Monday, May 2, 2011

Week of May 2nd

I haven't written in a while, so I'll start with a review of the market. I was expecting a little cup and handle pattern in the SPY, and was getting pretty long about 2 weeks ago. We put in more of an inverted head and shoulder pattern, rather than a cup and handle, but the psychology of the consolidation and the expected move is basically the same.

For this week, I'm expecting a slight pullback or a sideways consolidation to digest the recent fast run that we had from ~129 to ~137 in the SPY. After that, I'm expecting the market to continue higher, and my target to take more profits off the table is ~139-140. The NYMO was pretty overbought coming into today, so it should come as no surprise that we had a small pullback. The Osama Bin Laden news provided a nice gap this morning, and I sold partial positions into this gap.

I have several long positions, and I added back at the end of the day some of the shares that I sold this morning. All in all, I'm long some FNSR, FTK, LNG, WNR, WPRT, and added PANL and OVTI as well today. I'm also short some TZA from a few weeks ago (which is the 3x short ETF for the IWM): basically, I am long the Russell index...

One of the swings I added today was PANL. Although it broke out of the triangle today and couldn't hold the breakout, it is still consolidating nicely inside a flag pattern on the daily. Also note the decreasing volume inside this consolidation, and the strong volume on the previous up days.