MONTH END: TIME TO RIGHT YOUR WRONGS

As a trader, your job is not to impose your ideas on the market.  Your job is to research ideas and see if the market agrees.  Losses are part of the process. – FuturesTrader71

Often times we make assumptions in the market using the data at our disposal.  I personally feel that probabilities are the best tool available to a trader or investor.  I’ve built many probabilities into my trading style, and am fortunate to get a glimpse into The PPT which is a treasure chest of probabilities I can add to my stock picking.

Taking a loss does not mean you’re wrong if the process is right.

Taking to the profile we’re seeing some weakness carrying into the AM globex session.  The S&P futures have hit their head three times on 1496 and at 8:25 the level has been rejected in a rather stern manner by the sellers. Should we see trade continue to rotate lower today, I’m looking for buyers to step in at the naked VPOC from 01/24 at 1490.50.  I will be looking for buyers to stabilize price here.  Should they not show up to the party, I must consider cutting weak names from my portfolio to raise cash.

Left for dead big box retailer Best Buy has shown signs of life this year.  They had a decent holiday season and their earnings announcement pumped the share price of BBY out of a nice base.  Since then price has drifted higher along with the rest of the market.

The advertising team at Best Buy is putting out a funny ad during the Super Bowl.  As simple as it sounds, it is an opportunity to reintroduce consumers to the brand.  You nacho chompers love funny commercials. Pair this with the curious business model of their online rival Amazon and we could begin to see money rotate into this name.  It’s beaten down and people love a comeback story.

The daily chart shows price behaving in a way I particularly like.  I would like to see shares of BBY continue to come in and enter the hon3y hole.  I’m always looking to find the first pullback after a stock changes directional trend.  It offers the highest probability and also has the greatest profitability potential.  Of course, the overall market needs to remain constructive for these setups to work, but keep Best Buy on your radar leading into this weekend’s game.

For the sake of keeping things simple I’ve highlighted the two price zones that I consider significant in the short-term for the S&P future.  The scene of the breakout yesterday is interesting.  It’s the confluence of the prior two day’s value areas.  The subtle cue that the balance may break to the upside was the slight uptick in the value area.  Yesterday the breakout produced single prints.  Single prints signal aggressive activity that resulted in a violent movement in price.  How we treat this level for the remainder of the week can be very telling.

Above I’ve highlighted the level where I expect to see sellers enter the tape.  If they can’t show up and defend these levels, it’s pump time.

Today it’s all eyes on Facebook as expectations have been set high by wall street (why?) and they need to deliver. The GDP numbers are rattling the markets a bit, if the bulls actually hold on today they have serious sand.

With most of our countries attention focused on the upcoming Super Bowl, some people may have overlooked the nasty crash that occurred today at the Winter X Games.  The bone chilling crash didn’t weigh on me until hours after I heard the news.  It is one of those events that I suppose becomes more common with age where someone younger than you is on their deathbed.

I grew up hooked on the X Games.  I would much rather watch someone catch massive air and perform acrobatic feats over watching football or basketball.  Records were smashed every year as the hardware and ramps caught up to the courageous athletes.  Do you remember those gnarly street luge races where men wearing anti-g suits hurdled down mountains?  They would melt the wheels after two races.  To an adventurous daredevil like me it seemed I found my people.

I still partake in the occasional extreme activity, but never have I considered anything near the insanity of where these professionals have taken their respective sports.  The media wants to know if the games have gone too far.  How I could puke, instantly.  Perhaps we take for granted the massive risk these guys have taken for the last 17 years.  Try doing even their smallest stunt and you’ll be amazed you didn’t die.  They take huge chances, we watch closely because we know the risk.  It’s a lot like watching traders, or quarterbacks.  Any performance will be pushed to the highest level.

You have to expect to see carnage.  We’re fragile bags of fluid.  Please don’t sully the X Games.

In other extreme sports news, the biggest wave ever was ridden this week.  Check out one of the early images from the massive ride.  This is human nature:

They pull me back in.  I currently own shares of ANGI, SINA, ZNGA, and the fickle beast FB mother to all.  Their sized in the order listed, largest to smallest.  All the positions are rather small, but together these hacker thieves comprise nearly 20% of my portfolio.  As it happens, I’m juggling these pinless hand grenades into the hooded earning’s announcement tomorrow AMC.

Given the overall gravity of this situation and its potential implications on my wealth, I fancy this the proper time to review their price action.  Let’s have a look:

Before we get to my holdings, check out Zillow:

Now see my notes on all the aforementioned:

Obviously the results out of Facebook could affect the prices of all these names. So it’s all eyes on the social empire tomorrow. And yes, I will be wearing a hoodie.

There are several cross currents in the market this morning.  Refiners are crushing and other basic materials are holding on right where they need to.  The important matter for this sector is whether they can defend these levels.  Shares of ANR and CLF both were flashing alerts yesterday and today both are catching an early bounce.  How this is treated as the day progresses could be a critical component in eyeing the continued rotation of bulls from more extended sectors (like small caps) to these dicey looking charts.

The ball is still firmly in the bull’s court.  Seeing a day of liquidation with price discovery lower to find buyers would be constructive and welcomed by many participants who are sidelined or underexposed.  The question becomes at what level do the eager buyers step back in?  Buyers have spent the last six sessions buying value area lows and VPOCs from prior days.  They haven’t allowed price to trade below the prior day’s high.  If that trend changes, we can consider it an opportunity to test the true mettle of this year’s bulls.

Yesterday the developed profile overlapped Friday’s which signals a form of balance.  Buyers managed to push the VPOC only two ticks higher verses Friday and value high crept one tick higher also.  It appears the market is still trying to go higher but was contained by sellers.  The opening’s push lower by the sellers set the range for the day.  That was a minor victory for the sellers.

Clearly 1491 will be a key level today.  There are multiple levels in confluence here as of 8:30am the globex low was set here.  Should that break look for signs of buyers at 1487 where the low was set on 01/24 and is in confluence with the VPOC from last week Tuesday.

Chartpin link to market profile: https://chartpin.com/#chart/1151

Bears appeared to have their tea early this morning and were hungry when the session opened.  They spent the first hour of trading driving price nearly ten handles lower in the S&P, impressive no doubt.  Then, they vanished.  Poof gone.

I put out a twitter update that we must have just seen the day’s range.  Making such an audacious claim after seeing the market rip ten handles higher would be foolish as fading the prevailing trend is a sure ticket to insolvency. But after observing the magical disappearance of the sellers it was a reasonable claim.  At that point the only play was to try and buy or sell the extremes of today’s trade and ride back into the middle.

I was eyeing Zillow early on as it put out an early flag.  I sold out of the name far too early this year and even received a “hate to see you go” tweet from the CEO.  Odd yes?  Nevertheless I took my eyes off the prize for ten minutes and she was gone.  Later in the day it offered a juicy secondary entry good enough for any day trader but the swinger would be left underwater on the name.  I still like the progress bulls made today in Z.  It made holding a large sized position in Zynga that much more palatable.

On the topic of Zynga, how about today’s action?  Can we safely call that a face ripper or do judges require a bit more panache?  What a beast.  I’m targeting the 99ema for my first scale.

I spent a good portion (perhaps too much) of my day watching shares of ANGI trade.  Wow that stock trades in an ugly manner.  A huge amount of volume was transacted in the shares today in a tight range.  The stock looks primed to pump and with the rest of the mobile/social space ripping along I thought, why not?  It still may rip this week I’m certainly keeping it on close watch.

Other action today: TPX has been faded since posting a decent earnings beat.  Today it seemed overdone and I was happy to increase my position to ½ size sub $40.  I also added back shares of APP around $1.33 that I sold a few sessions back for $1.30.   I thought it an excellent lateral move.

Many called the day dull.  I found it to be grandiose.  There was even the surprise announcement that our supreme leaders at the FTC are busy saving us from pyramid schemes.  I can hardly contain myself.  I want to send them gift baskets of MTEX supplies as a sign of my gratitude for their investigative work.

As each session goes by, building value higher daily, it’s important to keep in mind the possibility of a pullback in the S&P future contract.  The first thing sellers are going to have to do is stop the advancement.  We have yet to meet a selling force of equal or greater value to the intermediate term buyer.  They want in and they’re willing to initiate trades at higher levels each progressing day.

This week I’m hunting for signs of the seller.  Tell tale characteristics of a seller are value pushing lower as measured by the VPOC, a wide range distribution day with broad based selling that takes out prior day value areas, and fast rotations to the downside.  Giving the markets current levels, action of this nature should not come as a surprise.  Rather we should prepare ourselves mentally for such market behavior and have a plan for addressing the downdraft.

My focus is on locking in profit in names I currently hold should we see the above signs play out this week.  I still plan to play the short term with potential short squeeze plays like GTAT.  I’m also going to stick around and ride a correction out if needed in my intermediate term holds like GS and CREE.

Taking to the profile, I’ve merged and chopped the sessions from the beginning of last week to get a better idea of the distributions.  I’ve split open last Thursday’s profile to give you a look at the “P” shaped profile that signifies a short squeeze occurred.  Notice the hard drop out of this area when 1494 was lost.  I want to continue to monitor this level as critical.  Next key support is 1486.25 where we saw a strong buyer reaction twice.  Should they not show up to defend these levels a third time it could signal a change in the market’s tenor.

If we keep levitating press your winners.  If a name comes into a big resistance level FOR THE LOVE OF WINNING take some profits.

HIT PLAY to unleash this jam as you read on good people of the internet:

Perhaps I’m being romantic whist envisioning the future and the architectural wonders it holds, but I seem to have caught the LED bug. I like everything I read about them. I like their features and hues.
The industry has the characteristics of a space race. The companies participating aren’t clinging onto old technology, spending millions on litigious hostility to defend their edge. Instead they forge forward casting aside old products at a modern rate and boaster higher performance. Their press releases boast about MORE lumens per watt, longer life, and the race for lowest cost per lumen. They’re creating solutions for businesses as amorphous entities. It’s quite exciting really.

With my mind halfway down the LED rabbit hole as I fired up The PPT this weekend, it was hard to direct my attention elsewhere.  Last week I bought shares of CREE post earnings as they’re clearly the leader in lighting grade LED.  They’re Chuck Yeager and everyone else is a Soviet henchman.  I expect big things from this name both in terms of revenue growth and human architectural advancement.

In an attempt to clear my head of all the excitement I have for LEDs I started running screens.  I see a few good setups but was nearly frustrated to see GTAT keep popping up.  GT Advanced is a sort of a shell of a company that set out to chase the renewable energy dream.  They grow rocks, essentially.  Their crowning achievement in the LED business is growing sapphire.  They will either sell you the sapphire or the machine to grow it yourself.  Seems odd to sell your tools in such a way but perhaps that’s how an outsider sees things.  Cree seems to have done away with sapphire in many of their 2^nd and 3^rd generation bulbs and that can only spell trouble for a lonely little rock grower in New Hampshire.

But of course after seeing GTAT pop up all over The PPT I had to pull up the charts.  I must say this play is a blaring short squeeze opportunity.  Starting first with the weekly chart you can see short sellers enjoyed to nice pullbacks where they sunk their teeth in and drove price lower.  The behavior in 2012 in many ways tells me this company was toast, and likely heading to zero if Obama lost.  The company is behind the curve but having a symbiotic administration in place gives them old fashioned government hope.  That hope may or may not be behind the force that has thus far thwarted the bears onslaught.  Regardless, the “third dip from the well” from a momentum standpoint is the lowest probability.  That also means it’s the highest probability to bet against.  SEE THE WEEKLY NOW:

Then we get to the daily chart.  It’s touting a highly visible inverse head-and-shoulder.  Is it too visible or just visible enough to get skittish bears to cover?  Fly’s out with comments tonight that it’s a kill the shorts type of environment.  I smell short blood in this name.  Stockcharts.com says the VWAP (volume weighted average price) is at $3.30.  Oh how lovely some good threes.  CUE OFF OF IT: