Technical Picture - Minor Gains

Markets gapped down on chatter regarding European debt and Mideast worries. Weak new home sales data at 10:00 added to the pressure. Prices stabilized shortly thereafter. By afternoon prices trended higher. The NASDAQ and DOW notched new short-term recovery highs, but the SPY didn't confirm. Still, today was the first trend-like day since the recovery began.


GDX (gold miners) forming a symmetrical triangle as it tries to catch up with GLD

GLD forming bullish inverse H&S pattern.

SMH wedging or flagging.

GES bear flagging following last week's earnings/guidance disappointment. Target gap support.

FOSL basing at resistance. Needs to consolidate after three consecutive higher closes.

LNN forming a small handle at base.

LRCX - watching to see what price will do when it fills gap. I suspect we'll rally back to $56.00 before reversing back down.

ITMN basing, looking for higher price.

Day Trades

Technical Picture - Bullish Gap on Light Volume

The U.S. markets gapped up wide following a strong performance overseas in the wake of positive developments at the Japanese nuclear facilities, ongoing military actions over Libyan airspace, and M&A activity. Price rallied for the first 45 minutes of trade and then stalled near the 62% retracement (ambush zone) of the last leg down. We went into a narrow sideways consolidation for the rest of the session, implying only muted selling pressure.

As we can see from the SPY chart below, we have gap support below today's price and gap resistance near the $131.00 level. The low volume on this retracement effort implies lack of conviction by the bulls, hence we remain cautious until further proof.

Technical Picture - Inside Day on Lower Volume

Index futures rallied overnight on positive news regarding Japanese nuclear situation, however the Asian and Europeon markets still closed red. So when the U.S. markets gapped up on the open I was a concerned about chasing longs. The broader markets outperformed on strength in commodities. Tech rose 0.7% and small caps just minor gains.

I still have 1/4 swing positions long in TCK and POT which I will sell tomorrow. As we can see from the copper chart below, the technical bounce to retest the broken trendline is almost complete.

After hours, the G7 announced that they had agreed to intervene with Japan to suppress the yen causing the currency to correct and the Nikkei to pop along with S&P futures.

SMH is in the support zone, but buyers aren't enthusiastic.

Couldn't resist one last trade in SU as depicted above. I exit as soon as the daily gap was filled.

EXC gapped and fell back down to retest yesterday's lows. It based sideways for a long time and I decided to try a low risk long after price had regained the 5 period EMA.

GES gapped down on earnings and ripped lower. When selling subsided, I took a low risk long hoping for a retracement back to resistance (blue line). There was no momentum on the retrace so exit as price approached whole $ level. Price backed off immediately and bears took back control. Notice the topping pattern on the 1 minute chart below, sets up a nice short into the close.

Optical stocks FNSR, OPLK, and OCLR were crushed today. JDSU is bear flagging, and I suspect if the sector continues to sell off, JDSU could fill the gap from $20.00 to $18.00. On the other hand, given today's blood, we might head fake lower and bounce. I'm leaning towards the latter for tomorrow, but won't be surprised if the stock sells off on the next market leg down.

Technical Picture - U.S. Markets Rebound from Japan Meltdown

The U.S. markets gapped aggressively lower on the Japanese meltdown overnight following nuclear power plant fires. Buyers stepped in as the S&P came close to 1260 support, a key level I noted in my last post. This level corresponds to the 2010 highs, an area we based at for the last seven sessions of 2010. Volatility spiked as depicted below.

Swing Trades

Buying support on the open isn't easy, so I decided to to take some of the nail biting out of my support strategy by trading from my swing account rather than my day-trading account.

HCPG gave us POT $51.00 and I also liked POT $50.00, so I wanted to buy somewhere in between.

In the end, I hesitated and decided to go long weekly S1 which is much closer to $51.00. I took a partial midday.

I was looking to hold my partial swings overnight if we made a higher high than yesterday on decent volume, otherwise we're just on a path of lower lows and there's no point in taking the extra risk of a swing. So POT took out yesterday's high intraday, and we'll see what happens tomorrow.

I'm three for three with SU, but still not holding overnight because we keep printing lower highs and/or lack of volume.

TCK breached my initial, narrow support target on the open, so I decided to put this name aside and wait to see how things develop.

I took TCK long on a NRB, low risk, entry as depicted below. I took a partial at resistance, but it just kept on going on accelerating volume, which was perfect for my swing strategy.

Dummy Day Trades

For daytrades, I've been trading the old standby - low risk, dummy trades over the last two days. I look for stocks that gap with volume. Not too hard to find these days.

SHAW is a contractor with several nuclear power plant contracts set to begin in the U.S. and China. Following news of the Japanese nuclear disaster is gapped down wide on Monday. Two really nice trades yesterday and one today as depicted below.

I take all the high volume pre-market gappers and first hour pt. gainers/losers that catch my attention and create a symbol list in my Trade-Ideas scanner which I run the 15 min. NR7 scan. NR7 signifies price/volume contraction (narrowest price bar over last 7 bars) and foreshadows expansion. For longs I want price, to close above 5 EMA (pink line) and for shorts, below 5 EMA.

MCP printed a few NR7s and carved out a NRIB (narrow range inside bar). Took it long on break of small handle or base. My target was a retest of the intraday high. Not very fond of MCP as it can get really erratic at times, so just take the money and run.

Also traded PEP ( not pictured) NR7 plus hammer, but it went nowhere for a scratch.

Technical Picture - Markets Pare Back Losses on Softer Volume

On the wide range view of the daily $SPX chart above, we see that price is testing the summer 2008 highs that formed a bear flag before the big plunge into darkness. This could serve as a support area however, we've yet to see any conviction on the part of buyers since the correction started. Major support levels on the $SPX (blue lines) 1275, 1260, 1220, and 1175.

Friday's bounce was no different, as we bounced on below average volume on the $SPX. The SPY chart below shows above average volume on the gap support bounce, however, still far less than on distribution days.

I'll be interested in semis again, when test the support zone. The current sell-off has a lot of conviction, and I don't want to get in the way of angry bears. The handle that formed in the support zone looks solid as to time and price coiling, so I suspect we could get a good bounce once it comes into play.

MOO gapped into the support zone and bounced. No position yet, lacks volume.

Oil printing a series of dojis as it pulls back. The doji signifies indecision. The Japan earthquake/tsunami will see lower demand from that country and the Saudi protest that wasn't = another doji.

CNQ bounced from its 50 DMA and trendline support, but here again, the low volume signals a lack of conviction on the part of buyers.

Copper looks good here. I expect a rally back up to the broken trendline. Looking at FCX, SCCO and TCK.

SU was a HCPG pick for Friday, and it played out as expected. Decided not to hold for a swing based on volume, however, SU carved out a bullish engulfing on the daily. Tomorrow, I'll look for a retracement zone trade, keying off of Friday's WRB.

Traded the ranges on low priced optical names CIEN and JDSU.

I also like the ARMH range below the gap and the potential for a gap fill.

SBUX was a failed trade on Friday, but I still think this name looks well positioned for gap fill.

Technical Picture - Bears Own It

The index futures rolled over night amid disappointing data from Japan and China, as well a debt downgrade in Spain. Above consensus initial claims exacerbated the situation and we opened with a huge gap down. The first hour pushed prices low and the next hour established a floor, from which some buyers stepped in. Prices slowly recaptured the ORH and then we fell back down as the afternoon headlines - Saudi violence, spiked oil prices. We closed near the LOD and below the 50 day SMA, something we haven't done since last September.

Looking forward, we have gap support coming into play as depicted on the SPY chart below.

QQQQ filled the remaining portion of the gap and held today.

The $USD finally got a bounce.

I see a lot of gaps above and below price which can be very constructive in establishing support and resistance. I also see a lot of commodity play breaking below their lower BB as we can clearly see on the POT chart above. The MOO chart below is coming into support from the Nov. - Dec. base. We can see that many charts are technically oversold and want to look for key areas of support.

As a side note, Cramer advised one of his lightning round callers to hang on to POT despite the house of pain he's in, and add to the position after POT corrects an additional 10% from today's close. Ouch!

Reports of high inventory levels in the semi space have investors bailing on high volume.



JDSU briefly breached gap support on the open and reversed just above the 50 day SMA.

Easy trade if you were watching because last night I discussed the importance of the $21 and $22 price levels. Long above $21 to target $22.00. After that it formed a handle and I went long again as it broke $22.00, but that trade stalled at the exact level I shorted it yesterday and the trade was scratched.

Also note the wide gaps above and below price on the daily. These gaps are in play and we want to be in on the action.

GMCR was at the top of the Esignal hot list and I wanted to get in rather than try to catch the falling knives from the usual suspects list. I hesitated when it printed a hammer reversal stick right above the rising 5 EMA and decided to wait for NR7 or NRIB. Exited too soon at the round $ level $60.00. Looks like GMCR wants to run higher. The huge volume foreshadows higher prices - add to momo focus list.