Solar Positions

A number of solars are well down in their longer-term channel as shown on the lefthand-side, daily graphs. They appear to be breaking out as shown on the righthand-side, 60-minute graphs, but some are doing so on light volume. Also, the market may be entering a correction, so may thwart any upward move.

SOL

JASO

LDK

CSUN

Market Breakout?

The market broke out of its down trend this morning as shown on the left-hand hourly graph of the S&P 500 Index (SPX). However, looking at the longer term, it may be a dramatic retest of the longer-term uptrend lines before continuing its correction. Time will tell.

Pre-market Position

The Standard & Poor's 500 Large-Cap Index (SPX) nears the top of its channel, indicating an end to pause days. It may take a half-day excursion up to its longer-term, upper, darker channel line, but then the shorter-term channel runs out of room within the longer-term channel. SPX then should turn down. It is now below its 50-day and 200-day moving averages, and it would appear entering the long-awaited 10-15% correction.

This indicates the bear-market 3X ETFs (FAZ, TZA, ERY) should resume running, and the solars, who have enjoyed this pause, to correct some more. Many of the solars are near their bottom channel line, and, market permitting, would turn upward. LDK seems to be leading the others by a day, so is shown here.

The left-hand, daily graph shows LDK approaching its lower channel boundary, thus good to rise, again, market permitting. The right-hand, hourly graph shows a breakout, with the stock, again, at a low position in the shorter-term channel. If the market meanders sideways for the half-day left before its short-term channel runs out of room within the longer-term channel, LDK may rise, but when the market turns down in earnest, it will, too.

With the market in downtrend and near its upper channel, it is looking for excuse to turn down. It will find it. Be careful out there.
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Somewhere around 11:20, the market overcame the old longer-term trend line, and went higher in the short-term channel. So much for predictions.... [sheepish grin]

Pause Day 2

As far as I know, there is no rule against two pause days in a row. If so, we broke it today. Market rose early then reversed when the Fed's Open Market Committee broke up. Guess they said what was expected, but disappointed what was hoped for. Anyway, markets are meandering, not knowing which way they want to go. Buyers and sellers are waiting. Traders longer than day traders don't much care which way the markets go, as long as they go. So we wait.

Pause Day

As predicted, after yesterday's market drop, today would be a pause day, or a day with little if any movement. It was. Indices were mixed, with Russell 2000 ($RUT.X) down.

Since the Russell 2000 continued down, TZA mirrored and amplified that move, closing slightly up. A rise of over 2% is nice for a pause day. Note, the left-hand daily graph, TZA continues to walk the upper Bollinger band, indicating the trend upward remains in force. The right-hand TZA 60-minute graph has had the latest channels redrawn to include today's movement. Today's drift sideways has left it near the lower channel line, close to an entry point.

ERY, in the left-hand daily graph, also continues to walk the upper Bollinger band, plus paused today on its 50-day moving average. On the right-hand 60-minute graph, the redrawn channel is parallel and overlaps the previous channel. The pause of today and much of yesterday is becoming a Bollinger squeeze. It is also nearing the lower channel line, but the On Balance Volume is not showing any enthusiasm. ERY moves more from the decrease in oil prices rather than the general market indices, so that may pause another day or three before moving.

FAZ in the right-hand daily graph also continues walking the upper Bollinger band, indicating an intact trend upwards. FAZ's 50-day moving average is above, currently t 6.25, and an attractor, if one allows fractal terms. The right-hand 60-minute graph has had the latest channel redrawn to includes today's pause, and shows price challenged the 38% Fibonacci retracement level twice. It held. FAZ has closed directly on the lower channel line, indicating we will know immediately in tomorrow's market whether FAZ will resume upward movement or breakdown. FAZ also has a resistance level at 5.37 which contained the upper movement after testing the 38% level.

Ten Percenters

Hunting ten "percenters," or stocks that rise ten percent in a day, is fun, and often lucrative. Rare are the days when one gets 3 for 3.

The obvious one is ERY, written up this morning before pre-market. It broke out Friday and carried through this morning. It reached its 50-day moving average and tarried there for the balance of the day. Reaching its target of 24.50 was thought to take three days, but it nearly achieved it today.

TZA reflected and amplified a drop of nearly 4% in the Russell 2000. The market has entered into the long-expected first bull-market correction. TZA gapped outside its previous channel on opening, and finished the day on a second leg up. Note it is still within its new channel. Its 50-day moving average is at 27.42, within reach of another day like today.

FAZ was the late star of the day, after closing well down in the channel Friday, then popping out this morning, and running some more in the afternoon. Its 50-day moving average is at 6.33, within another day's effort. FAZ also closed in mid-channel, indicating a desire to continue.

Tomorrow may be a pause day in the market's decline. Many of the indices are closing at their 200-day and 50-day moving averages simultaneously. These three will reflect that pause. Then, again, the indices may not pause, but accelerate, which will reflect in these.

ERY Up, ERX Down

ERY broke out of it correction Friday, and may wish to continue its climb today. It approaches to lower channel line, so an answer should come early. Note, the Bollinger squeeze and head fake annotated on the graph. Note, too, On Balance Volume and Stochastics also confirm the assessment.

ERX confirms the movement of ERY. The possible alternative assessment of this movement is that we have merely completed the A and B legs of an ABC correction, and the C leg will now follow taking ERY down again, perhaps actually reaching the 38% retracement level missed during the first attempt. If that is the case, we should violate the lower channel line (black) and the trendline (blue), and do so early.

Of course, a third possibility is that this correction could simply continue sideways. No one promised simple. Fortunately, prediction is not required; one simply need react to whichever occurs and place a nearby stop loss should the trade go adverse. It is playing the odds, not fate certain.

One aspects of ERY continuing upwards, is that the correction of the last Wednesday and Thursday forms a flag, which Friday was confirmed with a breakout. The question now is whether the upper boundary of the flag will be retested or not. If this is the correct interpretation, the price target should be approximate 24.50 and should be reached this week.

Learning to Trade 109

A basic on price channels and trend changes will perhaps help in interpreting the last few posts and reversal detection.

FAZ'zling On Down

FAZ never turned up but continued trading down within the channel, and closing within the channel. The last candle downward was after market, and most probably those who wish to not hold the stock over the weekend. It appears to have paused most of the day at the 50% retracement level.

FAS mirrored the same in-channel action with the exception of the after-market action. Price action just before closing reached the 50% retracement of the previous corrective action. It touched that point at the same time the upper channel lined passed through that level, then backed down to the upper Bollinger line.

Because of the continuation within the channels, there were no trade opportunities in either during the day, unless one was daytrading. Monday, perhaps, will provide a turn.

FAZ'zled

FAZ corrected to its 38.2% Fibonacci point yesterday, and held. The 38.2% retracement calculated at 4.94, and FAZ bottomed at 4.90, but call it close enough. The important point is that it held, even though the price action has not broken out of the short-term channel created by the retracement move. The action so far seems a flag formation of either a rectangle or pennant, but a flag. If the flag-flies-at-half-mast adage applies, a resumed upward movement should carry to the 6.10 area. Note, too, yesterday's retracement was on lower than average volume.

FAS, FAZ's mirror, also corrected, but did not reach its 38.2% level, stopping instead at the old, long-term trendline (heavy blue). Its correction also was on light volume, and appears to be forming a flag.

Both FAS and FAZ are coming out of a daily Bollinger squeeze formation. That formation is susceptible to head fakes, where price breaks out in one direction, but quickly reverses and goes in the opposite direction. Point&Figure (P&F) charting target for FAS is 5.50, a significant retracement of the movement off the FAS bottom of 2.32 to its subsequent peak of 13.27. This retracement closely matches the Fibonacci level of 70.7%, and is not unusual since first retracements off a long-term bottom tend to be deep, or a significant percentage of the upward movement. FAZ's P&F target has not recalculated, yet.

Tactic for the day is to watch for action indicating a resumption of upward movement in FAZ, taking a position when it breaks out of the flag formation. Set a stop loss thereafter below a possible pullback to the upper boundary of the flag. It could well be, the hesitation at 4.90 is a pause midway in a further decline to a deeper retracement, say, 50% or 61%, before price will continue its upward movement. Should the Bollinger squeeze prove to be a head fake, trade FAS as it resumes its climb.

Do keep in mind that trading FAZ is a counter-trend trade since the long-term trend of FAS is up, and this downturn is a correction r retracement of that longer-term trend. That means, be light of foot, quickly exiting should conditions go adverse, but that is good trading advise in any situation--just more so in counter-trend.

TZA'rd

TZA fell out of channel, yesterday, and now appears to be retesting the lower channel line. Often, when prices reverse near a channel's center line before breaking out, they retest the channel line subsequently broken. If prices come from the opposite extreme of a channel before breaking out, they don't retest. Note on the daily graph in the upper left corner, TZA is just entering a Bollinger squeeze.

TNA mirrors TZA with opposite movements. TNA, too, seems entering a Bollinger squeeze, although the pattern seems less clear. It also approaches its 50-day moving average, thus, a suspected retest. Although up for the day, it was up on lower volume, suggesting this just a correction of the move down.

These movements should be of little surprise since these ETFs represent the Russell 2000 small cap stocks, and the RUTX is moving into a Bollinger squeeze. It os also testing its 200-day and 50-day moving averages simultaneously. Whether it breaks through these, or merely bounces, is yet to be determined. Therefore, the eventual direction of TNA and TZA is yet to be determined.

ERY Running

ERY has been on a run, up from 16 to 20 areas in four days. Further, the two ETFs channel nicely, making them easy to trade. ERY appears to be coming out of a Bollinger squeeze, per the daily graph (upper left corner). It is low in teh 60-minute channel, and appears to be breaking its trendline on the 3-minute graph.

ERX, the bull mirror of ERY, is dropping out of a Bolliner squeeze, and is now poised for another leg down. It is at the higher channel line of the 60-minute graph, and shows a breaking of the trendline on the 3-minute graph.

These are the daytrading movements. If swing trading, it would be better to await a change of trend from the one now moving for four days. This will be evident on the 60-minute graph, with a breakout of the current channel.

FAZ Day

This combines the daily, hourly and 3-minute graphs on the same screen. The daily (upper left) shows FAZ breaking upwards from a Bollinger squeeze. Although it doesn't show clearly on this graph, volume was up considerably over its average.

The hourly, or 60-minute graph shows it moved upwards, out of the channel of the first two days. The upward channel will be redrawn to contain today's action. Often, early channels need such adjustment because they were drawn with so few data points. The redrawn channel having a higher slope reflects the strength of this movement.

Finally, the 3-minute graph shows the day's action well-defined by simple trendlines, allowing one to easily daytrade FAZ, should that be one's inclination. It also allows one to gain entry at a lower turning point, allowing increased profit while limiting risk.

Overall, FAZ was up 6.53% for the day. Tomorrow looks like it will continue. Note, too, the upper Bollinger band and its centering moving average contain FAZ's excursions very nicely. It provides an excellent indication of position, along with the 3-minute graph, showing where one should enter FAZ, then set a nearby stop-loss point to hold loss from an unexpected adverse movement to a mere nibble, while maximizing upward potential.

Using this technique today, one could have entered at 5.00 around 14:30, set a stop loss at 4.95, with an expected target of 5.30, so the reward:risk ratio would have been (5.30-5.00):(5.00-4.95) or 6:1, well above a minimally acceptable 3:1. End of day would have one up 0.25 per share, already five times one's risk upon entry. Tomorrow, the stop loss could be raised to match the Bollinger centering moving average which closed at 5.00.

A Thought on the Markets

The S&P 500 has fallen to its lower channel line where it is challenging both that and the 200-day moving average. Not far below both is the 50-day moving average, too. Today may resolve the potential change of trend should the lower channel line be breached.

The 60-min graph shows the downward channels of the last two days remain effective, without hint of a pending delay in further decline. The breaking of the longer-term channel line and/or 200-day moving average could add a day or two delay; awaiting the meeting of the 50-day and 200-day moving averages may be, ah, too poetic to resist. On the other hand, a breach-without-delay will indicate a decline of strength.

TZA, FAZ and the Markets

The Russell 2000 Index approaches its lower channel line challenging it and its 200-day moving average. It has been a long run since the early March bottom, and it's probably time for some retracement. If so, this would be the first correction of the new bull market, and they are often deep.

TZA, the bear-market 3X ETF representing the Russell 2000 index has already broken out of its trading range and is heading upwards for a second day. It has already established a new channel, although that may succumb to a correction in a day or so.

FAZ has also broken out and established an upward channel. FAZ seems a little steeper than TZA, but they are very similar (FAZ up 5.13%; TZA up 4.68%, today).

Solars: Positions Determination

The solar stocks are in correction and most have just started. However, two were up yesterday, indicating either they may have completed or at least finished a first leg of their correction. This analysis seeks to determine where they are using two tools: channels based on linear regressions and retracements using Fibonacci levels. These are explained in the links, so a basic understanding is assumed in the following analyzes.

APWR seems the most mature of the corrections, so is presented first to allow following issues to be compared. Please, note that APWR has already passed through its 50-day and 200-day moving averages, and retested each after its passage. Note, too, its position within the linear regression channels (in black) running since APWR's gap upward in early April. APWR is now relatively low in this channel, indicating a potential for reversal and movement higher. It has also approached a resistance line and the lower Bollinger line--with the Bollinger bands narrowing in a Bollinger Squeeze.

APWR's 60-minute graph shows its correction in detail, where it has now honored the 38.2% retracement level exactly. It has also undergone an ABC correction, often seen before stocks resume upward movement. Adversely, to reach the 38% level, APWR breached its lower long-term channel and upward trendlines, and is now preparing to return within them or is simply retesting them before starting a new downward trend. Today's trading may provide an answer to which will be.

SOL finishes its third day of correction by a small gain, but the shortness of the correction makes final completion suspect at best. It remains in the upper half of its channel, supporting that suspicion. It recently crossed its 200-day moving average, gapping over it, a sign of strength, but has yet to retest it. That may be in progress now. Other levels being approached are the 20-day centering moving average of the Bollinger bands as well as the linear regression line itself.

SOL's 60-minute graph shows it has reached the 38% retracement level of the upward trend starting in early May. After achieving the 38% level, it broke upward, out of its short-term correction channel. Note, too, the 38% level is also a successful retest of a gap up experienced June 5. The gap, an indicator of strength, especially after successful retest, expanded SOL's upward channel. The question to be determined is whether the correction is complete or whether it will be repeated in a few days. In other words, have we completed the A leg of an ABC correction and started the B leg? We should know in a few days.

LDK just completed a runup from retesting its 50-day moving average to its upper channel line. It is now two-days into correction, touching a resistance line. Note, waning volume on this correction indicates the sell off is merely profit taking of traders. Here, again, because of the shortness of the correction-to-date, one suspects it has not run its course. The high position in the channels and above the centering moving average of the Bollinger bands supports that suspicion. However, its 200-day moving average approaches in the top of the graph, and may prove a sufficient attractor to generate another leg up to the upper channel line, perhaps when it and the 200-day moving average coincide.

LDK's 60-minute graph shows LDK has achieved the 38% retracement level for two differing-timeframe movements, but remains within its short-term correction channel. A breakout upwards or breakdown beneath should come today.
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06/15/09; 08:30: APWR reported earnings of $0.04 per share down from $0.14 per share in this quarter from the previous year. We now have the answer of whether APWR is going up or down.