Dow Oversold?

Global Meltdown

Obviously we are in the middle of a global financial crises. It doesn't take a genius to figure that one out. The markets are playing limbo with each other, seeing who can go the lowest. So far this morning, European markets are down roughly 5%, Asian markets are down about 8%, and Japan is down 9.4% (the biggest single day fall in 21 years). Trading on both of the Russian markets has been suspended, one until further notice and the other until Friday.

This is all seen as a ripple effect after what happened in our markets yesterday. The Dow has dropped 875 points in two days, closing at its lowest point in 5 years. The Dow is now 33.3% below is record close of 14,164.53 it set last year.

Rate Cut

The breaking news this morning is that the Fed cut its interest rate from 2% to 1.5%. This is being done in an attempt to prevent a global economic meltdown (too late). Along with the Fed, the European Central Bank cut its rate by 0.5% to 3.75% and the Bank of England cut their rate by half a point to 4.5%. The Central Banks of China, Canada, Switzerland and Sweden also cut their rates.

The rate cuts will reduce borrowing costs for Americans who have home equity or other floating rate loans tied to the prime rate.

DUG

DUG- Ultrashort Oil & Gas Proshares. Corresponds to twice the daily inverse of the price of the U.S. Oil & Gas Index. Currently testing support as it touches its previous high. Look for a possible handle to form, maybe a 7-8% decline. If no handle is formed and the stock breaks through support on heavy volume, then think about buying shares.

United States Gasoline Fund

UGA- tracks the price of gasoline at the pump. This etf has broken through its support and is now setting fresh lows. These lows have not been tested since back in February. There is a big discrepancy between the price of gasoline on the market vs. what we are paying at the pump.

Inverse ETF's

With the market in a correction, consider looking at some of the inverse ETF's listed below.

DXD- Ultrashort Dow 30 Proshares. Corresponds to twice the daily inverse of the Dow 30.

QID- Proshares Ultrashort QQQ. Corresponds to twice the daily inverse of the Nasdaq 100.

SDS- Ultrashort S&P 500 proshares. Corresponds to twice (200 %) the daily inverse of the S&P 500.

Interview w/ Dan Zanger

Attached are interviews with Dan Zanger from http://www.chartpattern.com/cf/index.cfm. Its about 3 years old but the principles he talks about are priceless. Always invest in the leaders. Granted, he took some serious risks (shorting ebay before their earnings report), but they all played out in his favor. The greater the risk, the greater the reward. To sum it up, he's the ultimate momo investor. Not many people can say they made $3.2 million dollars trading in one day.

Part I:

http://video.google.com/videoplay?docid=7710736047622561973

Part II:

http://video.google.com/videoplay?docid=-8202422563036820659&q=dan+zanger

Part III:

http://video.google.com/videoplay?docid=2623777107662847866&q=dan+zanger

US Dollar Up ETF (UUP)

The dollar moves inversely with the price of oil. Oil goes down, dollar goes up. Pretty simple. Broke out to new highs yesterday on tremendous volume, showing strength. 2nd gap up; notice that it didn't fill the first one.

IPC The Hospitalist Co., Inc. (IPCM)

This could be a good stock to add to your portfolio. The Biotechnology/Major Drug/Healthcare sector has been doing quite well recently. The fact that this is a recent IPO makes it even more attractive.

ETF- Powershares DB US Dollar Index Up

This ETF is a good play on our economy right now. As the price of oil falls, the dollar strengthens. Notice the volume over the past couple days.

HTLD

JBHT

ODFL Approaching Buy Point

GWR Breaking Out

GWR is currently breaking out of a nice cup w/handle pattern

Stocks to watch for Monday

Urban Outfitters (URBN)
Symantec(SYMC)
Parexel (PRXL)

MacDonald's (MCD)
IIVI networks (IIVI)

Fuel Systems, Inc. (FSYS)
Covance (CVD)
Ansys, Inc. (ANSS)

My weekly watchlist consists of the following stocks:

*GENZ, *TMO, *FMC, *TDY, *IT, *EME, *LPNT, FFIV, ASIA, *DRIV, *APEI, *KSU, IDSA, *OLN, *DXPE, *PWR, *WRC, WAB, *HIL, KNDL, WBSN, *UTHR, MANT, ATVI, IWOV, TRLG, GRC, ICLR, SYNA, *NCIT, CMI, *PMTC, SY, QSII, ADBE, GTIV, BWLD, *ANSS, APH, VAR, MCD, *PRXL, *CVD, *IIVI, *SYMC, URBN, ORCL, RSG, BEC

Keep an eye on stocks in the software programming sector, the charts look very bullish.

Industry Group Snapshot - Trucking

Werner Enterprises (WERN)

USA Truck (USAK)

Universal Truckload Services (UACL)

Saia, Inc. (SAIA)

Old Dominion Freight Line (ODFL)

Marten Transport (MRTN)

Knight Transportation (KNX)

J.B. Hunt (JBHT)

Heartland Express (HTLD)

Dynamex (DDMX)

Con-way, Inc. (CNW)

Celadon (CLDN)

Industry Group Snapshot - Railroads

Union Pacific Corp. (UNP)

Norfolk Southern Corp. (NSC)

Kansas City Southern (KSU)

Genesee & Wyoming, Inc. (GWR)

CSX Corp. (CSX)

Burlington Northern Sante Fe (BNI)

These stocks are exhibiting similar chart patterns (cup w/handles, breaking out of bases) and approaching new highs which is a very good sign for this industry group, especially in this market.

Major Drugs

Chart analysis for stocks in the major drugs sector:

AstraZeneca (AZN)

Novartis (NVS)

Johnson & Johnson (JNJ)

Follow Through Day

IBD has labeled Tuesday, July 29 as a follow through day. Every bull market in recent history started off with a follow through day. However, there have been follow through days that didn't lead to a bull market. Just be careful. IBD advocates using a strategy as such:

1. Look for stocks in sound bases or breaking out of sound bases
2. Put half your capital to work. Ex: if you plan to buy $20,000 worth of stock, start the initial
position with $10,000 then add to it.

Hot Sectors:

1. Railroads
2. Trucking
3. Major Drugs
4. Bio-Technology

Day One of Attempted Rally

S&P 500

Dow

Nasdaq

Tuesday, July 8 marks day one of this attempted rally. Still waiting for confirmation. If we see a follow through (indice rises on higher volume than yesterday's total) 4 days from now or later then this will act as confirmation. This follow through can occur in any one of the major indices.

I'm holding Visa (V) for the long-haul. The stock went up on pretty good volume today. I'm still keeping an eye on the fertilizers (AGU, MOS, POT, CF). They are extremely oversold.

Luckily I had a 5% stop loss on my trades. I got stopped out of POT and MOS very quickly. I should have used a tighter stop, in the 3% range, given the current market conditions. I figured that MOS and POT would hold their support levels but this proved to be wrong. This is a very tricky market. The best thing to do is raise cash.

Charts of Interest

Terra Industries (TRA)

Baidu (BIDU)

CF Industries (CF)

United States Steel (X)

Visa (V)

United States Oil Fund (USO)

United States Gasoline Fund (UGA)

Sandridge Energy (SD)

Potash (POT)

The Mosaic Company (MOS)

Fording Canadian Coal (FDG)

Alpha Natural Resources (ANR)

Trades

Right before the close on Friday I placed a few trades. Here they are (all long positions):

Visa (V) @ 82.29

The Mosaic Co. (MOS) @ 147.97

Potash Corp. of Saskatchewan (POT) @ $228.24

United States Oil Fund (USO) @ $113.86

United States Steel (X)

Research in Motion (RIMM)

RIMM looks very attractive

USO

Yesterday, 6/10/08, I got stopped out of USO @ $106.83. I bought @ $112.46 and put a 5% stop on it. Will wait for another buy point.

Fertilizer's Look Primed and Ready

CF Industries (CF)

Terra-Nitrogen (TNH)

Potash of Saskatchewan (POT)

Intrepid Potash (IPI) - recent IPO

The Mosaic Co. (MOS)

Agrium (AGU)

USO & UGA Charts

United States Gasoline Fund (UGA)

United States Oil Fund (USO)

USO

Yesterday, 6.6.08, I bought 18 shares of USO @ $112.46. After a long rest, crude oil finally rose to its feet. We'll see if it has any left in the tank. I'm also keeping a close eye on UGA. One analyst from Morgan Stanley issued a prediction for crude oil to reach $150 a barrel. Right now it looks like the question is just a matter of time.
The reason for the $10 a barrel jump in the price of crude yesterday was mainly due to the geo-political factors between Israel and Iran. Iran is working on developing their nuclear weapons, and Israel said that if they don't shut down all nuclear operations that they will pursue military action. If Israel blocks the Strait of Hormuz then we could see oil prices skyrocket. 25% of our oil comes through this Strait. If that happens then crude oil prices could go upwards of $250.

It has been a very long time since my last post. I took a new position at work and all my time has been devoted to learning the ins and outs of this job. Its been pretty demanding but I'm starting to get the hang of it. I have made a few changes in my portfolio. I sold RTP @ $501.32 and GFA @ $39.02. Both unfortunately were disappointing losses. On 5/21/08, I bought 20 shares of Sandridge Energy (SD) @ $50.74. This is currently the only stock in my portfolio. I should be getting back into my research shortly.

Chris

Today was one of the most frustrating days of the year. After reading Mark Douglas' book, Trading in the Zone, I realized I had a lot of work to do with the mental aspect of trading. I wrote down several of his suggestions and have been following them religiously for about a month now. One of them is to repeat : I am a consitently, successful trader. I say this twice before I go to bed and twice when I wake up in the morning. The key is to get into your subconscious and make your brain automatically believe this. A lot like autosuggestion. The idea is that your thoughts are things and you will attract this to you, i.e. the law of attraction. Well, today was extremely frustrating. RTP broke out and gapped up this morning. I looked at the chart last night and calculated the buy point to be $518.01. The stock opened in the $530's. I kept watching as it moved from 535 to 537 to 540. Finally I told myself that I had better buy here before it goes up any further. The stock was up about 4% at the time and I remember Jesse Livermore saying that you want to buy within 5% of the breakout to avoid getting caught in a correction. I placed a buy order at $539.15. This turned out to be right at the high. Just my luck. Right after I bought, the stock goes down and closes at $525. Very Frustrating! I do all this research and mental work only to see the stock go down. The market is not for the weak or faint of heart. I am determined to be a success and will ultimately profit from trading stocks. Its just times like these that are frustrating.

Industry Group Snapshot - Shippers

TBS International (TBS)

Kirby (KEX)

Genco (GNK)

Eagle Bulk Shipping (EGLE)

Diana Shipping (DSX)

DryShips (DRYS)

This industry group has moved from no. 141 to no. 40 in the past 3 weeks

Today's Trade: Rio Tinto (RTP)

I had originally planned on buying shares at $518.01 but the stock gapped up this morning and blew past this buy point. Added shares at $539.15.

Industry Group Snapshot - Metal Ores

Rio Tinto (RTP)

Companhia Vale Do Rio Doce (RIO)

Freeport McMoran (FCX)

BHP Billiton PLC (BBL)

BHP Billiton Ltd. (BHP)

These are the top 5 companies in the metal-ores industry group.

Charts

True Religion (TRLG)-right at support, looks like a good buy point.

Teco Energy (TE) - extremely over-extended, needs to cool off.

Systemax (SYX) - very nice cup, approaching resistance

Fuel Systems (FSYS) - broke out today after announcing a phenomenal earnings report

Flowserve (FLS) - broke downward trend line, weak volume

It's All In Your Mind

Excellent post by Chris Perruna: http://www.chrisperruna.com/2008/05/12/focus-on-you/

Today's Trade: Gafisa (GFA)

GFA - started out down this morning then worked its way back up to close at $42.89, near the day's high of $43.37. Yesterdays down day was on very low volume which poses a good sign. Today's session and last Thursday's session were both on above average volume which is another positive sign.

Country Focus - Brazil

Companhia Siderurgica Nacional (SID) - Brazilain steel company. Testing resistance as it attempts to break-out of a cup.

Banco Bradesco (BBD) - provides life insurance and banking services to Brazilians. Nice break-out on huge volume.

iShares MSCI Brazil Index (EWZ) - tracks the performance of publicly traded securities in the Brazilian market. Broke through resistance on excellent volume, look for a pullback to add shares.

Petroleo Brasileiro (PBR) - a Brazil-based holding company engaged in the exploration, production, refinement and distribution of oil and gas. Nice cup w/handle. Volume looks to be increasing as its testing resistance.

Companhia Vale Do Rio Doce (RIO) - Brazilian metals & mining company, looks like its about to break-out of its cup, nearing resistance.

Gafisa (GFA) - a Brazilian Home-builder. Excellent break-out on great volume.

Not only do they produce beautiful supermodels and soccer superstars; its also where you can find some pretty decent stocks.

Recently the Chicago Mercantile Exchange signed a non-binding cross-investment letter of intent with the Brazilian Mercantile & Futures Exchange. The BM & F is the fourth-largest exchange in the world, and the largest in Latin America. See more details here:

http://cmegroup.mediaroom.com/index.php?s=43&item=642

S&P raised Brazil's credit rating to investment grade Wednesday, causing the IBOVESPA to pop 5% this morning. See more here:

http://www.iht.com/articles/ap/2008/05/02/business/LA-FIN-Brazil-Stock-Market.php

Charts to Watch

UltraShort Oil & Gas Proshares (DUG) - if you think the oil & gas bull run is over then check out DUG. The fund is twice the inverse (200%) of the daily performance of the Dow Jones Oil & Gas Index. Recently broke its downward trend-line on huge volume.

Hess Corp. (HES) - recent break-out that has pulled back. See chart

Rex Energy Corp. (REXX) - breaks out today on very low volume.

Amedisys (AMED) - breaks out on excellent volume. Looking to add shares on a pullback.

Google (GOOG) - looks like Google's back. Nice break-out from a flag pattern.

Apple (AAPL) - very nice cup w/handle. Would like to see volume pick up.

Visa (V) Trade

Yesterday I sold my shares in Visa:

5/1/08 Sold 20 shares of V @ $84.12

Purchase price $70.09

Cost = $1401.80- $7 commision = $1394.8

Sold Total = $1682.4 - $7 commision = $1675.4

Profit = $280.6 / 20%

I think shares are a bit oversold here. I'm going to wait for a pullback to the $79 range and then add more shares.

Burlington Northern (BNI)

Burlington Northern (BNI) reported Tuesday that its first-quarter earnings climbed to $455 million, or $1.30 a share, from $349 million, or 96 cents a share in the year-ago period. The Fort Worth, Texas-based railway company said revenue rose to $4.26 billion from $3.65 billion. Analysts polled by FactSet expected, on average, earnings of $1.22 a share on sales of $4.12 billion. Helping BNSF was a sharp rise in its agriculture products revenue, the company said. Agricultural products revenue were up 38% to $866 million due to strong volumes growth in the shipment of wheat, soybeans, corn and ethanol, coupled with improved yields. Looking forward, BNSF said it is optimistic about long-term prospects despite current economic softness in its consumer products business.

Excellent quarter for BNI, beat expectations by $0.08 cents a share. You have to wonder how much of their business will be affected if we see an end to the bull run in commodities.

Dow and S&P 500 log distribution

S&P 500

Dow

Nasdaq

2 of 3 Indices logged a distribution day yesterday

Visa (V) & Mastercard (MA)

Visa did extremely well today, setting an all-time high @ $80.88. The stock reported earnings last night, and initially, the street did not take this well. The stock was trading as low as $71 in the after-market. The stock dropped at the open this morning, filling the gap it created two sessions ago. After that, it was full steam ahead, closing up over 6%. Visa is the #1 credit card processor in the world, in front of Mastercard (MA), who also reported stellar earnings and was up 12.98% today to close at an all-time high of $273.98.

Sold UGA

Sold 20 shares of UGA @ $54.18. Profit = 4.8%. Purchased @ $51.19. The ETF gapped down 3.12% on volume of 71,467 which is the highest amount of shares sold ever for the life of this ETF. Looks like were seeing an end to the commodity bull run. Check out DUG, an ETF that is short the oil & gas sector.

Railroads Hold Support

Union Pacific (UNP)

Kansas City Southern (KSU)

CSX

Burlington Northern (BNI)

Indices Log Follow Through

S&P 500 Dow

Nasdaq

One word to describe this market: Whipsaw! Just yesterday I posted that the indices logged a distribution day. Now they have logged a follow through day. Absolutely amazing!

MTL Trade

Well, I sold my shares of MTL today @ $148.92. This is very frustrating given that I had over a 5% profit 2 days ago. I originally bought shares @ $150.5 and watched them rise up to $165. The past 2 days have been nothing but selling in this stock. Commodities as a whole are getting slammed today.

This market is not for the weak of heart.

Indexes Log Distribution Day

Dow Jones Industrial Average

S & P 500

Nasdaq Composite

All 3 major indices logged a distribution day yesterday. This is only the 2nd distribution day since the follow through on March 20. According to IBD this is not that big of a concern:

'Occasional distribution days are also a necessary evil for a market rally. Pick just about any major bull run in Wall Street history and you'll find a day or two here or there where the market suddenly pulled back in brisk trade.

It's instructive to see how the market responds to a negative day. Additional bouts of distribution would be a sign of weakness. If the market quickly resumes its uptrend, though, you can chalk up the distribution day to a blip on the screen.' - Investor's Business Daily

Charts

Netflix (NFLX) - nice break-out on excellent volume.

Hess, Inc. (HES) - broke-out on great volume. Currently testing its support line which could be a possible buy point.

Expeditor's International (EXPD) - very nice cup w/handle. Would like to see the volume increase if the stock breaks - out.