Monday, December 28, 2009

TBT While I Wasn't Particularly Looking

It has broken out of a symmetrical triangle it's been forming since October. It has even already backtested the upper line of the triangle, and it's now off to the races.

TBT is a double-short ETF on Treasuries 20-years and longer. It is a double-inverse of TLT. As those longer-dated Treasuries prices fall (thus their yields go up), TBT goes up.

There are even more leveraged inverse ETFs like triple-short 10-year Treasury (TYO) and triple-short 30-year Treasury (TMV) but they are very thinly traded for my liking.

It looks like I've missed the boat on this, but I think there's still some upside left on this leg. It can run up to $55 or so (target price derived from the height of the symmetrical triangle), where it meets a horizontal line that marks the previous resistance/support.

What's interesting to me is that TBT broke out and continues to go up, DESPITE the dollar strength (take a look at the top of the chart - that's US dollar movement). So, as I mentioned in the post a few days ago, the U.S. dollar "strength" doesn't mean investors are flocking to the U.S. dollar denominated "safety" assets like Treasuries. It is rather other currencies' weakness.

Saturday, December 26, 2009

Another Leg Up for JASO?

I played JA Solar (JASO) on December 14/15. I bought the breakout on a huge volume, sold one day later for a tidy profit. It may be forming a bull flag (a continuation pattern after a sharp movement), and getting ready for another move up.

JASO's chart is rather messy, but short-term, as you see, the resistance was around $4.90. That's where it turned back on December 8. Then for three days it declined on a very low volume. I was watching to see if it breaks out on a large volume, and sure it did on December 14.

I continued watching to see how it behaved after the breakout, and I decided I liked what I saw, a bull flag. So I bought it again, with initial target around $7.50. There is a very thin zone between $7 and $9, so it could run up to $9 in a relatively short time. The point and figure chart of JASO shows the target at $10.75. But it all depends, I think, on how the general market is going to act. (At the moment, I continue to think Dow and S&P will follow Nasdaq's lead and go up to 61.8% Fibonacci retracement.)

This is nothing fundamental, just technical. I don't even like solar stocks as a sector (I don't quite believe in a private sector that constantly needs public subsidies). But a trade is a trade, and it's a good one that makes money.

Tuesday, December 22, 2009

Other Currencies Are Sold, Not US Dollar Being Bought

Or so it seems to me. U.S. dollar has had a sharp reversal upward ever since Dubai announced the debt freeze very conveniently on Thanksgiving Day when the financial markets in the U.S. were closed.

Convenient in two ways: one, the U.S. dollar index (DXY) was just starting to bust the tenuous support around 75 to go down lower when Dubai announced its intention; it was also convenient for the commercial players in the U.S. dollar futures market, who had been net long U.S. dollar since this summer.

The sharp rise is attributed to the usual stuff: flight to safety and liquidity of U.S. dollar and dollar-denominated securities. I don't quite understand why the currency of a country whose government continues reckless spending is safe, but that's what's been said.

But is it the strength of the dollar, or the weakness of other currencies, particularly Euro and British Pound? And while the dollar has been ramping up with no fundamentals underneath it (as I can see), why aren't other U.S. dollar-denominated securities like Treasuries, agency bonds, MBS getting the bid?

When I created this chart below and took a look at it, I came to a conclusion (for now) that it is the weakness of other currencies. Why? Because it is only the U.S. dollar currency that has been bid up since Thanksgiving Day. Short-term Treasuries are flat, no bid for agency bonds and MBS, and long-term Treasuries are being sold and yields are rising. The lines represent different ETFs as proxy for underlying currencies and bonds.

UUP: US dollar ETF
FXB: British Pound ETF
FXY: Japanese Yen ETF
SHY: 1-3 year Treasury ETF
TLT: 20+year Treasury ETF
AGZ: Agency bond ETF

Monday, December 14, 2009

If Oil Is To Bounce, It'd Better Do It Now...

Here's a daily chart of UCO, double-long crude oil ETF. It's been bouncing within the channel (black lines), and it hit the lower line, yet again. Will it bounce? My bet is on the bounce, as the U.S. dollar is short-term overbought, and commodities oversold.

So I figured this might be a low-risk entry, and bought January call options (strike at $11) for a quick swing trade. My target is a bounce up to $11.75 area. There is a zone right above that level, full of gaps. If the dollar corrects some more and if traders become more optimistic about the elusive "recovery", it may go through that thin zone to slightly above $13.

The uncertainty is, again, the Fed FOMC meeting that starts on Tuesday, with the announcement on Wednesday after 2:00 PM EST. That almost always screws up the stock market movement.

Gold's Royal Pain

It's been a torture for long-term holders of gold and silver-related stocks (myself included). Every day gold spot price tried to move up, but as soon as the U.S. stock market opens the U.S. dollar strengthened and gold sold off much more than the dollar's appreciation. The stock market ended up for the week, but my portfolio cratered because of the large gold/silver/miner stock positions.

On Friday, maybe, just maybe, the slide may have been arrested. On a daily chart, GLD, gold-tracking ETF, stopped at $109.32, right above the 50-DMA which has acted as support since August.

Below is a weekly chart of GLD with three sets of Fibonacci retracement lines. GLD seems to have stopped at 38.2% Fib line from the most recent run-up, which is about the same as 50% Fib line from the breakout from the long-term resistance (and therefore now hopefully a good support) around $100.

One great lesson for me was that I have to remember I am trading the paper gold and silver (ETFs and ETNs), not the physical gold or silver. I could have sold all off near the top and bought back, say on Friday. Transaction costs are negligible. But I held on to them as if they were physical.

Oh well. The gold spot is currently up $8.40 at $1,123.50. We will find out soon enough whether the gain holds when the U.S. stock market opens.

Thursday, December 10, 2009

Big Move Coming: Bollinger Bands Tightest in 2 Years

so says They are hoping to trade the break to the upside, but are also ready to trade the short side should the break be to the downside. And they are urging us to be ready, either way.

Here's a partial screen capture of the bollinger bands on major indices from their newsletter on December 9, 2009. The anticipated big break didn't happen today. Thrill and suspense. I am yet to get ready for the short side though.

And here's the link to their Wednesday newsletter. You can sign up at their website to receive the newsletters for free.

They also mentioned trading ideas in the newsletter. Two of them happened to be the stocks I've been watching to enter on the long side: IBM and POT. Other ideas that looked interesting was ALB, JASO, and GD (all long), and NKE (short, but only if the general market breaks down). Please do your own DD.

Sunday, December 6, 2009

Gold Correction? Consolidation?

After tagging the all-time high of $1,226/ounce on Thursday last week, gold crashed on Friday on the strength of the U.S. dollar after the November unemployment number was announced. It sold off more than just just the dollar strength. The rumor was that the investors had margin calls and sold gold.

I don't know if they were margin calls on gold trade or the U.S. dollar trade. One possibility is that investors who were short U.S. dollar had to cover and unwound their carry trade (long gold).

A correction was overdue, as many say, as the rise after the October breakout was almost vertical. The candlestick formed an inverted hammer last week, indicating the trend change. The question is, how low will it correct?

This is a 3-year weekly chart of GLD, the ETF that tracks gold price. On Friday, the fall was arrested near 61.8% Fibonacci retracement from the long-term support (and neckline of the reverse head and shoulders) to the Thursday top. Since the rise in the past three weeks was particularly rapid, it could retrace back to 38.2% Fib, around $107, filling the gaps.

Slow stochastic (60,3) is still above 80 on the weekly chart, though it may be breaking below the recent trendline support. AROON's red and green lines are still very much apart, though this is a lagging indicator.

Looking at the previous breakout and correction (blue Fib lines in the chart), the level from which the breakout occurred held in the correction ($68.80). If that were to happen again, then the $100 level should hold.

The general market has been very volatile intraday these days, and the bollinger band on the major indices are contracting on the weekly charts. (Take a look at the latest newsletter about general market from Wait and see seems to be the name of the game for now for both gold and the general market.

Tuesday, December 1, 2009

What's With AAPL?

Apple (AAPL)'s relentless march upward since March this year seems to have stalled for several weeks. 7 weeks, to be exact. After the stock jumped on the earnings report, it has stayed in a narrow range for the next 6 weeks while other Nasdaq beta stocks like GOOG, AMZN, PCLN just keep going up.

AAPL may be forming a flat base. Just maybe. The volume in the past 7 weeks is low, with one distribution week. A flat base, if I remember O'Neil's book (How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition), is one of the most potentially powerful base from which a stock could explode upward. If that's the case, the breakout point is $208.81, 10 cents above the base high.

Here's a 2-year weekly chart of AAPL. AROON (a lagging indicator) green line is drooping down to 70, entering a danger zone of potential sell-off. MACD and slow stochastics still look good enough, with no diversion. The candlesticks on the chart for the past seven weeks are getting tighter, after initial swing up and down.

Chicken Little in me says "It's going to break down big (and take the market with it!)!!" But if this is a flat base, or if this is a super-deep cup (that was formed over 18 months) and high handle, the target price is somewhere above $300 (depth of the cup added to the handle break). ($300?? Yeah right... right?)

I frankly don't know what to think. The last time AAPL stayed at the same place was back in June this year. It was floating around $140 for 6 weeks, and on the seventh week it burst upward. I caught that ride up. Could that happen again? We will find out soon enough, I hope.