Trader Mike

After I covered all of my shorts today I was convinced that I should take tomorrow off and not press my luck. That’s because so many stocks seem oversold after all this week’s selling. I was also seeing things like the QQQQ breaking its July low, the SOX breaking to a new 5+ year low and the indices and many stocks closing under their lower Bollinger Bands. “Surely the market’s due for a bounce here”, I was thinking. But once I started looking through the charts tonight I changed my mind. I think there’s plenty of room left for even more selling. That’s because none of the major indices I track have oversold stochastic …

The bulls can’t be happy with Friday’s trading as the market sold off on slightly higher volume and started to eat into the post-Fed rally. In fact, the Nasdaq is basically exactly where it was the minute the Fed statement was released. The Nasdaq 100 has given back all of its post-Fed gains and then some. The S&P and Dow are faring a little better but the people who bought into the Fed rally hype must be sweating right about now.

Here are charts of the indices as well as some of the better looking individual stock charts (all shorts) I found:

The Nasdaq has slipped back into the June trading range:

I was surprised to see so many bearish candlesticks made on Friday given the strength in the indices. (You can see how many more bearish patterns were made Friday.) Maybe it was just people getting flat ahead of Tuesday’s Fed decision. I won’t be surprised if trading is somewhat muted tomorrow as traders keep their wallets on their hips ahead of Tuesday. That’s exactly where my wallet will be because I’m taking a couple of days off. I’ll get back to trading on Wednesday.

Below are charts of the Nasdaq, S&P 500 and the SOX. The SOX is looking really good, despite the weakness in INTC — I guess there is some benefit to …

I just ran though my scans and didn’t see as many interesting charts as I thought I would. I’ve added quite a few to both my long and short watchilists. Since most stocks still haven’t reported earnings I don’t want to comment on them. But here are a few charts that I thought were worth noting:

First, I got this email from Paul about my earlier comments about Yahoo:

I noticed on your site you think YHOO will be a good short candidate if it reaches it’s 200 day MA. What leads you to that conclusion?

I’ve noticed that when RSI indicates YHOO is oversold, it tends to resume it’s uptrend. However, now that I look at the 200 day after the last major gapdown (July), it took two months to break the 200 day. So I’ve got some conflicting signals here.

I said I’d be looking to short it on a weak bounce near the 200-day moving average. What I mean by a weak bounce is a low volume bounce and/or if I see bearish candlesticks forming at or near the 200 DMA. You can see on the chart how formidable the 200 DMA was a few months back. My logic is simply trading with the long term trend — the stock is under the 200 day moving average, therefore the long term trend is down. I like to enter shorts near resistance, which the 200 DMA should be. If I see YHOO struggling near some other, lower resistance I’d try to short it there as well.

Next up is the Banking Index (BKX) which just completed a triple (quadruple?) top:

I was all ready to write about all the shooting stars made today but Intel has launched the market (Nasdaq) into orbit and obliterated the shooting stars. This will finally get the SOX moving away from its 200-day moving average. It may be a wild one tomorrow if the jobs report is decent. (Duru nailed this in his INTC note last night)

It was an ugly day today as the NASDAQ erased all of yesterday’s gains and then some. Novellus’ earnings guidance and a slightly weaker than expected consumer confidence report were the reason for all the selling. The SOX is now back below its middle Bollinger Band and is sitting just 2 points above its 50-day moving average at 515. I think it could fall back to 500 without being technically broken. Should be some (more) interesting action in the semis over the next few days.

I’ve been wanting the NASDAQ to pull back to its middle Bollinger Band for a couple of weeks now. …