Sold Ingles Markets (IMKTA) Today.

I've grown to hate earnings season. Especially when I'm holding a stock that is moving up fast. I feel that IMKTA, which reports tomorrow, will have good earnings but not good enough to warrant the recent climb. I would hate to give back all my gains on a "sell-the-news" reaction.

I'll look to get back in when the 50 day moving average catches up to the price, or vice versa.

UPDATE: Ok, so I missed some big time upside by selling yesterday. The ABC structure will be done at 39 and then IMKTA should pullback to the breakout point. I won't kick myself too much for a profitable trade, but I hate earnings season!

Breaking Trendlines: the SPX and the Nasdaq

I recently finished "The New Market Wizards" by Jack Schwager, published in 1992. During an interview with Victor Sperandeo, Schwager asks about his methods of spotting market tops. Check this out.


JS: ...What are your three-step proccess of chart analysis?

VS: Once the trend line is broken, I then look for an unsuccessful test of the
recent high. This failure may take the form of prices reversing below the
previous high or, in some instances, prices might actually penetrate the
previous high by a modest amount and then break. In the case where prices
penetrate the previous high, a pullback below that high would serve as
confirmation of a failed test of the high. The third and final confirmation of a
trend change would be the downside penetration of the most recent relative low.

JS: In the second criterion you mentioned-the failed test of the
previous high-you indicated that sometimes the rebound will fall short of the
high and sometimes it will penetrate the high before prices break. Is the
pattern more reliable if the previous high is penetrated before prices pull
back?

VS: As a matter of fact, yes. In fact, this one pattern alone can
sometimes catch the virtual exact high or low. Im my view, these types of price
failures are probably the most reliable and important chart patterns.

The reason these types of failures often mark major turning points is
related to the mechanics of the trading floor. Many traders tend to set their
stops at or near the previous high or low. This behavioral pattern holds true
for both major and minor price moves. When there is a heavy concentration of
such stops, you can be reasonably sure that the locals on the floor are aware of
this information. There will be a tendency for the locals to buy as prices
approach a concentration of buy stops above the market. The locals try to
profit by anticipating that the activation of a large pocket of stops will cause
a minor extension of the price move. They will then use such a price
extension as an opportunity to liquidate their positions for a quick
profit. Thus, it's in the interest of the locals to try to trigger heavy
concentrations of stop orders

Look at today's SPX and Nasdaq charts. Do they remind you of anything?

Whipsaw

This whipsaw action is crazy! I'm glad I didn't panic and sell my QID position.

Looks like I missed some upside action with AB, but not much. They blew away numbers and were rewarded with a measly 1.5% gain. It seems, as suspected, the good news was already priced into the stock. I'll be looking to get back in on a pullback.

Bulls on parade

Ok, so the market took back half of my QID gains today. That happens. I just wish it would make up its mind and pick a direction.

I got back into IMKTA today. The low volume pullback of the last few days just looked too good. I also missed getting into Agnico Eagle Mines (AEM) by 2 cents on the morning pullback in gold stocks. Damn limit orders!!!

Why I sold AllianceBernstein (AB)

Besides the fact that the market is turning sour, I sold AB because of several factors.

First, AB has been getting more press lately. This used to be a quiet little stock that nobody paid attention too. Now I keep reading about how this is a great place to put your money if you want to play the world markets. With higher visibility comes higher expectations and the way the market has been selling the news I didn't want to be on board during earnings (Jan 24). Last quarter AB reported blah numbers and the stock didn't budge. Since then, the stock has really ramped up and is now poised for a pullback.

Also, the chart shows some signs of churning. This is when an above average amount of volume is accompanied by little or no price movement. This shows that the institutions are exiting.

The bottom line is that I rode AB up for a 23% gain. Might as well get out while the gettin's good.

The Spectacular Collapse of Amrep (AXR)

I wrote about AXR, #1 on the IBD 100 list, a short time ago and compared it to Empire Resources (ERS), a former #1 on the list. I predicted a collapse and that is exactly what we got today, with Amrep dropping by 22%.

The volume on the Nasdaq was lower than on Friday so we didn't pick up another distribution day. Nevertheless, the price destruction of AXR was the final piece of my market top puzzle, with US Global Investors (GROW) having already tanked. I therefore sold out another long position, AllianceBernstein (AB), with a nice 23% gain. (I got out of my IMKTA and HRZ position last Friday.)

So what do I have left? I'm still holding those QID shares I bought at last Thursday's open and a small core position in FTK. This makes 90% short right now. I plan on adding to that QID position after the first short covering rally.

I'm also thinking about shorting AMK at the first short covering rally, which should be huge since the short interest increased this last month to 84%.

Damn, this stock market stuff is sure fascinating!

Tom O'Brien Interviews

I like to listen to Tom O'Brien (www.tfnn.com). His market calls have been right on for as long as I've been listening. One of the best things about him is the respect he gives each one of his callers, no matter how crazy they might be.

His trading style is difficult and complicated and I'm not sure his system is as teachable as he might think. Nevertheless, he is out there putting his neck on the line each and everyday and is really trying to stop people from making mistakes.

Some people are beyond hope, however. Just listen to these two clips. They are amazing.

One guy has all of his money (multiple six-figures) in only one stock. Guess what this stock is? Motorola! What a nut.

The other guy is asking advice for an entry point into an ETF he know absolutely nothing about. Someone needs to tell this guy to just put his money into a mutual fund. You know the call is going to be bad when the caller asks about the "exchrange traded fund".

You can listen to Tom O'Brien every weekday from 10-11 am and 4-6 pm (eastern time). The Tom O'Brien Show

Tread lightly!

Many of the leaders took a big hit today. My bellwether stock has been US Global Investors (GROW) and that thing has officially tanked. Now if that AXR can follow suit. It will be difficult considering that 81% of the float is shorted.

We have 3 distribution days in the last 4 weeks. One more day of heavy selling and its time to go completely into cash. My long positions all acted well today, but I'm thinking about cutting them loose if we get another ugly day. It is time to be very, very careful.

It looks like that QID buy was a good one.

QIDing it again

There were some poor outlooks from Apple and LRCX last night so I bought some shares of the QID again. It got in at $50.80.

Also, it looks like the Nasdaq is headed for another ditribution day. Look out below!!!

Another buy in front of the impending pullback

I keep waiting for it and just never comes. That pullback came a little closer today when the Nasdaq chalked up another distribution day. We also saw some weakness in the leaders again, especially US Global Investors (GROW), which sliced through its 50 dma.

Well in the face of this impending doom I purchased some shares of Horizon Lines, Inc (HRZ). This is a shipping company that should be helped by the drop in fuel prices. What I especially like is the low volume pullback after its fantastic run last year. This will be kept on a short leash.

The Novice Bear Tracks Distribution Days

With the market off today I think it is time to add something new to the blog. The market is firing on all cylinders right now and we should be thinking about "tops". Is it possible to time the market? William O'Neil thinks so. All you have to do is look for distribution days. If you get 4 or 5 in the matter of four weeks then a correction/bear market is just around the corner. So what is a distribution day?

According to IBD :

A distribution day occurs when one or more of the major indexes (the
Nasdaq, S&P 500 or Dow industrials) falls more than 0.2% in higher volume
than the previous trading day. When volume spikes sharply higher but the market
fails to make any price progress, that's churning, another sign of distribution.

The chart shown above gives this last market correction as an example. If you read O'Neil's books you will see how this method worked time and time again. I will be keeping track of distribution days on this blog from now on. Just check out the links on the right.

Caveat: I may differ from IBD's distribution count from time to time so please understand that I'm doing my own analysis and not just taking the count from "The Big Picture" column.

Bearish but still long. IMKTA, AB, FTK

I learned my lesson some time ago when I sold out a position for no good reason only to watch it rise 20% in a matter of weeks.


Sure, I've been bearish about the market but that hasn't stopped me from holding my long positions. In fact, I even started a new long position at the height of my conviction that the market would turn lower. I found that buying one of these ultrashort ETFs was the key to my mental well being. For instance, I purchased some shares of the QID and put in a very tight stop. If the market went up I would be stopped out, but still have my long positions. If the market went down I would make 2% for every 1% the QQQQs went down. That gave me some peace of mind and a feeling that I would have time to exit my long trades.

As of now I don't have any QID shares and I'm currently enjoying the rise of my recent long position. Check out IMKTA.




I'm sure a pullback is in the cards but IMKTA has moved up almost 10% since I bought the flat base breakout.








AllianceBernstein is a model of strength. This one has been easy to stay long.














Like I posted earlier, the massive decline in crude prices has hurt everything connected to oil. I have been looking for an oil pullback and was ready to cut my FTK shares down on such a price break. Considering the beating that many of the other oil stocks have taken, FTK has held up pretty well. However, I think the bad weather in the Rockies will hurt Flotek's 4th quarter and expect them to report an EPS towards the lower end of their estimates. Who cares, the shares I still own are all profit. When oil turns around I'll add some more. Here is the chart. Notice the the recent distribution days and wild price swings (today especially). I'm looking for it to get down to the 21.50 area.

Creepy charts. Amrep Corp (AXR) and Empire Resources (ERS)

Every once and a while I see a chart and I say to myself, "wow I've seen this before". Check this one out. It goes follows nicely with my preoccupation with market leaders right now.

Amrep Corp (AXR) is currently sitting at the number 1 spot on the IBD 100 and has made a huge run in the last few months. (No one should be touching this stock right now. It only has a 1.6 million share float and has 81% of that float shorted. Crazy.) Now check out Empire Resources (ERS). This was at the IBD 100 number 1 spot just before the May top of this last year. The similarities to the AXR chart are uncanny. Its downright creepy.

Now look what happened to ERS. What goes up must come down. I have no doubt that the same thing will happen to AXR. The important thing to remember is that the market tanked a few days after ERS did. I don't know if the same thing will happen with the market today but I'll be ready for it when AXR crashes.

Leaders Tank! (GROW, ROS, VTS, IAAC, CRVL, GEF)

Last month I was getting antsy about shorting this market. As a result I nibbled a little at the QID and was stopped out rather quickly. What I quickly realized was that I was forgetting one important fact about market tops, namely, the leaders must tank before the rest of the market follows suit. I pointed out US Global Investors (GROW) as one of the leaders to watch.

Check out the first chart I have on the left. GROW has tanked and tanked hard! As I said yesterday, I tried to short it yesterday but couldn't get my hands on any shares to borrow. It looked like a fortuitous event when GROW shot up 5% this morning. But that quickly changed when a midday reversal took place.

Check out some more of the leaders.

I have a particular fascination with climax tops. ROS is a classic example.













Here are some more leaders that have come off of their highs with volume.

Buys, Sells, and Naked Shorts!!!

The excitement continues today. I put in another buy order for the QID again and this time my order was filled. It was pretty scary watching it sink another 2% after I bought it. The good news is that the Nasdaq closed under yesterday's highs, which suggests that we will probably head down again tomorrow. We shall see.

I took my principle off the table for Flotek Industries. I'm going to let the profit ride. There is strong support at around 22.5 and it will be interesting to see how it reacts when it reaches this level. The bottom line is that these last couple of days have been the first days of strong distribution since FTK took off in October. I'm going to be very cautious right now.

I found a very interesting stock today that I think I'll buy tomorrow. Ingles Markets, Inc (IMKTA) is a supermarket chain in the southeast. It popped up on my CANSLIM screen recently. Today, she broke out of a flat base on the second day of big volume. Very nice strength considering the volatility we've seen.

Finally, I tried to short US Global Investors (GROW) today but couldn't because there were no shares available to borrow. Too bad because it dropped a whopping 13% today. Bummer. I did short Ford (F) today as it bounced off of confluence again.

Oil spill

Holly cow! There was some crazy action out there today. I must admit that the wild ride definitely distracted me from my day job.

Anything remotely connected to oil and natural gas got absolutely smashed today. I cut my Flotek position in half and will wait and see about the rest. While the volume in FTK today was well above average it didn't come close to the high volume panic selling I witnessed in some other small cap oil service stocks (see ALY and BTJ, which found some support at their 50 dma).

To make matters worse, I put in a limit buy order of 52.32 for the QID when the market gaped up this morning. I missed that huge reversal today by 0.15. Jeez! Oh well, judging by the drops some of the market leaders had today I think there will be some more opportunities.

At least I still have good old AllianceBernstein.

The suspense is killing me!!!

Ok, I'm officially nervous about tomorrows opening. The suspense is killing me!!!

I'm hoping for a big time downturn. Last summer was a great learning experience and I would love to apply the lessons I've learned since then. I only wish there wasn't such large short interest set against the market. It is the only thing holding me back from getting short myself. Oh well, I guess it just means that any large downturn will be followed by a massive short covering rally, which will be an excellent short entry point.