Friday, April 14, 2006

Good Charts for Good Friday

Happy three-day weekend, everyone. No sermons today. Just a few good charts.

First up is AutoDesk. I mentioned this one a few days ago and a "blast from the past." It looks like it's losing ground (which is good, since it's a short recommendation, as all of these are). If this really starts to fall, the key question is whether it will fall all the way down to the lowest trendline you see or not. I'll leave that judgment for later.


ESRX is a high-risk/high-reward trade. It's in a pretty decent topping pattern, and I'd suggest using that descending trendline (as opposed to a neckline) as my stop-loss point.


Perennial favorite GOOG looks like it's weakening after a stury push upward over the past six weeks or so. The Fibonaccis are helpful guides, but obviously not rock solid lines in the sand.


Holly (HOC), although a big winner over the past year for the bulls, is so lofty it represents a relatively low-risk short position, as dictated by the trendline you see. It seems to have peaked for now.


Finally, the utility ETF whose symbol is UTH is continuing to weaken, as I thought it would a couple of weeks back. The green highlight indicates my earlier prediction for how far it might fall.

6 comments:

Hurricane5 said...

On March 29 at $385 you said to short google. On April 14 at $402 you said to short google. You do realize that google reports earnings on thursday and no technical chart in this world will matter on april 20th, right? The only reason to short google 3 days before its earnings release is if you think they will miss the numbers. Earnings drives stocks.

Tim Knight said...

You're leaving out the important fact that when I made that suggestion, I gave a specific stop-loss order, which would have been executed. And if you believe charts have no predictive value, I have no idea why you're reading this blog.

Chris Berte' said...

I'd be careful with Google's earnings coming up on the 20th(the day before April expiration). It could be the catalyst to move back down to where it was, but who knows...could also raise back up into the stratosphere!
Happy Easter!

Kapil Khanna said...

GOOG & AAPL both look like they are ready to rally up to their previous highs. What needs to be seen, is if they break out, or run out of steam. For both GOOG & APPL to turn bearish, they need to breach 330 & 57 respectively.

costas1966 said...

Here is my take on goog. It is announcing earnings on 4/20. Usually, I don't play this game because you never know what they will announce and you never know the market reaction. I know that the expectation bar
has been lowered after the last earnings miss so even a small improvement on those expectations can set initially the stock on fire. ALso even if they miss slightly I don't think the market reaction will be negative since, again expectations have been lowered and a slight miss would not be a big surprise. So I think, the only chance that I would have to make money with a short position before the announcement would be if they miss by a big number. Here is how I work out my probabilities.

Expected
market
reaction

1.exceed by a big number 20% up
2.exceed by a small number20% up
3.miss by a big number 20% dn
4.miss by a small number 20% unch
5.meet the expected number20% up
------
100%

I give equal weigtings to all above probabilities. Probability #4 I am expecting an unchanged reaction reaction in price, since there won't be a big surprice considering that they missed big last quarter.
I even think there would be a relief that they did not miss by a lot and it can actually have an initial rally in price. Probability #5, I am expecting an up reaction even if they meet the number. Again here, I am expecting an up initial reaction as a relief rally they did not miss expectations for a second quarter in a row. So overall, I expect only a 20% probability for the stock to go down after the earnings realease. That is if they miss their estimates by a big number. So I think that the odds are against holding a short position and going into the earnings.

Now what happens after the initial reaction of the earnings is a different story. Here are the tactics I would use after they announce earnings. If they beat by a big number (20%chance) then I would do nothing, I would stay away from it since there would be a follow through rally based on the big number (Notice that I would not go long on a retracent in this event and that is because my overall bearishness on the market). If they miss by a big number (20% chance), I would wait for the countertrend rally to go short. In all the rest of the cases I would wait for the stock rally to stall and that could be anywhere between 414-440 (overhead resistance) and then I would go short. So personally I would wait after the earnings and then decide what to do with the stock.

Now those expetation are based if price stays where it is now for the next 3 days. If price for some reason goes higher. Lets say it goes to 440, then that rally would have discounted all probabilities exept (#1 beat by a big number) so it would be much safer to go short before the earnings announcement.

Confusing isn't it?

costas1966 said...

Here is my take on goog. It is announcing earnings on 4/20. Usually, I don't play this game because you never know what they will announce and you never know the market reaction. I know that the expectation bar
has been lowered after the last earnings miss so even a small improvement on those expectations can set initially the stock on fire. ALso even if they miss slightly I don't think the market reaction will be negative since, again expectations have been lowered and a slight miss would not be a big surprise. So I think, the only chance that I would have to make money with a short position before the announcement would be if they miss by a big number. Here is how I work out my probabilities.

Expected
market
reaction

1.exceed by a big number 20% up
2.exceed by a small number20% up
3.miss by a big number 20% dn
4.miss by a small number 20% unch
5.meet the expected number20% up
------
100%

I give equal weigtings to all above probabilities. Probability #4 I am expecting an unchanged reaction reaction in price, since there won't be a big surprice considering that they missed big last quarter.
I even think there would be a relief that they did not miss by a lot and it can actually have an initial rally in price. Probability #5, I am expecting an up reaction even if they meet the number. Again here, I am expecting an up initial reaction as a relief rally they did not miss expectations for a second quarter in a row. So overall, I expect only a 20% probability for the stock to go down after the earnings realease. That is if they miss their estimates by a big number. So I think that the odds are against holding a short position and going into the earnings.

Now what happens after the initial reaction of the earnings is a different story. Here are the tactics I would use after they announce earnings. If they beat by a big number (20%chance) then I would do nothing, I would stay away from it since there would be a follow through rally based on the big number (Notice that I would not go long on a retracent in this event and that is because my overall bearishness on the market). If they miss by a big number (20% chance), I would wait for the countertrend rally to go short. In all the rest of the cases I would wait for the stock rally to stall and that could be anywhere between 414-440 (overhead resistance) and then I would go short. So personally I would wait after the earnings and then decide what to do with the stock.

Now those expetation are based if price stays where it is now for the next 3 days. If price for some reason goes higher. Lets say it goes to 440, then that rally would have discounted all probabilities exept (#1 beat by a big number) so it would be much safer to go short before the earnings announcement.

Confusing isn't it?