Day Trade Triangle Success! … 20% gain in 30 minutes

Its not often that these day trading patterns show up, that’s why I wanted to post an example on how to use these wedge-triangles to spot a huge move.

Pre-market Apex Silver Mines Limited [[sil]] showed up on my momentum screen, in big part to GreekPunk, as we were searching for momentum plays in gold and precious commodities.  FRG was another stock picked up.  Anyway, Dpeezy, another of our readers saw the same pattern in the descending triangle pattern.  These usually result in big moves, either up or down.  The probability of it moving up was big, since the stock had a huge morning already, sending the stock nearly 100% for the day.  Phew!  Then SIL retraced and consolidated firmly above yesterday’s highs.  This consolidation period led to higher lows and lower highs, which in this case is a bear trap.  The pattern was spotted so we posted this:

 

Notice how there were two triangles… one on the 3-hour chart, and one on the 30-minute chart… that means big move coming!  Also the stock was holding support at $3, twice!! On two high volume occasions, the stock refused to get below $3.  All we have to do is wait.  As I stated in that post “watch for a sharp move.  Volume should pick up in the close.”  Hold…. hold… hold… “triangle broken!  Set stop to $3.00″…. then…

… beautiful!  Just beautiful!  20% move in about 30 minutes with volume and momentum picking up.  Once again, these patterns are very rare, and you have to act fast on them.  If volume did not pick up, and momentum did not go bright green, then do not get long the stock.

Of course, you could have just gone long in the morning, set it then forget it, and end up +86% for the day.  Oh, how we wish it were that easy!  If you ever spot any of these triangles, be sure to ping me.

Aloha!
-gio-

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Ka’au Crater Boys- “Tropical Hawaiian Day”

Like I said earlier in the trading day, ignore whatever happens on today’s tape.  Volume is very thin, and it should be after we had quite a storm last week.  Therefore, I wouldn’t mark today as bearish or bullish, but neutral, even though the Dow is down -160.  Your first clue of a nonsense day was that a lot correlations were not in play today…

• You had the market flying all over the place, while airlines stayed FLAT.  Airlines should move in the direction of the market.  Therefore, lower oil means stocks like Continental Airlines, Inc. [[cal]] , UAL Corporation [[uaua]] , Hawaiian Holdings, Inc. [[ha]] should be up.  But they didn’t do anything when oil “corrected.”  Meanwhile, Yahoo and CNBC were posting crap again about oil, using big verbs like, trying to sound like it was crashing or something.
• Another broken correlation was found in some ag stocks.  You had the leader, Potash Corp./Saskatchewan (USA) [[pot]] and The Mosaic Company [[MOS]] down HUGE today, but then you had Titan Machinery Inc. [[TITN]] , a momo ag play, move up.  Hmmm.
• Then, while gold, another commodity play, was down everywhere, you had momo silver plays like Apex Silver Mines Limited [[sil]] going up like crazy.  I alerted readers before today’s open to get long this stock in my pre-market surf report.  Congrats to Dpeezy for trading it well, better than me!
• Google Inc. [[Goog]] , a correlation stock for the NDX, barely moved today, even though the Nasdaq dropped a lot midday.  Goog’s phone came out today.  They really suck at marketing, which is ironic since Goog is the king of advertising.

… lots of funny action.  There were, however, some action in certain sectors you must note down in your trader-diary.  For one, shippers really got hit today.  I had DryShips Inc. [[DRYS]] under 70 as a good place to short shippers.  Look at them now!  Excel Maritime Carriers Ltd [[exm]] , Diana Shipping Inc. [[dsx]] , TBS International Limited [[tbsi]] .  This is a “out of sector-rotation play.”  I noticed the pattern early in July (http://www.thehawaiitrader.com/2008/07/short-picks-buy-list-for-july.html).  Continue to keep an eye on shippers and the Baltic Dry Index- a bounce in that sector will tell you when to buy discounted coal stocks:  James River Coal Company [[jrcc]] , International Coal Group, Inc. [[ico]] , Patriot Coal Corporation [[pcx]]

Right now, the [[Vix]] is trading at 35.72, which marks a 28% channel from 28-36 in the past 5 days!  That was my predicted channel for the Vix for the next few weeks.  If you watched it intraday, it got rejected at 36.  Nice!  We are approaching a buy point, and we could see the market rally soon.  I think the Vix will spike above 36 briefly, and when it reverses back under 36 get long some stocks. 

 

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Watch for a sharp move!  Volume should pick up into the close.

 

Apex Silver Mines Limited [[sil]]

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Completely covered shorts:  CLR ( +5.30% at 42.92, shorted at 45.20), HK ( +5% at 24.75, shorted at 25.90)

New longs:  HK (25.10), JASO (13.00)

Other solar stocks to watch:  LDK Solar Co., Ltd. [[ldk]] , Suntech Power Holdings Co., Ltd. (ADR) [[stp]] , SunPower Corporation [[spwr]] , Canadian Solar Inc. [[csiq]] .  I almost bought LDK.  

Fuel Systems Solutions, Inc. [[fsys]] wants to go green.

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Today’s tape should probably be ignored.  Feels like we are being drifted up and down on low volume.  Meanwhile, Yahoo Finance is getting gay with their headlines again.  One minute their headline reads:  “Market up as investors monitor bailout”, now its printing something like “Stocks surrender gains as investors track bailout.”  … !!!  This is why I ignore the news, and buy the fact.

Short them…

Dry bulks and shippers:  DryShips Inc. [[drys]] , TBS International Limited [[tbsi]] , Diana Shipping Inc. [[dsx]] , Excel Maritime Carriers Ltd [[exm]]

Ags and chems:  Potash Corp./Saskatchewan (USA) [[pot]] , The Mosaic Company [[mos]] , Terra Nitrogen Company, L.P. [[tnh]]

Sell on the news:  Hansen Natural Corporation [[hans]]

Momo reversals:  DXP Enterprises, Inc. [[dxpe]]

Stocks I want to, but can’t short:  [[lulu]] , Overstock.com, Inc. [[ostk]] , Bank of Hawaii Corporation [[boh]]

Good for a dip… 

LDK Solar Co., Ltd. [[ldk]] , Goldcorp Inc. (USA) [[gg]] , JA Solar Holdings Co., Ltd. (ADR) [[jaso]] , FLIR Systems, Inc. [[flir]]

Stocks with steroids:  Titan Machinery Inc. [[titn]] , Tempur-Pedic International Inc. [[tpx]] , Apex Silver Mines Limited [[sil]] (which might be down -30% tomorrow),

Other…

  [[fxp]] back to 100s

MercadoLibre, Inc. [[meli]] to teens

Hawaiian Holdings, Inc. [[ha]] approaching 10. 

I also got an email/spam/newsletter saying gold is going to $3,000.  I wish I can reply to them with a bomb.

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“Bring Me Your Cup” – Pure Heart (Hawaiian Cover)

Expect more choppy trading Tuesday, as traders weigh on what the latest government intervention plan will take.

Congressional aides said the House could act on a bailout bill as early as Wednesday, but leaders emerged from a closed-door meeting late Monday with no firm timetable for action.

Will this cause traders to sell more?  Or will it cause shorts to cover? 

First, look to fade oil/energy stocks if they open up. If they open down, then buy the dip on a reversal for a swing long.  Right now my correlation stock is GMX Resources Inc. [[gmxr]] , which underperformed yesterday. I think the movement of this stock will dictate how other energy stocks will move. Hence, my watchlist includes Energy Conversion Devices, Inc. [[ener]] , Petrohawk Energy Corporation [[hk]] , China Finance Online Co. (ADR) [[jrjc]] . Milk them.

Also, look to short gold stocks for a day trade. Inflation scare was Monday. But now, there is a little more light on the government’s bailout package. Less speculation, means the end of a spike. I still think gold is good long term, but tomorrow all I will wait for and trade is a pullback.  Try Goldcorp Inc. (USA) [[gg]] , Yamana Gold Inc. (USA) [[auy]] , and [[gld]]

Finally, I like the momentum plays in Fuel Systems Solutions, Inc. [[fsys]] , Apex Silver Mines Limited [[sil]] , and Fronteer Development Group Inc. (USA) [[frg]] . If they continue to move up, get long. 

Vix Report

Based on the $Vix, I would get long stocks Tuesday if the $Vix reverses just below 35, since that would signal short term over-panic-sold.  Again, I would like to see the $Vix get under 28 with “quiet” trading before re-shorting.  Right now we are still very volatile until the governments package outlines specific bailout processes.  Expect a Vix spike very soon. 

Aloha!
-gio-
theHawaiiTrader

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