Looking at a daily chart of the S&P 500, it is easy to see why many traders assume that we have been topping out just like we did at various points throughout the summer. The market has seen a sharp rally for several weeks, followed by a long period of consolidation, just like we saw in June and August. However, a look underneath the market’s hood shows that there is far more underlying health now than compared to any point from late April until August. Not only have the leading stocks seen bonafide breakouts on stong individual volume (the broad market volume remains tepid, but look at February-April of this year to see how far and long a low volume rally can actually last), but now that many of those leading stocks have had time to rest, capital has rotated over to the lagging stocks and sectors instead of coming out of the market as a whole.
The bears had a golden opportunity late last week to capitalize on Thursday’s intense rejection of a break above 1150. In a matter of hours, we went from 1157 down to 1136 on the S&P. With the ball in their court on Friday, the bears proved to be impotent, which is in stark contrast to the coup they pulled after the June 21st downside reversal. Given the underlying strength and sector rotations that we have seen, I would look to lighten up or even outright remove all short hedges should the bears continue to lack any follow-through to the downside.
Below, you will find my best trading ideas for the upcoming week. Feel free to pick and choose whichever setups best fit your style. Please keep in mind that these are trading ideas only. I also urge you to use stop losses in order to mitigate your downside risk. In general, I prefer a trailing 7-8% stop loss, unless otherwise indicated on my annotated charts.
I hope you find these ideas helpful.
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HOG is a pos….anything is possible, but i wouldn’t be putting my money in a company focusing on the domestic luxury consumer discretionary market..
HOG is decently manipulated though, so who knows…we shall see.
Huggie,
Go take a look at a 5 year chart of $HOG and you will see that the market has been well aware of your thesis that the U.S. luxury consumer slowed down and will continue to be more fickle. Of course, if any stock goes against your thesis then obviously it is a “manipulated P.O.S.”
no, im not just crying wolf…nor would i frequently use that excuse. but, i believe they have a pretty small float with a large concentration by one fund (i remember reading that at one point, but i dont remember the specifics). I just generally believe they have a little bit more ability to support price levels due to this (also meaning they aren’t generally a great short candidate because of this)
and anyway, more importantly, I’m just saying i wouldn’t touch this company at this time, no matter how appealing the technical setup, because currently there isn’t the slightest positive fundamental sign for this sector. i also work for a company with a domestic consumer discretionary focus, and truthfully things appear to just be getting worse and worse.
of course, now we’ll probably add 200+ jobs this Friday and HOG will break out to $40.
Huggie,
Hey, it is your money and your decision. I think we just have different philosophies regarding the market. I believe, for the most part, that the technicals lead the fundamentals. There are exceptions here and there, as with anything. In the case of $HOG, I believe in the discounting mechanism of the market, and most of the known and legally knowable bad news at this time has already been priced in.
I don’t have a different philosophy; i generally agree with you that technicals are a better indicator and most fundamental news is baked in. God knows I learned not to invest on fundamentals the hard way. That said, I do like to invest based on technicals in a direction that agrees with macro fundamental trends…or at least what i perceive as the macro fundamental trends…so thats where i guess we diverge a bit.
Anyway, I’m not making the claim I’m right about this…you do great work and put in a lot more time in this than i do, so im smart enough to realize I may be wrong. Still,, speculation wouldn’t be all that fun without speculating… 😉
BUCY a beauty!
Thanks Chess for the post of DECK. Your analysis helps in letting me know if mine was along the same lines. I was looking at the same chart pattern and up volume bouncing off the consolidated EMA’s (20,50,100) with the rising 10EMA. The down volume on the last 3 days of consolidation (as you noted) is what led me to believe that this stock was going to go up. Also fundamentals are supportive. Went Long Friday.
Thanks, redman. I like DECK a lot here.
Chess – a few weeks back you had a spec call on TQNT in the low 7’s, as an AAPL derivative play. I looked at it and jumped in also with a 1/2 position. As soon as i bought it pulled back some but not to my stop. You were spot on and the stock has gone from low 7’s to ~ 9.70 at close Friday. A pretty big move. I sold at the close due to fear of pullback and wanting to bank some coin after watching other tech leaders pause last week (AKAM/NTAP/ROVI). TQNT was also at highs last seen in 2004.
I entered this as a ST speculation of sorts so I feel like I exited at an “ok” point but I didn’t really have a set sell point on this trade (which always makes me nervous). What would make you exit TQNT (or any stock) when it ramps 33% in a couple of weeks?
Thanks for your work here.
I would look for signs of exhaustion. With TQNT, I would just keep raising my stop.
Thx. I was probably too jumpy.
Been watching $F for a while…a lot of times, older industrial stocks like Ford are often overlooked by younger traders(I was once laughed at in a chat room when mentioning $F) but the technicals know better. Awesome set ups, by the way…”>
Thanks. Ford looks great.
Thanks Chess,
Your “Setups for Week” are a big plus for this site. It’s like someone helping you with your home work!
I generally pick my own, but when we pick the same one as in the case of RIG last week, it really help me with my conviction.
RIG is nearing the 50% fib from the whole move down. Might consider tightening up stops and adding on a pullback.
Especially, if the dollar gets strong and commodities get weak the technicals will matter less and less and RIG returns to normal levels.
Setups look better and better each week. It takes balls to post individual stocks considering the “institution” believes in the “risk on, risk off”, “trade the ETFs”, “stock picking is dead” mentality
Penny for your thoughts on:
RS – Inverse H&S with neckline around 42
RBY – Bull Flag around 4.27
PLM – Consolidating around 2.10 resistance.
Forgot to tag PLM as “Chinese Lotto”
please,explain to me how stock picking is dead. if you believe that,then i must assume,that your in the same belief,that buy and hold is dead also.both are pretty much refutable.the only difference between an etf,and a mutual fund is you can trade them all day long.a mutual fund is a once a week pain in the ass to unload,and just like a mixed bag of holdings a mutual fund has,where there is ONLY two,out of 5-6-7-8 issues in the fund that are anything worth their salt. and etfs has its share of crap in them to.so why not cherry pick?
Ummmmm…ever thought of blood pressure medication?
I didn’t say I agree, I just said that it is becoming common belief:
http://www.google.com/#sclient=psy&num=10&hl=en&rlz=1R2ADFA_enUS380&q=Stock+Picking+Dead&rlz=1R2ADFA_enUS380&aq=f&aqi=&aql=&oq=&gs_rfai=&pbx=1&fp=fdfb9c54bdf6e14b
Take a pill before you rip a guy’s head off.
donavon,maybe you should have thrown up the link, before you quoted someone else’s copy.as i dont hold much credence in the motley fool, i just may be biased to more of a qualitive nature in things.my reponse wasnt meant to “chew” your ass. more or less to say,that an etf and mutual funds, are in my opinion are b.s. etf’s are not a cure all to stock picking.i’m sure,that the both of us are from completely different generations, hence the very differing opinions on financial products.
I’m with you…(especially on the motley fool part). If you read further down the list there are articles from WSJ and other more reputable sites…but my point is that it is becoming a common belief.
Not sure what generation you are from but I’m 31 and I have three accounts: A long term IRA invested in mutual funds (buy and hold), a SEP account that I swing trade the SPY, IWM, TLT/TBT, EEM, etc. and a “bullshit five figure Zeeco” account that I trade individual stocks/leveraged ETFs in.
Anyway…just felt like you were flaming me. I digress.
Many thanks for the BGP idea Chess. Sold 3/4 today. That was fun!