May 22, 2012

Decided to day trade today because the market is still bouncing around right now. As I posted many times  in the past few weeks, I'm still bearish. Therefore, holding overnight, long or short, is just too much risk. Verifiable by my tweets, I made around 4 trades with AAPL, MA, BIDU, and NFLX; all on the short side. I closed those trades by noon, but in hindsight, it probably would have been smarter to hold them until closing. Coulda, woulda, shoulda.

AAPL

Gapped up this morning, I shorted after the gap and closed the short position when the gap had been filled. To be honest, I did think that AAPL was going to bounce and shoot up after filling the gap. The daily chart is still telling me that AAPL will see the 520's area again, but right now this stock is still a little oversold, and once it bounces around some more, I will look for a shorting opportunity.

Many stocks such as PCLN and CMG also erased gains almost completely throughout the intraday session. 

Market Outlook

Similar to AAPL, SPY, DJIA, the NASDAQ, IWM, etc. all saw a similar pattern: open strong and close red. Keep in mind that this is definitely a bearish signal and it only confirms my suspicions of a dead cat bounce. Notice the low volume and wiped out gains. My own theory is that once investors see the oversold area eases up just slightly, they continue to hammer the market by selling. 

Furthermore, the news from Greece and the eurozone is not helping.

JPM

Wall Street's so-called "golden boy" Jamie Dimon really screwed up. But his company, JP Morgan and Chase bounced quite a bit today. 

Let's investigate further.

There is absolutely no volume on this enormous bounce. Stocks do not move 4.61% in one intraday session with average volume, it's just not sustainable. Notice the chart I posted, most of the bigger candles are accompanied by a spike in volume. But not today, so is this a bottom? Obviously not. This stock is still oversold. Will look to re-short once the oversold area is cleared.

NFLX

I mentioned this stock several times on twitter and my blog. It's going lower. My target still remains in the 61-63 area, but it may see even lower. Still not oversold, waiting for another bounce to add to this short.

Conclusion

This market is completely broken, Greece will not be pumping out good news, and neither will JPM. Once this bounce is over, I'll definitely look to put much cash on the short side. 

You might be asking why I am sitting on 100% cash and only day trading. Here's the answer:

This is the VXX on a 5 minute chart. When the VIX is swinging from a negative 3% loss to a positive 3.5% gain in a single day, then why would anyone want to be holding positions and swing trading? The volatility is too high. VIX is the mother of volatility, and when the mother is volatile, how do you think the child behaves?

Market Sees Bounce While Facebook is Rejected

Dead Cat Bounce?


Yes. Dead cat bounce. I'll quote it again: "Even a dead cat bounces when it falls from a high place." My oscillator was showing some extremely oversold areas after last week ended. Of course, the word over the weekend was "oversold," but no one knew when it this bounce was likely to occur. I didn't either.

But the market bounced today. SPY 1.72% and Dow Jones is up 135 points. Furthermore, VXX slid 11%. However, let me remind you that the volume on these tremendous bounces were slightly higher than average.

My oscillator is still reading "oversold" as of today's closing. Therefore, we'll probably see some more bouncing on average volume before this market continues heading lower. Yes, I still think that the entire market is due to head lower. The news coming from Greece is still not good. In addition, France and Germany have their own problems, so in my opinion, this market correction is still not quite over yet.

Facebook

A hefty $104 billion dollar valuation clearly left this stock scarred today. After dipping 11%, it is clear that investors are not supporting the $38 dollar price and the extreme valuation. The market cap for FB is still 72 billion dollars, which in my opinion is still a little overvalued. From my point of view, the investment bankers that ushered this IPO seemed to have factored in the future "prospects" of revenue rather than current revenue. Sure enough, investors do not seem to agree. And why should they? Investors would much rather invest in a good pick right now and wait for the future prospects to come into play than to bet on these future prospects and risk their capital.

Thoughts on Facebook IPO

Facebook's upcoming and highly anticipated IPO is coming out tomorrow. It's probably the most anticipated IPO of all time I daresay. Lots of unnecessary hype if you ask me.

Valuation


Last I checked, they wanted to value the company at 100+ billion. I mean, really? It's outrageous. Some of the biggest companies with a proven history are valued much less at an IPO. But hey, value doesn't really stop an IPO from doubling in a few days, LinkedIn anyone?

Timing


As I stated in my earlier posts, the entire market is not looking good, with concerns from Greece, Spain, and China slowing down, we're facing a big correction in the broad market. So why would FB be spared the whipping? Some people are thinking that we've been selling off to raise cash for FB, but no, we're not.

Probable Fate


In my opinion, because Facebook is such a big and highly anticipated company, this IPO will do well. Many investors are probably thinking that this is the new AAPL. Some may argue that FB will be no different from GRPN, but no, GRPN was wrongly valued, AND it was a small and weak company. Facebook is wrongly valued, yes, but it is a giant in the tech industry. My outlook: Successful IPO.

Bottom line is, playing an IPO like this is like playing in Vegas. Or if you're a big risk taker, russian roulette.

Disclaimer: Buying 1 share tomorrow at the open.

Swing Short Ideas

BIDU


Big "panic" sell-off candle today on higher than average volume. Covered all shorts before closing today, will look to re-enter short on a bounce (it's oversold right now).

ADS


Breaking support, and moving averages on very heavy volume. Great short opportunity.

No real support for this stock until 100 area. Will look to enter short.

NFLX

Mentioned this stock on my past few posts and it's been treating me well for the short side. Stochastics is giving off bearish signals. And we're still not oversold on this stock despite almost 7 points lost during the past two days. I have no positions but will look to reenter this short. Low 60's, here we come. Outlook: BEARISH.

May 14th, 2012

My current holdings

Still holding AAPL short, paying off quite nicely. NFLX bounced pretty hard on Friday, did not expect an insider to be buying so many shares. It broke a descending trend line on heavy volume and it held up well today on Monday; will probably see it go down, but I closed my short position this morning on the gap down; Friday’s huge pop erased most of my NFLX gains and left me with crumbs, argh.

If this NFLX stock can't hold above the 10DMA, then I'll look to step in short again. At the end of the day, it's a crappy company with a crappy management team.

AAPL broke through 560 today, looking to test 555 from the April 24^th low. This stock is a bit oversold and we might get a dead bounce tomorrow. But test 551-555, it will for sure.

AAPL

Still short on this, we broke below and closed below 560, a small support line.

The real support zone is around 551-555, it might take a while to take it out however. Still bearish.

VXX

Let’s look at this VIX chart. I tweeted about this last night and played it long purely due to Greece's current condition. Paid off well, but I closed the position before closing.

It’s obvious that we’re going to see more volatility in the next month or so.

Broad Outlook

The Spyders broke below a support line today on weak volume. Might see a bounce tomorrow, but we’re still in a bearish region and I’m sensing lower prices for the entire market.  

Weakness in this market, but it’s not too dramatic … or is it?

HUGE WALL OF TEXT COMING UP, great insight though.

Indices

The United States economy is definitely starting to consolidate, there’s no doubt about it. How long will it last? Only time will tell.

Take a look at this SPY chart. As I mentioned before, the market wants to rest, so now we’re consolidating. An important zone is the $134 support area – give or take one or two points. Holding it will be key; breaking it on strong volume will result in turmoil. In addition, most indices ARE below the 50 DMA, thus, treading the bearish waters will require greater care. I would not suggest going long on anything until the market stabilizes again.

                                                                                                                 

Recent events have also given me a slight suspicion of the downside. The general intake from the daily headlines has been trouble. We have China posting lower data, Greece on the verge of getting shunned from the Euro yet again, and Spain creating more fear in the Eurozone with their overlooked risk.

That’s why we have the VIX heading higher – investors are simply scared.

Without question, our fear index will test the 50 DMA. Breaking through it on high volume can create huge volatility. It already broke through the descending trendline, not good.

Furthermore, JPM released some horrible news after the close, and being a significant company in the financial industry, its 5% dip will definitely create some short-term selloffs. Probably a gap down tomorrow.

Finally, we have many companies with tremendous runs in the last few months dipping as well. AAPL is a good example, let’s talk about AAPL.

AAPL

I’m sensing a gap down in the morning. I’m still short on this stock and I have been adding to my short hoard on each bounce. This stock is just not holding up at all.

Even a dead cat bounces from a big drop. Why is it a dead bounce? No volume at all. This stock wants to break that 554/555 support band very desperately.

I’m still having a negative outlook on this broken stock in the short-term. The fundamentals are still solid, so if it ever drops to 520ish, I will be looking to step in on the long side. But for now, I am short on AAPL.

NFLX

Still holding this one short. Fundamentals suck, technicals suck. Will ride until my target of 61-63.

Hope you enjoyed!