Worth every bit of headline...

We had a little hope yesterday!   We hoped that the market today would at least close flat and not to lose any ground on the day following a rally.    Boy did we close "flat"!   To summarize the action today, it was simply breathtaking.    There are basically two parts to today's theme.    The first part is of course the 'trading part' and as long as you had a little merchandise from the day before, or played just about anything intraday, you'd come out on top.   This is good because everybody is making money today, even probably the shorts!   Why?   We are assuming some shorts would be smart enough to cover today and booked some of their profit.   This is least important as it's really about the possibility to trade and make money into the New Year, not just today.    The second part is the psychological part!    Yes, the rally today does resemble the rally we had two Tuesdays ago but both rallies do seem a world apart.    Today's move is followed by a very strong move off yesterday and this is a very bullish sign.   This tells us that there can be momentum on the upside, and this market isn't just a one way ticket down.    Over 500 points were made in two days' worth of trading.    You can attribute some of those point gains to short covering but shorts cover for a reason don't they?     Now granted, we've come from a very oversold condition that is almost a month long, and today doesn't guarantee the end of this downturn.     However, odds have dramatically improved that we have just witnessed a bottom couple of days ago.     Basically, we need to fall more than 500 points just to reach the previous low and somehow we don't think there's that much more merchandise left for people to dump.     Even the financials, all of them, had a great day today.     Ok, we aren't going to get too cute with the financials and we still don't think they should be on our playlist, except GS here and there.   However, seeing the financials behave the way they did today does inject some much needed confidence back into ourselves which benefits our trading with other names.

Let's talk about some names....    First of all, the rally today is so broad based, we couldn't really find anything that's not working.    We'll just stick to some of the obvious and highly playable ones from our previous leaders. 

RIMM BIDU AAPL GOOG, out of these liquid ones, we actually liked the action from BIDU the best.   It does give you the best bang for the buck kind of deal.    Of course, today's isn't one of those average up days, so we'd cash out most of positions toward the end and only leave a small one in case we have another positive surprise.    The odds of this market having another great day like today is almost slim to none but we still have to respect what this market is capable of.

Solars,  SPWR/FSLR/STP, these three have become our favourites among the solar names because of their relative performance to the rest of the sector.    STP, a recent addition here and FSLR are near all time high and SPWR went up the most today.    We think given the current rosiness of this market, these names may get another leg up.     Remember, short term players will always look for plays that are fast and furious when the market is in a good mood.

Shippers, although this is the group that took the biggest damage last little while, they are being cheered for today.    We aren't looking for extended gains in names like DRYS EXM since they were beaten so badly and there's probably tons of resistance on their way up.   We'd simply be trading them in a day by day case.

ISRG, usually can pull off more than a few consecutive up days when it changes trends and VIP, a recent noted for a pre-earnings move with a NCH in sight, cashed in on one and will now feed or not feed off the report. These are of trading interest as well.  SIGM, put in an impressive Q and we will watch for a pullback here most likely.

Now, if we can only get the Asian DJIM plays joining, maybe we just will as a Chinese official said the country "will' proceed with a plan allowing individual purchases of the city's stocks.  Remember, this is a big part of the rally in the HANG this year and is also a big part of why the market corrected recently after an official said this was most likely being postponed. The HANG was up 4% overnight, large part to the activity in North America, but also to this 'will' proceed.  LFT, STV, EJ, WX, a few of the most widely played here...let's keep a close eye on them today for an opportunity.

Bottom line, the action may signify the end of the recent correction.    We aren't completely out of the woods yet but odds are pretty good that we won't go visit the recent lows in the 'short term'.     This does not mean that we have to go 100% back into this market right away.   Remember, we still need this market to find a strong footing and let it go back and forth and go sideways a bit before mounting an assault higher.   It does look like a Santa Claus rally may just be possible this year.   

DJIM #49 2007

Tis the giving season and Tuesday afternoon,  we're gonna get some in the way of a FOMC rate cut.   Following Fridays data, a .25pt cut is the most likely outcome, but there are enough still in the .50pt camp.  One thing is for certain is the decision won't be unanimous as we'd all like and all eyes and ears will be fixed on the statement attached.  Unless there is a knockout grinch punch to the market in the language, we think the market will move forward and set it's course on continuing the recent rally into the holidays and New Year.   Basically,  just get this over with and lets move on the heels of last weeks bullish days as the indices finished near the weeks highs.  Last week many quality stocks continued to get out of their bases with many more bouncing off the 50MA with follow through days.   Also, recent quality earning stocks showed some life as quiet a few closely followed at DJIM broke to new highs during the week.    They include...

MA, ISRG, AAPL,  we have always preached set ups with NCH's in place or in sight.  The market started to provide these trading opportunities once again after a long lull as these leading stocks in the past regained their lofty positions.  That's the kind of action any growth investor or just any trader wants to see and trade. 

VIP, MBT, SIGM, WDC, PSEM are the other recent EPS stocks that reported very good numbers and are now being recognized and given spurts of buying leading to NCH's almost daily.   MBT and VIP have an overweight initiation out from Lehman this morning.

SOLARS, the picture was not so clear heading into Fridays trade, but as we noted there were a couple of buy upgrades on YGE and SPWR to possibly play a part ahead of the trading day.  These upgrades definitely fueled the solars up again as many had nice days, including JASO again and STP...FSLR ran up on rumors of a contract.  We've seen the firms 'lead' this sector forward before when they start with upgrades, initiations. We might have some of that starting up once again.

Our closely followed China stocks LFT, STV, WX, EJ, EDU snailed to a 2nd consecutive week of gains since we turned our focus back on them. The volatility seems to have been removed for the time being and we started to call this group of stocks a Mutual Fund as they creep slowly higher and higher.

After weeks of trying to find a decent play, the market has started to give us plays that fit our methodology, eg NCH's and we welcome it and will concentrate on the above sorts with the usual sector (solar, china, shippers) tossed in.  It is a time for all of us to look at the 52week high lists and find more names that might provide a good trade while they trade at these levels.  You will start to find many former DJIM site names thrown around in this crop of stocks as you do your nightly homework...BOOM FWLT FSTR GEF LIFC PTT RICK TXT VE WGOV etc.   You want to trade strength and get out of any bad habits you've found yourselves in trying to trade a corrective market, such as bounces etc.  This may really be the time once again,  if we clear tomorrows FOMC hurdle in one piece.

Pre Fed

Many are lead to believe that last couple of day's action is due to the anticipation of a Fed rate cut tomorrow.     We think it's a combination of many factors that are setting us up for some really good action in this month.    However, Fed is still Fed and anything they say tomorrow can have a dramatic impact on the course of this rally.      As far as we are concerned, as long as the Fed addresses the current financial environment we are in and it's willing to adjust its policy to help the market, we basically get a green light for the next few weeks.    If for some reason the market sells off the Fed news, and especially if it's some good news, we wouldn't be hesitate to buy into the dip. 

Now the playlist...

Over 90% of the stocks on our watchlist are green and we just have to be very encouraged by the market action today, but FOMC on deck!!.  We'll get into detail of some of the action here,

Solars,  this group has been on fire since the Energy bill.   If you miss the low of the group on Thursday, then Friday would've been just fine getting into some of the popular names.    Today we are getting some really good follow through on top of the good action from last Friday.   Our top favourites are now STP LDK JASO FSLR...  we are also trading SOLF CSIQ as well to throw in the mix.     

China Plays, we are actually surprised that some of the more speculative names are still holding up and showing signs of perkiness.   This leads us to believe that there's definitely more pop to come with the whole sector.    The quality ones we like had some mixed action today with STV WX outshining EJ LFT by a wide margin.     STV has a particularly nice breakout out of the recent consolidation off very good volume and we think it has potential to return to its former glory.    We are definitely trading more aggressively toward STV after today's action.   With LFT, the consolidation is still between $23.50 and $25 and it may require some more time to really break out of it clean.

EPS winners, MELI had a very nice breakout today on very healthy volume.  It notched a nch and sits well above the recent range.    We were really hoping for an intraday dip to buy some more but it just never came.   It looks like we may just have to chase it if we want to get some more of this.  SIGM MA VIP MBT continue to trade with this market.   One thing we have to remind people that the eps winners do trade in a rational manner so the further away they move from 9 ema, the more likely that they'd stall and pullback.    We simply have to be a little patient with the eps winners and have a bit longer term perspective.     

The bottom line, this market still feels unconvinced for a rally and many people are still underinvested.   Alot of negative news are being absorbed by this market recently and all these are all considered bullish sign.    We have LEH releasing earning this Thursday and that may give us a clue of how the financial world will react, which is very important to gauge the market sentiment.

A new day with different drama....

One way or the other, it's not so easy to take advantage of this headline driven market.    Extreme emotion leads to extreme volatility and we have just witnessed two of the most volatile trading days.     Now that the Fed thing is over, we can move on and focus on events that'll shape up the rest of the year.   The big picture is that we are still in a much better shape than a month ago.   Regardless how you judge Fed's recent decision, Fed is doing something to help out the credit crunch by addressing the liquidity issues.    That to us, this the encouragement this market needs, but we have to see if it's enough.  Financial stocks are just weighing in on this market, day in and day out too much.    Soon we will get some good insights off reports from LEH and GS.   Hopefully, these two would provide the kind of certainty this market needs to get some stability from the sector.

Solar plays,  basically you just can't go through a trading day without playing these it seems.   Crude broke $90 signalling a possible technical recovery and that should bode well for the solar group again.   LDK has been active the last couple of days and think this one needs to catch up to others in terms of valuation in light of the recent development and therefore might have more leg room.  SOLF is also becoming one of our favourite to trade along with STP JASO and FSLR.  Again, remember we noted the upgrades seen recently as a possible prelude to their action as we've seen in the past.   At least, 2 more are out this morning, including one on FSLR with a $300+ target.

GXDX, this is a biotech co. similar to WX and it's based in U.S noted in the forum Oct 31.   It came out with an eps report tonight and we think it's a very good report that showed a tremendous growth rate.    The issue size was only 5 million shares.    This one also doesn't trade a lot so the volatility can be high when it comes to trading.    Knowing what they just reported, we are putting this one on our active playlist and will add incrementally when opportunity comes.  There hasn't been many good eps report from small caps lately, so this is definitely refreshing.  It will be interesting to see if there is interest in this kind of play from the market.

Turned out the prudent thing to do yesterday was to sell the gap and not just consider it as we noted in yesterdays pre trading note. The swings are wild and you have to your trading hat on or lose all or most of your gains as the market digests the rate cut and the follow up liquidity plan.   It may take a few more days and it's best we wait it out to see a trend emerge.   Again.. .."what we need to see is the indices recover and hold 13500 on the DJIA and 2700 on the NASD to start thinking of accumulating positions of substance".  This would be a start!

DJIM 50, 2007

As the year winds down with this upcoming last full week of trading, we find ourselves at the crossroads here.    We are here because there's definitely two distinct possibility in front of us.    One possibility is that we roll over from the recent gain and try to test the November low and who knows what happens after that.   The other possibility is that we stop going down right about here and churn our way upwards, in an apparent and somewhat violent manner.

Lets talk about what happened in the past week first.    The action from past week is purely centered around Fed decision and we can understand how market participants feel after the decision.  They have a hangover.  In our opinion, unless Fed surprised us in the optimistic way, this market would get sold off regardless because  as we had come off such a good 2 week rally from the November low.     In terms of Fed's decision, in our opinion, they are doing the right thing even though it may not be "instant market friendly" kind of decision.     The bottom line with the Fed is that we have the Fed on our side still.    They aren't being ignorant contrary to many people's thought and they are simply being patient to help out the financial crisis.   This of course isn't being bought by everyone because many wanted that "magical potion" from Fed that can solve all of the problems once and for all.    Believe it or not, many if not most of the problems associated within the financial sector still need to be addressed and resolved by the companies involved themselves.   In other words, market needs to do the most to bail themselves out.    This is only healthy in the long run.

Too many people are too negative toward this market and too many shorts have piled onto the recent upward momentum in our opinion.    Basically, we believe that when you want to trade this market down, you definitely want to do it with good timing.   First of all, you want to go negative really hard at the beginning of the crisis and in a seasonally slow environment.    Right now, there's definitely no saying that we are at the end of the crisis but we are definitely far from the beginning of it.     People are fully aware what the problem is and measures are being put in place to correct the problem.   It does take time.    However, you don't want to go really short when things are being fixed, slowly but surely.  

So against all odds, we think the second possibility is that this market churns upwards has much better probability.    In order for this market to dive and take out the November low, you'd need some really disastrous news or the proof that we'd go into a real recession to do that.    Somehow we just don't think any of those two things is in the cards at this moment.    At least, not during the Christmas shopping season, we might add.

Earnings Earnings and Earnings!    What more confident catalyst you need other than earnings?    We have them coming up and the way this market has been setup, anything better than the lowest expectation can cause a good rally upside.   Of course, that also depends from company to company and sector to sector.     Last week we had LEH reporting and we have to say markets reaction has been very positive, despite the drop of all major indices.     In the coming week, we have GS reporting and this is considered best financial house there is.    Again, the way it sets up is that the shorts wanted to push it below $203, which is the recent low and knock it down for good.     If this stock is at $240, we say the odds of getting sold off is pretty high regardless the earning number.    In our opinion, the trade definitely calls for the upside when the number is released.     The next important report in the coming week is RIMM.    In our opinion, the recent 20% drop from the $122 area took away any bearish surprise.    It feels that shorts have pressed a bit too early going into this report on the heels of a couple of firms analysis of RIMM.    It is "unlikely" that RIMM would report a slowdown in its business and we can almost ensure a massive squeeze if it doesn't play out the way bearish camp wanted.     There are quite few other reports in the coming week which include  NKE FDX MS BSC BBY ACN JOYG GIS... quite a few different and important sectors.   This should provide us a good picture whether our economy is heading into a recession or not.     Again, we believe in our thesis that market rarely goes into a crash into an earning season.     Basically, we'd be much more nervous being short than long at this point.

Now some plays....

Solars, is it us or does it feel that most if not all solar stocks are being setup conspicuously on Friday?   Just look at some the chart setup from some of the popular names and we swear they are all setting up for a good run-up in the coming week.     By the way, they are being setup(in a very positive way) on a day that all indices dropped well over 1%.    This is simply amazing which tells us that people want to own these things at year end.   Basically we still have a bit over a week to window dress these names and it isn't a myth that the best stocks get owned at the end of the year to show them on your book.

STP/FSLR/JASO/LDK,  these are what we considered the favourite solar names to trade last week.    With the exception of LDK EPS Dec.19th, which we are still waiting for the audit report to cast away the cloud, a start today as (independent Audit out according to LDK concluded allegations incorrect), the other three are being setup superbly going into next week.  YGE, IBD #92 is also enjoying a nice trend change.

SOLF/CSIQ, these secondary solar plays are also setting up nicely, especially with SOLF.  The 9 ema has just caught up with SOLF and the next move might be big and will likely get this thing out of the recent trend.   With the entire solar sector heating up, we feel the move is very likely to be up than down.  ESLR had 2 nice days after Thursday premkt upgrade and follow up news.

Asian stocks, as seen in charts this weekend they took the week off after a 2 week recovery, following overnight numbers from HANG/SHANG they will most likely continue to be out of favor to start the week. 

LRN, 300k volume and a higher finish on day 2 of trading. If this thing had any volume Friday, it might be already looking at the high $20's.

MELI, this is the play you only can wish we'd all bought more of before Cramers mention.   On the other hand, this is no longer a strange name to traders and with its tighter float and story, anything is possible.    Basically, this one is better now with Cramers exposure than before which is largely an unknown stock to many.    The trading in this one is rather volatile so we'd continue to be inclined to buy on intraday dip and sell into strength.   It has worked beautifully in the past so there's no reason to change the strategy with this stock.  The trend is firmly to the upside since the break at $45.

RIMM, we've been buying some late in the week looking to hold up to the earning report and then play after its EPS is digested.    Again, in either case, if this company reports a good number or the market rallies, we'd be all over this beta name along with other heavy favourites like BIDU AAPL GOOG etc.

VIP, MBT..also seemingly against all odds these were green on Friday, closing around highs of day.  Another Russian stock, WBD pulled off another impressive Q with what looks like their best EPS number yet. Again as we 've seen too many times lately, nobody was interested in earnngs, this time because of CPI data headline.   Simply, you had pockets of strength to buy...the solars, the biotech, the russian stocks late in the week despite the volatility to the downside in the overall market.

Bottom line, this is the time where you have to be playing the most popular stocks.   We have seen it that the small caps aren't exactly working so you might as well join the crowd.   The more crowded it gets with a good mover, the better.    We can even see it with some of the recent story stocks from the biotech sector like RIGL SVNT BMRN etc.   You trade what others trade, when a stock is showing upside momentum that is.   Only then, you'd have a chance to outperform others.

..firmer

Despite what at times felt like a volatile day, it came on the expected diminishing holiday volume and therefore some intraday expected yo-yo swings occurred on the indices.  At the end, the action is firmer for the last 2 days and unless the down swings are on a bad headline with volume, it is best to stick it out with some positions and look forward to the XMAS shortened week and a possible rally of sorts.  A few things occuring the past few days are indicative of a whacked out market, this is best shown in the different reactions to GS strong earnings and MS's blow up.  But this could be good news.  Possibly the best thing is bad news from the financials may be getting priced in on some stocks and confidence is climbing that the firms are finally throwing everything out including the kitchen sink and coming clean.   Now only..if the market can shake the ugly numbers from BSC due out and we'll have a clearer picture as to where we are going.   It's confession time for all these boys.    We've attached the importance of earnings this week to possibly set or at least curtail the latest slide, last night Oracle reported a big quarter on all fronts. This includes getting it finally right on what is usually their very so-so Q year after year.  Is this a forward to what we may expect from more tech firms ahead or is it just a anomaly of sorts?.  It does bring a potential boost today to techs, but this might be short lived as RIMM reports AH.  Let's hope RIMM makes it back to back, other wise this Oracle number will be forgotten quickly.  In the meantime today,  FDX , BSC, ORCL can lead the way in 3 essential  areas to a very big day....let's wait and see.

LRN,  if you took your eye off K12 yesterday, you found a surprise on your next look as it probably jumped another $1 or more.  We said this might see high 20's if it just got some volume.  Guess what....it didn't need it as hit $30 and up almost 50% since we alerted the buy in the first hour of it's debut last week.  Only regret and you could blame the weak market last week is we didnt go crazy into it.             Ah..the great trader/investor motto...could've..should've..would've!.  lol..    A pullback would be great as its up 50% from its opening price, but it just might be getting discovered so its best to watch the volume as a pullback might not be so swift for your first entry or a re-entry.   We've taken most off the table and will look for the re-entry, in the meantime we dipped into APEI after it passed it's initiation day with a few nice buy targets.  You can only dip as this is trading lightly and has only a 4.5 mln float.   With all the messes out there lately, we think these educational online plays are under radar.   Actually, they are the perfect stocks for a holiday buying frenzy if the manipulators want to drive a stock or two higher next week as in years past.

WBD, another recent buy in alert after earnings. This followed what we outlined here the past week quite well, it did look right the day before at 121 in a market where nothing was looking right and it hurled $124 for another entry before ticking up to 130.  A nice run and it did hold up well, but as we've repeated over and over lately....take what a stock gives you and walk away. In this case it was more than enough.  We'll look for re-entry here as well.  The volume has not come in yet as it has in the past on runs and so we'll look for it with a break over yesterdays high levels.

MBT,  we've been spreading out our risk lately and this means using foreign ADR plays (VIP,WBD as well), in specific regions like Russia. MBT, looked very strong yesterday and it held its break of the recent channel top.  This one can move fast and we are eyeing it back to recent highs.

MA, really beaten up the last few days on the Euro ruling for months and months to come.  In the near term this should affect MA's profits as it does not cover the majority (over 90%)  of MA's volume. Ma should get back on track after all this noise is digested.

Solars,  LDK guided EPS in-line, a downgrade and what you might have is some pressure on solars.  We'd use any negative reaction spreading to take advantage of the dips in the usual suspects.  These plays are not going away by a longshot in the short term.