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Yeah, I should have put the $10k account in it back at $13 when I was telling all you about it.
They report tomorrow and I think it could be the beginning of a biggger move to over $20. That is a classic example of taking advantage of a good stock that's been beaten for no reason other than mis-information. The problem though is being there when it happens. Lucking for us, I just happened to be following that stock when it did this.
But there's much more ahead for that one.
Now, I think BRCM is going to fall tomorrow night and set the stage for a bigger ABC decline to the low to mid $20s starting next week. Friday is a 'turn date' cycle wise in the market overall. July 31st could be a short term low after Friday (or tomorrow) comes in at a high.
I saw a mention that many misrepresented the head and shoulders pattern. It wasn't a true technical pattern because of the right shoulder. However, we are making a classic double top formation due to the low volume on the retest of the June 11 high.
We'll see!
Wow. BRCM is going to put BC software to the test. It shows that it falls every year right after earnings in Aug. They report tomorrow and the stock is making a 5th wave high here.
So, we could double our $2k investment in this if it works out.
Yeah. You got it right.
For you daytraders out there, you'll want to short ATHR out of the gate tomorrow if it opens around $25. These are all blowoff tops on 5th waves all over the place.
I remember BRCM back in Jan 2006. The stock ran up $10 after hours and gapped open the next day to running all the way to $50, only for that price to be the highest print it's made ever since. That was on earnings and all the same BS was said about it back then as they are saying about all these now.
Bla bla bla.
Hey Plash, you see that story on the IBM earnings scam? All these companies are doing this. They cut costs, and in IBM's case, actually lower the share count, making the headline EPS number look better than it actually is.
You can only cut costs so much before you have to start showing revenue increases. And, you can't count AAPL as any kind of indicator for the market overall because it's a niche player with a unique set of toys.
I think the market is about to catch up to the little game going on.
There were 10k $25 BRCM puts bought today almost in one block. The stock is at $28.25. They report on Thursday. I wonder if that's a hedge or a straight play on the WAY OVER EXTENDED state of almost ALL these stocks. The 2 RSI is almost 100!
I think a good way to play this is to buy the Aug $30 put for $2.80, then sell the Aug $26 for .80, costing you a total of $2. Anything under $28 you make money.
Look at the charts of ARO and ROST. Two specialty retailers that have been trading like tech stocks.
ARO today made what is potentially a monster top signal. ROST wants to turn down too.
The problem with earnings has been they're a sham. All due to cost cutting and not due to better biz. None have had better revenue growth. IBM played a game with their share count to bump the numbers.
So, will AAPL tonight jam the market? Who knows. But it's very clear the market is on the tipping point. SPX 956 is the key level to watch.
I was just listening to Bloomberg radio and they had a technical guy on who was saying that trading desks today jump for joy when they get a 100k share block order from a fund. It's typically been mulitmillion share blocks. The volume in other words has been pathetic. Most mutual funds are not buying into this. Most stocks and especially the indexes are making clear wedges, which are very often the making of 5th waves.
So, the market will turn on a dime at anytime. But will it be from SPX 1000 or here at 950?
AAPL could be the catalyst to get it turning down. You can only BS people so much. AMZN I don't think will have any impact because their biz is no secret. You're just stupid to short the stock. (as I've done over and over and paid dearly).
I think you're better off shorting these over-bloated pig retailers. Plus, you have monster seasonality on your side on the short side of both ROST and ARO.
No, just the etfs themselves. Or, if you're really quick, you can do the at the money QQQQ options because they trade like stocks.
If BC is correct, this week should be a down week for the Q's.
I was typing on my laptop for that email and misspelled RSI. Sorry for that.
And you are correct, they never mention shorting when a stock or etf is above the 200 day. However, I do it all the time and the rules still work very well. You just have to do the scale in approach rather than the normal 1/2 size entry and double down like normal.
They call it the '1,2,3,4' entry.
10%, then 20%, then 30%, then final 40% of total position entry as it keeps moving away from you.
What are you talking about? I haven't heard about anything new, just the old DVD they have of him, which I have. You really don't learn much other than him bragging about all his trades for 3 DVDs.
Wow. AMED turns out to be a double. Again, got out too early.
I think with the Q's looking so extended, the best bet would be to short/long put on GOOG and IBM. But I think a short on the NQ or Q's is the best play here.
The problem with options on so many stocks these days is they are priced so expensively, it really makes it hard to profit from. The VIX is too high, still.
The best way to play option trades is to do spreads. There are so many trades I see that work, but don't work with the options, I think I'm going to start making them spreads to bring down the cost of them. In other words, instead of paying say, $3 for a 2 strike out of the money call for example, you buy that call, then sell the next strike out against it for say, $1, bringing your net cost down to $2. It makes it more able to work out in the end.
Or, we might just start shorting or going long a small amount of shares of stock rather than options all the time.
You know, it's very funny you bring that up because so many have noticed that today. What it means is exactly what FastMoney talked about tonight -- panic. So many were shorting into the head and shoulders breakdown expecting 830 to 810 on the downside, they all got crushed. Many were selling calls short rather than buying puts. Today, those who were heavily short the calls had one of two options - either cover the short calls for big losses, or buy the stocks and create covered calls. The call volumes all over the place was enormous. Many were short this week's calls and were profitable going into today, only to get killed today.
By being forced to buy stock to cover short calls, they also then buy puts to protect those long stock positions. That gives you the jump in the VIX when it should have normally cratered to 20 on a day like today.
What does this tell you? It screams 'BS RALLY'. Or, panic short squeeze. Not a true rally.
The market is so screwed up right now. Think about it - would you normally get a 50 point 3 day rally in the S&P when taxes are set to climb as high as 70% on top earners? Huh? How about gold nearing $1000? Huh? The dollar falling to 3 month lows? Huh? The economy might be showing a little bit better signs, but how much growth do you expect with tax rates going from 15% on capital gains to 24%? The market CLIMBS on this?
Hell no. It's all about technicals and mechanics of over-leveraged short positions. Those of you like me who trade via Interactive Brokers might not have realized it, but when you signed the paperwork, you agreed that the company's software will at its discretion using their real time monitoring sell any margined position if you fall under the min maintance requirements at anytime during the day. Usually that didn't happen until you were given a margin call and 3 to 5 days to send in money. Now it's sold or bought to cover immediately.
So, if you were way upside down and looking to gamble to get even and you saw that head and shoulders breakdown, and decided to pile into a short position heavily margined, well, today was a very bad day for you and most likely saw your positions liquidated only adding to the rally. Multiply that by hundreds of thousands out there doing the same thing all day long and you can see how days like today happen.
I'm telling you this -- I hope one of two things happen -- the SPX runs to 1050 to 1200, or it falls to 600 or less. Why? Because both levels will be absolute certainties. At 1200, it's the mortgage your house short. At 600, it's the mortgage your house and your neighbor's long. Between here and there, it's a crap shoot totally manipulated by the thousands of people trying to get their money back doing crazy things which only add to the confusion.
Our QQQQ trade was a near triple in 3 days, had I held onto it. The reason I didn't was because the market could have just as easily fallen as it did rise. Live to fight another day.
I am shorting it personally for two reasons -- the TradingMarkets.com RSI strategy and the 3 month/seasonality BC charts. However, not looking for a homer. Just a buck or so. $42 on the downside for a trade.
No no no. ABT will trade $47.50 before Aug expiration. Trust me.
I thought the chances were good for that to happen today. But if you look at the chart and analyze the company, it's an easy shot to $49 within the next 3 weeks sometime. The seasonality of it really begins next week, so it could easily trade up very quickly.]
Damn, those Q calls doubled in two days! This is why it's so hard to pick stock trades over days rather than minutes! The market is so crazy right now, you just never know what the hell is going to happen.
Now watch ARO and ROST. They are setting up nicely for put trades. Personally I'm short ROST the stock at $42. Just happened to get a fill on an open order this morning. But ARO at $38+ could be a great trade. Retailers always go down into Aug and then start trading up in Sep/Oct.
I wonder if ABT is going to be a homer tomorrow?
I thought that stock would be over $10.50 by now. It might be headed there now. But the options expire Friday. So, it might still work out. But I think we'll have to just ride it out until Friday and see what happens.
As for the others, I'm letting you know they are shorts for a quick trade. Not for the $10k account.
The options are too expensive to use. So, just short the stock.
SHORT ROST at $41.80 or higher.
SHORT NFLX at $43.50 or higher. Good for a buck or two.
You have to get to know posters over time and how real they are. When you have a stock that has done what it's done, many get very bad feelings and end up trying to do whatever they can to get even. What they don't know is that nothing on a message board is going to alter what the stock does. But they think it does and usually that will prove how full of it a poster is.
You know, that does look good. I was just looking at it on BC and looks like a late July biggy.
Let's dig into that one a little more.
ABT calls might be a 1 day double.
Q's looking good. Too bad we set the limit so low. Hope some of you still holding.
Yeah, but what broker do you use? That was a terrible fill. Right out of the gate the stock jammed down to $45 pushing the calls at the offer to $1.25. This is why you use brokers like Interactive.
oh, another stock I'm looking at seriously is LSTR for a trade on TUE. They report Wed after the close.
That one has a very serious setup I think. But which way?
ABT reports before the bell Wed, and I think it wants to go back up. Remember, we are in the strongest seasonal time period for these types of stocks, to the trend would be for it run on earnings. I just love how it's trading near the lows.
So, a move to $45ish could get us a nice position into the Aug $46 calls.
http://finance.aol.com/quotes/abbott-laboratories/abt/nys/option-chains
TRADE ALERT
On Monday, SELL the QQQQ July $33 call for limit $2.10.
It's not going to have a licence problem. Think about it. The company is a monster profitable company. I posted on the Yahoo board some key stats in terms of the last 5 year's earnings. Starting from .15 to now over $1.10 a year. Only 70 mill in the float means it's setup for an easy run to $20+ again.
I think next week sometime they report the FDA approval - of which the FDA was never going to pull the licence, especially on a 7 months old inspection report that wasn't even that bad of a report.
I actually think there is a hell of a chance that JNJ buys them. If so, it would have to be at least 2x the market cap, or about $30 a share.
But that's just me.
I'm going to study it this weekend as to what it most likely will do. I thought $36, but it's looking like we might only get somewhere in the $35s. Next week is a big earning's week and it could really move the market. But I think down. This trade was only a short term trade. I thought that an easy move to $36 would happen within 1 day. Because it didn't, I think now we see maybe $35.25 to $35.50 - which would still be a 12% gain. Not what I wanted, but still good.
Cycle update --
Let's quickly review our overall market view. We believe the recent highs could turn out to be very important highs that ultimately lead to new bear market lows. There is an outside chance those new lows could occur over the next four weeks while we are away. The far more likely scenario is that new lows will be postponed until the final quarter of this year. There also remains an outside chance that highs above the June highs could be seen without changing the ultimately very bearish outlook, but we believe the odds are better than 50% that the highs for the year have been seen. Based on the potential head and shoulders pattern that we discussed yesterday, the market could test the neckline one more time before declining towards its price target around 822. At the close today, on a 30 minute chart, the neckline on the S&P cash was around 893.20 and rising approximately 2 S&P points every five trading days.
The S&P 500 advance/decline line which we believe is a far better representative of the average share of common stock than the New York Stock Exchange advance/decline, moved to its lowest level since mid April today. At that time, the S&P index was trading around 830. That does not guarantee a move by the S&P down to 830, but the S&P advance/decline line does tend to lead the market.
There are a couple of reasons -- did you read TradingMarkets.com's book, "High Probability ETF Trading"?
In it, they researched the best ways to pick tops and bottoms for very short term trades in ETFs and the Q's meet two. Actually 3 of them.
The first is the RSI 25 strategy, the second is the %b strategy, and the third is the MDD strategy. I don't have time to explain them right now, but basically it's screaming reversal, if only for a few days.
I think $36ish coming and that means a possible 50% gain on these calls. Plus on BC's log chart, the Qs were under the lower 3 month bands, which has also been a pretty good indicator.
Oh, did I mention the hammer today?
So, high probability. Know that when I put those out, you should take it as a trigger that moment. I always say that the account will be entering the trade the next morning at open because many don't get these until they get home. So, I want to be fair to everyone. But the trade is on the second I put it out unless I put out a limit buy price.
But use your own DD to back up or confirm what I say. I'm not always right as has been shown. The key is to be right with the big winners and wrong with the small ones.
Not yet. That trade's a loser. I thought it would gap possibly over $11.
Happens.
That's why the small amount.
Look at AMGN. I was wathing it for a further possible fall below $50 to get in, but was beat. Over $60 this morning on drug news. There's a rule about AMGN - always own it in July. Dang!
With the market about to break this head and shoulders at 880 on the SPX, targeting a low around 820, there just aren't many trades out there to take except for earning's trades.
For those who follow the general market and have an opinion on what's about to happen, you might find this interesting...
Over the next year, some good market analysts are
going to be very wrong about their market prognostications.
We acknowledge the possibility that we could be in the group
that turns out to be very wrong, but the diversity of current
opinion as to the market's prospects over the next 12 months
is quite startling. Over the past week, we read commentary
from our old buddy Joe Granville— Joe will be 86 in August —
and Joe is very bullish on the stock market. He believes we
are in a bull market that will last for at least another two years.
We, on the other hand, believe there's a chance for the Dow
to get down to the 4000 level or lower sometime over the next
12 months.
The front-page chart is a chart that we included in
one of our e-mail updates over the past week. It is a daily
chart of the S&P 500 cash index going back to the beginning
of 2008 and it shows a plethora of technical lines and moving
averages that have converged between 920-960 on the S&P.
The lines have been numbered 1 through 6 so that we can
describe them for you and you can identify them on the chart.
Line 1 is a simple trendline from the May 19th, 2008 closing
high (the high close for the year 2008) through the closing
high of August 28th, 2008. As this section of the newsletter
is being written, the closing high on June 12th, 2009 has
been the high close for the year 2009 and it just missed reaching
that trendline. Line 2 is a trendline we have shown you
before which moves through the lows of August 16th, 2007
and January 23rd, 2008. The importance of this trendline is
validated because an upper parallel channel anchored on the
high of October 7th, 2007 passes virtually exactly through the
May 19th, 2008 high which marked the high for the year on
this index. Line 3 is the uptrend line from the October 1990
low through the December 1994 low. This line was already hit
almost exactly at the June 11th, 2009 high.
Line 4 is the 20.5% envelope below the two year
moving average on the S&P 500. When we did our initial research
on the bear market rallies during the 1929-1932 super
bear, we researched only the Dow Jones Industrial Average.
That research led to our initial conclusion that if this were indeed
a super bear market, any market rally should be confi
ned below an envelope 25.8% below the two year (506 day)
moving average. When both the Dow and the S&P began to
move above that envelope a few weeks ago, we decided to
go back and conduct the same research on the S&P index
during the super bear market of 1929-1932. As it turned out,
the S&P index rallied somewhat further on a relative basis in
relationship to its two year moving average. The S&P, in fact,
rallied up to an envelope 20.5% below the two year moving
average before succumbing and moving to new bear market
lows. In this bear market, the S&P has failed to challenge
that line, at least so far. The Dow Jones Industrial Average,
on the other hand, tested the 20.5% envelope perfectly at its
high on June 11th. On that day, the envelope 20.5% below
the Dow's two year moving average stood at 8876. The high
for the Dow that day was 8878! Over the next two weeks, the
Dow dropped over 600 points. We believe that moving average
envelope holds out formidable resistance to any further
upside foray by the Dow. Line 5 is an exponential 200 day
moving average. The S&P 500 was stopped in its tracks on
June 2nd, 11th, and 12, when the index closed almost exactly
on that moving average and was not able to break through to
the upside. The Dow Jones Industrial Average reached its exponential
200 day moving average on only one day, the exact
day of the high so far on June 11th when the moving average
was at 8857 and the Dow reached a high of 8878. Wednesday,
July 1st, the exponential 200 day moving average stood
at 8808.50 on the Dow and 940.02 on the S&P. Line 6 is a
cycle-based or "turning point" line whose history goes back
for three prior resolutions. They turned out to be exact resolutions
of market turns on both a closing and an intraday basis
with a bottom on January 22nd, 2008, followed by a bottom on
July 15th, 2008, followed by a top on January 6th, 2009. The
next resolution was due on June 30th, 2009 ± a day or two.
Whenever we are faced with contradictory projections
for different market averages and indexes, we tend to
turn to the New York Composite Index as the arbiter of the
confl ict because it tends to be the most accurate projection
generator. Currently, the New York Composite Index is telling
us we can make a case that all upside projections have been
met. That is not so clear with the Dow Jones Industrial Average
and the S&P 500 but, as we said, we tend to trust the New
York Composite Index over the other two when there are contradictions.
It is important to remember that we can still make
a case for nominal 10 + year projections down to around the
4000 level on the Dow Jones Industrial Average and the 400
level on the S&P 500. Those projections would not become
overdue for another year or more but according to projection
theory they could occur at any time after the projections are
generated and they remain in effect until they are either met or
invalidated. We noted in our last newsletter that those indexes
would have to rally over 15-20% from current levels by the end
of the year in order to invalidate the downside projections
If you have BC, then this is what I do and it's worked out pretty well so far....
First, George Lea, if you watch that video they made of him, basically says he only does trades using the 3 month log chart and trades off the high/low extremes. If you noticed, the new 4.6 version added not only search wizards to find them, but also the sorting ability to filter them out. Pretty cool tool. I'm still playing with it.
However, you have to keep that seasonal stuff in mind, too. If you find a stock say at an upper extreme of 99% or more on a 3 month, then see the seasonal pattern is to move still higher, it's a hard trade to make. So pass. Or go small.
However, keep this in mind, we are just beginning earnings season. This is where you get monster 300% moves in options. I'm targeting many setting up and these setups change week to week before they actually enter reporting dates. The next month is going to potentially bring us some sizable moves because BC lets us see into the past as to what they typically do on reports this time of the year. So, I would focus mainly on ER stocks using the software.
The MSM trade the other day was an example of just that.
Yeah, that was pretty funny to watch. Did you see Breitbart's take on it. He said don't take it as a sign the press is turning on them. It's like a simple marraige spat in which the press caught Obama cheating on them. Pretty accurate comparison.
That said, here's a comment from my cycle people I follow:
It certainly appears as if our bearish attitude paid off in spades today. The market, however, came down to potentially very important support at exponential 55 day moving averages for the Dow Jones Industrial Average, the Dow Jones Transportation Average, the S&P 500, and the New York composite index. The Dow Jones Industrial Average actually closed a full 1% below its exponential 55 day moving average but the other three indexes mentioned above closed virtually on their exponential 55 day moving averages. That makes Monday's market action very important. A decisive break below that moving average for more than a day or two would be a very strong argument that the bear market rally is a dead man walking. On the other hand, a strong stand right at these moving averages would leave us to question whether there were still some upside maneuvers left in the market's immediate future.
Well, July as I said is typically a bad month for the general market. Drugs/biotech always do good in July after the initial drop early on as today proved yet again.
If the SPX breaks 875 or even a bit higher, then it's most likely going to the low 800s on that H&S break. I told you all that end of quarter proping up usually is what sets up July as a bad month as these manager a-holes don't sell off stocks into quarter end for the window dressing of statements. That way you don't get freaked out when you get your statement and want your money out. So, they hold off selling until just after June and then bail.
Because the volume has been so pathetic over the last few months, it makes sense the market would fall pretty strongly after q-end because it's only these clowns who are buying stocks, not the public. We are only but a few traders out there left. So, the crowd had a small door to squeeze out of all at the same time. Most large funds have no interest in the market at these levels as you can make a very good case as to the market being now extremely overvalued if the SPX earnings end up coming in around $43ish. That potentially values the market under 600 on the SPX. The reason it would trade north of that (at these current levels) is becuase of the hope that things will be getting better soon.
Normal recessions last less than two years and actually less than 12 months. This time is truly different. Then you add in these fools in congress talking cap and trade which will require upwards of double your utility bills to cover the upgrade costs to the coal power plants which make up 80% of all power plants in the country to meet these potential new requirements, and now even talk of a VAT here like they have in Briton, wow. Who the hell knows what's going to happen.
There has never been a civilization in history that has taxed its way to prosperity. Never. And yet the 'change we can believe in' crowd that runs things now is wholly convinced it will work in the worst time to practice it. Just unbelievable. The one good thing about this crisis is that its forcing my stupid state (California) to basically put the unions out of work until they agree to take less for the simple fact that we don't have the money to pay them anymore regardless of their election threats to the Dems they elected. You gotta see this ad that's been running showing the woman SEIU rep literally verbally threatening the Dem legislature on camera that they are going to go after each of them at election time if they cut their contracts. It's really fun to watch.
It's really starting to look bad for the Dems in 2010. This could be another setup for another 1994 rout again. Personally, I'm a registered independant having been disgusted by Bush, but that didn't mean I believe in this garbage. If reality starts to set in, the market could really be headed for a monster fall. I really do feel like the market's rise has been mostly propped up in an attempt to create 'happy feelings' in the overall economy to prevent disaster. I agree the premise to an extent, if that's what has been going on, but only to a limit. If you ever read the history of JP Morgan and what he did to save the stock market back then, it's the same idea now. But again, you can only meddle so much before you create more problems than you solve.
I get the eery feeling we're on the verge of that reality check.