Month: October 2005

GOOGLED

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Only have a minute since this is my third posting of the day, but I did want to point out Google’s (GOOG) action since last week’s earnings blowout and announcement that they will be taking over the world.  Notice the upward slope of the price and the downward slope of the volume?  That’s called “wedging higher,” and it’s not a good sign.  Also note the stochastic crossover in the lower part of the chart.  I took a flyer here to test out my new OptionsXpress account and try a $340 / $320 Dec GOOG put spread.  Stay tuned to see how it turns out.  I can tell you already that I broke a rule by entering the trade before a clear technical signal was given.  That’s what sometimes happens when you set a limit order away from the market and then go into a meeting…  The instruments actually come to your price.  That’s a kink I’m still working out, but at least I recognize it, right?  Ok, gotta hop.  Cheers!

Cheney / Rove Relief Rally

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We’ll call today’s rally the Dick Cheney / Karl Rove relief rally.  Everybody has been holding their breath, some fearfully, some excitedly, waiting for Patrick Fitzgerald to announce his first indictment.  Yes, everyone knew it was coming today, when the grand jury was set to expire, and yes every expected Lewis "Scooter" Libby to go down, which he did, but still a Cheney / Rove Relief rally was in order!  How exciting, right!?  Not so fast.  Notice the anemic volume?  That’s a serious warning, so better curb your enthusiasm.

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Record Inventory of New Homes

This is another example of fundamentals being a lagging indicator.  We have been shorting and covering multiple legs of the down trend in housing stocks for a few months now, as company after company beat earnings estimates yet saw its stock price fall.  Wha happen?  Same things that usually happens to beginning investors or anyone trading on fundamentals alone.  They usually get burned at "sell" time, because they don’t get their "fundamental" signal until stocks are well off their highs.  Why?  Because stock prices are forward looking and fundamentals are rearward looking.  Sounds simple, yet many an "investor" does not understand this most basic of points.  Sell primarily on the technicals. Cheers!

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Words You Hear at Tops

"If I don’t buy now, I’ll never be able to…"  And, "We’re just in it to make some cash."  Or, "…engaged in some fancy financial footwork to win a contract…"  This is what people are saying about real estate today, a few months after the top has been put in place.  See below for the entire front-page Washington Post article these quotes came from.

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One Day Wonder?

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As mentioned in yesterday’s post, I am in the “bear market rally” camp. Today’s high volume reversal and close on the low adds to the probability that the rally attempt will fail.  Note the resistance at the 20-day and 200-day moving averages.  Also as mentioned yesterday, at least some of this volatility is due to options expiration.  Tonight’s Google (GOOG) earnings blowout and after-hours new highs will allow market forces to reveal themselves tomorrow.  Google either jump starts the market or it doesn’t.  If the market fails get much mileage off the news or suffers an intra-day reversal then look for new lows.  Cheers!

Ebay / Skype / PayPal

Below is a copy of my recent email to eBay (reply to be posted in later).  I think the Skype acquisition is going to open up some huge opportunities for eBay and is going to totally disrupt conventional business models in marketing, advertising, direct response, and paid voice and video services…  and that’s just for starters.  Granted, I am biased since I am an eBay, PayPal, and Skype user and shareholder, but I took today’s reaction to pick up a few more shares of eBay (just a few because of general asset market concerns and non-ideal EBAY technicals).  Ok, now on to the email to eBay, which only mentions the eBay-related possibilities, which may be very small in comparison to all the other opportunities.  Cheers!

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Engulfing Pattern / Follow-Through Day

Qqqq_101905_2 Today’s action meets the generally accepted criteria for a follow-through day, with indexes rising 1%-2%+ on above average and increased volume on any day from the 4th day to the 7th day of a rally attempt.  Today was the 5th day.  The engulfing pattern and close on the high of the day both add to the credibility, although at least some of today’s action can be attributed to short covering and this week’s options expiration.

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