The "Bouncing Sector"

Hey Gang:

First, I'd like to thank Garvie and David Chambers for a GREAT lunch at Elizabeth's Pizza in Quaker Village last week. We had a very nice get-together to talk about a variety of investing subjects. I appreciate their confidence and curiosity in what I had to say, and I hope their lunch money was well spent. My wife, Sylvia thanks you too for her lunch. Finally, I will not be able to attend tonight's meeting because I have a more important engagement, birthing class with my wife. We are expecting our first child late May, so these classes are important. I should be able to attend the next meeting in April, and of course in the meantime, I'll continue the blog.

Y'all know I am a BIG fan of "bouncing" stocks. You know, uptrending stocks in established channels where I can buy on the bounce, and sell Covered Calls at Channel Resistance. Well, I MAY have found the motherload. Utilities.

I was looking at various components of Sector ETFs and noticed that Utility stocks have a very strong propensity to Channel and Bounce. Here are some examples:

AEP

CMS

CNP
ED
PPLThe charts are pretty self-explanatory. I have these on my watch list, so when the return to their support levels, I'll be entering a couple.

Overall, the market is pretty overbought IMHO (In My Humble Opinion), and the bad housing data (surprise!) didn't help with any Bullish sentiment. Here is th $INDU:

The MACD and STO indicate the recent run-up may be over for now, and we can expect a fall-back, probably to $12,300. If it drops below that, then it may come back to the top of the Major Ascending Channel (in Blue).

Here is the $COMPQ (NASDAQ Composite) 2-Year

Again, the market looks overbought and I expect a retracement to the targets I have highlighted in RED.

I hope y'all have a good meeting and I look forward to seeing you next time.

Happy Trading!

Quadruple Witch is Dead..now what?!?!

Hey Gang:

Hope y'all had a good weekend. Last week we had some more volatility with a $240 drop, then some recovery. Is this the "End of the Rainbow" for the Bears, or a "Bull Trap"? Let's take a look:

Here is a portion of the 5-Year Weekly Chart of the $INDU (Dow). You'll notice that we have begun to head down towards the top of the Major Resistance Line (support for us now) of the Major Ascending Channel (in Blue). If we bounce from here and continue up, this may signify a NEW Ascending Channel may have formed, and we could then use those support and resistance lines for analysis. But let's stay with what we DO know now. Let's take a closer look:

You'll notice that the $INDU has bounced off the aforementioned Major Ascending Channel Resistance line a couple of times already. Also, the MACD and STO are favorable towards an upward push. However, that being said we also have some other things to contend with...bad economic news, the forthcoming "Sell in May and Go Away" mantra, and more importantly, that Diagonal Resistance line I drew from the recent price action. At this time, it almost looks like a Decending Triangle since we are making Lower-Highs, and Equal-Lows. There is also talk that this "correction" is not over yet.

In Wall Street terms, a "correction" is a market drop-off of ten percent (10%). I have marked where that would fall to in a green box with "10%" in it. Once it hit there, it MAY be time to get into some positions. That would be an area where there could be some bargain hunting. Of course, I said "MAY" because if it hit there, we would be in a downtrend up to that point, so you need to be careful.

By the way, SBUX hit a bounce (like I predicted as a Triple Bottom) and took off on Friday. Full disclosure, I got taken out of this by my stop-loss on the -$240 day and did not re-enter due to Quadruple Witching Week which is always volatile. Anyway, keep an eye on it, it may come back a little bit.

Happy Trading!