Wow, we lost a lot of momentum today. In my previous article I illustrated why we might test the 200 day moving-average, but after today’s low volume I’m not as confident. Traders are becoming more cautious heading into Wednesday’s Fed meeting, today’s low volume is bad news for the bulls. Is the inverted head and shoulders pattern going to trigger? We are still at resistance and it will take a lot for us to push past this mark. We still have a chance to break above 1400 tomorrow but an end to our technical bounce is more likely.

If we are unable to pull through by noon of tomorrow, a sell off may begin. Again today’s volume was lower than usual…what’s worse is that we got more volume as we sold off right before the close. With the GDP results being released at 8:30am on the 30th, and FOMC at 2:15pm, what good news could there possibly be? We are at a critical point in the markets right now…be alert, we could shoot up or down from here. Wait for a confirmation and keep tight stop losses in place on all your long positions. I will likely consider taking profits in my long positions tomorrow afternoon if volume continues to be weak.

But with that said, keep this is mind:

“From watching CNBC’s ‘Fast Money’ tonight it seems that everybody thinks the market is set up to roll over here. That sentiment alone makes me think we’re headed higher. On-Balance Volume on the S&P 500 is hinting at an upside move too. As always, time will tell…” (Trader Mike)

Richard
richard@hedgeagainstspeculation.com

Woohoo! I’m done my finals!! Again I apologize for the lack of articles in the past weeks, but I hope you enjoyed Dylan and Marlin’s posts. You will be seeing more posts from them in the future, but as of today you will be seeing much more regular articles from me. So please come by more often and leave a comment or two. If you like or agree with an article let me know and if you disagree with an article, tell me why

So correct me if I’m wrong, but it looks like we have an inverted head and shoulders pattern in a downtrend. This indicator is usually the first sign that a bearish trend is about to end. Typically, a short-term uptrend will follow after the price breaks the neckline looking something like this:

Now compare the above chart with the latest S&P500 chart. This is what you’re looking for:

The head and shoulders bottom or inverted head and shoulders must follow an extended price decline or downtrend. Price makes a low which forms the left shoulder and bounces to a minor high. Price then achieves a major low which forms the head, then bounces to form one more minor high. Price declines again but does not penetrate the major low before it bounces, forming the right shoulder. The minor highs are connected with a trend line which may slope upward, and this trend line is called the neckline. An upside breakout from the neckline is the buy signal for this pattern, which confirms that a lasting low has been made and that a reversal of the downtrend has been made.

Do you see a resemblance? I think we see a bullish trend within a bear market. Further, there is a higher right shoulder, this is an even stronger signal. Some people may draw the head line or neckline where resistance is. I however drew the neckline a little bit more accurately. After breaking 1366, a short-term uptrend should have followed which we got. Now we have another obstacle to pass…the 1400 resistance. We tried breaking this resistance last Friday (April 19, 2008) but failed. After failing, a pullback was needed before testing this mark again. We made progress this week but unfortunately we’re sitting right at resistance again.With news that tax rebates are going out Monday, we have a much better chance of breaking this level than last week. This stimulus plan will begin earlier than previously announced, and “should help Americans cope with rising gasoline and food prices, as well as aid a slumping economy”. But will these rebates actually “trigger a spending spree” (YAHOO!)? I highly doubt it! This along with the inverted head and shoulders pattern should push the S&P higher, closer to the 1440 mark (200day moving average level), but anything could happen when and if we get there.

Richard
richard@hedgeagainstspeculation.com

What a week for the bulls, eh? After some nice earnings from big tech companies, things were finally shaping up. We are somewhat bullish right now, remember the key word here is “somewhat” because going into Monday, we are sitting right at resistance. We got the gap up we wanted, but we were unable to pull through and break resistance at 1390. After gapping up we did absolutely nothing! This was expected though because Friday was options expiration day, and not many traders hold over the weekend. The trendline I drew below indicates that we should test the 200 day moving average at 1430 in the S&P. If we are able to break through 1400 on good news there will be lots of panic in the market. Bears will be short covering and the indices should surge. Testing the 200MA and beyond should be no problem.

But remember traders, any bad news will drop the S&P back to the 1345 mark. Again, we are right at resistance, anything can happen…if you missed the rally, don`t just blindly get in, wait for a breakout before putting your money into a company. We are still in a bear market, so the overall trend is down. Yes, companies like INTC, IBM, GOOG and CAT all reported fantastic earnings last week, but they are all international companies. The U.S. economy is still struggling…with all these earnings due out this week, people are ignoring the Fed cut. With the markets shaping up, will they cut interest rates or will they leave it at status quo? This outcome will definately move the markets! If we do head higher to 1430 we should be anticipating for a long leg down. I still stand by the fact that we haven`t bottomed yet so be careful out there. To prepare yourself for the long leg down, I would load up on QID and SDS. I`ve mentioned these short ETFs many times before. They`re at a resonable price right now and by buying these ETFs you`re making money whenever the market heads down. It wouldn`t surprise me if we had a miserable summer and fall this year. By the end of 2008 many traders will lose confidence in the stock markets. If that time comes, we (readers of Hedge Against Speculation) should make lots and lots of money. In a bull market, all traders look like genius` but in a bear market, only smart traders make money. A professional trader makes more money in a bear market than they do in a bull market.  

Remember, the goal of this blog is to help traders become responsible traders. Hence the title “Hedge Against Speculation”. Don`t take unnecessary risks in the market, use the information we provide you to hedge yourself against any risk in the markets. If you`re unsure as to where the markets are heading, don`t guess. Engaing in a course of reasoning based on inconclusive evidence are for amateurs, be a responsible trader and wait for opportunities. I don`t want to see any of my readers lose money in the markets

Richard
richard@hedgeagainstspeculation.com

HMS Holding Corp. (HMSY) is a stock that I’ve had on my radar for the past 3 weeks. The stock has been pulling back from its recent price high at $31.60 at the end of March. As for now the stock is currently trading at its December low at $25.79. The (MACD) mac divergence, (RSI) relative strength, and (OBV) on balanced volume have all started gradually turning to the upside. A confirmation of a breakout to the upside will occur when the (RSI) goes above the 50 line and the 5, and 10 day moving averages cross. The 50 day (SMA) simple moving average is currently at $29.10 and the 200 day (SMA) simple moving average is at $27.58. HMS trades in the Healthcare sector. Based on my stock market grading system HMS Holding Corp. is graded (C). Other stocks to pay close attention to in this sector include TZIX, CRVL, RX, and NRCI. Keep your eyes on (HMSY) for a breakout above the $27.15. The stock ended the day today closing at $26.07 +0.19 or +0.73 percent on volume of 329,752.

By: Marlin Rolle

http://stockmp.blogspot.com/

Another low volume day.  Markets closed slightly lower.  I am tempted to interpret this low volume on small lower move as bullish, although I have the feeling that the market is playing it safe while it waits for a couple of the big movers and shakers to announce earnings this week.  A couple of the big banking stocks, C and JPM, as well as Merck are just some of the notable companies set to release results this week.  I know there are others, but these are the ones I know of off the top of my head.  As of right now, it’s tough to say what the market may do.  The S&P is nearing weak support at around 1320, with stronger support down at 1310.  So maybe it will hold. 

I would wait for an up move in any stocks that you are watching that moves past and stays above the previous day’s high.  Here are just a couple stocks from my watch list as well as a couple others that I saw recommended on another blog I came across.  I’m sorry, but I don’t remember which blog, otherwise I would give them the proper credit for several of them.

First off is AOC.  This stock is kind of smushed up against its 200 day moving average.  This MA seems to be acting as resistance.  I am still anticipating a slight pull back before this stock moves on to higher highs, although it is also sitting on some long term support.  I just wanted to show this one, because if it does pull back slightly and then burst above the 200 day MA, it has the potential of going up $6 of $7 to $50.  And if it pulls back a little like I am expecting, this move could be relatively quick, like in just a couple of weeks.

Next stock, just going alphabetically, is CXO.  I pointed this one out in my last blog, and I have come to like the longer term investment type potential this stock possesses.  I have actually been limping into this stock over the past week or so, so I am putting my money where my mouth is on this one.  What makes me really like this stock are a couple of things.  First off, the overall trend is up, even in a down market.  Second, it is a steady trend, which isn’t ideal for trading, but from many charts that I have seen, where the price is moving in such a way, this lack of volatile swing/retracement type movements seems to bolster the long term movement of the stock.   Stocks with this type of chart just seem to not get as worn out during a move.  Finally, if you look back even over the past 1-2 weeks, while the overall market has been in a kind of limbo, this stock continues its steady rise.  Even on Fridays big down move, this stock made a profit.  And on average volume. I am looking for this stock to go sideways over the next couple of days, because it has shown a history of not getting over extended from its MA.

Next I’ll show a chart for EGOV.  This is setting up an ideal retracement type, almost a bullish flag pattern, that is just doing a little consolidation before a possible move up to 8 dollars.  The down move has been on decreasing volume compared to the upward move.  And just before this, it had successfully broken out of an inverted head and shoulders patter (left shoulder on 2/11, head in early March, right shoulder in mid march).  It is right near support at about $6.85, so if it is going to bounce, I would anticipate it being relatively soon.  My only concern is the distance it has pulled back.  Because of this I am not entering until it makes that first breakout.

Just a couple other stocks that I found from this other blog, CSR, JASO, SOLF, and XIDE.  I especially like JASO and XIDE out of these three stocks.  JASO had a nice breakout move yesterday on good volume.  Everything about this chart is bullish right now.  And that move yesterday is the type of move I am looking for in other stocks such as EGOV.  XIDE, on the other hand is starting to give some bearish signals.  I’ll show this final chart just to point them out.  This three month chart starts right where the uptrend for this stock began.  It is starting to give signals that this up trend is coming to a close.  Mainly, I am looking at the MACD.  There is a bearish divergence in the MACD.  This is when the stock moves to a new high (on 3/26), recovers, then moves to a higher high (on 4/7).  At the same time, the MACD makes lower highs that coincide with these peaks.  This is a sign that momentum is starting to shift in the stock.  Also, this stock recovered to support at the same level that the last drawback fell to.  Do I smell possible head and shoulders forming up here?  This is pure speculation right now, and I do not recommend entering this stock on the down side until some of these suspicions are confirmed.  Confirmation, like always is key, otherwise your trading becomes more like gambling, and you will just end up hurting yourself in the long run.

Happy Trading

-Dylan