These morning markets, I come to them every morning. Much like The Zen Hunter alluded to about surfers, it’s an obsession—every day hunting waves to ride.
I put up these profiles, looking for where the waves can kick up. Boy did a wave kick up today! I have wins on both the long and the short side, easily my best day ever, earning 10 S&P points. It was fun too. And I stuck to the plan all but once. My one deviation, an attempt to knife catch that free fall, was my only loss on the day. So be it. Stick to the plan or lose money.
Anyhow, that’s why we do all this work, for days like today. They’re calling this the blow off top already. I’ll hold my judgment for now, but I did cut my RGR and YELP longs in case the afternoon gets a little Nightmare on Elm Street.
Let’s look at these stocks and see what’s working.
Yesterday was essentially a completion of Monday’s auction. The charting software I’m currently using won’t allow me to merge these two profiles together, so we’ll have to visualize it for today.
Notice the very fragmented, low quality trade that occurred in the upper 1/3 of Monday’s profile. Now notice how much of Tuesday was spent thoroughly auctioning those prices. Interestingly enough, yesterday was also a neutral day, featuring range extension in both directions, signaling a lack of directional conviction and the possibility of a change in the market conditions.
We’re still above the large balance distribution from last week, the overnight session is balanced within our current profile, and we’re essentially waiting for the market to tip its hand.
Here’s the levels I’ll be monitoring to gauge which way the market is trying to go, and how good of a job it’s doing:
It’s been another action packed day, albeit in a more concentrated bit of stocks. I almost looked wrong in boasting about my sub $50 RGLD purchase when the morning dipped briefly below. It should be noted that this was again a buying opportunity. Although we’re not out of the woods yet on this long position, it has constructive written all over it.
YELP started flagging nicely just below $32 around lunchtime. I added to my long thinking, “this is a good looking flag.” When I took to twitter to blast out my actions to the world I saw no less than four traders talking about the exact same breakout. The move was faded.again. This trade could flush lower, just be aware of that. We are all seeing the same telegraphed pennant at 52 week highs. Build a solid risk profile.
I thought my reasoning behind staying long JRCC was interesting, but it received zero airtime. If you’re into market dynamics, check it out. I scaled a piece around the three handle and have a 1/3 runner left on the books.
I closed out CRZO because it printed an ugly daily candle. I’m looking for constant gratification up here in the froth. I’m not looking to wait out and peak-to-trough foolishness in names that I have zero conviction in beyond price.
Ironically enough and completely contrary to the prior paragraph, I held my SCTY runner and watched it melt like a cheap ice cream cone down 12 percent. The position is still 8 percent in the green due to a sweet entry and there are gains booked to back it up. I’m not going to let one down day scare me out of the cocaine party. It will take at least two.
Final thought: A cheap ice cream cone? Does an expensive ice cream cone exist?
Lots of movement today, as a result there were several trades in the $ES_F. Ten contracts were traded in total, 6 winners, 4 losers. I want to get this more like 8 winners, 2 losers.
All the trades came on the short side today, with the best being a sale at 1669.25 and riding down to 1664.75. The worse was a sale into the hole at 1661.50 which didn’t stop out until 1664.25.
The total activity netted a small gain of $100 dollars and a grey hair or two.
Repetition is key in the futures market. I was talking to a friend of mine who works closely with Special Forces. I asked what they do in their off time. He said train. He said they have layouts of the buildings they plan to raid and run through mock up copies in simulation over a 1000 times before the real deal. That’s real deal awesome, and why they have high 90 percent win rate.
I like situations like JRCC. The setup appeared on no news, but I could see buy flow coming in. Then you get a major development, one favoring your position and you get instant gratification.
But should you sell? I always do, but not the whole thing. The event completely throws the stock price out of balance. Their slate was wiped clean of a looming going concern. I don’t even know if they had a going concern statement in their financial statements, but they were teetering on the brink, no doubt. So now what’s the company worth? I couldn’t tell you, nor could I care less. I know fundamental guys, debt gurus, hedgers, and directional gamblers all have to come to market a duke it out to determine value. And that means we’re going to see vertical development, both ways.
Once I’ve cushioned the position with nice booked gains, I can sit back and see who prevails in the fight. I can cheer for my side, but I swear no allegiance. I’ll just as soon cut if the sellers prove a more formidable force. For now things are looking good.
The overnight session has seen sellers trying to gain a foothold. Most of their overnight attempts have been thwarted but they appear to be gaining a bit of traction as I’m preparing this analysis.
We’re still above the major three day balance zone I highlighted yesterday morning.
The behavior of volume on the upper half of yesterday’s range is fragmented and signals a lack of trade facilitation. It’s odd really, it wasn’t a sharp reaction from the sellers but more running out of buyers. Either way 1666.75 was left behind as a near no volume node and is the primary resistance to the upside.
It’s looking like we may test the balance zone today, and along with it my expectation is for some choppiness. Buckle up.
UPDATED NOTE: We put in a double bottom at 1661 overnight. It’s close to yesterday’s low 1660. A test of this area seems likely and important. A break of 1661-60 should have us looking for swift trade back to the balance zone below.
It’s important when raising children to not only highlight victories but to exemplify the winners. You do this because, well, you want to live out your golden years vicariously enjoying the benefits of a successful child.
Some of you want your kids to excel at sports, so you point out athletes. You’ll be like, “Son, look at Joe Montana, he never kissed his biceps and he has four Super Bowl rings.” But I know there’s a small group out there, likely reading iBankCoin, who want their children to have a strong market hand. Skip the Wizard of Oz tonight. Instead pull out this post and show them how $RGLD traded below fifty dollars for a short time. Point to the chart and tell them a wise man named Raul bought those sub fifty prices.
Tell them how special that is and how rare surgical precision is.
Here’s the targets. I’m risking about 10 percent:
We’re seeing reversal action in some of the pockets of strength, including solar. But it’s not lights out yet. We’re still above the major bias line highlighted this morning.
I’m still considering the $ES_F range from 1654.75 – 1657.25 as the bias zone. We can turn out a few lights if price is accepted below here. Until then, swing away.
Stocks are strong right out the rip this morning, with the S&P tide pushing all these jet boats (momo stocks) higher.
In the futures, I’ve traded four contracts, all to the long side, earning 1.5 handles, 3 handles, 1.5 handles, and a runner. UPDATE: Closed the runner, 3.25 handles.
I kicked out SAM after initially thinking I would make it an investment. I don’t want to be invested in SAM. I like Pabst if I’m going low end, New Castle if I’m being normal, BUD for sports drink, and anything brewed at the micro capacity from Michigan all the time. So why own SAM?
I sold LOCK too because it had a chance to be great and it decided going sideways was cool. What a wimpy stock.
The solar trade is complete madness. I love it. These ‘late stage” conditions give a huge edge to the small trader who can ferret in and out of the crazy names. My wild boy is Scotty. SCTY is the proverbial stone that kills two birds, giving me a piece of Elon’s sweet ass and solar exposure. With that in mind, I’ve taken two scales, and am down to a runner on SCTY. You guys are crazy so I want to see how far your crazy gets me.
Don’t sleep on JRCC, it’s way out of balance after we learned Friday that they bought a little more time in their debt structure. I want to see the imbalance push higher, obviously.
New longs are YELP, and CRZO and cash is low low low, 25 percent.
Coming into the week, we have three days of overlapping value to use as bias for direction into the week. Last week featured a very similar overlap of value and seeing acceptance of price above the big value gave us conviction to the long side all week.
The same weight should be given to the three days of overlapping value this week.
The overnight session has been flat thus far. The only notable development was the rejection of Friday’s HVN on the upper volume node at 1664.50 which I consider the only line in the sand stopping more upside.
Here’s a markup of the other important S&P levels: