The Gilmo Report

November 16, 2011

November 16, 2011

Due to Gil Morales travelling to Las Vegas Wednesday for his Thursday speaking engagement at the Las Vegas Trader’s Expo, today’s report was written by Kevin Marder in consultation with Gil Morales. Gil returns to the writer’s console this weekend for the Sunday report.

Gil believes Wednesday’s market may have been telling.

Gil: “On Wednesday, big-volume breaks back down through the 200-dma on the Nasdaq Composite were news-related. The day’s failure at its 200-dma on heavy volume then came with no news and left many scratching their heads looking for a catalyst for the sudden end of day sell-off. I think the fact that it came with no news is ominous.”

Gil: “The NAZ shows a heavy volume failure at the 200-dma, and this could be ‘three and out.’ I don’t like that action at all. There is not much to say here as today’s distribution day puts a bad spin on everything. The long side is cautionary at best. Cash is king with an eye toward perhaps campaigning on the short side.”

Nasdaq Composite Gilmo Report Chart

Fusion-Io (FIO) is a throwback to the great technology titles of the ‘Nineties, most of which had “something new” going for them in the way of an innovative, new product or service that was changing the way consumers and businesses function. In FIO’s case, its product is a next-generation data storage solution. The company is a pioneer of a new storage memory platform that significantly improves the processing capabilities within a data center by moving process-critical or active data closer to the CPU where it is processed.

Gil: “I love FIO. The fundamental story here remains very compelling. This will likely be a leader in any continued rally phase, assuming a continued rally is what we see. FIO probably needs to pull back one more time to the 36 area. I would look to buy there if the market isn’t blowing apart.”

Fusion-Io (FIO) Gilmo Report Chart

Of any growth stock or other high relative strength issue, the most classic chart pattern showing blatant accumulation happens to be SPDR Gold Trust (GLD).

Gil: “Gold is working off overhead resistance here as it tracks sideways. We discussed the initial pocket pivot buy point in my October 26th report. Watch for another pocket pivot in the GLD. Meanwhile, as I noted in the November 9 and November 13 reports, we would expect the GLD to hold the 50-dma.”

SPDR Gold Trust (GLD) Gilmo Report Chart

Among other names:

Rackspace Hosting (RAX): “The stock is in a handle, looks okay but I would not necessarily establish a new position here because of the general market.”

Tibco Software (TIBX): “TIBX broke out through the 29.56 level, so it should hold that general level on a pullback.”

Red Hat (RHT): “I would not consider this right now due to the general market.”

Golar LNG (GLNG): “This looks good, but due to the general market I would hold off on entering this.’

Concho Energy (CXO): “This is an oil I was watching, but I’d pass on this for now due to the overall market.”

Oils: “Oils acted well today but they got mushy at the end of the session along with everything else.”

Gil: “On the short side, Apple (AAPL) and (AMZN) are still potentially shortable using the 50-dma based on my earlier theories that they had shown topping signs on the 2-down-2-up principle on AMZN and 2-down-1-up thesis on AAPL on the weekly charts. This was discussed in my reports in November, and members can use the search feature within the report viewer to locate the discussions on these.”

Gil: “Sina Corp. (SINA) is also potentially shortable using the 80 level as an upside stop.”

Gil: “Random sell-off here just means that the market is still doing the chop zone thing. I would stay cautious here and let things settle out. Meanwhile some names act okay staying within consolidations, but no window of opportunity open here yet.”

Gil: “Given the action of the general market, my view is that cash is likely king here with the short side possibly playable on AAPL, AMZN, and SINA. Volatility could still rule and make progress difficult either way. I was up big today going into the last hour and looking to be up more by the close as the market was flirting with the upside, and it evaporated pretty fast.”

Gil: “A little after 3 p.m. ET, I was up 8% on the day and blew to almost 100% cash at 3:20 p.m. ET, ending the day up 4.5%. Had I not taken a look at the quotes as I was driving at about 45 minutes before the close, I would have probably been flat for the day instead of moving 95% to cash and holding up a 4.5% gain on the day. Wild! I’ll take it!”

Gil: “The only question is whether QE drives stocks up in sloppy fashion, but so far that doesn’t appear to be the case.”

Gil Morales

CEO & Principal, Gil Morales & Company, LLC
Principal and Managing Director, MoKa Investors, LLC
Principal and Managing Director, Virtue of Selfish Investing, LLC

At the time of this writing, of the stocks mentioned in this report, Gil Morales, MoKa Investors, LLC, Virtue of Selfish Investing, LLC, and/or Gil Morales & Company, LLC held a position in AGQ, DGP, GLD, and RAX, though positions are subject to change at any time and without notice.

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