Custom Search

Saturday, September 19, 2009

E-Trade Gap Fill Coming? (UPDATED 21 Sep)

Though I am an Elliott Waver and tend to believe that the marketplace, as a whole, cannot be "controlled" (because social mood cannot be manipulated) that doesn't mean I am naive to the ways of Wall Street crooks and conspiracies.

Indeed the season of "upgrades" is upon us. Part of the reason for upgrades after a rally is that analysts are only human and are subject to market moves and forced to take positions on stocks that have risen or else they look like fools. A more sinister part is that upgrades are a mechanism that allows strong hands (MM's) to distribute to weak hands (retail) at the top. I here people all the time at my work mention upgrades on certain stocks as if that is "proof" that they are playing the "smart" buy. Yet another aspect of stock "upgrades" is no doubt a purposeful event done for the benefit of the entity that accomplishes the upgrade. Take Goldman Sachs. On Friday GS upgraded ETFC and it rose a nice 8% on Friday. It no doubt added to their trading coffers.

One thing I noticed on this P2 rally is that almost every stock has risen initially in the Spring, pulled back and then went higher on this late summer surge. There are a few stocks that haven't followed this pattern, yet. ETFC is one of them (RIM is another - but getting close to another high and for instance FSLR - not gonna make a new high I don't think)

ETFC has a huge gap from $1.98 to $2.46. It closed Friday at $1.84. A surge as of late has been done on huge volume. There is no doubt that the High Frequency Trading (HFT) machines have latched onto ETFC and are providing some high octane juice.

One other aspect of ETFC is that there have been whisper rumors that ETFC might get targeted for takeover by one of its rivals. It is a lucrative proposition as ETFC has an awesome trading platform. The problem of course is that they got caught up into buying toxic mortgages and have paid a dear price for it.

However they have gotten through it all so far. They have eaten the losses and somehow survived on the strength of their core trading business. With the power of a P2 peak, mergers and acquisitions have perked up lately so perhaps someone takes a gamble on ETFC. Their stock is pretty cheap still.

But still conspiracies and greed certainly exist on Wall Street. A GS upgrade here, maybe another rumor there, and next thing you know, ETFC gets a P2 squeeze to $4 or more.

So the HFT machines are in high gear and I expect the ETFC gap to get closed. I half expect a new recent high above $2.90 actually. And if it retraces back to the apex of a previous 4th wave, that would probably be around $4.

Then at the peak some serious stock dumping gets done under the volume cover of HFT and new bagholders of the "Hog" are created.

Anyways, with a good stop loss in place, it might be a decent trade this week.
blog comments powered by Disqus