DIVERGENCE FOR THE WIN

Here’s a detailed look at the buy signal we got this morning in the index futures. Or in other words, the process of identifying a tradeable market low (intraday).

Stocks sell off at the open…but take a look at the activity at the lows.

The criteria to buy a market heading lower like this is:

1. No extreme $TICK signals. The lowest reading into that meltdown was -500

2. A TF divergence against the NQ, ES, YM.

3. A breadth divergence. $TICK not following price to new relative lows.

That move resulted in a 16 point move in the Russell.

It’s been a fairly reliable signal even with all the added volatility.

OA

Since nobody gave two shits about my $WB post, let’s talk about some actionable ideas discussed in After Hours with Option Addict last night.

We picked up the topic of futures on Friday. Using a simple price/breadth divergence method, this has set up four trades so far this week in equities. One right off the open in the NQ worth 20 points!

This weeks trades: NQ + 40, NQ +0, NQ +20, TF + 3 (unrealized).

We’ll discuss today’s set-ups at the close.

OA

I am long shares of $WB this morning, and am also stalking $ATHM.

More later,

OA

I know what you are thinking… “Dow is up 300 today and my TWTR sucks!”

With that type of action at the bell, apparently that is what most of the crowd was thinking. Seemed they couldn’t get out of this thing fast enough off the open this morning as shares of $TWTR plummeted over 3.5%.

Now that the crowd has been trimmed a little, $TWTR goes unch into the bell.

Follow the weekly chart here. After last week’s breakout, buyers defended at the retest level.

I bought shares of $TNK.

OA

So the HTF’s get upset at last weeks news to register with FINRA and bitch slap everyone last week, only because they can. In hindsight, now having the luxury of nearly 300 Dow points to clarify, this is why there were no extreme breadth signals into last weeks sell off. It’s now obvious that it was nothing more than another freakish buy opportunity.

I’m in the process of developing watchlists for the upcoming week. I’ve gone through my cheap stock screens and have found CAPN, VHC, IBIO, NAVB, SZYM, TNK, AVEO. I’ll have the remainder of my list for After Hours with Option Addict later today.

Post a few tickers if you have them.

OA