I will taking a break from blogging through the end of the year. I may post intermittently, but will more then likely just be posting thoughts on twitter. I wish everyone a Happy and Safe Holiday season.


Joey

The folks at Trade-Ideas have recently released an onslaught of videos showing their trading robot (jointly developed by stocktickr.com) in action, and it's sparked some interest in automated trading. The videos are great, and they do a good job of showing what is possible with the use of a trading robot. Dave Mabe of stocktickr.com has also been writing recently on automated trading and has some great posts on his blog. As many of my regular readers know, I've been running the bot for a few months now. Recently, I've received a few emails asking several questions including;

• Are the results real?
• Does it ever blow up and have a really bad day?
• Is your automated system profitable too?
• How long did it take to develop your system?
• Could you just use trade-ideas and trade the alerts manually?
• Do you intervene with your system?
• Can you use the canned alerts that come with Trade-Ideas?

First of all, I have no doubt the results posted by Trade-Ideas are real. If you take the time to properly develop, back test, and then forward test a system, there is no reason it wouldn't perform consistently moving forward.

So how do you develop, back test, and forward test a system? The first step is finding a suitable alert and filter combination from the Trade-Ideas suite. The way I handle this is to think of a market behavior I want to take advantage of, and then recreate it with the alerts available to me. I then back test it using oddsmaker, which will let me know if it is a profitable idea over the past 14 sessions. I use the back testing feature to act as a filter on whether a system is worth pursuing. However, I've never felt comfortable relying on strictly back testing, so I then I forward test it by running it with the paper trading feature of Interactive Brokers. I closely examine slippage, stop performance, influence by time of day etc., during the forward testing period. Another often overlooked, but important part of forward testing is watching how the system trades through different market environments.

Does it blowup. I've never had the robot blow up using real money. I've had pretty spectacular blowups while forward testing, but luckily by combining back testing with forward testing, many issues are avoided.

Is it profitable? Yes. As mentioned above, if a system can graduate from the forward testing phase, it means it is profitable.

How long did it take? Developing the system doesn't take too long once you have created a few. If you have a good idea, creating and back testing it can all be done pretty quickly. I like to forward test for at least one month and preferably two or three months.

Here is a chart created by stocktickr.com that shows the results for one of the strategies I have developed for the robot. It shows the cumulative R's for the system from the forward testing stage to the current date. This is a long only, momentum based strategy. What I like best about this system, is that despite the long bias, it has been very consistent at avoiding draw downs. It has taken very few trades during the recent obliteration of the markets (needing almost three months to net 10R's), but it hasn't lost money and I have other short systems that take better advantage of weak markets. I think the chart shows that even in this environment, positive results can be achieved with proper development of an automated system.


Could you trade the alerts manually? Yes, in theory you could. In practice, not so much. Looking past the often discussed benefits of trading an automated system vs. a discretionary one, I find that the robot can trade systems that would be near impossible to trade manually. One of the advantages of using a robot is that it can act at lightning speeds and dissect huge amounts of data. It can enter several orders at a time and eliminates human errors on placing those orders. And I can attest to how fast the bot reacts to an alert and gets the order in well before you could manually.

Do you intervene with the system? While I have and won't rule out intervening, I don't do it that often. I've found that while you can step in and save some money at times, in the end it evens out with the times you exit early. However, since the systems have been extensively tested, I do have a feel for what market environments cause under performance, and I have no qualms with stepping in and flattening out.

Can you use the alerts that come bundled with Trade-Ideas? Yes you could, but I wouldn't recommend it. From my experience, most of the prepackaged alerts are a little noisy and would need a large amount of trading capital to use. However, they do have an extensive list for which you can base your ideas on.

Another benefit to trading a robot like this is for traders that have a non trading job or that have to be away from their trading screens, yet desire the safety of ending flat each day. You can create strategies for any part of the trading session and trade part time. I have systems that trade only the first 15 minutes and others that won't take a trade until 10:00am EST. The beauty is that you can create something that works around your schedule and can be as active as you want it to be.

If you're interested in learning more about Trade-Ideas, feel free to contact info@trade-ideas.com . Tell them I sent you and ask about a 7 day demo.

You can also find out more about the robot I use and stocktickr here.


Joey

The markets reacted well to the Feds aggressive actions, extending on early gains. While I've been bullish for a while now, I can't help reminding myself that we are in a bear market and every rally is guilty until proven innocent. While there is certainly the possibility for more upside, the markets have also risen enough to meet the standards for a typical retracement. Most of the indexes are testing their declining 50 day moving averages as well as retracing 61.8% of the last leg down. However, there are some positive factors as well. First of all most of the indexes closed above their 50's after consolidating bullishly under the moving averages for a few sessions. Second, most of the indexes have had shorter moving average such as the 10 day cross over the 20 day. While this is not a magical clue that we are headed higher, it does reveal that the vicious downtrend from the past few months has slowed considerably. Third is the fact that all of this has occurred in the face of pretty bad economic data. While the markets tend to look forward, there is nothing in the current data suggesting an economic turnaround, so the fact that the markets are shrugging it off is bullish.

We are at an important crossroads, because there is the real potential for a large move to either direction right now. While a large bet in either direction can pay off handsomely, it could also be a disaster if you get caught in a reversal. There are plenty of landmines coming up such as options expiration and the pending auto bailout, so don't marry any position long or short.

Trade Carefully,

Joey

Stock Chart Analysis AAPL

Apple Inc.(Public, NASDAQ:AAPL)

AAPL has been tracing out an interesting pattern recently. It corrected this year along with the markets, and while the correction has been pretty steep, it is no worse then what the majority of stocks suffered through in this environment. It started to consolidate in a triangle in October and ended up breaking out of it lower in November. After a measured move lower, it now looks to be setting up for a potential double bottom. It recently reclaimed the 20 and 50 day moving averages, and could be close to attempting a break of the neckline shown in red.

While AAPL could break out as soon as tomorrow, I think a few days of tight trading would help to digest the recent runup. AAPL is oversold on stochastics and volume has been light, so a word of caution is definitely worth mentioning. I am basically neutral at this point, but I think the move will be large once it clears either side of this pattern.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

The markets reversed off their lows Friday confirming the 61.8% retrace of the last swing high as support.

Some of the swings I have seen recently in the leveraged ETFs are insane. SKF for instance had over a 70 point range in ONE day recently.

T2108, the Worden indicator for stocks trading over their 40 day MA's just pushed back over the oversold level of 20%.

It's been well under 20% for the better part of three months, which is the longest since the 1990 bottom and longer then the period surrounding the October 87 crash.

Financials had every opportunity to fall apart late last week, and instead led the markets higher.

The way MOS reversed off it's earnings and guidance and then followed up with a reversal Friday, leads me to believe it is bottoming. The rest of the sector continues to look weak, but then again, so has just about everything.

For those that haven't been paying attention to intermarket relationships, the markets are basically trading inverse to the dollar right now. When money seeks the safety of T-Bills, it isn't going into stocks. Keep an eye on TLT, which happens to be quite extended.

Gold however, has been notably absent from the flight to safety trade.

While I'm shocked at the reversals in Crude and Natural Gas, I've always suspected that market reversals would be magnified now with the sharp increase in hedge funds.

Good Trading,

Joey

Here is another article I wrote for Investopedia on stocks making 52 week highs, even while stuck in this terrible market.

Joey

I wrote an article for Investopedia on a possible bear trap developing in oil stocks. Oil stocks have been weak since I wrote it, but the bear trap isn't failed yet either. It could go either way, so if you trade any of these names, do it carefully.

Joey

Stock Chart Analysis DUG

ProShares UltraShort Oil & Gas (ETF)(Public, NYSE:DUG)

It appears to me that a Bear trap is being set in Oil stock. Many stocks recently broke down from valid chart patterns and rebounded back into those patterns. I wrote an article for Investopedia this weekend highlighting a few stocks setting up for a possible short squeeze, so as soon as it's published I will link it up.

However, I did want to post on a pattern I am seeing in the ProShares Ultrashort Oil and Gas ETF (NYSE:DUG). While Oil stocks have been absolutely crushed over the past few months, it appears that they may be ready to bounce soon. While fundamentals don't suggest a true bottom in the oil sector, the charts are at least signaling the potential for a sharp bounce higher.

DUG has traced out a very choppy Head and Shoulders top over the past three months. While it doesn't fit the typical top, DUG did hit all time highs in this pattern. It also has setup so that the neckline coincides almost perfectly with the 200 day sma for the chart. It broke the neckline at $34.50 a few sessions ago, and it looks like it would be pretty stiff resistance on a bounce back higher. Of course, being an inverse ETF, it appears the DUG is portending higher prices for oil stocks in the near term. While DUG has only been around a couple of years, it should be interesting to see what happens if DUG trades to new all time lows.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

I wrote an article for Investopedia regarding a double bottom in some construction / machinery stocks. I mentioned CAT,DE,FLR and CNH. I should be writing a lot more of these in the near future, so if anyone has ideas they would like me to look at, drop me a comment.

Joey

Dave at Stocktickr posted a link to some videos the Trade-Ideas team created showing the trading bot I use in action. I think it does a pretty good job of showing how the bot works and gives you a glimpse into the possibilities one could create with a little work. Also, both Stocktickr and Trade-Ideas are great companies to deal with and they won't leave you out to dry like many of the other companies out there. Great Job on developing this together guys!

Joey

For those interested here is an article I wrote over the weekend regarding MACD divergences in some tech stocks for Investopedia.com.

This should be an interesting holiday week. Citibank is at the forefront with all weekend meetings going on to decide what to do to protect them. We also have Obama announcing his financial team tomorrow and also announcing some details to a stimulus package geared towards creating jobs. I think this is a good approach by the president elect as it tackles the issue of deteriorating infrastructure and the increasing unemployment rate. I just don't know how any of this is possible without a tax increase, other then cutting back on war spending dramatically.

Another interesting cross current this week will be foot traffic at the retail outlets. Everyone will be analyzing who is shopping where and how much people are spending to attempt and gauge how bad the holiday shopping season will really be.

And don't forget the automakers begging for money.

In short, there is a plethora of market moving news this week, in spite of the shortened week, so tread carefully out there.

Good Trading,

Joey

The markets had a heck of a reversal today after dipping to new lows. This has the classic signs of a bear trap, as the markets looked like they were breaking down and then reversed to trap anyone shorting into the thrust lower. Some of the most powerful moves come from these failed patterns, so it will be interesting to see what transpires over the next few days.

I'm going to be in New York tomorrow through early next week, so there will be no posts or charts. While all the signals are here for a strong push higher, you never know what the markets have in store. A lot of people think today was the low, and the markets have a funny way of proving the majority wrong. Manage your risk and be ready for anything the markets throw at you.

Good Trading,

Joey

Stock Chart Analysis ALXN

Alexion Pharmaceuticals, Inc. (Public, NASDAQ:ALXN)

Drug stocks have been outperforming recently, and many look like they may be ready to surge higher. ALXN is one that has held up very well throughout the recent turmoil in the markets. It is very close to confirming a double bottom off it's 200 day sma which would yield a target of $50 on a breakout. It would need to get over $43 in order to confirm the double bottom, but it could also in theory be bought here as it is bouncing off the 20 day sma. There are actually a few different ways to play this chart, but the bottom line is that it is bullish looking on all timeframes in my opinion.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

It sure looks like Obama will win tonight, but of course that shouldn't really surprise anyone. The bookies had it heavily in his favor, which makes it damn near a lock. The markets are getting a little ahead of themselves and are close to if not already tagging their upper bollinger bands. I am expecting a pullback in the next day or two and thus took a lot off the table today. Maybe the markets gap up tomorrow (futures are modestly higher) and run higher, but the risks are starting to outweigh the rewards in the short term. On the other hand, it looks like the dollar is finally ready to take a breather and this should really give a boost to commodities. Miners have been bouncing for a few days in anticipation of this and I think we will probably see gold and silver get a bounce. Oil has started to look interesting too, but some of the service stocks may not follow suit with an Obama victory.

Good Trading,

Joey

Stock Chart Analysis GXDX

Genoptix, Inc. (Public, NASDAQ:GXDX)

Regular readers of my blog know that I love stocks trading close to all time highs. While GXDX is a fairly recent IPO, it has found solid buying recently, despite the turmoil in the markets. It has found solid support at the 200 sma over the past month and appears to be headed towards a test of the high 30's. However, this doesn't mean I will rush out and buy it tomorrow morning. Often, when I find a chart like this one that looks like it is headed for a retest and possible breakout, I try and buy closer to it's 20sma, in hopes that it will use that average as support moving forward. This allows for a tighter stop loss, and improves the odds of a winning trade. There is always the chance of missing out on the trade, but chance are that it will retrace at least a portion of the 15-20% + move from the past few sessions. The ideal scenario would be a pull back to the 20sma and a solid reversal on intraday charts, or even the daily charts. Let's see if that opportunity presents itself over the next day or two. As a warning for readers, GXDX reports earnings on 11/6, or Thursday. This may make this a tricky trade, as it may not move till after the release.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis DLTR

Dollar Tree, Inc. (Public, NASDAQ:DLTR)

Wow, I actually found a chart that looks decent. DLTR, and the other dollar stores like NDN and FDO for that matter have held up fairly well throughout the recent crash. They all look like they want to challenge their recent highs and if the markets rally like I suspect they will, then they should accomplish the feat. DLTR looks like it has very good support at 31 and it appears that it cleared the channel it has been using to pullback. It looks like this is an obvious play in a recessionary environment as consumers look to save money, and maybe this is the gameplan for institutional money flowing into this group. While it is extended from the lows, I'm not sure how deep a pullback it will give, so I will probably look to intraday charts for a possible entry. I typically use 60 minute charts for possible entries on swing plays, so a pullback into the 20ma is a possible area for an entry.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

I've been swamped with some new responsibilities at work recently, which in combination with the recent market conditions has left little for me to blog about. While the intraday action has been quite good, swing trading is still quite dangerous. I've been basically picking my spots and daytrading QLD, while letting my trading robot take some trades. The markets are trading in triangles on the 60 minute charts and while it's not a forgone conclusion, they are looking like they will have downside breakouts. The markets are pretty oversold, and while they may plunge lower, I still think we are closer to making a low then beginning a new trend lower. However, now is not the time to be making silly bets or gambling, the best thing to do is wait for the intraday charts to line up with a bounce on the daily charts. We'll see how it plays out over the next few days.

Good Trading,

Joey

Stock Chart Analysis AFAM

Almost Family, Inc. (Public, NASDAQ:AFAM)

I wrote a post on AFAM a few weeks ago as a stock that has held up well through the recent carnage. Although I didn't buy it last time, I have kept it on my watchlist. While I have altered my lines a bit, I am still thinking of the price action as a consolidation rather than a top. While AFAM did move lower from my last post, it has still held up fairly well considering the market conditions, and could of cemented support in the low 30's today. While it may not be ready to assault it's all time highs in a few days, the price action remains constructive, and I would think that it will ultimately resume the uptrend. My preference would be for a couple of days of tight trading in order to build some fuel for a push above resistance. But, who knows, this is one of the very few stocks I have on a buy watch.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

The current trading environment is still not very friendly for swing trading, which is the major reason why you are not seeing as many charts as usual on my blog. There are tons of intraday opportunities, but there is still a lot of risk holding overnight or longer. While Friday / Monday held plenty of oversold snapback plays, we are back in a no man's land of sorts here, caught between the low as support, and all sorts of resistance above. Today's gap fade was about as easy a call as there is. After the strong move on Monday, it was very unlikely that the markets would continue rallying after the gap. If I was a betting man, I would guess that the markets begin trading in more of a range here, as volatility finally dies down a bit. Buyers will more then likely step in on any probe of the recent lows, and sellers will step in at about Dow 10,500+/-500. I am still in daytrading mode, and playing the ETF's for 2-3 day scalps, and probably won't stray from that until things improve on the daily charts. As soon as I see some low risk charts, I will resume posting them. Until then you are saddled with my boring commentary ;-)

Good Trading,

Joey

Let me go over some numbers before I reveal the two mystery charts below.

• The first chart has a two bar drop of 26%.
• The second chart has a two bar drop of 33%.
• The two bars in the first chart occurred under the 20 and 200SMA (red and pink).
• The two bars in the second chart began above the 20 and 200SMA (red and pink).
• The first chart shows panic selling well after a top (over 20% from the last high).
• The second chart shows panic selling just after making a new high.

The reason I highlight where these drops occurred is to show that panic selling can appear in both bull and bear markets. Usually, panic selling results in a major low once the selling subsides. The first chart is of a current issue after todays selling. The second chart is a historical one that went on to drop marginally lower before bouncing sharply. It did however, revisit the lows very soon thereafter before successfully marking a major bottom. What am I charting here? (see below)


The first chart is a weekly chart showing the SP-500 over the past few months. The second chart is also a weekly view of the SP-500 showing the crash in October 1987. While most of the damage to the second chart happened on "Black Monday", the end results of both are very similar. In fact, tomorrow may push the first chart even lower. I hate to speculate on how this will look a week from now, but I would think that there will be a much stronger capitulation since this powerful push lower is occurring after months of selling, rather then catching people off guard.

Let's see how the week ends tomorrow, but it looks like we will be off to a negative start in the morning (Down 2% in overnight futures).


Joey

The markets continue to drop, and the more they drop, the more bullish I am feeling. Worden's T2108 indicator which tracks stocks trading above their 40 day sma is currently at 1.97. This means that only 1.97% of stocks are trading above their 40 day sma's. That is absurdly low, and we have to go back to the 1987 crash to find levels this low. Notice that this indicator making lows that weren't seen during the nasty bear market that followed the Internet Bubble. I don't want to make too much of one indicator, but this has been a reliable indicator for me in terms of warning me that the markets are oversold on an intermediate level. Under 20 is the level I look for and it has been under 20 for the better part of the last month. Under 10% is pretty rare, and it has only been under 5% in 1987 and now. Again, we are at historic lows for this indicator and while it doesn't signal an all clear for buying, I think shorting here is suicidal.

Below is a weekly chart for the T2108 indicator going back to 1986 when it started being tracked. I overlayed a line chart of the SP-500 as well. Notice how rare moves under 10 are and the moves in the SP-500 that generally follow.



It's too early to call a bottom here, but I'm fairly confident we are close to one.

Good Trading,

Joey

Stock Chart Analysis KRE

SPDR KBW Regional Banking (ETF) (Public, AMEX:KRE)

Wow, I finally have a chart to post. I've been looking for capitulation in the markets before putting some money to work on some swing trades, and today may of marked the low for the current leg down. Most charts are complete disasters right now, so there isn't much to get too enthusiastic about. Also, in the current environment, any negative news is absolutely crushing individual stocks. For both of these reasons, I feel more comfortable sticking with ETF's.

Tonight's chart is KRE, which is an ETF covering Regional Banks. Many regional banks such as BB&T have been doing quite well, and have kept the most of the financial indexes from making new lows in spite of the disasters in LEH, WM, and WCB.

KRE has been making higher highs and lows over the past few months, and just recently challenged it's 200 day sma. I highlighted the interaction with the 200 sma on the chart below. Notice how the 200 day sma repealed it a couple times, before KRE was able to clear it. Once it cleared the average, it came back and confirmed it as support. The breakout stalled and it's now back for another retest of support. It has found buying in this area over the past week, and could be ready for a move to the upside. I much prefer to take a shot on something like this that has shown strength, then trying to cherry pick a bottom in a crashing individual stock.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

The Nasdaq and Russell 2000 made new lows today, breaking under the lows set Monday. Todays volume was much lower then Mondays and we are setting up for a possible bear trap. It seems that most of the ingredients are here for an important bottom. Fear is through the roof. The fear based indicators such as VIX are spiking higher. The impending doom of our financial markets is being broadcast on every channel, and every Joe Schmoe on the street is debating how we got here and who is responsible. We've also had other clues as to where we are from a cycle standpoint as well. If you pay attention to how sectors are rotating you will notice that late cycle sectors like Agriculture stocks have been getting creamed. And has anyone noticed that the financials as a whole are not making lower lows inspite of the fact that the news couldn't be any worse.

Ideally, we would have another plunge followed by a snap reversal to trap the bears, but there are no guarantees that the market doesn't crash either. Maybe we are on the brink of financial armageddon. The truth is we won't know until it's in the rear view mirror, so the best we can do is wait patiently to pounce on the rebound. I am getting excited because I think we are gonna have a heck of a rally coming soon. We only get a few scenarios like this where everyone is caught leaning heavily to one side of the market, and when it reverses it catches most people off guard. The key as I've mentioned before is to not get too cute and try to get in early. And once we bounce, we can't assume we have the bottom either. Thats why we set our stops accordingly.

Good Trading,

Joey

The past week and a half has been a tricky time to swing trade (at least for my style) as we are getting huge reversal moves every other day. I place a lot of emphasis on average true range for my stops and targets and it seems like the increased volatility is whipping stuff around. This is an easy problem to solve as a trader, as I just take less trades, tighten my targets, and wait for the odds to stack up in my favor. However, as a blogger who likes to post charts of potential trades I may take, it has been really tough get behind any charts lately. While this may make for slow blogging, I don't want to mislead any readers into over trading right now. As a trader it's very important to be cognizant of what market conditions make it difficult to execute your edge and then have the discipline to not trade during these conditions. The current environment is actually pretty good for scalpers and certain types of daytrading, so those types of traders should be doing the opposite and trading as often as there edge allows. There are really only a few lessons traders need to learn to be successful at trading, and learning when to sit on your hands is one of them. Cash is a viable position and you don't have to be in every move. It took me a while to learn that lesson, but it has paid off during the recent whipsaws, both in my bottom line and my sanity.

Good Trading,

Joey

I've mentioned before how I like to prepare for a few different scenarios and today is a perfect example of why I do. I've been fully prepared for a rally, but I've kept the thought in the back of my mind that things could unravel quickly. Once I saw things were getting ugly, I quickly exited most of my long positions. Luckily, I was hedged enough that I didn't lose any money today despite being net long. However, looking back, I was upset at missing some fairly obvious trades in the afternoon while watching the unfolding events and debating what was happening with co-workers.

One of the key points I've tried to drive home throughout the life of my blog is that traders should always have a plan and honor their stops. Today is a perfect example of why you should have a stop in place on ALL trades. Hopefully most of you weren't hurt in todays nasty tape, as we will be presented with an incredible buying opportunity soon, and it would do no good if you have no capital. There is a chance we have another nasty day tomorrow as well, but as hard as it is to believe, we are probably very close to a bottom. My favorite indicator T2108 is well under 20% down to 8.84%. VIX was through the roof today as well, and there is a real sense of fear in the markets. The hard part of course is being patient enough to sit on your hands until things begin to turn.

Here are a few links I feel are worth reading tonight.

• Interesting discussion between Andy Swan and a reader
• Trader Mike on worst percentage loss days in the markets
• Looks like Trader X is back to posting
• Adam with a very interesting way to play the current environment

Good Trading,

Joey

Stock Chart Analysis AFAM

Almost Family, Inc. (Public, NASDAQ:AFAM)

As regular readers know, I am a big fan of stocks close to their all time highs. This is because when a stock hits a new all time high, the only shareholders in pain are shorts. There are no long holders waiting to get out at breakeven, because they are all profitable. AFAM is pretty close to their all time highs, and whats impressive is that they haven't suffered at all through the current bear market. They had a nice move higher from April through August, and have been consolidating over the past two months. It looks like it is tracing out a small W bottom within a larger bull flag. I would think that if the markets rally at this point, that strong stocks like AFAM will lead the charge higher.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

I haven't been able to post any charts the past couple of days due to a sudden Business trip I had to take. I'm not sure it would of made a difference however, as it's been slim pickin's recently. The markets seem to be transfixed on every word that comes out on the "Bailout package" and therefore trading has been very choppy from one day to the next. I wrote last week of how I was thinking we might get a lower volume pullback and retest of the potential low, and stepping back and looking at the charts, that might be what is coming to fruition. The question is was today the beginning of a rally, or just an up day within a move lower.

It looks like all the after market news today is negative. RIMM was crushed after releasing their earnings report. It looks like WAMU is being seized by the FDIC tomorrow. There is also "breaking news" that the proposed bailout is falling apart. There is a chance that tomorrow starts off with a large gap lower setting up a possible retest of the recent lows. How it reacts will be key, and interestingly enough, the government is in a situation where they could be the ones to step in yet again and manufacture a low by sealing the deal. Now is not the time to be taking large bets for short time frame trades. I am still trying to position myself for a rally, but I don't feel the urge to get greedy and bet the farm. If we get a rally, it should last a while and provide plenty of chances to hop on.

Good Trading,

Joey

Stock Chart Analysis VLNC

Valence Technology, Inc. (Public, NASDAQ:VLNC)

While I've been thinking we are closer to an intermediate bottom then the beginning of another wave down, I am cognizant of the fact that we are in a bear market and most rallies will be shorted. As such, I like to have a list of short plays ready, so that won't have to rush intraday to find a play if I'm wrong about my main thesis.

VLNC is a classic breakdown and retrace back up to the broken support for a retest. It was actually a pretty strong looking stock up until August. It broke down and while it found support at the 200 day sma, the bounce quickly petered out and it fell for 9 straight days. It is now back for a retest of the 200 sma, and after the sharp rally, this looks like a natural place for existing holders to get antsy and sell some shares. If market conditions cooperate, this could make for a nice short trade even if only for a retest of the lows.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Wow. That was a crazy day. It's almost like we had two separate trading sessions. I've mentioned how I've been running the Stocktickr / Trade Ideas Trading robot, and today was a crazy day for it. It typically takes 4-8 trades a day, and today it took 63. It was up over 20 R's by noon on mostly short signals, and by 1:00 they were all gone. It chopped around a bit just after lunch, and then in the afternoon it took off again on mostly long signals. It actually used up all the buying power in my account and missed some trades. It ended up gaining 21R's, which is it's all time best day. The sick part about it, is that I had an urge to close out the mornings trades manually, but let the system run on it's own. If I had managed to just salvage half of those R's I would of had 30R's. Baby Frankenstein is definitely alive.

Today had some real fear and panic in it, and it shows up in several charts. What I would typically dismiss as bad ticks on daily charts, are actual sustained trading periods on several charts. There were some crazy moves in the market, and aggressive traders had plenty of opportunities. I mentioned how I would probably stay away, but once I saw how Frankenstein was shaken out of all his short positions, I had a feeling that capitulation had occurred. I entered a few long plays and was rewarded almost immediately after entering the trades. It's important to note, that while I went in with the frame of mind that I would wait things out, the markets showed me enough to risk my capital in a favorable environment. This is why I usually prepare for two or three different scenarios, so that I have a plan in case anything happens.

We may of hit a real important low today. Is it the bottom. Who knows? We won't know until it's in the rear view mirror. However, there are plenty of signals that an important low is being formed. Fear is rampant right now, and not many people believe a rally will hold up. Like I mentioned last night, I expect some follow through on this rally attempt, but I am fairly sure we will be back to test these lows. We might stop short of the lows, and we might surpass the lows, but it's HIGHLY doubtful, that we just catipult higher without some choppiness or backing and filling.

Also, keep in mind that after todays historic move, we are not even back to where we started on Monday. For all the market gyrations, nothing has really happened, so as traders we need to be fully prepared for anything that might occur. And as unlikely as it seems tonight, there is still a chance we plunge even lower.

Trade Carefully,

Joey

We started to get some panic trading late this afternoon, with several fear based indicators starting to hint at a low forming soon. T2108, which is my favorite indicator for signaling intermediate term bottoms closed under 20% today. The VIX closed over 30 as well. The Put/Call ratio was at a level consistent with overwhelming fear in the market and new lows have been at that level as well. The question is, are we there yet? As much as I trust these signals, I get the feeling we're not there yet. The market has to prove that we're there, and that means some sustained buying. A lot of traders have been burned recently, and I have a hunch that plenty of people are on margin calls and will be looking to sell once they "get back" some of their losses. Also, everytime the market is near a real panic, the Government intervenes and manufactures a low. These false bottoms end up just prolonging the inevitable and making it worse, by not allowing a real flushing of weak hands. The way I see things playing out is a sharp rally occuring at some point in the coming few days. I doubt we will get a rare V bottom, so it should eventually roll back over and have the critical retest, and possible bottom. Once that occurs, I will be more interested in getting long.

I did cover most of my shorts today, as I like to cover when t2108 get's under 20%. Maybe I'm missing out in the case of a real market crash, but I prefer to play it safe. One thing I will try to avoid the next few days is getting anxious on the long side. One of my faults is getting greedy and trying to get in early on a bottom. Even now, I am seeing plenty of bullish looking charts, inspite of the more common massacred charts. My plan right now is to start building a list of bullish charts that have not been damaged, so that in the case a bottom does form in the coming weeks, I will be ready. A few on my list already are bke, odfl, vocs, bwld, hubg, afam, cnqr and wbsn.

The longer and deeper this weakness lasts, the more likely we will set an important low.

Good Trading,

Joey

Stock Chart Analysis M

Macy's, Inc. (Public, NYSE:M)

M broke down in June after a perfect short setup. It had broken through support and gave a nice retest into the 20 sma where it failed. I could swear that I had blogged about it, and I know I ended up taking it, but I couldn't find it after searching for it.

Either way, it ended up dropping well over 25% and has steadily been climbing it's way back up to the breakdown area. It already failed it's first attempt at hurdling past resistance, and appears that it may be failing again. Additionally, the 200 sma has caught up to price, and it could offer up some additional resistance. If it rolls over, there is a chance it goes all the way back down to retest the July low, or even go past it.

Unfortunately, it appears we are set for a huge gap lower tomorrow morning on news that the LEH deal may of fallen through, so there may not be a good entry on M tomorrow. However, I will be on watch just in case there is a reasonable entry available.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis CSH

Cash America International, Inc. (Public, NYSE:CSH)

I like to keep a bullish and bearish watch-list at all times regardless of the current state of the markets. This way, I am ready to take advantage of any counter trend bounces when they emerge. The markets look like they may get a bounce here, so I'm gonna post a chart of a stock that has been holding very well while the markets have been dropping.

CSH has traced out a cup and handle type consolidation and looks like it may be breaking out of the handle. It has been unfazed by the recent market weakness, and on the contrary, is fairly close to all time highs. It had a strong move yesterday, and then held up well during this mornings weak open. It closed near the highs for the day and could be ready to move out as early as tomorrow.

Keep in mind that it is assumed that any rallies we get now are bear market rallies, even with stocks at all time highs. As a trader, I like to keep my targets fairly conservative when betting against the overall trend and much more aggressive when aligned with the trend. This would be a spot where I'm looking to take advantage of an oversold market with a strong stock, with the idea that I will be taking profits in a few days at most.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis TOL

Toll Brothers, Inc. (Public, NYSE:TOL)

Have we seen the bottom in the home builders? I want to clarify, that a bottom in home builders is not synonymous with a bottom in the housing market. Stocks tend to lead the economy by a good margin, and while the real estate market may have a ways to go, a bottom in the home builders really just means that investors feel more comfortable that the worst is known, and things will start to get better.

Today marked an important shift in Toll Brothers as they closed above a large double bottom that has been forming for two years. Below is the weekly chart showing that pattern I am seeing. I see a stock that broke a downtrend and cleared a sideways consolidation base. While we must wait for a weekly close, we did get a daily close above the base which was a good sign. The important shift, in my opinion, is that TOL may be setting a higher weekly high and did in fact set a higher high on the daily. Uptrends are classified as higher highs and lows of which TOL has both. Other homebuilders have yet to confirm the strength, so at worst, we may be getting a preview that TOL will be a leader in this space.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart LNC

Lincoln National Corporation (Public, NYSE:LNC)

While financials have been showing good relative strength, it looks like several names are trading up to resistance. There may be a decent swing trade in this sector, even though it appears that money is rotating into the sector longer term. LNC has been in a steady downtrend over the past year. It has been consistently failing on every bounce to the 200 day sma. It looks like it may be reversing from the 200 sma again. I highlighted a wedge it broke down from in June and it appears that it may be falling out of a similar pattern here. If it does, it should test the July low and possibly surpass it.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis TRA

Terra Industries Inc. (Public, NYSE:TRA)

Below is a weekly chart of TRA. It has been in a healthy uptrend and recently has been trading sideways in a range. Is the Ascending Triangle below a Continuation base or a Topping Pattern?



That was a trick question, as it could be either depending on which way it breaks out or down. However, volume is suggesting that this is a topping pattern, and that TRA is under heavy distribution. An important concept that many traders miss is that heavy volume is not always bullish. Heavy volume is valuable during a breakout or at an important low. However, heavy volume with no substantial movement signals that one party is "distributing" the stock to another. When there is heavy volume AFTER a strong uptrend, it's usually institutions distributing stock to retail investors. When you see heavy volume AFTER a log trend lower, the it's usually institutions accumulating from retail investors. Notice the common theme? Institutions are rarely transparent with their intentions, however, they can't hide the volume they trade.

In looking at TRA, it really has been in a sloppy range on the daily, however, the weekly is pretty well defined. It has been finding support at the 200 day sma on the daily chart with 6 touches over the past 6 months, but it hasn't been able to muster any real trend. Technically, it still can breakout higher from this triangle, but the heavy increase in volume has me a little skeptical. So, while the short agriculture trade may be getting crowded, TRA looks like one of the next to rollover to me.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis PAAS

Pan American Silver Corp. (USA) (Public, NASDAQ:PAAS)

I've mentioned a few times how I think commodities may have topped out for this cycle and how money has been rotating out to early cycle sectors. Gold and Silver had an interesting past month in that prices fell off a cliff as the dollar surged. There is a lot of trapped money in this sector, as the move was very sharp and swift.

If you look below, I am highlighting a weekly chart of PAAS, which is a silver miner. Notice how it surged over a defined trading channel and then promptly rolled over to break below the entire channel. It got a little bounce back into the channel, and now the million dollar question is if it can hold above the channel, or if it is ready to embark in a bear market. I suspect the latter, but I think there is a good chance the dollar comes back in a little, which will allow for Silver to bounce a little higher. One of the reasons I think it may be over for PAAS though, is how it has been reacting to moving average support. Notice how it has been bouncing off the yellow moving average every time it corrects. This moving average has held as support since 2002 (not shown) and usually it bounces fairly quickly. There is still a chance it climbs back above it, but the drop was much steeper this time. My guess is that PAAS will roll over soon and offer a decent shorting opportunity. As always, please do your own due diligence.





Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis MOS

The Mosaic Company (Public, NYSE:MOS)

I mentioned last night that MOS was on my short watchlist, but that I wanted to get a feel for the markets before making a trading decision. Well, I noticed quite early today that "Ag" stocks were showing weakness, as the general markets were exhibiting impressive strength. I also mentioned on a few occasions how early cycle sectors were starting to get some inflows and that late cycle sectors were being sold. It's not as easy to pick up these rotations on a typical day, but on strong trending days these patterns tend to stick out. Today, while Financials and Transports rallied, Agriculture stocks were down.

This, coupled with the fact that MOS reversed at its 200 day sma and had a bearish engulfing candle that took out a few days worth of candles was enough for me to establish a short position in the name. While I may be early, my expectation is that MOS will move lower over the next few weeks and make new lows. It has broken it longer term uptrend and then broke down under a lateral consolidation. Even the weekly chart is showing some topping patterns. For more analysis on a topping pattern, check out this post on POT. As always, perform your own due diligence.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

I was completely away from the markets Monday and Tuesday, not even reviewing after market. I was then only able to pay attention for a couple of hours today, so to say I and probably a little disconnected from the markets is an understatement. I hate to offer analysis or advice when I am not fully involved, so I won't be posting any charts again tonight. I do have a couple of picks that are interesting, but I prefer to get a feel for the markets tomorrow before committing to any positions. The two that I have my eye on are MOS short and SOHU long. I am quite confident that MOS will be lower this year, but I'm not sure how high this retrace will go. SOHU on the other hand is not as clear, but the potential is there for a strong move higher.

Also keep in mind that next week should bring the return of "normal" volume levels to the markets. Late summer is always a tricky time to trade, and I for one will be happy after next Monday. We may get a strong trending move, one way or the other beginning next week.

Good Trading,

Joey

No update tonight as I have a 7:00am flight to Philly tomorrow morning.

Good Trading,

Joey

Stock Chart Analysis NETL

NetLogic Microsystems, Inc. (Public, NASDAQ:NETL)

Add NETL to the list of cup and handle charts currently forming in the markets. One thing I like about this chart is while it hasn't cleared the overall cup and handle base, it has cleared the falling wedge that comprised the "handle". Also, respected the 4/30 gap as support, and in fact never completely filled it. Tech stocks have been getting some inflows the past couple of days on the heels of the HPQ report, and BCSI, which is in a similar space as NETL, was higher after hours today. The thing to watch for here is if NETL can pause here and get a bullish candle to reverse the pullback. I would bail if it fell back into the wedge, but more conservative traders may opt to place a stop under the 200 sma.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

I posted this on downtowntrader.com tonight regarding an Auto Trading Robot I have been testing.

I’ve mentioned how I’ve been working on an Auto Trading System previously, and so far it has gone really well. I’ve been testing some strategies over the past three months using a paper trading account and it has actually performed better then I expected. I feel very comfortable with the safety and reliability of all the components to the point that I feel I can leave the bot unattended for short periods of time. I could theoretically leave it unattended all the time, but I prefer to keep tabs on it in case some strange market condition appears that would trigger an excess of alerts.

I had been thinking of running an auto trading system for quite some time, due to several factors including having a full time career, my love for building and testing strategies, and the fact that automated trading aligns very well with my personality. Even my discretionary trading is very close to an automated system in how I enter and exit positions. I initially looked at all the different players in this field including tradestation, ninjatrader, aiq, and even building a bot from scratch, but my lack of programming skills made it difficult to get started. I had friends that were willing to help with the programming, leaving me to focus on trading strategies, but collaborating on ideas was cumbersome and time consuming at best.

Funny enough, a few months after I began my search, my friend Dave from stocktickr.com mentioned how he had arrived at a similar conclusion about adding auto trading to his arsenal and how he was working on a trading Bot that would interface with Trade-Ideas. He was open to allowing me to help him beta test the software for him and in the process, it was the perfect environment for me to build some strategies around a product that I already used and loved. Dave has really created a fantastic product that has some very unique features compared to some of the other products I have looked at. The components are as follows:

Stocktickr Trading Bot: The Bot is responsible for tying all the different components together and is the brains around the ATS. The Bot is where you create, edit, and run trading strategies. Trading strategies are centered around receiving an alert from the Trade-Ideas Software, using trade management rules such as position sizing and stop loss management created in the Bot, and rerouting the signals as orders in Interactive Brokers. Once positions are closed, the Bot logs every trade into a users Stocktickr journal. There are several options including what times to trade, how to manage risk, and how to alert yourself of trades. You can also have multiple exit orders such as a trailstop and timestops to close positions before the market closes. All full subscription users of stocktickr.com have access to the trading bot software.

Trade-Ideas Software: This is where the trading signals come from. Trade-Ideas is a real time market scanner that generates alerts based on the criteria you enter. There are several strategies prepackaged with the software and it’s fairly simple to create your own. The software lets you choose a predefined alert, and then you can customize it with numerous filters. There are several alerts to choose from, and while you can’t program your own, the folks at Trade-Ideas are always adding new ideas. Just recently they even added some fundamental data filters. Some may find it limiting that you can’t program indicator based strategies such as MACD crossovers and such, but I’ve found those basic strategies pretty flawed. The alerts you can build from Trade-Ideas are very powerful, and I would venture to say you could probably use some of the prepackaged alerts pretty successfully. I’ve been using this software for years now, and it’s fantastic. Here is a prior review.

Interactive Brokers TWS: This is simply the Interactive Brokers Trading Platform. It is responsible for all orders once they are passed by the Bot. The beauty of this setup, is that once the Bot hands the orders to TWS, they are live orders within TWS, and thus any disruptions such as a communications outage or a PC freezing have no impact on the orders. You don’t have to worry about resynching, or resubmitting orders, as they are live server side orders. The Bot communicates via the Interactive Brokers TWS API.

Trade-Ideas Oddsmaker: Oddsmaker is the software used to backtest any idea created with the Trade-Ideas product. You can test several exit strategies to verify if an idea is worth pursuing. Typically, I brainstorm for an idea then run it through the oddsmaker. If it shows promise, I will test several exit strategies, and if it makes it this far, it is a candidate for forward testing with the Bot. As a side note, the nice thing about using Interactive Brokers, is that they have a paper trading feature where you can test with real time data and fills. It will reject a short sale if shares are not available, account for slippage, etc.

Stocktickr Journal: I’ve written about stocktickr before, and this is where I log every single trade I make. It tracks all the stats I need to keep tabs on my trading systems such as expectancy, win rate, and net profit. Keeping a journal is one of the most important things you need to grow as a trader. I wrote an article a while back about how important keeping a journal is here.

* You can also configure the Bot to send signals to Medved’s Quotetracker software. I don’t currently use Quotetracker, but I can see this as a very useful feature.

To summarize, the basic requirements are using Interactive Brokers as your broker, subscribing to stocktickr.com and subscribing to the Trade-Ideas software.

I’ve been calling my bot Frankenstein and I brought him to life last week. So far it has been decent, with a gain of 4R’s in 3 days. More importantly, there have been no snags so far in live mode. There have been small issues here and there, mostly related to the bot logging the trades into the journal. The biggest issue I had in test mode was a trade that didn’t close, but that was a problem with AMEX executing the order and even canceling the orders and resubmitting manual orders didn’t work.

Of course there are pro’s and con’s regarding any product and some of the limitations with this setup are as follows:

At this point Interactive Brokers is the only supported broker. This was not an issue for me as this was my broker of choice anyways.

You can’t program your own strategy like in TradeStation, however, the ease of creating strategies trumps this limitation in my eyes.

There are no portfolio management options like limiting total capital used, although you can sort of rig it my limiting how many concurrent positions can be opened per strategy.

Some of the pros include:

Live orders at the broker.

Extensive statistics available with stocktickr.com

Very stable platform (all applications) with very fast executions from alert to journal entry.

Very inexpensive for having a complete trading BOT with no programming required.

I think anyone interested in building an ATS should check out this suite of tools. Through the affiliate links below, readers of downtowntrader.com can sign up for 7 day trials of Stocktickr and Trade-Ideas. Even if you have no interest in auto trading, each of these are spectacular products and deserve a test run.

Sign up here for your free trial of stocktickr.com

Sign up here for your free trial of Trade-Ideas

If anyone has specific questions regarding any of the tools, please feel free to post them in the comments section. If I don’t know the answer, I can forward the question to the respective companies.

Good Trading,

Joey

Stock Chart Analysis PETM

PetSmart, Inc. (Public, NASDAQ:PETM)

PETM is a nice example of a confirmed double bottom. A lot of traders see the W forming and assume it's a double bottom, but in fact a double bottom is only confirmed once the stock CLOSES above the neckline (or top of W). A large number of these patterns fail before closing above the neckline, and usually end up forming some sort of descending triangle.

Notice how PETM did in fact close above the neckline. The way to measure a target for this pattern is to measure the distance from the top to the bottom of the pattern. This yields a target of 6 points, which would take PETM near 31. Of course there are no guarantees it ever gets there. Here is a link to double bottoms on a great site for chart patterns and how to trade them.

It looks like PETM is coming back to test the breakout, and with a good chance of market weakness over the next few days, it's quite possible that PETM dips under the neckline, but it's on my watchlist in case it holds in this area and then resumes the breakout.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Not sure why, but I can't log in to Telechart tonight to review my charts. At this point, I am calling it quits, so no chart tonight.


Joey

Stock Chart Analysis BNI

Burlington Northern Santa Fe Corporation (Public, NYSE:BNI)

Railroad stocks have been marching higher despite the general markets being weak over the past several months. Take a look at the chart below for BNI and notice how it has been moving higher the entire year. While the chart doesn't jump out at you as anything spectacular, if you take a look at the same chart for the S&P500 then it makes you wonder how rails have avoided the recent plague. While it has been in a correction over the past two months, so far the correction has respected the breakout area as support, and the weekly and monthly charts still look very healthy. This is one is not too complicated, basically, there is an opportunity to enter a strongly trending stock, in a strong sector, on a pullback.





Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis ODFL

Old Dominion Freight Line (Public, NASDAQ:ODFL)

Often I look to intermarket relationships to look at underlying market themes that can help skew the odds in my favor on a given trade. Lately, commodities and oil in particular have been taking it on the chin and with the dollar breaking some resistance, it looks like it could rally some more in the next few weeks. Transport stocks have benefited directly from the drop in crude as Airlines, trucking, and rails have looked quite bullish over the past few sessions.

Below is a chart of ODFL with the price of crude as tracked by USO overlayed on the chart. Notice how ODFL was basing the entire time crude was in an uptrend and how ODFL would tend to rise on pullbacks in oil and fall back when oil would rise. Then notice how ODFL had a significant breakout at a time when oil was breaking down below a multi month trend line. Volume was substantially higher on the breakout and ODFL has been basing in a flag type formation since the initial breakout. While it may come back and retest the lower boundary of the flag again, it sure looks like ODFL is setting up for a sharp move higher. I also like that the all time high is just about 10% higher. It sure looks like this is a good sector to be in moving forward.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock ripped higher today well before the Fed released their statement and then continued to surge higher after the release. However, after huge moves the indexes are basically back up to lateral resistance and while volume was higher then yesterday, it was nothing to write home about. Often it takes a few days for the markets to digest what the Fed had to say and then "price it in", so I wouldn't put too much into today's move. I still like biotech, medical, and pharmaceuticals as leaders if the markets are going to rally here. Also, notice that commodity and AG stocks continued to roll over today. They may be the stocks to short for the next move lower whenever that occurs.


Good Trading,

Joey

Stock Chart Analysis POT

Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

POT has been a market leader for well over a year now. It has been immune to the weakness in the markets and has been bought on every dip. However, notice how it has basically been trading sideways on very high volume. This is how the big boys distribute stocks to the little guys. It is tough to pick up sometimes on the daily charts, but sometimes it pays to step back and look at weekly or even monthly charts. (High volume) + (no movement higher) = Distribution and therefore a possible top. Looking at the chart below, it has paid to buy POT on pullbacks to the rising 21 week ema so it is possible that POT is a buy right here. However, it sure looks like POT is headed at least to the rising trendline and possibly much lower.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis ABAT

Advanced Battery Technologies, Inc. (Public, NASDAQ:ABAT)

ABAT has been consolidating a breakout for over a month now and could be close to resuming the prior move. It has held above the prior peaks and most of the volume has been on up days. The all time high is 8.38 and when these small stocks hit new all time highs it can cause nasty short squeezes. This is due to a lot of different reasons, but a big part of it is many of these stocks are heavily sold short because they usually fail. Shorts get it right more often then not, but when a stock is able to push to new all time highs, then EVERY single short is underwater. Of course, any time a large group is caught on the wrong side it can cause fireworks. Of course there is no guarantee the stock ever gets there, but if it can clear this small penant, it could head for at least a retest of the all time high.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

I use my laptop for most of my homework and blog posting, and this weekend my charger broke. This has left me in a little pickle as I don't have most of my research software loaded on the trading computer. That's why there wasn't a post last night, and why there won't be a chart tonight either. I've been taking it easy the last couple of days anyways as the markets are a little herky jerky here. I still feel like we are closer to a rally then the beginning of a new leg down, but obviously the bears still have some fight in them. A couple of interesting charts on the long side are FSLR and NIHD. Keep an eye on those if the markets get some traction over the next couple of days.

Good Trading,

Joey

Stock Chart Analysis LMNX

Luminex Corporation (Public, NASDAQ:LMNX)

As bad as the bottom line looked today for the major indixes, several stocks held up or actually moved higher. LMNX, while giving back some of it's gains, still formed a nice bullish engulfing candle on an uptick in volume. This shows that buyers overcame early weakness and overwhelmed sellers. Looking at the bigger picture, LMNX looks like it recently cleared a small wedge like consolidation pattern, which should yield at least a retest of the prior highs. There is a very good chance it will continue past that and make new highs. There are several different options for stop losses depending on the type of trader you are, but for my style, I wouldn't want LMNX falling back into the wedge.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

I pore through hundreds of charts every night as part of my "homework" routine in order to scan the markets for trading candidates. I then typically pick one for my blog post. The last thing I do is check for earnings and upcoming events, because as a short term swing trader, I avoid earnings like the plague. I had four charts that looked pretty interesting tonight, but low and behold, they ALL report earnings in the next day or two. I don't want to mislead someone into buying a stock that reports earnings in two days, so I won't post the charts. I'll name the stocks for anyone that wants to go back and review the charts themselves though. I liked NETL, FFIV, NVEC and BMC as long plays. Funny enough, they are all tech issues. While some big tech names have been sold after earnings, the buyout of FDRY today could help other network plays like NETL, FFIV and even RVBD or BCSI. It should be interesting to see if the "sell earnings" theme continues.

Good Trading,

Joey

Stock Chart Analysis FSLR

First Solar, Inc. (Public, NASDAQ:FSLR)

I had lost track of FSLR for a while, as most solar stocks were nailed in a correction. I was quite impressed as I pulled up the chart and noticed that FSLR has not been damaged at all by weakness in it's sector and the general markets. Sure, it has undergone it's own pullback, but the chart looks very constructive and volume has declined during the consolidation. I don't know, or pretend to know if oil is topped out, or getting ready to squeeze higher, but if it does squeeze higher, I want to be ready with a basket of alternative energy stocks.

Looking more closely at the chart, notice that FSLR has generally had higher highs and lows, and it is more apparent in the weekly chart. It is in the process of potentially carving out a small W or double bottom continuation pattern, and also has the 200 sma rising to support it. Even if oil has peaked, this chart has enough potential to stand on it's own and we might even see a run in alternative energy stocks as the election nears. Being a technical trader, I don't usually worry about what causes a stock to move, but I like to be prepared for macro events as they occur.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis BVN

Compania de Minas Buenaventura SA (ADR) (Public, NYSE:BVN)

I wasn't sure about posting this chart tonight, because I was looking for gold to pull in a little more. However, this chart is close enough to a breakout that it should be on my watchlist. I can't predict if it will clear the descending trend line or not, so the best I can do is prepare for it, and watch what unfolds. Gold stocks don't necessarily trade in perfect unity with physical gold, so the miners may take the lead here. As for Gold in general, it still looks pretty good to me, although it will be interesting to see what happens if oil continues to drop.

Looking specifically at BVN, it was on quite a nice trend from January 2007 through March 2007, before beginning a correction. This correction it is in has been rather mild, and BVN has respected the $59-$60 area very consistently. The 200 sma is now exerting pressure from below as the trend line converges from above. There should be a resolution fairly soon, and my guess would be that this is a continuation pattern.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis WIRE

Encore Wire Corporation (Public, NASDAQ:WIRE)

I highlighted a possible cup and handle in AAPL yesterday and mentioned how I've been seeing similar patterns in the markets recently. WIRE is another stock I've been watching that is forming a possible cup and handle. This chart has a lot of things going for it besides the cup and handle label. It had a nice gap higher on strong volume in the right side of the base. The gap, combined with the 200 day sma, has been holding as support during the pullback as well. Volume has also contracted with the pullback which is healthy. It may come back at test the lower end of this trading range before attempting a breakout, but WIRE is definitely worth keeping an eye on.



Good Trading,


Joey

for more analysis, check out downtowntrader.com