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Thursday, February 01, 2007
Finally....
Wow, I have never been so late with a blog posting before! I am a day late but, thanks to my NZD/USD trade, far from a dollar short. I've been up since 3 a.m. catching up, and I am at long last going to do the post I wanted to do last night! (Technical Note: Blogger seems to be having major issues recently. I can't view comments, and I imagine none of you have been able to post. The lateness of this post is my fault, but the technical problems are not!)
If you saw the news last night, you should recognize what a scoop I provided with my bizarre BillyWitchDoctor.com post a week or so ago. That clip was from Aqua Teen Hunger Force and - wouldn't you know it? - they were the top story yesterday. No, I'm serious. There was ahuge bomb scare in Boston, and it was due to a publicity stunt from our french dry/milk shake/meatball pals. Nice going, Frylock.
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OK, back to charts. Today's entry is a little weird because I start pulling charts for it at 4 in the morning and was still doing so just 90 minutes before the close of the market. So this isn't a typical end of day commentary.
Kudos to those of you who took my NTRI suggestion seriously. This was a beautiful chart. It had a lot of good elements.....a major ascending trendline that had been broken.....a clear area of resistance.........a (sloppy) head and shoulders pattern. And it positively fell to pieces subsequent to my suggestion to check it out.

For those who didn't mind the risk, the rewards were handsome. Check out the action on this NTRI put - - up thousands of percent in just a few days!

Bulls in the stock market can take heart from the Transports. It looks like this has broken its clear bearish pattern. And, as I'm typing this, it looks like the market is headed to another solid close higher.

The S&P 500 is at the very, very top of its ascending channel. Any higher, and it's going to break above resistance.

Another cheer-up for the bulls is the MidCap 400. This is about as good a cup with handle pattern as you're ever going to see (my lame rendition of the pattern, in green, notwithstanding).

The Dow 30 seems to be headed for yet another closing higher today (the market's got another hour and a half open as I type this). But it's still below the ascending trendline is broke early last month.

For a bullish play, I like Genentech (DNA). The saucer shape and the volume both look positive.

CNX for a short idea.

Bank of America (BAC) is another good short idea. I closed my puts a couple of days ago at a profit, and it looks like it might be time to re-enter.

Sun Microsystems (SUNW), mentioned a month ago (or so) as a bullish play, is doing well. This is a gigantic saucer - just massive.

No one has commented on my FOREX suggestion (maybe there are only equity players here), but it's been doing amazing things. I've doubled my account balance in just a week based on this one currency.

I had never charted MWP before, but this is another good short idea.

McDonalds (MCD), shown here with Bollinger bands and the RSI, is a pretty safe bearish play.

And Google (GOOG), which announced earnings last night, is doing something really interesting - specifically, it's acting like a normal stock. In the past, whenever they had earnings, there were these massive gaps (highlighted here in green). There was no gap today - - although it's somewhat bearish for GOOG that yet another quarter of blow-out earnings is actually producing a down day (so far) for the stock.

My apologies to any of you wondering what took me so long to do the post. It's been nuts!
Remark on Comments: I think the geniuses at Google (Blogger) are busy counting their billions of dollars, because their site is sure a mess tonight. People can't even post comments. 90% of the reason I do this blog is to read people's comments, so please try again later. I want to hear what you have to say, and others do too!
at2/01/200710 insightful comments  Links to this post
Labels:$indu,$mid,$spx,$tran,bac cnx,dna,goog,mcd,mwp,new high,ntri,nzd/usd,sunw
Tuesday, January 30, 2007
Anatomy of a FOREX Trade
Ina recent post I mentioned how the New Zealand dollar was an attractive short trade. So today we're going to take a brief break from stocks and examine this trade idea, particularly since it helps illustrate how profitable FX trading can be.
First, let's look at the big picture. This chart spans about six years. The dotted red line indicates what I believe is a very strong resistance level (about .71, which is the ratio of the NZD to the USD). You can also see I've drawn a Fibonacci retracement series on this graph.

Looking at a shorter time frame (and remember, you can click on any graph to get a much bigger version of the image), you can see how NZD/USD marched from a little over .59 to .71 in the second half of last year. That may not seem like much, but in the world of FX trading, it's gigantic. So the basis of my suggestion a little over a week ago was that the tide was starting to turn on this huge move.

On a minute-by-minute basis, you can see how swiftly this currency has moved recently. Keep in mind the move over the past few days represents only a tiny fraction of the entire upward move. It really only went from about .70 to about .69, which on the surface seems like a mere penny.......virtually meaningless. But it isn't, as you shall soon see.

Below is a table of the profits from this trade. Simply stated, the profits were over 100% in just about a week. Not bad, eh? That's how much movement can happen in the highly-leveraged world of FX. Now, as you know, this cuts both ways. This trade could just have easily torpedoed the same amount of capital in just a short a timespan. What was operating in my favor, I believe was the core change in direction that I speculated was taking place when I made my recent post.

So what now? I have stepped aside for the moment and will wait for another opportunity to enter NZD/USD. There are no guarantees the price will bounce up again, but these markets don't tend to go straight up or straight down. They tend to bobble a lot, which is why it's important to have plenty of extra cash in your account in order to absorb the "margin shock" as the prices move. But if it pushes somewhat higher - like to .695 - I'd be happy to get back in and ride the next move down.
Speaking of moves down, just one stock I'd like to mention is NutriSystem (NTRI)which I suggested as a short very recently, on January 22nd. When I first mentioned it, the stock was at $65. In the short time since, it's fallen to $52, and I see in after hours trading it is losing even more ground, trading below $48 as I am typing this. You can imagine how much well-chosen puts would have soared in price based on this suggestion.

I'll see you tomorrow, after the Fed announcement!
at1/30/20079 insightful comments  Links to this post
Labels:new zealand,ntri
Monday, January 29, 2007
Slow Start to a Big Week
This is going to be an action-packed week - earnings, the FOMC announcement, major economic reports. The whole schmear.
There wasn't too much action today, however. The market rushed higher, sold off to negative territory, and closed today with tiny gains. Basically nothing happened. While we wait for something more definitive, let's look at a few interesting charts.
Back on January 4th, the Dow 30 broke beneath a medium-term trendline. I've circled the event here. Notice how the most recent trading has stayed clearly beneath this former trendline.

Backing up in time somewhat, you can see this from a different perspective. I've pointed out in red the day the trendline was snapped, and I've pointed out with a green arrow the reversal off this trendline. As regular readers of this blog know, I am always fascinating by the "turncoat" nature of trendlines. We are now beneath the former supporting line.

If you believe tech is vulnerable, you might consider buying puts on the $MSH. It isn't very heavily traded, but there's plenty of potential downside here on the index (and thus upside on the puts).

The Russell 2000 remains my favorite index on which to buy puts. But we remain trapped in a trading range. If this pushes above $801, all bets are off. In fact, I'd get very skeptical if things even pushed above $796. This is a minute-bar graph:

The S&P 500 is a more popular index venue, although to my way of thinking this is not as vulnerable as the Russell 2000. But you can see trendline behavior similar to what was witnessed above with the Dow.

I haven't been trading the $XAU (gold and silver) for a while, but this index seems to be heading south. Even if it reverses, the recent high price is such an obvious stop-loss level that this is a pretty low-risk trade.

Now a few other short ideas to chew on. Exxon Mobil (XOM):

Chicago Mercantile (CME), which at these price levels easily gains or losses double-digits worth of points on any given day:

BP, which continues to be in the throes of forming a head and shoulders pattern (as yet incomplete).

And, lastly, Bank of America (BAC) seems to be finally falling - - with nice volume too! My puts on this have been inching higher.

My book is coming out in just a few more weeks! Stay tuned!
at1/29/20079 insightful comments  Links to this post
Labels:bac,bp,cme,xom
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