Tuesday, December 07, 2010

Technical Picture - Bears Own It

Overnight futures rallied on news of Obama's compromised tax legislation. As the markets were setting for the open NQ futures broke out of a bull flag, but S&P and DOW did not confirm. Both the S&P and Nasdaq opened at fresh highs not seen since Sept. 2008, but the DOW failed to open above the Nov. 2010 high. Non-confirmation usually leads to reversals. The gap was faded with volume, hence a momentum move to the downside, followed by, the usual midday chop. Prices retraced back to the ambush zone, at which point, the bears took back control and crushed prices down to the 62% FE in the last hour.

As depicted on the S&P chart above, today's sell-off was on big volume. The intraday action was highly predictable just by studying price/volume and the candlestick action in the ambush zone.

The bears controlled the open and close and expect some follow through.


After watching Zortrades Monday night show on stocktwitsTV and studying the charts I was inspired to be bearish again towards gold and silver. Prices on some of the charts had traded outside the daily Bollinger bands for 2-3 days in a row and needed to correct. All we needed was a gap open.

The gap open was my cue and I shorted AEM, SLW, and CNQ on the open. The AEM chart below was my favorite. SLW almost identical. CNQ was slower, but eventually succumbed. After locking half, I'm swinging all three. Watching today's midday retracement highs to hold as resistance on the swings.

ONXX was a gapper. After it established support in the upper range of the opening gap, I entered long on break of NR7,or probably NR5. The opening range is too wide, so I eventually placed my fibs at the base of the cup. Markets were too weak and the C&H BO failed, but the early entry allowed for a good profit.

CTRP, another gapper, offered a good ambush trade, but I missed it. Instead, I took it long after a nice basing period at $46.00. Took a partial when it felt like it was stalling, and exit on the 62% FE.

A few stocks on my Focus List

AAPL - The third pivot in to the baseline is usually the charm. Failure here should retrace at least to the ambush zone.

LVS - Mentioned this one in my last post. It started to BO of the bear flag late in today's session.

NFLX - 60 minute chart - perfect ambush on the open. Look for NFLX to make lower lows, at least to gap support, and most likely to gap fill. As long as the RSI holds the 50-60 zone as resistance, the stock is weak.


13 comments:

Stewie said...

Nice post Jamie. Tons of good info on your blog. It's a must read for ALL traders.

DW said...

Hi Jamie,

Thanks for your explanation.

May I ask another question? If you take CTRP's ambush trade, how would you plan the trade? The facts I do not like in its pattern are:
1, no small base or hammer in R-Zone.
2, in 5min chart, the candle close below 61%.
3, why you set Fib on OR instead of from ORH to Previous day close?

Many thanks
DW

Dinosaur Trader said...

Jamie,

You seem to throw CNQ in with the silver and gold stocks. Does it have silver and gold operations that I don't know about?

Kind of a trick question, because frankly, I know about everything.

Thanks,

-DT

Jamie said...

Hey Stewie,

Thanks for the plug. Just watched one of your videos on how you scan the market. Always wondered how you came up with so many good stock picks. A lot of hard work and dedication, that's how. Great Job!

Jamie said...

Hey DT,

Thx for pointing that out. Something got lost in translation.

Jamie said...

Hi DW,

Points 1 & 2 are correct, but the wide green reversal bar breaking out of the ambush zone compensates. For point 3, I'm trying to be conservative and have realistic targets especially for counter-trend trades, yesterday being a trend day down.

DW said...

Hi Jamie,

Thanks for your great explanation. Very helpful.

Where can I find Stewie's vedios? Could you please give a link? Thanks.

Regards
DW

Jamie said...

Thanks DW

For Stewie's video, go to You Tube and type bnawas in the search field. The video I was refering to is entitled "Scanning for Stock Setups".

DW said...

Got it! Thanks a lot.

DW

Ashish said...

Hi Jamie,

Do you use Fib extension lines on the daily charts as support/resistance lines on the 15 min timeframe?

I have seen mixed results and was wondering if you have an opinion.

Thanks,
Ash

DW said...

Hi Jamie,

Do you think FBC is a good swing trade? My stop is 1.34 just below the flag. I hope the gap could be filled. Thanks.

Regards
DW

Jamie said...

Ashish,

Yes, I'm following the Fibonacciqueen.com free nightly vidoes as a guide for this type of analysis. I also look for symmetry on the daily. For example, I see a lot of symmetry on the CNQ chart which helps me make trading decisions.

It works best in analyzing widely held trending stocks. Not so good for low volume, non-trending stocks.

Jamie said...

DW,

Good luck with the FBC trade. I, unfortunately, have no opinion on penny stocks.

All I can say about the FBC stockchart is:

1. long-term trend of lower highs/lows;
2. Possible capitulation in lat Oct - early Nov.
3. Possible C&H pattern developing.
4. Possible failed BO on Friday.

If #4 is correct, you may get stopped out. Until it successfully breaks out, the $1.20 level is support. Until it successfully breaks above 50 MA with bullish 20 MA crossover, FBC is in a confirmed downtrend.