No Pigeons

[youtube:http://www.youtube.com/watch?v=WJYL4odVu3s 450 300]r
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My $RBCN holding is getting $CREE-mated today, along with along with the semis, in general, on reports of too much supply. I have a profit in the name since I bought it, thanks to the short squeeze deluxe screen inside The PPT. Simply put, one of my basic trading tenets is to not let a winner turn into a loser. Thus, I full sold out of it this morning. No pigeons in my portfolio, at least they won’t be there for very long…

All trades are timestamped in The PPT.

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TOTAL PORTFOLIO:

EQUITIES: 40%

• LONG: 32% ($TQNT $RINO $CTXS $CMG $NTCT $MELI)
• SHORT: 8% ($LULU)

CASH: 60%

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MARKET WRAP UP 09/07/10

Despite the expectations for a “back to business” type of day, we saw that familiar summer-esque light volume action, as traders are slow to return from vacation and/or are preparing for the Jewish holidays this week. Either way, the S&P 500 gave back some of its gains from last week’s powerful rally to finish today down 1.15% to 1091. Many stocks weakened during the final hour of trading, as the market closed on the lows of the day. However, today was not a complete bloodbath, as some leading stocks held up remarkably well, such as $CMG, $CRM and $NFLX.

Above all else, today was likely the first step in a much needed consolidation after last week’s sharp move from 1039 to 1105. Whether this pullback proves to be an excellent buying opportunity remains to be seen. Seeing as we remain in a defined trading range, caution is probably the best strategy going forward, until the bulls can establish a bonafide higher low above 1040.

The updated and annotated daily chart of the S&P 500, seen below, should illustrate just how tight the range is starting to become. On a short term basis, we could easily fall to roughly 1080 before the bulls will put up a fight.

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Looking at the daily charts of some of the other leading indices and sectors, the market could easily give back more of last week’s gains, yet would still be holding some key support levels. Thus, a cautious and patient approach is probably the best strategy in the immediate future.

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Going forward, the basic idea is that the short term parabolic nature of last week’s rally is in the process of correcting. Trying to ascertain how long and how deep this correction will be is a tricky game to play. According to The PPT, we should see some more sideways or down action in the coming days. Despite the progress that many charts have made over the past few weeks, the bulls still need to arrive to support them, or else they risk giving the initiative back to the bears to take us down to the bottom of the range, yet again.

[youtube:http://www.youtube.com/watch?v=xFPwI3r4c-I&feature=fvw 450 300]r

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I am about to go full hippie, playing hacky sack while living on an agrarian commune, style. I will not be a greedy capitalist pig. Despite $HMIN and $RDWR performing like reliable old pals, I do not want to fool around with my hard fought gains. Thus, I sold out of both, moving back to a heavier cash position.

All trades are timestamped inside The PPT.

UPDATE: I shorted 1/4 more of $LULU. I am now short a full position in the name.

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TOTAL PORTFOLIO:

EQUITIES: 48%

• LONG: 40% ($TQNT $RINO $CTXS $CMG $NTCT $RBCN $MELI)
• SHORT: 8% ($LULU)

CASH: 52%

After the powerful move higher that we saw to close out last week, many charts are suddenly looking like that 6’2, 145 lbs. sophomore in high school, who was only 5’6″ a year ago. In many leading stocks, these fresh new legs higher need to be filled out on the chart. The easy answer is to assume that we drop a few hundred Dow points from here. However, as I noted last evening, do not dismiss the idea of a correction in time, where we simply move sideways for a few days before marching higher.

Below, you will find some examples of stocks who have seen a recent “growth spurt,” and now need to fill out their lanky frames.

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I made three trades today.

• I sold out of $CTRP, which saw its breakout fail from last week.
• I sold 1/4 off of my $NTCT positon, leaving me with 1/2 left.
• I bought a 1/2 starter in $RINO, based on the chart below.

All trades are timestamped in The PPT.

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TOTAL PORTFOLIO:

EQUITIES: 56%

• LONG: 50% ($TQNT $RINO $CTXS $CMG $NTCT $RBCN $MELI $HMIN $RDWR)
• SHORT: 6% ($LULU)

CASH: 44%

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After reversing course and closing out last week in bullish fashion, the market has catapulted from the lower to the upper end of our multi-month trading range. As we enter the autumn, this broad range is becoming more and more obvious. The more popular and predictable a phenomenon occurs in the market, the more likely it is to fail. Just when the easy trade seems to be to aggressively short 1120 on the S&P 500, and vigorously buy 1040, it will become anything but. Thus, while it may be too early to boldly position for a break of the range, it is probably becoming a little late to assume that it will automatically hold.

One aspect of last week’s rally that was particularly bullish, as seen in the S&P daily chart above, was that we went out on the highs each successive day of the rally. You can see the full-bodied green candles above, even after the initial surge on Wednesday. This indicates a change in psychology, as traders suddenly had no interest in fading the moves higher, unlike in August. In the short term, meaning early this week, I expect a minor correction. We could see a correction in price (a sharp, but brief, pullback) or a correction in time (a period of sideways consolidation). I will be watching closely to see if the change in sentiment persists, and if the bulls are confident in arriving to buy the dip. If that happens, I expect us to plow through the 1130 level, and take a shot at 1150. If not, well, then perhaps we will need to see the financial news media complain about the trading range for a few more weeks before it gets long in the tooth.

In sum, I was taken aback by how many bullish charts I saw this weekend. However, a good number of charts are fairly extended and need a pause, in order to create lower risk entry points. The key is to find the leaders, and aggressively pounce on them when they give you a brief chance to do so. Please, please, please, do not chase stocks if we gap higher at the open tomorrow morning.

Below, you will find my best trading ideas for the upcoming week. I have noted on some of the charts where you should wait for a slight pullback before adding. 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–I prefer a trailing 7-8% stop loss.

I hope you find these ideas helpful.

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