The Big Bamboo Issues 2 Short Entries (Finally)

After not giving any signals since December 4th, the Big Bamboo is issuing two entries for Friday’s open.

As you may or may not remember, I had a laptop die recently, and the spreadsheet I used to track the system was on the laptop. I will have to rebuild the spreadsheet and update it over the weekend. For now, know the Big Bamboo will purchase long positions in SKF and DXD. An 8% stop will be used.

Here is the last post I wrote for the Big Bamboo, before my laptop crashed. The spreadsheet can be accessed via the post in order to see the results of the system through December 2008 (when it paused trading due to the trend component).

Big Bamboo Suffers Large Losses

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Possibly a battle for the history books.

Congrats to iBC’s own Chart Addict, as he is currently ranked 2nd place on Covestor for Risk-Adjusted Returns. Will he overtake Timothy Sykes, knocking him out of his month’s long reign as King of Covestor?

Notice my lowly 23rd place showing. That placement is due to two winning trades actually decreasing my return, according to Covestor. However, I have been hearing rumors that Covestor may be changing their method of calculating returns. More on that later.

For now, stayed tuned to the Battle for Blogger Bragging Rights.

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During trying times, even The Fly needs a nice gift basket to lift his spirits.

 

 

 

 

 

 

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Its been a while since I found a chart worth gracing with the proverbial honey hole…

This set up keeps making short screens. Its a very nice setup as EBS is bumping its head under the 50 day after a large run-up.

There is also what looks to be an imperfect or head and shoulders top (the arrows show the shoulders) with the neckline falling near $21.00

I would consider stops just above $24.00, a tight stop for a large position (lower blue line), or a 1.5*ATR stop near $25.20 (upper blue line) for a better chance of winning, but with a smaller position.

My exit would be to cover at the lower range near $21.00, or wait until RSI2 gets oversold. A longer term play could hold out for a break of $21.00 which would initiate a Head and Shoulders breakdown. In this case, I’d look to exit benath $18.00.

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It has been quite some time since I have put up some charts without a strategy being involved. I have not done so mostly because The Chart Addict has been doing a great job and has been covering technical analysis of the indices in his posts.

However, I’m seeing some things that I have not seen The Addict discuss, and so I want to cover those topics tonight.

The 200 day moving average has generated some interest as a target for the current or developing bear market rally. From Friday’s close, a rally to the 200 day average would equal a ~22% move up. As the average is falling, the rally would be less than 22% as it will take it more than a few days to get there.

A rally to where the 200 day average currently sits would equal a gain of ~19% for 2009. It seems unlikely to me that the indices will see gains that large so early in the year (February).

My gut feeling combined with some analysis and some fairie dust thrown in for good measure says $100 on the SPY would be a good initial target as that is the 38.2% Fibonacci retracement from the May 08 highs to the November lows. The $100 target would equal a gain of 15% from Friday’s close, and a gain of 9% for 2009.

The 50% retracement level ($108.00) corresponds with the big breakdown gap in October and might make a decent target area. I maintain that it is too early in the year to achieve that level.

The Triangle

Another pattern that has been forming for several months and is worth keeping an eye on is the large triangle. I expect that $90 will therefore provide some resistance both from the top of the triangle, whole number resistance, and because that level has provide resistance since November.

MACD

MACD must make a strong move here. Period. It must break above the downtrending line draw on the chart. A strong uptrend will not be established as long as MACD cannot rally significantly above the zero line.

RSI

Green vertical lines are drawn on the more recent months to show what happens when RSI2 is above 90. Selling short the SPY on Friday’s close would give a 68.94% chance of a close lower than Friday’s close with the trade lasting an average of 5 days.

Volatility

As demonstrated by ATR(10), volatility is down significantly from the Armageddon trading period a few months ago. Because the indices have been trading in a tight range, I would not be surprised by a big move, but for now it seems the market is content to drift innocuously upward. If volatility continues to decrease, the bulls should be the beneficiaries.

What Does It All Mean?

Short term, I’m bearish. I’ll be selling short the SPY or an equivalent on Monday’s open.

Intermediate term, over the next month or two, I am still slightly bullish. I expect that the indices will drift upward, and go positive on the year.

Long term, over the next 6 months to 1 year, I’m bearish. I believe strongly that the November lows will be breached again.

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Covered my SPY short on the open. I have no edge here and will wait for the next tradeable spike or dip.

I am traveling until Friday, so blogging will be light.

Our home will be, um, sort of invaded Thursday-Saturday by a film crew as my wife has us appearing on one of those mommy makeover/home improvement TV shows. Egregious.

I’ll be back to the blog as often as possible until things slow down around here.

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Okay, so it is a little weird letting you people in on some the more personal aspects of my existence, but in this case, I think it is worth it.

So…my wife’s childhood friend has a daughter (Isa Rose) who was very recently diagnosed with Leukemia. As we have small children, and for other obvious reasons, my wife was emotionally moved by her friend’s struggle. She decided to handle her emotions by trying to help the family in any way possible. As my wife has a small buisness designing and making boutique children’s clothing and toys, she decided she would make children’s hats for the cause and give all of the proceeds to her friend.

On my wife’s blog,  Ooh Baby! you can read more about the little girl’s family as well as order a hat to help them through this terrible battle.

Isa Rose’s mom is also blogging through the journey. On her blog you can find updates on her daughter’s treatments: Isa Rose’s Blog

Thank you for considering this family.

Back to your regularly scheduled system development and technical analysis shenanigans tomorrow.

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