We have some interesting price action today. With the recent moves in oil and gold, INO.com had two very timely videos posted today on where they stand.

Please enjoy and let me know what your thoughts and opinions are.

The first covers Gold and analyzes if it has topped out:

http://www.ino.com/info/230/CD3120/&dp=0&l=0&campaignid=3

The second looks into the recent moves in Crude:

http://www.ino.com/info/231/CD3120/&dp=0&l=0&campaignid=3

Good Trading,

Joey

Stock Chart Analysis AAPL

Apple Inc. (Public, NASDAQ:AAPL)

Often, after a market enters a trending state, you will start seeing similar patterns appearing in multiple stocks. You can see this to a greater degree during specific sector rotations. Lately, I've been seeing a lot of cup and handle type bases, which would make sense if you analyze what the markets have done over the past several months.

First there was the steep drop from October to March, where the left side of many of these bases was formed. Then as the markets bottomed and attempted a rally, the ride side was formed. Now as the markets correct once again, the stronger stocks are consolidating by retracing a portion of the right side of the base, therefore forming the handle. There are no guarantees that a stock will ever clear the handle and break to new highs, but the fact that they are well above the lows, while the markets test the lows, shows relative strength.

AAPL is a pretty good example of the type of base I'm seeing recently. It is pulling back in a flag like base, which also could be the handle in the base. I like how the 200 day sma is also providing support as AAPL attempts to find a low here. The one thing I don't like here is the relatively light volume as AAPL built the right side of the cup, but the decrease in volume in the handle is desirable. AAPL is not out of the woods yet though. It is still under a downward sloping 50 day sma and technically, it could lose the 200 fairly easily. However, trading is all about taking calculated risks, and if the markets are indeed getting ready to stage a rally, then AAPL should get the support it needs to attempt a breakout.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis IDIX

Idenix Pharmaceuticals, Inc. (Public, NASDAQ:IDIX)

It looks like the markets will gap higher tomorrow morning based on the FRE and FNM news. Throw in a little M&A news on the Anheuser buyout and shorts may get a little squeezed. I've been noticing some rotation into Biotech stocks and Pharmaceuticals recently and they could take a leadership role in whatever rally the markets get. While IDIX is no where near all time highs, they have been one of the few stocks to remain very close to their 52 week highs and remain above their 50 day sma throughout the recent market weakness. I highlighted some lateral consolidation areas that are similar to Darvas Boxes. Notice how IDIX has been respecting the previous resistance level as support. If IDIX can clear the $7.50 area, momentum could easily carry it into the $9-10 area. While Darvas theory would place a stop below the existing "box" at around $5.50, more aggressive traders could probably get away with a stop .50 cents higher.


Good Trading,


Joey

for more analysis, check out downtowntrader.com

I am in Marco Island, Florida for the week on vacation, so I doubt there will be any posts this week. I usually try to tune the markets out completely when I'm on vacation, but I have a feeling there will be a sharp move this week, so I want to try and monitor whats going on. I may get a post up if I see anything developing.

Good Trading,


Joey

My gut is telling the markets are in the process of capitulating. I was early on some of my buys and have thus been stopped out of several positions. I am still resisting any temptation to short as any snap back rally we get will occur sharply and trap more then a handful of bears. I've been continuing to nibble on the long side, but at this point, the best thing to do is what for the indexes to stabilize. Even after we get the first rally day, the markets will probably come back for a retest a few days later. It makes no sense to get too aggressive until things become more clear.

These can be difficult times for traders and the best advice I can give is to make sure you cut your losses with complete discipline. Just because the markets "should" bounce back, doesn't mean they "will" bounce back before margin calls force you to sell. Your capital is the only ammo you have to compete in this world, and you need to save as much of it as possible so that you have a fighting chance when the odds are back in your favor.

Good Trading,

Joey

Stock Chart Analysis XTLB

XTL Biopharmaceuticals Ltd. (ADR) (Public, NASDAQ:XTLB)

When you look in the textbook for what a symmetrical triangle looks like, this is what you see. There's a lot to like here on this chart. I like how XTLB reclaimed the 200 day sma and based in an orderly fashion as the ma rounded into form. It also has been building a healthy base as the overall markets correct. Today's breakout also came with the support of expanding volume and could ignite a move to new highs. Take care if you choose to trade this stock, as the volume is relatively thin, but if the markets get the snap back rally I've been expecting, then XTLB may be a nice play.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis NTWK

NetSol Technologies Inc. (Public, NASDAQ:NTWK)

With the Markets at oversold levels, I am starting to position myself to the long side. I may be early or wrong entirely, but that is what stops are for. NTWK is a stock I found through a scan that printed a narrow range candle at support. In looking at the chart, it looks like NTWK is trading in a small triangle pattern, that could be interpreted as the handle in a larger cup and handle base. The fact that it is basing over the 200 day sma is telling be that this level could very well hold as support, and institutions may be accumulating at these levels. Also, it has shown very good relative strength by holding up the past few days as other tech stocks got hammered. If the markets do indeed bounce from these oversold levels, then NTWK could beak out of the triangle and head up for a retest of it's 52 week highs.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis DUG

UltraShort Oil Gas & ProShares (Public, AMEX:DUG)

I know many will see this post about going long on DUG (inverse oil producers and oil service stocks) and assume I am trying to call a top in oil. I'm not calling a top in oil, although I think there is a chance it is close to topping out. What motivates me to write about DUG, is the recent divergence between oil the commodity and oil producers and service stocks like XOM and DVN. Notice that while Oil is hitting record highs, these oil stocks are not hitting new highs with oil.

In looking at DUG, notice that while oil was surging today, DUG didn't break to new lows, or even under yesterdays low. Are funds distributing Oil stocks into the unsuspecting retail traders? This is typical of institutions during the climactic phases of any trend, and DUG is showing some very interesting volume patterns. I highlighted the highest volume days for DUG in the chart below and circled the days they corresponded with. All the high volume days were associated with buying in the $27 range showing strong support for that level. It's tough to try and call bottoms or tops, but it sure looks like money is flowing into DUG here, even as Oil continues to surge. A key level to watch here would be DUG trading over $30.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis GLD

SPDR Gold Trust (ETF) (Public, NYSE:GLD)

Is Gold ready to turn higher, or is it in the process of topping out? It is starting to look like we will find out very soon which way gold will go next. Below is a chart of GLD, the ETF that tracks gold prices. Keep in mind this is gold the asset, not gold miners. I will first warn, that I have not had much luck in trading gold or gold stocks the past few months, but it looks like a possible setup is forming here. GLD was on a great trending move for 2007 and early 2008, before beginning a correction. The correction has been fairly well organized, and the wedge it was following was broken to the upside about a month ago. GLD also pulled back to a previous pivot high and it looks like it is holding as solid support. GLD has basically consolidated the past few weeks and may be close to setting a higher low. This could serve as the launching pad for a new leg up which would ultimately challenge $100. The key levels to watch here are a break under $84.50 which could lead to a break of the 200 sma and horizontal support, and $89 on the upside.



update 6/26/2008: My buddy doc, who is a gold bugs gold bug, wanted me to mention how he has been bullish gold bullion in a big way. Of course he is neither a real doctor nor a mining executive, but he wanted his opinion to be known.

Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis T2108 Indicator

Worden Telechart T2108 Indicator (% Stocks Above 40 Day PMA)

While I've been bearish the markets for several weeks now, I am starting to see some bullish signs. I think there may still be some near term weakness, but I am starting to think the markets will mount another decent rally in the intermediate term. Several of the indicators I watch are pressing towards lows commonly seen at bottoms and any weakness over the next few days will get them there. However, there is a chance that if we see enough strength in the next few days, it will not allow the markets to get truly oversold, thus delaying any bounce, and possibly setting up for a stronger move lower.

One of the charts I watch for bottoming in the markets is Worden's Telechart T2108 indicator. This indicator measures stocks trading above their 40 day moving averages. It's a percentage based oscillator and as such, is measured from 0% - 100%. The levels I look for are 80% for topping patterns and 20% for bottoming patterns.

This is not to say that I follow automatic buy or sell signals when it reaches these levels, but it definitely puts me on guard. In the chart below I highlighted the last three years and the occurrences of the indicator falling under 20%. In green, I superimposed the the S&P500 via the SPY ETF. Notice how a bottom occurs almost every time the indicator falls under 20%. There are a few cases where it takes a little longer, or fakes a little, but several weeks out, it has been a very reliable indicator.

The indicator is not yet under 20%, and it could spend a few weeks under 20% if it gets there, but what is important to note is that the markets are indeed approaching oversold levels and as such, it wouldn't make much sense starting to go crazy shorting now. Unless of course, the markets head higher too soon, which would offset some of the "oversoldness" of the markets and provide great shorting opportunities. One of those two scenarios should unfold over the next month.



Good Trading,

Joey

I will be out the rest of the week on vacation. I will be heading out to New Orleans for a few days of fun. If anyone has some good suggestions for places to eat at or visit, please feel free to drop a comment.

As for the markets, I was hoping to get a decent rally tomorrow to allow for some re-entries into some shorts or inverse ETF's. While we could have more strength ahead, I am still leaning towards the markets being lower over the next couple of weeks.

Good Trading,

Joey

Stock Chart Analysis FPP

Fieldpoint Petroleum Corporation (Public, AMEX:FPP)

Junior Oil stocks have been going ballistic recently, and several of them have been consolidating over the past two weeks. While most of these look extended, as simple as it sounds, the fact that they are not going down shows buyers are stepping in on any weakness. FPP has been trading in very tight narrow range candles the past five sessions, showing that bulls and bears are at a stalemate. Whichever way it breaks will find a group of traders scrambling as stocks usually explode after strong volatile moves followed by extreme contraction in volatility. FPP looks like it is trading in a bull pennant with volume contracting nicely as it consolidates. These patterns usually resolve to the upside as continuation patterns, so I am looking at a break of the recent narrow range candles as a potential signal that the uptrend is resuming.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

I'm not too crazy about chasing any new shorts right now. Although I think there is a good chance we continue to see downside, we are starting to get oversold and a snap back rally will probably happen very quickly when it does. I was surprised to see that the percentage of stocks over their 40 day moving averages dropped to 27% the past few sessions. I usually look at levels under 20% as oversold and it could easily get there after a day or two of extended weakness. Therefore I am also not looking to go long in too much now either. I would rather wait to get to an extreme oversold environment, or wait for a small bounce to relieve some of the fear in the marketplace. What I am doing now, is making a list of stocks to watch depending on the next few days of action. If we gap higher tomorrow on economic news and it sticks, I will then be looking to re-short next week. If we gap lower and crash, then I will start looking for long plays next week once things settle down.

Some stocks that have been showing relative strength are:
Some specialty retail like TRLG and DLTR
AUXL
Several Junior Oils like PDO,FPP,etc.
RIMM
ag stocks like MON and MOS
More oil stocks like GMXR and SFY

Stocks that have been showing relative weakness are:
Any airline stock
Any financial stock
China and Financial ETF's
Non specialty retail like M and SHLD
Some oil like RIG and XOM

All of these are on my watchlist and could provide decent entries over the next few days.


Good Trading,

Joey

I mentioned last week how downtowntrader.com readers could get a 16% discount for the Tradecision software. Alyuda Research just introduced 2 and 4 month subscription packages for those that don't want to commit that much capital to buying a software package. Additionally, they are running a promotion where they are offering the Alyuda Neatscan Market Scanner as a bonus to all buyers and subscribers. Keep in mind that there is a 30 day unconditional money back guarantee on their software, so it may not be a bad idea to pick it up now while the Neatscan scanner is free. You can find more information on the Tradecision software along with pricing here.

Good Trading,

Joey

Stock Chart Analysis LNC

Lincoln National Corporation (Public, NYSE:LNC)

One of my favorite patterns to trade is buying a stock that looks like it is completing a pullback after a 52 week or all time high. The reverse works very well in certain market environments. Assuming we are in a bear market, this would qualify as one of those market environments.

LNC made a new 52 week low in January and successfully tested that low in March. If you step back and look at the overall picture, it appears that LNC has been in a corrective move higher after a steady downtrend. While it could be in a bottoming process, the breakdown from a rising wedge portends a move down to retest the lows again. The retest would yield a 10% move, and there is always the chance it breaks down to fresh new 52 week lows.

I would look at any bounce in the next few days as a possible shorting opportunity.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis RIG

Transocean Inc. (Public, NYSE:RIG)

Oil and Oil service stocks have been on a tear lately. Many junior oil stocks like MXC and PDO have gone parabolic, and new ones seem to be popping up everyday like ROYL today. In the meantime, it looks like some oil stocks have quietly been under distribution. Often, when a stock trades sideways on higher volume then the preceding run up, it signals that institutions are unloading shares to retail traders. RIG has basically gone nowhere over the past 2 months and may be completing a triple top. It made a marginal new high and quickly reversed. All the indicators were divergent at the top as well. While it's oversold on a near term basis, the reality is, that RIG may be at the early stages of a deep correction. It's tough to spot a top in any market, but RIG is showing several classic traits of a stock that is in a topping process. Another point to consider is that RIG was recently among the Oil Stock Leadership group, leading most of the rallies. It is now a laggard, and could be due for a rough stretch.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

Stock Chart Analysis LULU

Lululemon Athletica inc. (Public, NASDAQ:LULU)

Often, failed patterns end up being more powerful then the original pattern projected. Part of the logic behind this idea, is that you have the added presence of a group of traders who were caught off guard in addition to the typical traders speculating on the position. LULU is a good example of a possible failed breakout.

LULU is in a precarious position here, as it attempted a breakout from a reverse head and shoulder type base, and quickly fell back under the neckline. This left a group of traders speculating on a breakout from a solid pattern, underwater. They are feeling the pressure as LULU is looking like it might be failing before even reaching their breakeven price. Then you add short sellers looking for a breakdown, and the potential for a sharp pullback is increased. Of course they don't always work out like this, but there is always a chance that failed patterns lead to a squeezing of the group who was caught off guard. This usually leads to handsome profits for the prepared trader.



Good Trading,


Joey

for more analysis, check out downtowntrader.com

I recently partnered with Tradecision in order to offer downtowntrader.com readers deep discounts on their professional trading software. In our agreement, I am able to offer 16% off the retail price for the software, and it's a one time fee, so no monthly fees to worry about. They also offer a 30 day money back guarantee, so there really isn't anything to lose by trying it.

I've been looking for a professional caliber trading package that would allow me to recreate my trading strategies into quantifiable systems that could be accurately backtested and work with my current broker. I also needed the ability to apply portfolio management techniques and of course, the ability to apply my typical technical analysis methods in a charting package. The Tradecision software is very powerful and has many features I haven't been able to use yet, but it looks like it will easily become an important piece of software in my toolbox. Here is a snippet from their website detailing how the software can help short term traders (What I assume the majority of my readers to be):

With the help of the clear Improvian language, strategy development tools, and the application's reliable Data Manager you can attain virtually any of your trading objectives.
Tradecision enables you to:

• Perform accurate price action analysis.
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At your disposal, you have a set of analytical studies including Auto-trends, Pivots, Single Bar patterns, Elliott wave, Reversal patterns, Fibonacci, Pitchforks, and Gann, as well as over 100 most popular indicators, such as RSI, PercentR, MACD, Moving averages, Stochastic, Bollinger bands, Chaikin Oscillator.

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With fully automated neural networks you can create a profitable trading strategy. You can reduce the time required for optimization of your trading rules and indicators using the fast Genetic Algorithms. At the same time, any over-optimization is automatically prevented by the intelligent algorithms.

I will follow up with this post in the coming weeks with details on certain parts of the platform as I become more comfortable with the software.

Follow this link if you're interested in trying the Tradecision software with a 30 day money back guarantee.

Stock Chart Analysis SPY

SPDR Trust, Series 1 (Public, AMEX:SPY)

First off, my thoughts are with the soldiers who have made the ultimate sacrifice protecting our country. Whether you support this war or not, think of the people who put their life on the line everyday. Happy Memorial Day.

I decided to show very simple chart of the S&P500 ETF, SPY for a couple of reasons. First, the markets are in a tough spot to be initiating new positions for the type of trades I make, so I don't want to post any charts of stocks until I feel the odds are back in my favor. Second, I felt it was important to show that the markets are possibly breaking down without over complicating things with tons of indicators.

Looking at the SPY chart below, you will find only a couple of moving averages, and a trend line. I also highlighted the most recent pivot highs and lows, as the very definition of how a stock is trending is based on the highs and lows. An uptrend is simply when a stock is making higher highs and higher lows, and the reverse of course, for down trends. If you look at SPY you will notice that it was in a clear down trend from October through January. It then started trading sideways until appearing to breakout late in April. It then cleared a down trend line dating back to October, but then immediately reversing a few days later. I highlighted a couple of questionable pivot highs and lows, of which both were broken. The low was broken last Friday, and while this may not be an important pivot point that was broken, it does portend a test of the more significant low near 132. I would suspect a bounce over the coming days, but as long as price doesn't make a new high, it looks like SPY will ultimately test the low formed at 132.33.




Good Trading,


Joey

for more analysis, check out downtowntrader.com

There are no charts tonight, as I feel it's probably time to step back and wait to see what the markets will do. I posted some more commentary on downtowntrader.com for those interested.

Good Trading,


Joey