Market Commentary: Tunnel Through the Air

Transcription

1 Page 1 Page 5 Page 6 Page 10 Page 15 Market Commentary: Tunnel Through the Air Pivot Points The DayTrading Report: GRMN, JOYG, ADSK and Observations The Swing Report: TBL, HTCH, DRTK, ARTC, Observations and Trailing Stops Notes and Guidelines Market Commentary: Tunnel Through the Air Stocks tunneled through resistance Tuesday and Wednesday as if the resistance were air. I must say that the time and price pivot of Oct. 26 and 1090 on the S&P 500, which I showed in yesterday's Square of Nine chart, deserves to be in Ripley's Believe It or Not. In two days, the Dow has gained 250 points, and the S&P 35. On Wednesday alone, the Nasdaq rose 41 points, or more than 2%. The relative strength of the Nazz kicked into high gear on Wednesday after a relatively subdued session on Tuesday. Yesterday, I showed the Power Surge setup on the Nazz, which played out on Wednesday as the index vaulted over its 200-day moving average with conviction and volume. Note how the Nazz has pulled back three times in October to test, but never violate, its breakout point from Oct. 1. The Nasdaq was in a strong position to capitalize on any buying pressure on the Street should that buying pressure show up. That's because: The Nazz never turned its monthly chart down in October as the S&P did. The Nazz remained above its rising 50-day moving average. Then there is the Power Surge pattern, which sets up from a three-point trendline. (Continued on the next page) PLEASE SEE IMPORTANT LEGAL DISCLAIMER ON LAST PAGE

2 On Wednesday, the S&P recaptured the bullish pivot of the year at 1123, closing at In the process, the index broke over the neckline of an inverted Head and Shoulders pattern shown yesterday. That pattern projects to approximately 1160 S&P that, not coincidentally, is near the high of the year. In that same chart from yesterday (updated below), you can see the three false breakouts for this year. The same down trendline -- which has dominated this year's action and which forms the neckline referred to above -- was recaptured in Wednesday's action. S&P Daily Now, because the market has cried wolf or should we say bull when no bull arrived on three prior occasions, market participants are probably poised for yet another false breakout this time around. However, it is my impression that now a bull may be genuinely knocking on the door. Why? The market has a way of playing out in threes. The fourth time usually is the real deal. This is the first time this year that the S&P has scored piggyback (consecutive) Real Accumulation Days. (Continued on the next page) 2

3 The Nazz chimed in with a Real Accumulation Day of its own on Wednesday. The S&P has carved out an outside-up week from an inverted Head and Shoulders pattern. That ought to be good for at least a challenge of this year's high. Nasdaq Composite -- Daily (Continued on the next page) 3

4 S&P Daily Conclusion: Stocks issued confirming buy signals on Wednesday's rally. The S&P literally plowed through its 50-day and 200-day moving averages on Wednesday. The first challenge for the S&P on a third day up will be Of course, that may not occur until Friday. On the S&P, 1130 is approximately the low of the high-bar day of the last swing high on Oct. 6, as well as the low of the first stab down from the high, which occurred on Oct. 7. I started this commentary with a reference to the mysterious power of the Square of Nine chart, which was one of W. D. Gann's most remarkable tools. It is interesting that W.D. Gann also spoke about the importance of eclipses on the market in his book, Tunnel Thru the Air Or Looking Back from It is interesting that a lunar eclipse at the high in early October and the lunar eclipse on Wednesday may have acted as an emotional slingshot in the market for October. As they say, seeing is believing. But sometimes what you cannot see is even more important. 4

5 Pivot Points Shuffle Master (SHFL:Nasdaq) Minute Shuffle Master was a day pick for Wednesday. As we all know, trading is not a free lunch. It is not as easy as simply entering when the stock triggers and riding it to quick profits. The market tests our will and resolve. On Wednesday, SHFL triggered immediately and then pulled back. Pattern: Power Surge (3 rd higher low). 5

6 Pattern: Power Surge (3 rd higher low). THE DAYTRADING REPORT Chart 1 Garmin (GRMN:Nasdaq) Long Entry: Only on an Opening Range Breakout Stop: 1 point from entry Pattern: Expansion Breakout / Volume Expansion Breakout 6

7 Chart 2 Joy Global (JOYG:Nasdaq) Long Entry: Stop: Pattern: 180 Comments: JOYG looks interesting because it is in the spirit of a Pullback that looks like a mini Cup and Handle Pattern. 7

8 Chart 3 AutoDesk (ADSK:Nasdaq) Long Entry: Stop: Pattern: Expansion Breakout Pattern: Power Surge (3 rd higher low). 8

9 OBSERVATIONS -- New River Pharmaceuticals (NRPH:Nasdaq) still looks interesting. -- Cree (CREE:Nasdaq) also still looks interesting. 9

10 ay s Close: [Up.86] THE SWING REPORT Chart 1 Timberland (TBL:NYSE) Long Entry: Stop: Initial Target: (trade toward) Pattern: Cooper Pullback 10

11 Chart 2 Hutchinson Technology (HTCH:Nasdaq) Long Entry: Stop: Initial Target: (trade toward) Pattern: Pullback Pivot / Swing to a Test 11

12 Chart 3 Duratek (DRTK:Nasdaq) Long Entry: Stop: Initial Target: (trade toward) Pattern: Cooper Pullback / Extended Level Boomer Comments: Heads up as this one is extremely thin. 12

13 Chart 4 ArthroCare (ARTC:Nasdaq) Long Entry: Stop: Initial Target: (trade toward) Pattern: Piggyback Expansion Breakout 13

14 OBSERVATIONS AND TRAILING STOPS -- Thursday is day two in Zimmer (ZMH:NYSE) (long). We are long from a gap open at Remember that the gap rule states that you should not chase any gap opening of two points or more. The gap open on ZMH was less than two points. However, the initial target was or 2 points from the stated entry. Consequently, you may have sold your first piece at However, I doubt that many of you took a stock that gapped open substantially to make 45 cents, and so, you probably sold your first piece higher. Obviously, it is important to use discretion when entering a large gap. Remember that there is a big difference from gaps that occur from a low level such as ZMH and gaps that occur from a stock that has been trending strongly. Obviously, the latter entails more risks. For the record, we are going to use as the exit for our first piece, locking in a profit of 45 cents. Raise the stop to and look to sell the second piece on trade toward As of Wednesday's close at 77.95, we are up 2.20 on our second piece. -- Thursday is day two in SigmaTel (SGTL:Nasdaq) (long). We are long from Raise the stop to break even at and adjust the initial target on trade toward As of Wednesday's close, we are up ArthroCare (ARTC:Nasdaq) (long) did not trigger, and we are going to use it again. -- Whole Foods Market (WFMI:Nasdaq) (short) was stopped out for a break-even on the second piece. We covered our first piece on Monday, locking in an approximate gain of 85 cents. -- Thursday is day eight in Georgia Gulf (GGC:NYSE) (long). We are long from Raise the stop to to break even and reduce the initial target to As of Wednesday's close, we are up 45 cents. -- Thursday is day 11 in FuelCell Energy (FCEL:Nasdaq) (long). We are long from Maintain the adjusted stop at and maintain the initial target on trade toward As of Wednesday's close, we are up 74 cents. 14

15 Notes and Guidelines DayTrading Report: Trades marked indicate stocks that are considered small-cap, trading 500K shares or less. As you know, thin stocks are generally more volatile and trade with a wider spread. Trades marked * indicate patterns that don t conform to the original rules of the pattern but are defined as in the spirit of their namesakes. The 1-Point Gap Rule: Any stock recommendation that opens 1 or more points above the listed entry price (for longs) or 1 or more points below the listed entry price (for shorts) should be ignored for the day. Please note that history suggests that entering a stock on a gap open increases your potential for a loss. Reminders: A signal is not valid unless the stock trades at or above the listed entry price for longs and at or below the listed entry price for shorts. If a position moves 1 point in your favor in this choppy environment, it is a good idea to sell half the position and move your stop on the remaining position to break even. Charts: The green line is a simple 10-day moving average, the blue line is a simple 20-day moving average, and the red line is a simple 50-day moving average. The Swing Report: Trades marked indicate stocks that are considered small-cap, trading 500K shares or less. As you know, thin stocks are generally more volatile and trade with a wider spread. Trades marked * indicate patterns that don t conform to the original rules of the pattern but are defined as in the spirit of their namesakes. The 2-Point Gap Rule: Any stock recommendation that opens 2 or more points above the listed entry price (for longs) or 2 or more points below the listed entry price (for shorts) should be ignored for the day. Please note that history suggests that entering a stock on a gap open increases your potential for a loss. Initial Target: Target price at which you should look to sell/cover half your position. Reminders: A signal is not valid unless the stock trades at or above the listed entry price for longs and at or below the listed entry price for shorts. If a position moves 2 points or more in your favor in this choppy environment, it is a good idea to sell half the position and move your stop on the remaining position to break even. Charts: The green line is a simple 10-day moving average, the blue line is a simple 20-day moving average, and the red line is a simple 50-day moving average. 15

16 Contact Info Customer Service: Please or call Mon. Fri. 8 a.m. to 6 p.m. ET Reader Feedback and Questions: Please Jeff directly at jeff.cooper@thestreet.com. Again, please direct all account-related inquiries to customer service. Legal Information This information is confidential and is intended only for the authorized Subscriber. Please notify us if you have received this document in error by telephoning Jeff Cooper, writer of The Trading Reports, is a principal at Mutual MoneyFlow Management, a money management firm ( MMM ), and a financial markets author and trader who contributes regularly to TheStreet.com s RealMoney premium subscription web site. MMM, a registered investment adviser, and its affiliates may, from time to time, have long or short positions in, buy or sell the securities or derivatives thereof, of companies mentioned in The Trading Reports, and may take positions inconsistent with the views expressed by Mr. Cooper in The Trading Reports. In the event that, at the time of publication, MMM has a position in a security mentioned in The Trading Reports, appropriate disclosure will be made. Mr. Cooper will be restricted from transacting for his own benefit in securities discussed in The Trading Reports. Specifically, at the time of publication of The Trading Reports, Mr. Cooper may not hold for his own account any security that he discusses in that issue. However, Mr. Cooper may enter orders to purchase or sell securities mentioned in The Trading Reports after 10:30 a.m. on the trading day that begins after the publication of the issue of The Trading Reports in which the security is mentioned. IF YOU ENTER ORDERS TO BUY OR SELL SECURITIES AFTER 10:30 A.M., IT IS POSSIBLE THAT MR. COOPER MAY HAVE PURCHASED OR SOLD THE SECURITY AT A PRICE MORE ADVANTAGEOUS THAN THE PRICE YOU WILL OBTAIN. The Trading Reports contains Mr. Cooper s own opinions, and none of the information contained therein constitutes a recommendation by Mr. Cooper or TheStreet.com that any particular security, portfolio of securities, transaction or investment or trading strategy is suitable for any specific person. You further understand that Mr. Cooper will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. 16