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ShadowTraderPro Swing Trader for February 26, 2010
The ShadowTraderPro Swing Trader is your every morning dose of market reality brought to you from the resident geniuses at ShadowTrader. Overseen by Chief Equity Strategist, Peter Reznicek, each issue contains a full report on the prior day's action, including market internals, technicals, and what sectors were hot and cold. Each issue also includes the ShadowTraderPro Model Portfolio, which updates members on what stock plays STPro is currently engaged in officially, as well as provide a daily list of long and short setups for more self-directed traders and investors. To get the most out of your subscription, please read our Swing Trader User's Guide If you have any questions or comments regarding commentary or plays in this newsletter, please email to swingtrader@shadowtrader.net. The Big PictureGood morning, traders. We are opening this Big Picture by profiling one of the trades in today's Bulls and Bears section and then we will move to a discussion of how we intend to handle the day with regard to the open positions in the ShadowTraderPro Swing Trader Model Portfolio.  Above is a chart of General Dynamics Corp. (GD). We are showing the longer term view to reference the ascending trendline (magenta) which GD recently recovered while simultaneously forming a bull pennant. If we move to the close up inset picture of recent price action, we see that the stock made a failed breakdown out of the bull pennant yesterday. It then went on to touch both the primary ascending trendline and the recent horizontal support level (blue dashed) before closing as a bottoming tail by the end of the day. The on-balance volume (OBV) remains near it's highest level over the last 52 weeks which tells us interest by those who have accumulated the stock during that period remains intact. We like this set up as a long play with an entry just over yesterday's high and the stop placed below the 50 day moving average (red line). The specific entry and stop levels are listed in the Bulls and Bears section below. With regard to the ShadowTraderPro Model Portfolio, we began this week by reviewing the monthly S&P 500 Index (SPY) chart with the idea that if the index could close the month above 112.31 (which is the 50% Fibonacci retracement level of the study drawn from the high during 10/07 to the low during 03/09) it would be an undeniable indication that the SPY would be primed to cut through the limited resistance between 112.31 and the 61.8% Fibonacci level at 122.98. As it stands on this last day of trading in February, the SPY is 1.64 points or 1.48% beneath the 112.31 level so it is unlikely the index will close this month above this key level. This isn't to say that it can't happen in the near future, but until it happens, we won't risk more capital to the long side beyond the $42,000 we currently have committed. We may sell and replace positions, but committing just under half of our total capital of $100,000 is enough risk for the current choppy environment. Our highest priority now is to protect gains in current positions (ASIA and MAC) and to prevent our other positions which are currently near breakeven levels (CRL, MS, RIMM) from turning into losers thereby eroding the gains of our winners. We intend on doing this by being quick with a sell order for any position with even a remote indication of starting a sustained move against us. If the market moves higher and takes our stocks with it, bravo, but we are going into trading today with just over a 1% gain for the week (including the closed trades in RIMM and RKT). We simply will not feel apologetic for closing out any position that threatens this. After today's close, we will go into this weekend with the "edge" of our work ethic and the commitment of scanning the charts of every single stock trading over $20.00 with volume higher than 500k. This will provide us with a fresh perspective and new opportunities for next week, so even if we take the extreme measure of selling all five of our longs today, we know there are plenty of opportunities waiting for us next week. We recommend that each of our subscribers adopt this non-apologetic and committed mind set with regard to their own trading. If there was anything that yesterday's price action reminded us of was that around every proverbial corner of the stock market is something waiting to trip us up. We are not in the type of market that allows us to squeeze the last point out of any trade. Take profits when you have them and protect your capital. Under The Hood
Heads UpToday - 02/26/2010 Monday - 03/01/2010 Tuesday - 03/02/2010 Bulls and BearsLong Ideas
ShadowTrader Model PortfolioTo get the most out of your subscription and for detailed instructions on how to structure your own portfolio, read our Swing Trader User's Guide
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