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Weekly Wizards

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Weekly Wizards

Wed, Jun 17 2009, 05:33 GMT
by Mike Paulenoff, Jack Steiman, Harry Boxer

AdviceTrade.com

Harry Boxer, www.TheTechTrader.com, on 4 Short Ideas

Today I want to give you 3-4 ideas on the short side with the possibility that the market hit a short-term top on Monday.

Allegiant Travel (ALGT): The channel in force since last July, which went from about the 15 to 55 area in April, has suddenly turned lower and broken the trendline, rallied back and failed at the moving averages on very low volume, with almost no increase at all in the technicals, and then rolled over, down 2.31 on Monday at 37.80, and is right at the May low. If it takes that out, it could get a quick hit down towards 32 and beneath that I'd be looking for something in the mid-20s.

ITT Educational Services (ESI): The education group was hit recently, and despite the big move from low 40s to more than 130, it came down and broke the trendline. In the last couple days, it's been narrowing to a coil in a descending wedge which if broke to the downside could take a quick hit to the bottom of the forming channel, down around the 70 area. It's currently at 92, so could be a nice 22-point run if it can get it.

Amedisys (AMED): The stock recently rolled over from around 39. There's now a left shoulder, head and right shoulder forming. The neckline was taken out on Monday, with the stock dropping 1.93, and it looks like it's breaking down out of the pattern. From the way we've drawn the channel, there could be a very big hit coming that takes this down around the 18-20 range from 29. There is some support at around 25, which would be my initial target.

Coinstar (CSTR): The stock had a tremendous run from 15 to 38, but the recent pattern that's formed shows a very distinct left shoulder, head and then a tiny, weak right shoulder, and now breaking down beneath the neckline. Technicals aren't as negative as some of the others, but I wanted to show you a chart that may be rolling over here.

Jack Steiman, www.SwingTradeOnline.com, on Why to Not Short Just Yet

You don't want to short against the trend in place and you only want to short with aggression if the trend changes, which would only happen if the S&P 500 lost that magical duo of support of 875, which was that neck line it finally broke through, and 893/891, which are the 50-day exponential and simple moving averages, respectively. 875 is the line in the sand for the bulls. Truth is, as long as that holds, the buy signal remains in place. It would be best if the 50-day moving averages held, but 875 is that long-term resistance turned support now; thus, that's what I'm using in terms of breaking the trend we're in.

The market did gap down on Monday and it wasn't a small one either. A good hard sell that left little if any doubt that it was time to get the unwinding party started. And unwind it did. The three major indexes -- the Dow, SPX and Nasdaq -- had stochastic's averaging in the mid 90's not more than a few days ago. Now they're averaging the mid 70's. Not great but a decent start. However, the RSI's were averaging 69 and now they're averaging 56. A very smart move lower while the indexes hold critical longer term support. I'm not suggesting it's go in and buy time but at least the market is finding a way to unwind things without changing from a buy to a sell signal.

It was interesting to see the latest news from the AAII survey of sentiment among investors. As of late last week, the bears had caught up to the bulls at 39.25% each. This is a more bullish set up for the future as it's almost always a good lead for the bulls. It can get as high as 18-20% more bulls and you would still likely see the market climbing higher if things were more bullish. They're clearly not as bullish now but the fact that after today you'll almost certainly have more bears again, that sets things up nicely for the bulls down the road.

Support for the SPX is 923, or the gap down, and then 891/893, or the 50-day moving averages. The big number after that is 875, or the long-term neckline taken out some weeks back. It took multiple efforts to get through that beast of a number and should not get lost if the bulls are to remain in control. 1792 is gap support near-term on the Nasdaq.

Mike Paulenoff, www.MPTrader.com, on Bearishness in Euro & Gold

Let's have a look at the chart pattern that is developing in Euro/Dollar, which is VERY similar to the pattern exhibited by spot gold and the SPDR Gold Shares (NYSE: GLD) ... and could have serious implications for a host of commodity and financial markets in the days ahead.

The 4-hour chart (see link below) of the Euro/$ definitely has a toppy formation to it and might even be considered a head-and-shoulders top that is in the process of breaking down.
Today's Euro recovery notwithstanding, after this minor bounce from 1.3750 to 1.3950-1.4000, I will be expecting another loop to the downside that retests 1.3750.

If 1.3750 is violated, then Euro/$ should embark on another downleg towards 1.3500 and then perhaps 1.3300, with commodities like gold following to the downside.

Conversely, if the 1.3750 area contains another bout of weakness and the Euro then pivots to the upside again, the entire correction off of the 1.4340 high likely will be complete.

For the time being, however, the bears control near-term direction, and the upcoming hours/days in Euro/$ will be very important for the action in gold prices, largely because spot gold has carved out an identical pattern.

Gary Dean, www.MarketsPath.com, on Lower Levels to Follow

On Monday, the S&P 500 took out the 927 pivot, which allows us to rule out the bullish count and can now place an overweight rating on the bearish count and expect lower levels to follow. But we have to anticipate bounces along the way.

It looks like the indexes either finished or are trying to finish wave (3) of this leg down. Once it completes, we should see some type of corrective bounce before the next leg down begins. For the current leg down which is taking the form a 5 wave move, I am expecting it to complete somewhere between the 914-896 pivots.

Once the corrective bounce finishes from those levels, we should see the next round of selling to start. As far as time wise, I wouldn't be surprised to see this pullback last until mid July. It's way too early to try and pick targets, but a 38% retracement from the 667 lows is a minimum target to watch. (845)

The shorter term count is calling for a shallow bounce in the coming hours. I am watching the 928-933 pivot areas where sellers should be waiting. If they hold down the spx, the next leg down should take the spx to the 914-908 pivot zone.

Published on  Wed, Jun 17 2009, 05:43 GMT