Hot Pocket

Yesterday morning we tested higher early in the session and found responsive selling early.  The action followed through for much of the day until we reached the value area high from Wednesday’s initial distribution.  If you recall, Wednesday traded like two different sessions, thus it made sense to split the distributions in market profile.  The resulting market profile print from yesterday is a normal variation which ended near the middle but lower than Wednesday’s close.

The USA economic calendar is quiet on this Quad Witching Friday, however Canada is releasing the CPI information at 8:30am and we also have Euro-Zone Consumer Confidence at 10am.

The overnight profile is squatted with no clear balance forming.  We however form a shelf at 3784.75, only one tick above the slippery pocket spanning from 3784.50 – 3780 on the intermediate timeframe.  This small pocket is critical in the short term because it separates price from the uppermost auction distribution and the below balance region.  Even more important, sustaining the prices shows the market accepts the Fed rally.  Otherwise, if we drop back down into the balance just below, the entire context is called into question, and the toothy thin zone below our most recent balance becomes a tasty target for short sellers.  I have highlighted this intermediate term structure below:

With that intermediate term context in mind, let’s put our eyes on the short term and find out where we can best gauge price action intraday.  These levels are a bit more subtle to spot today by simply looking at the distributed profile, but when I split it open and observe some of the key characteristics of yesterday’s trade, the relevant levels jump right out.  Use these levels early on today as your sign posts:

A few of my largest positions have been sedentary throughout this quiet low volatility environment.  They did not participate in the rally and the continued to sleep today.  There is a certain element of squirrel that enters my mind when I spend 4-5 days with size in a company like Candy Crush maker King Digital Entertainment.  They make free iPad games for goodness sake.

Oracle missed earnings expectations after the market closed and the shares are getting hammered.  This should serve as a friendly reminder how pungent and nasty the price action was during earnings season a month or so back.

I managed to end the day green while giving back my quick gains in Facebook.  There are definitely winners and losers in this stock pickers market.

I bought the early selling in Amazon with options, a move which seems too soon in hindsight.  These fast moves down are not the best time to buy options.  Then again, buying yesterday afternoon would have been worse, yes?  I will see how they trade tomorrow and hopefully carry the calls through the weekend.

Tomorrow is a quad witching of option expiration and index futures expiring and the action may spike into the realm of violent.

I joined RC on the FRO late in the session, I am working the short side in NFLX whist riding a small YOLO runner into tomorrow OPEX, and I am overall feeling groovy even while I lose trust in some of my largest positions.  I have a plan here, it is working, and I will stick to it, even if I feel a bit of paranoia.

I am currently short NFLX via some YOLO 445 puts (note: I took a scale already), and long Amazon calls on this sweet morning dip.

Amazon is a champion, NFLX is an old tiger.

#PairTrade

The Nasdaq futures are trading a touch higher overnight in a session which printed a quiet, slightly imbalanced market profile.  Initial Jobless Claims and Continuing Claims came in worse than expected at 8:30am but we saw no reaction from the market after the news.  We have Philadelphia Fed at 10 am, and the Natural Gas report at 10:30am which may affect any energy trades.

Yesterday reads like two different sessions on the market profile.  There was the normal variation session before FOMC, and the trend day after the session.  Our expectation after a trend day is that we are likely to see balance near the upper end of the trend

Taking our eyes out to the long term, I want to point out two items.  First, we are trading near prior swing highs.  We are coming into prior swing highs with strong buyer thrust.  How we handle these prices will be very telling going into summer.  On the second chart, I have plotted monthly profiles to exhibit the lack of structure behind our most recent upward move.  This is a caveat to the recent upward action, something I keep in the back of my mind but always consider.  See below

Finally, and perhaps the most pertinent to swing trades (2-12 days) is the intermediate term auction.  Prices are back inside the uppermost distribution of action.  Buyers need to sustain trade above 3784.50 to keep us from a harsh revisit of our prior balance.  Sustaining trade above this level would be constructive and suggest the strong initiative force which drove us from this balance on 06/12 has changed, as has sentiment.  See below:

As the very dapper Janet Yellen discussed margin levels and dismissed the concerned questions of whether the stock market was priced too high, I was pressing piles of chips into leverage.  First Facebook, then Fords.  All the excitement about cell phones while Amazon was officially releasing their new smart phone enticed me into the ultra kool IFON.  The international splendor of the World Cup also encouraged me to join the elite men of iBankCoin in IFON.

The timing of the leverage was sublime, as it was soon followed by a wave of buy flow, swelling up beneath me and carrying me to glory.

Trading has gone exceedingly well these last 10-12 trading days, and I am down only 10% on the year.  I made more aggressive mistakes then most during the rough months of trade, and to mount this much of a comeback is rewarding, although I want MOAR.  I started feeling a touch greedy, and a bit of post traumatic stress kicked in toward the closing bell.  I remembered waking up down a quick five stacks and the aloof weeks I spent wondering how to go forward.  This memory pushed me to buy some NFLX puts.  I bought Friday’s $445 puts, for 2.13 each.  This may put a damper on any gains I stand to make on the long side tomorrow and Friday, but it gives me piece of mind.

Also, for $199 and a two year plan, YOU my friend can be the lucky owner of an Amazon Fire phone with a FREE one year Prime membership.  Once the masses come to find out Amazon Prime has more streaming content (cough, HBO) than NFLX on top of FREE two day shipping, they will be like, “maybe it is time I put NFLX out to pasture.”  At least that is my take on the news.

This Amazon phone is a killer across the board, a pure disruption of the highest tier.  It has a button you press and can then scan ANYTHING, and instead buy it on Amazon…likely for less.  Retail showrooms are the free advertising of Amazon.  This will not end well for most.

All this Amazon pumping aside, the Nasdaq trended hard for 2.5 hours this afternoon.  We are likely to see some continuation tomorrow.  But if not, I have some NFLX puts.

The Nasdaq futures are quiet overnight, up a few points as the financial participants hold their collective breath ahead of this afternoon’s Fed proceedings.  The market expects $15B pace in MBS purchases, $20B pace in Treasury purchases, $35B in QE.  We also our rate decision (0.25% forecast) and Janet Yellen press conference at 2:30.

With OPEX this Friday, and the Fed itinerary, the rest of this week is not an environment to be complacent in.  There is likely to be other timeframe participants through the rest of the week, and knowing the key price levels and observing the market behavior is important for knowing exactly the type of context we are trading in.

On the intermediate timeframe, we are balanced just below our uppermost distribution.  Three attempts have been made to breach the threshold separating our current bracketed trade from the uppermost distribution and each time we have found responsive selling at the resistance.  Below, and nearly 40 Nasdaq points away, is a base which formed during the end of May and into June before we rallied.  The VPOC of this entire composite still resides in this bottommost distribution and the structure below is thin and toothy.  If sellers can initiate order flow below 3754.75, then we are likely to see a test of this base before we go elsewhere in the auction.  See below:

If you look at the 24-hour globex profiles, you can see the long duration of time we have spent in balance.  The older these balances become, the more likely it is they break.  The key is monitoring the action near the extremes of value and whether we are making a clean break.  See below:

Taking our attention to the short term, we can see value continues to overlap but move higher over the last four distributions.  Yesterday’s auction formed a much cleaner distribution than Monday, thus we should monitor today’s action verses the value area that formed.  A clean move away from this value may be an early indication of where the market is headed over the coming days.  See below:

The Nasdaq index has gone into wait and see mode since dipping off the highs last week, and it appears we are taking a pause in front of the market moving FOMC tomorrow afternoon.  If this activity was taking place near swing lows, we could very likely be seeing momo stocks down 8,12,15% a day.  But, since we are trading near the highs, this quiet chop allows momo to run higher.

We are starting to see a bit of euphoric sentiment across the twitter/stocktwit streams, however, this is difficult to gauge and is subjective at best, emotional at worst and potentially distracting.

I have four full size stock positions, none of which are for the particularly faint of heart: TWTR, KING, BALT, and LO.  KING joined the ranks today after starting as a half position, and BALT went full size yesterday.  Also, if you are not already aware, I am long Twitter since $51 because TWITTER TRADERS CAN’T LOSE. I am pressing longs into the FOMC with an eyeball toward the exit in this burning hot summer heat.

My book is full of winners-JAZZ and TSLA to name drop the headline standouts.  I am up nearly 15% on TSLA, a wonderful position as Elon Musk and team hurtle red tape with elegance and panache (LINK: New York-DONE).  I sold TRIP today, booking a small win.  I expected more action from the name today, and when the consolidation became very old, I bounced because it seemed much buying power had been exhausted during the chop.

The market is in aunt Yellen’s hands, all we can do is manage risk.

Do you know where your risk is?

Nasdaq futures sold off 10 points just after the 8:30am release of stronger than expected Consumer Price Index numbers.  The futures had initially drifted higher overnight to take out yesterday’s high and the action made sense when you view our price action in yesterday’s regular trading hours.  There is not much else on today’s economic agenda.  We have headline sensitivity to issues surrounding Iraq, the World Cup is in full swing after the USA narrowly escaped with a victory over Ghana, and we have FOMC announcements up tomorrow.

Yesterday we printed a Normal Variation Day which structurally has a wide initial balance followed by a range extension from the initial balance.  It is as if the other timeframe participant has watched the early action of the auction and decided with conviction to make an aggressive entrance into the market.  Yesterday, we traded higher for the first hour of trade until responsive sellers made an aggressive entrance into the market which subsequently extended our range lower.

The quirk of yesterday’s Normal Variation print is these types of profiles usually establish value lower.  That was not the case however yesterday, as the remainder of the day behaved more like a neutral day, where we saw the selling move faded back to the midpoint of the session.  After that occurred, the market returned to a one timeframe, local-to-local chop.  Logically, we drifted higher overnight, pressing into the other timeframe seller (OTF) from yesterday.

If we take a look at the intermediate term, we can see the overhead supply which we bumped into, which makes the responsive selling make much more sense.  We traded into our uppermost balance region and finding sellers up there was a very logical expectation.  As the market continues trading in balance, we may test lower to see if buyers in the lower balance/base possess the same conviction they had prior to lifting prices.  Overall, we are in balance with well defined regions to trade/form intermediate term bias from, see below:

Bringing our eyes in a bit closer, we can see there was no clear value area yesterday during trade.  It almost suggests imbalance.  And although we saw the aggressive entrance from an OTF seller, we expect their behavior to press balance lower.  The net effect of yesterday’s action was higher prices and a higher VPOC, although the lack of value suggests an imbalance exists on the short term.  If the sellers do not take control early on, we could set up a squeeze.

I have liked the constructive action in shippers for a solid 6-7 trading sessions, first grabbing a win in EGLE then being persuaded by the candid Randad to consider looking elsewhere.  I did not have to look much further to find BALT, a company thoroughly researched by the blogfather himself, and a chart just as enticing as what I was seeing in EGLE.  Well, not quite, but a better financially positioned company nonetheless.

I started buying BALT last week and went full long on the name today.  The price action started working, then I added, then I came to find out there are DEALS going down in the shipping lanes as SBLK bought OceanBulk this morning (h/t PPT member @momono and 12631 member @equalizer).  As it has been described, a world of liquidity sloshing around, trying to find a home, it is a pleasure to see these loose funds finding a home in shippers.  The industry continues to be the beneficiary of rotation.

Who the hell wants to buy shippers with the Mideast going to war?

I have no idea.  I can tell you with absolute certainty one tactic that saves me tons of time and keeps me from going bananas—I stopped looking for the “why”.  It is a very human tendency to get to the bottom of everything, to find an absolute, an answer to every question, a perpetrator for every injustice, and an environmental theory to explain our climate.  If you ask me why shippers have gone up over the past 10-12 days then expect a simple answer, more buyers than sellers.  If you want me to put on a show, then I will make up a funny story to please your monkey mind.

Into the bell, BALT was my second largest position behind only my Twitter investment (RLOL).  I took short dated risk in TRIP, bought some RGSE, and closed out FEYE for a 15 bagger.

On these big waters, I like driving my small fast boat.  Stocks need to work early and often or they are gone.  I am talking to you, KING, get your act together.  Note: talking to and personifying your stock positions if very NOOB.  With my behavior in mind, watch your risk because a post with this much swagger usually portends calamity.

For now, enjoy the prosperity like it is 1986:

With the Mideast heating up again, energy prices BOOM! take the tip top of everyone’s agenda.  Funny how fast we can forget $5 gas and convince ourselves into the BIG HORN 6 liter engines.  Surprising to no one, we are again faced with energy tension and rising prices.

And we all want to make some money off of such conditions, right?

Solars

Oil Services and Components

The Raw Commodities

and TSLA

Sometimes you have to accept that the world is filled with all sorts of people who couldn’t care less about your needs or beliefs.  We all want new technology, but the salty old villians with their secret societies keep us hooked on oil.  Keep in mind, the combustion engine is one of the most efficient pieces of technology on the planet for creating energy.

However, we have an established wildcard.  He flies cargo to space, he builds electric cars that race, and he calls fuel cells bullshit.  The bold leadership of Elon Musk cannot be discounted.  It IS a reason to own shares of TSLA, as is their steady success.  Good businesses don’t just make one good decision or have one solid product.  They pile solid decisions one atop another.  It does not take a genius to make the right decisions.  Anyone can choose the right and wrong when presented with the right information.  So the discovery process must be logical, data driven, and then we make decisions and carry on.

The Tesla vehicles produce volumes of objective data, the Tesla brand is in high demand among the new elites, and the Tesla brand gives big ups to the man himself, darling Nicola.

My play on Iraqi conflict is long TSLA to $1000.

(Full disclosure: I am long since last week)