GG is down on a day like today for a couple of very simple reasons and they are all based on understanding  the tools one should use to trade with over the short term, technicals.  Let's take a look at the chart of GG above.

One can see GG had a big run followed by a heavy volume selloff through critcal support at the 50 day moving average level.  This was followed by a lower volume bounce off the next obvious area of potential support at the 100 day moving average level.   This bounce lasted 2 weeks and ended this run up 5 days in a row.

Experienced traders know that stocks don't typically go up more than 5 days in a row without taking a breather and even if they do the longer they run, the more likely they are to get caught up at technical resistance levels.  We also saw one of our short term  trademark reversal patterns on May 31 where a stock hits and obvious resistance area, reverses off the new highs only to close at or below the open for the day creating a large reversal body on the chart. This is normally a red flag and we can point to countless examples where this has happened.  Once an area such as the 50 day moving average is breached and a bounce occurs it is very common for that old support to turn into a point of reference for further profit taking and selling pressure as well as a place where shorts add to their positions.  Odds favor this happening a majority of the time and this is what is going on here today.

Remember, trading using fundamentals or opinions over the short term can lead to severe damage to your portfolios.  If you must use fundamentals or a story as a backdrop for your investing this is fine but please use the technicals (technical analysis) to tell you WHEN you should be buying and WHEN you should be selling.  This will supercharge your portfolios performance and let you understand why stocks behave the way they do on days like today.

Thanks,

www.globalchartanalysis.com
 

Market Confirmation: Market Uptrend Broken

Short Term Action: Old support levels being tested in attempt to re-establish uptrend
 

We are in day 3 of a bounce after surviving one of the ugliest weeks in the last year. Just like markets can’t go straight up without pulling back and refreshing itself, a market can’t go straight down without bouncing. It’s where we bounce and what the volume looks like that tells us what will most likely happen next.

The market bounced last week at an obvious support level, the 100 day moving average, after slicing through a key support level earlier in the week. The volume was heavy on the downside and we are still seeing very anemic volume on the up days. This pattern almost always is very negative but if we can retake the 50 day moving average and hold it for a couple days then the bulls have the chance to regain the uptrend. What is important to us isn’t whether the bulls win or the bears win but that a tradable, predictable trend is established.

Despite the fact we had 3 up days each day gapped higher and either sold off or traded sideways into the close.  The small and midcaps are showing the most strength which is good.

Here is where the big test is for Tuesday right at the 50 day moving average. Breaking support levels is one thing but when old support levels as important as these turn into new resistance levels, this is where things can get ugly to the downside.

S&P 500

 

Dow 30

 

NYSE

 

NASDAQ

 

Russell

 

NEW SETUPS

No new setups yet

We continued the pullback on Wednesday that started on Tuesday and although the selloff wasn’t as sharp, the volume did continue to grow. This is the largest pullback since November where we had a false breakout to the upside. The big money laid into that breakout hard but the panic subsided and we found solid support at the 50 day moving average. We traded sideways for a couple weeks before being propelled once more to new highs.

NASDAQ

DOW

SP500

This type of action would be welcome but we do always have the possibility of a complete melt down like we called back in May of last year. We were out near the top before the bottom fell out and dropped nearly 20% in a short period of time. Most of our older trades have plenty of support and profit cushion to ride out pullbacks like that but the newer trades are always very susceptible to these whipsaws. This is why we will be pulling the plug when we see the first sign of weakness

There were several late attempts to lift the market late in the day but these attempts all fell flat. We had a number of our open positions close the day with long tails telling us that they may have whipsawed out the weak hands and are ready to move higher but due to the heavy volume and how stretched this market has been, we aren’t willing to take any new trades here.
MOS

EXPD

AGU

VRSN

C

A couple new positions from last week actually rallied huge and are already up nicely. These are the type of trades to look for during these weak periods. The wheat does get separated from the chaff and we will see which stocks will be the big winners during the next rally.

HLF

CLR

We had quite a few of our sturdy trades actually start to crack today. They started breaking loose from their tight ranges and through support and on higher volume. It could be some minor profit taking or it could be the start of something larger. We must watch closely.

You also must ask yourself do you want to ride this out or do you want to lock in profits here. The downside for many of these can be 10-30%. Even though we have a number of names that are up 50% and others like VRX that are up 183% it’s a tough call. We have to base our decision on how many solid support levels each stock has and how far away they are.
We would close the following stocks if they trade any lower: DE, TRW, ILMN, JDAS, VAR, SAM, SLH, HAS, POWI, SMTC
CYD closed out trade today with a 61% gain

NEW SETUPS
No new setups for Thursday
Market Confirmation: Market in intermediate term uptrend

Short Term Action: We are still looking to buy on pullbacks but market is currently too stretched to buy here. We are currently letting our winners run and weeding out stocks that are stalling out or breaking support levels.

Thanks,

www.globalchartanalysis.com

We are initiating a strong buy on the housing sector. We are seeing several signs of bottoming action and favor the following stocks: BZH, NVR, MDC, SPF, DHI, NVR and HOV.

HOV

DHI

SPF

MDC

NVR

BZH

We have seen some solid technical indications of a bottom  including favorable action around support and resistance levels, volume patterns and other price action.

Thanks,

www.globalchartanalysis.com

SBUX was another situation where we were able to hold through earnings because we were already up over 25%. The downside here was around 20% on what would be a very unfavorable reaction to earnings but that would still keep us at a profit. Our goal in this service is to get some quick profits under our belt which then gives us breathing room to let a stock do its thing. This is how we have been able to rack up hundreds of double and triple digit gains over the past couple years.

NVDA is another recent example of entering at the right time and letting a stretched stock run. NVDA is now up over 120% in the past 3 months.

As sick as it makes us to just barely miss some 15%-20% moves in NFLX and CRUS, we aren’t just swinging for the fences but taking a trade when the risks aren’t too high. The odds just weren’t in our favor enough for the amount of risk we had to take. Wall Street is littered with portfolio managers who don’t take this serious enough. We know the right stocks to be in but you can’t catch all the moves
Now let’s focus on the moves we did participate in and see how they grow into monster trades allowing us to outperform most portfolio managers out there.
NEW HIGHS LIST
VRX up 173% and 156% on 2 trades

BZ is up 48% in a few months time

DE is up 43% since our August entry

SLG is up 23% in 5 months

PPS is up 47% since our August entry

TRW is up 71% from our September entry

DD is up 25% since August

We are close to closing FDO if it trades much lower.  It is in an area where it should be finding support from institutions but so far we are seeing continued distribution even after a huge move lower.

GLD is still getting slaughtered but we still have some serious profit cushion to work with. We will watch how it behaves around the $125 level and if the current bullish uptrend is in danger of coming to an end.

SHOO needs to hold the 200 day ma

OPEN POSITIONS LIST (Click To Enlarge)

NEW SETUPS

No new setups for Friday

Thanks,
globalchartanalysis.com

SBUX was another situation where we were able to hold through earnings because we were already up over 25%. The downside here was around 20% on what would be a very unfavorable reaction to earnings but that would still keep us at a profit. Our goal in this service is to get some quick profits under our belt which then gives us breathing room to let a stock do its thing. This is how we have been able to rack up hundreds of double and triple digit gains over the past couple years.


NVDA is another recent example of entering at the right time and letting a stretched stock run. NVDA is now up over 120% in the past 3 months.


As sick as it makes us to just barely miss some 15%-20% moves in NFLX and CRUS, we aren’t just swinging for the fences but taking a trade when the risks aren’t too high. The odds just weren’t in our favor enough for the amount of risk we had to take. Wall Street is littered with portfolio managers who don’t take this serious enough. We know the right stocks to be in but you can’t catch all the moves.

Now let’s focus on the moves we did participate in and see how they grow into monster trades allowing us to outperform most portfolio managers out there.

NEW HIGHS LIST

VRX up 173% and 156% on 2 trades


BZ is up 48% in a few months time

DE is up 43% since our August entry



SLG is up 23% in 5 months



PPS is up 47% since our August entry



TRW is up 71% from our September entry



DD is up 25% since August



We are close to closing FDO if it trades much lower.  It is in an area where it should be finding support from institutions but so far we are seeing continued distribution even after a huge move lower.



GLD is still getting slaughtered but we still have some serious profit cushion to work with. We will watch how it behaves around the $125 level and if the current bullish uptrend is in danger of coming to an end.



SHOO needs to hold the 200 day ma

OPEN POSITIONS LIST (Click To Enlarge)

NEW SETUPS

No new setups for Friday
 

Thanks,
globalchartanalysis.com