All Posts by Jani Ziedins

Follow

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 has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees 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 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.

Apr 23

NASDAQ continues under-performance

By Jani Ziedins | Intraday Analysis

S&P500 daily

A rough start to the week for the markets as we are down 1%+ in the first couple hours of the day with all three major indexes crashed through their 50dma.  The S&P500 and Dow are still trading in their recent consolidation areas but the NASDAQ broke support and is making a new relative low. This continues the trend of under-performance by the NASDAQ and demonstrates weakness by technology and smaller, growth companies.  Given the huge run-up and out-performance by the NASDAQ in Q1, profit taking and rotation out of this sector should not come as a surprise.

NASDAQ daily

Traders watch moving averages and trade off of them, but are secondary in psychological impact when compared to technical levels represented by concentrations of actual buying and selling activity.  It is one thing to see your stock fall under a moving average on volume, but seeing your stock fall under its purchase price generates far more anxiety.   This causes breaks under support to be far more powerful than drops under moving averages.  The NASDAQ broke under its support, but the other two indexes are holding up for the time being.  A break by those over the next couple days could signal this correction still has room on the downside.

It is not uncommon to see the markets retrace ~33% to ~66% of a move as part of a normal and healthy correction.  This is just part of the natural two-steps forward, one-step back process the markets use on their march higher.  On the S&P500 this gives us a pullback range of 1347-1275 if we use the Dec dip as the start of the current move, or 1321-1222 if we use the Oct low.

No matter what metric we use, we still have a little more to go to make this a normal and healthy correction.  As for how to trade this, we should continue to sit tight and wait for the upside confirmation before buying back in.  As for using this weakness to initiate short positions, I’m not sure this down-leg will produce the profit potential necessary to justify the risk.  As opposed to bear market conditions that make for the best shorting opportunities, this appears to simply be a normal pullback from overbought conditions.  No doubt money could be made on the short side, but you need to be very nimble with your short trades and take profits early and often because this downward move doesn’t appear like it will cover a lot of ground.  Rather than look for shorts, I think the smart move is searching for buy candidates holding up well in this sell-off so you are ready for the rebound.  But of course markets top when everything looks good so we always need to be wary of what we least expect.

Apr 20

Up, down, up, down…..

By Jani Ziedins | Intraday Analysis

NASDAQ daily

The market again continues to hang out right at the 50dma and neither the bulls or bears have the strength to break the market from these levels.  It is still early in the day and we could see a more directional move this afternoon.  Today is options expiration so volume will be inflated, but it will still take a price move greater than 1.5% to trigger a follow through day.  Ideally we’d like to see volume far higher than yesterday to demonstrate the elevated volume isn’t simply a technicality due to the options market, but is really institutional investors getting behind the upside move on the long side.

The one helpful part of hanging out at the 50dma is the average has been inching up with every passing day and so while we are sitting on support, the market is still in a modest up trend.  But of course the real tell will be when we break above or below this consolidation in volume.  The last few weeks has done a good job of bloodying premature bulls and bears anticipating technical breakouts and they are getting far more gun-shy with each successive humiliation.  What this means is the next move out of the trading range is more likely to be the real deal because fewer premature day traders are artificially pushing the market.  With a diminished influence of technical and momentum traders, the next price move will be more influenced by institutional investor supply and demand and thus more likely to stick than the recent peak-a-boo breakouts that quickly retreated back into the trading range.  There is no grantee the next peak-a-boo won’t also retreat, but the probability of the market showing its true colors increases with each failed peak-a-boo due to the decreased influence of technical and momentum traders.

Again, no reason to trade these daily swings and it is best to wait for a confirmation either direction.  It is better to give up a little upside in order to improve your odds of success by waiting for a higher probability trade.

Apr 19

Treading water

By Jani Ziedins | Intraday Analysis

S&P500 daily

The indexes continue treading water near their 50dma in a frustrating fashion.  Up, down, up, down and repeat until thoroughly confused and demoralized.  Just like its been for the last week, this price action continues to support both a bullish or bearish setup and the only way we’ll find out is when we get a confirmation from the indexes when they actually move out of this range in a compelling manner.

So far all this trading range has accomplished is chewing up and spiting out any premature bulls or bears with overly tight stop-losses.  Neither side has the conviction or money to push us outside this range and we will continue to hold here until either the buy-the-dip crowd or the sellers lose the battle when they finally run out of funds to support their cause.  This is turning into an endurance race between the two camps and at this stage I really can’t say which side has an edge.  Both sides seem well represented in media making it hard to use a contrarian analysis to get a sense for what is the path of least resistance.

As far as CAN SLIM rules go, sitting and waiting is exactly what we should be doing right now when current outlook is market in correction.  We need to give the market time to prove itself and when deciding how to manage your portfolio, remember it is better to be out of the market wishing you were in than in the market wishing you were out.

FFIV daily

Aside from the indecisive indexes, we have seen good price action out of some leading stocks.  FFIV popped on strong earnings and retook it’s 50dma on a gap-up this morning.  Today’s move puts it back in line with its recent highs after dropping under it’s 50dma on large volume a couple weeks ago.  This price action demonstrates how difficult it can be to respond defensively to a stock by waiting for weakness to sell.  Very few stocks make big moves that are easy to hold and often the biggest winners are highly volatile and do their best to shake traders out prematurely.  There was no reliable way to identify FFIV’s April 10th and 11th plunge was just a regular shakeout and not the start of a larger decline.  For my personal trading style, I don’t want to be stuck trying to decide if a pullback is just a normal correction or the end of a move and is why I prefer selling into strength after a nice run-up.