After Market Close May 25, 2010
Bottom In?
By George, we MAY have a low in place. I'm suspicious, of course, but I'm ALWAYS suspicious. Certainly, it was a bit convenient to turn the market right at the February lows. I'd not be surprised if we revisited, but by the same token, we've got enough to fuel a pretty nice rally here.
DJIA: The Dow didn't quite make it to positive territory.
SPX: The S&P made it positive and is up about 10 in GLOBEX.
NDX: Boy, that's a close one on the Naz. I think we have to call it a possibly completed correction.
RUT: The Russell actually looks like it made a bottom. We'll see.
HUI: The miners were quite resilient, even though they were down in Europe.
BKX: The banks were up and after a smart bounce off support, that's bullish.
XLV: Health Care stocks rallied right where they should have.
DJT: The trannies were resilient today, too.
RTH: Retailers put in a very interesting stick. That's a possible bottom there, too.
SOXX: The Semi's were up and they bounced very smartly right off support. Bullish!
XBD: The Broker Dealers were a different story. Up, sure, but not looking as healthy, yet.
DFT: Dupont Fabros had a nice day today. We'll take it!
BLUD: Meanwhile, BLUD is sucking wind still. Nice pick, Chartist!
CHD: And our Church and Dwight short made us some money too.
SNDA: Shanda was also down pretty hard today. Not bad.
CPKI: And just to rub it in, our short in Ca 'Za Kitchen made money too.
OCN: Ocwen is sending mixed messages. Let's pass for now.
HUM: Humana was off it's lows, but thats' about it. Still, support held. Try again.
CRME: Cardiome looks like it wants to bust out.
Summary:
Picking bottoms is tough. I'm always hesitant to do it, but we turned a lot of good indicators up today. The action was consistent with a low, though it wasn't perfect. Now, we've not confirmed anything, so we may want to be careful for a bit still. Once we do confirm, however, we could see a nice rally. For now, let's stay the course and honor our stops.
Be Well, and Trade Smarter Than the Average Bear!
-The ChartSmarts Team
Current Positions:
Long 25% DFT at 23.23, stop at 21.51
Short 25% BLUD at 20.79, stop at 20.79
Short 25% CHD at 65.94, stop at 68.32
Short 25% SNDA at 42.37, stop at 42.37
Short 25% CPKI at 19.02, stop at 19.97
Watch List:
HUM: Buy 25% on a print of 46.37, stop at 42.83
CRME: Buy 25% on a print of 7.99, stop at 7.31
Changes in Current Positions:
Move the stop down on SNDA to breakeven 42.37
Move the stop down on CPKI to 19.97
*30 Minute Trading Rule:
In order to prevent whipsaws, we use a 30 minute trading rule. This means that, as a general rule, we are going to "sit on our hands" during the first 30 minutes of trading, this includes the lifting of stops during this 30 minute period as well. Additionally, if after the first 30 minutes of trading the range of the stock pick is within the stop and buy/short boundaries presented, the trade recommendation is valid. If the stock's range is outside of the buy/short and stop boundary, the trade recommendation is VOID. E.g. if the recommendation is "Buy a print of 10.25, with a stop of 9.95," and the stock trades up to 10.50 during the first 30 minutes, we would pass on the trade. Similarly, if that stock were to trade down to 9.90 before 10:26, the trade would also be void.
In addition, due to Market Makers, programmers, and market miscreants targeting our stops, a long pick must trade at a stop or below for a full 5 minute bar before actually triggering the stop. For a short pick, the stop must trade at or above the stop for a full five minutes before triggering a stop. This should have the effect of reducing the risk of 'gunning for our stops', though it will subject us to more technical risk. At this point, we believe it is a worthwhile trade off.
There is no 30mn rule on limit orders, but if price gaps out of the buy/stop range the trade is void.
Rule on stops: As a general rule for the model portfolio, we will lift all stops on existing positions for the first 30 minutes of trading. As a practical matter, subscribers may wish to leave their stops in place if they expect to be incommunicado or unavailable during that time to monitor positions.
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