Tuesday, May 29, 2012

Tuesday Evening

The action today was an example of why this market has become very challenging to trade (in my opinion). A lot of the typical things traders look at were lined up just right for more downside. We reversed from the highs by slightly more than 10 points, the Euro was weak, Gold was weak, there is a "no trade" gap in S&P futures sitting at 1315, ... etc, etc. In addition to all of that stuff, seasonally for May, today had the weakest odds of being a positive day (See Day 20 below).


This brings up an interesting thought that we've all talked about before. The game has definitely changed from 5 years ago (I know... "duh"). But, some days it seems the best trading strategy is to just do the opposite of what the indicators are telling you to do. I know that sounds stupid... but on a serious note, I think it's important to make sure we really understand both sides of the trade.

With the playing field narrowing in the last few years, "left over" market participants are now faster, sharper, more patient, and have every tool available to make trading decisions. That's not even including the explosion in HFT Algo's... which throw in even more challenges to the market environment. This is a tough job and it's only getting tougher...

Tuesday Afternoon

Tuesday Morning

Gator's Chart of the Day: LVS
This looks to be a critical week for Las Vegas Sands.  They have the primo properties in Macau and Macau is the gaming capital of the world with five times the revenue of either Las Vegas or Singapore. 

The stock is in a bearish configuration with the 20 day simple moving average having sliced down through the 50 and approaching the 200 from above.  It has pulled back 25% from the April high and is forming a bearish wedge just under the 200 day.  All of that means there is considerable overhead resistance but there is a positive development; it bounced from the lower Bollinger band on the weekly chart (not shown but trust me) and printed a green candle.

The trade

The 200 day is the key.  If it fails to break through in a decent tape then it looks like it's a good place to short it (or buy puts or sell a bear call spread) but if it does clear that green line it could be the beginning of a retracement.  My target would be a 50% retracement which would take the stock to around 54.50.  That would also take it to the bottom of the big red candle from March 5th.

I'm long calls from last week and will either dump them on a failure or add on a break through the green line.