Trade Plan For Thursday-(SPY, CTRP, ULTA, BAC, C, GS, JPM, MS)
Posted on June 16, 2010 by trader21 in GLOBAL CHART ANALYSIS
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We saw some profit taking early on Wednesday after Tuesday’s big day but by late in the day we did go positive for the day. The major indices closed mostly flat but in our opinion this was more positive then another big up day. We pointed out last night we needed to hold the major long term support levels (200 day moving averages) to show us that we are getting some institutional support and that was exactly what we got. We actually pulled back near those levels and bounced. As for today’s volume, it was light, but that is perfectly ok on a pullback or consolidation day. Just because we are holding support for the last 2 days does not mean we have confirmation of an uptrend. For now this is a short term tradable rally at best and we can easily fall back below support if only average selling volume comes in.
S&P 500
Now that we are attempting to bottom out, we would like to see some news confirmations show us that this is the case. What do we mean by news confirmations? A news reversal is when a stock misses on an earnings report or has some other bad news hit the market and the stock has an ugly gap lower. This gap lower is then followed by buyers stepping in and buying the stock regardless of the bad news, pushing the stock higher. There is no purer way to see where a stock goes next then this.
Here are a couple of examples of stocks we were trading over the past year and what they have been doing lately. These are perfect examples of what can happen if you chase a stock or buy a stock when not using proper market timing. Huge whipsaws of 20% over a few days. Don’t forget these were the stocks that held up and not the ones that broke down. The stocks that broke down ended up in worse shape. If the market can finally get its footing and head higher these whipsaws should be more muted and we should be able to ride these waves instead of having them drown us.
CTRP
ULTA
We can expect some weakness in the financials in the morning thanks to the UK tax on bonuses. This could be a 1 time tax but if they plan on permanently hitting the financial names with this sort of tax the big financial stocks could get hit hard when the market prices it into their future earnings and stock price. http://bit.ly/coQzCg If this link does not work you should be able to read the stories on www.bloomberg.com in the morning.
If these names gap down in the morning(GS, C, BAC, MS, JPM) and bring the market down with it, we would like to see buyers step in and give us a bad news reversal. This could be our trigger to start re-entering the market.
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