Watch These Three Stocks Today
Sometimes even the high-probability set-ups do not
work. On the bright side, it is really easy to know when you are
wrong and be able to get out quickly before too much pain is inflicted.
The potential opening reversal trade in Hewlett
Packard
(
HPQ |
Quote |
Chart |
News |
PowerRating) yesterday was a great example. I love these trades,
and for the most part they are good “bread and butter” trades. HPQ,
on the heels of their earnings report, was down well over a $1 on the opening, a
pretty good percentage drop as well. Naturally, large gaps up or down will
typically result in a favorable bounce back if you time it properly. The key
really comes from watching the tape vs. the chart on this particular type of
trade. The key thing to watch for is an indication that the initial selling
pressure has dried up. In this case, HPQ
opened at 16.60 where it seemed to find some support. The offers began to get
lifted and a sizeable bid showed up. This is typically all the evidence I need
to pull the trigger. I did, the market was 16.60 x 16.65, and I placed an order:
BUY x shares at 16.70. I was willing to pay up a nickel at the
most in order to ensure a fill. I was filled at 16.65. It then went 16.65 x
16.70. This was encouraging as the 16.70 stock was trading. At this point, I
really thought I had the trade nailed and was waiting for the move to really
take off.
However, your best friend on these types of trade is price action, NOT
the charts. Suddenly, HPQ started trading
16.65 again for size. This is unusual for a trade like this, as typically the
move feeds on itself. This was sign #1 that it may be different this time. Then
the market went 16.60 x 16.65. At this point the decision was easy. If it
trades 16.60 (the opening price and low for the day), I am gone: SELL x
shares at market. This is what happened, I was filled at 16.55, for a loss
of 10 cents. Sure, not what I wanted, but if I had been stubborn, I would have
had my head handed to me. Look at the chart below.
For me, it was experience that allowed me to cut my loss before I had a loss
that would have been difficult if not impossible to recover. This is why I am
sharing this trade with you. It is not the “textbook” type trade, but something
that is incredibly useful.
Now let’s take a look at the S&P.
The 30-minute S&P futures chart gives us a potential break of the
consolidation shown above. The gap has been filled from back on 2/24, and a triangle is
setting up with a key level at 829 on the S&Ps. Either way, it should be a
powerful move out of this pattern. The stochastics indicate it may be a move
higher.
A couple of weeks back I had mentioned the upcoming mid-quarter updates for
tech companies. Today we have Novellus
(
NVLS |
Quote |
Chart |
News |
PowerRating)
coming out with theirs. I have no idea specifically what they will say, but
with the recent performance of techs, lay-offs, cap-ex reductions, etc., it is
hard to imagine the news being good. However, just like in the legal world,
this is pure hearsay and speculation. The charts (daily) tell a much more
clear, albeit grim picture.
Look at the charts of
(
AMAT |
Quote |
Chart |
News |
PowerRating) and
(
KLAC |
Quote |
Chart |
News |
PowerRating), two stocks which may very well catch
the contagion if NVLS disappoints.
To me, these look like reasonable shorts for a longer-term trade. The
market is having a very hard time mounting any type of a rally, and barring a
war-relief rally, the market will likely trend lower in the sessions to come,
especially if these mid-quarter updates disappoint.Â
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| *856* | *1039-44* |
| 843-45 | *1018-24* |
| 838 | 1006 |
| 833-35 | 998 |
| **829** | 991 |
| **823-24** | *970-74* |
| 821 | *962* |
| 814 | 952 |
| 808 | |
| 803 | |
| 796 | Â |
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