Continuation Selling Quickly Brings Back Quasi-Oversold Conditions

The sell-off has reached a new level of criticality. The S&P 500 (ARCA:SPY) finally dropped below its 50DMA. The NASDAQ gapped down, rallied and then faded again to close near the converging support of 2014 intraday lows and its 200DMA. Astute technicians will notice that Thursday featured “continuation” selling that confirmed more downside was likely coming.

Looking at these charts, I like starting the next fades on a S&P 500 retest of the 50DMA and 4100 or so on the NASDAQ.

I used Friday’s sell-off to finally close out my long position in ProShares Ultra VIX Short-Term Fut ETF (ARCA:UVXY). This second trip was another experience in high risk and small reward. Even worse, it took three tranches of buys this time to get the small reward. Needless to say, I am pretty much done with UVXY. I sold out with UVXY hitting its 50DMA. I promptly turned on it and started in on UVXY puts to play the inevitable gravitational pull. I am much more comfortable using UVXY puts as a hedge on other short positions than using UVXY shares as a hedge on other long positions.

Finally, some chart reviews. Going forward, SwingTradeBot will likely become an increasing source of my scans for interesting charts. To-date I collect charts from my own small watchlists and some browsing of stocks in the news. I think the pictures speak for themselves along with the short captions. I follow the charts with a brief summary of trades I have done with these stocks.

International Business Machines (NYSE:IBM): I WISH I had stuck with my call last November by buying and holding shares. Instead, I do not even find myself holding call options as IBM has finally proven my old thesis correct that a time would come when traders would look for “cheap” stocks like IBM. I got more caught up in playing IBM like a trading range.

Intel (NASDAQ:INTC): I still like INTC on the long side. I sold call options early in the week as part of a new strategy to buy and sell Intel between earnings. After two successful rounds, I am almost ready to write about it.

Voxeljet Ag (VJET.K): Looks like VJET’s days of riding the momentum in 3D printing are over for now. I went ahead and bought on Friday’s plunge because I often find success buying a stock when it drops to the price of a share offering. Plunging well below the lower-BB is an added bonus. There is a lot of incentive baked into this situation to make sure these generous investors get rewarded for their agreement to fund the company. VJET was particularly accommodating in issuing stock at a (relative) firesale. This is a trade for a bounce.

Netflix Inc (NASDAQ:NFLX): I am of course disappointed the stock could not hold support, but I am sticking with the May call spread. Upcoming earnings will likely make or break this position now. Even if I did not have my current position, I would NOT short NFLX on this breakdown. Next up is the 2014 low…which could mess with the little optimism I am clutching.

Zillow (Z.O): This is clearly a stock to own whenever the market starts loving momentum stocks again. In the meantime, it looks like a stock that can still be played off support and a general uptrend. The wild volatility along the way gives opportunities for bulls AND bears.

Starbucks (NASDAQ:SBUX): I wish I still had my short position! My trade in SBUX was very sub-optimal. I first shorted it as a chase downward on the first breakdown from its 200DMA. I failed to make any further trades despite the opportunities to add to the position at better prices. I achieved a small reward barely worth the risks I took.

VMWare (NYSE:VMW): I have not touched this one in a while, but it has been one of my preferred tech stocks to buy on dips. I have put it back on the radar now that it has finally started breaking down. A tumble to the 200DMA would be a gift.

iShares 20+ Year Treasury Bond (TLT): I have maintained a “strangle” on TLT with out of the money puts and calls in anticipation of some big move either way. It looks like the big move could be a breakout.

General Motors (GM): One word: “ugly.” The stock has the classic pattern of a good short. It broke down below its 200DMA on February 3rd to signal/confirm growing weakness. After struggling with 200DMA resistance it finally broke out only to quickly fail at 50DMA resistance. The subsequent plunge below 200DMA confirmed the stock as a good short. More churn and another 50DMA failure set-up the current sell-off. Friday’s plunge is the exclamation point to sell this stock (on rallies). I do not even think I need to map out the bearish headlines on this chart. It simply speaks volumes on its own. (Disclosure: I drive and LOVE a GM vehicle, my second one in a row using credits from purchases on a GM credit card. I stopped using the card after my last purchase as I suspected I did not want to feel compelled to buy a third GM car in a row whenever the next moment comes!).