Friday, May 04, 2007


OK, this up-every-day thing is getting realllllllly old.

I'm started to become disenchanted with the Russell 2000. I wasn't surprised at the recent recovery. In fact, I sold a huge block of puts just before the bounce higher started (thank God).

What bugs me is that the bounce-back pushed higher than the point I thought things would soften up again. The entire area I've shaded in green here (a closer view) is basically the "WTF???" zone. Particularly the strong finish during the last few minutes of today. Disgusting.

The $XAU is sporting a handsome shooting star, and although I've had no position in this for a while, I picked up some puts on it today. Because of the behavior of the market these days, I've focused on deep in-the-money, far-out expiration puts. Low risk, low volatility (and consequently lower profits should a miracle occur and things actually start heading down one day).

I mentioned CRDN yesterday as a possible long. The awaited breakout took place today, although on unspectacular volume.

ONT, mentioned many times here as a long, had a terrific day. The volume in the past few weeks is sensational.

Akamai (AKAM) might be pushing back to a neckline, but this isn't a perfect head and shoulder, so no position yet. The right shoulder is higher than the left, and I tend to be a purist about these things.

Jones Soda (JSDA) got whacked today. Even so, it has a nice little head and shoulders pattern, and this could have another $8 to $10 to drop (based on classic measurement techniques).

The balance of today's offerings are basically "rollovers." That is, stocks I think have lost momentum and have a good chance of falling. They are......Caterpillar (CAT):

Hess (HES):

Noble Energy (NBL):

Potash (POT):


I've had enough. Time to hang up the charts for the weekend.


Dennis said...

With also-ran companies like DJ and YHOO getting bids, I finally conclude that this is not the time or place to be a bear. My suggestion for bears is to either stay away from the market for a period of time (1 or 2 years?) or go long for a ride. Personally, I covered all my shorts and went long SPY yesterday.

tommy t said...

"OK, this up-every-day thing is getting realllllllly old."

Further evidence of disbelief Tim? What does it take to make people believe in this move?? in fact, since we are way beyond overbot and all that,I've convinced myself that the mkt won't put in a "good" top till bears throw in the towel...look at the sentiment stuff...very little bullishness for this stage of a rally. ST pullback due, yes, nothing bigger till we break the uptrend lines/get more bullishness.

Anonymous said...

Bears giving up? NO?????

Safal said...

VLO, INFY and CTSH good short candidates for Monday.

Brett said...


Do you only play head and shoulders patterns when they have a successful retest of the neckline?

I entered AKAM when the neckline was broken.

wshhmm德州牌手 said...

Do I need to give up? From now I need to be a pig.

Geoff said...

Tim, I noticed you don't discuss your trading rules very often, but what do you do when a pattern breaks out far from its resistance?
Wait for the retest or do you have some kind of percentage that it must exceed before you think the risk is too high?
If you talk about that in your book let me know, I bought it but haven't finished reading it yet. So far it's been really helpful and I've learned a lot.

plunger said...

I still disagree with the ONT analysis tim. Yeah it had a big day yesterday, but it was all in the gap up at the open. even though it shows a gain for the day, it actually closed down on above average volume. If you bought at the open you'd be down @ 6% at the close[.15 cents], not alot, but with what I've seen in the past few weeks on this stock, I wouldn't want to be holding it with out a serious cushion. I'd have to wait for some confirmation of the gap to play it up. The volume has been big lately, but almost all the large volume days closed down.

I still believe this thing is headed lower and settles into a range of $2.10 on the low, to $2.50 on the top, But I would be a buyer of this thing if it showed upside strength of the gap and indicators moved right. It is definately worth watching.

Why do you do some charts without volume? I've always been under the impression it plays a huge role in analysis.

All my cards...

long :
TNH @ $69.88 - no target, sell on trailing stop and TA indicators.

A @ $33.41 - [since late march, actually lost $$ on this stock first trying to short at test of support breakdown]

SF - Buy at upside break of handle @ $48.50

sold yahoo on the gift Friday morning pre-market @ $34.47 after a bounce play for a 21% gain. [It was actually a value play bought on the drop last month, and the suprise news is always an oppurtunity to sell.]

TBH - no position, just like the the chart for trading [up or down , depending on flag breakout] easy 10%-15% either way

COF -[TIMS CALL}- no position,would Have shorted at retest of @$75.00 with downside target of @$70.00

short :
TRA @ 18.30 -1rst target @$16.25 , 2nd @$14.65 - stops @ $19.00

KOG - $6.18 -looking for quick 8%-10% downside, 1rst target - $5.60 -stops @ $6.45 [starting to worry a little now tho,]

BID-[TIMS CALL] - june50 puts @ $2.65, targets of @- 1rst-$47.50, 2nd- $45.00, 3rd-$40.00 [following indicators and fans]

Nobody take my advice on these stocks tho, I have no idea what Im doing..

I'd would appreciate your opinion of these charts Tim.

Debbie Davis said...

Hi Tim,
I'm seeing yesterday's action on ONT as a BO of a bull flag with and immediate retest of the breakout. We'll see next week. I'm looking at AIV as a H & S top, but I'm unsure where to draw the neckline, especially since the right shoulder is higher than the left. ~$53.50? Thanks!

plunger said...

Brett said...

Do you only play head and shoulders patterns when they have a successful retest of the neckline?"

I know Im not Tim, But thought I'd give my 2 cents, Hope you don't mind Brett.

First, I don't consider this a H&S pattern either, too many flaws. I do agree with the downside trade tho. [What I see is two rising wedges that failed, with both reaching their exact targets. 1rst =@$9.00,[$55-$46] 2nd= @$10.00[$52.50-$42.50] ]

But that said, I normally will never play the first break of the neckline. I've been burned too many times there. But if I do, I try to jump the gun and get in a little early for a cushion in case you get run-in. [easier to pick a stop loss exit as well], Or buy after the retest fails on heavy volume and/or breaks the first low.
The fact AKAM has failed the 50d MA a couple of times already, and the break came on huge volume bodes well for this failure.

You may never see the "neckline". You're at resistance now, [from sep-nov 06],and start to drop from here, tho doesn't seem likely. you've got the 200d MA to deal with or you could run -in as far as $47.50 or hell maybe $50.

I'd personally use an indicator to tell me when to bail.

good luck tho, seems like a good trade,

Don't listen to me tho, I have no idea what I'm doing.

plunger said...

ONT could definatley be pennant breakout but it's got to be confirmed with better conviction than a gap that closes down on the day. I don't see the retest yet either. But I will say if it does test and then move , I'd be a buyer then.

AIV is a really nice looking chart as well. Lots of downside volume. I'd just play the failure of the 200d MA and bollinger bands tho.

beanie11111 said...

Bear charts don't work in bull markets. Tim, that's why your bull charts appear to work so well.


plunger said...

beanie1111 none of your charts work in any market obviously. The only specific stock pick you gave on this site as a long, is DOWN like 30% or better since you made the call! booyah! or in your case boohoo! Thats not a record which allows alot of room for gloating.

you must a took quite a "schlacking" on that one?

By the way,you wouldn't know good chart if it walked in and ate that dead dog of yours.

how about another pick? Put up or shut up time beaner111!

beanie11111 said...


not to worry. Pay attention on Monday and i will give ya a super stock on the verge of exploding upwards.

Yuri said...

Tim has said the most intelligent and practical thing I've read on this blog lately - (and I paraphrase)If the market went up, but my shorts, and my portfolio in general, held their own, then that is a good day. In other words, I will have my day. If the market is about to correct (and jeez, 22 of 25 days up), best to be short what hasn't been performing well and what has run up parabolic and obviously gotten ahead of itself. One thing I will say - my buddies that trade Grandma's money by buying Iron Condors on the Indexes, have been getting blown out of their Bear Call legs most every month since July - frustrating!
Short selling stock lately just plain sucks - no sooner do you turn around than another M&A deal is announced. I was being fairly successful trading the weekends - buying midweek, selling on Friday, and shorting on Friday and covering Monday, Tuesday. The statistics will back me up - contrary to public perception, traders do NOT typically sell on Friday and return on Monday ready to buy. But just about every Monday for months now has seen the announcement of yet another M&A deal. Anybody that thinks that the Central Banks, and our own Fed can get away with this loosey, goosey monetary policy, needs to go back to school and study some economics. Look at China & Japan for example - if you asked me, it will be China that sets off the next worldwide financial crisis. If they don't reign in their money supply (and God forbid , they hurt their own export business), we are going to have to coin a new word for the kind of inflation that is ahead - I was toying with the terms "speedoflation" or "nucleoflation".
Anybody recall the recent rumors that the Peoples Bank of China might raise interest rates, causing a 500 point drop in the Dow? I will tell you bears, categorically that the best is yet ahead. If you have the discipline, like Tim does, to stick to your guns and stay short when the market is so stretched out like this(obviously, there are ALWAYS weak stocks in a bull market), and be well-positioned when the proverbial s__t hits the fan, you won't be able to count the windfall profits.
But if you think that you are going to wait till that day that the dow opens 400 points down (yes we will know what went down in Asia long before our markets open), and buy your puts like every other sad fool out there, then the market will be happy to take your money - first by overcharging you 15-20% for your puts, and next by counter-rallying and whipsawing your ass right out of your money. So if you miss the first big drop, my suggestion would be to wait until all the fools who think that this is just another buying opportunity, and run out of either money or the desire to buy anything more - then when the last bull has spent their last dollar, go short like there is no tomorrow!!

NewEquity said...

This bull market you speak of really hasn't moved much since 2000 so I would expect the Dow 14k(only about 6% up) to be here in no time. This bull has not even started to rear its head up if you look at the chart. People are just now getting back to breakeven after losing everything in 2000-2002 and counting inflation, so you really think we are due for a correction? no. Sorry guys and tim.

beanie11111 said...

we are due for a correction. next week could be it, for the sake of the shorts. the QQQQ has topped.

Anonymous said...

how long has everyone said we are due for a correction??

Tim Knight said...

I really appreciate everyone's words of support, particularly Yuri's. I can't think of a time I've been more demoralized about the markets.

I honestly wasn't born a permabear. My problem is that I see the markets rationally, and they are not. One look at an $INDU chart tells you things have gone insane.

What galls me is things like the home page of CBS Marketwatch this weekend, where it declares not that stocks might go up, or that they will probably go up, but that they WILL go up (I swear to God, it says "U.S. stocks will push higher next week.") So we're at the point now where any charade of humility is long past. The bulls see a never-ending push higher as inevitable.

plunger said...
This comment has been removed by the author.
ctkwtk said...

$BPINDU @ 93.33%. Double-topped with Jan. '04, after the big '03 run-up. Only laggards HD and GM keeping it from 100%.

plunger said...

Buying S&P calls, selling on stochastic break.

John said...

It's probably not even worth talking about, but a poor unemployment # basically spelled the end of the 2000 'comeback' rally in September 2000.

We moved up on the report that day, and closed higher, but that was the top.

Of course, this post can be rendered pointless if we move up on Monday.

Anonymous said...

check twtc for a short, inap and ceco for a long ride.

Happy Trading

plunger said...

adding to earlier post; daily cubes look week, but weekly cube chart show bullishness. just closed outside upper bollinger band for second day, indicators don't show break yet , so correction could be short lived if at all. July 46 put @ $1.03 now

hope and fear

beanie11111 said...

oh man, if the bears don't come out and play this week, they are finito!!!! Gone gone gone, found on road dead.

beanie11111 said...

BRLC the next DELL?

Get on board of the 'Mother of All Short Squeezes'!!!!

8.47 right now.

We wanted you in at $7, but here is ok too.

plunger said...

Out of TNH at the gap open this morning. Nice quick profit and shorts are moving as well.

I noticed today that even as the NAZ was up the QID was up as well. MAybe signs to come..

QQQQ puts still cheap @ .96 now

plunger said...
This comment has been removed by the author.
plunger said...

BID puts getting hammered on earnings news, stock moving up fast.