Two Days In A Row?
Well, we will just have
to see. Yesterday was a very positive day for the markets. We are
still trading below some significant overhead resistance, but with the increased
volume and the moves in the underlying stocks, the bulls have something to cheer
about, at least in the short run. The release of the employment data just a few
moments ago (5:30 a.m. PST) seems to put some additional ammunition in the
bulls’ corner. I discuss some key levels below which need to breached in order
for this move to continue.
First off, let’s review a trade that panned out
quite poorly. Luckily I did not recommend it in the
service or in the column. Nonetheless, the trade was based on what I would
consider solid reasons. The charts below highlight my thought process.
A close just
above the 50-day MA and the lower regression channel accompanied by a negative
candle formation was technically a bit negative. Add to that an earnings
release, which based on other company earnings, certainly had a chance to
disappoint.
Naturally, the
earnings came in above estimates, as did net income (suspiciously so, I may
add). There were two options: cover, or as I did, add to the position (A)
expecting some of the gap to be filled. If it went back above the short entry
price, cover everything (B), which I did.
Things will certainly get interesting I suspect
for the remainder of the week. We now have the emergence of some serious buyers,
and this tug of war is what will ultimately create some great HVT.
For the last few weeks it was naturally very lopsided on the downside and almost
became expected, resulting in a slow steady grind. But with that in mind we
still have some formidable levels to overcome, and that is where the trading
should get real interesting.
The December S&P Futures:
The downward
move appears to have exhausted itself, the upper regression channel was broken
and has held. The 855 – 860 will be key in order for this upward leg to sustain
itself. A pullback to the 827 level would not be out of the question, and if it
held would be positive.
However, one day does not change things
radically. In going through the charts last night I did see some nice
long setups, unfortunately the risk/reward was not there. At best, I was seeing
a gain of a buck or so, but risking a buck. Most stocks and the major indices
still have some pretty good overhead resistance.
The picks below reflect this observation. Please
keep in mind that the entries in these stocks should only be considered once
the S&Ps have confirmed the overall direction. Given that most of the ideas
below are shorts, wait for the S&Ps to break a key level like 827 before
committing.
| Intraday Setups |
|
|
|
|
| Stock | Action |
| BJS | Short |
| MO | Long |
| CL | Short |
| COP | Short |
| HIG | Short |
| PG | Short |
| RTN | Short |
| GM | Short |
| ROOM | Long |
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 865 | 923 |
| 860 | 912.75 |
| 854 | 902.50 |
| 840-44 | 886.25 |
| *838* | 870 |
| 832 | 859.75 |
| *824* | 849-46 |
| 815 |
As always, feel free to send me your comments and
questions. See you in TradersWire.