SMOKE SCREEN

I use this term to attempt to describe markets that trade down simply to trigger emotion or generate a reaction. They have no intention of being down, they just want to get you to react.

Take the NASDAQ today, which has been steadily selling off throughout the day. Only one extreme TICK reading on the day, and aside from that, no real speed.

While the NASDAQ has been slowly making new lows, the Russell has managed to hold its opening low. This divergence is generally a good “risk on” signal, or a decent condition to buy dips on the day.

What would make me change opinion on this market here, is this Russell divergence to be negated and a second extreme negative TICK signal. Other than that, I am long TF at 1230, and long CL from 49.71. All this smoke screen action in stocks is masking some pretty impressive action and resolution to the great set-ups in the energy patch.

Top Pick here: FEYE.

My top two holdings have been in $FSLR and $SUNE. I’ve been with these names for a long time, and they are starting to warm up a little.

The comparison to our sentiment chart and the weekly chart of $FSLR is compelling:

And $SUNE is about ready to test its volume pocket above.

OA

Since the discussion is already pointed towards seasonality, here is a breakdown of the month from a historical perspective. We spent a lot of time on this back towards the end of the year to find pockets of strength in the trend.

Hat tip @Mrk for the chart.

OA

Two months are now in the books for 2015. Thus far it’s been a been an ok stretch, but I still feel a little out of sorts to be honest. A little apprehensive, a little depressed, a little anxious, impatient, nervous, etc. The market is right for what I had forecasted last year, but my actions are still hit or miss. I let the market get to me last year, and I haven’t quite gotten past it.

Confidence in trading is hard to come by. I’ve always had it and I let that get clouded last year with some of the difficult stretches I went through. The drawdowns I’m always able to repair, but the toll it takes on your mental game is a little more difficult to patch.

For those of you that read my stuff back in 06, I went through a similar situation. From 03-06 I went wild. Went on an incredible run. I got into 06 and every bias I had and every approach I followed went bad during the summer and I took a big hit. I repaired the drawdown in about 3 months, but my mind was rattled. Another trader I was close to had a mental coach (read: therapist) that he recommended and I actually paid her a few visits. I was that desperate.

The opportunities are improving out there, but the mood is shot. I’m in the same boat. The emotional toll that this takes on you is incredibly difficult to manage. You have to try hard not to let this shit have a lasting impact on you. You can’t take it home to see your wife. You can’t let it linger when you go out to play with the kids. You can’t let it take the emotions on the inside and wear them on the outside. Otherwise, this business can literally ruin your life.

I don’t know why I opted to write this today, other than just putting it out there to identify the emotion and work towards repairing it. Once that happens, said emotions won’t get in the way of getting into rhythm with the market.

Looking forward to a nice weekend to clear the mind. See you guys on Monday.

OA

I like the environment here. A lot. Speed is dying off, market is trending, and options are getting cheap. However, I am running out of set-ups here, with the exception of energy stocks, which have been hit or miss.

When I scan, I visually look at around 1200-1500 stocks. This is quite cumbersome, but it gives me an overall impression if stocks look better to buy in general, or better to sell. Right now, the number of set-ups on my radar has diminished a bit. However, where I am finding the best charts is in the cheap stock department (stocks < $10).

I am literally scanning the top dollar losses each day looking for buy opportunities. Not trying to buy the worst declines, but focusing on DIPS.

More later,

OA

Just for a quick follow up on our After Hours with Option Addict Trade of the Week, I sold the $BLOX calls here ahead of earnings tomorrow.

What’s on your radar today?

OA