The Day that Was - July 24th 2007

Ouch... That is going to leave a mark!

I said this morning before the market opened that I was expecting a lot of companies to pullback today. I sure hit that one right on the nose.

We started out in pre market with some "not so great" earnings crossing the wires. Then AT&T reported theirs and I think most investors were just wanting to hear about how the iPhone was doing. What AT&T provided was not enough for the investor community to feel happy and AT&T gaped down at the open. But as the day went on they recovered some but at the end of the day they could not manage to close green (even though AT&T reported a good earnings quarter). Now the investors that were hanging on every word and figure from AT&T left them and went over to Apple and started cashing in their profits. They were fearful that the iPhone was not selling enough. Then a little while later financial analyst CIBC Securities released a statement about a study they just completed and found that store inventories of the iPhone were good (no one was sold out) and they observed customers passing by the iPhone. They summed up their analysis as the iPhone demand was "thin at best". Well that just pushed Apple over the edge and they fell throughout the day.

I expect to see some buying of Apple on Wednesday morning ahead of their earnings which will be after the market closes. I will have my popcorn ready because tomorrow will be one heck of a show to watch as Apple trades in the after market hours when the numbers are released. Will Apple be green or red this time tomorrow? Only Apple holds the answer to that question right now. My feeling is red. I think in Vegas right now they are placing odds on this very same question!

So, we started out the day with the Apple situation, then throw on top of that the bad earnings from Dupont and a big earnings miss from CountryWide Financial and the writing was on the wall that we were going to have a down day. But it only got more interesting when CountryWide held their conference call (which lasted almost 3 hours! That is NOT the norm). They indicated that they were seeing losses in the prime lending portion of their business. We all knew about the sub prime but this time a large mortgage lender was now saying they had troubles with the prime lending side. That was a nuclear bomb on the market, for months we have been hearing that the sub prime was "contained" or words similar to that. But now someone has come out and said the prime sector was being impacted now. I have been saying that we were not done hearing about this issue and that it would propagate into other areas.

And as if that was not enough the company said that the housing market was still weak and that they were seeing "home price depreciation at levels not seen since the Great Depression". It was as if someone yelled 'fire' in a crowded room, everybody started selling in a frenzy.

The financial sector I see continuing to fall over the next few weeks. There will be an occasional reaction bounce here and there but this is not over yet. This is why I have not been recommending any financial, banking, or mortgage sector stocks on RebelTraders. How far will this financial mess extend into other sectors remains to be seen. But I remain very cautious.

On the DOW chart we closed right at support. If the support level fails and we fall back down into the trading range we just broke out of a week or so ago then we have some initial signs of a bearish market coming. I said initial signs, not a confirmation. That would come if the DOW drops below 13250.

I expect to see a reaction bounce on the major indices tomorrow. And we may even close green tomorrow. But will it hold is the part that we will need more days to see. If we continue to fall tomorrow then that will likely amplify the bearish worry on the Street and take us down even faster.

I am not recommending any new long positions tonight, I will watch the trading closely before I attempt a new swing trade. Normally a pullback would be an opportunity to grab a quick swing trade as pullbacks are a normal process of any bull market. And good traders will always seize an opportunity for a quick kill when their prey is weak. But the ferocity of the selling today was concerning.

(Note: even on a pullback a good trader will wait for confirmation that a stock is starting to rebound before jumping on board, the expression: "Never catch a falling knife" means a trader should never buy something that is still going down. That is throwing money into a dark hole where you can't see the bottom)

I need to see where this is going before I would take on a new swing trade. Remember this: Smart traders know when to sit one out. One does not need to trade all the time.

Today I closed the ALGN swing trade when it was trading up on a pre earnings run. Always sell when possible into strength. If I had waited thinking I could get a better price I would have lost my gains as ALGN rolled over shortly after I sold and headed down. Selling into strength is a good habit to develop if your new to the markets. Never worry about squeezing every cent out of a trade. For if you do you will lose more in the long run than just those few extra cents.

ALGN - UPDATE

ALGN reports earnings tomorrow morning before the market opens. Today ALGN is having a pre earnings run. I'm selling into the strength and capture the 7.5% gains. Closing ALGN at $26.87.

Don't want to expose the gains to a possible earnings release with bad news. Selling into strength is the best thing to do as a swing trader.

Pre Market - July 24th 2007

Good Morning Rebels,

The big news this morning is earnings. The biggest one that will impact the markets today is from CountryWide (CFC). They missed earnings and cut their forward guidance. CFC is in the mortgage business so this is one more knife in the back of the financial sector. I see mortgage lenders and big banks having a down day today.

AT&T (T) reported this morning and they beat estimates but in the view of the investors it was "not enough". AT&T is trading lower in pre market. It is my view that investors were looking for bigger iPhone talk in their earnings. I don't think AT&T gave the investment community a good feeling about how the iPhone is working out for them. And on that note, this morning CIBC analyst has conducted a study to analyze how the iPhone sales have been doing. Their findings were that most stores had a good inventory and the demand for the iPhone is in a significant decline. Their analysts visited Apple stores and observed that most visitors were not looking at the iPhone and the demand was "thin at best". This news is causing Apple (AAPL) to sell off this morning in pre market. I said last week that $140.00 may be the short term top for Apple, and I did say "$140 give or take a little". Apple traded up to $ 145 but could not hold it and closed down to $143.70. In pre market Apple is trading down to $140.22. Is this the end of the Apple iPhone hype? To some investors it is and is why we are seeing the pull back in pre market. With Apple releasing their earnings this week Apple will be one of the most volatile stocks on the day of their earnings. Grab some pop corn and watch the trading on Apple on that day.. it will be a wild show.

I will be closing the ALGN swing trade today. They release earnings tomorrow morning and I'm not risking the gains to a potential earnings miss.

Futures are down and I see a volatile trading day today.

The Day that Was - July 11th 2007

Today the market was able to recover some of its big drop from yesterday. Yesterday the big driving force that made the already nervous market take a dive was that ugly word popped up again. That word is "sub prime". Any time the market hears that word there is a fear that runs all the way down the spine of the markets. Personally I feel the sub prime issue is still looming over the economy and it will manifest itself into other areas over time. We are not done hearing about sub prime woes.

Today the market was helped by the M/A news of Chaparral Steel being purchased by Gerdau Ameristeel Corp. That boosted the metals sector today. And the rebeltrader portfolio holding A K Steel Holding Corp (AKS) got a boost from that today as well closing up 1.78%.

Portfolio holding Grant Prideco Inc. (GRP), an oil services sector play remains in play. I am still bullish on GRP. Yesterday Motley Fool mentioned that GRP is still on their 10 highest rated stocks list per their investors subscriber base of recommendations.

Yesterday I took a position in JSDA as it was advancing throughout the day after it had closed above a key support level ($17.00). The entry price was $17.85. Today JSDA sold down to $17.07 on a CEO interview that made it through the markets as being "not so hot". I watched the interview and while the CEO was not well spoken he did not say anything in my view that warranted a sell off. But one always has to remember the market does not care about the old saying "what have you done for me lately", but instead wants to hear more of what are you going to do for me tomorrow. The CEO addressed that by the end of the year they would be introducing some sort of new product. For me it does not matter what the CEO says or not. I'm playing the chart. And for now $17.00 is still a support line that if there is going to be a leg up it has to start from somewhere. And $17.00 is that starting point. Every swing trade has to have a plan. You can not just buy something you hear about or see flash by on a ticker window showing a big gain. You have think like a tiger, stalking your prey. A tiger waits for the right moment to attack. JSDA was a stock that ran from $14 to as high as $19 in the span of 3 days. It was a moving target in the middle of a freeway at rush hour. Trying to rush into traffic to catch it could either get you run over or when you caught it the stock could change direction and head for the off-ramp. Smart traders will wait for a setup. The setup was the formation of a base above $17.00. That we got, we made the kill on the move up out of the base (albeit a short time frame base) and we will play it by the book. If it fails the base then this stock is not ready for prime time yet.

Discipline is always the key. Never buy any stock that is being talked about in the news blindly without looking at it carefully, plan your attack, and wait for the conditions to establish and then you have your trade. Have a plan and trade the plan.

Today I entered ALGN on a very healthy advance. The volume was good and it closed up 5.23%. Today it set a new 52wk high. I did not enter the second 1/2 of my swing trade funds to this trade yet. Although it did clear the second buy point it did it at the end of the day and by only a couple cents so I will wait until tomorrow. If you had a pre programmed trade setup to grab it at the second buy point then that is fine, you may end up with a better entry than I will when I enter my second buy.

We are still in a place I don''t like being. We are still in this sideways trading range on the major indices and it's makes swing trading difficult. But perseverance I have and I will keep looking for good trading ideas. For those of you that email me asking me what are some good trades I can only tell you that I have a list of stocks in my office up on the wall that I like, but I am stalking them and looking for the setups to establish themselves. Over the weekend I will post a picture of the RebelTrader 'research department' and you will see my wall of stock plays.. LOL

I hope all my fellow Rebels had a great day and to all I wish a wonderful good night.

p.s. - Today I was contacted by Lindsay, a wonderful lady at http://www.ino.com/ asking if I would be interested in providing some guest commentaries for their site. So from time to time I will provide her with some articles that I write and she will share with me some of their content in return. Thank you Lindsay for considering my market views as worthy for your site.

Updated ONT and ALGN charts:

ALGN - Update

ALGN has been doing good all day so far. Next buy point for adding the remaining 1/2 of this swing trade is when it moves above $25.73

ALGN - Buy point reached

ALGN has advanced to the first buy point. Long 1/2 position on ALGN @ 24.86

Market Summary - July 5th 2007

Bond yields were the food for bears today. The market volatility was all over the place today but even with the volatile conditions I still entered or added to swing trades today.

The public charts have been updated with current stop loss values for current open trades. ALGN goes back onto the watch list tonight.

Additional watch list stocks coming over the next few days. Waiting for more market movement to decide on which sectors I am going to post new watch list items for.

See you in the morning...

ALGN

Lets close ALGN for a break even. It is a nice setup but we will have to come back again later. Don't want to risk turning it into a loss

Quick Summary.... Monday June 18th, 2007

No positions in the FP80 portfolio were sold today.

This was a very low volume trading day today. Almost like watching grass grow today.

One new addition to the portfolio was made at the end of the day. Matrix Service Co. (MTRX) reached the buy point today, long at $27.65.

Portfolio holding Arena Resources (ARD) was the big winner today. Added another 4.6% to the gains already made in this. Brings us to a gain of 12.1% in just a few days.

Align Technology (ALGN) was up another 1.35% today, as was Sturm Ruger & Co. (RGR) up 0.2%.

The recent addition to the watch list; Biovail (BVF) broke out of the triangle pattern I highlighted on the chart in yellow, but notice how it failed to clear the resistance above it. This is why I chose not to play the triangle breakout. Instead we want to see this move above the stronger resistance point before we make a play in this.

Other portfolio holdings had low volume pullbacks today, all minor. All holdings are still in play. A complete run down will be posted later.

Did you notice that the Dow Jones Industrial Average chart on my public chart list showed that we would have resistance to overcome in order to resume our bull run. Last Friday it hit the resistance and pulled back, today it pulled back even more. We need to see the major indices move above their recent resistance levels in order to bring back the confidence (and the big money) that we are continuing the bull run we have been having so far this year.

More later..

FP80