Where The Rubber Meets The Road

Equity futures gapped lower overnight displaying strong follow through on yesterday’s trend day.  As the USA comes online the S&P is down nearly 10 points and the NASDAQ about 20.  We have an hour until the cash session begins to recapture some of this downward progress but this is otherwise known as a pro gap.  Essentially that means the risk is elevated beyond a level most retail traders can handle in the event they attempt to fade the move and close the overnight gap.

I am of the opinion that with the right tools we can formulate a sound method of participating in this gap, and the most important tool today is market profile.  On Wednesday morning, I highlighted two key price zones which tell the story on the NASDAQ.  One was a low volume price zone above.  We traded ALMOST the entire range of that upper zone before stalling and being rejected out.  Auction logic would suggest a move to the lower end of this bracket to see if buyers possess the same conviction they had down here.  This takes us to February 4th, a rather interesting day.  Have a look:

NQ__MarketProfile_04112014

I won’t get too deep into observation of the above except to say this type of well defined profile structure is VERY useful for leaning on.  I will look to buy as close to the value area low at 3431.50 as possible.  Here’s the current market profile picture:

NQ__MarketProfile_04112014_current

The intermediate timeframe auction is in clear seller control.  They have this timeframe locked into a pattern of lower highs and lower lows.  I have highlighted a few very interesting low volume nodes we are coming into this morning on my volume composite:

NQ_VolumeProfile_intermediateTerm_04112014

Finally, the long term auction.  On the daily I show balance with sellers still pressing.  But on the weekly, there is something keeping me on the buy side, a squiggly line.  We may overshoot this reference point, given the markets current velocity, but I am leaning on this level nonetheless until we make a clean break:

NASDAQ_WEEKLY_04112014

 

 

Prepare To Be Left in The Dust

The fast and corrective markets of late are a welcomed climate.  I open my arms wide and high, advancing to embrace the cold corpse of volatility.  I was forged in these conditions coming into the game fresh faced back in 2008.  The markets feel more normal and accurate now than the last two years.

What was that even?  A slow drift higher guided by a gentle summer breeze price action?  That was no place for me, a disheveled secret agent of sorts, affixed on extracting the knowledge of unaware old men before they perish.  NOTE: the strictest adherence to the 47.5 and up policy applies.  If I suspect one meets this threshold, then I begin my process of stealing their lifeblood.

Odd, I agree, but how else does one become wise to industry?

Let’s change gears and talk about how I am an ignorant buffoon who moves far too slowly.  My autonomous trading algorithms are still in testing as I wrap up the ‘odds and ends’ of robo trading.  Algorithms I have spent months building, years thinking of, and weeks testing for THESE VERY CONDITIONS, are still in the laboratory.  Have a look at what Elroi was doing today:

 

Elroi_04102014

 

There is a very simple plan for deploying elroi into the market-early range extension.  Anyone who wants to inch closer to my classified potion now has another piece.  Early range extension and I fire up the algo and go eat iced cream whilst driving a go cart and listening to 47.5 and up rock musics.

On the flipside, this is what I was doing today:

chasingwaterfalls

 

Chasing waterfalls with by groin brain…

I front ran both of my secondary entries because a bounce felt suddenly imminent about 4 times today.  We closed below both.  This isn’t to say I no longer desire to hold these positions because quite the opposite is true.

I have convinced myself (and others) that what we are seeing, RHRN, is a dirty trick.  With April options running rich, it was time to secure some premium, just as we must every month before option expiration.  In the hood they call it the overplay for the underlay.  I do too.

So I fret not, really, even while the world around me degrades into a disheveled mess.  If I want to see real death and decay then I can just drive down to Mound and Caniff to see the most destitute shitholes this nation has to offer.  Crumble around me bro market seriously, I shine in the rough.

Active Overnight Session and How It Fits inside The Big Picture

Futures traders had some action early this morning when equity futures abruptly fell out of balance and knifed lower.  The wave of selling rolled in around 5am and it was soon met with responsive buying.  The overnight profile shows no clean consensus on value and we are currently trading near unchanged in the NASDAQ.

I will always buy the first test of my EMA if I feel the chart is still trending and the EMA resides at a higher low then our previous swing high (or lower high then our previous swing low).  However, the buying is typically the easy part of this trade.  Knowing whether the trend will resume or whether price will roll tide back is the management key.  The very long term auction as seen on the weekly composite chart is still buyer controlled.  We were buyers ahead of the 33 EMA which has now edged higher to touch the low print.  Did you know moving averages move?  See below:

NASDAQ_WEEKLY_04102014

The daily chart which I most commonly refer to as the long term auction is no longer a clear picture of buyer control.  Our EMAs are not in full alignment and our longest term EMA, the 99, is flat.  We have also seen a pattern of lower highs and lows recently and it appears the long term timeframe is in balance.  Now buyers and sellers must slug it out before one or the other becomes the clear controller of the long term auction.  However, buyers have a slight control edge remaining (see blue circles on major swing levels).  See below:

NASDAQ_DAILY_04102014

The intermediate timeframe is seller controlled.  Their control can be seen as a series of lower highs and lows.  Yesterday’s action was dynamic and powerful to the upside, but until we see a higher low printed, the sellers have the ability to assert control on this timeframe.  I have removed all the lines I normally keep on this chart so we can more clearly view the seller control.  There are some very interesting low volume nodes if you click and enlarge the chart, and these make great entry points because they often see “hot plate” type reactions:

NQ_VolumeProfile_intermediateTerm_04102014

The short term auction is buyer controlled.  This can be seen as a migration of value higher as well as strong responsive buying tails on the recent profiles.  We are trading inside the price zone I highlighted yesterday as a low volume slip zone.  This zone is so important.  If buyers can finish trading up through it, and then gain acceptance via value up above 3602.25, this would translate well into gaining control of the intermediate term at best, putting the intermediate term auction into balance at the least.  I have highlighted this interesting zone on the following market profile chart as well as a few other observations:

NQ__MarketProfile_04102014

To Live and Die in Momentum

Momentum stocks have beat me into a red YTD performance on the year.  They beat me good to teach me a lesson, much like the nuns of my youth.  Just as the nuns failed to beat their religion into me, nor can momentum stocks beat me into submission.  I keep coming back like a good little hellion.

When do they make money?  Is this time different?

Momentum stocks make money when they are trending with you.  Sometimes (like now) the trend on the daily chart loses its trend.  This is when a general upheaval is occurring.  Your faith is being tested and the devotees have not buckled yet.  Do you believe they have been put through real pain?  A real test like honest Job?  I think momentum names have gotten off easy so far…some of them.

That’s why I am only looking to buy the very best momentum.  I consider names like FB, TWTR, DDD, TSLA, YELP, AMBA and more the finest.  AMBA builds tiny state-of-the-art components for gopros and other low energy, high definition cameras.  These are great for drones and robots.  YELP tells me where to eat and gives me a microphone to blast out my hipster foodie advice.  DDD will print drones and robots and give us gadgetry for our homes.  TSLA wants to replace side view mirrors with cameras because it improves range on their ELECTRIC luxury cars.  Facebook is like a venture capital firm buying anything and everything amazing in California.

That’s all great, great stories and great prospects for the future.  LED lighting is more realistic and getting insane traction.

That’s great too but why are we really putting our money in the stock market?  To make money.

These stocks will make money on the way up.  Some of them will go to new all time highs fast.  Not all of them will, such is the game of stock picking.

These are my top momentum picks, right here right now.

#1 Twitter – I am blown away by the pessimism for this one.  They are practically ubiquitous in a few short years.

#2 and #3: FB, FSLR

Top positioning pick is still LED lighting.  I think there are so many misconceptions and misunderstandings of who is winning the business in this space.  CREE, RVLT, AIXG, PHG, and OESX in that order.  LEDS is pure jetsam, just trade it when you see fit.

A cocktail of the above will propel my account to new highs.  We might as well have some fun while we’re at it.

Swing Trade Plan for $DDD

I started buying 3D tech this morning with a 1/3 entry.  This equates to roughly 3.5% of my risk portfolio.  My goal is to continue having price come against me so I can build to at least 2/3 in size.  If however we turn higher here, I will be obligated to take my first target and wait for a new opportunity to enter.

This trade is me getting back to my swing trading roots in my favorite industry, technology.  If I side with any political party it is the futurists.  I am intrigued by the people behind companies who are technology ambassadors to the world.  They are disruptive and have more potential then established cash cows.

3D is almost 50% off the high water mark we printed late last year.  This is an overreaction and a welcomed one by me, because I have been left out from owning this company for a very long time.

Without further adieu, here is my wish list plan for accumulating 3D technology.  Hopefully it craters after earnings, which I will be holding through:

DDD04102014

Cut Through The FOMC Noise With Two NASDAQ Price Zones

If you do not have time to read the entire context report, skip to the last paragraph/chart for the Two NASDAQ price zones you need to navigate the FOMC reaction-to-the-reaction-to-the-reaction.

Buyers showed up overnight and as the USA warms up we have a slightly green NASDAQ market.  One of the features of this multi-week selling has been mornings which start strong only to be faded and eventually wind up with price closing near the low of the session.  However, just when you think you have the markets number it will throw you a slider.

Let’s have a closer look at the long term auction and why I suspect a bounce is near.  Also, let’s look at what will begin to worry me and cause me to really tighten my book up.  See below:

Weekly Chart (long term auction):

NASDAQ_WEEKLY_04092014

 

DAILY CHART (long term auction):

 NASDAQ_DAILY_04092014

Intermediate term we are still seller controlled but stretched.  This increases the likelihood of a big move in either direction, either a continuing to stretch the boundaries of the market to the downside or a snapback move.  With FOMC minutes out this afternoon, the likelihood is even greater.  You can see price has reverted back to my 33ema and paused.  The market is very likely waiting for FOMC minutes before deciding the next move.  More importantly to us is how the market reacts to the price reaction we see this afternoon.  This is not to say the first move is wrong or fake, but instead that long term participants are likely to be moved by the action and if they are we need to observe their order flow.  I have highlighted some key intermediate term levels on the following volume profile composite:

NQ_VolumeProfile_intermediateTerm_04092014

Finally the most delicious and powerful timeframe of all, THE SHORT TERM auction.  These profiles are set up more exciting then I have seen in a great while.  We have very low volume slippery zones on both sides of price right here, right now.  The short term is in balance with buyers trying to take the early initiative to break the balance.  On my market profile chart you will see a thick pink and a lovely chartreuse green line.  These two levels are the edges of where very low volume starts.  A breech of either (or both) is very likely to see an acceleration of price in that direction.  Which side of this environment we end up on will ultimately dictate the control on both the short and intermediate term.  In the meantime, it produces a massive trading opportunity to “go with” a move that penetrates either zone, intraday.  See below:

NQ__MarketProfile_04092014

Where The Rubber Meets The Road

Equity futures gapped lower overnight displaying strong follow through on yesterday’s trend day.  As the USA comes online the S&P is down nearly 10 points and the NASDAQ about 20.  We have an hour until the cash session begins to recapture some of this downward progress but this is otherwise known as a pro gap.  Essentially that means the risk is elevated beyond a level most retail traders can handle in the event they attempt to fade the move and close the overnight gap.

I am of the opinion that with the right tools we can formulate a sound method of participating in this gap, and the most important tool today is market profile.  On Wednesday morning, I highlighted two key price zones which tell the story on the NASDAQ.  One was a low volume price zone above.  We traded ALMOST the entire range of that upper zone before stalling and being rejected out.  Auction logic would suggest a move to the lower end of this bracket to see if buyers possess the same conviction they had down here.  This takes us to February 4th, a rather interesting day.  Have a look:

NQ__MarketProfile_04112014

I won’t get too deep into observation of the above except to say this type of well defined profile structure is VERY useful for leaning on.  I will look to buy as close to the value area low at 3431.50 as possible.  Here’s the current market profile picture:

NQ__MarketProfile_04112014_current

The intermediate timeframe auction is in clear seller control.  They have this timeframe locked into a pattern of lower highs and lower lows.  I have highlighted a few very interesting low volume nodes we are coming into this morning on my volume composite:

NQ_VolumeProfile_intermediateTerm_04112014

Finally, the long term auction.  On the daily I show balance with sellers still pressing.  But on the weekly, there is something keeping me on the buy side, a squiggly line.  We may overshoot this reference point, given the markets current velocity, but I am leaning on this level nonetheless until we make a clean break:

NASDAQ_WEEKLY_04112014

 

 

Prepare To Be Left in The Dust

The fast and corrective markets of late are a welcomed climate.  I open my arms wide and high, advancing to embrace the cold corpse of volatility.  I was forged in these conditions coming into the game fresh faced back in 2008.  The markets feel more normal and accurate now than the last two years.

What was that even?  A slow drift higher guided by a gentle summer breeze price action?  That was no place for me, a disheveled secret agent of sorts, affixed on extracting the knowledge of unaware old men before they perish.  NOTE: the strictest adherence to the 47.5 and up policy applies.  If I suspect one meets this threshold, then I begin my process of stealing their lifeblood.

Odd, I agree, but how else does one become wise to industry?

Let’s change gears and talk about how I am an ignorant buffoon who moves far too slowly.  My autonomous trading algorithms are still in testing as I wrap up the ‘odds and ends’ of robo trading.  Algorithms I have spent months building, years thinking of, and weeks testing for THESE VERY CONDITIONS, are still in the laboratory.  Have a look at what Elroi was doing today:

 

Elroi_04102014

 

There is a very simple plan for deploying elroi into the market-early range extension.  Anyone who wants to inch closer to my classified potion now has another piece.  Early range extension and I fire up the algo and go eat iced cream whilst driving a go cart and listening to 47.5 and up rock musics.

On the flipside, this is what I was doing today:

chasingwaterfalls

 

Chasing waterfalls with by groin brain…

I front ran both of my secondary entries because a bounce felt suddenly imminent about 4 times today.  We closed below both.  This isn’t to say I no longer desire to hold these positions because quite the opposite is true.

I have convinced myself (and others) that what we are seeing, RHRN, is a dirty trick.  With April options running rich, it was time to secure some premium, just as we must every month before option expiration.  In the hood they call it the overplay for the underlay.  I do too.

So I fret not, really, even while the world around me degrades into a disheveled mess.  If I want to see real death and decay then I can just drive down to Mound and Caniff to see the most destitute shitholes this nation has to offer.  Crumble around me bro market seriously, I shine in the rough.

Active Overnight Session and How It Fits inside The Big Picture

Futures traders had some action early this morning when equity futures abruptly fell out of balance and knifed lower.  The wave of selling rolled in around 5am and it was soon met with responsive buying.  The overnight profile shows no clean consensus on value and we are currently trading near unchanged in the NASDAQ.

I will always buy the first test of my EMA if I feel the chart is still trending and the EMA resides at a higher low then our previous swing high (or lower high then our previous swing low).  However, the buying is typically the easy part of this trade.  Knowing whether the trend will resume or whether price will roll tide back is the management key.  The very long term auction as seen on the weekly composite chart is still buyer controlled.  We were buyers ahead of the 33 EMA which has now edged higher to touch the low print.  Did you know moving averages move?  See below:

NASDAQ_WEEKLY_04102014

The daily chart which I most commonly refer to as the long term auction is no longer a clear picture of buyer control.  Our EMAs are not in full alignment and our longest term EMA, the 99, is flat.  We have also seen a pattern of lower highs and lows recently and it appears the long term timeframe is in balance.  Now buyers and sellers must slug it out before one or the other becomes the clear controller of the long term auction.  However, buyers have a slight control edge remaining (see blue circles on major swing levels).  See below:

NASDAQ_DAILY_04102014

The intermediate timeframe is seller controlled.  Their control can be seen as a series of lower highs and lows.  Yesterday’s action was dynamic and powerful to the upside, but until we see a higher low printed, the sellers have the ability to assert control on this timeframe.  I have removed all the lines I normally keep on this chart so we can more clearly view the seller control.  There are some very interesting low volume nodes if you click and enlarge the chart, and these make great entry points because they often see “hot plate” type reactions:

NQ_VolumeProfile_intermediateTerm_04102014

The short term auction is buyer controlled.  This can be seen as a migration of value higher as well as strong responsive buying tails on the recent profiles.  We are trading inside the price zone I highlighted yesterday as a low volume slip zone.  This zone is so important.  If buyers can finish trading up through it, and then gain acceptance via value up above 3602.25, this would translate well into gaining control of the intermediate term at best, putting the intermediate term auction into balance at the least.  I have highlighted this interesting zone on the following market profile chart as well as a few other observations:

NQ__MarketProfile_04102014

To Live and Die in Momentum

Momentum stocks have beat me into a red YTD performance on the year.  They beat me good to teach me a lesson, much like the nuns of my youth.  Just as the nuns failed to beat their religion into me, nor can momentum stocks beat me into submission.  I keep coming back like a good little hellion.

When do they make money?  Is this time different?

Momentum stocks make money when they are trending with you.  Sometimes (like now) the trend on the daily chart loses its trend.  This is when a general upheaval is occurring.  Your faith is being tested and the devotees have not buckled yet.  Do you believe they have been put through real pain?  A real test like honest Job?  I think momentum names have gotten off easy so far…some of them.

That’s why I am only looking to buy the very best momentum.  I consider names like FB, TWTR, DDD, TSLA, YELP, AMBA and more the finest.  AMBA builds tiny state-of-the-art components for gopros and other low energy, high definition cameras.  These are great for drones and robots.  YELP tells me where to eat and gives me a microphone to blast out my hipster foodie advice.  DDD will print drones and robots and give us gadgetry for our homes.  TSLA wants to replace side view mirrors with cameras because it improves range on their ELECTRIC luxury cars.  Facebook is like a venture capital firm buying anything and everything amazing in California.

That’s all great, great stories and great prospects for the future.  LED lighting is more realistic and getting insane traction.

That’s great too but why are we really putting our money in the stock market?  To make money.

These stocks will make money on the way up.  Some of them will go to new all time highs fast.  Not all of them will, such is the game of stock picking.

These are my top momentum picks, right here right now.

#1 Twitter – I am blown away by the pessimism for this one.  They are practically ubiquitous in a few short years.

#2 and #3: FB, FSLR

Top positioning pick is still LED lighting.  I think there are so many misconceptions and misunderstandings of who is winning the business in this space.  CREE, RVLT, AIXG, PHG, and OESX in that order.  LEDS is pure jetsam, just trade it when you see fit.

A cocktail of the above will propel my account to new highs.  We might as well have some fun while we’re at it.

Swing Trade Plan for $DDD

I started buying 3D tech this morning with a 1/3 entry.  This equates to roughly 3.5% of my risk portfolio.  My goal is to continue having price come against me so I can build to at least 2/3 in size.  If however we turn higher here, I will be obligated to take my first target and wait for a new opportunity to enter.

This trade is me getting back to my swing trading roots in my favorite industry, technology.  If I side with any political party it is the futurists.  I am intrigued by the people behind companies who are technology ambassadors to the world.  They are disruptive and have more potential then established cash cows.

3D is almost 50% off the high water mark we printed late last year.  This is an overreaction and a welcomed one by me, because I have been left out from owning this company for a very long time.

Without further adieu, here is my wish list plan for accumulating 3D technology.  Hopefully it craters after earnings, which I will be holding through:

DDD04102014

Cut Through The FOMC Noise With Two NASDAQ Price Zones

If you do not have time to read the entire context report, skip to the last paragraph/chart for the Two NASDAQ price zones you need to navigate the FOMC reaction-to-the-reaction-to-the-reaction.

Buyers showed up overnight and as the USA warms up we have a slightly green NASDAQ market.  One of the features of this multi-week selling has been mornings which start strong only to be faded and eventually wind up with price closing near the low of the session.  However, just when you think you have the markets number it will throw you a slider.

Let’s have a closer look at the long term auction and why I suspect a bounce is near.  Also, let’s look at what will begin to worry me and cause me to really tighten my book up.  See below:

Weekly Chart (long term auction):

NASDAQ_WEEKLY_04092014

 

DAILY CHART (long term auction):

 NASDAQ_DAILY_04092014

Intermediate term we are still seller controlled but stretched.  This increases the likelihood of a big move in either direction, either a continuing to stretch the boundaries of the market to the downside or a snapback move.  With FOMC minutes out this afternoon, the likelihood is even greater.  You can see price has reverted back to my 33ema and paused.  The market is very likely waiting for FOMC minutes before deciding the next move.  More importantly to us is how the market reacts to the price reaction we see this afternoon.  This is not to say the first move is wrong or fake, but instead that long term participants are likely to be moved by the action and if they are we need to observe their order flow.  I have highlighted some key intermediate term levels on the following volume profile composite:

NQ_VolumeProfile_intermediateTerm_04092014

Finally the most delicious and powerful timeframe of all, THE SHORT TERM auction.  These profiles are set up more exciting then I have seen in a great while.  We have very low volume slippery zones on both sides of price right here, right now.  The short term is in balance with buyers trying to take the early initiative to break the balance.  On my market profile chart you will see a thick pink and a lovely chartreuse green line.  These two levels are the edges of where very low volume starts.  A breech of either (or both) is very likely to see an acceleration of price in that direction.  Which side of this environment we end up on will ultimately dictate the control on both the short and intermediate term.  In the meantime, it produces a massive trading opportunity to “go with” a move that penetrates either zone, intraday.  See below:

NQ__MarketProfile_04092014