Actionable Trades: SPY, GLD, RGLD, AAPL, AMZN, BIDU, OIH, MS,

The market took the gap down in stride today, surging higher to fill the overnight gap before the SPY ended up closing down only 1%.  Selling intensified at noon after some early strength, but buyers stepped in to rally the market into the close. Today's gap down was handled better compared to the action over the two last weeks, where selling generally led to more selling. Today's weakness was led by financials and energy with tech and industrials not far behind.  Where will SPY go from here?  We have had a solid bounce but are trading in the middle of the range, making it difficult to get conviction on the long side or the short side.  Continue to monitor the action, take it slow, and we should get more clarity soon.  

Below is an hourly chart of SPY, so the retracement levels are easy to see.  Right now, the SPY is holding above the 25% retracement level from the bounce off lows.  The 38% retracement level is $116.77 and the 50% retracement level is $115.50.



The trade in the precious metals was largely driven by economic news in both the US and abroad.  GLD continues higher and closed on the highs today.  Last week's pullback in GLD was just a move into the 10-day moving average.  Everyone has an opinion on gold--either it's run is still just beginning or that it is very extended to the upside. If you stick strictly to technicals, GLD is showing tremendous strength as it flags at highs. For the active trader, look for a momentum scalp through highs for a trade, but do not look to get invested at these levels.    



Gold miners are starting to act better with the sustained strength in GLD.  They were highlighted this morning as a sector spotlight on the Morning Call.  RGLD has a solid chart pattern and could trigger for a move soon.  It has held above the previous breakout of $62/$63 and has an upper level consolidation forming.  Look for a move on volume above $70 for new highs.

 

AAPL could use some more horizontal work before setting up for another swing trade, but the dips are buyable in this stock.  AAPL closed down less than 1% today.  Use this as a gauge for the market.  



AMZN has been out of play for a few weeks now.  Is AMZN consolidating for a move higher or setting up for a clean break of this ascending channel?  It is trading below the 50-day moving average and trying to hold support of the 100-day moving average.  Today AMZN closed the day down over 2%. We are not ready to commit to a direction for AMZN, but will be watching it closely.



BIDU closed the day down about 5% but closed off the lows.  BIDU began selling off Monday after negative news was released, which coincided with a great short into resistance that was targeted in the Morning Call (8/15).  After 2-days of selling, is BIDU coming into a buy area? With potentially damaging news filtering out, we are not yet ready to commit to a buying strategy, but this is another one to watch closely as volatility is likely to be high.



OIH closed the day down around 2.5%, showing relative weakness to the S&P's, which closed down 1%.  Looking at retracement levels from the move down from $163 to the low of $122, OIH rallied into the 38% retracement level.  It looks like there is more downside action to come for the oil sector.



Financials continue to be a drag on the market.  A lot of financial stocks (MS, GS, BAC, C) are creating bear flags at much lower levels.  On one hand, banks are very oversold, but based on the technicals this sector is poised to move much lower. The sector could be adjusting to a new paradigm, and several prominent investors are starting to pare down stakes in financials.

Actionable Trades: SPY, CF, GOOG, AAPL, OIH, HAL, CRM, DE, CAT

The wild ride continues in the markets, but the action today was a little easier to manage than the previous three days.  The Dow closed up over 400 points today, down more than 500 points yesterday, up over 400 points Tuesday and down more than 600 points Monday.  This is, in fact, the first time in history that the Dow had moves of 400+ points in four consecutive days.  Pockets of strength are starting to show, which is a positive sign for the markets. But that doesn't mean you should start chasing excitement. The same problems are still looming over us, and the VIX hardly pulled in, suggesting many people are still seeking downside protection.  On the positive side, the SPY held the lower pivot entry and extended above Tuesday's high today.
  

After a bullish crops report this morning, CF made new 52-week highs, a positive sign for the market.  CF is the leader in the agriculture sector and finished the day up over 10%.  This has already had a run into new highs, and considering it is coming from below $140, it would be better to see some high level consolidation or a pull-back to get involved.  It is best not to chase highs, especially in this environment.  




GOOG has now filled the gap on the downside from earnings and is currently trading above the 100-day moving average and the 50-day moving average.  It looks like GOOG could form a potential wedge pattern before making a new move.



AAPL continues to show relative strength to the market as it holds above key moving averages and began bouncing earlier in the week, giving clues to a bounce in the market.  AAPL held support of the 50-day moving average and only pulled 12% off of highs where as the SPY had a 20% pull-off of highs.   A new range is forming in AAPL and it could see an easy bounce up to $381-$383 before running into resistance.  AAPL is a good tell for the rest of the market.  




OIH has been hammered as the market was falling.  OIH had over a 20% move off of highs when it was at the lows from Tuesday.  There is a lower pivot forming in OIH that could provide an actionable trade soon.  Other stocks is in the sector are forming similar patterns, look to HAL, SLB, and OXY.



HAL is one of the leaders in the OIH's.  See how this lower pivot area resolves.



There was strength in the cloud computing sector today.  CRM cleared the lower pivot area to day with a clean break above the range.  Stocks like VMW (+4%), FFIV (+4%), and APKT (+10%) contributed to the group's strength.  CRM had room for a bounce to the $140 area.  Continue to take trades though.  



DE and CAT have similar chart patterns.  DE cleared the lower pivot area today and closed over +8%, where as CAT closed over +4% and has not cleared the lower pivot area.  Perhaps CAT can play catch up with DE.  DE has room up to $77-$80, if the market continues in its oversold bounce.

Actionable Trades: SPY, OIH, AAPL, NFLX, MS, FAZ,

Today we saw continued intense selling pressure following the downgrade of the U.S. sovereign debt, which triggered a sell-off around the world.  Today every stock in the S&P 500 closed negative!  The action right now provides ample opportunity for the skilled active trader, but for the active investors, the most prudent move right now is to sit on the sidelines until there is more clarity.  This is a scalping market, as you are getting two-way action.  The Head and Shoulders pattern that was previously targeted, has now met the measured move and is in the midst of an overshoot.  It is crazy that the Head and Shoulders Pattern in SPY took 8 months to build, but is achieving the measured move in just 3 trading sessions.  WOW!  This down move is fast and furious with weakness and technical damage across the board. 

 

This market is slippery.  SPY is 100% off the March 2009 lows and only 18% off the April 2011 highs.  That is a normal correction, but with the intervention of Quantitative Easing that was propping up the Market, traders and investors were spoiled previously by being saved when the Market started to dip.  Next key support in SPY is $105 and then $101 area.  Today, SPY closed the day down over -6%.  In volatile times, it is good to limit your focus.

 

Below is a weekly chart of the S&P.  Last week the S&P broke a multi-year trendline.  Composure has definitely changed in the market.  It is good to know retracement levels, so you can be prepared to test major support areas for oversold bounces.  From the lows of March 2009 to the highs of May in 2011, we are below the 25% retracement level but the 38.2% retracement level stands at 1102 and the 50% retracement level is 1019.  Remember, it is good to look at weekly charts when daily time frames become invalidated by large price movements and extreme volatility.  

With oil futures getting crushed, the ETF, OIH, is getting crushed as well.  The OIH's, previously a market leader, has had a major composure change in the last couple of trading sessions as it is trading well below key moving averages.  Today, the OIH closed around -10%, again showing relative weakness to SPY.  Below is a weekly chart of the OIH, again something to note, the OIH rallied into the 61.8% retracement level in April this year from the June 2008 high to the December 2009 low.  There could be an oversold bounce in OIH, when it comes to test the ascending trendline.

   

AAPL closed on the lows today, around -5%.  When the market is pressured like we are seeing now, the charts become broken.  The best way to play these trades is at the extremes of the ranges with a level versus a level.  The 50-day moving average is $353.93 and the 100-day moving average is $347.76.  It is important to know key support levels, so you can take advantage of the moves.  There are big ranges for the intra-day action to scalp both long and short.

    

NFLX is another broken stock.  It has now traded below the longterm trendline and 100-day moving average, maybe play versus the 200- day moving average.  A good piece of advice is to avoid playing stocks like this when the market is so volatile as they are hard to handle, especially when you are seeing such large price movements in the indicies. 

The banking sector continues to be a drag on the market and having been showing relative weakness all year.  The trend is down and momentum is to the downside. 
    

FAZ is an inverse ETF for the banking sector.  It has been on the move, while banks get hammered on the downside.  FAZ closed over +25% today and banks like BAC closed over -20%, C and MS closed over -15%.  When volatility is in the market, inverse ETF's come back into play, which are good vehicles for the active trader.  Also on the moves is the VXX, which gauges fear and volatility in the market. Today it closed over +15%.

 

Actionable Trades: SPY, DIA, OIH, AAPL, AMZN, GLD,

Yesterdays reversal trade was nothing more than a relief of some oversold pressure.  The Head and Shoulders Pattern in SPY took 8 months to build, but is achieving the measured move in just 3 trading sessions.  WOW!  This down move is fast and furious with weakness and technical damage across the board. This move is due to a combination of factors, with deteriorating economic numbers, escalating problems in Europe, and an absence of Quantitative Easing. Many pundits have opined that stimulus packages and QE artificially inflated the market, and now it appears the chickens are coming home to roost.  Tomorrow is the Jobs Number, and we will be watching close to see how the market reacts.

 

Below is a weekly chart of the S&P.  This week the S&P broke a multi-year trendline.  Composure has definitely changed in the market.  It is good to know retracement levels, so you can be prepared to test major support areas for oversold bounces.  From the lows of March 2009 to the highs of May in 2011, the 25% retracement level is 1195, and the 38.2% retracement level is 1102.

The DOW closed down more than 500 points today and had the biggest 10 session loss since March 2009 lows.  Below is the weekly chart of the DIA, the Dow Jones Industrial average.  This also broke a multi-year trendline.             

The OIH's, previously a market leader, has had a major composure change in the last couple of trading sessions.  It is now trading below key moving averages and traded with force through the 200-day moving average and closed on the lows.  Today, the OIH closed -8.81%, showing relative weakness to SPY, which closed the day -4.8%.    

   

Below is a weekly chart of the OIH.  It is good to look at weekly charts when daily time frames become invalidated by large price movements and extreme volatility.  When looking at a longer time frame of the OIH, something interesting to note is the the highs of April 2011 was the 61.8% retracement from the highs of June 2008 to the lows of December 2009.  

 

    

AAPL broke the earnings low today, not surprising when the market is under extreme pressure.  For the active investor, the next compelling level to test a buy is a retest of prior highs, $365 area.  For the active trader, continue to scalp AAPL for cash flow.

    

After the push through failure in AMZN on Monday (8/1), it was noted that it would be best to avoid AMZN for now as it would need more time to build a base.  If you did not lighten up on your position then, the next out was once it broke bigger support of $215.  Now AMZN is approaching more compelling levels to test an oversold bounce.  First level, $201.  If that does not hold, $195 is more compelling.  

Yesterday, it was noted that there could be a possible reversal trade in GLD as it failed to hold new highs.  The strategy used for this trade was an 80/20 reversal trade, which uses a calculated entry and stop.  This morning GLD gapped up, but gave a way out of the trade and set-up a new 80/20 trade.  Entry: $162.86, Stop: today's high: $163.83.  GLD could see a move down to $155.40, the 21-day moving average, without causing any technical damage to the recent move.

Actionable Trades: SPY, AAPL, OIH, AMZN, GS, GE, XHB

It looks like the Head and Shoulders pattern in SPY is coming to fruition.  The neckline stands at $127/$127.50, with a target area of $120-$117.  This morning we saw a big gap up in the market as there was some resolution to the debt ceiling, but the highs of the day were in at 9:30am ET, and the market continued to get hit after a very weak ISM number.  SPY traded below Friday's low and through the 200 day moving average, however it closed above both levels.  If this pattern is to play out, it would be nice to see some sideways action first.

 

AAPL is a go-to stock for strength after a blockbuster earnings report this quarter.  AAPL was highlighted last week for potential buy back areas.  It held the first area which was the low from its earnings gap and also the 10 day moving average.  AAPL showed a lot of relative strength today as it closed +1.65% when the SPY closed around -.65%.  It is always difficult to buy the dips when they present themselves, but that is why you must be prepared and know key levels.  For now, use AAPL as a cash flow stock as there is no real set-up on the chart and could be difficult to make new highs, while the market corrects.      
    

 

   

This ETF remains bullish as it trades above key moving averages.  One level to test a buy back is the 100 day moving average at $153.71 and then next level will be the 50 day moving average at $150.81.  The OIH's did put in a bearish reversal candle on the daily chart, signaling it may need a little more time before making another move.

  

AMZN, another go-to stock for strength, had been holding up well after gapping up to new highs after the earnings report last week.  It had a nice 3 day basing pattern that usually ignites another move higher, but failed to hold that new highs, although not unusual as the market was pressured today.  For now, AMZN is an avoid as it needs more time.  

 

GS had a powerful snap back two weeks ago when it failed to hold a new 52-week low.  Now GS is holding around the 50 day moving average and above the break of the descending trendline.  Something to note, GS did not break its low from Friday ($133.13) but the SPY did.  Use the $133 support level as the reference point.

 

GE is trading below the $18 support level, which is not surprising after we saw a big miss in the ISM number that came out at 10:00.  It was a full 3.6 points lower than expected.  GE is showing bearish signs on the daily chart as it trades below key moving averages and makes a series of lower highs.  

 

  

The XHB is the homebuilder's ETF.  For all of 2011, it had held the $17 level, but broke that Friday.  This head and shoulders pattern in XHB is very bearish.  The neckline stands at $17, which it closed below today.  This pattern has now triggered and targets a move down to $14.80, use your own trading rules to take profit on this trade.

 

Actionable Trades: SPY, BIDU, AAPL, OIH

The possibility of a US debt default still weighs heavily on the market.  Today we saw a small oversold bounce in the morning, which was met with selling in the afternoon for the SPY to close on its lows. SPY is trading below the 100 and 50 day moving averages today.  For now, it is time to stay light and in a wait-and-see mode as things are uncertain regarding the debt ceiling situation.  $129.63 is the next point of reference. Look to market leaders to buy potential dips, but don't start too early. Tail risk is high right now.  

Above is a short term picture of SPY, so when we hit oversold readings like we saw this morning, the active trader can take advantage of cash flow trades.  As for the swing trader, wait for more data and precise levels. Some market technicians are looking at this macro Head and Shoulders pattern that could be developing in the SPY.  This pattern is triggered with a break of the neckline that stands at $128/$128.50.  If this pattern triggers, the target is $120-$117, which corresponds with a big support area from last November.  It is hard to be short going into the weekend with the headline risk that is out there.     
   

Today we saw a small bounce for the active trader but for the swing trader, wait for more clarity.  There will be an opportunity to buy back market leaders once this market settles, and BIDU is certainly one of the market leaders after a strong earnings report.  This is a stock to buy a dip, but wait for key support levels.  First zone to test a buy back is a retest of prior highs: $156.06-$152.90, which is the 10 day moving average.  If that zone doesn't hold, look to bigger support level of $147/$147.50.  BIDU is trading far off its moving averages, it would be healthy to see some digestion in this stock before working its way higher.

AAPL is another go-to stock for strength after a blockbuster earnings report this quarter.  AAPL is extended well off its moving averages.  First spot to test a buy back is $383.90, which is the low from its earnings gap and coincides with the 10 day moving average. The next level to test a buy back is $366-$364.90, a retest of prior highs.      

It was noted earlier this week that the OIH's were coming into the resistance area that was highlighted from the previous buy entries, which was a good spot to lighten up on the trade.  $155-154 is the first area to test a buy back.  $150 is the next key area to hold in the OIH's, which is support of the 50 day moving average.  Remember to buy dips in the market leaders when the market is in correction mode. 
       

  

Sometimes in the market, there are times to be in cash, and now is one of those times.  

Actionable Trades: SPY, QQQ, BIDU, AAPL, OIH, RIMM, NTAP, RVBD

SPY got hammered today as investors begin to take the possibility of a US debt default more seriously, trading below key support levels. SPY closed below the 100 and 50 day moving averages today.  For now, it is time to stay light and in a wait-and-see mode as things are uncertain regarding the debt ceiling situation.   $129.63 is the next point of reference. Look to market leaders to buy potential dips, but don't start too early. Tail risk is high right now.  

Potent down day in QQQ, as the Nasdaq led all indices down 2.7%.  This is a sign to lighten up on your positions, but $56.87 is the key level to hold for strength and upside momentum.  Watch the price action and be cautious. 
    

There will be an opportunity to buy back market leaders once this market settles, and BIDU is certainly one of the market leaders after a strong earnings report.  This is a stock to buy a dip, but wait for key support levels.  First zone to test a buy back is a retest of prior highs: $156.06-$152.90, which is the 10 day moving average.  If that zone doesn't hold, look to bigger support level of $147/$147.50.  BIDU is trading far off its moving averages, it would be healthy to see some digestion in this stock before working its way higher.

AAPL is another go-to stock for strength after a blockbuster earnings report this quarter.  AAPL is extended well off its moving averages.  First spot to test a buy back is $383.90, which is the low from its earnings gap and coincides with the 10 day moving average. The next level to test a buy back is $366-$364.90, a retest of prior highs. 
     

It was noted earlier this week that the OIH's were coming into the resistance area that was highlighted from the previous buy entries, which was a good spot to lighten up on the trade.  $155-154 is the first area to test a buy back.  $150 is the next key area to hold in the OIH's, which is support of the 50 day moving average.  Remember to buy dips in the market leaders when the market is in correction mode.     
   

  

When the market has big down days like we saw today, look to the stocks highlighted in previous newsletters that are showing relative weakness.  RIMM (July 14th), NTAP (July 14th), and RVBD (July 25th) are weaker than the market and are trading below key moving averages .  The market closed the day -2% and these stocks closed -5.95%, -4.5%, and -6.3% respectively.