Built For This Game

Every detail matters. It is the little details that add up to something big. If anything ever seems cryptic or overly granular bear in mind it all adds up to the big picture. Never lose sight of either.

I can’t always clearly see the low of the day at 10:30am, but when I do the Pelicans are the first to know about it:

And I don’t throw these types of calls around often. They’re special. Sometimes there is a clean stride to the auction; a near perfect grace to the proceedings of the price mechanism and it whispers sweet nothings in my ear.

“Go long, Raul”

As many of you know, I am a product of the bull market having become active around 2013. Therefore, confidence with my long trade is a bit stronger than the short trade. But I am developing those tools as well. Trade ideas are symmetrical, ideally, meaning they work both ways. The thing is if you study market behavior you will learn that the behavior of the market hardly symmetrical most of the time.

That’s what makes the symmetry so special.

So while my stocks exchange punches with each other, there are a few clams to scrape out of this market as a scalper. One needs both skills, IMO, to truly benefit from the ebb-and-flow nature of the stock market.

As you can see from my prior post, I sold out of my weekly Zillow calls this morning. Now the stock is ripping.

Here’s how it all started. I have been faithfully stalking Zillow for many weeks after it impressed me with its gay jaunt higher early last month. I stalked and I stalked, like a caveman who sees their next ‘mate’. Then it came right to me, right to my trap, and I pounced and procured my position at wonderful prices.

Oh joy, I trade well.

Then this morning, just after leaving a deep meditation, I receive a text message. Mind you, this is 9:24am and the market is just about to open. The message reads, “Free Mustache Rides” which hell that sounds fun. It carrys a link to some disgraceful sight expounding at length a certain sexual harassment case brought forth on Zillow.

Short of time and eager to earn my lil Nasdaq nut, I check premarket quotes on Z, flat, whew…I go to Twitter and find the douche instant message convos of douche bags working for Zillow, puke.

I opt to keep the open in my peripheral while centering my attention on the much more vial Nasdaqs. It flinches and I cut out my risk.

I ignored my plan, forged for weeks in the bowels of the mother ship and missed out on a money making opportunity.

Lesson: news is noise, trade price action. Most of the time news rolls right off me like beads of water—because I am water. But I let these creepy dude-texts infiltrate my robot brain. ERROR.   Not a huge deal but you deserve to share in my lesson. Speculation is a sport for the Iceman. And let’s face it, most of you are crass perverts of the first degree. And that’s okay. I have no qualms with your life choices. As long as you execute trades well its ultimately your cross to carry. I’m not the moral deputy of the internets.

NEXT TRADE

I have no desire to hold weekly options fresh on the heels of them catching a case.

Next…

We started the month of December with an ‘event’ of sorts. The first half-hour of trade, also known as the initial balance, was spread far and wide (61.25 points) by an aggressive other time frame participant who predominantly sold the market. We must also give some credit to the buyers who pushed up 7.75 points before the move, the move largely driven by a fast sell in AAPL shares.

In case you are very new to the Nasdaq, Apple Inc. is the largest component of the Nasdaq 100, the underlying index of /NQ_F futures.

However, none of this activity was news driven, which makes it unique. We treat motivated, news driven moves a bit differently from big, participant driven moves.

Participant driven moves must be monitored for continuation. Does the responsive seller become initiative? Is the other-time-frame (OTF) still engaging the market? So far no, and maybe.

We have traded inside this initial balance since it occurred. And as far as I am concerned, we can shelf the volume profile I normally share which features very granular levels only useful to me and other day traders, and instead put your eyes, the swing traders eyes, on just a few key points.

Listen, we have Fed Beige Book coming out at 2pm today and it is usually not a high impact event. But before then ISM Non-Manufacturing Index is set for release. This number surveys all sorts of odd industries like services, construction, mining, agriculture, forestry, and fishing and hunting. It may be of interest during the great commodity liquidation of 4^th quarter 2014. Keep an eye on the price action around 10am eastern.

In the meantime, amid all that noise, keep these context levels close to your itchy trigger finger during today’s session:

I spend my mornings like any humble speculator. Wake earlier than most, shower and have a nourishing breakfast, spend time enriching mindfulness, build a plan of attack for the morning, then grind out the first hour or two of trade to earn a few clams.

Then my attention quickly turns to stock picking. I have a rule, if I do something for too long without making money then it’s a hobby. I can assure you, picking stocks is not a hobby. Aside from the drubbing I received back in The March and the breath holding contest of September it has been a fruitful endeavor.

Yet, part of me, the cynic, wants to kill all of these stocks and leverage where things are actually working, trading these index markets. But then I recall the egregious money making ability of consolidation breaks. 2 breaks pay down 6 fakes, I kid you not. So I stick to the swings too.

I grabbed a fist full of dynamite sticks yesterday and today, buying Z, P, NOR, and CLR. I have loose cash still. These trades are intended to last a few days, like sore muscles from a vigorous workout. But I am flexible—if they work right away I will take profits. If they heap dung upon me I will heap dung upon them. I have no time to stink up my book. The year end is fast approaching.

The start of a new month tends to carry volume with it and yesterday was no exception. Prices traded lower fast to start the cash session in the Nasdaq after opening right at Friday’s low. The initial drive down behaved much like news had caused a swift other timeframe entry, however it was largely due to a sharp sell in shares of Apple, the largest company in the world.

The market spent the rest of the session confined within the 61.5 point range developed during the first hour of trade and overall led to a weak climate for individual stocks. The heavy churn managed to shift the VPOC of the current micro composite up from 4242 which was a subtle contextual development. Whenever I see a VPOC shift it tells me two things—value has migrated and it’s time to closely observe who it motivates to act most aggressively on the market (buyers or sellers).

The Nasdaq is still trading above an air pocket which separates us from the mutli-day balance formed from 11/13-11/20 unlike the S&P which is already down in its pocket. Buyers need to sustain prices above 4268 to hold off the process of exploring and negotiating the pocket open just below current prices on the Nasadq.

The overnight action was up and contained within the balance formed yesterday. Buyers were most active thus my expectation is for the open to feature a push lower to test the overnight inventory. Sellers will look to target the MCVPOC at 4290. If buyers are not found in this region then I expect us to continue lower to test the overnight low 4283.50 then Monday’s low 4273.50.

Swing traders will be eager to see if the speed in the marketplace continues which may lead them to raise cash of even seek out short positions.

I have highlighted the important levels I will be trading from on the following volume profile chart:

There are two types of gripes I consistently hear—the ones who missed the trade, and the ones who stopped out on a trade. For a trader, these two events are as normal as breathing. Which reminds me, are you aware of your breath while you trade?

Are you aware of any other physical sensations? Your forehead, is it all wrinkled up? Your shoulders, are they up by your ears? You need to start listening to your body—it is a better indicator than anything you can slap on your chart.

It is a better indicator of RISK TOLERANCE.

You may have assumed too much risk. And that’s okay. Correct yourself today. Choose today.

This is no sport for the mindless buffoon. You should surrender your wealth to a broad swath of index ETFs, they’re crushing. Speculating requires constant biofeedback so you can listen to the internal feedback of the marketplace while always accepting the external events as they come.

And stop spending so much time trying to answer the ‘why’ of your dilemma. More x than y, move on already. Clear the deck for your next opportunity.

We take them as they come, and if you have been reading along then you know I have been stalking this Z for a while. Well, it hit my reference point this afternoon, found some buyers, and thus henceforth I too am a buyer of Z. Do you see how simple this can be? If it’s wrong I lose less than 1% of my book. NEXT.

If it’s right, my friends, 3-4% easy.

This is all you need to do, over-and-over. Fuck your ego off, literally. Eliminate it.

Big ups to my dead soldiers today: CREE, UGAZ, some TWTR, and BALT

To my new grunts, Z and VA. WELCOME, it’s hell out there but you better start shooting if you intend to live.

Two of my positions accelerated against me last week and into today during the rout in oil. My turkey hangover appears to have dulled my senses and amid this folly both BALT and UGAZ have seen fit to properly correct me.

It appears the tofu eating class has used their lean edge to run circles around the carnivores, making them pay for their sins against animals.

Spared from said atrocities are the Californians and their Habit burgers. Their diverse menu will be spared from the rapture.

On a different note, let me tell you about the best flight I ever took. It was different than any plane I have been on, the website was hot and streamlined, the gate management was fluid, and the in-flight entertainment was on a new level. Clearly I was flying Virgin America.

And much like the Habit burger, I cannot enjoy said company from my desolate homelands—pirate’s cove—Detroit. But like all things west coast, it is better and shall be spared from the rapture.

I actually sold down some of my long term TWTR shares this morning to make room for a position I am beginning to build in VA. I intend to own a diverse set of quality companies. Dead is the Raul who concentrates on internet and tech. And with oil on the cheap, you would be crazy to not have an airliner in tote.

While they all make me sick, Virgin Airline is FTW only.

Despite the volatility in the commodity futures markets, the action in the Nasdaq has mostly ‘normal’. I use the term normal loosely to define the amount of volume transacted and the overall range of the session which both fall well within the 1^st standard deviation of a data set dating back to January 2012.

Also, the profile print suggests balance. You can see the action formed a well-distributed bell curve:

Keep in mind we have ISM manufacturing stats at 10am today then an otherwise quiet economic calendar until Wednesday.

Looking at the higher timeframe as we start the week, we can see the first real sign of excess show up on the Nasdaq since the doji on 11/25/2014. As we enter a new month of trade with the potential for new cash flows, it will be interesting to see how this candle is treated to start the week. I have noted very little else on this daily chart, just the major air pockets below current prices:

Below I have note the key price levels I will be observing today. Note how prices overnight exceeded the lows of Thanksgiving day. The market appears to want to properly auction these prices. If we decidedly break below 4309.75 then it likely opens us up to continued tests lower. Otherwise, I expect chop and balance. Please see below:

Prices on the Nasdaq have drifted higher during the holiday session in a holiday manner. Under the influence of low volume and perhaps tryptophan the market has gained nearly 40 points to the upside since Wednesday’s close.

When trading at swing highs, there are not many reference points nor is volume profile analysis as effective for noting key inflection points in the market. However, as the market trades higher searching for sellers, we can not the key price level footprints left in its wake.

I have noted the key support levels and air pockets which may offer fast trades on the following volume profile chart: