Daily Archives: September 28, 2010

An Ideal Long

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Let me show you a chart that I own and that I really, really like. I've mentioned it before; it's Rackspace.

0928-rax

Why do I like this chart? Let me count the ways:

(1) The pattern is nice and big; the saucer spans nearly a year wide;

(2) The pattern is extremely well-defined. This has "saucer breakout" written all over it;

(3) The volume has generally been increasing, and on the breakout, the volume exploded higher.

As much of a permabear reputation as I have, I like to highlight the longs that I genuinely respect and appreciate. 

Hanging Man or Hanged Bear?

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It's the hottest day of the year here in the Silicon Valley, and I just rode my bike many miles after dropping my car off for some service. So I'm not in the mood for a long post (the cutesy drop-then-surge today doesn't add much inspiration either).

Every index ETF has a hanging man. I don't put huge amounts of faith in candlestick patterns, since they are principally about the relationship between a single day's opening and closing prices, and I don't think that single data point makes a whole hell of a lot of difference. All the same, it's worth noting:

0928-candle

I am just about counting the minutes until this wretched month is over. I have ten long positions, one of which is (as usual) a very large SPY position as a hedge. The mega-risk to the bears, as everyone on the planet knows, is a zoom to 125.

0928-fuckyou
The market is acting weirder every day. I, for one, will throw myself a little party when this month – and this quarter – are history. September's reputation as the month for the bears should permanently be executed.

22 Stocks That Are Breaking Down (By Ryan Mallory)

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There are some bearish divergences out there indicating that this market could reverse course and allow for us to see a pullback of sorts in the very near future. While I don't rule that out, I think the odds are we move higher, and I have positioned my portfolio accordingly. Below you will find  a handful of stocks that are showing signs of, or already in the process of, breaking down as the smart money appears to be leaving them in a subtle manner. There are stocks trading at its peak and finally showing some vulnerability, while on the other extreme, there are stocks that have been in a channel near or at their lows, before finally breaking down below those lows.

One particular play that seemed to be of interest to me is Kimberly Clark Corp (KMB), which broke its upward trend line yesterday, and is seeing continued selling into today. Where I'd be interested in shorting this stock is if it can break through support at $63.75 and put in a lower-low as a result. 

Here are 22 Stocks That Are Breaking Down.

Checkout Ryan's Blog at SharePlanner.com

The Picture of Vulnerability

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Sheesh. The mere rumor of an executive (Tim Cook, pictured herein) from Apple leaving for another company was enough to briefly knock about twenty points from AAPL (and, consequently, the Apple-dependent NASDAQ index). Can you imagine what this stock is going to do on the unhappy day that Jobs either leaves or dies? That one man alone would cause the entire market to crash, if only briefly.

0928-aapl

Looks Like Consolidation So Far (by Springheel Jack)

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We saw a small move down on SPX in trading hours yesterday, and a sharper move overnight, but this just looks like consolidation so far. If it is consolidation then the support trendline on ES, currently at about 1125, should be respected. That's also the level of the SPX IHS neckline of course:

100928_ES_60min_Trendlines

Bonds have bounced sharply in recent days, and we've seen a perfect 50% retracement of the recent move down on 30 year treasuries. If equities are to rise much further then I'd expect bonds to fall, so these are looking like an interesting short here:

100928_T30Yr_60min_Fibs_and_Rising_Wedge

We're seeing some sideways consolidation on USD as well, and on USD, from a technical perspective at least, there seems little reason to expect a bounce in the near future. Looking at the USD currency pairs I'm seeing possible three drives patterns on EURUSD and GBPUSD with the first two drives completed.

Classical three drives devotees will have to forgive my not having been particularly concerned about the fibonacci retracements after the completion of each drive, but the essence of this pattern for me is the formation of three drives of almost equal size. We have that on both of these, and on EURUSD that has formed so far within a broadening ascending wedge:

100929_EURUSD_60min_BA_Wedge_and_Drives

On GBPUSD we've had two drives within a rising channel. The recent drive has formed a broadening ascending wedge which gives us a rising support trendline currently slightly over 1.575:

100928_GBPUSD_60min_Possible_Three_Drives_Pattern

These have been big moves on both of these USD currency pairs and if we see a third drive on each then I'd expect that to be in the context of a move up on SPX taking us to the 1175 area. If we are to see that then I'd expect us to chop around today with a slight upward bias before moving up towards 1175 on Wednesday and Thursday this week. If ES breaks support today then I'm doubtful about seeing any move much below 1125 SPX and I'd expect the retracement to conclude by Thursday.

LATE NOTE:

Since writing this ES has bounced back up to 1142.25 and found resistance there. In doing so it has confirmed today's pattern, which is a little broadening descending wedge. I'm expecting us to continue to trade within this until, most likely, it breaks up, which will be a strong signal to go long. Here it is on the ES 15min chart:

100928_ES_15min_BD_Wedge