Monday, November 22, 2010

Technical Picture - Bulls Defend Support

A modestly weak open was quickly bought to fill the opening gap. Despite strength in tech, the broader markets couldn't find any momentum because the $USD gained strength causing commodity prices to weaken. After the 10:00 turn, prices fell and printed lower lows. They tried to consolidate at Thursday/Friday lows, but failed as prices swooned to a partial gap fill at support from Wednesday's base.

The partial gap fill signaled a long entry on positive divergence of the RSI to lower prices as depicted on the 1 minute timeframe below.

The rally off the lows was slow at first, but managed to retrace most of the day's range by EOD.

As you can see from the 15 minute chart above, we have strong resistance at $120.65 if we manage further gains tomorrow. That level held as support on a few tests last week, and will difficult to break through unless we have a catalyst. If GDP data provide an upside surprise, we could see higher prices ahead of FOMC minutes tomorrow afternoon. Otherwise, I would expect narrow range trade.


$USD and GLD are developing as planned.

Today's trades include AMZN which expanded after Friday's NRIB NR7 on the daily. Why can you take this trade on the open? The base at $165.00 is solid as it was tagged three times over the course of two previous sessions. If price breaks out, it will retest the base before failing, giving buyers a chance to scratch the trade, if it looks like a failed BO.

NTAP tested support on the open and bounced. No follow through in the afternoon.

FFIV - shallow retracement and held in upper range as markets corrected. A good long opportunity and daily BO at $128.00.

Back to my beloved Habs. We're up 2-0 against the Flyers, midway through the 2nd period.

13 comments:

joshua said...

Whats up Jaime,

I have a few questions.

What kept you in that SPY trade the whole time? It seems like you had to sit through a fair amount of pullbacks. Do you get nervous holding for so long, or its no big deal?

What did you see in that second entry in AMZN?

Thanks

Jim said...

Hey Jamie,

Glad to hear that you are feeling better after the surgical procedure.

thedocument said...

While my cycle analysis also calls for a bit more pull-back in gold, I would be quite wary of calling a H&S top. I can't tell you how many H&S "tops" gold has formed over the course of the bull. My guess, based again on what I see in cycles, is that we get a neck line break to run stops and draw in more shorts, then turn tail and run seriously higher.

Jamie said...

Hey Joshua,

The SPY setup is a bread & butter trade. As long as RSI holds the 50 area as support and RSI is red on higher highs, I feel that the SPY has a good chance to go higher. SPY and S&P futures are much choppier than stocks so you have to get used to all the pullbacks.

The second entry in AMZN was a small base forming at the whole $ level and I wanted to maximize my profit as I felt the market would continue to rally into the close.

Jamie said...

Thanks Jim,

Out patient surgery on my lower eye lid. Was painful and I still have a black eye, but I feel a lot better now that the stitches have been removed.

Jamie said...

the document,

Yeah, I suspect if the $USD breaks out of the channel and builds momentum vs. the Euro, gold will become a hedge against the weaker Euro if the Euro can't find support from its trendline. Thus, your scenario will be right. But for now, the negative divergence of the RSI vs. higher prices, combined with developing H&S pattern leads me to believe in the setup. I'm monitoring all of the elements daily.

joshua said...

thanks man

Banenga said...

Hi.

Wounder if u got any thoughs on SNDK long above ORH 42.33

Jamie said...

Banenga,

That's not the type of trade I do off of a 1 minute chart. I posted my targets for SNDK on the weekend, but with yesterday's gap up, I decided to pass.

The only setup I saw today was an ambush for SNDK after the 10:00 turn. Not following through so far because of general market conditions.

Banenga said...

alright. One more. I tried to short F below 15.02 at 10:30

thoughs about that?

thanks for answer

Jamie said...

Banenga,

Not my kind of trade. I don't like low priced stocks. It just seems like a guessing game to me because the candlestick patterns are so nebulous.

JTT said...

Hi Jamie,

Quick question on your AMZN trade in this post. Taking the trade on the open, where do you put your stop? The other end of the candle can be a long ways away. I know you said if it fails it will test the base and give buyers time to exit but if it fails quickly-like a false BO. Would you give it 20cents?

JTT

Jamie said...

JTT,

Yeah, I wouldn't give it too much wiggle room. 20 cents is plenty. Failures make good shorting opps, so you might want to plan a strategy around the failure as well.

I wouldn't do this type of trade with stocks that are not liquid. It works well with the momo tech names and hot stocks that everyone is focusing on, but too risky for low priced stocks with low volume.