Trading Plan for May 4, 2011

Current Long Positions (stop-losses in parentheses): GOOG (524.00), NFLX June 270 Calls, AAPL (343.95), CVS (35.91), SSO (54.70)

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

BIAS: 41% Long

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Challenger Job-Cut Report (7:30am), ADP Employment Report (8:15am), Treasury Refunding Announcement (9am), ISM Non-Manufacturing Index (10am), EIA Petroleum Status Report (10:30am)

My Observations and What to Expect: 

• Futures are slightly lower in a whipsaw overnight trading session.
• Asia was much lower with China down 2.3% (only Japan was higher at 1.6%). Europe was lower across the board on average of -0.6%.
• Nice sell-off yesterday, that ultimately saw the dip-buyers rush in off of the day’s lows, and erase half the day’s losses. 
• There hasn’t been any technical damage done to the daily charts from the selling of the last two days. At this point, it appears to be nothing more than a nice orderly pullback. 
• Continue to watch the 10-day moving average going forward – the strength of this market has been marked by its ability to continuously trade above this ascending support level. Right now it resides at 1346. 
• Volume has remained steady over the last five days. 
• Yesterday’s rally in to the close on the 30min charts broke the descending channel the market had been trading in (also using 30min charts).
• 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.
• 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.
• 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.
• Higher-low has been established at 1294. Look for this pullback to establish the next higher-low.
• My conclusion: Wouldn’t be surprised to see us bounce and regain some of the momentum we saw last week and the week prior. However, there is still some room to give back some recent gains without hurting the technical picture of the market.

Here Are The Actions I Will Be Taking:

• Did not sell any positions yesterday.
• Added AAPL at $348.73, SSO at $55.30, and CVS at $36.50.
• No changes in my stop-losses.
• Will look to add 1-2 new positions to the portfolio today.
• If NFLX and GOOG continues to struggle today, I will likely close my positions out in these names.
• 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).