Wednesday, March 26, 2014

Why is the Nasdaq Such an Easy Short Here?

When I go through my charts every day, there are a lot of things that I look for. Price is the most important of course, but momentum, moving averages, relative strength and price patterns are just a few of the other details that I try to focus on. The goal with all of this is to find risk/reward opportunities where the reward potential is exponentially greater than the risk involved.
This is why the Nasdaq Composite is such an easy short. Not because trading is easy, but because the risk here is so well-defined, and the reward possibilities are substantially greater. This is all that really matters. Look at the new highs in February and into early March. Momentum was nowhere near confirming them and now momentum is making lower lows.
3-24-2014 COMPQ daily
In my opinion, the big level here is 4250. This represents the highs from January 22 that turned into support throughout the month of March. As long as prices are below that, the Nasdaq Composite is a short all day long. Above that and things get messy skewing the risk/reward ratio away from being in favor of the bears.  (more)
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Get Out Of Gold Stocks -- Right Now

Few investments are driven by psychology and fear as much as gold. Concerns about ruinous inflation, global tensions or economic instability can send investors out of stocks and right into the seemingly safe harbor of gold.
Is the fear trade back on? A double-digit rebound in gold prices since the year began has led some investors to wonder if gold is poised for a great 2014 after a dismal slump in 2013 when gold prices fell more than $400 an ounce. Junior gold miners have fared even better: The Market Vectors Junior Gold Miner ETF (NYSE: GDXJ) is up roughly 35% in the past three months.
Much of the impetus for an upward move in gold prices was the building tensions in Ukraine, which led to concerns about potential military escalation. It's now apparent that financial sanctions, and not a deepening of a war posture, will characterize the hardening Russia/European Union relationship, and the risk factor is slowly receding. (more)

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Ferro Corporation (NYSE: FOE)

Ferro Corporation, together with its subsidiaries, produces and sells specialty materials and chemicals in the United States and internationally. The company operates in five segments: Pigments, Powders, and Oxides; Performance Colors and Glass; Performance Coatings; Polymer Additives; and Specialty Plastics. It offers various performance materials, including frits, porcelain and other glass enamels, glazes, stains, decorating colors, pigments, inks, polishing materials, specialty dielectrics, electronic glasses, and other specialty coatings; and performance chemicals comprising polymer additives, engineered plastic compounds, and pigment dispersions. The company’s products are used in appliances, automobiles, building and renovation, electronics, household furnishings, packaging, and industrial products. It sells its products primarily to the manufacturers of ceramic tiles, appliances, construction materials, automobile parts, glass, bottles, and wall coverings directly, as well as through agents and distributors.
To review Ferro’s stock, please take a look at the 1-year chart of FOE (Ferro Corporation) below with my added notations:
1-year chart of FOE (Ferro Corporation)
Since November FOE had essentially been trading sideways while forming a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. FOE’s rectangle pattern had formed a $14 resistance (red) and a $12 support (green). The break above $14 was not only a break out of the pattern, but it was also a new 52-week high.

The Tale of the Tape: FOE broke its rectangle pattern to a new high. The possible long position on the stock would be on a pullback to $14, while a break back below $14 could negate the expectation for higher prices.
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First bank runs in China reported today may signal the start of an old fashioned banking crisis / Peter Cooper / 25 March 2014
There have been runs on two small banks in China with depositors fighting to get through the doors to make withdrawals when they opened. Is this the first crack in the great wall of Chinese credit?
Reuters reported local news about queues outside the Sheyang Rural Commercial Bank in Yancheng yesterday and the Rural Commercial Bank of Huanghai faced similar rushes by depositors today after rumors of insolvency at Sheyang. Officials say it is impossible for a Chinese bank to go bankrupt.
Real estate crash
However, financial institutions have made large loans to private and state developers whose project lie abandoned and their loans cannot be repaid. Where are the banks to find the money to pay out to depositors who want to withdraw their money?
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Nasdaq Biotech Index Re-Plunges To 10-Week Lows

UPDATE: Sure enough the 100DMA was met with buying… for now…
The Nasdaq Biotech index is down 4% from earlier opening highs and is once again testing the 100-day-moving-average that provided some impetus for a modest bounce yesterday. This is a 10-week low level (-14% from Feb highs) and has retraced over 60% of the gains since the Fed announced the taper in December. Volume has been very heavy.
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