AAPL: Speculative Short Trade

I went short AAPL today. Overbought and lots of space between price and moving average.

Today's Trade: PCU

I entered PCU as an oversold bounce play as it falls to support.

Trade Entry: ACI (short)

I am short ACI at $28.05 based on the extreme overbought readings in stochastic, along with extended price action. This coal setup was featured in the Trade Report last night, for short on strength at the open.

Trade: SDS

I entered SDS today. It is extremely oversold and RSI shows a positive divergence. The last 3 similar states have lead to decent, tradeable bounces.

FCX and PCU: Great Long and Short Setups

PCU and FCX are on fire. Technically, they look great on a pullback to support for long entry. However, they are very extended. Take a look at the distance from the 50 day moving average. I think we are due for a snap back. I will likely short on more strength.

Low Risk AMZN Short

AMZN has been a great "extremes" trade (stochastics 90+ and extended price) for the past few months, both as a long and short. The stock is again extended, and offers a low risk short opportunity.

Entry here with a tight stop offers a favorable a reward to risk ratio. Allow only for a small loss or big gain using a tight stop and target at least 2 times the stop.

Game Plan and Free Trade Report

Here is my game plan for the rest of the week and free trade report. Watch for the key SPY support levels. A continuation of the down move would setup some nice "oversold bounce" trades.

http://docs.google.com/Doc?id=d5z8q8w_1296ffhsmdfn

September 2, 2009

Note: I will not have access to a computer Thursday and Friday while on vacation, so there will be no Reports or intra-day notes for those two days. The next report will be for the first trading day next week.

Market Notes:

Today's welcome continuation down move (for those of us net short) broke through last week's support zone and sets up a possible move to the next support zone at $98.

If looking to add short positions, look for a weak bounce to former support. If looking to get long, wait until the $98 support zone is reached. This would setup a nice oversold bounce trade, with stochastics reaching oversold conditions.

Trade Tracker:

I am still holding all of my short positions but LMT, though using profit taking strategies to lock in profits and still benefit from a possible down trend.

I took partial profits in AAPL and VPRT. I am still holding SNDA and POT, which are now partial positions after profit taking.

I exited LMT. It has not been cooperating. The fact that it has not participated in the market down move, even with a nice short setup is what got me to give up on the trade.

I was stopped out of my SSO and SPY long partial positions at my entry levels. Profits had been taken earlier at the top of the trading range (see past reports). I am happy with this SPY trade as it allowed me to make some profits while waiting for my short positions to work.

Game Plan:

Keep and eye on index and focus list stocks. Shorts can be added on a weak bounce. Longs can be added on weakness, when SPY reaches support.

If the market continues to drop, keep the "oversold bounce" and "rubber band" setup handy. Look for stochastics that reach below 10, price moving far from resistance and big drops to support.

Keep an eye on key support and resistance levels, along with stochastics. This should make for some easy, slam dunk trades.

Trading Strategy:

While I don't have my full setup, I will have my iphone and will monitor the index ETFs and core focus list stocks. This is a good strategy when away from your usual trading setup or on vacation. SSO and SDS will be the main trading vehicles, with focus list stocks as possibilities.

Speculative Entry: SRS

I took a small positions in SRS today. It is very oversold (meaning real estate is overbought) and, if history is a guide, should bounce soon. I am using a tight stop with a target near the moving average.

Monday Game Plan and Free Trade Report

Here is the strategy I laid out for subscribers to start the week:

http://docs.google.com/View?id=d5z8q8w_1205gxt3rxp3

The market is in a very bullish made right now. As we can see on the SPY chart, RSI confirms the recent breakout over resistance, as it makes new highs along with the index. The volume patterns shows there's some real velocity behind this move, as price is being pushed by some real volume. It's not supercharged, but steadily increasing.

The market is overbought, so entry is not optimal until we get a pullback to support. At that level, one could enter SPY or SSO for extra leverage.

If by chance the market continues to ramp up, we can take another stab at the oversold bounce or rubber band trade. If SPY bounces close to $100, I'll look to take a quick short trade with a tight stop.

Trade Tracker:

I was stopped out of the X trade on Friday.

Focus List:

A few specific short setups with triggers:

Some stocks are showing extreme overbought conditions and setup as "rubber band" short setups on a bounce.

AAPL is stretched about as much as it has been over the past year. Notice that it is piercing the bollinger band and showing extreme overbought conidtions. It's not just oversold, it's extremely oversold. If it bounces again tomorrow ($162-165), I'll look to get short. Only on bounce, which would make a pullback almost inevitable.

SRS is an inverse ETF. While it is a bearish trade, we have to look at it as if we are going long. As with AAPL, it is at extreme levels, but I'd like it to get more extreme. A dip tomorrow to around $16-$16.25 and I will enter.

AMZN is a "failed breakout" trade. The stock broke out of major resistance with a huge price bar and major volume, only to breakdown the following day in equally powerful fashion. I will look to short on strength tomorrow. Stop should be around $91. Low risk, high reward.

Long watchlist

Remember that the market is overbought so I'd like to wait a few days for most long entries. Here is my watchlist:

breakout-pullback candidates: SBUX, NFX, POOL, TXI, ALB, ISRG, CELG

Hot stocks showing accumulation (many commodities): BHP, PCU, NOV, RIG, FCX, ACI, GRMN, RL

Hot sector: Solars are looking really good in terms of price and accumulation. They can turn on a dime and are volatile, but I'd like to take a position on pullback of one of the following: SOLF, SOL, CSIQ or FSLR.

Disclaimer: All information and opinions expressed in this report are to be used for entertainment purposes only. The author of this report is not an investment adviser and does not give buy, sell or hold recommendations. Trading stocks is a risky undertaking, and due diligence is required before making a trade. Consult an investment professional before making a trade. The information in this report is not verified and may be incorrect. The author of this report may or may not hold a position in stocks mentioned in this report.

Exiting Short Positions

Here is an alert I sent subscribers this morning:

I was stopped out of the SPY short (via SDS) for a small loss. Also exited most shorts.

I am NOT taking on any short positions. This is not an orderly pullback. Instead, SPY is showing a strong breakout bar. We'll see if it holds, as conditions are now getting extremely overbought.

While I won't short here, a few more days of bounce would setup "rubber band" shorts, based on extreme overbought conditions (current shorts were only overbought setups, not extreme overbought).

You may be wondering why I differentiate between the two . . .the overbought setup is based mostly on risk and a slight edge. The extreme overbought setup offers a significant edge and I am willing to up my position size.

Today's Trades: FCX and MON

I made two speculative trades today, short FCX and long MON.

MON is oversold, but still a few points from support. The higher probability setup is to enter long at $70, which I will do if I get stopped out of this trade.

FCX shows a bearish pattern, but has bounced over the 50 day moving average.

Both trades are low risk, but average probability. Obviously I am using tight stops for these trades.

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.

Against the Apple Trend

AAPL is on my bullish watchlish. Why wouldn't it be? It has a great price and volume pattern, and has shows relative strength versus the S&P 500.

However, the stock is very overbought. Every one of the measures I use to find "rubber band" setups is off the charts. I will likely short the next move higher.

This is a countertrend trade that is very short term and managed with a tight stop. Remember, I am long on this stock. The short "rubber band" trade is short term and against the trend.

The Simple SPY Strategy

My strategy for trading SPY is about as simple as it gets right now: Short strength and buy weakness.

I will look to enter long on a pullback to the 200 day moving average. My "rubber band" short setup triggers on continued strength close to $100.

Today's Trade: SSO

I took a small position in SSO today based on the "oversold bounce" or "rubber band" setup. My stop is just below the support line and I will be quick to take any available profits.

Update: I am having trouble with chart annotations and will post chart later today.