SKX Ready For Pullback

I took a short position today in SKX. The stock is extended and today's indecisive price movement on high volume leads me to believe a pullback is in order.

More on the Overbought Status of Apple

Last night I talked about the "rubber band" short setup for Apple. If the stock heads into the close with the same candle pattern that has emerged this morning, I would expect a pullback based on an early "evening star" candle formation.

My testing and experience tells me that this type of candle formation is an average predictors at best. However, when coupled with extreme overbought readings it gives a very strong edge.

Note that I am still bullish AAPL. It's just overbought and due for a pullback. An orderly dip to support would make for a great long entry.

SPY at a Glance

The doji candle printed Friday, which follows a bounce on low volume with overbought stochastics, leads me to believe we'll see a pullback this week.

SPY Prints Possible Reversal Candle

Believe it or not, although SPY was down almost 4 percent today, technically it was a good day. The index printed a bullish "long tail" candle on massive volume, while the Worden T2108 indicator at extreme oversold levels. Generally, this ia a clear reversal signal, at least short term.

The index recovered right after I was stopped out of the SPY trade (via SSO) and closed over 2 points above my entry . Looking back, it's easy to say I should have used a wider stop. However, my main concern was limiting risk.

While I am disappointed that I got stopped out of SSO, the X and K trades were gems. X closed up over 6 points from entry and both printed bullish candles.

A Bullish Divergence in AAPL?

Frequent e-mailer and one of my most loyal readers, Hal B., asked about a bullish divergence setup in AAPL. I don't have annotation capabilities from my current locale, so bear with me as I explain the chart.

I do see a slight divergence that might be used for an extremely short term play. We measure the divergence by taking a look at the two february lows, both of which printed long tail candles. If you measure both RSI and Stochastic readings at those levels, you will see a "higher low" readings. This creates a bullish divergence.

While the divergence could be used for a short term play, the overall trend in both price and volume is still down. OBV stinks. Volume is not diverging with RSI and Stochastics. Today's nice up move was not on "bottoming" type volume.

Thus, until AAPL mounts a major resistance level and has an uptick in upside volume, I'll stay out of the divergence trade.

Market Notes: Indecision

Talk about your emotional swings. I laughed, I cried, and in the end I am merely content. Both the S & P 500 and the Naz closed up slightly after a wild day that saw both bulls and bears doing the profit dance.

Take a look at this chart of the Nasdaq. What jumps out at you? Of course there is today's "doji" candle. What's more frustrating is the fact that it printed on increased volume. A down or up day on increased volume would be pretty easy to game. However, today's candle marks indecison, which is not what anybody wants to see, whether in the bull, bear or agnostic camp.



I am still holding my partial positions, in effect, letting them "ride". The gave me no buy or sell signals today, so I'll have to be content with managing them until we see a better signal.

Current Positions

Market Outlook

Sector Review

Chart: LVS

LVS has shown solid accumulation during the uptrend. If today's hammer is confirmed by a close above $130 tomorrow, we could see another leg up.

SNCR: No Longer an Ideal Pullback Candidate

I received an email from a reader who asked if today's pullback in SNCR was an entry signal. My answer was a not so subtle, "Not on your life!"

In last night's chart post, I mentioned that I liked SNCR on a pullback. Those that have been reading me for some time know that I only enter low volume pullbacks that gradually pullback to support.

What we had today was a high volume move with a long negative bar that "engulfed the previous day's smaller postive bar". In Japanese candlesticking vernacular, this is called a bearish engulfing pattern. Of course, as it sounds, this a bearish signal.

What we want to see is an orderly pullback to support that takes a few days to develop. While a big down day like today does not take SNCR off the watchlist, it certainly pushes it down to the secondary watchlist.

Chart: APPL

Earlier today, I mentioned that I felt there was a good chance AAPL would hold it's rebound from the lows of the day and print a long tail at the close. Sure enough, the stock closed near it's high and looks ready for another leg higher, assuming we get confirmation tomorrow. If the stock closes above today's high, I may go long again. However, if the stock does not confirm today's close, the bullish implications of the close will be nullified, a hanging man could print, and we could see a top form.

ZUMZ Bullish Englulfing Pattern, Steel, Energy and the UFC

I entered ZUMZ yesterday on a pullback to support, and today it looks as though we have confirmation that the stock is going to bounce. ZUMZ printed a bullish engulfing pattern where three areas of support converged (the 50 day moving average, price and gap support). I could not have hoped for anything better.

Conservative traders would argue that yesterday's entry was risky. The safe way to have played ZUMZ would have been to place the stock on your watchlist as it moved to support, and entered only after they type of bullish confirmation signal we received today.


Steel and Energy stocks are high priorities on my watchlist. The two sectors are finally pulling back, albeit after parabolic moves up. STLD, RIO, PDE, VLO, HOC, MT, XTO and DNR are a few of my favorites right now. I've also added two new stocks to the breakout-pullback watchlist.

Off-Topic:
As many of you already know, I am a huge UFC and boxing fan. Saturday night, UFC is showing a good match-up free on SpikeTV. Mirko Cro-Cop against Gabriel Gonzaga. Mirko is known to unleash some of the most lethal kicks in mixed martial arts. Check out the teaser: