Bearish scenario still in play

There have been some erratic price movements to the upside since my last post and QQQ popped up to 88.5. It may still try to hit 89, but downward pressure is on.  Signals I have recently described are still showing in numerous stocks.  One classic example is Tiffany.  TIF had a classic Elliott 5 wave impulse down March to Mid-April, then a back and forth retrace to the Fibonacci 61.8 % retrace which is also at a 3 point downward sloping channel.  Other parameters also point to continued drop in the stock. The initial target is around 80, probably in 3-5 weeks.

A few stocks expected to lead the way down are IBM, SHLD, ANF, and AXP.  Expect about a 10 % drop in these over the next month or so.

Also, CSCO did make it's anticipated pop and should continue toward 27 despite downward pressure on stocks overall.  Stop for CSCO is now 22.4

I am not a professional, trade at your own risk. 

Watching carefully

The bearish signals are most significant in the Nasdaq.  Watch for the 87 area to hold resistance if the bearish scenario is to remain intact.  BMY may be a good long, will continue to watch for follow through on that one.

Da Bears

Special update... I have had a tendency to focus on bearish events in the markets and on several occasions have called downturns incorrectly.  Being aware of this tendency, I have attempted to find stocks that I believe are moving up, such as YRCW, CGI, OWW, CSCO, and a few others to join in with what has been an incredible bull market since 2009. Several of these have done well and a few such as RIG and CLF not so well.  I mention the above so that you know that I have considered my bias and hope that you do not hear me crying wolf with this update.

The chart below shows the daily Nasdaq 100 ETF (QQQ) with a pattern that suggests and impending downturn.  The degree of the drop is not clearly known at this time as it will depend on price action on weekly and monthly charts as well.  I will be paying close attention to those to look for evidence of a new upturn.

However, a preponderance of evidence is mounting that suggests a significant top has occurred in the markets.  

1. Numerous major stocks have closed gaps that were left in impulse waves with retracement type patterns.  GE  and AT&T are excellent examples.

2. Many major stocks appear to have completed bullish 5 wave impulse patterns. AA, BIDU, NFLX, APC, AET, BA, TIF

3. There are several stocks with weekly bearish candlestick patterns (inverted Hammers and bearish engulfing) 

4. Banking stocks have turned bearish and are often early to move in new trends.

5. A 5 year cycle has hit with the March highs. 

It is certainly true that markets can do anything at anytime and just because there is evidence that many stocks appear to be entering a bear phase, it does not mean that all of them are.  At this time, I think it would be prudent to keep tight stops on positions.

For anyone looking to short, I suggest picking some that already have 50 week moving averages that are flat or have turned down such as ANF, BAC, BBY, C, EWJ, EWZ, FXI, GM, HD, IBM, JCP, JPM, NKE, RIG, SHLD, T.

In regards to recommendations from my last update, BIDU hit the 165 target and FB it 63.5, just shy of my 64-66 target range.  CSCO moved up a bit but did not shoot up in a 3rd wave, so I have sold 2/3 of my position and am maintaining a stop around 20.90 for the rest. 

Trade at your own risk.  I am not a professional.

CSCO, VLO, BIDU and FB update

VLO ran up into the range I mentioned topping recently around 53.7 and dropping back down in what looks like a 5 wave.  This brings into question whether it will stay below 55, so this downside play is on hold until a proper turn in momentum is seen.

Cisco did come down to 22.5 and is looking solid. It may be entering a 3rd of a 3rd elliott wave which would mean rapid movement up to 27 and eventually 30.  There is still a low chance of a quick drop down to 22 but that would be a tremendous buying opportunity if it was rapid because that level has significant support. 

BIDU and Facebook still have some downward momentum but look to be joining in the coming rally with short term targets of 165-170 and 64-66 respectively.

I am not a professional trade at your own risk.

Cisco looking strong in face of weak overall market. VLO setting up for fall. CGI was a big winner.

Cisco has upward trends on daily and weekly charts as well as a series of bullish impulse waves since mid 2011.  While the Nasdaq has shaved off 8% in the last month, CSCO is up around 8%.  Look for pull back to $22-22.50 to buy.  Target is 28-30 over the next few months for around a 25% gain. stop at $21.

On the daily and weekly charts, momentum for VLO is sharply down.  In addition, there are significant divergences on indicators.  The chart below shows a classic and pretty impulse wave down.  I'll be watching for a retrace up to at least 52.5 and possibly up to 54 but then it should turn and go south with a first target of 48 and second of 42 ish.  If we can pick up May 55 puts for 2.50, we should be able to get a triple by selling them for 7.50 in a month or less.  I'll be watching for the turn signal on this retrace.

Updates from the last post...

- RIG broke down through 20 years of trendline support so that trade is over.  If you bought at 47-49 and got stopped out at 42 then that was about a 12% loss.

- IBM made it to 190 as I suggested but is having trouble with 195.  No recommendations now.

- CVX did not make it to 130 so we got stopped out at 120 for a 4% loss.

- Citigroup and BMY both promptly made it to 55 as predicted for 6-8% gains.

- CGI made it up to 24 for a 23% gain.

- And my big love YRCW is still looking good as a long term buy.  After my last post it dropped to my buy range of 12-15.5 and then promptly took off for 27.  Now at 20ish it is still a buy and may drop down to 17.5  for the opportunity to pick up some more.  

I am not a professional. Trade at your own risk.

Picks

Markets appear significantly overbought, but still no clear signs of slowing down so I am focused on the upside though still keeping an eye on some potential bearish plays as a hedge.

Updating from last post, CAT was not actually dead, just in a coma which it woke from and came roaring back up to the target above 90.  It is reaching resistance now and I have no recommendations regarding it.

RIG retrace made its way down to about 47 but has turned back up and should be taking off for long term bullishness as mentioned in previous posts.  It is a buy!

IBM got down to 172, just above my target of 170 and now is in a strong up trend with next resistance at 190.

CVX bounced around since the last post making it down to 118 ish but now is back up to 125 and still should hit target of low 130's. Stop at 120.  Citigroup and BMY both are showing signs of running up in an elliot wave 5 on Daily charts with targets of about 55.  Stops at 51.40 and 52.40 respectively.

CGI is Celadon Group, a trucking company trading around 19.4.  It is bouncing up from 10 month trendline support and is a buy with a target of 24.  Stop is at 18 so risk/reward is about 3 to 1, 7.5% loss vs 25% gain.

Also in trucking is our old friend YRCW.  It had a big retrace down to 7.5 and popped back up to 20. Trading around 17 now.  It is a buy from 15.50 down to 12 though one might have to endure some high volatility on this one since there is a gap way down at 8.70. Long term I think this has great potential.

Summary... CGI, RIG and YRCW long term buys.  CVX, Citigroup and BMY short term buys.
I am not a professional.  Trade at your own risk.

The CAT is dead.

CAT did not quite make it up to 90, so this was a case where it moved in the right direction but didn't quite make it to the target. It is now actually a sell since it is breaking down below some significant long term support. I'll watch it over the next week to confirm that it is now in a downtrend.

RIG had a nice pop up to 55 ish but is now retracing to the 52-53 range. It may go as low as 50, and it is still a buy for the long term. Stop remains at 44.

Expect CVX to hit the low 130's over the next 6-8 weeks. Current price is around 124.

IBM may be entering a third wave down, heading to around 170. It was down 1.5 % on Friday while other Dow stocks were climbing. This could be a big options play. Try for some Dec 180 puts which will be quite attractive if the stock does a retrace up to 183 this week.