Saturday, May 02, 2009

Our thoughts

If we extrapolate from Friday's action then we would be long USO OIH XME MOO as money rotates into the new leadership of commodities. Of course reacting strongly from a few days of market action is not always the wisest thing to do; however, if we get continuation this week of the alleged new trend, then there's a good chance that this is for real. What we're looking for is for money to flow out of REITS and financials and into commodities. The wild card of course is the release of the stress test on Thursday.

If you see the trend continuing and want a pair trade then go short IYR XLF, and go long USO OIH XME MOO. Our feeling is that the aforementioned commodity ETFs will not only outperform the financials and REITs but also the small-caps (IWM), the Nasdaq (QQQQ) and the S&P 500 (SPY).

Hopefully we'll find out this week whether Friday was an anomaly or the start of a new trend. Stay tuned.


Sector D: Steel and Iron

The best two charts we could find from this sector are AKS and RIO.

We had AKS at 12.5 in our newsletter Wednesday night -- it still looks good.

RIO over the 200 SMA and looks great until at least 20.

Sector C: Crude Oil and Oil Services

We're move ambivalent about the Oil sector because of the lack of volume accompanying the recent break-out. If volume comes in, we'll change our stance, but until then we'd rather trade this sector with a bit more caution.

The two ETF's we like to use when focusing on crude and oil companies are USO and OIH. The other popular one, XLE, is also a good trading vehicle but the daily on OIH is much cleaner than in XLE.

We had USO long on the trend-line break of 29 in our newsletter on Friday. We still like it but want confirmation as the volume on the break was questionable.

OIH same story -- price looks good and it wouldn't surprise us if OIH rallied 10 points within 10 days but it needs to confirm as volume on Friday was weak.

SU looks good to go for run to 30.

Lots of clean air for COG as it sits above its 200 SMA.

EOG could be in for a good move through 67.

Sector B: Metals and Minerals

The ETF we like to trade in this sector is XME which looks set to go to the 200SMA and resistance around 38. Looks great.

Here are our favorite trading stocks within the sector:

MEE might need a few days to consolidate the Wednesday earning's move but it looks good to go for at least another 6 points. If you're a swing trader look to buy dips on this stock.

Huge volume break-out move on JRCC on Friday -- a bit of digestion under the 200 SMA would be excellent for this runner.

We had CNX in our newsletter with 33 alert for Friday. Stock looks good to 38.

We had BTU long alert for Friday at 27.5. The stock blew through our spot and now is basing under 30. Looks good to go for another 4 points.

This sector looks even better than the Ag-Chem in that a) it has less congestion (compare to MON) and b) has more up-side potential in that resistance is further away.

Sector A: Ag-Chems

Over the weekend we're going to be posting up charts of some sectors that could show some decent trading opportunities come next week. Let's start with the Ag-Chem sector:

There's no ETF we love for this sector (not liquid enough) but MOO seems to be the best of the bunch.

Clear break-out on increased volume (not difficult though as stock normally trades thin so a bit of day-trader attention would get the volume spike) but has 200 SMA to deal with relatively soon.

Angle of ascent is a big part of the way we trade. Note the increased angles of ascent in AGU (versus the more flat nature of S&P 500 in April versus March). This means that there could be fast up-move coming in the stock. Possible top? Maybe, but before then there should be an excellent long opportunity, at least to the October gap area.

CF is the leader of the group; excellent price action but possibly needs a bit of rest ahead of the 200SMA (at least that is what would happen in a rational market :-)

MON messier than the rest but important enough to be mentioned -- could easily run to 88, especially if it rests for one day.

POT looking good under 92.

Stay Tuned for this evening's post, Sector B: Metals

Friday, May 01, 2009

Commodity Rip

We'll have to see how they close them but commodites are on fire with more break-outs in the sector that we've seen in a while -- and note divergence with financials (XLF) and commercial real estate (IYR) asleep, and treasuries bleeding. Obviously, this is an inflation trade and it will be interesting to see how long it lasts. Ride the trend in the commodities -- here are some charts.


Oil Service:


And the poor Treasuries:

Gold lagging -- let's see if they catch up.

Update: today was one of the clearest change of leadership days we have seen in a long time. One day a trend does not make -- however, if we get continuation on Monday then it's a good bet we're going to get a very good run in the commodities with money flowing from the REITS and financials into metals, ags, coal, and oil.

Today's triggers

Here are all the triggers from last night's newsletter (BTU 27.5 long, CNX 33 long, FLR 37 short, USO trend-line long over 29). Arrows are places we will offer explanations on the why and where of entry (will be included on this weekend's newsletter).

These are day-trade entries but often our subscribers swing-trade many of our trigger spots. We ourselves are primarily day-traders and look for 1-4% moves with stops around 0.3%-0.5%.

Thursday, April 30, 2009

Comp 200 SMA tag and reverse

We've been harping for a few days in our newsletter about the 200 SMA and the Nasdaq. The following chart shows a vertical run into the 200 SMA. Not a bad place for you swing-traders to take some profits.

Monday, April 27, 2009

CDC Warning-- Please refrain from the following: