Day Trades - SOHU, BIIB, LVS, (DO - HCPG)

Yesterday, we said that SOHU was flagging and had just printed NR7 (price/volume contraction ahead of expansion) on the daily as depicted above.

We entered long after price broke above NR7, as price crossed $75.00. The preliminary target at the 1.27% extension was reached as SOHU expanded vertically, barely taking a breath.

Took a second trade after price held support. As long as it doesn't form a H&S top intraday, it remains bullish.


BIIB, another setup on our focus list, didn't breakout of its flag today, but still an active alert.

We bought BIIB on the initial retracement and exit after it printed a long upper shadow at intra-day resistance.

LVS was a short setup that didn't pan out. Price gapped lower on the open and retraced back to the ambush zone of the impulse leg down.

DO was a HCPG pick at $70.00 which I missed. I waited until price pulled back inside the BB to the rising 5 period EMA on the 15 minute timeframe. Worked like a charm.

Technical Picture - Best Week Since Sept. Surge

Jobs data reported significantly better than expected, but the upside was somewhat limited in the wake of the surge and the rebound in the dollar.

As we can see from the weekly chart of the S&P above, we have cleared the 200 week MA and retraced 61.8% of the 2007-2009 crash ie. ambush zone. We are likely due for some consolidation/corrective action prior to moving to the next resistance level.

Despite extended technicals, there are no short-term reversal signals for the S&P yet.

The USD carved out a lower low on Thursday in the wake of QE2, but Friday's shakeout bar (bullish engulfing pattern) and the positive divergence of RSI to lower prices, foreshadows a reversal. Inversely, the EURO confirms this analysis with a bearish evening star reversal pattern and negative divergence of the RSI to higher prices.

If the $USD bounces here, look for energy, commodities to correct. Also, look for sector rotation with financials set to lead on the upside after finally breaking out of the doldrums.

Technical Setups

LVS extended beyond 100% of the previous impulse leg (A to B) after a minor correction to C. It carved out a bearish shooting star reversal pattern on Friday at point D.

We note that there is no consolidation beyond the earnings gap up day and expect a decisive move back to the 50% retracement level of the last impulse leg up (C to D).

LVS got ahead of itself as we can see from the 15 timeframe below. Price surged out of the channel in morning trade, retested and surged higher still. The last thrust higher saw negative divergence of the RSI signaling the end of the move. The high volume for the day was more on the sell side than the buy side.

SOHU is flagging and looks poised to break higher very soon. Friday's price/volume action was NR7.

BIIB is also flagging and could benefit from some sector rotation.

Technical Picture - Broad Based Accumulation

The markets gapped up in the wake of the post QE2 push. Gold and commodities were the leaders on a much weaker dollar, but overall the rally was broad based with few laggards (biotechs and education). In the final hour, financials broke out of a multi-month base.

However, as we can see from the chart of the S&P, we've breached the top of the Bollinger Bands and will consolidate/correct soon. Momentum is strong and the jobs data would have to be really bad in order to spoil the week IMO.

DW mentioned VMC in the comments a couple of days ago as a short squeeze play. Today, VMC gapped up, consolidated and extended a full measured move of the previous day's range. Good call!

Using the Trade-Ideas scanner - pre-defined scan entitled "Down 50 cents in last 5 min. on big volume", I found two perfect RSI divergence candidates. MUR ripped lower, bounced and then made a slightly lower low with positive divergence of the RSI, setting up a retracement long.

DLR had daily support at $55.00, so it was just a matter of waiting for price to hit the number. As depicted below, the positive RSI divergence, signals a buy at that level.

Technical Picture - New Multi-Month Closing Highs Post FOMC

Early weakness post election was followed by erratic trade in the initial 20-30 minutes following the FED QE2 announcement. The announcement was roughly in-line and slightly better than expectation, which helped push equities to multi-month closing highs (52 week highs for the Compq.) Bonds,as measured by TLT, were crushed.

However, the $USD held up better than expected and GLD wasn't able to fully recover from high volume weakness earlier in the session. A bit of a red flag.

After hours, the Canadian gov't rejected BHP's bid for POT. POT sold off and should be a good buy the dip candidate. Earnings winners QCOM and WFMI will be on my focus list tomorrow as well.

Today's trades started with BO longs - MYGN, FFIV (HCPG pick), followed by support long - AGU and RIMM. Long ABX twice post FOMC, but it didn't rally as much as anticipated.

Chart Request - MasterCard Incorporated (Public, NYSE:MA)

MA has rallied 100% from its base (lower blue line). It has recently printed two distribution days, today and Thursday. Today's close breached the trendline. Preliminary support is the 20 EMA, followed by $230.00 (former resistance). Major resistance is $250.00.

The trendline is too steep to be maintained. Corrective trade into the two immediate support levels noted above would be constructive over the near-term.

Ambush - Capitulation - Reversal: Cognizant Technology Solutions Corp. (Public, NASDAQ:CTSH)

CTSH was an earnings gap which was quickly faded. Price reversed and made a decisive move back to the ambush zone and stalled. I shorted CTSH as depicted on the chart above. Normally, on an ambush setup, I would target the 27% Fib. ext. and then the 62% level. But CTSH was a rip, so I decided to let the 2nd half go. It capitulated on a volume spike at $62.00 (daily support).

Ambush trades work best when the retracement into the ambush zone is decisive, but on lower volume than the preceding trend move. I look for smaller candles on the retracement than the preceding trend move to confirm it's not a trend change and a waste of time. CTSH met all of the ambush trade criteria perfectly and the result was awesome.

Capitulation signals the end of the move and can be traded for a partial retracement of the preceding move. CTSH started off slow, but eventually formed a cup & handle to which I doubled my size. As we can see from the chart below, the retracement was 62% of the entire day's range. Sweet!

I tried to do an ambush trade with AAPL, but the result was far from perfect. This brings home the point that we need a decisive move into the ambush zone in order to anticipate a really successful outcome. The only part of the AAPL move that was decisive was from $304.00 to $302.50. Anticipating this, I took a partial at $304.00. The balance of the trade was stopped out at $303.50.

It's easier for price to move through a non-congested area and that's why the criteria calls for a decisive move back to the ambush zone.

Technical Picture - Choppy Week Ends Unchanged

As we can see form the 15 minute chart of the SPY above, despite two attempts to BO, the week ended almost unchanged. We carved out a series of dojis on the daily, implying indecision. The Nasdaq continues to outperform. We note more distribution on the SPY, however, weakness continues to be bought. Therefore, we can't conclude anything bearish from this week's action.

Reaction to U.S. elections and FOMC policy statement will be interesting. Jobs data on Friday will no doubt be an important factor.

Some companies of interest reporting this week:

Monday: ACOR, AGN, BHI, CTSH, CTB, ICE, JKS, APC, ESLR, EXTR, WFR, NTRI, and VMC.
Tuesday: ADM, BP, CLX, COCO, K, NYX, CECO, CQB, ERTS, HTZ, LEAP, MYGN, TEVA, OPEN, STEC, and WYNN.
Wednesday: ANR, ASCA, CVS, GRMN, JRCC, MGM, TAP, Q, TWX, CELL, FRPT, ROCK, JCOM, QCOM, MELI, MUR, PRU, SWIR, THQI, WBMD, and WFMI.
Thursday: APA, BDX, CVC, CBOE, CCOI, DTV, RAIL, PCS, ZEUS, SMG, TWC, UPL, USM, WWE, AMLN, BEBE, NILE, CEDC, CF, FLR, FTEK, HANS, JDSU, MCHP, SBUX, and SVNT.
Friday: BZH, BAM, CEP, DISH, SATS, FIG, FWLT, FCN, NVAX, PXP, SOL, and YRCW.

The $USD tried to rally from minor support, but now looks poised to retest the lower channel.

GLD looks bullish after some backing and filling. Weakness in the $USD will no doubt fuel a retest of the recent highs. Silver has already retested and broken out.

Oil could retest $87.00 on a weaker dollar, but the chart is less compelling.

Negative divergence of RSI to higher prices in corn futures, foreshadows the end of the move is near.

Materials holding up, but banks still look vulnerable.