AIG - Stock under accumulation

American International Group - AIG looks to be under accumulation by big players. Any break above the ascending triangle will cause the price action to spring up due to the huge number of buy stops placed at the breakout region just above the triangle by traders (see chart below). AIG, however, remains a short term buy trade due to the huge amount of overhead supply. There will be another low risk opportunity for you to purchase the shares on a secondary test of support. Perfect stock for "buy-and-hold" investor to load up, IMHO.

More downside risk in the weeks ahead

These are gloomy times for the markets and investors but not so for traders as good money is being made as the markets appeared to be trending lower. Rallies to resistance were pounced on by new short-sellers and desperate investors wanting to dump their stock holdings. Many stocks from different sectors are already at favourable level to initiate low risk shorts. I have an earlier post here last week (click to read) whereby i had discussed on the failing energy sector as oil prices look like they are ready to drop as dark clouds loomed over the weak economy. This is a 'short the rally' market. Any bounce in prices are good opportunities to offload your holdings if you are still not in cash position. Do not fight the downtrend.


ERY Drexion Daily Energy Bear 3X

LVS - Las Vegas Sands

APKT - Acme Packet Inc.

CAT - Caterpillar

GE - General Electric; widely know as the bellwether stock of the economy was seen leading the charge down through the 200day MA. Definitely a sign of bad times to come.

Prices for precious metals are also breaking down as the Greece fiasco played out in the media. The markets are forward looking and I believe they are already pricing in for a higher US dollar environment. I have no idea what it will mean for Greece though but the markets apparently doesn't think its good !

Gold

Silver

The financial sector looks beaten down. However i wouldn't touch them yet. I am keeping a close watch on the financial stocks for any signs of life as they should be the sector that will lead the economy out of this bearish market.

Good weekend to all.

Dow Jones and S&P500 - Updates

The Dow Jones Index was down 200 plus points and then managed to craw back 150points to close at -59pts on 23 June 2011. Even so, we are still in bearish territory. While the market's huge reaction to the initial sell-off was huge in the final hour where it pare most its losses for the day, we need to see a follow-through higher in order to confirm that the market is indeed displaying strength and rebounding.

Dow Jones Index

S&P500

Overall, I remain bearish on the markets.

American International Group - Good Buy at Current Levels for long term investors

American International Group (AIG) looks to be a good buy at current levels! In my opinion, this would be a good time to be a position trader for this particular stock. The confirmation to buy AIG would be when it breaks out of its triangle and closed above the red Kijun line on my Ichimoku overlay. One could nibble a little bit at this stock and then add more as it goes higher when it breaks out of a proper base.

Keeping AIG on my watchlist.

Lower pump prices to come - Energy sector next to drop

Dear Readers, I saw many topish patterns two months back and have actually called a top to the stock market in my many subsequent posts. Please click to read: "Go Defensive, protect your capital" & "Possible trend change in the making". According to the charts, the energy sector looks like the next to drop as the topish patterns are setting up for more lower prices to come, in my opinion. For investors with long positions in the energy sector, my advice is to sell, sell, sell !!

A few days back, pump operators had actually jack up the retail price of petrol. I can't fathom the rationale behind the raising of the prices. It doesn't make any sense at all. Perhaps the last draw of the blood from the general public? I foresee cheaper pump prices to come. One just need to take a look at the charts below to understand. A top takes many months to form and the energy sector now finds itself at the edge of the cliff whereby a little nudge would start the free-fall.

Direxion Daily Energy Bear 3X shares (ERY) has an inverted Head & Shoulder patterns formed over many months. Look at the volume for the past few weeks. Goodness me.... I repeat: investors who are long energy sector, SELL !!

For those of you who are not comfortable with shorting the market, please go into cash position. Good weekend to all.

 

Art of Trading - Flexibility, Discipline & Patience

Trading is very dynamic. Traders who adopt a wishy-washy mindset are those who who really excel and stay in the game. Nothing is cast in stone in the world of trading and perhaps this is one of the reasons why many people do not embrace the finer art of technical analysis and trading. They give up practicing technical analysis or even trading altogether after setbacks. Many are too fixated in their long or short bias that they forget the most important goal of all; which is as traders, they are supposed to follow the way of the market instead of arguing with the tape / charts !!

Adopting a strict discipline mentally will allow a trader to overcome his fear of the market taking away his paper profit by adhering to his sell rules as dictated by his trading system or style. Jumping at early profits would only compromise the "letting your profits run" rule. It takes discipline to sit on your hands and wait for the desired move to end before closing your trade. The right patience is also required to make the big money as the market takes its time to play out the move. More often that not, we may be right in our interpretation of the movement of stocks but we beat ourselves by failing to sit tight. This was rightly pointed out by Jesse Livermore in one of his many famous quotes: “It never was my thinking that made the big money for me. It always was my sitting."

Whether you like it or not, there will be times whereby your favourite trading setups will fail. One should be flexible enough to change course or even scratch (fold) your trade if your stock is not acting the way you think it should be. Staying in cash and doing nothing at all while waiting patiently for your setups is also a strategy which many of us failed to fully appreciate. It is only after one experience the painful losses when market whipsaw that one will learn to appreciate the rationale behind this strategy.

Without a doubt, trading is one of the most challenging game ever. Let's embrace uncertainly, fear and greed. Never give up.

Silver lining beneath the dark clouds - AIG

The market is now clearly in a down trend as many stocks are breaking down. However, there appeared to be one silver lining beneath the dark clouds. AIG had plunged from a high of $52 to $27 since the beginning of the year.

American International Group (AIG) looks good for a bounce trade now. It is the first week since the beginning of the year that we finally saw a potential reversal candlestick being formed. I will be looking to nibble a little bit at AIG. The fact that the reversal candlestick pattern being formed so close at the base of the Ichimoku cloud on the weekly chart will only add weight to the fact that selling has more or less subsided, for now. I will buy AIG here with a stop loss at $26.94.

AIG weekly chart

On Friday, the Dow Jones Index plunged and closed at more than -170pts. One closely watched sector, the Financials, managed to buck the trend by eking out a small gain. Looking at the chart of FAS below, one can interpret that a bounce might be coming soon. Look at the volume. At this current climate, any bounce should be sold if price action FAILED to breach the huge supply of overhead resistance. Investors would be dying to dump their shares when price action bounce.

Direxion Financial Bull (FAS)

Bank of America (BAC) displayed abnormal price action along with the rest of the banking stocks. Selling might have subsided for now. The financials lead the overall market lower and should rightly be the sector to lead the bounce as well. Do note that I am under no illusion that this is the right time to go long. We have to wait for a successful retest of its low before employing the 'buy-and-hold' strategy.

One have to be nimble and flexible when counter-trending against the down trend of the market. A worst case scenario is that the financial stocks might even be too weak to bounce at all. Trading is very dynamic and traders should employ their risk management strategies (position sizing etc) accordingly. Overall, I am bearish on the market.

Trade well, my friends.

Market updates - 7 June 2011

Dear Readers, i have not been posting as regularly as i would have loved to due to a change in my working environment. Once i have settled down, i will be looking to post more stock charts and analysis of the overall general market sentiment.

Meanwhile, let's take a look at the S&P500 chart. Do note that trading is still on at the time of this post.

Overall market sentiment is breaking down and moving lower. This has indeed become a "short the rally" market as many investors would be anxious to dump their holdings if the market does ever rally. The market is weak and might not move that high up at this moment. If you are a long trader and have no position at this moment, i would suggest that you be patient and wait for proper stock base to form before jumping in. Protect your capital is everything in trading.

If you are short selling the market, congratulations! I am sure you are making huge profit by now. The market appears to be trending lower and in my opinion, the best strategy to employ for this market would be trend-trading. Do note to trail your stop behind your profit at important level accordingly to lock in your profit. Trend traders never sell at the bottom. Instead, we milk the meat of the move.

And remember what Jesse Livermore used to say: "It never was my thinking that made the big money for me. It always was my sitting." Stocks never move up or down in one straight line. It always zig zag up or down. Have the conviction to stay with your trade and refrain from being shake out by the small fluctuation in stock price.

Not the time to be long, in my opinion. Sell into the rally!

Time to Short Sell

Dow Jones and S&P500 plunged big time on Wed on huge volume. My sense is that we could be having a near term correction. We are also seeing more volatility and the erratic price action of stocks could be interpreted as topish signals by the bear camp.

Dow Jones Index

S&P500 Index

Las Vegas Sands (LVS) retested its 50day MA and was currently rejected at the level. It has a reversal hammer candlestick pattern on high volume which to me is tell-tale signs of an overhead supply area. Price action is currently below the Clouds and is a short-selling trade, in my opinion.

The financials are breaking down again. They are looking cheap but i wouldn't touch them until they display strength again. The saying "What is low does not mean it will not go lower" really does hold true!

The chart patterns are looking increasingly like the short patterns depicted in William J O'Neil's book "How to make money selling stocks short". I have got an earlier post here. Do check it out.

Its best to be in cash if you are not shorting the market. We will have to wait for proper bases to form before going long again. Patience is the key.