"Bear" With Me

Hey Gang:

Sorry I missed the meeting Monday, hope those who attended had a great time and shared some good ideas.

I'm feeling down (as in the Market) so "Bear" with me. I mentioned in my previous post that I felt the Market was going south. I still belive that, especially with oil prices soaring, gas prices soaring, the housing market is getting really bad, the Fed still has some inflation worries, etc. I have started entering Bearish positions in my portfolio (NOT a recommendation). I have been buying Bearish ETF's, the DOG (Dow) and the QID (NASDAQ). Here are the charts:

DOG
QIDYou can see on both charts I have my pre-set target prices where I either exit, or move my stop-loss price tighter. Technically, these were good entry days as the MACD and STO were favorable for a rise, and the "bounce" off the diagonal support seemed to give me my "go" signal. I also like this trade now because "Sell In May and Go Away" is just around the corner. If you look back on last year's chart, you'll see what happened then. That is NOT to say it will happen again, but it seems to be the pre-summer trend when the trading moguls retire to the Hamptons for the summer and let the junior traders take over. Hopefully this trend will continue.

A caveat about DOG, it isn't as heavily traded as DXD (which is probably a better ETF since it is more "liquid"), so you may want to look into DXD instead.

Chris Harding I was told is in a particluar trade I follow (and have done well with) - PCAR. Here is the chart:Again, one of those Channeling, Bouncing trades (notice I didn't say "stock") I love. Clear, defined Entry and Covered Call signals on an uptrending stock. I am out of this position now, though I have highlighted my anticipated entry area.

Some other "favorites" are: BHP, BUCY, CCJ, DVN, FCX, GRMN, PICO, TIE, to name a few.

Happy Trading!

Correction, or Worse?

Good day Triad Traders. Today we are seeing what may, or may not be a correction in the markets. The Dow fell by 400 points today which was up from an intra-day low of over 546 points, the worst day since the first trading day after 9/11. This pullback has been mentioned by the talking heads for some time and the Bearish action in the Chinese markets, along with Bearish Durable Goods info was the catalyst to send the markets tumbling.

You may remember at our meeting I mentioned, "you take a stairway to the top, but you jump out the window." Basically, when a selloff like this occurs, it could be good, or it could be bad. We have to look at the charts to give us some idea what is happening. Let's look at the 5-Year Dow:

(Click on the picture to enlarge, use the browser "back" button to return to the blog.)

You'll notice that the index broke out of a pretty good Ascending Channel to create two new ones. You'll also notice that the newest channel is much shallower than the last, indicating the market may be running out of steam.

Now let's take a much closer, and shorter term look at the Dow:
WOW, that is some leap, eh?

So what does this all mean? Well, it could mean tremendous opportunities have presented themselves to us. Remember yesterday I mentioned that a stock does not necessarily reflect the strength of a company. There were a lot of good companies that got hammered today because "those boats sank with the outgoing tide." Now, I am not suggesting that this downturn is a "one and done" day. It could be the start of a correction which means more downside. It could also mean the start of a Bearish Market. As Traders, we don't care because we can make money in ANY market conditions.

The NASDAQ had quite a fall today too. Let's look at the charts, first the 5-Year:As you can see, the index was very close to the top of a major Ascending Channel and has now begun to fall. How far and how fast remains to be seen, but look at what today's action did to the previous trend:If the index drops below $2,400, we are talking a potential trend reversal. Of course, we need to see the index make a lower high and fall off to be sure, but it has the makings of a potential reversal. The $COMPQ also broke two MA's today, the 30 Day and the 100 Day. If it breaks the 200 Day, watch out!

Now, as mentioned before, there may be some GOLDEN buying opportunities coming up as some of my favorite stocks got popped today, so I may be looking for a move to their support lines, then bounces to move into some poistions. I'll give you some names, but I'll leave the charting up to you. BHP, CLF, EXP, FCX, NAVZ, TDW...(these are NOT recommendations) to name a few.

By the way, if you are looking for a way to play the Bearish side of the market but are afraid of shorting or using options, you can consider the QID, which is Bearish ETF for the NASDAQ.

Happy Trading!