iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,151 Blog Posts

Baking a Layer Cake

We’re starting to get several layers of profiles building upon one another.  Seeing this tight consolidation after the monster run we had to start the year is impressive. It suggests a strong bid is present in the market.  Support levels are holding.  I’m always on the lookout for a rug pull, but I continue to give upside the benefit of the doubt.

 

First level I want to draw attention to is 1456-1457.  I highlighted the price level yesterday morning for its confluence of multiple reference points.  Yesterday added another reference point to the mix after trading above the level for most of the day only to give it up going into the afternoon.  The result was a very low volume “slip” zone.  I won’t look too far into the level except to say interesting activity has occurred at the level and where we sustain trade relative to this price is our tell going into the weekend.

Key overhead resistance for reference today is the VAH from 01/04 which also was the globex high as of this writing.

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Hijacking The Fly’s Time Machine

In my last post attention was drawn to the Independent Oil & Gas sector after seeing it exhibit unique seasonality performance with a high count of stocks excessively outperforming and underperforming their January seasonality.  That tells me the industry is all over the place (read: tradable action) thus I got lazy and asked the Fly to provide me his top pick in the space.  I wanted the space alien magician pick.  Then I realized he’s a very busy man, piping conference calls into his brain and abstaining from profanity.

I then at that very moment realized I was being very lazy.

Interestingly enough, The Fly leaves the keys to his time machine lying around for the tabbed bloggers.  It’s a work perk.  I’m sure some of you get cocaine or hookers from your degenerate bosses.  We keep it classy and get data.

Without further adieu, here is the stock plucked from The Fly’s computer brain.  LONG LIVE THE FLY:

CLICK HERE TO SEE THE AMAGAMATION OF THE FLY AND RAGINCAJUN BRAINS

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Digging into January Seasonality

Seasonality is new to me, and like all new things in life, it brings out my childlike curiosity.  This same curiosity, mind you, killed the cat.  With that in mind, when I approach anything new that can impact my little purse (very homo) I like to get my hands dirty.  All covered in nasty data.  Okay this is getting weird.  I like it.

I pulled some very basic seasonality statistics from The PPT into excel to get a sense of normality.  Specifically, I analyzed the following:

Month To Date Returns – Average January Monthly Returns

The idea behind the above function was to get an idea of how far stocks have deviated from their average January returns to get a grasp of what is “normal” and what is not.

This is not normal

I define normal using histograms. Similar to the value areas I’ve been writing about in the mornings, I want to find where around 68% of the data falls. I consider any outliers as unique and perhaps warranting attention.

Using all PPT stocks that trade more than 500k shares on average, I built the following model:

You can see the model skewed to the high side, over the 0% line indicating an outperformance of January seasonality is happening in more stocks. Also you can see the range or value area where most performance deviations lie.

The top two tables tally the lower tail (below -1.5%) and bottom tables the upper tail (above 6%). I know, it’s backwards. You’re backwards. See below:

So what’s the play, the action? Well you can see biotech ranks high on both lists like a good lottery ticket. Fly told us this early this morning, so no insight gained there. Gold as an industry and a gaudy jewelry is failing big time in 2013, perhaps you game the mean-revision. Also note two oil industries making the underperformance list. Is our old nemesis the dollar to blame?

Turning our attention to the industries loaded with stocks outperforming the outperformers we see independent oil and gas. Just like the lottery action in biotech, the same is happening in this industry. HOWEVER, the difference is several fine folks in these halls know a thing or two about this industry. I must assure you I am not one of them. But if anyone (ehm, Fly) would like to suggest a top pick in this industry I’m all ears.

Solar made the list (obviously) and so did Business Services and Shipping. I don’t really have more to say. I’m just presenting the data to you. I would love to see some bravery and have some interpretation of the data in the comments below. Ga’head:

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Gaps Filling – Stocks Chilling

My portfolio enjoyed a slight loss today mostly due to the shake down I received in shares of RGLD and CEDC. Moody’s decided today was a good day to throw hot potatoes at the Russians by downgrading their debt. I don’t entirely see how this company’s tiny debt matters when a Russian billionaire has taken the stock under his wing. Their debt is peanuts to him. Fund it.

Royal Gold on the other hand is whipping around, undecided on whether or not to hold this very important price level. I don’t intend to stick around and find out after Fly damned the entire space.

Finally, I added to my shares of SINA near the highs. I still like the name.

Banks caught a slight downdraft too (sans my Goldman).

All of these losing propositions were muted by my Facebook position.

Overall, the market traded lower in a rather orderly manner, especially the S&P which spent the day filling its opening gap.

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Bulls Building a Case

Yesterday the bulls showed up and defended the critical breakout level from the beginning of the year.  Their reaction to the lower prices can be seen in the profile as a single print of TPOs.  Just like a low volume zone, we can draw knowledge from this area.  The market spend very little time trading in the area as buyers snapped up the perceived discounted price.  We therefore can expect those same buyers to show up on any attempt to revisit these levels.  If they do not show up and defend the lows, it’s our cue something has changed, and we need to reevaluate the overall tenor of the market.

I’ve also marked 1457 as a key level.  Not only did the overnight session top out just below this level, there are multiple levels of confluence here.  Where we sustain trade as the week progresses will be a solid cue to the direction of the market in the swing term.

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Stalker List

I like this dip and need to get all the names I’m stalking on paper.  Ideally, I would write on the pages of a small notebook in blood or on a mirror with red lipstick like a good stalker.  But then how would I share them with you?  Facebook?

Stalking the following names for entry:

TPX, APP, JIVE, EWJ, and SINA (to add)

MOAR Update: ZLC, ATML

Note: I’ll be adding to this list as I find more opportunities

Side note: CEDC failed at the very basic necessity of meeting the listing requirements for NASDAQ yesterday.  Yesterday it was a non-event.  Today it’s a decocking.  I may close my position.  Developing…

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Royals Chopping Up the Bears

My favorite mining play has been Royal Gold (RGLD) ever since Senator Gint brought the stock to my attention.  The stock has always flowed in a rather smooth manner, even when taking my coin.  I prefer this type of behavior when I’m trying to build a large position.  I don’t want 5-10% positions in cocaine monkey stocks like ZNGA (a current long) because my portfolio will oscillate too violently.

Today the stock is reclaiming a VERY critical support level even as the rest of the market sells off.  I like the potential bottoming characteristics the stock is exhibiting and currently have no precious metal exposure.  I think the stock has much work to do before I can build a full size position, but I’ve initiated a medium-sized trade today. 

NOTICE: this is a trade with a tight stop until the stock proves it’s ready to start behaving again.

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Well Behaved For Now

http://youtu.be/0UjsXo9l6I8

The pullback yesterday occurred in an orderly fashion with the market finding support at the first key level below Friday’s range.  It wasn’t important that we traded inside of Friday’s range. Had we done so that could have cued us to an impatient bull.  Instead we want to see now is price tighten and coil into a range.  This will give us a tight set of profile characteristics to cue from.

Below I’ve noted the chart and my expectations should we trade above/below certain price levels.  Should we enter the below “slip zone” it will be vital that bulls defend the support down at 1445.  The area is home to heavy initiative buying and losing the level puts many positions initiated into the New Year under water.

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Building A Business

We mostly talk stocks in this surreal environment and occasionally the halls are overrun by bullshit politics.  You’ll toss off to hours of politics instead of spending your time with your children or contributing to society.  And this is perfectly fine.  It’s simply another time-waster that will result in me finding the next innovation b3fore the distracted masses.

Some people enter these halls with the proper intentions of managing real money and watching others manage real money live.  I believe enterprising up and comers should work diligently to develop multiple residual income sources.  We have no pensions.  Some of our best are rotting in corporate mediocrity or studying their asses off for a higher earning slave shift.  But others have thrown up a big middle finger to monotony.  If you’ve taken this route and intend to stay on it you must build businesses.  Businesses, so when one goes stale another one flows ensuring your continued freedom.

As a trader, you can create several businesses.  Maybe you call them strategies.  Mostly we manually trade stocks.  Even when following systematic trades like trading a particular ETF based on PPT scores, we enter the trade manually and follow a set of rules to set (again manually) our profits and stop losses.  We analyze indices but mostly to gauge the context we’re trading in.

Perhaps you haven’t been reading the market profile work I’ve been doing daily and I couldn’t care less if you’ve decided it isn’t suited for you.

“But won’t The Fly cast your charred caucus in the dumpster come March?”

Yes, that’s the deal I’ve made with Le Fly and blogging is a business.  But I’m telling you as sure as 2013 is my busting out year, that thrusting my game onto the interwebs have sharpened it.  To me the biggest disgrace would be to sully these halls with lackluster advice.  We’re here to bank coin.  The profile work is putting coin in my purse.  And soon it’s going to be putting much more.

Enter Hybrid Trading:

My biggest problem with day trading is the idle time staring at the computer waiting for my high probability setup to emerge.  The best setups vanish so fucking fast and most days only have three or four dips from the well to grab a drink.  But what if you could assess context, key off of critical levels, then turn on a robot to diligently hunt out an entry with a high probability of reaching your first scale point?  This dramatically reduces the time eyes must be glued to a chart.  Once your context presents itself you simply turn on your robot and continue your business until a fresh trade is fed to you.  Then you manage the trade manually. Voila!  Hybrid trading.

And that’s exactly what I intend to build this year.  A new business.  If you’ve ever built such a mechanism and care to chime in sage bits of advice please comment.  I’ll always trade and talk stocks.  Swinging for yachts, if you will.

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