Boiling Oil
Well, I have mentioned last week that oil is the key right now. Oil up = everything down for US.
"The big question is how high can oil prices go? Goldman Sachs says the average for the second half of the year will be more than $140 a barrel. Boone Pickens this past week said he expects it to hit $150 this year.
M.F. Global's John Kilduff, a CNBC contributor, says he thinks the oil market may have formed a top this past week. "With the week over, the weekly bar chart for crude is looking like a pronounced blow-off top," said Kilduff. " Quoted from CNBC
Well, I dont wish to question that MF Global guy, but a pronounced blow-off top from the weekly bar chart. I wonder how he sees it.
Yeah it is obvious that oil will come back down one day. However, does this week show a topping sign? NAH. But he is from MF Global, I am a nobody from Singapore. LOL of course I dont discount a Dark Cloud Cover happening next week and only then will I call it a topping sign. Not this week alone definitely. Oil is up about $5.90 for the week, closing at $132.19.Other Highlights Of The Week
1. Well AMR closed at $6.32. I shorted at $9.30, closed at $7.2. Shorted again at $6.8 closed at $6.3. I had another short at $6.2 (bad timing). Did pretty well I guess. Finally catching up with the leader, Mr. X
2. Speaking of Mr. X. He shorted Home Depot. I was talking to him just now and I liked his logic for shorting Home Depot.
No Home = No furniture. That's how he decided to short Home Depot on its earnings week. Nice logic there.
3. Gold played nicely into a three white soldier which I mentioned last week. =) Up $26.60 for the week to close at $925.60.
4. Needless for me to mention about US dollar I guess. Well I have given up hope with CNBC. They don't allow shorting and their currency trading is still facing difficulty.
5. Olam is at $2.68. Actually IF you still have not shorted Olam, I don't know about shorting Olam on monday. I will probably see Olam at $2.5 on monday. Close to a 20% drop. Well everything is falling, so its quite common sense to short some blue chips last week.
6. Celestial was not very good though. It only hit a high of $0.93 before closing at $0.885 on friday. Flat for the week. Took a small profit over there.
In conclusion, my stand is pretty much the same. Oil will still climb towards $140. Gold will head to the $1000 level again. Ouch. For AMR, I am afraid of a bounce actually though I am still negative about this stock. Maybe you wish to short a small portion of it and short everything when it breaks $6. If you are still holding it, have a stop at $7.1. For Olam, I think we will be reaching our target pretty soon. Last but not least, Down Dow =)
Important Next Week
I am currently trailing at 3rd position on Tradershub.net. Need to pull off a 25% gain next week because it is the last week of the competition.
So, I will have to look at non-blue chips, especially those penny stocks.
I come down to two stocks - ManhattanRes and Mercator. Shorting them is a hassle to me because I need to short them exactly at 900am. I can key in the order before hand.
I have played this chart formation before but it is a daily chart. This is the weekly chart of ManhattanRes. It is a two black crows on the daily. Notice that it was on a three white soldiers before forming a long gravestone doji. Actually together with the white candle, they form a bearish evening star. I will probably short ManhattanRes everyday. I am more inclined to this compared to Mercator which I intend to short in case of weird things happening with ManhattanRes.History repeats itself
Ah, I forgot to add this to this week's post. Hopefully you will still come back and take a look. Well, basically this is the daily chart of NOL showing a chart formation that I like a lot - Dark Cloud Cover. Though I call myself a chartist or technical analysis kind of person, I don't really believe in pure technical analysis that includes numerous indicators such as MACD, RSI and etc. I merely use charts to obtain a better picture of price movement.Dark cloud cover, as suggested by its name, shows an impending doom, not really a doom but a bearish outlook. The whole formation goes like this in a layman explanation.
Price of this stock has been rising for quite a while. On one particular occasion, the price gaps up, showing some signs that the stock still has some strong buyers flocking around it. However things are not looking pretty for some reasons, buyers begin to disappear and the price comes tumbling down way into the trading prices of previous day. Generally candlestick practitioners use the mid of previous candle as a guide to justify strong selling pressure. So at the end of the day, the stock closes down at the mid of previous candle or below it. Somehow, there is a lot of selling pressure and it is very likely that it will still continue for the next period of time, in the NOL case, a day.
As you can see, somewhere in Feb ( first red box), NOL was pretty bullish due to some merger rumours. It rose to $4 and if you had studied properly, NOL tumbled down pretty badly after it broke the long term support of $4 during early Jan. Well its all in the picture, not really chartist point of view, just some logical thinking in fact. So $4 could be considered a very psychological barrier, be it a support or resistance. Here we considered $4 as a resistance. A dark cloud cover formed at this very resistance level and as expected, the next day after the dark cloud cover formed, price of NOL continued to fall badly. A 10% shorting gain in a day. Not bad.
Things aren't over yet, somehow someway, NOL's earnings was good but outlook wasn't. Most people ignored that and NOL was again seen rising towards the LEGENDARY $4 barrier. In fact, it broke $4 and closed at $4.08. But if you have been analysing the environment or READING what I have said about oil being the stock's market greatest enemy, you know we are going to see a nice sell off in the US market. NOL gapped up as $4.15 before closing down to $3.96. AH, below the legendary $4 barrier. A lot of psychology in play down here. Indeed, NOL gapped down the next day at $3.87, showing a lot of selling pressure. It climbed up to $3.98 during mid day and really collapsed at the end of the day.
With a nice paper profit, you may even wish to hold on your shorts to the next day for a nice 3 Black Crows. Of course, for the first dark cloud cover that we analysed, there was no 3 black crows in the end but most of the profits could still be retained.
When I buy stocks for a rise I like to pay top prices and when I sell I must sell low or not at all.
Jesse Livermore
1 comment:
The dow downs.
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