Monday, October 27, 2014

Under the weather

The title of this post has nothing to do with the markets.  It's me that's under the weather right now but the market trades on, and so must I.  So here's whats going on.

Oil is in focus today as it went to test the double bottom it made at 80.  As traders say in this business, double bottoms hold and there is no such thing as a triple bottom.  Oil confirmed that saying and broke below 80 moving down to 79.40, bouncing to retest 80 and failing there so far which is likely what sent the market down.  Stocks, which opened lower already don't care an hour and 45 min now into trading and after being down about 80 points a few min ago, the Dow just turned positive.

Gold and gold stocks have done nothing but continue to disappoint.  In terms of what I said earlier about triple bottoms, well watch gold carefully because the lows at 1180 very well might fail.  The nice rally the metal had off of that level and the consolidation and drastic under performance of the miners is looking less and less promising.

So as a trader your stuck in a weird position as the market indices have taken off skyrocketing and the alternative assets like gold are a stick in the mud.  So we must look for individual stocks.  So here is what I was buying on Fri and why.

First up, Burger King (BKW).  BKW gapped up to 34 then slid down to fill the gap, which it did and caught perfectly on trendline support and the old resistance (now support) at 28.  Bounced nicely off of that level and gave us a nice bullish set up.  My initial target for this is 34, but I am not looking to blindly sell it at that level unless it rockets up there in the next couple days and stops dead.  Then I will sell and wait to see what happens next.  If it breaks through, I'll be back in.  If it steadily moves up there and everything still looks on the side of the bulls, I will have no reason to sell there until that changes.  We will see soon enough what it feels like doing.

Next thing I was buying was Blackberry.  (BBRY...I know right?  Who the hell wants BBRY?)  I do.  Same sort of bullish setup.  10 and 20 day MAs crossing higher and both crossing the 50 day.  That nice little consolidation it is making right above the 50 day is making me believe this thing will likely rocket higher, and it can do so quickly (which is why I like it).  Resistance comes at 50 cent incriminates up  as you can see, 10.50, 11 and 11.50.  But thats really just the start.  I think a move to and above the 11 area is likely and if so, it could run up to 13-14 easily.  (nice 30-40% profit on a 10 dollar stock).  If I back the chart up a bit, you can see how 18 is even plausible over a longer time frame.  So this is one that could be big profits with relatively little risk at this level.  I iniatally thought this would look fine so long as it holds the 9.50-10 level.  This morning it was sent down to 10.08 and rocketed back higher, now at 10.40, renewing my confidence in it.  I think this level between 10 and 10.50 is what will decide whether bulls or bears are in control, but I obviously feel it is the bulls now.

That's all for now.  As I curse the fall/winter season and the fact that I live in a place that experiences it, I will be raiding the medicine cab for a remedy.  Remember, today is Monday and Monday's can be tricky and deceiving.  Oil will likely dictate this market for now (which is now BACK over 80 at 80.60 now.  It's a MIRACLE!!! Watch to see if this holds or falls back to make yet another lower low)

-Jonathan M Mergott

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