Schaeffer's Trading Floor Blog

Readers Respond - IBM?

by 4/20/2005 2:10 PM
Stocks quoted in this article:

Anil says - "IBM seems to be having a nervous breakdown. I had a May 80 put and got out this morning with a 50% profit. I am greedy... I agree. If I waited couple of hours probably made another 6k. When I looked at the charts, I thought 74.3 was going to be the low for the current swing. Looks like it is deeper than that. Houston where is the bottom ? Your experienced thoughts please."

My response - I can't give specific trading advice, however, I did touch on IBM yesterday in my column on the homepage - Still Concerned About Big Blue And a Stock to Watch. In that column I said:

    "In others words, even though the stock has pushed to a new annual low, the majority of analysts are still favorable on the stock. While the stock is still "oversold," the sentiment profile is still not what you typically see at longer-term bottoms."

Also this question brings a topic about trading that every trader will wrestle with. And that is that you will rarely exit at the "perfect" moment...no matter how hard you try. Some exits will be early and you will leave money on the table while others will be late and you will watch profits evaporate before your eyes. This is an extremely frustrating situation but one that every trader goes through.

The key is to develop a trading plan with an eye toward what overall numbers you need to hit in order to make money. This means defining what you need on average in terms of profits, loss control, and winning percentage. Having this in mind may help you "stomach" missed opportunities if you can say you are still on track to hit what you need to. Also that might push you to hold on for bigger gains if you think of it in terms of overall performance.

As a final note, some might also consider taking positions off in portions. While commission and position size might not always lend itself to this practice, there are times when it can be helpful to book some gains while allowing part of the position to potentially accumulate further gains.

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New Lows

by 4/20/2005 1:15 PM
Stocks quoted in this article:

While I was pounding out the post below...


Chart Courtesy of Thomson/ILX

The broad market slipped to a new low for the session. The SPX has effectively "erased" yesterday's gains as it trades at Monday's closing level. However, the "big" levels to watch are 1142 (Friday's close) and 1139 (Monday's low)...

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Readers Respond - Da Rut

by 4/20/2005 1:02 PM
Stocks quoted in this article:

Mike says - "Hi, Nick--Don't know if you were planning to, but any chance for an update on the RUT? I'm especially interested in your take on former support/new resistance areas. As always, thank you a bunch for your time and herculean efforts on da blog!"

My response - The RUT is definitely at a critical point. Check out the two charts below that show the weekly and the monthly perspective of the small cap index...and the 20-unit moving average.

Created with SuperCharts by Omega Research

The weekly chart shows the familiar support and resistance zones we have been following. The RUT broke the support zone last week and is moving back to test this as resistance as the 20-week moving average is in the process of rolling over. This seems fairly ominous.

However, the monthly chart tempers that bearish view a bit. The currently pullback resembles what we saw back in August as the RUT is still holding above its 20-month moving average. Also note that the RUT is still holding above the monthly closing levels from its prior peaks.

In other words, the longer-term uptrend hasn't yet broken but the intermediate-term action is not exactly the most constructive. I would keep a close eye on the resistance zone that sits just above 600 as well the recent lows near 575.

Also, if you haven't seen it yet, those interested in small caps might find my colleague Beth Gaston Moon's recent column - "All the Small Things" - worth reading as it discusses some interesting facts.


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Index Check

by 4/20/2005 12:26 PM
Stocks quoted in this article:

Here is what the big picture for today looks like...

As was the case with the open, the major indices aren't doing much while internet and networkers soar (relatively speaking) and broker/dealers drop. And as was the case with the open, I still find it curious that semis can't rally on the Intel report.

In my ending post last night I noted that both Yahoo and Intel were showing positive reactions and that it would interesting to watch how this carried through to the morning. These stocks did open higher and as I scan down the list below, I see that a number of stocks are showing solid upside reactions. But then you look at the broad market indices and see little reaction. Maybe I am just being impatient but if the bulls were waiting for positive earnings to jump into the market - what are they waiting for?

  • Tellabs (TLAB) +10.2%
  • St. Jude Medical (STJ) +9.6%
  • Juniper Networks (JNPR) +8.9%
  • AMR Corp (AMR) +6.5%
  • Yahoo! (YHOO) +5.4%
  • Caterpillar (CAT) +5.3%
  • Stryker (SYK) +5.1%
  • Gilead Sciences (GILD) +3.6%
  • Seagate Tech (STX) +3.4%
  • Ford Motor (F) +3.3%
  • Intel (INTC) +2.9%
  • United Tech (UTX) +2.2%
  • JP Morgan Chase (JPM) +2.0%


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I Am Back

by 4/20/2005 12:03 PM
Stocks quoted in this article:

Sorry about that...I was pulled away into a meeting and didn't get a chance to give you a heads up. Looking at the chart below, it seems like a missed a quick uptick that was quickly reversed.


Chart Courtesy of Thomson/ILX

Overall the broad market indices are quiet as the mull around breakeven. I am going to do a quick scan to see what is on the move and then I have some reader questions to address....


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