Stock Setups

A 2 Year Correction for the Dow Jones Industrial Average ?

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Thomas Bulkowski of the pattern site thinks the DJIA could be close to entering a 2 year correction starting pretty soon.  It is a nice post and lays out a few arguments why this may be the case.  After that he says the market could take a shot at the old highs.

In general I agree with him. We are getting close to the time for an extended correction.  Whether or not it will be two years long is unknown to me.  I was thinking earlier that it could be maybe 6 to 8 months long.  Either way a sideways to down correction like that would go a long way towards working off the overbought condition of the market and help build cause for the next move.

In other news I am keeping an eye on SQNM Sequenom.  It appears to have a nice ascending triangle and might get some kind of run going next week.  But on the other hand looking at the history of the stock the ascending triangles have not proven all that reliable and it is worth noting that SQNM is a biotech stock and has shown some very wild and scattered price action in recent years. 

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YGE Yingli Green Energy Solar Power and China Power ?

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Well Thanksgiving is over, the world is still turning and China is an economic powerhouse that needs lots of energy and food to keep its people and growing economy happy.  Can you imagine how many turkey’s they would need in China to feed every family there?  Hmmm lets see, the population of China is around 1.325 BILLION people.  So let’s say 1 turkey for every 3 people… so that would be four hundred and forty one million, six hundred and sixty six thousand, six hundred sixty six freaking turkeys!!! (441,666,666). 

Clearly China is the 100lb gorilla taking the world by storm.  I mean just look at the run that Baidu (BIDU) stock had, what an unbelievably huge run.  Chinese stocks can be huge runners and huge winners for the simple fact that there is such large untapped market potential for all sorts of products, everything from fertilizer to solar panels.

YGE is looking damn good right now as a potential setup.  YGE does solar panels in China.  Solar stocks from my experience seem to be somewhat of a bumpy and unpredictable ride sometimes.  They can have some occasional really good periods of outperformance and then just go into hiding for ages.  Part of that could be due to the ever changing oil price as perhaps a rising or spiking oil price can make solar seem more cost competitive.  And incidentally from what I have seen in the oil charts I would not be surprised to see another trend higher in the oil price soon as we have recently seen the dollar break down into a new free fall mode.  That should support higher oil prices for a while.

Anyway, regardless of the funny mentals, the chart of YGE seems to be saying that YGE could be preparing for a big sustained run perhaps into the 20 range or higher.

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Travel Centers of America TA and NewCastle Investment Corp NCT

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Once again the bulls completely own the show and gapped the market up today and closed very strong and on pretty healthy volume at least compared to what we were seeing before. I once again refer you to this chart of the SP500 that shows we still have some time left before we actually hit … Read more

I am Going to Run With the Bulls Again TA Travel Centers of America

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Well for a little while anyway.  I am glad I finally recovered from my own personal ‘October scare’ watching the market last week and feel that I have at least half my sanity back now.  So I am gonna run with a bulls a bit more and see what I can find.

The bottom line is, if you show me a good chart whether it be a stock or an ETF, then it is worthwhile exploring if there is some potential regardless of what the rest of the market is doing.  It may mean that you have to use tighter stops to control risk, but might as well go with the predominant trend force.

A Stock is Never too High to Buy and Never Too Low to Sell

That is the quote from Jesse Livermore that I paraphrased a bit.  I don’t know the exact quote, but I am writing it again because I think it is a very important point.  But again, manage risk prudently and use tighter stops and closely defined entries.

Buying stocks ‘high’ is also referred to as ‘momentum trading’.  I believe statistically it may produce more winning trades than any other method for the simple reason that you are making trades along side the predominant force in the market and in many cases that force is likely to continue.

In the past I used to be afraid to trade momentum because I could not remove the blockage in my mind how scary it is to ‘buy high’.  Not anymore.

So that brings me to TA Travel Centers of America.ta20091009

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OREX Orexigen Therapeutics Possible Cup and Handle Setup

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OREX is a biotech stock that has the smallest tradeable float as compared to two leading rivals in the same space VVUS and ARNA.  All three of these companies are developing a new type of weight loss pill that supposedly has very minor if any side affects and tricks peoples brains into thinking they are ‘full’. 

ARNA had some wild up and down trading today and managed to close slightly positive and VVUS had a huge gap up over a week ago on positive late-stage clinical data for its weight-loss drug Qnexa.  We are seeing big moves in this sector probably because they are talking about potential billion dollar markets for these drugs.  Let’s face it, weight loss is a huge market and a huge problem in this country.  If these companies can come up with an effective solution that speeds up people’s weight loss SAFELY then it would seem these companies stand to make some pretty good money.

OREX insiders have recently bought quite a big chunk of shares in the 8 dollar range in August and have quite a big stake in the success or failure of the company.

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