Cast Netting

I was never a big fan of pole fishing.  It’s slow and I like action.  Over time I suppose I may gain an appreciation for it but in the short term I prefer cast netting.  It requires an athletic throw and snatch and puts stubborn biters in a more vulnerable situation to end up in my cooler.

They don’t have to take the bait.  They become discombobulated and panic instead.

My book has a similar look and feel too it.  I could describe each position to you but that would be very time consuming and I have pressing matters to attend to on this hallowed ween.

But I will disclose my risk profile.  It is long, friends, again, here atop the highlands.  It was long in the lowlands too.  It has always been long (extra Grady).

75% of my port is positioned amongst common stocks of various industry.  Just a tad over 5% is in November call premium.  I want more, gentlemen, and will exercise my right to speculate in the path of power and rotation.

Now I must make haste to new elevations.

Pro Gap Into Month End

Nasdaq futures were thrown out of balance overnight after the Bank of Japan announced they were expanding their massive stimulus package.  The reaction was large enough to put the index to new swing highs meaning participants are coming to market this morning at prices dramatically different from the closing bell. The volume and range on the globex session are beyond normal as you might expect putting us in pro gap territory.

On the economic calendar for today we have Chicago Purchasing Manager at 9:45am and U. of Michigan Confidence stats at 9:55.  We are also in the thick of earnings season as the month-end trade takes us into the weekend.

Prices at the open will be trading levels unseen since March of 2000.  Given the lack of price history available, I need to work using available support levels and measured move targets.  I have noted the measured moves and support levels I will be observing on the following volume profile mash up chart:

10312014_intterm_NQ

Crazy Credit Card Market

Believe me, I am on these charts looking for responsive sellers too.  We started showing signs of finding one yesterday, but we also had a firm grasp of the third reaction, remember?  There was a strong rotation down today, and it fizzled away, poof.  There was a moment today where you could have a short bias, it came and went by 11am.  There are few signals better than a failed hypothesis, IMO.  It reveals the other side.

It is hard to initiate fresh index risk up here, which is why you hunt out a chart that is still basing along or not too far from the launch zone.  When the long and intermediate term trend are up, you have to be nimble on the short side.  You can be a short seller in this tape, I have seen it with my own eyes.  But you need to wait for the big sellers to show up.

Momentum pockets are narrow and not every stock is a winner by any means.  The market structure is overheating.  There are still losers everywhere, especially if you dabble in the dark arts of short term duration.  Twitter found a responsive bid today, about a buck before I wanted to add a slice.  Eager buyers front ran my logical level and I could not chase.  I bought FB yesterday afternoon based on 3rd reaction analysis and that was a dud, I cut the loss early.

I am not crushing right now, mind you, I am nearing where I left off before the great OPEX rout of 2014.  Playing it old school, with these common stock positions son.  I am trading well though.  I traded well through the selling too but my teeth still were kicked in, it’s the nature of speculating.

Accept it, tie risk to every single trade you make.  If I put you on the spot, right here right now, and ask you where trade XYZ is wrong, I expect an answer mother fucker.  That is step one, put down the opium pipe and face the risk profile you have established.  When you lay all the numbers out you might not like what could happen in the event of a goose hunt.

Know you risk, know you risk, knowyourisk.com

If it didn’t matter I wouldn’t annoy you all with it.

It is a pillar, you will lean on it, and it will give you confidence to engage these markets.

As for hoping the lack of Fed intervention will lead to another rug pull, they’re still intervening just in bigger and quieter ways.  You don’t take the training wheels off the bike and then push the child into the road, you run alongside them whilest smoking cannabis.

I see the markets broke as I was penning this piece, very well, I must return my attention to work.

On a lighter note, Michigan is dreary about this time.  If your land is also becoming dark and cold, why not join me for a few cocks and laughs at the First Annual iBankCoin Investor Conference?  We can discuss auction theory live in person via aggressive hand gesturing.  A true break from the click clack of the keyboard, yes?

Active Time Frame Identified

Nasdaq futures started to drift lower overnight shortly after we heard data on German unemployment early this morning.  The resulting range on the entire session is still within the 1st standard deviation of normal although volume picked up to levels we have not seen since the fast down markets of a few weeks ago.  At 8:30am the US quarterly GDP stats were released along with jobless claims and personal consumption.  GDP was better than expected in the third quarter and the other data were worse than expected and the net reaction was an aggressive responsive buy taking us nearly to the midpoint of the overnight session (4064).

The overnight session managed to press into Monday’s range before finding responsive buyers.  It will be interesting to see in the cash trade hours whether a retest of this overnight low occurs and how it is treated.  Since the gap higher Tuesday morning I have noted that we are provided with a unique opportunity to gauge demand.  How the market trades relative to this gap, mainly if buyers sharply reject us from Monday’s clean balance, will be a clear clue of short term sentiment.

I present only the volume profile mashup chart today.  Notice how well recent action has adhered to the price levels noted on the chart.  This is a clue that the intermediate term and short term time frame participants are the primary drivers of market rotation.  If instead we begin seeing large moves which ignore or steamroll these levels, then we know an even higher time frame is participating and it makes sense to step out of their way.  I made no adjustments to these levels from yesterday, they are still key reference points as we go about trade:

10302014_intterm_NQ

I like The Number 3

I always have.  Even as a child I recall my third year being my finest, it was such an enlightening age where the fog of sounds all started to become words and the words flowed off my tongue like a Shakespearian thespian.  I could ride a bike without the trainers for the first time.  Everything clicked.

That year has stuck with me and shapes many of my trading methods.  As much as it may seem ‘top down’ to rely on something divisible by three, I have gone the opposite direction, working raw stats to extract probabilities, and quite often I return to the number three.

The 33 ema, for example, mimics VWAP surprisingly well.  And a daily 99 ema, oh the jump you have on all the traders working the 100 sma is staggering.  I leave them in the dust 9 out of ten times.

When a major news piece hits the market, like today’s 2pm Fed, I sit with laser focus and carefully indentify each reaction I see.  The first reaction is usually simply, the second can be a bit slippery, and the third is where the babies are made.

The third reaction today took a strong bit of deliberation but ultimately was higher.  It was by no means gregarious and certainly nothing to hang ones hat upon.  However, here I was, sitting here, and I might as well make myself useful and share this information with any reader who had more pressing matters to attend to from 2-4pm.  Corporate Raul would saw his leg off to have a source like me.  I write for corporate Raul and street Raul eating MacDonald soda pops from the trash can.

On the Net, the Nasdaq printed an inside day verse yesterday.  It shows a slowing of the auction higher.  We found some responsive selling, but the prior day lows held.  Tomorrow, as many of you know, is Thursday and the day after is Halloween and then a spooky weekend and then BOOM, a new month, new money to put to work.

So ask yourself, are we set for another month of outflows, or will the mutual funds put on their pony costumes and serve up a proper mutual fund Monday, new ATH and all?

As always, TBD.

Little Glitch in The Matrix

A discrepancy between the closing price and settlement price on the Nasdaq futures resulted in an odd no-volume push lower.  This may or may not have something to do with the big drop in Facebook shares after their earnings report motivated participants to sell the stock down significantly in after hours trade.  However, that action will slowly move to the back burner as we enter US trade.  Set for announcement this afternoon are several Fed data points.  We also have crude oil inventories at 10:30am.

The price spans our market has traversed lately are huge.  This is not an environment we have traded in, velocity and rotation size-wise, since perhaps 2011, more so like the 2009 bottom.  Put simply, the market is acting either like prior major bottoms or like an inflection point.  You can thus see how these recent events might be unsettling to speculators.  The directional ramifications these conditions typically preclude are major.

I am keeping my bias with the market’s biggest punch.  This is helps me accept conditions and adjust as the market dictates.  Currently, the uptrend is steep long term and the largest most recent rotation is up.  There are warning signs around, but I will reserve caution for when I have proof in the price action that sellers are regaining an edge.  What are my clues?  Retracements, especially the 50 percent retracement.  I have noted the 50% retracement as well as a few other observations on the following daily bar chart of the Nasdaq futures:

10292014_daily_NQ

If you were to ask me one week ago today whether we would be templating the volume profile printed on the day BABA went public today I would suggest it was very unlikely.  Yet, here we are observing the key price levels left behind on the swing high volume profile.  I have noted these levels, as well as other carefully selected levels on the following volume profile mash up chart:

10292014_intterm_NQ

Know Your Limitations

There are certain market conditions that will force you to the sidelines.  There, I said it.

Thus, to begin this discussion, the trader pedigree is divided into three very distinct grades, the scalper, the swinger, and the investor.  The next question to be approached concerns the pedigree of internet-trader law and the latter’s natural affinities.  There is a real stink about a person who is in every move and magically free of the natural process of losing.  Arguably more painful is seeing someone press a method that is not bearing fruit. This comes back to knowing your risk.

You must embrace change because the market will ultimately ensure you do—or leave with a frustrated look about yourself.

I have not done much to capitalize during the latest movement in stocks.  The only shares I was brazen enough to procure during the #knifeparty were shares in GNRC.  Those have rewarded me handsomely, but I assure you the trade was executed on smaller size due to overall market conditions.

The best traders I know have conditions they sit out. This is a huge part of their edge.  I know a fantastic day trader who is bored and meditating most of the time when the market enters a grind up.  I know another trade who whips that move 10 different ways and extracts milk and honey.  I know traders who crush swing trades when price action becomes fast and furious, keen on price levels and legging into their trades as part of their management.

Monitoring continuation is without question my strong-suit.  I am not a knife catcher, I have many deep scars to prove it.  I enjoy the anticipation trade with a touch of predominantly favorable order flow.  Being that the bulk of my trading career is post 2011, most of my experience is on the long side.  I need to improve my short game, even on the intraday scalping level.

Something about the nature of support after a thrust is much more in my wheelhouse then working a resistance even though the behavior is a symmetrical inverse. Perhaps I will take up standing on my head while I trade.

Needless to say, this grind-piece of an auction is where I thrive.  I measure midpoints, I buy dips, I scale, all very methodical and profitable.  This week has been about making hay while the sun shines and the weather stays oddly elevated over 70 degrees in the murder mitten.

I managed to win today, even while losing in TWTR common.  CLR, purchased the day before the gut check, came back a bit for me.  GOGO, hangs in there, consolidating inside of consolidation, not moving, causing much a tension!  The drama!  I kid, I love this type of compression.  BLOX, and old swing hold, again is knocking on the gates of a big-ass gap.  It might not rip, but it might.  And Elon decided he had shareholders’ backs which was the proverbial cherry on the pumpkin cheesecake

In short, I am grateful for these conditions, armed with a few new tools for faster conditions, and comfortably in some cash ahead of the popped-corn Wednesday Fed event.

I Will Never Sell These $TSLA Shares

Sometimes you have to toss your entire school of thought out the window because someone logically teaches you something.  Your foundation stones, scribed with hammer and chisel, explode them on your knee and then open your mind to change.

Your favorite vagrant stock picker uses these charts to assess swing trades.  My most recent entry into Tesla was for the ‘200 role’ which is a power move to $250 a share reserved only for the hottest of momo stud muffins. Lately I sit here, filling up my subcompact with sub $3.00 benzino, watching these Saudi Arabians push the black tea down, and news flow looking grim.  To make matters worse, the market was running a rout, this company has some despicable valuation, and the technical picture is a bit dicey.

Let me show you something before cleansing the earth by burning it to ash and smoke.  This is a daily candle chart of The Tesla Motors aka TSLA.  What it printed yesterday looked like a textbook start to another wave lower.

TSLA_Daily_Oct

Then, on cue, like the guy keeps a technical analyst on staff, the most brazen CEO of our time takes out the South African whip and lashes the media.  Oh, the drama of it all:

Said technical picture is now moot, the auction has pulled a 180, and the torque behind this move is spine bending.

Let this be a lesson to all of yous.  Tech analysis has its limitations.  It is simply a method of measuring supply and demand and their effects.  But when you have a brilliant company on the edge of scientific discovery led by a Swiss knife of brilliance, just sit back and never sell those shares.

These old TSLA charts will also be burned for good measure:

TSLA_DEC12

TSLA_July192014

TSLA_08112014

The Tail End of The Auction

There comes a point in any auction where higher prices cut off activity and more ‘noise’ must be introduced to give the perception of a continuing auction.  In a traditional one-way auction, say for a vintage automobile, the auctioneer will begin repeating words or adding details or pointing around manically to create an illusion of activity when price has actually stalled.  In a two-way auction like the futures we start to see overlapping value, indecisive doji candles, range compression, and eventually value compression or rejection.

The last three sessions in the Nasdaq did not quite demonstrate these traits yet.  Instead we are seeing a smooth migration higher in value.  As we approach US cash trade prices are set to gap higher.  Some of the gains has been paired back after a weaker than expected Durable Goods Orders (Sep) number came out.  However prices are still trading outside of yesterday’s range which creates an opportunity to clearly observe demand.

As we trade early on there will be clues as to whether the auction needs to continue exploring higher to find sellers or whether we have arrived at a location where sellers are motivated and present and willing to introduce enough supply to the market to overwhelm demand. First, the open type—is it an aggressive selling response from the minute the bell rings?  Or do we see an open auction with two-timeframe participation?  Next, do we trade into yesterday’s range?  Or is demand so strong prices cannot even return to the prior range?  Then, if we trade the range do we close the overnight gap, the VPOC, VAL?  And so on, we go, down the line, always observing the nature by which these events take place if in fact they do.

A unique opportunity to observe demand today, you see?

Keep in mind we have Consumer Confidence at 10am, MBA Mortgage Applications premarket tomorrow at 7am, Facebook earnings AMC, and tomorrow is a big Fed day-type afternoon which at some point is likely to produce a pause in the market.  At least, that is the expectation.

The second leg lower to follow the big, motivated knife lower in the Nasdaq came into question on 10/21 when we started the day with prices gap higher well above the midpoint of the move.  There are many useful Fibonacci numbers, I suppose, but the midpoint is my favorite checkpoint.  If sellers were truly motivated, then we should not have been trading back up through the mid.  Now the inverse is true, we have a midpoint to this up-V, it can be seen as the thick blue line on the below chart.  It is far away, as you might imagine, after such a large move.  This risk now, to longs, is this distance, as revision now begins to favor the seller.  However, auction theory, as noted in the lesson above, suggests we can be cautiously bullish.  See the below daily chart which has two air pockets and a midpoint noted:

10282014_daily_NQ

Bringing our eyes a bit closer, I have noted the price levels I will be observing today on the following volume profile mashup chart:

10282014_intterm_NQ

Momo Taking Heat

They are selling Twitter in the afterhours market, a place inhabited by traders who deem the company insufficient in the manner of earning.  Price is moving just enough to give short sellers some hope at making a profit.  However, I would imagine the opportunity may be a short lived one, especially given Tuesday’s Facebook earnings and Wednesday’s FOMC business.  If you look at a chart of trade since the IPO of TWTR, you will see no real movement has occurred over the last year—just a sine wave through time.

I put some broad strokes on the chart, and essentially any trade confined within these levels is to be considered noise.  A conviction break and hold below ~$45 allows the bears an early advantage in initiating discovery.  After hours it has traded as low as ~$42.  It will be interesting to see how this trades come cash hours in the manana.  Until then, and even if I had been on the winning edge, it is best to save dancing the tapioca until after you have booked the trade.

In other news, the beaten back buyers inside of today’s /NQ_F could not be overwhelmed and as a result we saw a late day push higher.  The order flow became very clear just before noon New York when opening swing high, overnight low, and the daily midpoint all converged at 4027-4026.50.  We traded down into the level, found an initiating buyer and the rest was history—clean rotations higher suggesting the intermediate term buyer from last week is still active.  The only caveat is we printed a P-shape profile suggesting a short squeeze but no real initiation.  And with a busy week ahead, month-end, and the massive V-shape in our wake, price might want to test a bit lower come tomorrow.  However, the sellers are tasked with making an aggressive push at this point after merely reacting and absorbing today.  Buyers are innocent until proven guilty.

The scene under the sheets was a bit different.  Each rotation lower in the Nasdaq, even the minor ones, managed to put heat on momo stocks.  However, from the heat CYBR came blazing higher.  It was a bit of a mixed bag with correlations lower then we saw a few weeks back, but overall participants were not rewarded for assuming risk in aggressive growth names.

My Tesla looks weak too, very much a proper looking continuation lower chart.

Tomorrow morning looks to feature a few gut shots.  It comes with the territory of swing trading.  Earning season is fun, yes yes?

Cast Netting

I was never a big fan of pole fishing.  It’s slow and I like action.  Over time I suppose I may gain an appreciation for it but in the short term I prefer cast netting.  It requires an athletic throw and snatch and puts stubborn biters in a more vulnerable situation to end up in my cooler.

They don’t have to take the bait.  They become discombobulated and panic instead.

My book has a similar look and feel too it.  I could describe each position to you but that would be very time consuming and I have pressing matters to attend to on this hallowed ween.

But I will disclose my risk profile.  It is long, friends, again, here atop the highlands.  It was long in the lowlands too.  It has always been long (extra Grady).

75% of my port is positioned amongst common stocks of various industry.  Just a tad over 5% is in November call premium.  I want more, gentlemen, and will exercise my right to speculate in the path of power and rotation.

Now I must make haste to new elevations.

Pro Gap Into Month End

Nasdaq futures were thrown out of balance overnight after the Bank of Japan announced they were expanding their massive stimulus package.  The reaction was large enough to put the index to new swing highs meaning participants are coming to market this morning at prices dramatically different from the closing bell. The volume and range on the globex session are beyond normal as you might expect putting us in pro gap territory.

On the economic calendar for today we have Chicago Purchasing Manager at 9:45am and U. of Michigan Confidence stats at 9:55.  We are also in the thick of earnings season as the month-end trade takes us into the weekend.

Prices at the open will be trading levels unseen since March of 2000.  Given the lack of price history available, I need to work using available support levels and measured move targets.  I have noted the measured moves and support levels I will be observing on the following volume profile mash up chart:

10312014_intterm_NQ

Crazy Credit Card Market

Believe me, I am on these charts looking for responsive sellers too.  We started showing signs of finding one yesterday, but we also had a firm grasp of the third reaction, remember?  There was a strong rotation down today, and it fizzled away, poof.  There was a moment today where you could have a short bias, it came and went by 11am.  There are few signals better than a failed hypothesis, IMO.  It reveals the other side.

It is hard to initiate fresh index risk up here, which is why you hunt out a chart that is still basing along or not too far from the launch zone.  When the long and intermediate term trend are up, you have to be nimble on the short side.  You can be a short seller in this tape, I have seen it with my own eyes.  But you need to wait for the big sellers to show up.

Momentum pockets are narrow and not every stock is a winner by any means.  The market structure is overheating.  There are still losers everywhere, especially if you dabble in the dark arts of short term duration.  Twitter found a responsive bid today, about a buck before I wanted to add a slice.  Eager buyers front ran my logical level and I could not chase.  I bought FB yesterday afternoon based on 3rd reaction analysis and that was a dud, I cut the loss early.

I am not crushing right now, mind you, I am nearing where I left off before the great OPEX rout of 2014.  Playing it old school, with these common stock positions son.  I am trading well though.  I traded well through the selling too but my teeth still were kicked in, it’s the nature of speculating.

Accept it, tie risk to every single trade you make.  If I put you on the spot, right here right now, and ask you where trade XYZ is wrong, I expect an answer mother fucker.  That is step one, put down the opium pipe and face the risk profile you have established.  When you lay all the numbers out you might not like what could happen in the event of a goose hunt.

Know you risk, know you risk, knowyourisk.com

If it didn’t matter I wouldn’t annoy you all with it.

It is a pillar, you will lean on it, and it will give you confidence to engage these markets.

As for hoping the lack of Fed intervention will lead to another rug pull, they’re still intervening just in bigger and quieter ways.  You don’t take the training wheels off the bike and then push the child into the road, you run alongside them whilest smoking cannabis.

I see the markets broke as I was penning this piece, very well, I must return my attention to work.

On a lighter note, Michigan is dreary about this time.  If your land is also becoming dark and cold, why not join me for a few cocks and laughs at the First Annual iBankCoin Investor Conference?  We can discuss auction theory live in person via aggressive hand gesturing.  A true break from the click clack of the keyboard, yes?

Active Time Frame Identified

Nasdaq futures started to drift lower overnight shortly after we heard data on German unemployment early this morning.  The resulting range on the entire session is still within the 1st standard deviation of normal although volume picked up to levels we have not seen since the fast down markets of a few weeks ago.  At 8:30am the US quarterly GDP stats were released along with jobless claims and personal consumption.  GDP was better than expected in the third quarter and the other data were worse than expected and the net reaction was an aggressive responsive buy taking us nearly to the midpoint of the overnight session (4064).

The overnight session managed to press into Monday’s range before finding responsive buyers.  It will be interesting to see in the cash trade hours whether a retest of this overnight low occurs and how it is treated.  Since the gap higher Tuesday morning I have noted that we are provided with a unique opportunity to gauge demand.  How the market trades relative to this gap, mainly if buyers sharply reject us from Monday’s clean balance, will be a clear clue of short term sentiment.

I present only the volume profile mashup chart today.  Notice how well recent action has adhered to the price levels noted on the chart.  This is a clue that the intermediate term and short term time frame participants are the primary drivers of market rotation.  If instead we begin seeing large moves which ignore or steamroll these levels, then we know an even higher time frame is participating and it makes sense to step out of their way.  I made no adjustments to these levels from yesterday, they are still key reference points as we go about trade:

10302014_intterm_NQ

I like The Number 3

I always have.  Even as a child I recall my third year being my finest, it was such an enlightening age where the fog of sounds all started to become words and the words flowed off my tongue like a Shakespearian thespian.  I could ride a bike without the trainers for the first time.  Everything clicked.

That year has stuck with me and shapes many of my trading methods.  As much as it may seem ‘top down’ to rely on something divisible by three, I have gone the opposite direction, working raw stats to extract probabilities, and quite often I return to the number three.

The 33 ema, for example, mimics VWAP surprisingly well.  And a daily 99 ema, oh the jump you have on all the traders working the 100 sma is staggering.  I leave them in the dust 9 out of ten times.

When a major news piece hits the market, like today’s 2pm Fed, I sit with laser focus and carefully indentify each reaction I see.  The first reaction is usually simply, the second can be a bit slippery, and the third is where the babies are made.

The third reaction today took a strong bit of deliberation but ultimately was higher.  It was by no means gregarious and certainly nothing to hang ones hat upon.  However, here I was, sitting here, and I might as well make myself useful and share this information with any reader who had more pressing matters to attend to from 2-4pm.  Corporate Raul would saw his leg off to have a source like me.  I write for corporate Raul and street Raul eating MacDonald soda pops from the trash can.

On the Net, the Nasdaq printed an inside day verse yesterday.  It shows a slowing of the auction higher.  We found some responsive selling, but the prior day lows held.  Tomorrow, as many of you know, is Thursday and the day after is Halloween and then a spooky weekend and then BOOM, a new month, new money to put to work.

So ask yourself, are we set for another month of outflows, or will the mutual funds put on their pony costumes and serve up a proper mutual fund Monday, new ATH and all?

As always, TBD.

Little Glitch in The Matrix

A discrepancy between the closing price and settlement price on the Nasdaq futures resulted in an odd no-volume push lower.  This may or may not have something to do with the big drop in Facebook shares after their earnings report motivated participants to sell the stock down significantly in after hours trade.  However, that action will slowly move to the back burner as we enter US trade.  Set for announcement this afternoon are several Fed data points.  We also have crude oil inventories at 10:30am.

The price spans our market has traversed lately are huge.  This is not an environment we have traded in, velocity and rotation size-wise, since perhaps 2011, more so like the 2009 bottom.  Put simply, the market is acting either like prior major bottoms or like an inflection point.  You can thus see how these recent events might be unsettling to speculators.  The directional ramifications these conditions typically preclude are major.

I am keeping my bias with the market’s biggest punch.  This is helps me accept conditions and adjust as the market dictates.  Currently, the uptrend is steep long term and the largest most recent rotation is up.  There are warning signs around, but I will reserve caution for when I have proof in the price action that sellers are regaining an edge.  What are my clues?  Retracements, especially the 50 percent retracement.  I have noted the 50% retracement as well as a few other observations on the following daily bar chart of the Nasdaq futures:

10292014_daily_NQ

If you were to ask me one week ago today whether we would be templating the volume profile printed on the day BABA went public today I would suggest it was very unlikely.  Yet, here we are observing the key price levels left behind on the swing high volume profile.  I have noted these levels, as well as other carefully selected levels on the following volume profile mash up chart:

10292014_intterm_NQ

Know Your Limitations

There are certain market conditions that will force you to the sidelines.  There, I said it.

Thus, to begin this discussion, the trader pedigree is divided into three very distinct grades, the scalper, the swinger, and the investor.  The next question to be approached concerns the pedigree of internet-trader law and the latter’s natural affinities.  There is a real stink about a person who is in every move and magically free of the natural process of losing.  Arguably more painful is seeing someone press a method that is not bearing fruit. This comes back to knowing your risk.

You must embrace change because the market will ultimately ensure you do—or leave with a frustrated look about yourself.

I have not done much to capitalize during the latest movement in stocks.  The only shares I was brazen enough to procure during the #knifeparty were shares in GNRC.  Those have rewarded me handsomely, but I assure you the trade was executed on smaller size due to overall market conditions.

The best traders I know have conditions they sit out. This is a huge part of their edge.  I know a fantastic day trader who is bored and meditating most of the time when the market enters a grind up.  I know another trade who whips that move 10 different ways and extracts milk and honey.  I know traders who crush swing trades when price action becomes fast and furious, keen on price levels and legging into their trades as part of their management.

Monitoring continuation is without question my strong-suit.  I am not a knife catcher, I have many deep scars to prove it.  I enjoy the anticipation trade with a touch of predominantly favorable order flow.  Being that the bulk of my trading career is post 2011, most of my experience is on the long side.  I need to improve my short game, even on the intraday scalping level.

Something about the nature of support after a thrust is much more in my wheelhouse then working a resistance even though the behavior is a symmetrical inverse. Perhaps I will take up standing on my head while I trade.

Needless to say, this grind-piece of an auction is where I thrive.  I measure midpoints, I buy dips, I scale, all very methodical and profitable.  This week has been about making hay while the sun shines and the weather stays oddly elevated over 70 degrees in the murder mitten.

I managed to win today, even while losing in TWTR common.  CLR, purchased the day before the gut check, came back a bit for me.  GOGO, hangs in there, consolidating inside of consolidation, not moving, causing much a tension!  The drama!  I kid, I love this type of compression.  BLOX, and old swing hold, again is knocking on the gates of a big-ass gap.  It might not rip, but it might.  And Elon decided he had shareholders’ backs which was the proverbial cherry on the pumpkin cheesecake

In short, I am grateful for these conditions, armed with a few new tools for faster conditions, and comfortably in some cash ahead of the popped-corn Wednesday Fed event.

I Will Never Sell These $TSLA Shares

Sometimes you have to toss your entire school of thought out the window because someone logically teaches you something.  Your foundation stones, scribed with hammer and chisel, explode them on your knee and then open your mind to change.

Your favorite vagrant stock picker uses these charts to assess swing trades.  My most recent entry into Tesla was for the ‘200 role’ which is a power move to $250 a share reserved only for the hottest of momo stud muffins. Lately I sit here, filling up my subcompact with sub $3.00 benzino, watching these Saudi Arabians push the black tea down, and news flow looking grim.  To make matters worse, the market was running a rout, this company has some despicable valuation, and the technical picture is a bit dicey.

Let me show you something before cleansing the earth by burning it to ash and smoke.  This is a daily candle chart of The Tesla Motors aka TSLA.  What it printed yesterday looked like a textbook start to another wave lower.

TSLA_Daily_Oct

Then, on cue, like the guy keeps a technical analyst on staff, the most brazen CEO of our time takes out the South African whip and lashes the media.  Oh, the drama of it all:

Said technical picture is now moot, the auction has pulled a 180, and the torque behind this move is spine bending.

Let this be a lesson to all of yous.  Tech analysis has its limitations.  It is simply a method of measuring supply and demand and their effects.  But when you have a brilliant company on the edge of scientific discovery led by a Swiss knife of brilliance, just sit back and never sell those shares.

These old TSLA charts will also be burned for good measure:

TSLA_DEC12

TSLA_July192014

TSLA_08112014

The Tail End of The Auction

There comes a point in any auction where higher prices cut off activity and more ‘noise’ must be introduced to give the perception of a continuing auction.  In a traditional one-way auction, say for a vintage automobile, the auctioneer will begin repeating words or adding details or pointing around manically to create an illusion of activity when price has actually stalled.  In a two-way auction like the futures we start to see overlapping value, indecisive doji candles, range compression, and eventually value compression or rejection.

The last three sessions in the Nasdaq did not quite demonstrate these traits yet.  Instead we are seeing a smooth migration higher in value.  As we approach US cash trade prices are set to gap higher.  Some of the gains has been paired back after a weaker than expected Durable Goods Orders (Sep) number came out.  However prices are still trading outside of yesterday’s range which creates an opportunity to clearly observe demand.

As we trade early on there will be clues as to whether the auction needs to continue exploring higher to find sellers or whether we have arrived at a location where sellers are motivated and present and willing to introduce enough supply to the market to overwhelm demand. First, the open type—is it an aggressive selling response from the minute the bell rings?  Or do we see an open auction with two-timeframe participation?  Next, do we trade into yesterday’s range?  Or is demand so strong prices cannot even return to the prior range?  Then, if we trade the range do we close the overnight gap, the VPOC, VAL?  And so on, we go, down the line, always observing the nature by which these events take place if in fact they do.

A unique opportunity to observe demand today, you see?

Keep in mind we have Consumer Confidence at 10am, MBA Mortgage Applications premarket tomorrow at 7am, Facebook earnings AMC, and tomorrow is a big Fed day-type afternoon which at some point is likely to produce a pause in the market.  At least, that is the expectation.

The second leg lower to follow the big, motivated knife lower in the Nasdaq came into question on 10/21 when we started the day with prices gap higher well above the midpoint of the move.  There are many useful Fibonacci numbers, I suppose, but the midpoint is my favorite checkpoint.  If sellers were truly motivated, then we should not have been trading back up through the mid.  Now the inverse is true, we have a midpoint to this up-V, it can be seen as the thick blue line on the below chart.  It is far away, as you might imagine, after such a large move.  This risk now, to longs, is this distance, as revision now begins to favor the seller.  However, auction theory, as noted in the lesson above, suggests we can be cautiously bullish.  See the below daily chart which has two air pockets and a midpoint noted:

10282014_daily_NQ

Bringing our eyes a bit closer, I have noted the price levels I will be observing today on the following volume profile mashup chart:

10282014_intterm_NQ

Momo Taking Heat

They are selling Twitter in the afterhours market, a place inhabited by traders who deem the company insufficient in the manner of earning.  Price is moving just enough to give short sellers some hope at making a profit.  However, I would imagine the opportunity may be a short lived one, especially given Tuesday’s Facebook earnings and Wednesday’s FOMC business.  If you look at a chart of trade since the IPO of TWTR, you will see no real movement has occurred over the last year—just a sine wave through time.

I put some broad strokes on the chart, and essentially any trade confined within these levels is to be considered noise.  A conviction break and hold below ~$45 allows the bears an early advantage in initiating discovery.  After hours it has traded as low as ~$42.  It will be interesting to see how this trades come cash hours in the manana.  Until then, and even if I had been on the winning edge, it is best to save dancing the tapioca until after you have booked the trade.

In other news, the beaten back buyers inside of today’s /NQ_F could not be overwhelmed and as a result we saw a late day push higher.  The order flow became very clear just before noon New York when opening swing high, overnight low, and the daily midpoint all converged at 4027-4026.50.  We traded down into the level, found an initiating buyer and the rest was history—clean rotations higher suggesting the intermediate term buyer from last week is still active.  The only caveat is we printed a P-shape profile suggesting a short squeeze but no real initiation.  And with a busy week ahead, month-end, and the massive V-shape in our wake, price might want to test a bit lower come tomorrow.  However, the sellers are tasked with making an aggressive push at this point after merely reacting and absorbing today.  Buyers are innocent until proven guilty.

The scene under the sheets was a bit different.  Each rotation lower in the Nasdaq, even the minor ones, managed to put heat on momo stocks.  However, from the heat CYBR came blazing higher.  It was a bit of a mixed bag with correlations lower then we saw a few weeks back, but overall participants were not rewarded for assuming risk in aggressive growth names.

My Tesla looks weak too, very much a proper looking continuation lower chart.

Tomorrow morning looks to feature a few gut shots.  It comes with the territory of swing trading.  Earning season is fun, yes yes?

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