Showing posts with label fallen momo stocks. Show all posts
Showing posts with label fallen momo stocks. Show all posts
Thursday, October 08, 2009
Is FUQI Ready for a Fall?
Momentum stocks usually give ample warning before taking the inevitable fall. Is FUQI showing signs?
Wednesday, April 23, 2008
Potash Trade
Potash finally posted an extremely bearish day. Although I felt strongly that the stock was ripe for a fall, I have to admit I got a little nervous when the stock started creeping dangerously close to my stop in the $215 range (I went short at $208.77).
I highlighted a few important happenings on the chart below. First, take a look at the bearish candle formation formed over the past two days on heavy volume. This is a classic sign of a short term top (we won't know if it's a long term top until a support level breaks).
I expect to see the stock test support at $190. That is my target for this trade, although I may take partial profits earlier.
Now take a look at the volume pattern. What attracted me to this stock as a short setup (besides the extreme overbought condition) was the fact that the stock rose on low to average volume. That, coupled with the high volume down move, has to concern anybody long this stock.
I highlighted a few important happenings on the chart below. First, take a look at the bearish candle formation formed over the past two days on heavy volume. This is a classic sign of a short term top (we won't know if it's a long term top until a support level breaks).
I expect to see the stock test support at $190. That is my target for this trade, although I may take partial profits earlier.
Now take a look at the volume pattern. What attracted me to this stock as a short setup (besides the extreme overbought condition) was the fact that the stock rose on low to average volume. That, coupled with the high volume down move, has to concern anybody long this stock.
Wednesday, April 16, 2008
How Can You Not Bet Against Gold?
I am hearing a lot of bullish chatter amongst bloggers and media about the near future for gold. This seems to always happen when a former leader (momo stock) breaks down and prints a dead cat bounce. I love it when this happens.
Let's ignore the talking heads and take a look at the chart. First, we see a head and shoulders top that is in the later stages of forming. Many traders like to wait for price to break the neckline, which is the line drawn on the chart below around $85. I don't take this conservative approach when a stock is clearly showing distribution--heavy volume on the initial breakdown. Once I see a weak volume bounce up towards resistance, I enter.
The neckline is my initial target, where I will likely take partial profits and move my stop to protect the profit. If the neckline breaks, the remaining shares will likely give me a huge gain. If I get stopped out, I will usually still make a nice 5-10 percent gain.
Back to the chart. Take a look at the squares drawn over the volume bars. It is clear that the volume pattern is bearish. Huge volume on the initial drop and overall heavier volume on down days signals distribution. The smaller rectangle highlights the volume on the recent bounce. The putrid volume tells me there's not much conviction right now and the ETF is not ready to reclaim its momo status (heavy volume on the bounce would tell me the bounce was just a deep pullback within trend).
Finally, the stochastic confirms the theory that the bounce has created an overbought condition within a down move that provides for a good entry.
Today i added to my bearish gold position, buying 400 shares of DZZ at $26.60. While I use GLD for my gold analysis, I like use DZZ to take a short position, since it provides extra leverage.
Let's ignore the talking heads and take a look at the chart. First, we see a head and shoulders top that is in the later stages of forming. Many traders like to wait for price to break the neckline, which is the line drawn on the chart below around $85. I don't take this conservative approach when a stock is clearly showing distribution--heavy volume on the initial breakdown. Once I see a weak volume bounce up towards resistance, I enter.
The neckline is my initial target, where I will likely take partial profits and move my stop to protect the profit. If the neckline breaks, the remaining shares will likely give me a huge gain. If I get stopped out, I will usually still make a nice 5-10 percent gain.
Back to the chart. Take a look at the squares drawn over the volume bars. It is clear that the volume pattern is bearish. Huge volume on the initial drop and overall heavier volume on down days signals distribution. The smaller rectangle highlights the volume on the recent bounce. The putrid volume tells me there's not much conviction right now and the ETF is not ready to reclaim its momo status (heavy volume on the bounce would tell me the bounce was just a deep pullback within trend).
Finally, the stochastic confirms the theory that the bounce has created an overbought condition within a down move that provides for a good entry.
Today i added to my bearish gold position, buying 400 shares of DZZ at $26.60. While I use GLD for my gold analysis, I like use DZZ to take a short position, since it provides extra leverage.
Monday, March 31, 2008
Trade Portfolio Charts: GTLS and DZZ
GTLS is an earnings breakout play that has shown accumultion as it consolidates the breakout move. A key day was early last weak when it confirmed the hammer the stock printed at the breakout point. The RSI and OBV trends are positive and the volume pattern has favored up days.
My target is the recent high of $38, while my stop is just under the breakout point, around $31. This gives me a nice 2.5:1 reward to risk ratio.
I am using the well known gold ETF GLD to detail why I entered DZZ, which is a leveraged inverse short ETF. I am using this chart because it gives a good example of how I like to play "fallen momo stocks". Note that Gold is showing many of the elements that DBA and other ag stocks showed as they broke down.
Why use an inverse ETF rather than short GLD or other gold stocks? The short ansser is I don't have to borrow shares, thus I don't incur any interest charges.
Updated Trading Results:
My target is the recent high of $38, while my stop is just under the breakout point, around $31. This gives me a nice 2.5:1 reward to risk ratio.
I am using the well known gold ETF GLD to detail why I entered DZZ, which is a leveraged inverse short ETF. I am using this chart because it gives a good example of how I like to play "fallen momo stocks". Note that Gold is showing many of the elements that DBA and other ag stocks showed as they broke down.
Why use an inverse ETF rather than short GLD or other gold stocks? The short ansser is I don't have to borrow shares, thus I don't incur any interest charges.
Updated Trading Results:
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