Oh man did it get ugly today (again). Yesterday was bad, but today was even worse. The selling today was broad-based and with heavy volume. This is not what you want to see. We have some big news going on in the aftermarket tonight (earnings) and tomorrow we'll know China's GDP growth, which has become a very big deal lately because it's too hot for comfort. GOOG got whacked pretty good in the aftermarket following its earnings tonight, and will likely open weak tomorrow morning, putting pressure on the market.
The US indices are all pulling back near their 50-day EMAs, which have acted as support consistently the past several months. As such, I am still viewing this pullback as a buying opportunity. In the 401k today, I made small purchases in my $RLG, $RLV, and $SPX index funds, as these are basically right at their 50-day EMAs. The weekly charts are still bullish, so I'm comfortable buying a little on weakness. These are not big buys, and I'm leaving plenty of room in case support fails to hold.
I'm not doing a new pick tonight. The carnage this week has been too broad and I want to let the week conclude and the weekend begin so I can catch my breath and regroup. I'll possibly delete a couple picks from the list here. I may also retool my approach to picking in the list. The more I think about it, the more I realize I'm a chartist first, an options player second, and a fundamentalist third. So, I need to tweak my approach accordingly. So far in this blog, I've been doing fundamentals first, then charts, then options. It's just not a style I'm feeling comfortable with.
Today was a bad day on the watchlist. My unwillingness to play ESI prior to its earnings proved costly, as the stock was up over 10% at one point before closing up about 6%. ESI left an inverted hammer, which makes me think that I'll get a chance to buy into it as it fills the gap-up it created. A close like today's, at the lows of the day, indicates weakness, or at the least an inability of the bulls to take it higher.
There were breakdowns left and right today. FUQI failed to hold support and shed another 5% today. My remaining calls are really hurting and this chart feels like it's breaking down, so I'm thinking the plan is to look for a rally to escape the calls to minimize the damage. As of right now, the call spread cut the loss in half on this trade, and if I can get a rally to unload these calls, I can cut into that remaining loss.
CBI had a nasty pullback and this trade is now back to flat. Had I entered it better, it would've been a decently profitable trade. I'm looking to exit this trade with at worst a minimal loss. The chart still looks good, but the position was entered poorly, so I might just cover the sell leg on a dip and look for the stock to hold its breakout.
CEU and EME continued their pullbacks today. Both still have further to fall, I'm thinking. IACI is testing its breakout level and has filled that gap-up. It's holding tough along with CRE, RGR, ROST, and SPAR.
GFRE pulled back to the 50-day EMA on heavy volume. I'm still liking this one. JST, however, absolutely collapsed today, down 12% on very heavy volume as it decisively sliced through its 50-day EMA. It's now right back at the breakout level at $38, and to be honest, I think it has further to fall. The 200-day EMA around $33.50 is definitely in play right now.
Position: Long CBI, FUQI, RGR, $RLG index fund, $RLV index fund, $SPX index fund,
Disclaimer: This is not a recommendation and is presented for informational purposes only.
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