S&P 500 breach important support

S&P500 breach important MA 50 day support. While Dow is heading for MA 50 days support.

As Dollar continue to be stronger, stock go down. Same thing happen with crude oil and gold. Looks like the profit taking action is happening. The lack of good economic news and doubt for USA earning has caused market to go down. The last four days loosing streak happen on Sept 29 when the dow and sp500 pullback to their MA 50 days support, then bounced up.

Today SP500 already breach it but Dow has not. While this is usually happen in bull market, especially in overbought condition, we have to becareful to add long position. Buy on support can be used with stop loss in place to protect capital.

For BAC , I just entered put option 15 nov 09 because the stock and bank sector lack of good news and the sentiment has been negative for BAC.

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DOW weekly chart

DOW weekly chart's candle formed gravestone doji, a sign of reversal. Meanwhile the dow daily chart show sideways movement.
On Oct 26 close, DOW close lower with increasing volume.
I check the technology(XLK), energy (XLE) and financial sector(XLF) as the leader of market rally. Financial currently on the support of MA50 (daily chart) after went down because bad news for banks.
Weekly energy and technology chart is at resistance level MA50 and can not go through it.
They signal that market may have some pullback.
DOW can reach MA 50 before go up again. Some profit taking action are going to happen. We just to be careful to see if the big institution sell to individual customer (which often come late) at top.
I have not added more long position because of this market behaviour lately.
The last time DOW hit MA50 showed good entry point because market went up after that. I will wait to see that happen while looking for some potential short position.

BAC chart show some weakness as it break support yesterday, creating first lower low.
Usually market will bounce up after went down more than 100 points these days.
So when BAC go up then fail to create higher high, then we can go short BAC for more safer entry point. The timing entry should be at 15 minutes before market close.

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SBUX update 2 - exit signal

Ascending triangle of SBUX give exit signal today as stock break down the support of ascending triangle. Next support is $20.03. One can exit today, for more confirmation can exit near market close to confirm that the candle close below support. For me I will stretch my stop loss to $19.90 to avoid false break support, but the risk is I will loose more. Please calculate your potential loss and protect your capital. My personal view this SBUX is a good ascending triangle but now it is starting to fail that chart pattern play. My current floating loss for SBUX position is 40%

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SWKS - CUT LOSS

Update for SWKS, this play does not work. I have exited my position and take loss 60% of my SWKS position. As usual, I did not put more than 5% of my total capital for one position. So my loss is about 3% of my total capital. This is business cost. Yesterday after I analyzed SWKS chart and admit I was wrong. This chart create lower high and lower low. I should not play call option. So yesterday I took my loss.

Today the stock going down further because of symphaty play. TQNT which in same industry as SWKS get bad earning news so SWKS going down in symphaty.

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CROX

This once loveable stock had been crushed from $75 to $1. But from early April 09 this stock has started uptrend and go sevenfold. The last closing price is $8.

I admit the buy signal should come yesterday when the stokc break its resistance at $ 7.45.

The stock usually rise two weeks before earning date (Nov 5) and now plus takeover rumours that may push the stock up. The target price from Technical Analysis can reach $10.

Fundamentally, the last earning report is better than expected. The firm is probably mending their financials.

It is up to you want to buy call option or the stock for investment.

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UPS

When searching for stock candidates, I found UPS. The stock has created higher low, and with economy going better, surely UPS sales can increase.

The earning date is Oct 22, 2009. If you are not an earning gap player, you should exit on Oct 21.

We can buy Nov 55 call at $3.2 per contract. How many contract? It depends by your capital. We must not take more than 5% of our capital for one position.

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SWKS

In line with good news from INTC, i found new candidate for my blog. I have played this stock and made profit from it before. The stock has pulled back and may give sign ready to go up again. The earning date is November 5.From technical analysis, the stochastic ready to leave the oversold area, MACD histogram create lower bar, the price also fail to create lower low.

The 12.5 call Nov 09 looks interesting. I capture the price 2 minutes after market open as below:

The ask price is $85 per contract.

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Ascending Triangle-SBUX-Update 1

It has been a while for SBUX. On Oct 8, 2009 it penetrated the resistance line but failed to close above it. After that SBUX going sideways for few days. Looks like the stock wait for the good news to break above or bad news to break down.

Today we may have good news to push it up, the good news from INTC & JPM earning.

Hopefully SBUX can go up and close above the resistance line for confirmation up trend.

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OC, LVS reviewed from Sep 28 posting

Let's see if we buy my candidates on Sep 29. We buy OC Nov 22.5 call $$2.00/contract and LVS Nov 18 call @ $2.00/contract.
The stop loss is set on 70% loss, so we will get out if loss reach $1.4/contract. Big stop loss for anticipating price swing dan can kill our position and reverse back the next day/hours. Because of that, for one position we should only put maximum 4% of our capital. So the maximum loss for each position will be 70% X 4% = 2.8% from our capital.

I use thinkback feature from my favourite brokerage, Thinkorswim, to track historical price.

For Oct 8, I use live price when writing this post, so the price can be a little different.

Buy on Sep 29, sell on Oct 8.

The calculation as per below :





Not a bad profit for 8 trading days only.

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SBUX...again ?

I notice that SBUX is forming a continuation pattern. The pattern is called ascending triangle. The stock price creating higher low, and one resistance area of last highs.



For uptrend stock like SBUX, this pattern is a good setup for long play. If the price break the resistance of $20.94, we can buy the stock or call option Nov09 strike 21 or 22.
If breakout, the target price is about $25-26. Quite a good reward.

Hopefully the earning season will be good so market can support breakout plays.

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Swing to profit

Market go up in early trading after tested MA 50 and bounce up.
Buy on support strategy work well. If yesterday you buy stock or option for my candidates, most of them go up yesterday and today.

For quick profit taker, you can take your profit now.
If you are trend trader, can try to ride the uptrend if earning season news are good.
If it is bad, better to protect profit by taking it.
The chart shows similiar pattern before last earning season. If the bull climb wall of worry, maybe it is time to show it. Pullback has been placed and supported by MA 50 days, now if only the market can make new high...to maintain the uptrend.

Are you a bull or bear this october? :)

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Buy on Support

Dow jones is being supported by MA 50 days. We should anticipate bounce for the stock market. Calculate the risk and set stop loss.
I will share some candidates for "buy on support" strategy.

MGM-Support by MA 50 days


STLD- Doji candle, outside bollinger band,stochastic oversold-ready for golden cross, ,support with fibo 38,6%.


Some others stock being supported by MA 50 days = NLY,LVS,MU

Plan your trade and trade your plan.

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Dow continue its weakness in early trading

Dow once again open red and go lower in early trading today after bad economic news.
Looks like it is hard for market to take out last lower high. For the last 6 trading day , there is only one green day for Dow, the rest are red. We did not see this when the market rally for the last few months.
The last similar pattern occur on June 15, 2009 until July 10, 2009 which was a correction period.

Should be careful to take long position. Either use buy on support strategy or sell on resistance, at least for October month. October month also known as bad month for market historically.
If I see Dow chart, I may guess that Dow will create head and shoulder pattern, but this is just a wild prediction. What do you think ?


As an Option Trader, we can buy call option to play uptrend market and buy put option to play downtrend market.

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DOW on Sep 30 closed

Dow pare losses and close higher than the support line.
It still down a little. The candlestick form a hammer, sign of bullish reversal.
Let's see if it can take out the last lower high.
If it does, we can go long position again.

Best regards

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