ShadowTraderPro Swing Trader

The ShadowTraderPro Swing Trader is your every morning dose of market reality brought to you from the resident geniuses at ShadowTrader. Each issue contains a full report on the prior day's action, including market internals, technicals, and what sectors were hot and cold. Each issue also includes the ShadowTraderPro Model Portfolio, which updates members on what stock plays STPro is currently engaged in officially, as well as provide a daily list of long and short setups for more self-directed traders and investors.

Good morning traders. In the February 9th issue of the ShadowTraderPro Swing Trader we listed Microsoft Corp. (MSFT) as a short trade idea in the Bulls and Bears section. The stock has traded within the short entry range during the past three days, but it is not too far below the entry range for late comers to consider taking a position. MSFT is a key component of the Software Index ($DJUSSW) which looks ready to give back some of this year's gains.

Please observe the chart below.

$DJUSSW is in the midst of a bullish swing pattern of higher- highs and a higher low highlighted by the blue circles on the chart above. The current leg higher has resulted in six of seven higher weekly closes. But so far this week, price has exhibited difficulties in following through higher just above 2011 highs (black dashed line). The orange circles illustrate the current lower level of on-balance volume (OBV) versus the two previous times price was at current levels.

All of these current weekly chart characteristics suggest a higher probability of price decline in the near future. As we stated above, a short of MSFT is one way to participate in a related trade. Other stocks in the software arena include: ADBE, ADP, ADSK, ANSS, ARBA, BCSI, BMC, CA, CHKP, CNQR, CRM, CTSH, CTXS, DOX, DRIV, EBIX, FIRE, INFA, INFY, INTU, IRM, LFT, MSCI, NTES, ORCL, PMTC, PWRD, QSFT, RAX, RHT, ROVI, SAP, SFSF, SINA, SNPS, VMW and VRSN.

Be sure to check out the ShadowTrader Home Page for a quick video on the most recent broad market money flow data.

When we say "under the hood" we mean market internals, ie: what was really happening behind the scenes. ShadowTraders who listen to our daily broadcast every day live on the thinkorswim platform know that all closing figures on the major averages should only be interpreted in the context of market internals. Look for convergences and divergences in the breadth, a/d line, and trin figures below to either confirm or cast doubt on what all those talking heads on TV are telling you.

The ShadowTrader Sector Trend Score matrix is a proprietary method of assigning values to twenty five sectors that are a representative cross-section of the market as a whole. The heat map in the trend score column defines the current strength or weakness of that sector using a proprietary weighting formula. Sectors bolded in green and red are the two sectors that experienced the largest absolute gain and loss in trend score over the prior day. We strongly urge subscribers to read the full explanation of the meaning and calculation of the trend scores in the Swing Trader User's Guide.

ShadowTrader Sector breadth was bearish yesterday with only 5 of 25 sectors closing higher. The broad market could move lower for two more days before reaching oversold conditions by our measure.

Up and coming economic and corporate data that may move markets this week:

This section is for self-directed traders and investors who like to "do it themselves". Every trading day, Bulls and Bears will list long and short equity setups with defined entries and stops. Note: A listing in this section does NOT necessarily mean that the stock will end up as a part of the ShadowTraderPro Model Portfolio. Plays listed here change daily and are not managed or tracked by ShadowTrader unless traded via MyTrade posting.

Long Ideas

Short Ideas

The matrix below shows all current ShadowTrader Pro plays in the Model Portfolio. The Model Portfolio contains only those plays that are sent out in real-time via posting to MyTrade or text message to your phone. Bulls and Bears plays above are not actively managed or tracked. Current open positions are on top, with positions that were closed in the current calendar week on the bottom. Closed positions are moved out of the matrix on Monday mornings and posted in our performance page here.

To get the most out of your subscription and for detailed instructions on how to structure your own portfolio, read our Swing Trader User's Guide