Daily Archives: November 20, 2012

Simple Contrarian

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When it comes to politics, almost every person I've ever spoken with about it in my life is from the same party: Economically Conservative/Socially Liberal. It seems a sensible stance, doesn't it? Who wouldn't want to be prudent with money and open-minded about fellow humans? But obviously not everyone belongs to one party; there is a huge divergence of opinion.

Similarly, when it comes to investing, everyone seems to fancy themselves a contrarian. Who doesn't want to imagine that they and they alone are the ones courageous and intelligent enough to buck the groupthink of the herd? But, as with politics, it is absolutely certain that not everyone is a contrarian.

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Lazy Trade Long & Short: NTE & ETFC (by Ryan Mallory)

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While the market appeared to be satisfied with trading sideways, we've obviously changed course and the market is stroking the fears of Wall Street once again. I've added only one position on the day to my portfolio, which was a long in Philips (PHG) at $25.41. 

I'm watching NamTai Electronics (NTE) with a very close eye, and while it has give up its day's gains, I'm still watching it closely should it reverse and move to above $14.10 and out of the bull-flag pattern it is holding itself in, within the next day or two. 

On the short side, E-Trade (ETFC) has rallied nicely in the last 3 days, but it has gone straight into declining resistance, which offers and excellent trading opportunity, particularly with the market  pulling back after the Uncle Benny's therapy session. Ideal stop loss for ETFC is $8.44, and entry as close to $8.15 as possible. 

Here's the trade setups for today's swing-trade strategies.

Long: Nam Tai Electronics (NTE)

Nam Tai Electronics NTE swing trade long out of bull flag pattern

Short: E-Trade (ETFC)

E-Trade ETFC

Make sure to check out more of Ryan's swing-trading setups at SharePlanner.com

HUI-Gold Ratio; 3 Views, 1 Conclusion

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Here is a little snippet from NFTRH 213 that showed the important
indicator of gold sector health, the HUI-Gold Ratio (HGR) from three
different views; daily, weekly and monthly.  As you can see, daily must
hold to keep the weekly intact, which in turn must hold to keep the
monthly big picture of the secular bull (for the HUI, not this sad looking ratio) intact.

This is a difficult sector to own and indeed these charts say it is
best to trade the stocks regardless of what one does or does not do with
the bullion.  But the conclusion is that until the HGR breaks down to a
lower low, the current situation is viewed as a buying opportunity.  On
the other hand, HGR will serve as a handy risk management indicator if
it should unexpectedly collapse.  From #213:

hgr daily

Daily HUI-Gold Ratio (HGR) needs to hold a higher low to both the May and July lows here or else the story is bearish…

That is because a new low here would threaten the higher low from
Armageddon ’08, highlighted in yellow, per the chart directly below…

Which would in turn threaten 2008’s higher low to the one from the beginning of the bull market in 2000.

hgr weekly

hgr monthly

So you can see that it is kind of important that the daily HGR hold its parameter.

It is a simple conclusion; HGR must hold a higher low on the daily to
avoid a threat to the July and May lows so that the weekly view can
remain intact and not threaten the 2008 low and eventually, the secular
low of 2000.  Meanwhile, higher low status across all time frames means
the indicator is not broken, despite the formerly “normal” correction
that become somewhat intense last week.

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The Magic of “Levitation” (by SB)

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This
definition of levitation is from Wikipedia:


"Levitation
(from
Latin levitas "lightness")[1] is the
process by which an object is suspended by a
physical
force
against gravity, in a stable position
without solid physical contact. A number of different techniques have been
developed to levitate matter, including the
aerodynamic, magnetic, acoustic, electromagnetic, electrostatic, gas
film
, and optical levitation
methods."

When markets gap up on the open, they remind me of
something which is levitating…they seem to be suspended/elevated by
combined forces which have exerted energy through momentum. As you can see on
the Daily charts below of the four Major Indices, after today's
(Monday's) opening gap up, they are all still under the influence of negative
momentum, albeit two days' worth of decelerating negative momentum.

As shown on the
2-day comparison chart below, the Nasdaq 100 leads in terms of
percentage-gained on the two-day bounce, followed by the Russell 2000, the
S&P 500, and then the Dow 30 Index. This suggests that the current
market appetite favours the riskier sectors over their blue-chip counterparts.
Whether buying continues to push and hold momentum above the zero level remains
to be seen. It would appear that the high-beta stocks within the NDX and RUT are
the ones to watch over the near-term. Buying momentum within all four Major
Indices can continue to be monitored by viewing the Momentum indicator, as well
as the percentage-gained on a daily basis. Any weakening of these may be a
signal that this recent bounce may have run its course, particularly as the
Indices approach the underside of their major trendline breaks (which I've
written about in recent posts).

Bull and Bear Options (by Springheel Jack)

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SPX had a very strong day yesterday and closed slightly over the 200 DMA. There has been a remarkable change in sentiment and the intractable problems of last week all seem to be relatively small bumps in the road ahead this week. Have we really seen a major low that will trigger a big new bull run? Possibly, but I'll need to see some more evidence first. 

I'll lead with the ES chart today, as that expresses best the main two technical paths for today. On the bear view, with this being a strong oversold bounce in a downtrend, the obvious upside target is rough declining channel resistance in the 1405-10 area. The overnight action looks like a bull flag so we could see a move directly to that channel resistance, with the big caveat that there is very strong resistance in the 1386-8 area. 

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