The Kirk Report |
Posted: 03 Jun 2009 10:42 AM PDT Last week I ask for members to submit stocks/etfs they'd like for me to do a chart review. 31 were submitted and 6 of those were requested by two or more members. Let's start with those: Apple (AAPL): Technically, this is about a strong as a stock you're going to find out there. The problem is that EVERYONE knows it. As you can see from the stochastic reading, we're now severely overbought and trading well above the 10 day moving average. Bottom line - if you're not long, this is not a good risk/reward entry point. While the stock continues to move higher (even while overbought as a sign of strength), I still think you've got to be more selective in your entry. The lack of volume in this stock's rally is a red flag and one which tells me to be more skeptical than trusting of the recent gains. To buy a popular "everyone knows it's a winner" stock, you need to see something negative to happen (i.e. Steve Jobs is dead, Mac's start exploding, sales fail to hit expectations, margins show material decline, etc.) With all winners like this, I like to buy them when they get oversold and the last time that happened was in mid-May (see stochastic reading above) and that would have provided a decent entry point to the recent uptick. For my money now, I'd have to find an entry point somewhere around the 20 day moving average ($129) which is coincidentally the current recommended stop price. In my view, that's the definition of a good entry point - a pullback within a strong trending stock with a tight stop and a break below May's closing low at $119 would have me entirely stopped out on this one. Again, look for those oversold entries and stay away unless you can find them. Also, if owned only for a short-term position right now, I'd be using strength to take some partial profits and to reduce position size in order to allocate the capital to other positions. If you didn't catch the breakout setup early (like back in mid-March and again in April) you've got to move onto other trades now unless we see a pullback entry point. Like before, I'd have to see a stochastic reading around 50 or so and a move around the 20 day moving average before I could entertain a setup in this one. Stops should be set on a break below $5 right now or violation of the 20 day EMA. Like the others, I don't like to chase'em unless I'm operating only on a daytrade time frame. Beyond that, I think we'll see SOHU fall back to its 10 day moving average (around $59) setting up a potential aggressive short-term trade with a tight stop at the 20 day moving average. Two days of closes below the 20 day would tell me this rally is in jeopardy. Using simple trend channel analysis utilizing the 200 day regression as a median line we see that it is still stuck within a longer-term downtrend. Until this breaks and we see both the March and May highs broken (and later confirmed through subsequent retests), I'm not all that interested. If you disagree, I'd still wait for severe oversold conditions to develop like we saw back in late May before making any attempt to bottom fish. This posting includes an audio/video/photo media file: Download Now |
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