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Russell 2000 S&P500

Update on SPX and RUT as of Nov 3, 2009

RUT and SPX stage a counter downtrend and rally yesterday, though not before they have to fight off a very down futures before the market opens.

So, is the reversal in play now?

Let’s look at the charts.

For the RUT, we can see that the rally is more substantial. However, it fails to break above the previous day’s candle high.

2009Nov-Russell 2000-800x600

For the SPX, we can see that the candle is still inside the previous bar. And that give us an ‘inside bar’. With an inside bar, the risk-reward is huge given that the inside bar is much shorter; hence reduced risk if we have the proper stop-loss in place.

2009Nov-S&P 500-800x600

RUT being the small caps index also shows risk appetite. With the RUT trying to break through its previous day high, suggest that investors/traders risk appetitie is back.

Remember, in my previous chart,  RUT forms a double top and refuse to go higher. The sign is much clearer on RUT than on SPX that the market is losing steam back then.

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Tech

RightNow Technologies (RNOW) : A Daily Chart Review

Yesterday, I touch on RNOW’s move into securing government contracts and how its deal with the DoD lay the foundation for it to make in-roads to secure contracts of such nature.

Here’s a quick overview of RNOW on the daily chart:

  1. We can see that the kumo is flattening out. A suggestion that that RNOW has been trading in a ‘fixed’ range and at this moment, there is no catalyst for it to fly.
  2. Chikou Span may break through the kumo, and when it does break through, it may signal a bullish trend.
  3. However, we need to take a look at its low trading volume. This represent some form of risk. With such volume, any price movement without significant increase in volume could mean that RNOW may be moving up with the broader market in a rally.
  4. What I would like to see is more contract wins and since this is the earnings season, we should take a look at how its cashflow and revenue growth is standing.

2009apr-rightnow-technologies-inc-800x600

Thinking out loud. Are there any direct competitors for RNOW? Who are they?

Salesforce.com (CRM) is in the same ‘segment’, however, I believe  both offers solutions for different needs.

    Categories
    Tech

    How I traded the IBM-SUN M&A news

    I remember it was March 18 when I saw the headline in the afternoon that rumours are going around that IBM may acquired SUN.

    By then, the pre-trading price has already shot up from $4 to $7+.

    I have SUN (JAVA) on my watchlist for a long time. 2 reasons for that.

    1. Cash
    SUN has quite a fair amount of cash sitting around. So, unlike the financial institutes, it has a little bit more strength to weather the storm (and this is back in Dec 2008).

    2. Southern Asset Management
    These guys announced back in Dec 2008, that they have acquired 22 percent of SUN’s common stock. A substantial amount. There must be things that they know and I don’t know.

    Nonetheless, just sitting around and not buying does not help much. And I miss the rally.

    However, not all is lost.

    For one, I know that such M&A news is never confirmed so early. Secondly, there is always a chance that the M&A does not go through.

    So, instead of chasing after the stock on its first rally, I sold an APR 9/8 Vertical Spread. And took my profit the very same day. I choose a spread because it reduces my risk. There is never a sure thing when it comes to M&A talks (and in this case ‘rumours’).

    The second chance to make money off SUN comes when it announced job cuts on the last day of Q1 (31 March). The market open and it very soon fall below 7.

    This time round, instead of buying option, I decide to just buy the stock. Treating it as a lottery ticket. After all, I am comfortable enough to hold SUN stocks for the long term.

    At this moment, the general market is in my favour and the counter has move to about $8 before market opens.

    Just keeping my eyes open for any abnormal selling price-volume action.

    I’m wondering, how will others trade this counter, if you have miss the first rally?

    Your thoughts are appreciated.