Archive

Archive for September, 2010

NFLX – Time For A Pullback

September 30, 2010 Leave a comment

Several Nasdaq leaders look to have gotten well ahead of themselves, but the one that really sticks out to me from a set-up standpoint for a short trade is NFLX. The Nasdaq has had a hell of a run and looks poised to pause before making its next move. This would allow for several of the high flyers to cool their jets. (NFLX, AAPL, BIDU, AMZN, PCLN).

NFLX is demonstrating a "dark cloud cover" on heavy volume much as it did during August before pulling back ~10%. If NFLX follows a similar script this time around then we can expect a move down to the mid to lower 140's allowing the 20 and 50 day ema's to catch up.

Stepping back and looking at an even broader picture, via the weekly and monthly charts, we can see this monster looks close to reaching the precipice. But, before I go calling a top, which is a risky game, I will stick to the shorter term view that this stock has some retracement work to be done.

When betting against monsters such as NFLX, my preference is towards trading the options vs. a naked short.

Nflx

Categories: Short-Term Trader

Chart Of The S&P 500 Points To A Few Possible Outcomes Heading Into Fall

September 7, 2010 Leave a comment

The Charts are beginning to shape up a bit more clearly as we head into the all important fall trading period. The past three months have been range-bound creating plenty of confusion amongst the bulls and bears. Soon, one side should be vindicated even if for only a short period of time. Upon examining the S&P 500 I see three possibilities for how the next 2-3 months could unfold.

1. The Inverse H&S pattern highlighted last week will further develop and the market will make a strong push to or even past the old highs set back in April.

2. The market will continue its back-n-forth range bound ways eventually wedging itself towards the apex of a triangle which will break to the upside.

3. The before mentioned triangle turns into a bearish continuation pattern from the downward thrust in late spring/early summer. This triangle could also be considered the right shoulder of a more grand head-and-shoudlers pattern, which everyone is aware of by now.

Possible paths of least resistance

Categories: Short-Term Trader

Indices Head-and-Shoulders OR Inverse H&S?

September 2, 2010 Leave a comment

We all know about THE Head-and-Shoulders pattern so widely discussed by the financial media and every analyst with a charting package – But, how many are discussing the Inverse H&S pattern developing? We could  be on the cusp of putting in the lower right shoulder, which consequently happens to be taking place at a long-term trend-line extending back to the March 2009 low.

Spx hs patterns

Ndx inverse hs
 

The last H&S pattern  (which held better symmetry) that everyone was talking about triggered the neckline back towards the end of June, but was quickly reversed and the market traded up for the next month negating the pattern. Back then I was suspicious, as I am now, that the pattern would not follow through due to the excessive coverage and dismal sentiment in the marketplace.Will this larger sloppier pattern trigger as many are expecting or hold a similar fate as the previously mentioned H&S pattern.

JUNE HS PATTERN
 

Sentiment could further be supporting the bullish side as it is difficult to find anyone with a positive spin on the market. Mom and pop (AAII investors) sure don't like stocks either…..that is often a good sign for the market, however; when they have gotten as bearish as recent polls are demonstrating and the market fails to follow through to the upside the fallout can be swift and harsh. Sometimes dismal sentiment is a leader – this is not an exact science and sometimes being a contrarian means being contrarian to the contrarian – or something like that. Anyways, here is a solid piece regarding the current investor sentiment by QuantiableEdges 

Seasonality, as everyone knows, does not favor stocks in the next few weeks either.

So what I am saying? What I am saying is this - there is a decent chance that the market could hold the longer-term trend-line and trigger the Inverse H&S pattern proving to participants to be overly bearish (from the pros to moes) and the market surprises to the upside. To further add to the bullish case – Emerging markets and Dr. Copper are showing some pretty solid relative strength which could be acting as leading indicators. OR the other scenario is that the trend-line fails along with the Inverse H&S and the bears are vindicated with a breach of the neckline on THE H&S pattern and market goes to hell in a handbasket just in time for Schocktober. As long as SPX 1040 holds, im leaning with the bullish scenario.

Either way, the market should make a sizable move in the next couple of months and volume will pick back up providing solid trading opportunities one way or another.

 

Categories: Short-Term Trader