Market at a Cross Road

Things are coming together, roads are merging, and it means something. What it means is something we are soon to find out. What am I talking about? I am talking about the direction of the market.

We are now at a major inflection point technically. The DOW has rebounded to around that 50% fib number from the high at the top of the recent trading range of 12,800 in the same location that a major trend line is placed. The market knows it, and whether we break beyond this range on volume and continue an uptrend that preserves a long term Bull Run, or whether we retest and expect another leg down into the bear morass may very well be decided in the short term (see chart).

Almost all the technical channels and indicators favor the bulls, but this is a news driven market and this can change in a New York minute. For me, I am betting LONG and I added to existing positions this week. I added (actually doubled) to my position in AAPY on Wednesday when the stock was trading below $4.00. It appears that news leaked out that APPY will have to wait a little longer for an FDA study to be completed (delaying a potential roll-out of their human appendicitis test by 4-5 months).

The damage to the stock was done before the company made that announcement. Seeing APPY as a long term bet, I felt that I could wait a little longer and doubled down at what I thought was a bargain after traders seemed to express disappointment. The stock has since rebounded some since the Board of Directors apparently agreed with me and announced a $5 million stock buy back because they believe the stock is undervalued.

I also have spent to week leveraging into a position in ATI. The announced earnings met what I was looking for from management and Pat Hassey (ATI CEO) was able to paint a more positive outlook for the company for the next year. I have continued to nibble at deep ITM calls with an October expiration all week.

I also doubled down on BOLT at $18.00 yesterday. The stock bounced off of resistance perfectly and is rebounding (see chart). I wanted to see that bottom before adding some more. A trader may have taken the bet off the table when BOLT failed to break out at $24.00, but because this is thinly traded, I felt an investor’s approach makes better sense. The double down will now essentially be for trading around a core position and I will be unloading some of my buys after the stock gets back into the $20’s again shortly.

I haven't added more to GRMN (I am already overloaded), but this week showed that the stock was building a base and putting in a series of higher lows. This is a kind of base that the stock needs at this point after a traumatic start to the year (see chart).

Finally, AAPL reported great earnings and appear to be executing exactly in accordance with their game plan. News headlines actually dubbed the AAPL economic outlook as “what recession?” This kind of positive momentum is great for the stock with the company now building towards an event driven cycle of new product releases for the rest of the year with some excitement being driven by the expected release of the iPhone 3G. I bought some May calls from AAPL just before earnings were released in what was an emotional purchase.

I haven't been posting as often as I used to. Hopefully, that will change some in the future, but my time commitments on other priorities have increased here in the short term.