10 sigma

TSL, Head and Shoulder bottom as well.

2007-11-06T11:18:00.000-08:00

Another pattern I came across on tsl is the H&S bottom with the neckline at $64.5. This is the moment of truth, it clears 64.5 we go much higher it fails we see profits disappear quickly.

TSL REVISITED

2007-11-06T09:31:00.000-08:00

As I am writing this solar stocks are gaining a lot of momentum, fslr and spwr are up more than $15.00 per share hitting new highs. At the same time tsl looks like it is going nowhere. I think there is no reason to worry and very soon tsl will catch up with the rest of the group. The long term chart above looks bullish building a 7 month base after an initial 400% move since the ipo.

Short term chart is building a tight flag formation between roughly $57-$62 and it is breaking out of the consolidation as I am writing. Sweet!!!

The heavy resistance on the stock lies between $64.5 and $65.5. Watch how many times the stock has retreated from that area (highlighted in yellow). Once it penetrates $65.5, I think it will be clear sailing.

6-8 days consolidations in the past like we have now have produced 66% and 40% gains so we need to keep in mind the potential of a break out. Needless to say I own the stock.

TSL, looking very promissing

2007-09-21T12:56:00.001-07:00

6 months trading range is in effect between 39-73. The recent test at $39 could very well result to a price expansion to the upper end of the range.

Short term chart is very bullish with a H&S bottom formation, with a break out today on volume. The right shoulder took the form of 3 week ascending triangle consolidation formation which was also broken today. There is not meaningfull resistance untill $63-$65, so this could run 10 points very fast. Needless to say I bought today at 49.88 in anticipation of the break out.

S&P 500, THE TOP?

2007-08-22T21:46:00.001-07:00

Is this a head and Shoulders top forming? There is a clear left shoulder and a head and now we might be working on the right shoulder formation. Volume was exceptionally strong on the way down from the top of the head which implies distribution while it has been anemic during the rally the past 4 days. It will be interesting to see the volume tomorrow with another up day after the announced BOA investment in CFC. I suspect tomorrow will be the last expansion day of this rally with sideways action the next few days just so the oversold condition can be worked off. I figure out another week to two weeks of sideways action and then it can start trading water again as we enter into September. September and October are seasonally the weakest months of the year. Although those two months have not lived up to their reputation the past 2 years, considering the set up on the S&P 500 I suspect they will this year. Anyway, I am not convinced of this rally and I think that at least a retest of the low is coming. If that low breaks then we will have a completed head and shoulders top with another 180 points to go on the downside which would put this index into a bear market.

EMC, a way to play VMWare.

2007-08-12T00:03:00.000-07:00

VMWare, considered the hottest ipo of the year to many on Wall street comes out in public this Tuesday. Emc the company who owns Wmware has already raised the offering price from $23-$25 to $27-$29. A few facts about Wmware are in this link.http://biz.yahoo.com/ap/070810/vmware_ipo_spotlight.html?.v=2

What I could gather from the article is that Vmware has a very hot software product which manages running of several applications and several operating systems on one server. By using fewer servers, a company can reduce energy requirements and gain better manageability of the data in the system. This product is so hot that Intel decided to invest 218 million in the company for a 2.5% stake and Cisco came up with another 160 million for 1.5% stake. VMW, reported already earnings of $41 million dollars for the quarter ended on March 31, 100% higher than the same quarter of last year. The company expects to raise 866 million from the deal which part of it will go to pay off some debts to EMC and buy a building from Emc for its headquarters. EMC will retain 87% of the company and the rest will belong to Intel, Cisco and the public. In the event, VMW prices in the middle of the range which is $28 the market cap of the company will be $10 billion dollars.

This is what my thoughts are after looking at the facts. Since Intel and Cisco decided to put that much money in the company they must be seeing a huge market potential. The price they acquired it is not that much lower than the IPO price. They paid $8.7 billion for the company vs $10 billion for the ipo price, that is 17% below IPO which makes me feel that I am not getting screwed over that much, if I buy at IPO price. The problem is that I will not be able to get it at ipo price and I will have to chase the stock in the aftermarket.

BUT WAIT A SECOND. Emc will own 87% of the company which tranlates to $8.7 billion plus the cash they will get from the IPO. So lets say $9 billion. EMC is now worth $37.2 billion of which $9 billion dolars is VMW so this is the mathematical formula. VMW=.2419*EMC or EMC=4.133 * VMW. So if VMW goes up 10% EMC will go up 2.419%. I am buying EMC on Monday to participate indirectly on VMW's IPO.

S&P 500

2007-08-09T21:55:00.000-07:00

Broadening top, the bears keep the bulls in check as they bring the price down to the flat line in spite of the bulls attempts to take the price up with higher highs. At the end the bears manage to break the flat line on volume and the following rally up to the flat line fails again on volume. The market action in general is very poor with expanding volume on the sell offs, today's sell off on 2.8 billion shares is a testament to that. I am expecting the bulls to put up a fight at 1427, the lows of 8/6, but I suspect that eventually we will head lower and visit the March lows.

NEXT IN LINE

2007-08-09T11:29:00.001-07:00

It seems that the rest of the fertilizer companies who have been trading like 1999 Internet stocks are making tops today. Pot, above attempted a break out yesterday but today it sells below the breakout point of $86.74 with a double top forming. On a failed break out attempt usually what happens is that the price fails very fast to the next support line which is around $76 as the most recent buyer who positioned for the break out bail out and longer term holders are strategically take profits. I put a short on the stock today at $87.56 with a stop above 90 and so far so good. I will probably short some more on any intraday rally tomorrow.

MOS, also has the same pattern. Another failed break out.

TNH

2007-08-02T11:16:00.000-07:00

After a $34 point drop the stock is attempting a short term bottom. It needs to penetrate 92.7 to have an intraday H&S bottom complete.

2007-08-02T11:14:00.000-07:00

TNH sets up a topping formation

2007-07-31T10:04:00.001-07:00

The stock broke out of a H&S top formation on 7/23 on volume. Reaction rally started on 7/25 and it has stalled at the neckline for 4 days failing to break above it. The weakness has been pronounced today and yesterday as the stock price failed to make any progress despite the rally in the general markets. All technicals point to a continuation of the decline. Next level of support is at 104.93 and then 99.88.

Vimicro attempting an H&S bottom.

2007-07-06T12:13:00.000-07:00

Before I get into Vimicro, I like the cross verification that I get from SOX which is making a new 52 week high today. So there is strength in the general market, there is strength in the semi sector and they all confirm the strength in Vimicro. A very positive situation.

Potential H&S bottom is obvious in the above chart, with the neckline at $7.32. I like the volume action today as it accelerates with the price coming off the bottom. Very constructive price action.

This is the profile on the stock: Vimicro International Corporation, through its subsidiaries, engages in the design, development, and marketing of mixed-signal semiconductor products and solutions for the consumer electronics and communications markets in the People's Republic of China. It offers mixed-signal multimedia processors for personal computer and embedded notebook cameras, as well as for mobile phones. The company provides system-level solutions that include integrated semiconductors, customizable firmware and software, software development tools, reference designs, and applications support. Vimicro sells its products through direct sales force to distributors, original equipment manufacturers, and design houses and module manufacturers. The company was founded in 1999 and is headquartered in Beijing, the People's Republic of China.

Important facts to mention are that the company had 70% of the semiconductor for the PC camera worldwide market before the Vista roll out. They did miss their numbers during the calendar (not fiscal) Q4 of 2006 attributing it to the Vista transition but they still made money. They haven't reported numbers for calendar Q1 2007, they have changed public accountant and they will report caendar Q1 and Q2 on July 12, 2007, next week. Company has $3.00 per share in cash which I think offers a nice support for any Q1 or Q2 disappointment. Also the move from $24 to $5 probably discounted most or all of the negativity that may lay in these reports. Looking forward I can see many positives such as Vista ramp up, potential mobile phone contracts and a seasonally strong second half of the year. Fundamentally I believe that the worst is over. Just a slight positive piece of information next Thursday, in the earnings report, could be a catalyst for a sustainable move to the upside. Another important fact to note is that Janus and Fidelity own a big stake in the stock. Janus Worldwide Fund has 5.5% the outstanding shares in the stock while Fidelity OTC Fund has 4.5% of the outstanding shares in the stock and that is a vote of confidence http://finance.yahoo.com/q/mh?s=VIMC. Bottom line I like the stock and its potential and I bought some today at $5.96 with a stop at $4.8. The stop is way down and that is because I want to give the stock room to fluctuate. This is a six month to a year trade for me.

Charts that I like.

2007-07-02T12:22:00.000-07:00

Mitshubishi financial, the largest bank of Japan, is forming a potential Head and Shoulders bottom, with a neckline resistance at $11.58. I bought here with a stop underneath $10.75. I think with patience it can go back to its recent highs at $16.75.

Above is the 6 year chart on MTU. The fact that it managed to hold above the 2001 peak is very constructive on a technical aspect.

The I Shares Japan above broke out of a symmetrical triangle suggesting that Japan could be back into play after being flat for some time.

CMED had a breakaway gap after an earnings release that shuttered expectation. It is consolidating into a flag formation setting up a further price expansion.

The longer term chart on CMED reveals that it has more room to go. I am thinking 2006 highs.

This is the recent mention on IBD about CMED. Very bullish fundamentals going forward.

"High-frequency sound waves can sketch images of a fetus in the womb. Similar ultrasound technology can also blast away at tumors.That high-intensity focused ultrasound technology, or HIFU, has been the core business for China Medical Technologies. (CMED) Sales of the tumor-fighting systems provided 60% of revenue last year. And there's room for more growth.But diagnosing diseases, rather than battling them, is China Medical's future.In March, the company bought a new diagnostic technology that could better spot prenatal disorders as well as cancers in adults.That system is called fluorescent in situ hybridization, or FISH. Combined with the firm's existing diagnostics line, it should kick in more than half of sales for fiscal 2007."The FISH business is now ready to take up the untapped huge market in China," Vice President Feng Zhu said in a conference call last week. Company officials weren't available to comment for this story.Analysts think diagnostic systems will deliver most of the revenue in coming years.Jinsong Du, an analyst with Credit Suisse, says rising incomes in China and heightened concerns about health are driving demand for diagnostic equipment. "Health checks and medical checks are becoming more popular, so that will give life to this segment," Du said. Credit Suisse advised China Medical on the FISH acquisition.The Beijing firm posted profit of $1.39 per American depositary receipt in fiscal 2006, which ended in March. That was up from $1 a share the year before, thanks mostly to the strength of the tumor-busting ultrasound gear.China Medical sharply hiked spending on marketing, research and development in the fourth quarter. It paid off.Profits UpQuarterly income was 40 cents a share, up 38% from a year ago. That was 29% more than analysts polled by Thomson Financial expected. Sales climbed 52% to $21.1 million. HIFU sales rose 32% to $12.6 million.Company officials say they've gone into Chinese hospitals to convince doctors their tumor treatment systems work. The firm also expects to sell the units in Korea and Japan this year.In April, it agreed to partner with France's EDAP, (EDAP) which sells a HIFU system in Europe for treating prostate cancer. If it gets the proper approvals, the team will sell China Medical's HIFU gear in Europe and Russia.Still, diagnostic systems are China Medical's fastest-growing line.Sales from its ECLIA systems enhanced chemiluminescence grew 74% in the quarter, to $8.5 million. That system analyzes blood, urine and other bodily fluids to track diseases like diabetes and hepatitis.The firm thinks that growth can go on, thanks to new ECLIA tests for other ailments such as Down syndrome and liver fibrosis.And China Medical has high hopes for the new FISH system.It paid $136.8 million for the technology, which it plans to fully develop and market. It will pay out another $40 million if the product succeeds. One benchmark: drawing $20 million in sales this fiscal year.The system, which involves tagging a DNA probe with fluorescent dye, is new in China.The firm is also selling the fluorescence microscope that reads the tests. It has already taken 100 orders from large Chinese hospitals. It expects to deliver the first 40 this month.Now it is working on Chinese state approval for the actual probes that will look for prenatal disorders. Later it plans to roll out FISH probes for cervical, breast, bladder and other cancers."This technology should also enable accurate diagnosis of some of the most significant disorders at a competitive cost," the company's chairman and chief executive, Xiao-dong Wu, said in a statement.The firm said the deal will be accretive in fiscal 2008. China Medical formed in 1999 around the HIFU system. The firm says it has treated more than 40,000 people with it. Listed On NasdaqIt launched its ECLIA system in 2004, and now has testing kits for more than 60 different conditions.The company's ADRs began trading on the Nasdaq in 2005. Within six months, the stock price almost tripled to nearly 45. It then fell into the doldrums until the most recent results gave it a 15% boost.China is a hot market for medical device makers right now.It has a fifth of the world's people. The government has made health care a top priority and it favors domestic players, China Medical says.Hospitals are looking to lure patients with fancier equipment. Spending on medical gear could climb 12% this year to $11.1 billion, the firm says.China Medical reported $70 million in sales last fiscal year. It expects to beat that by about 50% to 60% this year.Analysts expect a 12% gain in net income in the current year, to $1.56 a share. The company is still looking for more medical hits. In March, it signed a 10-year deal with longtime partner Peking University to found a joint medical lab. "

Historical Charts of Interest

2007-06-02T22:32:00.000-07:00

Historical Charts of Interest

NYX, washed off at the bottom.

2007-05-09T10:42:00.000-07:00

There are two support lines of interest, one at 81.85 which was tested and held and one at 80.51. So far the 81.85 looks like it is holding and the stock is trying to put the bottom.

This is the daily chart with the support lines I mentioned above. Also the 200 sdma is coming at play here offering some extra support. The stock looks washed off here ready for a bounce. Growth is very good going forward http://finance.yahoo.com/q/ae?s=NYX.

Charts of the day

2007-04-27T09:18:00.000-07:00

Aspv has completed a break out from an ascending triangle formation. The stock is pulling back at the break out area today and that gives us the entry point with a stop right beneath it at 21.90. Next area of resistance is the gap area and then $27-$28. Fundamentals are very strong on this one with extremely low pe and good growth. http://finance.yahoo.com/q/ae?s=ASPV

I would like to point this chart out as an example of how hard is for the bears out there. HMIN which is a budget hotel operator in China recently broke support at $34.00. The break down came on accelerated volume attracting excited bears (thank GOD I was not one of them) only to skin them alive with a head fake. Most short setups simply do not work in this market.

Is S&P 500 running out of steam?

2007-04-24T19:32:00.000-07:00

Interesting day for the markets today. Dow was up and that thanks to IBM and DUPONT but breath was negative on the NYSE and the S&P 500 was down fractionally on higher volume (distribution day). Commodities and commodity stocks the leaders of this bull market were weak across the board while the dogs were barking (for the definition of the word dogs please look under semiconductors). The question is can the semis lead higher without commodity stocks participating. I seriously doubt it. Also momentum indicators such as stochastics and RSI have turned down. Stochastics has been overbought since April 4. If a pull back were to happen the conditions for it are perfect right now.

Shw sold off on high volume today. I am looking for a short entry if it breaks 63.53.

Ctsh retraced 38% of its high volume down move making it another short candidate I am looking at.

Words of Wisdom for the bears

2007-04-18T19:15:00.000-07:00

Basic rules of technical analysis is that the trend is your friend.The trend is up in all indices and shorting in an up trend is the like you are swimming upstream on a river. You may have some luck swimming against the current but if you insist doing it you will end up drowned. Using stops does not matter you may delay the process of losing big money but sooner or later you will lose big money. I don't care if you are the best trader in the world (and it is an impossibility that you are because you are trading countertrend) , you keep shorting in a bull market you will get burned. You may get 2-3 profitable trades out of 10, but what good is that.

It is not rocket science. You buy the retracement in an bull market and you short the rallies in a bear market. Last time I looked at my charts we were in a bull market. Also I don't want to hear the market is overbought. The market can stay overbought for a long time in a bull market. Using overbought stochastics or rsi to sell short in a bull market is a guarantee money losing proposition. These are the rules when you trade off oscillators such as stochastics or rsi. In a bull market you buy when the oscillator signals oversold. In a bear market you short when the oscillator signals overbought. In a trading market you sell when the oscillator signals overbought and buy when it signals oversold.

Also I don't want to hear that the market is overvalued. It sells at 16-17 times this year earnings. Where do you see overvaluation. You can argue it is fairly valued but overvalued it is not. S&P 500 was selling 35 times earnings in 2000, that was overvalued, Nikkei was selling 70 times earnings in 1990, that was overvalued.

Yen carry trade status.

2007-04-14T09:41:00.000-07:00

There are two charts above, the S&P 500 and the Japanese Yen continuous contract. The highlighted areas show the days that the S&P 500 got into trouble on yen carry trade concerns. The first day, February 27 2007, yen broke out from a quadruple bottom formation and the second day , March 13, yen held the breakout line and rallied strongly. Both of those days were painful for the S&P 500, with big down moves.

The past few days, yen has declined back to the break out line and it seems that is finding support again. The probability of the yen spiking up again increases as this line holds. I think we are at a very important juncture here as the S&P 500 tests the highs of the year and as the yen tests the support line. If the yen somehow manages to fail below support and sell off then the yen carry trade is alive and odds favor a break out on the S&P 500. If the yen holds support and rallies then watch out for trouble on the S&P 500, since the yen carry trade concerns will reappear.

S&P holding support and the 38% Fib line.

2007-04-02T18:16:00.000-07:00

Very constuctive action today on the S&P 500. It rallied smartly with an almost 2 to 1 positive breath shrugging off negative news in the subrime lending space http://www.marketwatch.com/news/story/mt-slides-mortgage-woes-first/story.aspx?guid=%7BEB5A4602%2D15FC%2D443B%2D98E7%2D9A1508F65D59%7D&siteid=yhoo&dist=yhoo Support at 1415, the high of 2/28 is holding as well as the 38% fib line at 1410. We could very well be working on an abc up formation with a 1:1, 1480 projection.

CASE STUDY, ICE, HEAD AND SHOULDERS TOP FAILURE.

2007-04-02T11:43:00.000-07:00

The best trading opportunity arises when a Head and Shoulder top fails? . The formation itself being the most recognizable chart pattern attracts such a great number of shorts who create the perfect squeeze when the pattern fails. Fear is always stronger that greed so shorts provide enough fuel for a sharp rise in the stock. This is what happens on ICE real time as I am writting

this blog. The neckline at $125.2 was repenetraded to the upside today and it looks that the rise from here can be parabolic. I would not be surprised if I see $140 out of this stock tomorrow.

Chart of the day, ADM.

2007-03-26T20:59:00.000-07:00

Keeping an eye for a H&S bottom with the neckline at $36.47. H&S target if neckline breaks is $42.00.

At the same time ADM is challenging the neckline of a H&S bottom, Corn is challenging the neckline for a H&S top. As corn goes down, profit margins for ethanol producers are heading higher so this is a very critical point in time for the ethanol long play. ADM is the safest bet but I also like ANDE. PEIX and VSE are secondary more speculative plays with much weaker relative strength charts.

HOW CUTE!!!

2007-03-23T23:02:00.000-07:00

What an awesome set up?

2007-03-23T22:42:00.000-07:00

This is a beautifull set up. Hopefully I have time to buy this on Monday before they run it. What is there not to like. It broke the resistance at 36 and it has a tight 3 day consolidation on contracting volume. It should start shooting for the high of $38.55 soon, maybe higher.

Market seems to consolidate for the next move, the retest of the highs

2007-03-23T22:19:00.000-07:00

I think the market will retest the top and even break it marginally. When you have a 38-50 percent fib retracement of the prior move that is a weak retracement and the move comes right back down and tests or breaks the lows. When you have a 62% fib retracement that is a strong retracement and it usually goes on to retrace the whole 100% of the prior move. That is what we will see now. 100% retracement and a test of the highs. I suspect the retest will first start with a sharp drop 100-130 points, and then a fast same day recovery and a close in to positive territory which will set up the retest of the prior highs.I look inside the market and I don't see anything that can lead it lower. The leaders of the last drop, the home builders and the financials are too oversold to go lower, they still need to work their oversold conditions. The Chinese Exchange, one of the reasons the market sold off on 2/27/07 is hitting new highs again.There is noone left to lead the market lower. However there are plenty of sectors to move this market higher. Tranports, basic materials, energy, large cap techs like csco msft orcl emc ibm are a few stock that come to my mind that can take this market higher.
10:18 PM

Google seems ready to move and an S&P 500 flashback.

2007-03-21T23:53:00.000-07:00

Above is the chart of the S&P 500 during 1991-1993 period. What I am noticing is that the market back then had a very slow trajectory rising about 8% per year. It is interesting to know that we did had similar problems back then as we are having now. Economy was growing slow,

the real estate market was declining; the banks were plagued from bad loan problems with Citigroup being on the verge of bankruptcy; many S&Ls went under; auto sales were problematic with Chrysler running into financial distress; jobless rate was persistently high with media talking about jobless recovery all the time. Despite all those problems the market did not manage to get in a bear market but it continued to rise even though the rise was at a very slow pace. I mention this to warn all the bears predicting Armageddon and loading up on puts every time the market sells off that the stock market does not have to crash or get into a bear phase just because there is a housing bust and subrime lenders are going bankrupt. We had been there before and the market could not even do a 10% correction (sounds familiar?). We all need to put things into perspective and keep an open mind about this. Yes the economy is coming off from probably the worst housing bust in decades but that does not necessarily mean we will see a bear market. Don't get me wrong I don't rule a bear market out but it does not have to happen.

Google broke a 3 month rising wedge on rising volume. A follow through tomorrow on higher volume should validate the move. I am willing to take the trade on an early retracement tomorrow. Target on the wedge is the high of last January.

CMED technicals

2007-02-05T11:18:00.000-08:00

Four days ago the stock violated resistance at $24.00 on more than a million shares which was quite heavy, but it is clear today that the move was a failed one. It is already at $24.4 as I am writing this blog. When there is a failure of a break out the price is going to the opposite side of the break out and it is quite powerful move. In the case of a break down like we had in cmed, the breakdown attracts a lot of shorts but when the stock gets back above the support not only it creates a lot of pressure for the shorts to cover but there are also new long positions that are coming in. I would not be surprised if this stock gets back into the top of the trading range at $27.5 and it can happen real fast.

RGLD

2006-12-07T09:02:00.000-08:00

This looks one of the easier setups to trade. Resistance at $31.82 broke on volume and it got tested and held today. Next logical step will be the swing high at $35.53 and given enough time the high of $38.84. Stop below todays low should be good enough.

Preparatory signals for short sales shown by trend action

2006-12-02T22:40:00.000-08:00

NOTE ABOVE that L and O are to be avoided.

ISRG update

2006-11-28T17:19:00.000-08:00

There are 2 areas of interest in the chart above. First there is gap resistance at $112.16 (first highlighted area) and second the trendline resistance at $113 which is also the upper side of the triangle consolidation that I mentioned on my previous post. I think the price will hit those levels rather quickly considering the rising volume and the violation of resistance at $102. The pleasant surprise will be though if the price breaks out of the triangle. I dont't know if the GE rumor is true or not but either way it seems that there is enough momentum built in the stock that it will at least hit those targets 112.16-113.

Isrg stuck in a consolidation

2006-11-24T23:01:00.000-08:00

One year consolidation triangle is clearly defined by the 2 converging lines. Price looks poised to test the upper line of the triangle about $114-$115.