Chart of the day: GTLS

We have been swing trading the bottoming formation in commodities since December and now the formation has matured to the start of a possible trend move.

GTLS is a good example of a commodity stock ready to start a momentum trend.  It looks to have put in a bottom formation on strong volume and now is working hard to remount the 50 dma.  Once this level clears a measured move to $45 is in play in the coming months.

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Broken Trendline: PALM

I like PALM as a short setup on a bounce. Would have liked to see more volume on the break, but still would offer good risk/reward.

Market Trend Change on the Long Term Chart

The easiest way to watch the intermediate to long term trend in the market is to simply watch the 200 day moving average. During the down trend, it sloped downward and acted as resistance. That resistance recently broke, and the slope has now turned flat and looks poised to turn up.

The market is extended, so it's tough to get long here. However, a pullback would provide a great long opportunity.

A Monsanto Topping Pattern?

I went short 100 shares of MON at $120.76. Rather than analyze the trade setup as I have been doing, I'd like to take a look at MON's weekly chart. It's starting to look like a top might be forming.

Take a look at the price action. For the fist time in two years, the trend is stalling and we are starting to see a volatile, 30 point range forming. This by itself is not a sure fire bearish signal.

However, when we add volume, a bearish "tell" forms. Volume during this range has been decidedly bearish--lots of tall red vs short grey bars. RSI is also divergent during this range. The recent high was not confirmed by a high in RSI, which is not a bullish sign.

My current trade was not based off the weekly chart, and I am using a tight stop. If I do go short in my longer term position trade account (which I do not detail here), I would place a stop at the recent high around $132, with an initial target at the bottom of the range around $90. A second target would be at $70, the last area of consolidation.

Do I Have the Guts to Buy Financials?

I'm scared as hell to buy a financial, even with a small position size. However, if I didn't know the name of the company behind this chart (Morgain Stanley), I would be buying. We have price breakout over the 50 day moving average after the stock printed a bottoming long tail on heavy volume a few days ago. RSI is breaking out. Stochastics show strength. OBV is improving. This is damn near a text book reversal play.

I may enter on a small position later today.

High Flyers Have Lost Their Wings

My focus list, which is mostly comprised of momentum stocks, looked ugly today. Not only was there a lot of red, but many stocks have broken major support levels. Because of this, I cannot play a bounce in these stocks. I never play bounces when support has broken. Many of my favorites have now made it to my short term shorts list.

For example, LFC, BHP, FXI, AAPL, RIMM, DE, RIO, FLR, VMW, FCX, DRYS and many others now look like short candidates on a near term bounce towards old support levels. Only a few stocks are on my long list. These stocks are mostly recent breakouts that are still acting strong, such as DCO and HMSY.

Looking at today's sector action, the bottom performing sectors have been the darlings of the market the past few months (and in some cases, much longer). Industrial Metals, Gold, Silver, Copper, Tech, Ag, Chemicals, Energy, Industrials, they all got hit hard. What does that mean? There are two theories. The first is we had our capitulation move and can expect a resumption of trend. The second is that now that the high flyers have also broke down, we can officially expect a bear market.

I can't make a prediction, other than to say I am now more inclined to add a few shorts. I added a few today, and may add more if we get a weak bounce.