Technical Picture - Consolidation - Markets Mixed

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 - Small Caps Lead as Markets Extend Rally

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 - Bulls Push Prices to Top of Channel

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

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!

Scanning for Momentum Day Trades

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.

Ags Breakout - Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

MOO broke out of a two month base yesterday led by POT (second largest component of MOO, next to DE).

As discussed in my previous post, POT had carved out a multi-mth base and was setting up for BO. Unfortunately, I wasn't expecting it to move so quickly. But in reviewing the chart now, I see that the price/volume contraction on Monday and Tuesday foreshadowed an imminent BO.

Based on the size and quality of the base and weekly resistance, I am targeting $180 near-term for POT.

My initial entry and partial ($150 round number) were executed from my TWS iphone app using an area chart. I wish I had been home for this. Was relieved to get home in early afternoon to see a real chart.

This chart is one of the most perfectly orderly charts in my recent trading memory. Note that POT never made a lower low after the initial entry, until it failed to print red price bars on a new high shortly before my exit. Anyone trying to short, prior to that level was hurting pretty bad.

POT formed two ascending triangles on the way up, allowing participants who missed the initial BO, to jump in. Burn this chart to memory, it's a perfect example of momo in action.

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Technical Picture - Bears Own It

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

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

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

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

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

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

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

A few stocks on my Focus List

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

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

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

Dummy Trades

Biotechs were the best performers on my radar today. AMGN retested the base but the 20 EMA was close enough to provide support and get things back on track. BIIB was a nice momentum move as you can see from the accelerating volume.


COCO was gapper on an earnings beat with improved guidance. OR breaks out of the daily base on big volume. Since the OR is wide, place fibs. from ORL to ORH as per Trader-X guidelines. I had a buy stop order ($20.52) in place after bar 5 but it took a long time to trigger. Well worth the wait. Partial after 1 pt.

DIS is an after hours trade on an earnings miss. Inverse C&H on 1 minute timeframe. Target achieved like a hot knife through butter.

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

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

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

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

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