Trading Plan for May 3, 2011

Current Long Positions (stop-losses in parentheses): GOOG (524.00), NFLX June 270 Calls, DF (10.48), NVDA (18.73), BKI (26.35), ADM (35.58)

Current Short Positions (stop-losses in parentheses): None

BIAS: 11% Long

Economic Reports Due Out (Times are EST): Motor Vehicle Sales, ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), Factory Orders (10am)

My Observations and What to Expect:

• Futures are moderately lower heading into the open.
• Asia, on average was 0.6%  higher and Europe is trading lower on average about -0.6%.
• We are finally getting the selling that I was looking for. Nothing major at this point, but nonetheless, we are 20 points off of the intraday highs.
• Look for a couple of resting places – I don’t think we’ll pullback below 1340 due to the psychological importance it represents – but a pullback between 1352 and 1342 seems to be in order.
• We’ll have to see how today plays out first, but so far, the market doesn’t look like it is at all panicky with yesterday’s pullback and today’s selling in the pre-market.
• Today’s selling will also give us some nice breathing room from the upper bolling-band. 
• Yesterday’s selling off of the day’s highs occurred in a very tight range (using 30min candles) which lines up nicely with a pullback settling down some where in the lower 1350’s and allowing for the market to work off some of its overbought conditions.
• One interesting note, since the March 2009 recovery lows, and the ensuing rally since then, volume continues to get lighter and lighter on the monthly chart, as prices march higher and higher.
• When I begin to see the S&P push as high and as fast as it has, it helps to take gains, where the easy money has been made and limited upside remains, and then use that capital for new plays.
• Some minor resistance may be found at 1370, but the more significant level is at 1430 .
• By breaking 1340, we confirmed the inverse head and shoulders that had been in development since February ’11. Last time we confirmed a IH&S pattern was back in Sept ’10 and we rallied 220 points after the confirmation.
• On the 30min intraday charts, watch the 1350 level for support. Strong trendline in place off of the 4/18 lows. A move below 1358 would break this level.
• Higher-low has been established at 1294. Look for this pullback to establish the next higher-low.
• My conclusion: The fact that we sold off on UBL’s death, not to mention on other bullish factors (i.e. Monday and first trading day of the month) shows that this market is tired and will probably see some profit taking in the short-term.

Here Are The Actions I Will Be Taking:

• Sold the following yesterday: NVDA at $19.98 for a 2.2% gain, DF at $11.39 for a $6.3% gain, ADM at $36.98 for a 0.6% gain and BKI at $26.09 for a 3.2% loss.
• Did not open any new positions.
• Will closely watch NFLX and GOOG and monitor how those positions react to market action today.
• Will look to add 1-2 new positions to the portfolio today as long as the selling does not get out of hand.
• Tech plays have been performing very well lately, and will likely be the focus of my trading going forward.
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas (as well as everyone else’s).