Trader Mike

Michelle B submits:

LP, in a recent comment to this blog entry, expressed interest in understanding trades based on capitulation. Capitulation means that there are no more sellers for the moment, and the stock price will rebound sharply. The most important aspect is not to confuse capitulation with the low-grade drip, drip of continuing distribution, better known as the infamous falling knife. The two down legs shown in the chart below are distributive in nature, though quite vigorous, while the third and final leg down represented capitulation. Another important aspect is being able to know when they are happening—in my case, it’s my watching the hi/lo ticker that finds these kinds of trades.

Michelle B submits:

Do the Q’s have a hefty oxygen tank of a striving economy on its back as it claws its way up a tough path? The monthly chart for the QQQQ show the rarefied air suspended over it at present prices.

Michelle B submits:

Taz Trader discussed the diamond pattern forming in the Q’s in his second post dated February 5 and provided a nice chart of the formation in progress. Diamonds are both rare and very tricky. Quoted from How Charts Can Help You In the Stock Market by William L. Jiler (p 129):

The Diamond is most often found after a big swing in price. It is an exciting time, with the public alternately enthusiastic about the stock and worried about it. This naturally causes prices to fluctuate. If there were less excitement, prices would hold in a more or less horizontal …

I hate to add to the bearish consensus but I have to call ‘em like I see ‘em. Right now I’m seeing a lot of charts which look ready to roll over. A good number of them look a lot like the QQQQ chart — a weak bounce back to the 50-day moving average which reminds me of many of the patterns in William O’Neil’s ‘How to Make Money Selling Stocks Short’. For now the opportunities look better to me on the short side.

Below are charts of the indices as well as some of the better (worse?) looking stocks I found in my scans, including LRCX, BRCM, AAPL, MVL, RIMM, CIEN, RACK and GOOG:

I got an answer from StockCharts.com about their QQQQ data but I’m still not happy!

Did the QQQQ really hit its 200 DMA yesterday??? Some charts say yes, others say no.

In case the QQQs don’t provide enough fun for you, now there’s an ETF to track the entire NASDAQ Composite Index. (but it actually only tracks a sample of all the Naz stocks) It’s ticker symbol is ONEQ. I just want to know if it can be shorted on downticks like the QQQ can.

There’s an interesting divergence between the QQQ and NDX today, but I think it’s actually because of what happened yesterday. Those two instruments track the same stocks, but yesterday the NDX was down 2.97% while the QQQ was down 3.94%. So it looks like some arbitrageurs have stepped in today to snatch a nice quick profit. As I write this the QQQ is up about 0.5% while the NDX is down 1%. How could this happen? My guess is that there was a bit of panic in the QQQ yesterday and it just got pushed down too far. This was free money for those quick enough to catch it. Reminds me of …