Base & Break - Cognizant Technology Solutions Corp. (Public, NASDAQ:CTSH)

I found CTSH through the TI momentum scan yesterday, but it was too far gone. I liked how orderly it traded and decided to add it to my focus list. Today, it set up a near perfect B&B (mini C&H on 5 min.).

I scalped CLF long in the very early going and let it go after a 1 pt. gain as price moved into resistance at the lower blue line. Too bad.

Took it short in the afternoon. Again my target was the lower blue line. I was hoping that the market would roll over before my target was hit, so that I could partial out and hang on for a bigger gain. But the market reluctantly carved out a minor new intraday high, so I had to stick to the original plan.

CNQ carved out a symmetrical C&H pattern. Once the trade got underway, the lower volume on the BO was suspect. The second BO bar stalled, again, due to a lack of volume. The the third BO bar took off on a volume spike. Again, this was suspect because volume spikes of this size should come near the end of the move. So I partialed out at $99.00. Smart move. The bears finally got into gear in the last hour.

NASDAQ Technical Picture - Late Day Profit Taking as Bears Defend 200 SMA

DELL earnings could be a catalyst to morning strength, but this relief rally is feeling stretched, so I'll be watching for some profit taking and perhaps a weak close. Transports still feel bullish as oil continues to pullback.

Target Trade - SINA Corporation (USA) (Public, NASDAQ:SINA)

The first chart is a daily of SINA. Resistance at $53.00 based on yesterday's close. I was looking to target trade this one to resistance if it set up a B&B at or near $52.00. Worked out perfectly. Got the idea from HCPG based on their assessment of SOHU last night.

The second trade was based on support of R2 and potential run to $54.00.


TTEK - Much better today than yesterday.

Steel sector was sort of split, so I guess I should avoid trading the leader when all the rest is so choppy, unless there's a story. I had plenty of opportunities to scratch the trade. If they don't take off right away, that's usually the best thing to do. Because the shooting star (BO bar) closed green, I hung on.

NASDAQ Technical Picture - H&S Top on Track

Minor gains for the major indices amid a low volume relief rally. Sector leadership came from Coal +4.3%, Steel +4.3%, Mining +3.4%, Chemical +3%, Paper +3%, Oil Service HOLDRs OIH +2.8%, Casino +2.2%, Crude Oil +1.5%, Natural Gas +1.4%. Banks and insurance were weak due to loan loss hikes and AIG's need to raise more capital.

The H&S top scenario is on track and the choppiness amid a lower volume rebound supports the right shoulder pattern.

Dummy Trades - Sector Strength

The first trade was TTEK as highlighted in the pre-market post - Cup & Handle on the daily but it failed intraday. I scaled in $25.98 and placed a stop order at 26.01 - bad fill at $26.08. There was no backing and filling so the stock shot straight up, but the long upper shadow on the BO bar and the next, foreshadowed potential trouble. So I managed the trade not to lose - tighten stop after price carves out each new high. It didn't much beyond the 38% Fib. extension of the previous day low to the ORH.

CLF a steel sector stock, gapped up slightly. After the initial swing high, it consolidated in an increasingly narrow range. Base & break following NRIB. Price broke out nicely and then the second and third BO bars consolidated. I waited until 3 WRBs following the minor consolidation to take a partial. After the partial I tightened stop after each new high, but never got stopped.

Along with steel, coal was on fire today. Managed to catch a piece of FCL off of a bull flag consolidation and NRIB. Ag Chem also very strong today, but I missed out.

I was anticipating a relief rally in Dry Shippers after all the selling. After gapping wide, DRYS formed a C&H pattern but no IB. Took a chance and it paid off nicely.



My main screen consists of, sector quote windows on left side, indices and sectors top right, usual suspects lower right, four chart time frames - daily, 15, 5, and 1 min., as well as total view (level II). The sector quote windows are almost entirely filled with names from HCPG recent picks. This is invaluable to being in the right sector at the right time. I used to flip screens with 6 charts from each sector, but the quote screens allow you to quickly see which sectors are green/red or mixed. Sorting quote windows by % change allows to see which stocks are leading each sector.

NASDAQ Technical Picture - Relief

H&S top is playing out according to plan.

The 15 min. chart looks like an inverse H&S bottom. On a measured move basis, we can expect to climb back up to resistance at 2510.

S&P much weaker than the NAZ, but 50 SMA held as support today and prompted a somewhat choppy, low volume relief rally.

Base & Break - Reasearch In Motion Ltd. (USA) (Public NASDAQ: RIMM)

Today my trading strategy was to look for solid base and break setups based on a relief rally following last weeks' sell-off. As noted in my NASDAQ post, I'm looking at a possible right shoulder as part of a mini H&S top formation. The right shoulder generally has much less volume and can be quite choppy, so the need for solid setups is a must.

I stuck to my usual suspects list. Most trades didn't reach the full extension, but there were no losses.


The best trade was RIMM off of a near perfect three pivot base. I took a partial at the 100% Fib. extension of the reaction swing low to the base. This also matched up with 3 consecutive WRBs 15 min.

The second half extended to 1.62%. Sweet!

ESRX was a base within a base. The trade was very slow and didn't reach the full extension.

GRMN was a low risk setup at the same level as Friday's base, but it didn't do much until the last minutes of the session, but I had previously exited the trade.

FWLT was a NR base in line with Friday's C&H base. I was looking for a gap fill but time ran out.

NASDAQ Technical Picture - Testing Trendline

It now appears as though the NASDAQ may be forming a mini H&S top with the left shoulder and head in place following Friday's action. Now we need a relief rally after all this selling to carve out the left shoulder. This is all speculative, but nevertheless a real possibility as price tests the trend line with a hammer reversal bar.

After ending last week at the lowest levels since seen since Oct, market volatility rose steadily this week as equities declined (S&P -3.4% on the week, Dow -3.8% on the week, Nasdaq comp -3.5% on the week). The VIX (CBOE Volatility Index) is up 20% from last Friday's close, now at 19.68, while the tech-focused VXN (CBOE Nasdaq Volatility Index) is up 21% on the week at 23.87. Expectations for near-term volatility in the market increased steadily over the course of the week, with equities reversing early in the week after failing to hold gains, oil prices setting new highs and the mid-week FOMC minutes adding to concerns about the economy.

NASDAQ Technical Picture - Narrow Range Consolidation

A truce after all the selling in the form of a NRIB on light volume. Trading might be light again tomorrow ahead of the long holiday weekend. Existing home sales out at 10:00 tomorrow might stir things up.

Gapper Trade of the Day - TBS International Limited (Public, NASDAQ:TBSI)

TBSI from the WL and highlighted on the Briefing.com gapper list, set up a low risk short following a narrow range consolidation. The entire group was weak including DRYS. A quick look at the DRYS daily chart and it is clear that this is a reversal as opposed to a retracement. What's the difference between a reversal and a retracement? Volume - high volume on reversals as opposed to lower or declining volume on a retracement. Three WRBs in less than a week and a 22% price decline. The bull is gone and the bears are clearly in control.



V was a HCPG pick at $78.00. Thought I had missed the move on this one in early trade, but then V delivered a low risk, dummy short (NRIB -NR7) right on the number. Sweet!

LEH was a B&B short. The target was the ORL and I took a partial midway near support from the the second bar low.

NASDAQ Technical Picture - Bearish Expansion

Higher oil and FOMC minutes beat up the markets today. As noted yesterday the down sloping 50 SMA was observed as resistance on the 15 minute intraday chart.

FOMC highlighted weakening economic activity, slowing growth in consumer spending, softening labor market, financial/housing markets still under stress, and no more rate cuts even if economy contracts.

Technical damage - loss of 20 EMA on the daily and trend line break on S&P. The aggressive reversal off of Monday's highs leaves the door open for more weakness, but the NASDAQ is coming into support levels as highlighted on the chart, as well as, May low at 2535/2429.

Dummy Trade of the Day - Sohu.com Inc. (Public, NASDAQ:SOHU)

The first chart is the 15 minute NASDAQ Emini futures. Last night I said, "The key elements to watch are the depth and choppiness of the retracement. On the 15 minute chart, I would look for prices to hold below the declining 50 period SMA in order to maintain the corrective bias."

I expected that we might get a choppy reversal attempt after price retested yesterday's lows. If you click on the chart above to enlarge you will see that price observed the declining 50 SMA on both tests. After restesting yesterday's lows, price attempted to reverse but, it couldn't get any traction due to lack of volume.

The NQ chart helps guide my trading. So after failing on the open, I was looking to short weakness.

The next chart is the LEH daily, which I highlighted as a focus list chart a while back. Yesterday the trendline was broken, but had no momentum. Today it broke the base (black line segment) shortly after the open and fell like a hot knife through butter until it capitulated.




HUM was a B&B dummy long that I found on my momentum scan yesterday. If not for today's market weakness, I think this stock could have done much better as it attempts to rally out of a base on the daily.

DRYS was a C&H base & break. There was no momentum beyond the BO bar. When price rallied out of a two bar consolidation and then gave it back, I was stopped out. After all, $133 oil is not favorable for transports.

Normal Fib. extensions for these setups is 100%. When both DRYS and HUM failed, it flagged the overall market weakness and it was back to looking for short setups.


SOHU carved out a bearish rounded double top pattern. The only problem I had with the setup is that it triggered before the FOMC minutes were released. But after reading the minutes, which were pretty gloomy, there was no need to take a partial at the blue support line.

NASDAQ Technical Picture - Narrow Range Day

Higher crude and worrisome core PPI data weighed on the markets today. The NASDAQ managed to carve out a NRB hammer bar which may result in a reversal. The key elements to watch are the depth and choppiness of the retracement. On the 15 minute chart, I would look for prices to hold below the declining 50 period SMA in order to maintain the corrective bias.

The S&P is a little more bearish with a deeper close today. The proximity to the lower trend line could provide support.

The CBOE is back above 1 which implies more put buying.

Gapper Bear Flag - BHP Billiton Ltd. (Public, NYSE:BHP)

BHP was a Briefing gapper. It carved out a bearish flag-like pattern. It wasn't really obvious from the volume that this was a flag. I usually like to see a clearer sign of declining volume. However, the 5 minute time frame (below) was clear in its rejection of price at the declining 20 ema and I decided to take the trade. I took a partial after 3 consecutive WRBs and was stopped out when price reversed after carving out a hammer.


OXY set up out a low risk entry at the base of yesterday's high. Once in the trade I wasn't really feeling any momentum and decided to play a textbook Trader-X exit at the 38% Fib. extension of the previous day low to the ORH.