4 Charts to Watch
The market continues to press higher despite a midday sell off Monday. They closed with solid gains for the day with technicals better on NYSE than Nasdaq. Nasdaq was kind of sloppy and may be some cause for worry. We'll just have to see how it goes. In a day or so we may look at the short side, but for now stocks still continue to look strong.
Allot Communications Ltd. (ALLT) is in a beautiful rising channel, and has been for months now. It finally broke out of its 2-week flag on a sharp thrust in volume, almost 750,000 shares, up 1.13, or 7.6%. A clean breakout should lead this up toward the 18 1/2 - 19 zone. That's our next trading target.
Coeur d`Alene Mines Corporation (CDE) had a big day Monday, breaking across a key level of resistance with a thrust in volume. It traded the heaviest volume in a very long time, 8.6 million, up 3.86, or almost 14%. That's the highest price that stock has closed in about three years. At this point I'm looking for a move into the mid 30s.
Royale Energy Inc. (ROYL) is one of the strongest in the junior oils. While some of the others have backed off, this stock continues to move higher, reaching my target of 6.50 Monday. My secondary target is about 7 1/2. That's what I'll be looking for next. It needs to be stopped at 4.90, in my opinion.
Crosstex Energy Inc. (XTXI) popped across key resistance Monday going back a year and a half. This could mean that an extension of this move to the top of this channel ultimately could take place down the road. We'll set a long-term target at 25, short-term target at around 13, intermediate at 18.
Other stocks in our Charts of the Day video are Apricus Biosciences, Inc. (APRI), Abraxas Petroleum Corp. (AXAS), Dynamic Materials Corp. (BOOM), Columbia Laboratories Inc. (CBRX), Exelixis, Inc. (EXEL), Great Panther Silver Limited Or (GPL), Hardinge Inc. (HDNG), ION Geophysical Corporation (IO), Kodiak Oil & Gas Corp. (KOG), NXP Semiconductors NV (NXPI), Pulse Electronics Corporation C (PULS), SodaStream International Ltd. (SODA), Samson Oil & Gas Limited (SSN), Transition Therapeutics Inc. (TTHI), Vertex Pharmaceuticals Incorporated (VRTX).
See Harry's Charts of the Day video.
Harry Boxer is author of TheTechTrader.com, a real-time diary of his day and swing trade alerts, including live audio-video of Harry discussing his charts throughout the trading session. Sign up for a Free 15-Day Trial!