03-23-14 Weekly Review & Watch-list

If you were trading in the right places this week, it was just a normal week of trading nothing too crazy happened in the S&P even with all the noise Yellen provided.  FSLR went insane this week though and I was all over it starting Monday morning.  This is a large reason why I post to StockTwits, so afterwards when I am talking about how I caught a huge move you can go back to my stream and see exactly what I was talking about without any deleted or edited tweets when the move started taking place on Monday morning.  Moving on, I took home a few long positions but also with hedges on in more defensive assets with a bullish tone to them, like bonds.  For now the market is in no mans land without many good short setups, and long setups that need the market to at least hold up to get a bid.  In these market conditions I would rather just keep my size smaller than usual, be more nimble with the trades I take, and keep the profits I made on the bull move we just came out of.


So like I was just saying the S&P is sitting in no mans land and I think we are all thinking the same thing.  Two things I will be watching next week; 1) that zone from $184-$185, & 2) the 50 day average right below that zone.  So that is telling me a boatload of support is below here so that will be the test of how strong bulls or bears are depending on how well the bulls defend that entire area.  I really like the look of bonds here especially in context with the S&P market conditions we are in.  I thought they were a great buy off the 50 day at $106 and I think they are here too, but mainly for a hedge trade.  If the market starts to sell off while bonds are looking bullish like this, people will bid up the bonds.  If they do so at a rate to where we actually breakout from this large base, that could prove to be a big trade in itself (aside from a hedge trade).  I think it's amazing to watch people's emotions around this whole gold trade.  I had been talking about how far away bears would have to take this before they could make a lower low, and because of that dips are highly likely to be bought.  Now that we are getting this dip that every noise maker is freaking out about how gold is heading lower again, which is a perfect setup to rip everyone's face off when gold is ready to start the rally back up.  Will be watching the 50 day and the 50% retracement level of about $124.

The obvious thing to talk about here this weekend is the sector rotation moving into financials and energy stocks.  I found myself in the lower half of my watch list for most of the week last week; which is energy, materials, & financials.  Most of the setups I will give out at the end will likely come from those sectors.  Sometimes these ETFs don't represent money flow very well because they have so many stocks in them but if you look at the well known names in these sectors, you see the money.

I made some changes to how I do things involving sectors and the stocks I follow.  Previously I was following every liquid stock (with liquid options) in every sector but I found that to be too hard to get to know each stock like that.  So I made a change to where I am only following about 10 names in each sector (these are well known names with good steady price action) except for tech and consumer discretionary where there is around 20 names.  This way it will be easier to keep tabs and really get to know each stock individually.  Also by doing this I can clearly see where the money is flowing, since they are well known names.  It's like a quarter back having the option of having 20 wide receivers or just 4.  With only 4 he can concentrate very closely on where they are going & when they are doing it, with 20 they are all over the place and concentration is lost quickly on who is doing what.  Just part of me building my swing trade process.


Not going to go over these too much as nothing has really changed.  VIX still holding divergence, percent of stocks above 50 day still upper end of the range, and percent above 200 day still holding up.


AAPL - long or short - break out dependent
AKAM - long - needs to continue from here
AMZN - short
BAC - long
COST - short
EOG - long
ESRX - long
HES - long
IBM - long
JCP - long
JPM - long
KEY - long
MS - long
PXD - long
SBUX - long
TWTR - long - short squeeze only
VLO - long
WFC - long

So like I said in the beginning, the long trades will really be much more profitable as a whole if the S&P can hold up or even move slightly higher.  The few short trades I am watching will depending on whether or not the S&P breaks down.  If you overlay the S&P and go through each stock you follow, you begin to learn how that stock moves with the market.  That is part of what I mean by getting to know the stock individually.  Also understanding how they move on an intraday basis, how the sectors interact with each other, how the stock interacts with the sector, etc.  If there is a big picture move that is going to take place (ex. staples and materials make huge moves higher), then these well known stocks I am following are going to be participating in them and I think that is powerful to understand.  I know a lot of traders believe that you should only be following the price action of the instrument you are trading and judge it completely on it's own merits but I don't believe the market works like that for my time frame.  Technical analysis is more than just analyzing price of a stock, although it is the primary tool I use, there is a larger picture that you have to grasp hold of and constantly stay in tune with.

I'm always on StockTwits and Twitter @M5amhan if you want to follow me there for updates to these stocks and potentially new stocks that I am focusing on during the week.  Thanks for reading.

Trade well,
-Michael