All Posts by Jani Ziedins

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.

May 07

European upheaval

By Jani Ziedins | Intraday Analysis

S&P500 daily, end of day

Interesting to see the outcomes of French and Greek elections.  The Euro crisis fell off the front page last fall and now it looks like it is trying to nudge its way back into spotlight with key political upheavals in France and Greece.  But with all the negative talk by market pundits, the indexes held their ground today and were flat in the face of this news.  Much of that can be attributed to the market expecting these results as they were telegraphed by pre-election polling over the last few weeks. But while the actual result was expected, the consequences might not be priced in.

The problem with new govts in Greece and France means the political negotiations that took place last summer will need to be rehashed and all the uncertainty and infighting that went along with last summer’s volatility will be front and center yet again.  Since we’ve already been there and done that, I don’t expect the same amount of uncertainty, volatility, and sell-off as we saw last summer, but as everyone knows, the market hates uncertainty and no doubt this will weigh on equities.

Today’s lack of a sell-off is most likely due to the expectations that France’s and Greece’s new ‘socialist’ govts will give up the economic crushing austerity plans and instead support a more growth oriented easy money agenda.  And ultimately I think this will be a good thing for Europe and the global economy, but the near-term battles with fiscally conservative Germany will muck up the waters and the market hates uncertainty. Can the markets continue ignoring the Euro mess as it has done for the last several months, or will new infighting and breakdowns bring the story back to page one?

Ultimately I expect this will all work itself out, but over the near-term it will be hard to justify the bull-case in the face of this turmoil and the market could struggle over the summer because of it.  The market is facing an uphill battle between headline-risk and if we fall a little lower, the technicals will also be supportive of a sell-off.  For the adventurous looking to make money on the short side, now would be a good time to ready a watch-list with high-flyers that have struggled recently.  Look for the market and these watch-list stocks to break resistance on high volume and jump on board the downdraft.  But I expect this downward move will be fairly moderate, so be prepared to lock-in worthwhile profits and don’t let yourself get greedy.  Just like last fall, I expect the market will find its footing once the it realizes the fear is unjustified and the outcome becomes more clear.  This will lead to another nice year-end rally.  Of course the further away the predictions are, the less reliable they become so we will need to continue revising our expectations as events and price action unfolds.

And as always, I could be 100% backwards in this analysis and the market might rally strongly in the face of what it should do because that is how the market rolls.  The number one rule in investing is the market is bigger than we are and it can bankrupt us no matter how sound our logic is.

As always, stay safe.

For those following the blogs over the weekend, there was a technical glitch that produces a post full of gibberish.  I apologize for that and it has since been corrected.  If you wish to read that post, it will follow this post on on the main page of the website.

May 05

Disappointing employment numbers

By Jani Ziedins | Intraday Analysis

S&P500 daily, end of day

Friday’s employment numbers came in under expectations and were the lowest net gains we’ve seen in six months. In addition, this was the second consecutive month employment came in under expectations and the situation was ripe for a sell-off.

But while the results were disappointing and the market sold-off, volume was relatively constrained and the indexes have not retreated to new lows. This shows waves of panic selling didn’t hit the market and the decline was relatively orderly. Some might suggest this is a positive revelation, but ironically I find the lack of concern by market participant a concern. Panic sell-offs rebound quickly, but orderly sell-offs have legitimacy and are far less prone to bouncing. No doubt markets overdo things, but they usually overdo them in dramatic fashion and we have yet to see that drama, so I expect we could have more room on the downside before we see a bounce.

IBD moved the Market Outlook into Market In Correction, so that means we need to see four days of constructive price-action before we get the green light for new purchases. And given the sentiment of other traders, that seems to be the prudent move at the moment. It makes sense to lighten up on existing positions showing any weakness and is a good excuse to weed-out under performing stocks.

INVN daily, end of day

As for individual stocks, INVN blew up in spectacular fashion, plunging 25% as they reported disappointing 250% growth. Hard to fault management for that performance, but the market can be a brutally judge, jury, and executioner as they set far higher standards. This is a painful reminder of how volatile small-cap growth stocks can be and why often it is prudent to lock in gains when you can. No doubt INVN was a trading vehicle and fundamentals took a backseat to gambling-like speculation. The interesting thing was to see the far more modest 5% loss in Thursday’s after-hour and Friday’s premarket trading, yet when the stock opened for trading it plunged beyond belief. No doubt much of that anomaly was structural in nature as the decline triggered countless autopilot stop-loss orders and it was all downhill from there. This was a dramatic flush out and it has the potential to clean the slate for INVN as it drove of most of the speculators. It will be an interesting stock to keep on the radar given its impressive earnings growth and the fact that the reduced guidance was due to external factors. No doubt is is far from a buy candidate in its present form, but I’m not convinced INVN’s run is over.

May 04

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.

May 02

Lack of conviction continues

By Jani Ziedins | Intraday Analysis

NASDAQ daily @ 1:17 EDT

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.

LULU daily @ 1:17 EDT

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.

May 01

Nice rally day

By Jani Ziedins | Intraday Analysis

S&P500 daily @ 2:32 EDT

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.

KORS daily @ 2:33 EDT

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.

Apr 30

Buy the dip or sell the rally?

By Jani Ziedins | Intraday Analysis

S&P500 daily at 1:05 EDT

Indexes are selling-off modestly for the first time since breaking above the recent trading range.  Is this a good time for people who missed the recent run to get in, or a last chance for those still holding stocks to get out at a decent price?  In typical fashion, the arguments for both directions are equally compelling.

If we use the strength of the follow through day and the performance of the recent rally’s general, AAPL, as a benchmark, it seems less than an ideal foundation for a material move higher.  But on the other side, the markets often climb a wall of worry and it is this very uncertainty that provides the best opportunity to buy early weakness and hold for a profit as other investors slowly come around.

 

FRAN daily @ 1:05 EDT

I am fighting a negative bias and I don’t want to let it skew my outlook, but I still find myself suspicious of this rally.  There are a lot of good stocks holding up well in this weakness, but I have yet to pull the trigger on any of them since the follow through day.  FRAN is having a great day, up 5% in a continued bounce off of its 50dma.  LNKD is also showing impressive strength after its own 50dma bounce.  SWI is holding on to an impressive move off of last week’s earnings.  On the other side, AAPL is extending a 3-day slide after its blow-out earnings.  It is pushing down toward its 50dma and a bigger risk will potentially be a test of the recent $555 low.  It seems at the moment everyone who wants AAPL already owns AAPL and no one is left to rush in and prop up the declining price.

Apr 27

Indexes continue holding gains

By Jani Ziedins | Intraday Analysis

S&P500 daily @ 12:15 EDT

The indexes continue to hold recent gains and are edging higher. The S&P500 is above 1400 and sitting above the recent consolidation area. Today the NASDAQ joined the S&P500 by also poking its head above its recent range. These developments continue to be constructive and supportive of yesterday’s Follow Through Day. With this positive price action, there is no reason not to venture in and try some promising stocks. Start with 1/2 positions and add on as the market continues to move up.

From a sentiment point of view, it seems like the number of bulls and bears is fairly balanced and the lack of a disproportionate disparity most likely means the moves going forward will be more modest.  Extremes in the market tend to coil up the spring and today there is not much energy bound up in the spring.  Of course this balance rarely holds up and over time we’ll see the market skew one way or the other based upon headlines, price movements, and group think.

There are some interesting individual stock stories (AAPL, AMZN, SWI, GNC, etc), but as far as the indexes go, they are fairly boring at the moment.  Give it a few weeks and no doubt traders will find some kind of drama to start obsessing about.

Apr 26

Markets Flat after IBD calls Follow Through Day

By Jani Ziedins | Intraday Analysis

IBD called yesterday’s 1.4% gain on the S&P500 a day 11 follow through and we are back in a Confirmed Uptrend by their measures. But waiting more than two weeks for the follow through, having average volume on the FTD, and making just 1.4% gains are three separate signs that this FTD is less potent than ideal. That doesn’t mean this one can’t work, just in the past FTDs with this less than compelling action are more prone to failure. No doubt we can find weak FTDs that worked, but on average they have a lower success rate than more powerful ones. The best thing we can do is watch the subsequent price action and not jump into this market head first without waiting for more compelling evidence to support this FTD, namely positive price gains. Start buying good looking positions and then add on when the price increases. This will let you in the market, but also manage the risk if things breakdown.

As for where we are, the markets are mostly flat today on light volume. The SPX is at the upper end of the recent trading range, just poking its head above. The NAS is in the upper half of the range, but still has a bit more progress before breaking above it. The market seems unsure of itself at these levels as neither the bear nor the bulls have the courage to buy or short this market and it is a staring contest between the two to see who will blink first.

So far the market has found good support at the 1360 level as we bounced off of that twice. A third trip to that level would be fairly bearish as there is no such thing as a bullish tripple-bottom. On the upside, we have taken a few weeks to digest recent gains and flushed out some of the irrational exuberance leading up to the end of the first quarter. The bulls were humbled by the pullback and the bears will humbled by the bounces off of support. So in these regards, the clock has been reset for both groups and we are just waiting on the price action to see which side has greater strength. Being at the upper end of the trading range means the bulls have a slight edge and just need to push us a tad higher before traders start buying the breakout. But given the positive sentiment over yesterday’s price move and regaining the 50dma, it is disappointing that there is not more follow on buying today. No doubt this indecisiveness will continue the lower volume trading we’ve seen over the last few months. But as traders, price is truth no matter what the volume is.

We have seen positive price action from the leaders that weathered the storm and there look to be good buys to invest in. I continue to be cautious and am not sold on this FTD yet, but further gains will get me in the market with both hands. If we can’t hold above the recent consolidation, there is most likely more left in the downside move.

Apr 25

AAPL does it again

By Jani Ziedins | Intraday Analysis

AAPL daily

AAPL blew away estimates again and is single-handedly lifting the market today.  Most of AAPL’s strength comes from iPhone sales in China as they missed iPad and Mac expectations.  The one upshot is these quarterly results don’t include a Chinese release of the new iPad, which will provide a big boost for next quarter’s results. But AAPL is warning of a slowdown in iPhone sales going forward as customers hold-off in anticipation of an iPhone5.

As for how this affects the rest of the market, we are experiencing a nice pop today and all three major indexes retook their 50dma, but are still within the previous consolidation range, so not a technical breakout yet.  Today’s 1% and 2% gains are great to see after the recent weakness, but don’t constitute a follow through day because declines over the last few days reset the rally count.  This is day two for the S&P500 and day one for the NASDAQ.  We need a strong follow through day on Friday or next week to signal this market is ready to rebound.

NASDAQ daily

And given where we are, it seems prudent to allow the market a couple days to prove itself since today’s rally is the result of a single company.  The challenge will be to see if AAPL’s results can reverse the bearish sentiment we’ve seen in the markets as of late.  Is AAPL stronger than the markets, or are the markets stronger than AAPL?  And of course it doesn’t have to be an either/or as AAPL could decouple from the markets and continue higher in the face of wider weakness.

But again, sit tight and wait for that confirmation to demonstrates it is safer to venture into the market.  We give up some profit by waiting, but we decrease the risk of losing money by being patient.

Apr 24

Waiting for AAPL

By Jani Ziedins | Intraday Analysis

The markets are flat to up modestly this morning as we digest yesterday’s sell-off.  Is this the level were value buyers are attracted to the market and that is who is supporting us here?  Or are we being propped up by swing traders foolishly trying to pick a bottom?  One group has a lot of weight and conviction behind them and the other is a 90lb weakling that will bail at the first sign of trouble, so it really does matter who is buying at these levels.

The one slight positive is we no longer seem to be triggering an avalanche of selling at each weak patch we encounter.    Yesterday we sliced through the 50dma and found a bottom early in the trading day and climbed from there.  But the other side of the coin, if we are not seeing panic induced selling by weak-kneed traders, then what we are seeing is real selling by institutions, and that is a lot more meaningful.

AAPL daily

The market moving earnings release will come from AAPL after the close.  AAPL was the general that lead the Q1 rally and it also represents ~12% of the NASDAQ index.  Any weakness in AAPL will surely affect the tech trade, if not the entire market.  But on the other side, a strong result from AAPL could kick off the next bull leg higher.  Given AAPL’s 50% price gain over the last few months, it really is hard not to think AAPL shares are priced for perfection and the bar is set extremely high for them.  And on top of that, virtually every ‘expert’ I’ve seen is saying you should buy the dip on AAPL.  When the market gets so one sided on a stock, it inevitably goes the other way because of the supply and demand imbalance.  Is AAPL at that point?  In a few hours we’ll know the answer.