ROOM testing its 200 day moving average here and high of the day. EXPE is moving towards the declining 20. Wow here goes EXPE again. There was an article in Business Week on line yesterday, let me get it. and don't forget EXPE was down straight from 55 to 38.
ESRX, SYK and FRX The Wonder of the Techno-Fundamental Giant.
DO you wonder how we might short these huge companies and how terrific it can be to buy at the first move up after the dip? The point is that stocks are more than just one dimensional candlesticks on chart and although we use ONLY TECHNICAL SET UPS to enter all plays, the tendency and CONFIDENCE to hold those plays comes through proper analysis of the sector rotation, its fundamentals, investor sentiment, and market internals. Its more CONFIDENCE in your trading strategy that will give you big gains than just knowing how to trade a 20 minute move up for a small gain. Perhaps our overconfidence maybe even bordering on cockiness that held us short through so long. Unfortunately, it might be necessary to rebuilt confidence to hold positions on the long side as well to milk out profits until the container runs dry.
I am still so skeptical on the long side that even yesterday practically every long position and they were a lot were in call options. Confidence though is building not ONLY because of technical lows, but because earnings might be improving well enough for forays back on the long side. Thank the Lord for index options and call options.
Banking, building sector and financial financials are easier because they usually trade in 2-4 days of downside followed by about 2 days of upside. For these kinds of companies, its easier to set up potential target areas for exits on longs and covering short plays. Of course the technology and other sector shorts were the best of all these past 6 months, so it was those big trades to the short side that was the way to fly. If the market recovers somewhat, we might refocus back to chasing our earnings plays for strength and upside and perhaps think of swing trades on the long side, that will last move than just 2 nights.
ESRX was called short in the 55 area and it pulled back to 48, after we called it long but at least I didn't hold it through yesterday's surprise news after the close. STRONG STOCKS need the pullback to get even stronger and if you carefully track them at their Fibonacci retracement areas, you can them both long and short.
Usually these companies will have anticipatory upswing prior to the report, they might gap 'n snap after the report, but can be tracked for the final profit taking and pullback. Its also very good trading strategy and one of the key strategies of techno-fundamentalists to buy them back after these healthy retracements.
SYK is a huge company and earnings are from the strong medical device sector. Even if you can't trade both trends, you can buy it after a dip.
FRX is one the phenomenons that stump pure technical analysts, because its montly position in overbought territory goes beyond the scope of technical analysis. We know that which is why we suggested a call option when the stock was already trading at 79!
ESRX I did have both the short and the long but missed that great move today. We did mention that ESRX is the sector leader and when AMHC did so well, it was not the best idea to sell ESRX after just a 2 day profit.
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