iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,285 Blog Posts

Watching for Stabilization

Sellers dominated the auction yesterday up until the late afternoon where we saw a vicious short squeeze.  The resulting candles for many charts look impressive, showing a long tail which suggests very aggressive responsive buying.  What is now vital for a constructive bull case is for the market to stabilize and work to build value higher.  This would involve initiative buying which is more confident than the gnarly reactionary buying we saw yesterday afternoon.

Although the buyers pulled off a heroic bout of buying, the market was successful in moving value significantly below where the markets traded last week.  The overnight market has a very large range and we’re set to gap lower as of 8:30am.

I consider 1399.50 on the e-mini S&P critical for the bull case today.  Losing that area could result in a quick revisit to yesterday’s lows.  Above I’ve boxed a low volume zone where price saw significant rejection by the market several times yesterday.  Should we see the market trade higher, seeing how the market behaves from 1408 – 1410.50 (also yesterday’s close) will be telling of the overall tenor of the tape.

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First Sign of Stabilization

When the market is trending lower, one of the characteristics of the profile to monitor is whether the TPOs can recapture the high of the previous half hour. Alas we’ve officially seen the first TPO to accomplish the task at the one o’clock hour. It’s a start toward stabilization:

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Bad But Not Horrible—Girls Will Be Girls

We’re seeing follow-through today on yesterday’s selling and it’s decimating many bullish charts.  As of lunchtime the SPY has made a clean break through its 33ema.  However, the 99ema is right below and I’m hesitant to dismiss the bull case entirely until we see the markets put in a lower high.  With that in mind, I want to turn your attention to a relative strength standout today and hot money high flyer, Lululemon Athletica ticker LULU.  The stock is up today.  I started buying this morning but was shaken out by the broad selloff. Should we see the market stabilize and turn around (which it is yet to do) I could see this name rocketing higher.  Keep it on your watch list.

Aside from my quick jaunt in LULU ownership, I liquidated most of my longs.  Remaining longs are AWK, ATML, GS, RVBD, and FB and I’m short SKS and M.  Cash is hovering near 60%.   

UPDATE: sold RVBD too

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Long Liquidation Christmas Hangover

What first catches my eye when viewing yesterday’s profile is its shape.  It nearly resembles a lowercase letter b.  The shape of the profile indicates sellers overwhelming the tape early in the session only to find interested buyers down below.  It’s often referred to as long liquidation which is the opposite of a short squeeze.  Once the temporary excess of supply from top tickers and chasers ends the market stabilizes.  Often times the occurrence of a long liquidation can mark the low of a trough.  However, I’ve noted a bias line where I want to see trade sustained above to be constructive on long positions.  The level also acted as resistance during the overnight session on three occurrences also before we blasted through it around 7am.  Watch trade in and around 1415:

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Don’t Act Brand New

We’re getting our first solid snow and by the looks of it winter is off to a healthy start.  Last winter featured mild temperatures and practically no accumulation of snow.  Jeff Daniels and I can attest to the importance of snow and ice for our iconic lakes.  I mostly enjoy the ripe conditions for Tokyo drift driving.

The funny thing about the first significant snow is how everyone acts brand new.  Even the well studied librarians insisted it was imminent that the roads would become impossible to trek.  Oh the horror!  I performed my inaugural double-doughnut parking lot warm up before advancing to some chicane action near the obviously empty golf course.  You must always consider your risks when performing advanced driving maneuvers and perform every slide in a kickass manner–Ludacris on bump.

I’m almost giddy to shovel all the snow in the morning.  It’s the light and fluffy, good for making you feel boss strong and getting the blood flowing into your rosy cheeks (no butt).

Back to drifting, how do so many people resist the urge to slide their car around like they’re James Bond being chased through Stalingrad by a bunch commies?  Are people so caught up in the mundane that they completely overlook a practically free and amusing activity?  Then I thought perhaps they don’t have a method for learning the technique.  Then I thought about trading.

One thing you will notice about consistent traders is their methodical approach.  I look back at the worse trades of my year and they were all deviations from my plan.  I tend to throw money at an idea quick, trial-by-fire.  Take for example my entry today shorting Macy’s.

One overarching thesis going into the New Year is weakness in high-ish end retail stores.  Today the early holiday sales data comes out and we get a bid sell the news reaction.  I practically sold the lows on M.  I’ve already deviated from my method of trading.  My method is simple, it’s momentum and order flow boiled down to two simple steps:

Define the trend (or lack of)

Trade pullbacks in the direction of the trend

I love this method because it has a margin for error.  I also know much sooner if I’m wrong.  Fortunately I started very small in my M short.  But even that is a deviation.  Nowhere in my plan does it say, “Toss a feeler on and add when the sauce starts to thicken” or whatever.  It says trade the pullbacks.  Now I may have to ride peak-to-trough before I can even assess the downward momentum.

I acted brand new.  And we should all learn from it.  2013 is about trading the PLAN only.  As for drift driving, you can call me Steve McQueen.

http://youtu.be/5cPN6EsE6cc

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Not Much Action

Today the market’s weakness resulted in an early flush in a few names, especially retail as we cut through the key support level highlighted in my premarket profile work.  Many retail and department store names were sold off early morning when data came out suggesting a ho-hum holiday of selling.  The data points are lining up in favor of my department store thesis.  Unfortunately, AMZN took a hit too, and I sold the name for a scratch after being up in the position.

Other than selling my shares in AMZN I started small shorts in Macy’s (M) and Saks (SKS).  Also I sold my degenerate OTB guy position in BGMD at a 5% loss.  I suppose I should have booked that dog as soon as it was a winner.

MOS had a solid first day in my possession, and shares of POT and MON behaved well also.  All the companies have earnings right around the corner in early January.  After the earnings are out of the way I plan to build into the names for Q1.  Unless they start sucking wind, then I’ll abandon the entire idea.

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Merge For a Clearer Picture

Sometimes when a session like Monday occurs with very little movement in price and trade entirely contained within the prior session’s range, I will merge the profiles into one, to get a better sense of the overall trading range and relevant guideposts it can present.

By merging Friday and Monday sessions together, we get the below profile.  Interesting note, the volume price of control at 1423 (also Monday high) has been tested three times overnight.  Going into the open we’re priced to open right on the level. For all these reasons, I consider the range from 1422 to 1423 my pivot line.

Above resistance is the confluence of the profiles value area high and last Tuesday’s session low at 1425.  The next interesting area above is last Friday’s high.  Trading above 1428.50 would demonstrate buyer strength.

Very important support below is the confluence of last Monday’s VPOC and the profiles value area low from 1418.50 to 1419.

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Santa Ben Is Coming

You better be good, Santa Ben is coming to town.  Everybody have an excellent holiday.  Remember, the holidays are all about forgiveness.  Don’t forget to forgive yourself too.

http://youtu.be/2e5TYdNqJ8M

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Lets See Who Shows Up For Work Today

The early AM has seen prices in the S&P gently levitate after gapping down Sunday evening. After finding support near Friday’s low near 1418 the market has lifted over five handles and as of 9:15 AM is pricing an open within yesterday’s value area.

Key levels from Friday’s balance are the volume price of control at 1422.75 and the value area high and low at 1426.75 and 1416.25 respectively.  Below Friday’s low the next key area is last Monday’s value area low at 1415.75 and below there we want to see bulls holding last Monday’s low, otherwise they risk a quick blow to their confidence on this shortened trading day.  Taking out Monday’s lows, the lows of last week could set the tone for the week.

Keep an eye on the key levels from Friday for a cue on who make their way to market this Christmas eve:

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The Upper Middle Class Is Fucked

My second major theme for 2013 is that department stores all face serious headwinds, and are the most vulnerable industry.  Here’s a link to my first theme going into 2013.  Anyone who loves the stock market and has been dragged out shopping during the holiday season should love this piece.

First off, I never shop in department stores unless I’ve been dragged there by my girl.  What that means is when I’m there she’s shopping, I’m a pack mule for carrying cargo.  Mentally I’m completely removed from the shopping experience, instead diverting my mental capacity to investigation.  I look at the racks, what people are shopping for, ask for a manager and see how long it takes, and talking to employees about their sales goals.  This is old school channel checks, it’s incredibly subjective, and perhaps only a defense mechanism for my otherwise disdain for being dragged around town.  BUT, this year, I’m telling you as objective as I possibly can, volumes are down.

CASE IN POINT: Sephora.  This is one store where I can get concrete information.  Their store at The Somerset Collection, our best shopping center, and a top 10 grossing store nationally for the company, is missing their sales targets by nearly 10%.  They’re also over on their labor budget.  I consider the products they carry especially sensitive.  Ladies from the upper-middle class need makeup because, as Chuck Bennet so eloquently stated, without it they’ll “get no handbags.”  Women don’t bend the budget knee and give up their beauty products without a fight.  It’s the first in three years they haven’t blown their sales forecasts out.  Red flag.

The second force, the big chipper, the internet.  Yes of course I know department stores have a huge online presence, but they also have huge physical shops–full of expensive sales reps, nice warm air, shined floors, and well you get the picture–overhead.  Smart phones are more prevalent than last year and shopping on the go (read: at work) easier.  Out on the internet the competition is leaner, have better developers, and way more budget flexibility to advertise.  Department stores a losing online.

Finally, we’re going over the fiscal cliff. Whatever, WHATEVER the fuck that means.  Rest assured either by simply being more cognizant of the risk or the high likelihood of it’s occurrence, the upper-class expect higher taxes.  And they’re bitter in general.  They watch way too much news.  Cliff imagery.  Domestic Terrorists.  Doom’s day preppers.  NRA.  Careless citizens snapping pics of people moments before death by train.  Increased hurricane damage.  It’s all enough to BUY A GUN, at the least.  Suddenly, blowing money on RL over at M seems less important.  Why not go on EBAY and get a ten pack of polo shirts from Izod or APP?

With all this in mind, I took to the almighty PPT.  I was happy to receive thesis support instantly, Department Stores are the lowest ranked industry in the service sector.  Their January seasonality is 50/50 with an abysmal average return less than 1%.  Things perk up slightly in February, and March is downright bullish, seasonality speaking.  Here’s a very brief fundamental comparison:


According to these few fundamental comparisons, Sears obviously is getting their ass kicked.  Shorting shares of SHLD has been a well publicized trade, it has been a loser .  The stocks up nearly 30% this year.  Shorts could get their redemption this year.  But I see more vulnerability in the slightly higher end (but not too nice, remember upper-middle class).  Which makes me not want to short KSS, except investors may be ready to dump the shares after watching their modest annual gains gap into the red earlier this month, POOF!  JCP already crushed their shareholders this year, down big.  It’s more vulnerable to a squeeze higher on its inevitable march to zero.

Mostly I’m interested in Macy’s (M)  and Saks (SKS).  I suppose a head-to-head comparison is in order.  After all, either of these stocks aligns well with my overarching thesis.    For now I’ll leave you with my short-term chart annotations for all the highlighted stocks:

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