Monthly Archives: May 2012

Uptrend under pressure

By Jani Ziedins | Intraday Analysis

Leading stocks had a rough day, falling far more than the modest pullback in the indexes. Live by high-beta stocks, die by high-beta stocks. While today was ugly, taken in context of last week’s progress, we have only given up a portion of the recent gains and are not in hot water yet. We continue have a some cushion before we risk breaking resistance and making new relative lows.

The problem for the current market comes when bringing in the volume of the up-days vs the down-days. The largest volume days have either been down-days or stalling-days ending with little gain.

As it stands, the market seems more skewed toward the bearish case and that is why IBD’s Big Picture moved its market outlook to Market Under Pressure, but all that will be rendered irrelevant if Friday’s employment numbers are outstanding. Meeting expectations or missing expectations will most likely allow the bear case to develop. At this point it is too late to predict what the employment numbers will be and we are left reacting to the aftermath once it is released. Regardless of the fundamentals, we need to trade our plan and respond to the price action no matter what we think should happen.

As for individual stocks, KORS, FRAN, INVN, and others had rough days giving up a large chunk of their recent gains. But that is the nature of trading high-beta stocks. One day you are a hero, the next you are a goat. But there is no such thing as easy money in the markets and the stocks with the greatest potential also are the most gut-wrenching. If it were easy, everyone would do it. Stick to your rules and use those to dictate how you respond to this market and try to keep emotional impulses in check.

Stay save and lets hope for the best Friday.

Lack of conviction continues

By Jani Ziedins | Intraday Analysis

The markets had a disappointing finish yesterday, giving back most of their intra-day gains in the last hour of trading.  And this morning the market continued that reversal, opening modestly lower, but on a positive note have since bounced off of the daily lows by early afternoon.  As for absolute levels, the S&P500 is holding up reasonably well, but sticking with the ongoing lagging theme, the NASDAQ retested its 50dma again and is less technically strong.  From the price action of the indexes, it appears money managers are rotating out of the aggressive tech and small cap names and moving their money to more defensive sectors.

Given the lack of conviction by either bulls or bears, it is not surprising the indexes are continuing to churn sideways and breakouts either direction quickly lose steam.  Both headlines and sentiment have been mixed preventing a more sustained move either direction.  Maybe Friday’s employment numbers will be the catalyst that finally tips the scales one direction or the other.

KORS is adding on to yesterday’s strong move off of the 50dma.  LULU is also exerting itself, powering to new highs today.  LULU’s move doesn’t have the duration to qualify as a base and is simply a bounce off of the 50dma.  The buy range for 50dma bounces are from the 50dma all the way up to 5% above the previous high.  From that measure, both LULU and KORS are still in the buy range.

Nice rally day

By Jani Ziedins | Intraday Analysis

The indexes are up nicely today, reinforcing last week’s technical breakout above the recent 50dma consolidation.  Obviously my reluctance regarding the market so far has been misguided and no doubt an army of people feeling the same way I do is partially responsible for the upside we are witnessing.

The interesting thing will seeing how far this can go.  A big push behind last quarter’s monster rally was institutional investors playing catch up as the market left them in the dust.  At the moment the second quarter is in the red, so there is no pressure for big money to chase the market.  Of course that could change if we start making new highs with a few more days like today.

Friday’s employment number will be a big headline grabber, but it seems like it is less of a market moving event than it was earlier in the economic recovery.  No doubt a big surprise either way will shock the market, but anything that approaches expectations should not create too much of a wave by itself.  Of course that doesn’t mean investors won’t use it as an excuse to trade a preconceived bias they have and that could potentially trigger a larger move if enough people jump on board as part of self-fulfilling prophecy.

FIRE is having a great day, up 13% after earnings and is adding to its already impressive gains since its Feb breakout.  KORS is jumping off of its 50 in strong volume today, giving a solid entry or add point for a bull.  BWLD is flirting with its 50, but struggling to hold above it in afternoon trade.  AAPL found support at the 50 earlier in the day, but has since given back all those gains and is currently flat.

I added a tab to the CrackedMarket website with a watch-list of the stocks I am following.  This is far from a comprehensive list and many big winners will not make the list simply because by design it will be highly exclusive instead of inclusive.  The goal is not to find every stock that makes a big move, but instead be focused on identifying a highly targeted list with as few false-positives as possible.  Because of the advantages of scalability in stock investing, we only need to identify one or two big winners each year to produce great results as long as we allocate enough capital to each good idea.  The bane of a portfolio is getting stuck with dead money stocks that don’t move and water down any winning positions.  This is why I am merciless when cutting otherwise good stocks from consideration.  Further, the goal is not to find obscure stocks no one knows about yet, but instead target stocks that are starting to show up on my radar multiple times and in the early stage of generating buzz across the larger investing community.