Wednesday, April 27, 2016

Post Mor-tem 4

I wake up with funny thoughts. If the world is mostly illusion, then the trading world is a mirage wrapped inside a hallucination. While I struggle in isolation, traders travel the world together, extracting money from the market with cookie cutter setups in between half-naked cocktail hours.

It can't be...because it's not. 

1. GLW Short: Bad earnings reaction on volume 4x normal with close near lows.

Trade Size: Min 500 shares, Max 2,000 shares.

My Scenario: Limit orders $19.35-$19.45 w/ $19.63 stop. Look for move to $19 then $18.78 area.



2. BCEI Short: Stock very extended on all time frames. Last 2 days narrow range bars with big volume indicate war between buyers and sellers. This morning's gap up represents a short opportunity with good risk/reward.

Trade Size: Min 600 shares, Max 2,400 shares.

My Scenario: Looking to short $4.2-$4.30 area with $.20 cents of risk. Stock very unlikely to get past $4.6-$4.7 area. Ideally want big 5m blow-off bar or hard move higher with 4-8 5m up candles. Target move back under $4, then $3.7.



3. JD Short: Massive selling here 5x average volume.

Trade Size: Min 300 shares, Max 1,200 shares.

My Scenario: Will look to short $25.40-$25.60 area with about $.30 cents of risk ($25.83 is stop). Looking for move back below $25 then yesterday's low of $24.55.



Tuesday, April 26, 2016

Post Mor-tem 3

1. XRX Short: Bad earnings reaction here, $9 could become a magnet.

Trade Size: Min 700 shares, Max 2,800 shares

My Scenario: Start in $9.85 to $9.95 area. Stock could pop over $10 but will have hard time getting past $10.10. $.15 cents of risk.



2. ONTY Long: Volume over 2x average yesterday with no news.

Trade Size: Min 2,000 shares, Max 8,000shares

My Scenario: Don't want below $1.30, look for early consolidation/flag above $1.30 for $.05 cents of risk and possible move to $1.53. Make sure volume is there, preferably over 2MM shares for day (guestimate here). Stock can be choppy, but if buyer is there be patient. Try to use limit orders here.



3. WTI Long: 6 day breakout and strong close above 50 day MA.

Trade Size: Min 1,000 shares, Max 4,000 shares

My Scenario: Want to stay above $2.27 and preferably more volume today. $.10 cents of risk for move to $2.57 area. Use limit orders here.



4. BCEI Short: Getting very extended with big volume and narrow range bar/bars. $4.19 resistance area.

Trade Size: Min 600 shares, Max 2,400 shares

My Scenario: Short on rinse above $4 with $.20 cents of risk looking first for return to $3.75 area (yesterday's close).



4. MYL Short: Sell-off on $PRGO earnings warning yesterday on 2x volume.

Trade Size: Min 200 shares, Max 800 shares

My Scenario: Sell limit orders in $45.55-$45.65 area. Do not expect stock to get above $46. Look for return to $45 and lower.



Sunday, April 24, 2016

Post Mor-Tem 2

Just took a walk back in time to the Deserted Village at the Watchung Reservation, a county park that spans 5 towns in Union County, NJ. Through the 18th to 19th centuries this area was home to residents who built Sawmills, Printing Presses, and even a summer Resort whose fate was doomed with the advent of the Jersey shore. Fortunes rose and fell, and people moved on.

Last week we did a hike in Mendham, NJ where George Washington's forces set up camp during the revolutionary war.

You get the feeling that not much ever changes. People are the same, wars rage, and money ebbs and flows from one hand to the next. We are a fairly predictable species.

Back to the grind. You can't do the same thing everyday in trading. This is difficult to accept, but if you don't accept it you cannot trade for a living. It might be easier to think of it as illogical anyway. If the same thing worked all the time, than a computer would have all the money in the world. Embrace this and you are ahead of the game.

The market is going up, which is just my naive assumption based on trend as defined by upwardly sloping moving averages. This puts me at ease because I don't go back and forth on what the market is doing, or going to do (this is psychologically draining). I know the odds are that it continues to go up and I will trade, for the most part, accordingly.

One way to take pressure off of yourself is to think about trades by asking the following question. What would a smart trader do here? This way it's not about you and what you think is going to happen with a stock. You are simply trying to figure out what smart traders would do in any given situation, and then follow them.

So what am I doing differently? I'm working more with gaps lately given we are in earnings season, and trying to come up with different ways to exploit them. Let's use $NSC as an example.

Couple things of note here. With gaps I don't want to buy 2nd day gap ups (after a gap up the previous day), I want to short them. On the contrary, I want to buy 2nd day gap downs/early weakness, with the presumption that areas that were bought on day 1 will be defended on day 2 (support). Traders bought the $90 breakout on $NSC on Friday, so I am assuming that breakout area is support.

1. NSC Long: Big earnings reaction here Friday with volume about 3x normal and a strong close.

Trade Size: Min 250 shares, Max 1,000 shares.

My Scenario: I see 2 scenarios with $NSC. I will buy $90.65-$90.85 early with a stop below $90 or buy $90 to $90.20 area with stop at $89.15 area. It will depend on where the stock opens and how it acts early. Then I can sell a piece around Friday high of $91.43 with a runner to the $94.50 area (this would likely happen on an overnight hold).



Saturday, April 23, 2016

Post Mor-tem 1

The most unpredictable thing you will ever encounter in trading is yourself. This is why your trade plan should be as specific as humanly possible. If a plan is not made you will do trades that are difficult to understand after the fact. This opens the door to a negative psychological cycle that will hurt future trading performance.

For the time being markets are a bit divergent with healthy up-trends in $SPY/$IWM and a potential new down-trend in $QQQ. While $QQQ has broken trend, it is still technically within a range with $108 as important support. Earnings from $AAPL on Tuesday and $FB on Wednesday will help determine $QQQs future direction.



1. AMD Long: $5 plus doable after earnings report. Expect continuation higher here in next few days, stock is unlikely to see less than $3.80-$3.90. Link to earnings report article.

Trade Size: Min 1,000 shares, Max 4,000 shares. 

My Scenario: Will have buy limit orders for 1/4 position at open for $3.85 to $3.95 with $3.65 stop. Can add a 1/4 position on pullbacks using 15m 8/20 SMA as guidepost. Don't just add for the sake of it, look for a strong move to $4.10-$4.20 first then consider adding on pullbacks.




2. HA Short: Bad earnings reaction with heavy volume close below 50 day. $40 possible with minor support at $43.

Trade Size: Min 300 shares, Max 1200 shares

My Scenario: Don't want above $45 level. Will have sell limit orders $44.30-$44.50 early for 1/4 position, can add on pullback if weakness is there. Not more than $.50 cent stop here.



3. PACB Long: Solid earnings reaction with volume. $14 possible, stock needs to stay above $10.

Trade Size: Min 600 shares, Max 2,400 shares

My Scenario: Buy limit orders $10.20-$10.40 area for 1/4 position with stop below $10 for about $.30 cents of risk. May have to increase bid level $.10 cents ($10.30-$10.50) as stock closed strong and will likely magnet to $11.



Sunday morning April 24th. Watched a PBS special last night on Poet Laureate W.S. Merwin which was excellent. If you care about the environment, poetry, or Buddhism it is worth a watch. Here is a link to the documentary film about Merwin and his environmental views Even Though The World Is Burning . A fascinating man.

4. AKS Long: With earnings on Tuesday pre- market and 11:00 a.m. Earnings Call I will take advantage of any weakness tomorrow created by traders looking to get out of the stock before earnings. Unlike the gold/silver stocks there is limited distribution so far in $AKS and $X.

Trade Size: Min 1,000 shares, Max 4,000 shares

My Scenario: Buy limit orders $4.65-$4.75 area for 1/4 position with stop below $4.50 for about $.20 cents of risk.



5. FCX Short: With earnings on Tuesday pre- market and 10:00 a.m. Earnings Call

Trade Size: Min 1,000 shares, Max 4,000 shares

My Scenario: In daily chart below $12.75 resistance held and last week's Tuesday and Wednesday buyers could be trapped. I have $11.45 as support (previous b/o area) shown on 15M chart below. If stock cannot get above $12 early will look to short $11.75-$11.85ish area with $.20 cents of risk looking for a break of $11.45 then a trade toward $11.




Tuesday, February 16, 2016

FB 15M

Watching closely, 15M trendline broken just below VPOC.

Look to short whips toward $101 stop no higher than 101.31

Target $100 then $99


Monday, February 15, 2016

Market Thoughts

I go back and forth between "should I look at the charts first" and "should I look at the news first" each day. I typically start with the latter, but should probably start with the former. The charts don't lie, the news does.

$183 is important support and has been tested four times now. Once in 2014, once in 2015, and twice in 2016. 2014's test occurred in October, 2015's in August, and 2015's in January and February.

$SPY closed above where it opened last week which was a small victory for bulls. That optimism will carry forward into tomorrow and has the potential to move $SPY above $190 with upside to $194.

Conclusion

The $SPY weekly chart paints a bearish picture. Shorting $190-$192 area with stop above $195 gives me ample risk/reward with downside targets of $185, $183, then a runner with potential to $176 area. This trade could take weeks to play out and will require patience. Battles will likely be fought in $190 to $192 area.


Non-Sequitur


News of Draghi talk of easing in March is potential bullish development as this market has had nothing but headaches since the Fed tightened last year. The Feds actions obviously de-stabilized something, it's just not clear whether this is a short-term or long-term phenomena. 2016s price action has been particularly bearish given that the business/economic/earnings news has not been all that bad. So how the market reacts to this type of "reversal of central bank tightening course" news will be important.

SPY Daily

Two solid bounces last week off lower bollinger (set at 2.5 st dev.). Middle bollinger at $188.39 with $190 above. Expect choppy action both ways as we have short-term bullish news pushing us into declining 8 and 20 day EMAs. In December the 8 EMA was crossed 5 days in a row with daily highs and lows above and below the average. This type of action is likely this week. 

Conclusion

In this type of chop around the 8 EMA scenario, 1st tests of $185 area should be bought and first tests of $188.39 area should be sold. Ideally we gap higher to $188 level which would be good early short. Stops for this trade should not be higher than $189.31 and first covers would be in front of $187. If we break back into Friday's range and stay there for a bit tomorrow $185 becomes likely. However, if $187/Friday's close is not breached we may just rally a bit giving us a narrow range up day.

I expect us to gap higher tomorrow but do not expect a squeeze into and above $190. I am, however, aware of the possibility, but it is unlikely. If we are above $188.39 tomorrow afternoon the likelihood of a squeeze to $192.50 becomes more likely and I will look to take advantage of that accordingly.


SPY 60M

We are near the highs of a 2 day rally that started last Thursay near lower 60M Bollinger. Upper Bollinger stands at $189.28 right near lower bound of high volume node at $189. $187.50 is 50% retrace of February range. Friday closed above bear channel, but volume for the day was light. The 60M 50 EMA is currently being tested from below for the 3rd time in February. Support is at $184.82/$185 (HVN, 20EMA, Round #) and first tests of this area should be scalped from the long side.

Conclusion

A reversal is in the works and possible at this point. I'm not willing to say probable as 60M is stretched to upside. Notice this chart in February during a downtrend. Buying the outer bollinger and shorting returns to the 60M 50 EMA would have been profitable. That trade is over. I will approach tomorrow with a range bound mindset, shorting $188/$188.39 area and buying $185 area.

Again, a close above $188.39 makes a reversal to at least $191 (60M 200 EMA) probable, but for now it's a range.


QQQ Weekly


$QQQ is a more troublesome weekly chart than $SPY. If one were to look for the "cause" of this correction, tech would be a good place to start. Last week $SPY did not breach its swing low of 2 weeks ago, while $QQQ did. The wide gap in $QQQs volume profile stretching from $95ish down to $86ish will act as a vortex from beneath. $100 is of obvious importance and oddly $QQQ spent the first 5 weeks of 2015 going above and below $100.  $95 is support.




Much like $SPY, $QQQ shorts in the $100 to $103 area offer great risk/reward with stops above $105. Start weekly short in $102 to $103 area with stop no higher than $105 and first target in front of $100. Big downside targets below are $89 (200 weekly EMA) and $86ish (top of weekly VP).

QQQ Daily

Notice heavier distribution last week vs. $SPY.  $100 to $101 nice confluence of 20 EMA, trend line resistance, and round $100. An early visit to this area tomorrow should be shorted. Stops should be no wider than $1 from entry. This chart could get bearish very fast below $98 (top of profile/last week close). However, first tests of $98 from above are scalp longs.


Again, if $QQQ is able to close above $101 then $105 becomes likely. This scenario, however, is unlikely this week. Similarly to $SPY I expect a range bound week that may travel above and below $QQQs 8 EMA.

QQQ 60M

Double bottom possible as well as ascending triangle between $95 and $98. Both project to $101 area. February 50% retrace is $99.50 with upper bollinger at $99. Scalp hard moves lower to $96 from long side, first time only.





Tuesday, January 19, 2016

Morning Rant

1. Really? How the heck do they know? I recall sitting atop 1 Wall St. explaining to a Journal reporter that when interest rates go down, bond prices go up. I guess they've move beyond basic bond math to calling corrections.


2. Would ya' short this weekly chart? Hope not. Lookin' to buy more calls today.


3. Carbo Ceramics (CRR): Net debt is zero. Half the float is short.