Wall St. Warrior

Technical Picture - Reversal Bar

2012-01-26T16:34:00.003-05:00

Today the SPX carved out a reversal bar - higher high and lower close from the previous session. We are looking for minor corrective action to bring us half way back to roughly 1300 before resuming the uptrend towards our 1344 target.

Technical Picture - Bullish Response to FOMC

2012-01-25T23:31:00.005-05:00

As discussed in my last post, the SPX chart above shows that since the new year started, we've broken out of the mean reverting pattern we were in over the past few months. The two fib patterns show two ambush setups. The second smaller ambush reached its 23.6% Fib extension target, and now we are moving towards the larger target - 1344.

Last Friday we were looking to BO of the first Fib extension. Monday morning, we blew past the 23.6% FE and drew a new extension (green), but failed to hold the 50-62% retracement. That failure resulted in a fast move back down the ambush zone of the stretched original FE. Buyers stepped in and managed to take price all the way half way back (grey fibs). As depicted below, the bears ambushed EOD and the counter-trend traded to the 23.6% target on the open Tuesday.

Today, bears failed after the release of the FOMC statement. Shorts were squeezed out of positions as price rallied to new highs.

Price reached the the 23.6% FE and now we stretch our Fibs and hope for a chance at a new ambush tomorrow.

Technical Picture - Bullish

2012-01-22T23:30:00.003-05:00

The SPX chart above shows that since the new year started, we've broken out of the mean reverting pattern we were in over the past few months. The two fib patterns show two ambush setups. The second smaller ambush reached its 23.6% Fib extension target, and now we are moving towards the larger target - 1344.

The 15 minute SPY chart below, shows three ambush setups. The first two were traditional low to high Fib setups which involved some gap filling. The second Fib ambush blew past the 23.6% target, so now the third fib (red) is an extension from previous high to high. The ambush traded on Friday. If we blow past the 23.6 FE, we'll have to draw new Fibs from Friday's high to the next high, if not, we'll use the same anchor and stretch the Fibs and wait for the next ambush.

In the event that the Fib. extensions fail, we'll have a much deeper pullback, probably all the way, half way back from the base of the blue Fib. pattern on the SPX daily chart.

NR7 - Market Test Your Scan with OddsMaker

2012-01-12T20:58:00.010-05:00

We've been in a mean reverting market for almost a year and long breakouts are few and far between. Long setups that worked well in 2009 and 2010 had little chance of success last year. If that sounds familiar, you need to refine your trade setups to the reality of the current market environment.

One of my favorite setups is the 15 minute NR7 which reflects price/volume contraction ahead of expansion. I like to trade NR7 with stocks showing intraday momentum. NR7 is a great trading strategy to deploy during earnings season. Earnings gaps offer good trading opportunities but we don't want to chase. Wait for NR7 and catch the next leg with low risk.

Using Trade-Ideas Pro Scanner 3.1 in conjunction with OddsMaker, I am able to market test under current conditions and refine my NR7 scan to generate a winning strategy.

As depicted below, my scan generates a 27.7% win ratio. That may not sound like a lot, but since I use a tight stop, losses are small and winners generate good income over a short period of time. The OddsMaker quickly market tests my NR7 scan and provides summary and detailed results of the strategy over the selected number of days of back testing. In this sample, I used 500 share size for all trades and after 15 days it generated $4,000.00. Even if we reduce the maximum number of trades possible on any given day, the results are still impressive, given that my testing assumes that all trades are closed after a $1.00 profit is attained.

My NR7 scan starts with a preview of stocks gapping up in pre-market and then alerts me of NR7 stocks that meet the criteria in real time as depicted below. If you want the exact configuration of this scan click here.

A couple of sample NR7 trades are CROX on Jan. 11 and SINA on Jan. 12.

Identify a trading strategy that works well under current market conditions and then let OddsMaker back test and crunch the numbers. All you have to do is refine the scan and trading rules to enhance the results and make the strategy manageable.

For more info check out the Trade-Ideas blog.

Technical Picture - Failed Breakout

2011-11-01T00:51:00.004-04:00

The S&P had its worst day since the Oct. 4th reversal, but still managed the best October performance in 20 years. Confidence in the euro was lost as it appears to be making a U-turn at the top of the ambush zone as depicted in the chart above. The euro dove more than 2% against the greenback. The yen was an even worse as it tumbled more than 3% after Japan's officials intervened in the currency in an effort to curb its strength after it had set a post-WWII record high last week.

ES futures have extended losses after hours. FOMC minutes on Wednesday afternoon and jobs data on Friday will set the stage for November.

Gap Momentum with NR7 - FEIC

2011-10-30T15:21:00.003-04:00

High volume gapping stocks offer good trading opps if you can sit on your hands until a good setup presents itself.

There were two trading opps for FEIC on Friday.

Fib retracement long - red fib lines where you should target the 23.6% FE. I missed it. After coming within 10 cents of the FE, price consolidated in an increasingly narrow range, which we identify as coiling ahead of the next leg up.
Within the coil, we spot the NR7 bar and place a long entry, using a few cents below the low of the NR7 as the stop.

Technical Picture - Ambush Fails, Bulls Own It

2011-10-30T14:39:00.001-04:00

News of the EU debt resolution sparked a huge rally as depicted on the ES emini chart above. The ambush zone was broken and we expect this rally to continue to through to the end of the year.

On the SPY weekly chart below we are targeting the $148-149 level which represents an extension of 23.6%. All future fib pullbacks will be measured from highs to highs where August high is the base, until the pattern fails.

We saw some profit taking into the close on Thursday. Buyers stepped in half way back of the US trading hours price levels. Then we traded all the way half way back short, and held within that range overnight Thursday and all day Friday. Short-term, we don't expect wide price expansion ahead of Friday's jobs data, notwithstanding a catalyst. In the meantime our trading is guided by the 15 min. Fib. levels.

Friday's daily bar is narrow, in the upper range of Thursday's WRB which is bullish. A few more upper inside bars would lead to a coil.

Technical Picture - Ambush

2011-10-25T20:05:00.008-04:00

As depicted on the daily ES emini futures chart above, the bears ambushed the bulls at the cusp of the ambush zone ( 50-61.8% Fib. retracement) and carved out a reversal bar.

On the 15 minute chart below, we see that in pre-market, price printed new highs, but failed to hold, leading to failed BO and swoon back to former resistance just as the US markets opened. The first test of support was a buy and we traded half way back to the 15 min. ambush zone. This is where the algos a programmed to short once a trend is broken. This level was tested twice and the algos defended both times.

Basically, we carved out a symmetrical continuation triangle and support gave way into the close.

The short squeeze off of the Oct. 4th lows was getting long in the tooth. We were overbought and needed to correct. If the bears can push prices below last week's congestion area, we will likely trade half way back to the October lows.

Technical Picture - Short Squeeze

2011-10-18T21:43:00.003-04:00

Yesterday's the bears ambushed, controlling the entire session and carved out a bearish reversal bar. Today, the bulls countered and completely offset yesterday's action. It's clear that most of yesterday's participants were squeezed out of the their short positions today. The only curious thing today, was that the ES came within 1 point (4 ticks) of yesterday's high and stalled. The bulls couldn't finish the job and close above range highs (white line segment in chart above).

We are at a critical level. If we retest highs tomorrow, watch for confirmation of all major markets. For example, if ES breaks out, but isn't confirmed by NQ, YM, and TF, it will be suspect and the bears will jump back in.

Technical Picture - Best Weekly Performance since July 2009

2011-10-16T16:41:00.005-04:00

The broader market scored its strongest weekly gain since July 2009 and the Tech heavy Nasdaq had its best weekly performance since March 2009. A commitment early this week by leading eurozone officials to develop a comprehensive plan intended to stabilize precarious conditions and shore up capital at European banks sent a strong signal to global investors. It also got the week started on a strong note. The stock market rallied more than 3% on Monday. JPM results were a drag on the banking sector mid-week. Strong results from Google on Thursday night, helped prices press higher on Friday, even though we are hitting up against resistance.

Earnings will be key this week as many Tech heavyweights are scheduled to report including AAPL and INTC on Tuesday. Markets are overbought and will correct soon.

LNKD is starting to make a move ahead of earnings scheduled for Nov. 3rd.

OVTI carved out a bearish reversal bar on Friday, following the disclosure that their video chips have been replaced by Sony chips in the new iphone iOS4. Unconfirmed by OVTI. Speculation that maybe Apple used more than one supplier for its iOS4 video chips.

Technical Picture - Strong Tape

2011-10-06T22:08:00.003-04:00

Tuesday's failed bearish extension has emboldened the bulls. We now have a bullish candlestick reversal pattern on the daily "Three Advancing White Soldiers". We've also retraced more than half way back of the two month trading range. We are extended as the pattern implies, however, tomorrow's jobs data in pre-market will be key to keeping the pattern and momentum with the bulls.

On the lower timeframe, we still don't have any negative divergence of the RSI to higher prices. Every test of the rising 20 period EMA was supported by buyers.

Day Trade AAPL. I placed my Fibs from high to high as the stock has been trending higher since Tuesday's capitulation. I was looking for a break of the symmetrical triangle to the downside. Took a partial when price popped back into ambush zone, just before it broke back down and traded to, and eventually exceeded the target.

Technical Picture - Markets Extend Gains

2011-10-05T22:48:00.005-04:00

Futures held their Fib levels in overnight trade and the markets opened near the PDH. On the US market open we had early consolidation in the upper range, which was followed by further extensions long. We ended the session near our Fib targets. Volume was lighter than yesterday. After hours, news of the death of Steve Jobs put pressure on NQ futures. ES futures still holding Fib retracement levels.

So sad to hear about the passing of Steve Jobs. He was such an important innovator. RIP

Initial claims and ECB conference in pre-market.

Since we were able to hold our gains overnight, it was safe to trade stocks on the long side today. I traded POT and TCK. Both trades were executed in the same manner except that TCK reached its target by mid-morning.

Technical Picture - Short Squeeze on Breach of August Lows

2011-10-04T20:39:00.003-04:00

As discussed in my last post, we were expecting a rip your face off, bear market rally on the retest of the August lows. That's exactly what we got this afternoon.

We took the August lows out overnight on the ES mini futures, gapped wide, and after bottoming on the 10:00 turn, we managed a half way back into the ambush zone of yesterday's break down lows to lows. Initially, I thought we might base and break from there, but the bears didn't want, so I got a signal to short again. After retracing most of the morning run up, I noticed the NQ futures were printing new lows on AAPL weakness. The new lows on the NQ and QQQ were not confirmed by the broader markets and that was the tell that we might get the much anticipated short squeeze, if AAPL could just capitulate and reverse.

Bear market rallies are usually very short in duration, so I'm not expecting much follow through. The maximum expectation is the ambush zone of the last leg down as depicted on the 15 min. chart below. But don't be disappointed if we don't even get that far. Don't fight the tape on the squeezes, but don't forget that the overriding trend is still to the downside. If we gap down tomorrow morning, look for support in the ambush zone of today's range.

Technical Picture - Very Bearish

2011-10-02T23:38:00.004-04:00

On Sept. 22 we broke out of H&S pattern on decisive volume. From Sept. 23-27 we had a dead cat bounce on lower volume. Since then we have been pushing back down, ending last week on lows.

To calculate the measured move of the H&S pattern, we take the distance from the top of the head to the neckline (blue line) which is approx. 10 points and extend from the breakout point - approx. $116 and subtract to arrive at our target of $106. The August low is a psychologically significant level and its retest could produce a rip your face off, bear market rally (day trade).

Reading the stream this weekend I saw a lot outrageous predictions of gloom and doom based on the H&S pattern and the top that preceded it. I think some people are incorrectly drawing the neckline. We don't move a trendline unless we make a higher high, so the way I've drawn the neckline is technically correct.

Technical Picture - Bears Follow Through

2011-09-28T20:00:00.004-04:00

Price stalled at the 62% Fib retracement of yesterday's range and the bears ambushed. Initially, the PDL held as support, but after the midday doldrums, the bears came back in pursuit, pushing price beyond yesterday's gap fill. We came back for a retest of morning support and it held as resistance, forming a bear flag, which broke into the close.

As depicted below, bulls are trapped and need to hold the 61.8% Fib retracement of the last leg up, if it doesn't give way overnight.

Technical Picture - Gap, Chop and Fade

2011-09-27T20:32:00.009-04:00

The big moves took place during the overnight session and we were left with scraps. EOD, we have a bearish black candle which closed in the ambush zone and below the daily 20 SMA. Is this the end of the dead cat bounce? I don't know, I'm waiting for a close below the ambush zone.

As depicted on the 5 min. chart below, we gapped up wide, and chopped around a narrow range for most of the session.

As noted last week, when price is extended and choppy and we want to fade the market, we look for either

A failed BO, or
The 50 SMA to cross above the 20 EMA on the 5 min. timeframe (MA kisses and air kisses don't count).

We short, on a first come basis.

Today, we had a failed BO, which set up a short into the close as depicted below.

Last Tuesday (Sept. 20th) we had a 20/50 MA cross for a short into the close.

Technical Picture - Waiting for Capitulation

2011-09-25T22:17:00.002-04:00

Markets consolidated on Friday after a week of sharp declines. On the SPY chart above, we have gap resistance above price and a retest of the August 9th lows just below. Headline risk related to tenuous global economic conditions and precarious financial conditions in Europe will continue to dominate.

CME will be raising metal margin requirements by EOD tomorrow on gold (21%), silver (16%) and copper (18%). Expect more forced selling.

The good news is, we should get a robust relief rally when capitulation finally occurs!

Technical Picture - H&S Breakout

2011-09-22T23:29:00.007-04:00

Markets traded lower overnight following a disappointing FOMC statement yesterday. We gapped wide and grinded lower for much of the session. From the daily chart of the SPY above we see that our H&S pattern has finally broken out successfully with volume. We are oversold and I am expecting a dead cat bounce soon.

Big picture, if we fail to hold the 61.8% Fib retracement of the 2010 low to the 2011 breakdown low as depicted on the SPX chart below, a full retracement is likely.

Update on the copper futures chart I posted over the weekend. H&S top within a big double top. The H&S measured move is close to target. Here again, I would expect dead cat bounce soon.

Technical Picture - SPY 50 SMA Holds as Resistance

2011-09-20T22:05:00.004-04:00

Markets gapped up and filled the gap from the previous day close before rallying to retest Friday's highs and the downsloping, daily 50 SMA. Price consolidated for several hours in the top of the range before selling off one day ahead of the FOMC statement. Selling was aggressive leaving us with a tweezer top reversal pattern and shooting star.

Part of the problem was lack of resolution concerning the Greece/Troika dealings. Last I read, they have agreed to meet again in October.

As I was watching the price action on the 5 minute chart above, I thought we could have one of two scenarios:

Failed BO which could shorted.
The 50 SMA crossing above the 20 EMA and price breaks support.

The latter played out perfectly for a nice short into the close.

On the 15 minute timeframe below, we see the possibility of a double top forming. A double top breakdown would result in a fast move to the downside.

Technical Picture - Rally Extended

2011-09-18T18:54:00.008-04:00

Equities closed the week with a string of five consecutive daily gains resulting in a 5.4% gain on the week, the best weekly performance since late June, but only the second weekly gain since the markets rolled over.

The week started on a low note as Europeon debt fears spilled over to Monday's open, but in the afternoon attention turned to rumors that a sovereign wealth fund from China was talking with Italy about a bond purchase. That news helped stocks stage a rally, which gained traction as short sellers were squeezed out of their positions. Later in the week another boost in confidence came on news that the European Central Bank had coordinated with other central banks, including the Fed, to make dollar loans available to European banks. These measures trumped poor economic data and by week's end traders felt compelled to chase the markets higher.

Watch the 50 SMA and top of channel for resistance if we make it that far.

An update of the chart I posted Wednesday, shows that the QQQ has leaped even farther ahead than the broader markets on the strength of AAPL (BO of symmetrical triangle) and leadership provided by the SMH, which has staged a sharp recovery after bottoming on August 19th. Notice how the IWM and SPY are starting to flatten out. Non-confirmation of new recovery highs in the QQQ by the broader markets is a red flag - caution going into next week.

As we can see from the chart below, the SMH has retraced almost 62% of the last leg down. Friday's stick is a bearish spinning top in the ambush zone and I expect a retracement to kick in early this week.

The chart below shows some leading names in the SMH that I follow. SNDK has been ripping higher since the beginning of Sept., up over 30% since Aug. 19.

Copper futures don't look very healthy. Copper is generally considered as a leading indicator for the broader markets and it has carved out a bearish H&S pattern within a double top. If it breaks out successfully, look for a $0.60 drop as targeted on the chart below.

Gold futures appear to be forming an ascending triangle.

Technical Picture - Retest of Last Week's High

2011-09-14T23:21:00.004-04:00

The retest of last week's highs sold off sharply into the close with continued weakness in index futures as I write this post. Investors are reluctant to hold overnight especially on the third day of a rally.

The QQQ is far outperforming the broader markets as depicted in the chart below. However, unless we start to see some rotation, the broader markets are going to dominate and that is likely to lead us back down to retest support.

Also, keep a close eye on the $USD which has broken to the upside. We are consolidating the move, but once the next leg up gets underway, it will hurt stocks.

Technical Picture - Gap Fill and Fade

2011-09-08T21:50:00.000-04:00

Markets gapped down on the open and the gap was immediately faded. Price retested the lows before extending yesterday's rally. As we can see from the 15 minute chart below, we filled the bearish gap from Friday's jobs data and immediately faded. Note the negative divergence of the RSI to today's higher high, foreshadowing the end of the move. Now we have support from the bullish island gap which occurred on yesterday's opening gap up.

From the daily chart above, we see a possible H&S pattern developing within the consolidation channel.

On the 60 minute chart below, we see a lot of gaps, but only the unfilled gaps, highlighted in color are important. If the bulls are going to do something, now is the time to show their strength with the bullish island as support. Overall, the bears still have the upper hand, but they need to own it on the next test of the lower channel line.

Futures sold off during the President Obama's speech, but have since recovered to pre-speech levels. Chinese CPI and PPI data seeing further upticks in ES futures.

Technical Picture - Bearish Island Reversal Within a Bear Flag Pattern

2011-09-03T12:05:00.011-04:00

Technically, we have a bearish island reversal on the SPY following Friday's action, because, if we remove the bad tick from Wednesday, there's a portion of the gap that remains unfilled. For the daily timeframe, I'm focusing on the S&P futures chart just above as opposed to the SPY chart daily at the top of this post, because as you may have noticed, the SPY daily ETF is now being smoothed or filtered eliminating unfilled opening gaps. For accurate, raw data you need to look at the lower timeframes such as the 60 minute below. Hopefully the ETFs will end this new filtering process so that the SPY daily chart can become useful again.

Narrowing the view to the 15 minute timeframe below, we can see that negative divergence of the RSI to higher prices started on Wednesday, following which prices started printing lower highs and lower lows. Friday's jobs number was the nail in the coffin as prices gapped wide and bulls could not push prices above S2. After the third attempt at S2 failed, it was time to get short. A minor attempt EOD to thrust off the bottom failed, as Emini S&P futures prices closed on the lows of the day.

The bears are firmly back in control, and I doubt we will be able to fill the gaps in the short-term.

GLD is back near all time highs. After retracing from the initial impulse move lower, GLD consolidated in a sideways box play. Overnight Thursday to Friday, GC futures rallied some 30 points (goodnight gold trade). When this happens you want to get long gold miners as these need to do some catching up.

Looking at the pre-market action of a few large cap gold miners, I decided to go with my usual suspect, ABX. Long on the open, Lock in some profit on the 10:00 turn and reload on the Fib. retracement. Avoid trading GLD in these instances because it gaps too wide as it follows the gold spot prices too closely.

Technical Picture - Bulls and Bears Battle for Domination - Symmetrical Triangle

2011-08-28T14:23:00.006-04:00

Big Picture - After breaking the H&S top on high volume, bears pushed prices lower, beyond the full measured move of the pattern. Now the SPY chart has carved out a textbook symmetrical continuation pattern.

Drilling down to the 60 minute chart, we note that after filling the gap on Thursday morning, bears stepped in to push prices lower. Following the Bernanke speech, bulls stepped in for another relief rally.

The upper blue dotted lines are areas where I expect that bears to add pressure, and the lower blue dotted lines are areas where the bulls will play defense. This pattern could play out for quite some time before one side becomes victorious. In fact, it may not look like a perfect symmetrical triangle when the breakout finally occurs.

How to play the reversals within the bigger pattern. Prior to Jackson Hole, Bernanke tanked the markets on August 9th with his FOMC release. I didn't want to get in front of freight train on Friday, as the markets swooned on the lack of relief measures in his speech, but I did want to participate on any relief rally following the dip. The best way for me to do this is to wait for confirmation of a counter-trend.

I look for the RSI to move quickly from the lower range to above 60 then dip under. When it crosses back above 60, if momentum is above 0, I go long. Negative divergence of the RSI to higher prices signals a short term top and time to take profits. An orderly consolidation such as the symmetrical continuation triangle below, can allow for a second entry.

The same counter-trend setup works after a rally. Look for the RSI to quickly move from higher readings to below 40. If RSI moves back above 40 and crosses below on negative momentum, it sets up a short. It's important that the inital move in the RSI is quite fluid as is the move in price, otherwise, it could be signalling a minor move within a larger consolidation pattern, which is fine if you're nimble, but if you're not, stay on the sidelines.

Click on chart for larger view

As I noted in my last post, GLD had the potential for a 62% Fib. retracement. That target was reached EOD on Friday. Now that hurricane Irene is on its way out with less damage than forecast, the bears might come in and ambush GLD in the ambush zone.

Technical Picture - Short Term Symmetrical Triangle

2011-08-25T22:43:00.005-04:00

From the SPY 60 minute timeframe above, we see a symmetrical triangle developing. These are usually continuation patterns, but we won't know for sure until it actually breaks and holds. Today's action was somewhat predictable as we opened right into the gap fill level and faded.

Tomorrow we have GDP data in pre-market and the much anticipated Bernanke speech at 10:00. The speech is intended to quell market fears, but I'm not sure that can be achieved without further stimulus, and that seems unlikely.

The goodnight gold trade was on the short side and GLD opened in the 2nd level support zone. As we can see from the 15 minute chart below, we had positive divergence of the RSI to lower prices. The opening range carved out a hollow red candle which is usually bullish (filled black candles are usually very bearish). Price consolidated the early push in the upper range, setting up a gap fill long.

The SAR in the daily timeframe signals that the parabolic move is over, but how far can we retrace from here. Since GC futures have been very active in the overnight sessions, it is best to study the overnight moves in pre-market before jumping in. A 62% Fib retracement will take us back to $177.50 and perhaps form a H&S top.

BTW, we've read about all the genius traders that have been selling some of their gold holdings near the top - Soros, Sprott, and Doctor Phil, but generally speaking, beyond the well known gurus, gold is held by much stronger hands than silver, so it may not have such a rapid and devastating decent as we saw in silver a few months back.

GLD Sees Some Profit Taking and Markets Bounce

2011-08-23T21:33:00.008-04:00

Gold sold off overnight and gapped down on the open. Profit taking in gold was offset by buying in the broad equity markets. Is the correction over and the gold move done? IBD seems to think we are in a confirmed uptrend following today's market action.... We need more evidence. Gold sold off on high volume but has many layers of support as depicted on the GLD chart below. The relief rally in the SPY lacked volume IMO. We seem to be rallying in anticipation of Ben Bernanke's Friday speech, but I doubt he can propel this market back into bull mode.

Longing for a Bear Market Relief Rally

2011-08-20T15:22:00.009-04:00

So we're in the midst of a bear market and I'm longing for a robust bear market relief rally, the likes of which we had on October 28, 2008 as depicted on the 5 minute NQ emini futures chart below.

Looking at the daily closes on Friday, I noticed that the QQQ is very close to a retest of the August 9th post FOMC lows, whereas the SPY and DIA have a ways to go. Compare the charts of the SPY and QQQ below.

History doesn't repeat itself, but....if we compare the October 2008 charts of the SPY and QQQ and you'll see what I'm getting at. The SPY held the initial reaction low as support throughout the month of October 2008 and well into November, but the QQQ breached the previous low early on two separate occasions, each time resulting in a reversal and bounce. The second breach preceded that huge parabolic day trade depicted in the upper half of this post.

So be ready if a similar scenario develops next week. I can envision a breach of support in QQQ, but if the SPY and DIA don't confirm, we should get the highly anticipated relief rally.

Technical Picture - Low Volume Contraction Precedes Expansion

2011-08-17T19:56:00.002-04:00

This week's price/volume contraction pales in comparison to last week's wide range, interim bottoming formation. However, contraction precedes expansion, and after three days in a tight consolidation, I am expecting expansion very soon. Tomorrow's loaded economic calendar might propel price expansion one way or the other, or not. Watch for reaction to initial claims and CPI in pre-market as well as, existing home sales and Philly Fed at 10:00.

From the two 60 minutes charts of the SPY (above) and the QQQ (below), we note that the price action is constructive - basically base on base. As long as the RSI holds 40 as support, we can look forward to continued recovery - target the ambush zone 62% fib. retracement and bearish gap resistance.

Technical Picture - H&S Top Bears Fruit

2011-08-05T00:00:00.002-04:00

Today's price/volume action was due to forced selling from margin calls. All sectors were hit, commodities and precious metals led the way down. Concerns about the global economy - contagion fears in Europe spread to Italy and Japan's central bank opted to to expand its asset purchase plan. As deleveraging takes place, highly-liquid equity markets become the victim, as they offer the most convenient place to raise cash.

Technical Picture - Neckline Break on High Volume

2011-08-02T23:27:00.004-04:00

Neckline break of H&S top on high volume. On a measured move basis, target SPY 116.

TUP bear flagging. Looks ready to go tomorrow.

Technical Picture - Few Setups as Markets Await Debt Deal

2011-07-31T22:23:00.007-04:00

Markets are paused after an extended run from the 2009 lows. We are in a time correction as markets consolidate sideways. If we make higher highs we can adjust the trendline, but for now we wait and see.

CPC approaching top of bearish sentiment zone.

Stocks I'm watching include DML on TSX (symbol DNN in US.) Positive divergence looks promising.
RENN coiling
AMRN looks promising following Friday's hammer reversal stick.

Watch List - AMRN

2011-07-25T09:29:00.002-04:00

Market Tell - Confirmation vs. Non-Confirmation Between Indices

2011-06-10T00:19:00.007-04:00

Non-confirmation of the NASDAQ versus the broader market, leads to late session sell-off. The S&P futures easily took out the PDH and continued to trend higher, almost reaching a full retracement of the last leg lower as depicted on the ES chart below.

The NASDAQ futures, on the other hand, stalled at the test of the PDH. When the NASDAQ failed to confirm the price action of the broader market, it was a tell. The bears stepped in on the non-confirmation leading to a late session sell-off.

Technical Picture - Bulls Get Ambushed

2011-06-01T19:35:00.009-04:00

Yesterday, IBD changed their current outlook from "Market in correction" to "Market in confirmed uptrend" based on a high volume follow through day on the NASDAQ as depicted above. Today, they are saying that the rally is in its third year and any new uptrends can fail because the rally is tired. So what observation can we make from this? Just looking at the NASDAQ chart above, two observations can be made:

It took four consecutive higher closes to get a confirmed follow through off the reversal last week. That's a long time and should be considered suspect.
The follow through day occurred in the ambush zone (50-62% Fibonacci retracement level).

Overall economic data has been soft in recent weeks and today's ADP private sector jobs was even softer, ie. dismal. Top that off with a lower than expected ISM and we had the makings of a real market drubbing.

The 60 minute SPY chart below highlights the double top in the ambush zone. Two trendlines were broken as the bears took over with a vengeance.

There's lots more economic data over the next two days, including the real jobs data on Friday.

The $USD held minor support and bounced.

In my last post, I highlighted a number of stocks setting up. Most of those daily charts are broken after today's session, but we did manage to get some good day trading action.

ERTS broke out of a daily bull flag yesterday.

NVLS set up a long above yesterday's lower base. Took a partial at $37.00 and was stopped out on balance.

MELI, which was my favorite long setup (also included in HCPG newsletter last night), had a beautiful rip after consolidating the opening range and forming a C&H pattern overlapping with the previous session. Euphoric volume spike foreshadows the end of the move.

As we can see from the daily, the BO failed and we have a bearish shooting star.

In my last post, I said that RIMM was a box play. The box was breached in pre-market, so I placed a sell stop just below the pre-market low. Took a partial after three consecutive WRBs.

Technical Picture - Markets Edge Up in Quiet Trade

2011-05-30T20:46:00.000-04:00

The SPY has managed to fill all of the gaps as it bounced off of the lower channel line. However, there's been a lack of momentum as depicted by the RSI. Without a catalyst, I expect more lackluster trade.

The $USD failed in a attempt to BO of an inverse H&S bottom. This has provided a boost to the commodity trade, but outside of Ags and copper, I'm not seeing much conviction yet.

ES_futures trading higher on a very weak $USD as I write this post.

Stocks Setting Up for This Week

NVLS- NR7 coiling - buy on break of $36.00 for a move back up to the base of inverse H&S pattern, and eventual BO.

Flagging - PETM (above) and ERTS (below). Other bullish flags on my WL are DISH and FL (not depicted).

QCOM has been basing in a tight formation for several weeks. Now that the Bollinger bands have tightened, I expect a BO attempt very soon.

MELI has carved out a symmetrical continuation pattern with strong volume on the upswings within the triangle. This is the most promising setup for a BO long.

RIMM is a box play.

AKAM - positive divergence of the MACD to lower prices foreshadows a trend reversal.

FFIV cleared its 200 DMA on higher volume. Look for price to consolidate in upper range and then BO.

CREE cleared its 50 DMA on decent volume. Base and break.

Technical Picture - Technical Rebound In Play

2011-05-19T00:47:00.005-04:00

The markets continued the rebound off the 62% retracement which bottomed yesterday. Tech and small caps outperformed the broader markets. I would expect the rebound to slow or stall into OPEX over the next two sessions as pinning comes into play, and as we move towards the down trendline.

Econ. Calendar - Initial Claims in pre-market, followed by existing home sales, Phil. Fed, and leading indicators at 10:00.

IPO - Looking forward to the LinkedIn IPO tomorrow symbol LNKD

Last night I posted the daily chart of ESRX as a bullish base on base pattern. Today it pulled back to its rising 200 SMA on the 15 minute timeframe and found support , as it has over the last few sessions.

An easy, low risk entry presented itself on the 1 min. chart below.

SNDK was a low risk short after price failed at resistance (blue line). The short extended to 1.27 and reversed, setting up a long. Looks like a solid C&H pattern setting up for tomorrow.

RIMM gapped up on an analyst upgrade, which ruined my morning star daily setup. Small scalp trade.

ALTR was very strong out of the gate. I waited for a Fib. retracement rather than chasing early strength. It worked well for a 1.27 FE.

Chart Setups - ESRX, AKAM, RIMM, SINA, SOHU, GOOG

2011-05-18T01:22:00.005-04:00

The following charts were posted on Chart.ly.

SINA is a morning star stick reversal pattern with good volume.

SOHU is a bullish engulfing stick on the support zone.

RIMM is a morning star reversal pattern on long-term support with a very oversold RSI.

GOOG is a wide bullish engulfing stick in a key support zone.

ESRX is a base on base continuation setup.

AKAM is a hammer reversal stick on support.

Technical Picture - Stocks Retreat to Low End of Range

2011-05-15T16:36:00.007-04:00

The first chart above is a weekly chart of the SPX with the RSI superimposed. The most important element of the chart to note is divergence of the RSI. We note that when the market bottomed in March 2009, we had positive divergence of the RSI to lower prices which foreshadowed a reversal. Now we have negative divergence of the RSI to higher prices which foreshadows a reversal, or at least a correction.

This week's price action was mostly range bound, but the bears made the presence felt on Wednesday and Friday. As depicted on the 60 min. chart of the SPY above, we see a H&S topping pattern develop with in the latest price range. If we break down, I expect a gap fill. All 10 major sectors were down on Friday with Financials (-1.5%) leading the way followed closely behind by Material -1.4% and Tech -1.2%.

Overall, tech was weaker than the broader markets on Friday. Two big names that were a drag on tech were NVDA and YHOO.

SMH is still basing at recovery highs but needs to break and close above $37.00. My scans indicate that several of the old school chip names are best positioned to make this happen - ALTR, CY, INTC, MCHP, MXIM, NVLS, QCOM, XLNX.

Much of the weakness in commodities is due to strength in the $USD. As we can see on the daily above, price has bounced into a former support zone which could now act as resistance in the short-term. The RSI has moved beyond 60 which suggests this bounce is quite strong.

Keep an eye on the UUP as it trends higher within the price channel.

Ags have not performed well lately, but we could be forming a multi-month triangle pattern. I wouldn't be surprised to see a bounce here or at the 200 SMA. Note the volume spikes on up days exceeds down days over the last two weeks. We keep reading of crop delays due to excessive moisture. Over time this will affect the price of the underlying crop commodities, and in turn, the agribusiness.

Blogger

2011-05-13T15:07:00.003-04:00

Sorry for the lack of posts over the last two days. Blogger was down for maintenance and when that didn't work, it was just down. Hopefully, it is back in business and I can post some charts over the weekend.

Tecnical Picture - Bounce Extends

2011-05-10T21:36:00.006-04:00

The market has retraced 62% of last week's slide on lighter volume. As depicted on the the 5 min. chart of e-mini futures below. Last Friday's jobs report gave us a wide gap, but formed a bearish rising wedge which eventually led to a complete gap fill. Monday's action was inside, and today we were finally able to extend beyond Friday's high.

SLV has filled the bearish gap more or less, but the bounce has been lame in terms of time and volume. It took three sessions to retrace one day's losses. Very choppy intraday action - not my cup of tea.

USO has retraced 38% of its slide, but needs to push up to 62% in order to fill bearish gap.

$USD is consolidating after breaching downsloping trendline.

Most of my morning trades were scratches but the afternoon trades turned things around. I have been keeping an eye on RIMM's decent. Today, it breached $44.00 for a minute or two and then snapped back - head fakes usually lead to good trades in the opposite direction.

RIMM is technically oversold (daily RSI below 30) and was a good candidate for an oversold bounce (short squeeze).

Enter long on break of NR7 following head fake. See the volume spike as price takes out the obvious resistance levels (blue lines). This is where the stops get triggered and the squeezes occur. Keep on WL for follow through.

CTSH looks well positioned for an attempt at a gap fill following last week's earnings gap.

Technical Picture - Commodities Get Crushed Extending S&P Losing Streak

2011-05-05T21:28:00.013-04:00

The CRB commoities index DBC chart above, fell 17 pts. (the most in 2 years) almost 7% on huge volume today. No commodity escaped the selling. Gold lost $40 (3%) while silver lost another 10%. Crude oil fell $12 (10%). Copper lost 4%. Part of the reason for the heavy commodity selling was a sharp rebound in the U.S. Dollar. Look at a chart of UUP and you'll see a huge move up on massive volume. Most of the dollar strength came from a falling Euro which tumbled 2% on the ECB suggestion the next rate hike was being postponed. The breakdown in commodities (and copper in particular) is especially troubling since it suggests that the global economy is slowing. That may also explain why bonds are rallying and stocks are correcting around the globe.

Furthermore, sector rotation over the past weeks suggests a move into biotech/healthcare, consumer discretionary, and utilities, all defensive sectors, which could indicate a near-term market peak.

The S&P is still on a path of lower highs and lower lows as depicted on the 60 min. chart below. The first support level held in early trade, and a nice rally ensued. We moved to the upper channel line, consolidated and then plunged, carving out another lower low. If the S&P doesn't turn around tomorrow, we'll have a failed pattern IMO. Inverse H&S pattern broke out, came back for a retest and failed.

Job data tomorrow in pre-market.

The NASDAQ is holding up well so far. The SMH is still basing out, but the biggest holding in the SMH is INTC which has been vertical since reporting earnings two weeks ago. Not sure the other components of the SMH are really strong enough to propel this sector higher.

We've been talking about an oversold technical bounce in the $USD for a while now, so today's move is no surprise.

Oil prices back under $100.00. Smart money trade of the day was short USO because oil futures (CL_F) were bear flagging in pre-market.

Just when many thought, it couldn't go much lower, it gaps down and rips lower on higher volume. SLV has given back three months gains in one week. Next supports are $33.00 and $30.00.

I'd like to see SLV gap well below it's lower trend channel line and then bounce. Today's gap down was well within the channel, so no trade. I tried some long when it capitulated into the lower channel line on a huge volume spike, but it didn't end well. A lot of aggravation for a scratch trade.

If you're hurting yourself trying to pick a bottom in SLV, it's not worth it. Margin requirements are being increased frequently and every increase is another leg down. When you see a bonafide short covering rally, you'll know it and you can jump in.

SPY - Levels of Interest

2011-05-05T08:38:00.000-04:00

It feels like we will test SPY $134.00 in today as ES_F is printing a lower low in pre-market. All eyes are on this level. If it doesn't hold we have a small bullish gap support area just below. The level of strength of the kick back rally will be telling.

Also watch copper, oil and gold futures, all of which have sold off with volume in pre-market. This could be the flush we've been anticipating.

Initial jobless claims very disappointing 474K vs. 410k consensus.

Technical Picture - Correction In Play

2011-05-03T21:36:00.015-04:00

After breaking out of a bearish rising wedge, the SPY corrected to the first minor support level and bounced in the last hour to trim today's decline. The Nasdaq corrected more sharply on higher volume resulting in a distribution day. Most technicians expect a retest of SPX 1340 (former resistance) to come into play.

The SMH retested resistance and is now pulling back on light volume which is constructive. Bullish gap support might be tested.

Th parabolic SAR sell signal for silver ishares triggered yesterday as depicted on the chart above. High volume selling over last two sessions.

The beaten down $USD is forming a tiny base. This could lead to an oversold technical bounce and move back towards the downsloping trendline.

Today's Trades

When I logged into my broker account this morning, there was a bulletin advising of an increase in margin requirements for silver derivatives. This was a good clue that SLV could be under pressure again today.

CTSH was a failed BO yesterday, and today's gap down and breach of support, set up a good shorting opp.

The best part of the CTSH trade was the reversal long after price formed a perfect, low risk handle on the 1 minute chart below.

At the EOD price broke back above resistance. I'll be watching tomorrow to see if CTSH forms a bullish inverse H&S bottom.

ARMH, another failed BO from yesterday, set up a short on break of well defined support. Took a partial at gap support, but eventually it failed. Covered balance as price approached complete gap fill. Not much of a bounce after such a big move.

Technical Picture - Modest Gains on Higher Volume to End the Month

2011-04-30T20:31:00.011-04:00

Markets opened somewhat mixed, with the DOW outperforming on the strength of solid earnings from CAT and MRK, whereas the NASDAQ lagged following disappointing reports from RIMM and MSFT. Still, we managed to close positive across the board on higher volume. Leaders included solars, semis, coal, GLD, MOO, airlines and energy. Biotechs saw profit taking after an extended run.

Some of the companies reporting earnings the week of May 2nd-6th:

Monday: ACV, AB, CPO, DISH, SATS, JKS, APC, DVA, DNDN, FMC, FST, HOLX, and NETL
Tuesday: ANR, ADM, AVP, BZH, BYD, BPI, CLX, CTSH, INCY, LM, MA, PCS, MYL, OSG, CBS, CEPH, CRL, CMCSA, DENN, GNW, KNXA, MAKO, OPEN, VCLK, WWWW, and AUY.
Wednesday: ASCA, AOL, CLH, GRMN, HNT, K, GAS, NUS, OIIM, PCG, SLGN, BEBE, CMO, CECO, CLWR, ERTS, GG, GDP, IPI, LEAP, PRU, SMSI, TSLA, and WFMI.
Thursday: CVC, CBOE, DTV, RAIL, GM, MINI, MNTA, OWW, PXP, RDN, SHOO, TBL, THS, VNDA, VC, WNR, JOBS, NILE, CQB, DEPO, FLR, HANS, KOG, JCOM, KFT, LLNW, PWER, PCLN, RNWK, V, WBMD, and WMGI.
Friday: CAS, DSX, ZEUS, PNM, UPL, WTW, and WCG.

The $USD is in a free fall versus GLD and SLV which are parabolic. We should get a technical oversold bounce in the $USD any day now. This is not likely a bottom because there's no positive divergence to indicate an imminent reversal.

By the same token, GLD is due for an overbought technical correction, similar to what we saw in SLV early last week.

Last week's correction in SLV provides us a preliminary support level.

Coal is breaking out of a tight congestion area.

Day Trades

OXY - HCPG pick - favorable earnings was the catalyst for this high volume extension. I waited for a NRB before jumping in.

DRIV - A narrow range coil triggers the short entry. Came within 5 cents of a stop out, but by EOD, my target was reached.

RIMM was a gap down on earnings warning. After the opening range, price couldn't move beyond the 50% Fib. retracement level and eventually broke the trendline for a low risk short.

I covered half when I saw some real size on the bid side at the $48.50 level.

AMRN printed NR7 on Friday. Watch for price expansion.

Technical Picture - Modest Gains

2011-04-28T23:41:00.006-04:00

A slightly weaker open following higher than expected initial claims (429k vs. 390k). We chopped in a narrow range for most of the session, but managed new recovery closing highs by EOD. Next short-term target is 1362.

Stocks in play for tomorrow - RIMM - Q1 earnings warning - big gap down. CAT earnings in pre-market. Since Caterpillar last reported, the stock has gained 17.5% versus the S&P 500, which is 4.8% higher. Also, since CAT last reported, it purchased Bucyrus (previously BUCY).

Biotech/Pharma ETF IBB has been one of the best performing sectors since the March correction as depicted on the chart above.

AMGN rebounded strong this week after last Friday's earnings sell-off. Now ESRX, a pharma related name, is doing the same following earnings weakness on Monday evening.

AMRN another Biotech, set up a sweet dip buy as depicted below. Also setting up a C&H pattern for tomorrow.

Two trades in AMRN. 1. Long bullish rounded bottom; and 2. Re-enter long when price corrects back to its trendline as depicted on 1 min. chart below.

Technical Picture - Nasdaq Clears Resistance on Strong Tech Earnings

2011-04-23T10:38:00.008-04:00

As we can see from the chart above, the NASDAQ took out preliminary resistance at 2800 on the strength of tech earnings from AAPL, FFIV, and QCOM. Volume was lighter likely due to the holiday shortened week. Hopefully, we can hold 2800 as support next week, however, semi names reporting Thursday night were mostly down (SNDK, CY, RMBS...).

S&P closed just shy of resistance as depicted on the chart below. Now we have a perfect inverse H&S pattern. On a measured move basis, a successful BO target would add 90 points to SPX 1430.

On the SPY chart below we highlight the gap support area. Some backing and filling prior to BO would come as no surprise given the short-term extended posture.

Some of the bigger names reporting earnings the week of April 25th-29th:

Monday: ABFS, CYOU, BEAV, BPOP, ACGL, MAS, RCII, SANM, UCTT, VECO, WRB, and WCN.
Tuesday: MMM, ACPW, AKS, ACI, AN, CPLA, COH, KO, DAL, F, GPI, HSY, ITW, LMT, LO, MHP, ODP, PCH, RYN, UA, X, UPS, LCC, VLO, WDR, ADVS, AMZN, AJG, BGS, BDX, BRCM, BWLD, CNI, DV, EHTH, FORM, IRBT, LIFE, MIPS, HA, RFMD, SSCC, SWK, SFSF, SMCI, UHS, USNA, VSI, and WBSN
Wednesday: ARMH, AUO, ABX, BA, BP, EAT, COP, DPS, ENR, GD, LAZ, LAD, ERIC, MSO, MCO, TUP, WLP, WHR, AKAM, ALL, AVB, BIDU, EBAY, FLEX, FLS, LOGI, MBFI, NSC, ORLY, SBUX, TQNT, and VAR.
Thursday: ABC, BWA, BGG, BMY, CAB, CAH, CELG, CME, CCE, CL, XRAY, D, DOW, XOM, BEN, HEP, HST, IMAX, KBR, MJN, OXY, OMX, OSK, PEP, POT, PG, PHM, CELL, CSTR, DECK, TWC, STRA, KLAC, MSFT, MWW, NTGR, SIMO, TRLG, and VRSN.
Friday: AXL, CAT, CVX, DHI, FLIR, GT, LEA, MRK, and WY.

SLV - Watching for short-term blow off top as price edges above the upper BB and trades along the upper channel line.

USD testing the upper level of support zone. Looking for an oversold technical bounce any time now.

Biotech Day Trades

After last Monday's huge earnings gap, AMRN formed solid base, setting up a target trade back to the upper range of the gap up day.

AMGN and TEVA were earnings disappointments, setting up downside extensions.

Technical Picture - Tech Leads Markets Higher with Huge Gap

2011-04-20T23:19:00.007-04:00

The markets gapped up sharply on the heels of good earnings from tech bellwether INTC +7.8%, as well as VMW, JNPR, and YHOO... Not much in the way of extensions for the indices, but only limited selling pressure off of the mid-morning highs.

After hours we got more favorable tech earnings from FFIV, QCOM and AAPL. Markets are extended very short-term.

There's a lot of talk about SLV being way overextended, but so far, it has managed to stay within its rising channel. I am waiting for a huge gap open which takes price beyond the upper channel line and well beyond the upper BB, setting up a short. We may get that tomorrow as SI_F is trading at $45.62 as I write this post.

This is a chart of AAPL post earnings. The profit taking in the second half of the after hours session is somewhat suspect. Will be interesting to see which support level will hold, if any?????

Day Trades

ALXN - Low risk, long entry ahead of earnings tomorrow morning.

RVBD - Support was holding and I couldn't resist the low risk setup.

NTES - Failed breakouts yesterday for NTES and SOHU set the stage for today's weakness. Another NR7 (low risk) setup.

Technical Picture - Modest Gains

2011-04-17T23:23:00.006-04:00

Markets are little changed since my last post on April 5th. Tech is till lagging with weakness in tech titans AAPL and GOOG, as well as disappointing guidance from INFY late last week.

The SPY is carving out an inverse H&S pattern, but earnings will be key.

Companies reporting earnings the week of April 18th-22nd include:

Monday: C, LLY, HAL, KEY, AMTD, GWW, TXN, and ZION.
Tuesday: BK, CMA, FRX, GS, JNJ, NTRS, BTU, STT, USB, CREE, CSX, HBHC, IBM, INTC, ISRG, JNPR, MANH, STX, STLD, VMW, and YHOO.
Wednesday: ABT, MO, AMB, T, ATMI, ELN, EMC, FCX, HBI, FCX, NDAQ, DGX, WFC, AMGN, AAPL, CPHD, CAKE, CMG, ETFC, FFIV, GILD, LRCX, MAR, QCOM, WDC, and YUM.
Thursday: BBT, BIIB, BLK, CNH, CY, FITB, GE, MCD, NOK, NUE, PCX, PM, SLB, TZOO, VZ, AMD, SNDK and SYNA.
Friday: Markets closed in observance of Good Friday

AAPL has carved out a bearish H&S top. Earnings on Wednesday.

Friday's Trades - MBI low risk entry as price moves out of the retracement zone.

CTSH - I was looking for a short entry around $78.50, but didn't get a NRB, so I passed. After a minor extension, price formed a nice base at $78.50 and took it long back to the ambush zone. Should have shorted the ambush because there was no volume on the rally.

Thursday's Trades - JBHT - gap and flag.

CAT - Low risk long on break of flagging type pattern. Add on the B&B setup.

Technical Picture - Markets Mixed

2011-04-05T21:20:00.006-04:00

We got off to weak start but supports held and the broader markets managed to test and notch marginal new highs, on strength in gold, silver, and semis (TXN/NSM merger). Technology overall, however, remains weak. Hence if the NASDAQ can't confirm the action in the broader markets, it starts to weigh, and eventually, pulls them down too. That's basically what happened this afternoon. Look at the difference between the ES_F and the NQ_F. By EOD we have a potential double top on the ES.

We've discussed the symmetrical triangle pattern on the GDX for several weeks, and today it finally broke out with decent volume. The bullish inverse H&S pattern in GLD also broke.

I traded GG in my swing account, took a partial and holding the balance. After hours GG announced expansion of the Cerro Negro project in Argentina - according to feasibility study - proven and probable gold reserves double.

Day Trades

ALXN, highlighted over the weekend as a bullish setup on the daily. Placed fibs from late day handle to ORH. Enter long as it pulls out of the Rzone.

LULU - bull flag good for a pt.

QCOM - highlighted last night as a bearish wedge on daily. I was tempted to short when it paused at the 38% Fib. retracement, but I waited till the feeling passed because the markets were still in an uptrend and there was no tangible setup. Shorted into the close for a retest of yesterday's lows.

RIMM - short into the close on break of NR base.

Technical Picture - Consolidation - Markets Mixed

2011-04-04T22:46:00.010-04:00

We had little in the way of catalysts during the trading session, to move the markets, hence we printed inside days. After hours TXN announced bid for NSM at 70% premium over closing price. This prompted buying in SMH and more specifically in names similar to NSM such ADI, MXIM, ISIL, and LLTC.

We'll see if the euphoria carries over into tomorrow's session. At the moment, the S&P futures are ticking down as depicted below. Support in the 1320-21 area looks good and I would be a buyer, notwithstanding negative news.

QCOM forming bearish wedge. Prelim. target $50.00. QCOM popped after hours on TXN/NSM news, but I doubt it will hold for long.

Day Trades

ALXN - Fib. retracement trade

TCK - Traded in my swing account. TCK is on my short WL of Canadian stocks (mostly commodities). TCK formed a bullish flag on 5 min. timeframe. I took a partial at full extension and swinging the rest. From the daily chart above, we see an inverse H&S pattern basing for a BO. Full measured move will bring us back to highs and beyond.

RHT formed a nice flag pattern (tweeted by Independant trader). Exit after it formed a bearish tweezer top, because it just didn't have enough profit at that point to partial and ride it through.

RIMM - shorted break of PDL and it snapped back. What else is new? I keep trying the same bear flag BO trade and keep getting the same result. I was getting a little discouraged, but deep down, I knew it was going to break eventually. So I sat back and placed my Fibs from Friday closing handle to opening swing low and waited to see if anything developed. Price rallied to 1.27 FE, carved out some bearish long upper shadows, and fell back into the retracement zone. So I decided to short again as price broke out of the Rzone. Finally, lower prices. Took a partial at weekly S2 (1.62 FE). Price then retraced sharply, sort of forming a triangle into the close.

Not sure what to expect tomorrow. Felt there wasn't enough volume on this move lower, to risk a swing on the second half, but I will get back in if we break $53.85.

Technical Picture - Modest Gains on Favorable Jobs Report

2011-04-02T13:18:00.015-04:00

INDU is testing February highs. I'd like to see a retracement here so that we can carve out an inverse H&S pattern, before attempting to move towards the top of the channel.

Small caps are testing 2007 highs.

The SPY gapped up on the favorable jobs data, but a mid-afternoon swoon brought us back to the base. Black candles can be bearish as they highlight gap fades. I'm interested to see if new money will come into the market as we begin a new month, or if we get some sort of constructive retracment before attempting to make new ground.

My main concern is the NASDAQ which has yet to confirm the price action of the other major US markets. We saw late day selling in AAPL (20% of the QQQ), weakness in a number of cloud names, and the SMH appears to be falling out of bearish rising wedge with volume (see SMH chart below COMPQ). Also, copper, a leading indicator, is printing lower highs. These are red flags. The broader markets can't continue higher if the COMPQ fails to confirm and pulls back.

Watch List Stocks

AAPL looks vulnerable to further selling. Friday's late day sell-off had volume. If it fails to hold the retracement zone as support, it will likely retest the base (blue line).

ALXN is testing $100.00 resistance again. Large scale buying into the close, pushed the stock just above $100.00. I would prefer to go back and fill the gap before breaking out, but ALXN might not wait.

ISRG attempting a big level here. Breaking out on good volume. I'd like to see a few days consolidation (coiling) in the upper shadow of Friday's stick, before moving above $350.00.

RIMM bear flagging, closed near lows on Friday. If the BO closes below next support at $54.60, I'll hold for a swing. There's virtually no support between $54.60 and $50.00 as we had two WRBs on the BO of the base back in October. That's why I find this setup so compelling.

AKAM setting up a mini inverse H&S pattern. Measured move target 100%.

RVBD looks like it might be forming a H&S top.

FFIV - The Fibonacci symmetry on this chart is a thing of beauty. After gapping down on earnings, price retraced to the ambush zone and the downsloping 50 SMA and extended to the Fib 1.27 level. We retraced to Fib 1.0 and now it looks poised to extend further. $80.00 seems like a realistic target, if FFIV fails to hold the 1.27 level.

Day Trades

GES caught my eye on the open because of the gap up. I placed my fibs from the late day handle to the opening swing high and waited to see if it would set up a reversal in the ambush zone. It did, so I took it for a long. My target was the high of the earnings gap down bar on the daily (blue line) on the chart above.

VRUS was a gap continuation play. If we ignore the opening range, we see an orderly base on base setup. My target was $81.00 which represents a full measured move on the daily. (See Thursday's post).

I thought the third test of the support zone on RIMM would finally break, but there some large buyers sitting on support and I took a small loss. Price rallied back towards the 5 day EMA, carved out some bearish looking upper shadows, formed a base and broke back down, so I shorted it.

Technical Picture - Consolidation - Markets Mixed

2011-03-31T22:42:00.006-04:00

The markets consolidated ahead of tomorrow's jobs data and in the wake of the big move from the March lows. The DOW and S&P had minor losses whereas, the NASDAQ and Russell printed minor gains. As depicted on the chart above, we are testing the top of the congestion zone which formed prior to the correction. Normally, we would expect matching or similar congestion areas to form prior to breaking higher. If that's the case, we need to consolidate through price and not just time.

Normally, strong jobs data leads to higher interest rates and pressure on gold. The GDX chart below shows that we are on the cusp of breaking out of a symmetrical triangle. How does it work? Well, strong jobs data suggest the need for continued QE (quantitative easing) by the FED, may be coming to an end, sooner than later. Whisper numbers are always higher than consensus, so this is always tricky.

Day Trades

TSLA gapped up, and flagged into the rising 5 period EMA on the 15 min. timeframe. As we can see from the daily chart above, we had two targets, gap resistance and gap fill. I took a partial at resistance and was stopped out on balance. Eventually, formed a bearish base, which I shorted.

Early weakness in RIMM formed a bearish flag near daily support which I shorted hoping for a BO, but there was a huge buyer lurking around $56.85. The trade was aborted when price formed a base just under the flattening 5 period EMA. Just like the APOL trade from a few days back, the failure sets up a long entry. The next test of this level should break.

From the daily chart above, we see that a measured move of the bear flag pattern would bring prices down to $50.00, a solid support zone.

DECK - not a winning setup, but I was hoping that the bear flag would break and extend to the low end of the congestion zone.

VRUS was a momentum gap. Price rallied, retraced and consolidated, forming a base and setting up a low risk entry (NR7). VRUS is blue sky, but on a measured move basis, it should top out between 80 and 81, and consolidate.

Technical Picture - Modest Gains

2011-03-31T02:37:00.004-04:00

After gapping up, the markets were able to grind higher. Small caps outperformed with the $RUT taking out February highs. Limited selling pressure as we test March highs on the S&P. A retest of $132.00 and gap fill would be healthy at this juncture.

Copper is normally a leading indicator and we see continued selling again today. Could be a heads up for the broader markets.

Technical Picture - Constructive Price Action

2011-03-29T23:34:00.007-04:00

IBD is changing their market outlook from "Market in Correction" to "Market in Confirmed Rally" based on the out-performance of the Nasdaq today, despite the lack of volume. The logic is that prices have moved high enough above 50 SMA. The next hurdle will be to get above 2800, which should take time as there is a lot of resistance.

As we can see from the 60 min. SPY chart below, we briefly fell out of the rising wedge on late day weakness yesterday, but managed to hold in early trade today and recover by the end of the session.

If copper is a leading indicator, it may be premature for the bulls to reclaim victory, as copper has slipped back below both the 50 and 20 MAs.

Leading stocks are performing well. A few examples include SOHU and UA strong performance today as depicted in charts below. LULU strong performance yesterday with follow through today.

Day Trades

SOHU was on my focus list. I entered small size on break of weekly R1. I added when price held R2 and formed a bull flag. Exit at daily resistance. I missed the UA trade because it didn't show up on my momo scan which has a criteria for min. RSI of 60.

APA was a HCPG pick for target trade back to resistance.

APOL gapped down on weak earnings. I shorted it when it breached it's base, but the trade was slow and lacked volume. I covered on the first signs of a reversal. I entered long when it consolidated back at the original base. Exit at daily resistance.

RIMM set up a long entry on third test of resistance, but wasn't able to follow through after the initial thrust.

Technical Picture - Tech Leadership

2011-03-25T01:10:00.005-04:00

The markets gapped up on the open, the SPY probed its 50 day SMA and faded. Once the gapped was filled and prices stabilized, the bulls regained strength and pushed prices back up. Leadership was provided by tech including casinos, disk drive, internet, software (RHT earnings) and semis, in other words, a broad based tech rally.

As depicted on the SPY charts above and below, the market is extended in the wake of the rally from last week's lows. We have wedged our way back up to the short-term downsloping trendline and a pause here would be good. Rally has been on lower volume

Economic data - GDP in pre-market and Michigan sentiment at 9:55.

Copper has retested broken trendline and we will soon see if this is a dead cat bounce or not. HG_F look like they are forming a topping pattern, basing just above 430.

GDX profit taking took hold this afternoon after the big move from the lower edge of this symmetrical triangle. No surprise given the overbought bias.

Biotechs setting up a solid base here. This defensive sector looks poised for a BO soon.

Biotech sector names - I like CELG - solid base forming after testing long-term support.

CEPH (not depicted) just won its FENTORA patent suit against WPI.

AMRN if it regains $8.00.

GES Bear flag on daily. BO point is $37.50 as long as it doesn't regain its 5 period EMA (orange line on 15 min. chart below.)

Day Trades

FOSL - was hoping this would wait and set properly, but it based at $85.00 and eventually broke for a quick scalp.

JDSU gapped up, consolidated and broke above 5 day EMA.

RIMM was a good day trade into earnings, but after hours, it fell out of favor on weak guidance.

Key supports in play are mapped out on daily chart above.

Technical Picture - Minor Gains

2011-03-23T21:18:00.007-04:00

Markets gapped down on chatter regarding European debt and Mideast worries. Weak new home sales data at 10:00 added to the pressure. Prices stabilized shortly thereafter. By afternoon prices trended higher. The NASDAQ and DOW notched new short-term recovery highs, but the SPY didn't confirm. Still, today was the first trend-like day since the recovery began.

GDX (gold miners) forming a symmetrical triangle as it tries to catch up with GLD

GLD forming bullish inverse H&S pattern.

SMH wedging or flagging.

GES bear flagging following last week's earnings/guidance disappointment. Target gap support.

FOSL basing at resistance. Needs to consolidate after three consecutive higher closes.

LNN forming a small handle at base.

LRCX - watching to see what price will do when it fills gap. I suspect we'll rally back to $56.00 before reversing back down.

ITMN basing, looking for higher price.

Day Trades

Technical Picture - Bullish Gap on Light Volume

2011-03-21T21:31:00.003-04:00

The U.S. markets gapped up wide following a strong performance overseas in the wake of positive developments at the Japanese nuclear facilities, ongoing military actions over Libyan airspace, and M&A activity. Price rallied for the first 45 minutes of trade and then stalled near the 62% retracement (ambush zone) of the last leg down. We went into a narrow sideways consolidation for the rest of the session, implying only muted selling pressure.

As we can see from the SPY chart below, we have gap support below today's price and gap resistance near the $131.00 level. The low volume on this retracement effort implies lack of conviction by the bulls, hence we remain cautious until further proof.

Technical Picture - Inside Day on Lower Volume

2011-03-18T01:00:00.009-04:00

Index futures rallied overnight on positive news regarding Japanese nuclear situation, however the Asian and Europeon markets still closed red. So when the U.S. markets gapped up on the open I was a concerned about chasing longs. The broader markets outperformed on strength in commodities. Tech rose 0.7% and small caps just minor gains.

I still have 1/4 swing positions long in TCK and POT which I will sell tomorrow. As we can see from the copper chart below, the technical bounce to retest the broken trendline is almost complete.

After hours, the G7 announced that they had agreed to intervene with Japan to suppress the yen causing the currency to correct and the Nikkei to pop along with S&P futures.

SMH is in the support zone, but buyers aren't enthusiastic.

Couldn't resist one last trade in SU as depicted above. I exit as soon as the daily gap was filled.

EXC gapped and fell back down to retest yesterday's lows. It based sideways for a long time and I decided to try a low risk long after price had regained the 5 period EMA.

GES gapped down on earnings and ripped lower. When selling subsided, I took a low risk long hoping for a retracement back to resistance (blue line). There was no momentum on the retrace so exit as price approached whole $ level. Price backed off immediately and bears took back control. Notice the topping pattern on the 1 minute chart below, sets up a nice short into the close.

Optical stocks FNSR, OPLK, and OCLR were crushed today. JDSU is bear flagging, and I suspect if the sector continues to sell off, JDSU could fill the gap from $20.00 to $18.00. On the other hand, given today's blood, we might head fake lower and bounce. I'm leaning towards the latter for tomorrow, but won't be surprised if the stock sells off on the next market leg down.

Technical Picture - U.S. Markets Rebound from Japan Meltdown

2011-03-15T21:37:00.013-04:00

The U.S. markets gapped aggressively lower on the Japanese meltdown overnight following nuclear power plant fires. Buyers stepped in as the S&P came close to 1260 support, a key level I noted in my last post. This level corresponds to the 2010 highs, an area we based at for the last seven sessions of 2010. Volatility spiked as depicted below.

Swing Trades

Buying support on the open isn't easy, so I decided to to take some of the nail biting out of my support strategy by trading from my swing account rather than my day-trading account.

HCPG gave us POT $51.00 and I also liked POT $50.00, so I wanted to buy somewhere in between.

In the end, I hesitated and decided to go long weekly S1 which is much closer to $51.00. I took a partial midday.

I was looking to hold my partial swings overnight if we made a higher high than yesterday on decent volume, otherwise we're just on a path of lower lows and there's no point in taking the extra risk of a swing. So POT took out yesterday's high intraday, and we'll see what happens tomorrow.

I'm three for three with SU, but still not holding overnight because we keep printing lower highs and/or lack of volume.

TCK breached my initial, narrow support target on the open, so I decided to put this name aside and wait to see how things develop.

I took TCK long on a NRB, low risk, entry as depicted below. I took a partial at resistance, but it just kept on going on accelerating volume, which was perfect for my swing strategy.

Dummy Day Trades

For daytrades, I've been trading the old standby - low risk, dummy trades over the last two days. I look for stocks that gap with volume. Not too hard to find these days.

SHAW is a contractor with several nuclear power plant contracts set to begin in the U.S. and China. Following news of the Japanese nuclear disaster is gapped down wide on Monday. Two really nice trades yesterday and one today as depicted below.

I take all the high volume pre-market gappers and first hour pt. gainers/losers that catch my attention and create a symbol list in my Trade-Ideas scanner which I run the 15 min. NR7 scan. NR7 signifies price/volume contraction (narrowest price bar over last 7 bars) and foreshadows expansion. For longs I want price, to close above 5 EMA (pink line) and for shorts, below 5 EMA.

MCP printed a few NR7s and carved out a NRIB (narrow range inside bar). Took it long on break of small handle or base. My target was a retest of the intraday high. Not very fond of MCP as it can get really erratic at times, so just take the money and run.

Also traded PEP ( not pictured) NR7 plus hammer, but it went nowhere for a scratch.

Technical Picture - Markets Pare Back Losses on Softer Volume

2011-03-13T16:11:00.010-04:00

On the wide range view of the daily $SPX chart above, we see that price is testing the summer 2008 highs that formed a bear flag before the big plunge into darkness. This could serve as a support area however, we've yet to see any conviction on the part of buyers since the correction started. Major support levels on the $SPX (blue lines) 1275, 1260, 1220, and 1175.

Friday's bounce was no different, as we bounced on below average volume on the $SPX. The SPY chart below shows above average volume on the gap support bounce, however, still far less than on distribution days.

I'll be interested in semis again, when test the support zone. The current sell-off has a lot of conviction, and I don't want to get in the way of angry bears. The handle that formed in the support zone looks solid as to time and price coiling, so I suspect we could get a good bounce once it comes into play.

MOO gapped into the support zone and bounced. No position yet, lacks volume.

Oil printing a series of dojis as it pulls back. The doji signifies indecision. The Japan earthquake/tsunami will see lower demand from that country and the Saudi protest that wasn't = another doji.

CNQ bounced from its 50 DMA and trendline support, but here again, the low volume signals a lack of conviction on the part of buyers.

Copper looks good here. I expect a rally back up to the broken trendline. Looking at FCX, SCCO and TCK.

SU was a HCPG pick for Friday, and it played out as expected. Decided not to hold for a swing based on volume, however, SU carved out a bullish engulfing on the daily. Tomorrow, I'll look for a retracement zone trade, keying off of Friday's WRB.

Traded the ranges on low priced optical names CIEN and JDSU.

I also like the ARMH range below the gap and the potential for a gap fill.

SBUX was a failed trade on Friday, but I still think this name looks well positioned for gap fill.

Technical Picture - Bears Own It

2011-03-10T22:42:00.009-05:00

The index futures rolled over night amid disappointing data from Japan and China, as well a debt downgrade in Spain. Above consensus initial claims exacerbated the situation and we opened with a huge gap down. The first hour pushed prices low and the next hour established a floor, from which some buyers stepped in. Prices slowly recaptured the ORH and then we fell back down as the afternoon headlines - Saudi violence, spiked oil prices. We closed near the LOD and below the 50 day SMA, something we haven't done since last September.

Looking forward, we have gap support coming into play as depicted on the SPY chart below.

QQQQ filled the remaining portion of the gap and held today.

The $USD finally got a bounce.

I see a lot of gaps above and below price which can be very constructive in establishing support and resistance. I also see a lot of commodity play breaking below their lower BB as we can clearly see on the POT chart above. The MOO chart below is coming into support from the Nov. - Dec. base. We can see that many charts are technically oversold and want to look for key areas of support.

As a side note, Cramer advised one of his lightning round callers to hang on to POT despite the house of pain he's in, and add to the position after POT corrects an additional 10% from today's close. Ouch!

Reports of high inventory levels in the semi space have investors bailing on high volume.

JDSU briefly breached gap support on the open and reversed just above the 50 day SMA.

Easy trade if you were watching because last night I discussed the importance of the $21 and $22 price levels. Long above $21 to target $22.00. After that it formed a handle and I went long again as it broke $22.00, but that trade stalled at the exact level I shorted it yesterday and the trade was scratched.

Also note the wide gaps above and below price on the daily. These gaps are in play and we want to be in on the action.

GMCR was at the top of the Esignal hot list and I wanted to get in rather than try to catch the falling knives from the usual suspects list. I hesitated when it printed a hammer reversal stick right above the rising 5 EMA and decided to wait for NR7 or NRIB. Exited too soon at the round $ level $60.00. Looks like GMCR wants to run higher. The huge volume foreshadows higher prices - add to momo focus list.

Technical Picture - Inside Day

2011-03-10T00:48:00.000-05:00

Another inside day amid choppy trade. The Nasdaq is still under-performing. Today's weakness was due mainly to TXN FNSR earnings which pummeled semi-holders and optical fiber stocks. As depicted on the chart below, the SMH broke its trendline with a spike in volume.

Now is a good time to be thinking about hedging the portfolio with something like the QID (inverse ETF) which is basing nicely with Two inside bars.

Futures are weak with the NQ e-minis trading 10 pts. below today's cash market lows.

As discussed last night, I wanted to trade the optical space on the heels of FNSR's disastrous guidance. JDSU had the cleanest chart. As we can see from the daily chart above, $22.00 was the gap open on 02/04/2011 and $21.00 was the gap day low, give or take a few pennies. So I was looking for a narrow setup at $22.00 with a 1 point target.

It set up almost perfectly, but stalled at the ORL, so I had take a partial.

URBN was a gap down continuation play from yesterday.

IBM was a missed trade, but I did manage to trade a couple of scalps within the upper range.

My stock focus list includes three biotech bull flags ALXN basing at $100.00 and printed NR7 today; ITMN NRIB; BIIB regular bull flag. I also like TBL and EL for longs. APOL looks very weak - also NR7 today; AKAM 2 inside, could go lower.

Technical Picture - Low Volume Bounce

2011-03-08T21:28:00.005-05:00

The markets bounced today as BAC raised hopes for higher dividends from large commercial banks and oil consolidated. The DOW and S&P outperformed. Technology, as depicted on the Nasdaq chart, bounced on much lower volume which shows a lack of conviction.

Good setups were hard to find and the best trade for me today was the consolidation short in APOL depicted below.

After hours FNSR just met its earnings consensus and lowered guidance. The entire optical space fell in sympathy - JDSU, CIEN, OPLK, ALU, OCLR.

Many of these names have been riding high following JDSU's $0.10 beat on 02/04/2011, But since then CIEN earnings disappointed a few days ago, and now with FNSR's disappointing guidance, investors are bailing out of the sector.

Should make for some interesting trading tomorrow.

On the bright side, FMCN is trading higher on earnings after hours.

Technical Picture - Market in Correction

2011-03-07T22:19:00.006-05:00

According to IBD, tomorrow's Big Picture column will change from Market Under Pressure to Market in Correction based on yet another distribution day for the Nasdaq as depicted above. A distribution day occurs when institutional selling weighs on market ie. volume is higher than the previous session and we close significantly lower. The Nasdaq shed 39 pts. or 1.4% on faster trade when the semis, as a whole, were downgraded. CIEN earnings also weighed.

Using the SPY chart below, we see the NYSE TICK indicator versus SPY price. We note that the opening gap and go scenario was not confirmed by the TICK readings. Prices were higher than Friday's close, and yet the TICK stayed in the neutral zone and notched lower and lower lows.

The NYSE TICK measures the number of stocks trading at the offer minus the number trading at the bids. When buyers hit the offer, stocks rise, and when sellers hit the bid, stocks decline. So, a declining TICK reading cannot sustain higher market prices, hence a good shorting opp presented itself very early in the trading session.

Yesterday, I posted the IDCC chart above (bear flag) on Chart.ly and this morning I posted the chart below, as price reached the prelim. target.

The chart below is my trade. The trade triggered at $46.00 and since I didn't have a NRB, I gave it a $0.50 stop.

Technical Picture - Accumulation Day

2011-03-03T21:44:00.009-05:00

The markets gapped higher on better than expected initial claims in anticipation of a good jobs report tomorrow. We had broad based buying (accumulation) across most sectors except precious metals which are affected negatively on good jobs data due to higher interest rates. Subsequent downticks in oil off of overnight highs also contributed to the bullish tone. Bullish price action persisted until late afternoon. Small and midcaps outperformed today.

In reviewing my usual suspects charts EOD, I don't see a lot names that hit it out of the park today, the exception being momo stocks which had big Q1 earnings gaps and maintained relative strength throughout the recent pullback. Names such as ARUN, PNRA, TUP, TBL, PCLN...

A weak jobs report could set the tone for some early downticks, however, it's how we close that's more important - how we close the session and the week. I'm not saying that investors will be indifferent to a lousy jobs report, I'm just wondering if today's momentum will carry-over into the end of the week despite a weak jobs report. The bears have made their presence known over the past two weeks and until we make a higher high, I'm still leaning bearish.

ARUN formed a bullish handle at the base of resistance and pushed through to the next resistance by midday.

AGU formed a C&H with a very tight handle for a rally into the close.

JDSU printed NR7 NRIB on the daily. I'll be watching for expansion tomorrow.

Technical Picture - Markets Carve Out Lower High

2011-03-01T21:45:00.008-05:00

As depicted above, the SPY is testing its trendline which has been holding since August 2010. The high volume selling over the past week, in addition to the lower high from the last trendline bounce leads us to believe the trendline will be broken.

The first day of a new month and there were no buyers. We weren't surprised. As discussed in last night's post, we expected the Nasdaq futures to retrace between 62-78% and reverse. That gives us a lower high and now we expect a lower low to follow very shortly. My prelim. target is 2250 or 1.272 Fib. ext. as depicted above.

Of the three focus list shorts, highlighted last night, only one triggered. ACOM gave us a fast move down right out of the gate. After three consecutive days lower, we expect the name to consolidate.

Technical Picture - Tech Bulls Get Ambushed

2011-02-28T23:33:00.010-05:00

Early strength lacked momentum and the bears were able to apply some pressure in the ambush zone (62% Fib. retracement of last week's sell-off). I'm looking for the correction to carve out a lower high in the 62-78% fib. retracement level. Tech and small caps are the most vulnerable as the broader market still has commodity leadership. Oil, energy and precious metals are still trading near range tops. However, we still have a lot of economic data to digest this week as tomorrow begins a new month. We'll soon see if institutions are putting new money to work for the bulls, or if they are taking a cautious approach.

My short trades performed much better today than the longs.

AKAM made a vertical move to the downside after breaching the daily bearish flag pattern.

APKT tried to extend Friday's gains in early trade, but quickly reversed, breaching Friday's late day trendline.

JDSU was a long entry that failed.

In this SU trade, I was looking for a move back up to the range top, but settled for half, because the stock spent most of the session in a tight chop.

Focus List - ACOM looks almost ready to roll over.

MGA bear flagging.

CMI is bear flagging

Technical Picture - Market Slide Continues

2011-02-23T23:38:00.007-05:00

The market slide continued today as the "buy the dip" mentality has suddenly disappeared in the face of institutional selling or distribution. The Nasdaq chart above clearly depicts strong selling over the last two sessions. However, we are close to breaching the lower BB and short-term capitulation selling would be an opportunity for a bounce.

On the flip-side we have huge gains in gold, silver and oil. I'm monitoring gold and silver for euphoric price/volume action as these sectors over-heat and in need of short-term corrections.

Copper is another commodity of interest, as we approach trendline support and the lower BB.

Last night we talked about the Ags for a potential oversold bounce as most of the widely held names were coming in for a test of support. Also featured in HCPG newsletter last couple of nights for added confidence. As depicted on the daily chart above, CF corrected well beyond the lower BB.

On the 15 min. chart below, we see that price/volume capitulated after breaching weekly S2 (tweeted at 12:12 if you were able to decipher the spelling error). The recovery was slow at first and normally, when stocks capitulate, I expect a V bottom. However, patience paid off, because once price manged to break above weekly S2, it went vertical. I took a partial as price approached the downsloping 50 SMA and exited the rest at the next resistance level.

Similar trade in POT in my swing account. Here I waited for price to form a base before jumping in. My target on the swing is the unfilled gap. I will add to the swing if we retrace some of today's gains. Stop at BE.

BTW, NYSE POT 3 for 1 split on Friday.

Technical Picture - Bears in Control

2011-02-22T19:35:00.008-05:00

The first chart is a wide range view of the S&P emini futures. We note yesterday's trendline breach and close near LOD. Today we gapped lower on accelerating mideast tensions and inflationary fears out of China (gold, silver, oil gapped higher). The gap was quickly filled, however, if we zoom in on the next chart below, we see that price couldn't close above the 5 day MA (orange), and hence, the downtrend resumed.

Next support zone is 1309-1305. Next resistance is around 1325. If this is a bona fide correction, I would use the downsoping 50 SMA on the 15 min. timeframe as a guide. In other words, it should hold as resistance just like the 5 day MA did this morning.

The Ag sector continued to correct again today. As we can see from the 30 min. chart of POT below, we achieved a full measured move on the H&S top.

On the POT daily timeframe, we have a broken trendline, but we do expect price to retest the trendline and fill the gap. Keep an eye on grain futures (wheat testing support zone). Once they stop bleeding, we should get a tradable bounce in the Ags.

POT day trade.

Also, traded AGU.

I still have my eye on JDSU. I'm watching the gap $23.50 - 23.00 for a support trade.

TCK was a nice short out of the bear flag pattern, but now it's approaching a support zone, so we want to keep it on the focus list for a bounce.

Technical Picture - Index Futures Plunge on Escalating Mideast Tensions

2011-02-21T20:20:00.006-05:00

Index futures plunged today as tensions escalated in the middle east. Fear of civil war in Libya after 300+ demonstrators were shot and killed have stoked gold and silver futures higher. Oil futures are also on the rise.

Expect increased volatility when markets open tomorrow.

This week's economic calendar

Day Trade - CLF offered another low risk shorting opp as it based along PDL. The only caveat to the setup was the rising 50 period SMA on the 15 min. chart above. The price/volume contraction at the base foreshadowed expansion. Worked better on Friday than Thursday because of the coiling.

Day Trades - TCK, CLF, TBL

2011-02-17T20:44:00.011-05:00

Bear flags have been hit and miss in this market. Mostly they've been fake outs. So why was TCK a good short? From the daily chart above, we noted a huge volume spike on the Feb. 9th drubbing. So we see a huge red stick with volume, plus bear flag with NRIB observing the downsloping 5 ema as resistance closing at the base of support. This bear flag felt like it could work.

Small size on break of $58.00 and added at the first consolidation BO. Took a partial after 3 consecutive WRBs on 15 min. timeframe (not depicted). Got stopped on balance as price capitulated into $56.00 and bounced.

CLF gapped up on earnings. Price chopped around in the first hour and then started basing in an increasingly narrow range, forming a flat base at $99.50, and setting up a gap fade.

Price breaks down, retests the base and runs lower for 3 consecutive 15 minute bars. Take a partial as price approaches $98.00. CLF snapped back sharply. I thought the second half was going to get stopped out at BE, but, it came back down and I was able to salvage a decent profit on the second half.

Looking back at the 15 minute chart, there just wasn't enough volume expansion on the initial leg lower to expect continuation.

TBL was another earnings gap from the Trade-Ideas scanner - gap up min. $1.00, RSI on 15 minute timeframe minimum 60.

TBL gapped and ripped then spent most of the rest of the session in a tight narrow range. Normally, I like to buy the BO of the upper range, but time was of the essence, so I decided to buy the bounce off of the bottom of the range, then if the BO failed, I would have some profit from the trade. Turned out to be a good strategy as price/volume expanded into the close. The base BO also set up perfectly with a low risk NRB on the 15 min. timeframe.

Entry and exits depicted on 1 minute chart below.

Cup & Handle - BWLD

2011-02-14T16:19:00.003-05:00

Good, low risk setups were hard to come by today. The momentum names, for the most part took a breather, and many gappers were faded.

BWLD, which I mentioned in last night's post, set up as a textbook cup & handle pattern. Price/volume contracted as the handle formed. This contraction foreshadows expansion and BWLD delivered a full measured move.

Technical Picture - Small Caps Lead as Markets Extend Rally

2011-02-13T21:36:00.007-05:00

Small caps recently corrected to 50 SMA. Friday they provided leadership. As noted on Thursday, the situation in Egypt would affect trade. After testing and holding support, the markets retested resistance and rallied on news that the Egyptian President had stepped down.

On the Emini futures chart above we see that the uptrend continues after two tests of the trendline on Thursday and Friday.

On the SPX chart above we see that our measured move target was met on Friday. I've adjusted the pivots to take into account Thursday's dip. The new target would bring us to the 1342 level.

JDSU - huge volume on this extension. Keep on the WL. Shallow pullbacks are good buying opps.

I missed the early run, but managed to catch the last leg up on Friday as JDSU consolidated a printed NR7.

TUP was on our focus list. Price gapped and retested the base, so I entered long. Choppy until it formed a handle and extended higher. Hard to move the initial stop until the handle broke.

GMCR, another runner, flagged for a low risk entry point.

CELL - I felt that I had traded this one badly, but I think it was just a failed BO. Best not to trade small caps on 15 min. timeframe.

ISRG was a HCPG pick and it worked perfectly. For momentum stocks, I recommend using weekly pivots as opposed to daily pivots, to avoid folding too soon.

Add to Momentum WL - ARMH - bull flag

RL - Coiling after huge earnings beat.

Other earnings gaps on WL include AKAM, BWLD DIS, OTEX ATML.

Technical Picture - DOW Ends Win Streak

2011-02-10T21:12:00.008-05:00

The markets gapped down on weak earnings (CSCO), ignoring the better than consensus initial claims (383 vs. 410). As we can see from the S&P Emini futures chart above, we filled Monday's bullish gap and reversed back up to fill today's opening gap. BTW, a must read in the morning for a good take on the market is Gtotoy. His outlook this morning was spot on.

The rest of the session was a chop fest as various news items were digested - AAPL disappointing sales through VZ, and the mixed messages from Egypt. As the Egypt story unfolds, it will impact futures and the markets.

The DOW ended its eight day win streak, and the other major markets ended the session just above the unchanged.

The $USD looks poised for more upside.

GLD has filled the bearish gap and now looks like it is forming a bearish wedge. If the situation in Egypt worsens, gold could be in play. There are two factors at play with gold, safe haven in troubled times, and higher interest rates which dampen gold luster. GLD gapped lower on the open because of the good claims data, which in turn led to higher interest rates and lower bond prices. I still think GLD has to go and test the 200 DMA before we get a tradable bounce.

Today's trades were the same usual suspects as yesterday. JDSU, FNSR, and AGU tested short-term range supports on the open and bounced. JDSU sold off in the afternoon and probably needs a rest.

RL is consolidating the earnings gap. I'd like to buy it if it retests short-term range support at $124.00 and bounces.

CELL and TUP are bull flagging. TUP printed NR7 today, so we could get expansion tomorrow. Also, don't forget SWK which is still flagging.

These are not recommendations to buy, sell, hold or sell short. Everyone needs to think for themselves when it comes to trading their own accounts. First, it is the only way to really learn, and secondly,you are the only one responsible for your trading decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. The plan includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios before making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.

Good Trading!

Technical Picture - Markets Mixed

2011-02-09T22:18:00.010-05:00

A modestly weaker open was followed by a gap fill and two waves of profit taking. However, the bulls were able to recapture most of the losses into the close. The DOW and Nasdaq were able to notch fresh new recovery highs intraday, but the S&P failed to confirm. After hours, Nasdaq futures are weak following disappointing earnings from CSCO. If tech rolls tomorrow, the broader markets will follow. As noted last night, the markets are extended and a correction here would not be a big surprise.

Negative divergence in the number of stocks trading above the 50 MA vs. the SPX.

MA and V look like they will correct here.

Last week's bull flag BO in UA reached the full measured move today. The shooting star foreshadows some profit taking.

FNSR forming bull flag on daily, but this is a resistance area on the monthly chart.

Best trade of the day on break of ORH - Vertical move to resistance.

AGU earnings gap forms cup and handle for a fast move to $98.00.

JDSU was a missed ambush trade. Had planned to trade this one, but didn't want to chase on the gap up. CIEN, another planned trade turned into a scratch.

Good Trading!

Technical Picture - Bulls Push Prices to Top of Channel

2011-02-08T20:18:00.008-05:00

Read some interesting commentary from Arthur Hill. It goes like this - the SPY is up 3% since the beginning of February. The above chart highlights two types of price surges: 1. surges following corrections are identified by blue arrows where the 6 day ROC (rate of change) goes from negative to 3+; 2. surges from the bottom of the trading channel are identified by red arrows, where the ROC moves from neutral to 3+.

The second type of price surge led to a correction in early November. We see this same type of price/ROC pattern occurring right now. Are the bears up to it?

On a measured move basis, we can target S&P 1328-29 as depicted below.

Gapping up on earnings: WWWW +16.5%, ANDE +10.7%, BGC +5.7%, CBL +5.9%, PBI +5.3%, ATML +4.4%, TTWO +3.6%, DIS +3.4%.
Gapping down on earnings: MOTR -17%

Economic Calendar

Momentum Stocks In Play:

JDSU
CIEN $27.00
SWK - Daily - bull flag forming

Good Trading!

Friday's Trades - UA, CIEN, JDSU

2011-02-06T16:47:00.005-05:00

As noted in Thursday's post, UA had a well formed bullish flag pattern on the daily. Price broke out 30 minutes into the session and never looked back.

If you missed the initial BO, a second opportunity presented itself as price consolidated at $63.00 and coiled prior to the next leg up. I took a partial at weekly R1 and let the rest run, until I got a sell signal. That was a good opp. to short as UA was extremely extended.

On the daily, we see that UA has room to run for a full measured move, so keep it on the focus list.

CIEN was a volume momentum gap which I found through the momentum scan. Price retraced back to weekly R2 which held as support. I waited for confirmation. Price consolidated at the base of the the 50% Fib. retracement and set up out a low risk entry (NR7) . I targeted a move back to the early swing high.

JDSU was an earnings gap mentioned in Thursday's post. Wait for price to consolidate on or near the rising 5 period ema on the 15 minute chart or 20 ema on 5 minute.

Technical Picture - Minor Gains Ahead of Jobs Data

2011-02-03T22:05:00.010-05:00

Both the S&P and DOW have made new recovery highs since last Friday's sell-off. However, the COMPQ and RUT have yet to confirm. If the markets rally on tomorrow's jobs data, that would be ideal for confirmation. Without confirmation, it's hard to get overly bullish at these lofty levels.

GLD set up a nice short squeeze today as prices formed a solid setup out of a wide base. Looking for a gap fill as depicted below.

Note the small handle that forms at the baseline before price squeezes higher.

USD - Oversold technical bounce on test of the weekly trendline.

AMZN - bearish flag

UA - bullish flag

NR7 (price/volume contraction ahead of expansion) daily focus list APOL, FNSR, HOG, VRX

Earnings Gaps - Gap down - CSTR, LVS, PWER Gap Up - JDSU

These are not recommendations to buy, sell, hold or sell short. Everyone needs to think for themselves when it comes to trading their own accounts. First, it is the only way to really learn, and secondly,you are the only one responsible for your trading decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. The plan includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.

Good Trading!

Momentum Day Trades - APKT, TUP, WFR, BRCM CCK

2011-02-03T03:08:00.005-05:00

TUP - continuation from yesterday's big move.

APKT - Momo earnings gap

CCK - Failed bull flag BO.

WFR - Handle and extension

BRCM was a low risk short. I was looking for an extension to daily support at $42.00. Price formed a long handle at the base of weekly S2 and head faked lower. I covered the short and took it long into the close. Shorts were squeezed when price broke back above $43.00.

Scanning for Momentum Day Trades

2011-02-01T20:47:00.006-05:00

Scanning for momentum stocks intraday can provide low risk trading opportunities in addition to the usual suspects from the focus lists.

The scan I use is very simple to create and provides a short list of momo names.

I look for stocks priced > $10.00, with average daily volume > 500,000 shares. Today's price is > than yesterday's high by 1.005. Today's volume is tracking 1.5 times average. RSI > 60.

Today's scan produced a longer list than yesterday given the market rally.

The stocks I focused on were MTW, TUP, and FMCN as depicted below.

MTW was a wide gap to new multi-month highs. On the 15 minute chart below, we can see that volume is tracking far above average, hence the momentum play. Wide gaps generally need time to consolidate the gap before moving higher. We wait for price and the rising 5 period EMA to come together. If the 5 ema holds as support, we can plan for price extension.

Confirm the setup on the 5 minute timeframe. MTW looks good as price hold above 20 ema.

Price/volume contraction (coiling) precedes expansion, so we plan an entry on a break of the base. Took a partial at the next $ level.

TUP, another big volume gapper, did not hold the 5 period EMA on the 15 minute timeframe, but it did form a narrow base just below first level support at the cusp of $52.00. Here again, we see price/volume contraction ahead of expansion.

FMCN found support from rising 5 period EMA on 15 minute timeframe. I was looking for price to expand and retest the ORH. It started out nicely, but suddenly retraced back to the entry point. The bounce off of support was weak. I bailed when it couldn't hold $27.00.