Technical Picture - Bears Own It

A sharp bounce in the $USD and much weaker than expected existing homes sales data, gave the bears the fuel they needed to push prices lower on high volume for a second consecutive session. Next support level around $104.00 - will it hold on closing basis tomorrow?

After hours, RIMM beat by $0.03 and issued in line guidance. As noted last night, that wouldn't cut it this time round and the stock was crushed after hours, leaving the daily chart completely broken.

$USD versus $CAD

DOW transports approaching critical test of trendline near-term.

Technical Picture - Sell the News - FOMC Policy

The FOMC finally came out with a more optimistic statement regarding the recovery "economic activity has picked up following its severe downturn", but market participants reacted by selling the news.

The daily SPY chart signals that despite numerous attempts, we can't close above the Lehman gap open. Bearish gaps act as resistance and this one is typical thus far. Today's close is the first close below the daily 5 EMA since early September. The post FOMC sell-off was decisive, so expect that correction I've been anticipating to start now.

The weak dollar has been the major catalyst behind the last leg of the rally. The chart above and below foreshadow a pullback. The dollar looks like it wants to bounce here.

If the $USD bounces, oil will fall out of the box.


Textbook shooting star reversal on the SPY post FOMC. Notice how it retested last week's high, carved out a shooting star and swooned on accelerating volume. Sweet!

RIMM was an ambush setup following early strength (TI momentum scan).

RIMM reports earnings after the bell tomorrow. These are highly anticipated since it broke out of a symmetrical continuation triangle earlier this month. However, the BO volume is lame.

RIMM needs a big beat to justify current price. A big beat will likely complete the gap fill, however, just meeting the expectation will result in a failed pattern.

Technical Picture - Lehman Gap Still Holding as Resistance

Lehman gap is still holding as resistance as we head into the FOMC interest rate decision tomorrow.


AIG was forming a bearish h pattern when I spotted NRIB NR7. Price started to retrace when it retested the morning lows, but the move turned out to be an ambush - 50% retracement of last leg down. Finally, in the last hour it ripped lower on a rumor of a secondary offering.

CNQ gapped and formed a mini inverse H&S pattern. I pulled my stop on the second half at the last minute because the rising 50 SMA was just below. It held as support and price rallied to new session highs, but failed to reach full extension despite the daily breakout to new recovery highs.

Super Trader by Van K. Tharp

Super Trader - Make Consistent Profits in Good and Bad Markets by Van K. Tharp is a four step program to help traders develop a business plan that will allow them to make profits in any market environment - bull, bear, and sideways.

The four step program involves:

• self assessment of personal beliefs that will determine your personal trader psychology;
• developing different trading systems to suit your personal trader psychology under different market conditions;
• understanding and incorporating position sizing into the trading system in order to manage risk; and
  
• developing a personal business plan to guide your trading success.

That may sound pretty simple however, in order to maximize trading performance under different market conditions, we need to track setups(systems) in a vigorous fashion. Do you have any idea what the ratio of expectancy to the standard deviation of R for each of your trading setups? Yeah, exactly. And how could knowing these stats make a difference in your trading? Well, if we take any random setup, we might determine that the setup has a much higher expectancy in strong bull trends, but a very low expectancy in sideways markets. So we want to develop different trading setups for different market conditions. Tracking market trends and applying the right setups will greatly enhance trader performance.

The book emphasizes matching trading setups with individual trader psychology. What does that mean? If your primary objective is capital preservation and you have a low tolerance for losses and draw downs, you'll want to focus your trading on setups with higher expectancy which will mean fewer trades. In order to develop a workable business plan, traders have to do the exercises in the book, including tracking setups with live trades in order to develop meaningful sample data. Once the business plan is complete, the trader has a road map to success.

Highly recommended!

Potash Corp./Saskatchewan (USA) (Public, NYSE: POT) - Revised Guidance

Potash shares (POT 93.34, -3.80, -3.91%) dropped 4.2% to $93.05, while Mosaic (MOS 52.95, -1.30, -2.40%) fell 3% to $52.60 in late trading.

Potash said late Friday that it expects fiscal full-year earnings of $3.25 to $3.75 a share, down from a previous forecast of $4 to $5 a share. Analysts polled by Thomson Reuters were forecasting $4.16 a share for the year.

"The change primarily reflects lower than forecasted potash sales volumes due to continued slow demand and limited restocking by fertilizer distributors around the world," Potash said in a statement.

Potash also expects third-quarter earnings to come in at the low end of a range of 80 cents to $1.20 a share. Analysts are looking for 93 cents a share from that period.

Edit:

I've added the 15 min. charts for POT and MOS below with support/resistance levels (blue lines). If a low risk entry sets up at or near the S/R levels, I'll take the trade. MOS is more likely to trade in sympathy with POT than the other names in the agchem space. An entry for MOS would be between $53 and $52.50.

OPEX Trades - VistaPrint NV (Public, NASDAQ:VPRT)

The first chart is a stretch version of our gap resistance which we noted over the last couple of posts. We'll monitor it daily to see how it plays out.

OPEX is notorious for chop, so if at all possible, we want to focus on stocks trading outside of the previous day's range. Both VPRT and ILMN printed on the TI momentum scan in early trade.

VPRT was not obvious at first because it had so much congestion at the top of yesterday's range, but when we formed a base at that level, it looked compelling as an extension trade. The thick red line is the all time high prior to today.

If we consolidate in the upper range, we may get more mileage out this name. I'm adding it to my focus list.

ILMN - basic low risk entry , but not enough volume after yesterday's big move for a full extension.


CLF is one of my usual suspects and depicts typical OPEX trade - within a narrow range for most of the session. Last hour these usually break one way or the other.

The wider range view of CLF shows a H&S top after a sizable run. Could be a good candidate for next week.

Technical Picture - Gap Resistance In Play

I'm posting this SPY gap chart again tonight. I'm calling it the Lehman gap, but in fact it occurred about two weeks after the Lehman bankruptcy as the world financial crisis was gathering momentum. Today's spinning top edges into the gap, but closes at $107.16 (base of gap). Technically speaking, this gap is significant and will remain as such until it is filled.

Tomorrow is triple witching OPEX, but if we break below today's range, it could be good trading.


Transports appear to be forming a bearish rounded topping pattern.

Couple of stocks I picked off of the Trade Ideas momentum scan as longs earlier this week are now perfect candidates for shorting because they're so overbought. ASH from Tuesday and CMA from yesterday.