GS - Goldman Sachs - Support

20 EMA broke down under 50, at key $150 support.  Break that then it's game over.

NFLX - Netflix - Overbought

Netflix - great fundamentals, growth prospects, but way overbought on daily, weekly, and monthly charts with daily RSI > 86.  Chart clearly shows a parabolic move.  Likely to break higher tomorrow in the AM for a quick pop on short capitulation and fall for the rest of the day. 

Short entry ~$110, cover half at $100, rest at $90, stop loss at $113.

Market Update - 4/10/2010

You may have noticed that this blog isn't updated regularly like some of the other trading blogs.  That is actually intended.  Over trading and over thinking is often a common mistake by traders, both experienced and novice alike.  When the trend is intact, just sit back and relax; no need to analyze on a daily basis.  I have noticed many bloggers angry and fed up with the market since the start of the run-up after the January correction.  Many believe that this run up is government induced, fake, and must crash soon.  Of course, these same lines of thoughts are repeated day after day, all the while the market is hitting 52 week highs.  Folks, we are now in a bull market, and there will be no crash.  Indexes are way above moving averages in a strong uptrend, and believe me, there will be plenty of signs if a crash were to happen.

IYR - Overbought

Catching tops is never a good idea, and I don't recommend it.  Certainly it isn't one of my styles.  However, sometimes you wait for the trade to come to you, and some tops are so obvious that they're just begging to be shorted, like BIDU and CAGC posted last week.  This week, it's the REIT index, or IYR.  How overbought is this?  Let me put it into perspective.

In the last 10 years, there was only one instance - just one, that shared the same run.  Hint 1 :  It happened in 2007.  Hint 2: It happened at the all time high.  Hint 3:  It happened a month before Bear Stearns became a penny stock.

The reward to risk ratio by shorting the IYR through puts on DRN is extremely high at the moment.  The IYR is currently at the key resistance of $50, at RSI levels that occur once every few years, at the heart of bull markets.

 

AA - Breakout

ry nice breakout today above both 50 EMA and SMA on decisive volume.  Two things to watch for here.  First the obvious, wait for a retest of the 50 EMA to see if it holds.  Second, this must break through the multi-year resistance at $15.    I believe that AA will trade between $14 and $15 in the next 2 weeks, and the earnings will make the decisive call.  If it's good, I see a breakaway gap above $15, and to $20 by the end of summer.  If it's bad then I see a potential head and shoulders playing out that will take AA back to $10.  Either way, keep an eye on the bottom trendline of the channel.   A close below that spells trouble for AA.

GE - Breakout

Late by a couple days, but nevertheless GE broke above the key $17.00 resistance and also the 360 EMA.  Wait for a pullback to 20 EMA before going long.  Most likely that will be between $16.50 and $17.00 over the next couple weeks.  Expect to hit at least $22 sometime during the year. 

BIDU - 3/10/2010

I hate this stock.  I hate it because it's everyone's little darling.  Now it seems retail investors are piling on in the very late stages of the run, weeks or even days before the collapse.  There are so many gaps in this turd that we'll have to go down to $65 just to tag them all.  Do I recommend shorting darlings of the market, in uptrends as strong of a trend as this?  No.  But it is worth the risk to buy some OTM puts?  Certainly!  Believe me, the gap at $395 will be closed sooner than you think.

We are VERY close to the reversal.  Take a look at the charts if you don't believe me.

3/17/2010 Update - It seems like the top put in on Monday will be the short term top, as BIDU is likely to retest anywhere between 500-525.  I predict that this is not the absolute high, as BIDU will hit $6xx sometime during the summer.  $700 is not out of the question.  Once that occurs, I will buy leaps as this will crash to fill the gap at $55.