SMALL PULLBACK

There is really no big change from yesterday's posting. The market pulled back a bit today, but most stocks held their support levels. The Gold Minors sector made a nice jump today. I'm close to making a call to get back into gold. Wait for some confirmation. GDX, NEM, and AEM are all just sitting below their 10 day MA. RGLD and ABX closed above their 10 day MA. I do like the latest pullback in these stocks. If they trade higher tomorrow, I would consider that confirmation. I would also classify this as a short term trade. I would look to take profits if they approach their recent highs. That's if they even give us confirmation tomorrow. IBM is sitting on its 50 day MA. I'll give it one more day to get back above $120...maybe two days if tomorrow looks promising. AAPL still looks okay. Most of the picks from yesterday still look okay.

HERE WE GO AGAIN!

Lately...every time the market snaps back from a sell off, it ends up going to a new high. If this pattern is going to continue, we need to get in soon...before it gets to a new high. I'm there with a lot of you...you just don't trust any moves higher. Although it has been hard to do, I am trusting this trend until it breaks...and I haven't seen it break yet. This was a nice rally off of support which was lead by the Financials, Energy, and Technology. GS, JPM, WFC, and PNC could be a nice short term play in Financials. CHK, APA, APC, NOV, KWK, HAL, XTO, RIG, and PQ in the Energy sector. I've liked the pattern on IBM lately, but it had a bad move down today after holding tough during the drops on Thursday and Friday of last week. If it can't get back above $120 in the next day or two, I would suggest walking away from that trade. AAPL is rebounding nicely. It is almost easy money when trading AAPL after a pull back. AMD looks good. Wait for SOHU to close above its 10 day moving average...that would be some nice confirmation. BIDU look like it will make another run. I still like HLTH if it can finally breakout! EQIX, GOOG, YHOO, and AMZN all look nice. Obviously, I'm expecting some follow through to this rally...that has been the pattern. Don't get crazy though. We still only want to risk a small about of our cash to play some of these moves. We'll take the extra money if the market wants to give it to us...but we won't position ourselves to get wiped out if it doesn't. Look to start selling portions of your positions when either the market, or individual stocks start to reach new highs. I must emphasize that this is a very short term outlook. We kick off earnings season in about two weeks and I think it could get brutal. This might be the last push...the suckers rally. We'll either be market suckers...or market spankers. Be a market spanker!

THIS SECTOR COULD RALLY BIG TIME

The markets continued to sell off today, but it was encouraging that the move down was lighter than the previous two days...and the volume was a bit lighter too. I still don't recommend any bullish positions until the market proves it is done falling. IBM continues to impress me as it holds that $120 support. Technology has been weak lately...but if we get an up day in the market, IBM could really take off. Also watch AAPL. If it holds support at its 10 day MA, it could start to move back up. It didn't really drop much on that RIMM news...at least not yet. I am also keeping a close eye on the Energy stocks. I still like natural gas...CHK, APA, and APC. Watch the developments arising from the Iran nuclear program. Go to your favorite news channel or read some articles to get up to date as to what is going on there. If this situation escalates, it could cause oil prices to go through the roof. You might need to make some money with some of these trades just to afford the gas for your car! I'm not saying to run out there and buy these stocks right now. These conflicts can last months before they escalate...if they end up escalating at all. If an uptrend is in place on some of these stocks, you should definitely look to buy into the trend. In other words, let the trend dictate the trading decision...like it always should. More than anything I want you to be prepared. If something happens, you'll be ready to go. Some of my favorite trends include NOV, DVN, EOG, KWK, CLR, HAL, and ATPG.

THIS IS GOOD!!!

We want this sell off. I'll repeat...we want this sell off. It has been hard to continue to buy into this trend. We want the market to pull back and give us some better trading opportunities. When stocks start to get too far away from their 50 day moving average (above or below it), they will begin to move back towards it. Many stocks have pulled back to this average over the last two days. We will wait to see if the 50 day MA holds as support for a lot of these stocks. For the S&P 500, we will look to see if the previous resistance of 1038 will hold as support. The VIX spiked up today, but closed just below its 50 day MA. Those are the things I will be watching for tomorrow. This sell off should not have caught you by surprise. I talked last week about the VIX hitting the support around 23 and all the divergences in the technical indicators. You could try to buy puts in this sell off, but the safer trade would be to wait until the sell off completes and look to buy back into these uptrends. I hope you listened to my recommendation to sell out of RIMM going into today's earnings announcement. RIMM is currently down over $12 in after hours trading. If you stayed in the trade and didn't take any profits, this move wiped out all your gains...and then some. IBM still looks very good. It closed up a bit today and it is holding support at that $120 price area. It is also sitting on its 10 day moving average. I still like natural gas, but wait for confirmation. I've soured a bit on the Homebuilders. I might come back to them if they breakout of this latest pullback. I still like BIDU and SOHU...but wait for confirmation.

REVERSAL!!

That was quite the reversal today. The DOW was up 87 before closing the day down 81. That is a 168 point move down from the intraday high! These types of intraday reversals usually have some follow through. I would expect the market to continue to move down a bit tomorrow. If we can hold at today's lows and rally up tomorrow, it would again signal the strength of the uptrend and you would want to buy into that type of move. I would like to see another drop like we had in the beginning of September and the middle part of August. This would create very nice buying opportunities and allow the market to adjust from its current overbought condition. Most of the patterns I gave you yesterday pulled back today...some more than others. If you got into any of those trades, make sure you have defined your risk (stop losses) in case the sell off continues. For those that didn't enter any of those patterns, keep those stocks in a watchlist and wait for confirmation before entering any trades. I like to use something like today's intraday high or today's opening price (whichever was higher). If the stocks are able to shake off today's move and rally above today's high, it will have reversed the sell off in one day. This (combined with the overall trend of the stocks) would indicate some nice confirmation to get into the trade. If these stocks continue to sell off in the next few days, you could start to look for new entry techniques using many of the ideas I taught you in the course. Try not to buy if these stocks keep falling. We don't know yet how far the correction will go. Keep an eye on the 10 day MA. We haven't been below it since the beginning of September. It could be an early signal as to the depth of this retracement. One quick note on RIMM. It has made a very nice move since it broke out of it's triangle pattern (about a $10 move). They are set to report earnings after the market close tomorrow (Thursday). You should consider getting out of most of your trade before the market closes. This stock could break in either direction after the earnings announcement is made. Why risk giving back a large chunk of your profits if it sells off after the announcement? Keep 1 or 2 contracts, but sell the rest. You option should have doubled or tripled on the $10 move it has already made. Remember the old Wall Street saying...Bulls make money. Bears make money. But pigs get slaughtered. Don't get too greedy.

JOIN THE "FOLLOWERS" SECTION

For those that are new to the blog, please join the "Followers" section. My goal is to have that section increase each week. We are currently at 61, but I know there are more that are following this blog on a daily basis. You don't have to post your picture if you don't want to. Thanks.

BULL MARKET

Sorry for the lack of postings over the last few days. Not much had changed from my Wednesday (last week) posting so I figured I'd take a few days off. I'll try to make up for it today. Thank you for the success stories. Please keep those coming. It is the main reason why I do this blog. These stories help students see that this system does work. It also helps to motivate those that may not be putting in the necessary work to succeed. We are definitely in a bull market right now. Most of the traditional indicators have triggered. There are still some that want to wait for the Q3 earnings before they buy into it. We are nearing the next resistance area on the S&P 500 (around 1085 to 1100). There are a lot of nice patterns that I see out there. I will give you a rather long list of stocks to watch. I am tempted to encourage you to put more of your cash back into the market, but I am a big believer in Murphy's Law...it must be part of my Irish heritage. I know that as soon as I recommend you put more cash to work in the market, we will end up getting the big drop that I have been worried about over the last several weeks. Because of this, I won't be recommending that you put more cash to work in the market. I'm in a better position if you end up making less money than you could have...rather than losing more than you should. Before I start the new list, let's look at some of the past recommendations. I think CHK, APA, and APC still look great after their brief pull back. Those trends look like they will continue at least a bit longer. JRCC, BTU, MEE, and ANR have strong patterns in the coal sector. If SOHU stays above its 10 day MA and it gets back above today's opening price, there could be another entry into this trade if you missed the first one. IBM is also in a nice position for a new trade. Use a closing price below $120 as a stop loss. I still think if it holds $120 as support, it will take off from here...to at least $126. Any pull back on AAPL could be used as a reason to get in. It hasn't been pulling back much at all. I've noticed some very nice bullish ABC patterns in the Homebuilders sector. I like TOL, DHI, BZH, RYL, KBH, LEN, and PHM. Many of these patterns still need some confirmation, but a lot of them have pulled back to their 50 day MA and the 50 day MA is turning upward. I love the reward to risk in those types of trades. Other energy related stocks I like include DVN, NOV, EOG, CLR, HAL, DO, RIG, BEXP, ATPG, and CSIQ. In the Agricultural Chemical sector, I like MOS, AGU, and TRA. In the financials, I like the patterns on C and WFC. I also like several other financial stocks, but a lot of them need to pull back or retrace a bit before I would want to get in. I like the patterns on LVS and MGM in the Gaming sector. There is a nice triangle pattern on HLTH (wait for the breakout). I also like WDC, PMCS, ALTR, and INTC. Some stocks from my Market Trend Signal (www.markettrendsignal.com) scan include RDN, VCI, FUQI, JNY, ANN, SOA, SWKS, NTES, EJ, FFIV, ALK, and MDR. Make sure you use the trade management techniques I taught you in the course for some of these recommendations. I know there are a lot, but it has been about 5 days since I last posted. With the market pulling back a little, it has created some buying opportunities. Watch the market tomorrow. If we have any sort of sell off, wait for confirmation before entering any bullish trades. We don't want to buy while things are still falling. I like to buy when the stock is moving in my expected direction.

SUCCESS STORY

Jerry,

I learned a lot in your basic options class and have started to do some trades. Your blog has been a great source of trade ideas and strategy. I bought AAPL option for 5.94 on the morning of the 15th, then sold for 10.57 towards the end of trading on the 16th as it started to pull back. A 78% profit in 2 days. Thanks!

-Evan

NEXT RESISTANCE 1100

The next area of resistance on the S&P 500 is at the 1085 to 1100 area. IBM made a nice move today (up $2.50), but it gave most of it back in after hours trading. We'll see what happens tomorrow. If it doesn't sell off below its 10 day MA, it could provide another chance to get in. Remember what I said earlier...if it breaks above the $120 area, it could really start to move up. Although it did close above $120 today, it dropped back below it in that after hour session. AAPL made a big move today. Those that got in yesterday are up big today. If you got in this morning, you still made some money as it continued to move up about $3. If you got in yesterday, you were able to take advantage of the gap up in the morning...an almost $7 move from yesterday's close. Energy stocks continued to make good moves today. The natural gas stocks I recommended (CHK, APA, and APC) have continued to make big moves. APC was up over $5 today. APA was up over $3. RIMM was up another $1 and SOHU up another $2. If you made any of these trades, please send me a success story. I'm happy with most of these gains. I'll hold on to a few contracts in case we continue to move higher. I've taken a lot of the profits off the table. This is not a good area to get into any new trades. The VIX actually moved up a bit today. That is a divergence since the market also moved up. That 23 support seems to be holding. This could mean that a sell off could happen soon...maybe even tomorrow. Watch the DOW and S&P futures in the morning. If they are down, we might sell off a bit tomorrow. If they are up, see if we rally up to that 1100 resistance area. If we move up tomorrow, watch the VIX to see if it continues to move up...or if it breaks below that 23 support. If it breaks below 23, this uptrend could continue a little longer.

I TOLD YOU SO...

Natural gas continues to make a nice move. Since I mentioned it on the blog last week, the natural gas stocks have been on a tear...CHK is up $5, APA is up $4, and APC is up $4. Some other recent picks include SOHU (up $3 since the breakout) and RIMM (up $5 since the breakout). I mentioned the coal sector yesterday. JRCC is up $3 over the last two days. PCX is also up over $3 which is a 30% gain for this lower priced stock. I talked about BIDU in some of my classes. It has gone up over $55 since I mentioned it. It's time to take some profits off the table. I know I sound like a broken record, but if you aren't taking profits, you aren't trading properly. The VIX is sitting right at 23...the same place it was on the July 24th low. The problem is that the market has moved much higher than its July 24th high (remember that the VIX has an inverse relationship). This could be looked at as another divergence....combined with the divergence in the RSI, MACD, CCI, ADX, PPO, OBV, MFI, etc. Many of these stocks I've mentioned are a bit over extended for new entries. I think AAPL and IBM could still be in good entry areas although a lot depends on how they open tomorrow. If they gap up in a big way, don't chase them. If they move down in a big way, we are probably having a sell off in the entire market which could bring the price down much lower...thus creating a better entry point.

ENERGY AND TECHNOLOGY ON THE MOVE

I brought up the natural gas stocks last week as a possible trading opportunity. Even though I was a bit late on the recommendation, the natural gas stocks have moved nicely over the last three trading days. Many energy stocks have had similar moves. The coal sector had a nice move today with Patriot Coal (PCX) moving up 22%! One of my favorites stocks in this group is JRCC. This whole group should be watched over the next few weeks...but be patient. The divergence in the market continues. We reached another yearly high today in the S&P 500, but the technical indicators continue to show lower highs...and they are near overbought conditions. The trend is still up so we will continue to look for bullish positions until that changes. RIMM had a nice move today. It is up about $3 since the breakout. If you have several contracts, you might want to sell a few to lock in some of the recent gains. SOHU broke out of its triangle today, but the volume was on the lighter side and the breakout wasn't huge. If you bought the breakout, you could use the lower support line of the triangle as the stop. If you didn't buy the breakout, you might want to give it one more day for confirmation. Another pattern I like is IBM. Its formed a bullish ABC pattern over the last few weeks and today it moved above its 10 day moving average. If it breaks out above $120, it could really take off. AAPL could also be ready to move again. Look to see if it can break above $174. Thanks for the success stories. Keep them coming.

SUCCESS STORY

Hi Jerry,

My name is J.J. and I am currently taking your Options Basics course on Wednesdays. I was checking out patterns at the end of July before our class had even started. I had read Jesse Webb’s Option Magic book and knew a little about ABC patterns.

I saw that TIE made a move starting on 03-09-2009 and ending on 06-11-2009. It was a 185% move from 4.04 to 11.52. An ABC pattern formed between 06-11-2009 and 07-13-2009. I didn’t know it at the time, but since we have been talking about Fibonacci retracement levels, I see that it retraced exactly 56.4% of that move. I watched it for a while and then bought two September $7.50 calls on 08-04-2009 for $1.50 each. It chopped around until 09-02-2009 where it began a strong upward move. I put a trailing stop of .10 under the bid price this morning because I knew I would not be able to monitor it closely. I ended up making a 44% profit when I was stopped out at $2.38 this afternoon.

I am absolutely loving the class and learning about your option trading techniques. Looking forward to next Wednesday. Thanks for your great instruction.

JJ

BIG DIVERGENCES

Look at the RSI and MACD divergences taking place in the market. As the market goes higher, the RSI and MACD keep trending lower. These divergences don't always mean that the market will go down, but they are signals that shouldn't be ignored. I hope everyone who made the gold trade took some money off the table. It could still continue to trend up, but I didn't like the sharpness of the sell off over the last two days. Great traders always take some money off the table...even if they feel the trend will continue. Here's another symmetrical triangle pattern I like...SOHU. Wait for the breakout. You could use the 50 day moving average as a stop. If you were late to the gold trade, be patient. Wait to see if the gold stocks (more specifically the GDX) can get back above today's high in the next few days. If it can, you might conclude that the buyers have come back and the trend could continue. I love some of the patterns on the energy stocks...particularly natural gas (CHK, APA, and APC). I'm a little late in recommending some of these energy stocks. It might be because I am very suspicious of this latest trend. If you do trade any of these patterns, please do so with small amounts of your cash. Use sound money management principles. Keep an eye on the VIX tomorrow. It is near a support area around 24. We've had a couple of sell offs in the last few weeks when the VIX has hit this area.

SUCCESS STORY

Hi Jerry,

Thank you for the excellent teaching. I am looking forward to my next Elliot Wave class in November.

I bought FUQI oct 22 calls at 4.00 $ on 09/02 and sold them today at 8.70 $ making more than 100% return in 7 days.

It was a nice bullish ABC pattern on a stock rated 98 in Market Trend Signal.

Best regards

Bernard from Belgium

THE SAFEST PLACE IS IN CASH!!

The end of last week brought another rally that closed the market back above its 10 day moving average. The rally looked eerily similar to the one a couple of weeks ago when I made the last prediction of a move down to 950. We might continue to move up tomorrow...just like we did a few weeks ago. I have to trust the change in the short term trend (close back above the 10 day moving average). In the bigger picture, there are technical divergences that I can't ignore. Each rally feels like a set up for a bigger move down. I will repeat what I have been saying for the last few weeks...the safest place is in cash. This market is killing those that are getting in late. If you wait too long to get in on a rally, you get a big sell off. If you go short after a big sell off, you get a snap back rally. Most technical indicators are showing either a larger sell off coming, or many weeks of sideways price action. Now keep in mind that no technical indicator can predict the future. If you want to keep trading in these conditions, start looking at shorter term trend indicators. Start using a 10 or 20 day moving average and try to swing trade (1-5 day trades) or day trade. The gold trade was a good example. This was a great 3-5 day trade. If you made that trade, I would encourage you to start taking profits off the table. If this rally gains more momentum, you might see gold prices fall back down a bit. If the market rallies and gold continues to go up, it could be another signal for a big drop in the future. Keep an eye on RIMM. I mentioned this one a few days ago. It is sitting on the resistance of the symmetrical triangle pattern. It could break out in the next few days. If it does, it could move up very quickly...just like the gold patterns did. For those that haven't been sitting on the sidelines these last few weeks, please send me some of your success stories so that I can post them on the blog...especially if they were gold trades from my last prediction. I want to make sure we are getting success stories posted.

GOLD BREAKS OUT!!

We had huge moves today in all of the gold stocks. I talked about this trade yesterday. We broke out above the triangle pattern today...in a big way. The volume was high which confirms the strength of the breakout. I think there is still time to profit from the move in gold. A lot of price projections suggest the move today is just the beginning. Many gold stocks could move up another $5 to $15. With the strength of the move today, it is possible that we might get a bit of a pull back in the next few days. Then again...we might just keep going. The price action of the S&P 500 was almost a perfect set up for another move down. We chopped sideways for most of the day before dropping a bit at the close. There is a possibility that we could rally up a bit and test the 1007-1012 area as resistance. The downside target would be about 980-982 initially, but it's looking more and more like we will test that 950 support area within the next few weeks.

IS THIS IT?

This was the question most of you were asking yourselves today...myself included. We broke through some major support (1013-1017) and closed below 1000 on the S&P 500. The VIX spiked to 29.15...the highest level since the end of June. Every DOW stock (except for WMT...barely) was down. This could be the start of a larger correction. The problem is that I felt that way very strongly a couple of weeks ago and we came roaring back. I will probably look for some possible put option trades tomorrow, but with small amounts of capital. The safest place is in cash until a consolidation takes place. This doesn't mean that there aren't opportunities out there. I've talked about the RIMM pattern. It hasn't broken out of the triangle yet, but it could end up breaking one way or another. I also noticed similar symmetrical triangle patterns in the gold sector. Almost every gold stock I've seen has a symmetrical triangle pattern. If the sell off continues, gold prices could go up as money managers move to the safety of this commodity. Again...wait for the breakout. Look at GDX, GFI, GLD, NEM, AEM, RGLD, ABX, HMY, AUY, and IVN (uptrend). For bearish trades on the market (DIA, SPY, or QQQQ), wait to see what happens tomorrow. If we drop hard at the open, be careful not to chase it...that would be a dangerous trade. Ideally, we would like to see a choppy market tomorrow with a slight rise in price. This would be an almost perfect set up for another move down. This would also allow you to get into put option trades without a huge inflation in the option prices.