The Ascending Wedge and the Homebuilders

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The FED’s no taper “surprise” has provided another opportunity for the housing trade thesis to revive itself. Immediately after the announcement last Wednesday, housing stocks saw sharp and fast move higher. However, the market did not allow the sector to rip higher for the remainder of the week. To be honest, I thought that the move would instantly produce a drift higher. I took to the charts and noticed a subtle technical chart pattern occurring in the near term. The pattern is know as the “Ascending Broadening Wedge.” Click here for the information page on Bulkowski’s chart pattern site.

Below are the charts (60 day, 2 hour candles) for both the iShares U.S. Home Construction ETF (ITB) and the SPDR Homebuilders ETF (XHB).

Screen shot 2013-09-22 at 1.45.17 AM Screen shot 2013-09-22 at 1.45.02 AM

 

The ascending broadening wedge is characterized by a series of higher highs and higher lows. These types of patterns can be difficult to trade due to the fact that they can serve as bullish and bearish triggers. While the longer term broadening wedges are indicative of a topping process, shorter term wedges are typically a continuation pattern. According to Bulkowski’s website, the continuation win percentage is an impressive 76%. My argument in this case is that the current wedge forming is a bullish continuation pattern.

A typical pattern will sport three touches to the bottom trendline before a fast break higher that pierces the upper trendline. This is what is known as the breakout point. Prices can then fall to establish what is known as a “partial decline” and this is quickly bought up prior to another touch on the bottom trendline. Currently, prices in the above ETFs are participating in this very partial decline. Monday and Tuesday will be highly important in terms of the pattern resolving itself either higher or lower.

Sorry for keeping this post brief. I did not want to use too many words to describe the above charts. It makes a lot of sense when you line those charts up with the Bulkowski article examples. Please leave comments as any discussion is welcome!

PS: To the guys in 12631. I have exited the trading room for now because I have to tend to both classes and internships. I will be back in soon (probably like a month or so) when the dust settles. I learned a lot trading in there over the summer with both Chess and RC. The methodical approach that Chess takes to trading is elemental to both portfolio success and risk management. Even if you are not following his exact positions, noting his levels of cash and participation on the long or short side is extremely helpful and it prevents being caught out of position in a choppy market. Meanwhile, RC possesses a unique momentum approach to trading with the same risk management principles as Chess. His winners move fast and big, and he is able to spot what is working in the market with his legendary “Intraday Runners” screen.

Thanks again guys for making that room a place to learn and to make money each and every day. Also shout out to all the members that make that room great. You know who you are. I’ll be back in soon.

Trade Ideas

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Despite the market maintaining a rather boring posture relative to the past couple of months of trading, there continue to be plenty of actionable trades forming beneath the surface. After sifting through The PPT and some charts, I have prepared a decent list of setups that should remain relevant throughout the month of August. I have both long and short ideas. To keep things interesting, I will start with the short side. Forgive me for being rather brief in my explanations, but I believe a chart says a thousand words.

SHORTS

At the moment, I am really bearish on Healthcare REITs. I think there have been a lot of technical rising wedges that continue to demonstrate the potential for further downside. That is, they all remain weak. Have a look at VTR. I believe they have already announced and digested their earnings report, so that should mitigate any risks associated with the pressure of time.

Ventas, Inc (VTR)Screen shot 2013-07-30 at 12.53.05 AM

I think a short trigger would be a breach through the 68.00 level. I rarely short the market considering the trend we have been in, but the success of chessNwine’s recent shorts within 12631 has made me reconsider being narrow-minded in a market that permits both long and short ideas. Anyways, we will see how this one pans out. I think the odds are fairly high IF the trigger is hit. The stock may very well consolidate here before ripping higher, as we have seen in bull markets like the one we are in. I like my odds here because the entire sector is pretty weak. I could go through all of the other charts, but they essentially look the same as the one I posted above.

LONGS

Now to the long ideas. I have several, and they aren’t necessarily in the same industry or even sector. These are charts that caught my eye, or The PPT‘s eye for that matter.

PPG Industries (PPG)

Screen shot 2013-07-30 at 12.31.43 AM

I like how price is pushing higher after a pullback from testing all time highs for this name. Some overhead supply may have asserted itself, and now the price is ready to make its real move. I believe earnings have already gone by for this name as well.

PerkinElmer (PKI)

Screen shot 2013-07-30 at 12.30.59 AM

The name looks very coiled here as it is not yet extended. Should it break this downtrend, we may see a powerful move to the upside. Earnings are August 1st after the market closes.

Pitney Bowes Inc (PBI)

Screen shot 2013-07-30 at 12.30.19 AM

Same type setup as PKI. I like it over 15.00. Earnings July 30, but a scalp or daytrade is still possible.

Verizon Communications (VZ)

Screen shot 2013-07-30 at 12.29.48 AM

I am currently long this name from 51.00. I took a position at the open this morning. I believe that there is plenty of upside left in the name. I like the uptick in buy volume. This is the type of breakout I am looking for in PKI and PBI. Earnings have already been reported.

United States Steel Corp (X)

Screen shot 2013-07-30 at 12.29.30 AM

I am currently long this name through options. I believe that they reported another loss after the bell. The after hours trading does not show too much damage, so it should be interesting to see what happens tomorrow. The obvious trigger for the trade would be over today’s high, but I jumped the gun.

Valero Energy Corporation

Screen shot 2013-07-30 at 12.28.59 AM

I sold out of this name today. I was long the stock with calls throughout July. I dumped them today because I think that this has the potential to move sideways for a little longer. With that being said, it will probably rip to the upside tomorrow. I want to buy some common stock should it break the highs of the pattern. My target is the gap above. It also does not hurt to have this in your portfolio throughout the Hurricane season. Earnings have already been reported.

I believe those ideas should shape into something interesting at least into the first half of August. I still see a lot of potential for breakouts, but I will plan on scaling into trades before committing all of my capital prior to the move in the stock.

Meanwhile, I am messing around with some screens inside The PPT. Throughout the week, I will be tracking names that have a high hybrid score change, yet almost no change in price. The objective here is somewhat obvious. I want to see the potential edge that The PPT can provide prior to price making its move. However, I will have to sift through the historical score archives to establish whether or not a hybrid-price-divergence is a good or bad thing in each specific case.

Combining the PPT with Technical Analysis

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When glancing over the S&P 500 year-to-date chart, one can easily discern the change in the character of the market (aside from the fact that this market seemingly only goes up). The early morning gaps higher and the late day fades have made this v-shaped move extremely hard to play, especially if you are a swing trader. Breakouts from weekly bull flags and other powerful technical set ups have been working for the most part in the hot sectors like the biotechs. However, there is still a vast amount of false moves occurring. A breakout will trigger, then fade and hit stop loss orders, only to press on and rip higher within the next couple of days. With these types of games being played, I decided to experiment with the oversold algorithms in The PPT.

First and foremost, I am not one for indicators. I like to strictly play price action and technical set ups. I do not like to deviate from my technical style too much either, for in the long run (in terms of win percentages and probability) it is key to remain consistent. With that being said, I am always open to applying new filters to my trades to increase my odds at winning. It is necessary to do this because the market character as a whole is constantly changing. If you have a tried and true method as your backbone and are open to apply a tool or analysis to refine the trades that you take, then your system will ultimately be more versatile and successful in the long run. We all want to achieve profits in the long run with our capital, right?

I am not trying to pump The PPT here, but I am just being honest and demonstrating that it is useful for providing that necessary filter discussed above. With each of the algorithms resetting in their respective time frames, it always allows the current dynamics of the market to be integrated into the system. I took some trades this week using my technical style in conjunction with the oversold readings of The PPT (I looked for trades that were hybrid oversold). I deviated from the traditional style through not waiting for a breakout to occur. Now that may have decreased the probability of the trade working, but I leaned on the backtested results of The PPT to carry me through that line of logic. It is hard to say what is more probable at that point. In this analysis, The PPT wins.

So the basis behind these trades is this: find a technical setup that contains a good risk reward ratio, and layer that into the oversold or extreme oversold readings of The PPT. I filtered my selections of the oversold readings by screening for stocks that had greater than 5% return with over 80% accuracy. For those of you who are not familiar with The PPT, it gives timeframes for the stock to make its move. Those timeframes are 1,3,5,7, and 10 days. I did not really pay too much attention to that when using this method. As long as it was greater than 80% accurate for the 3 and 5 day timeframes, I was fine with it. This is where I leaned on the technicals of support and resistance in my traditional analysis.

The results were great. I have detailed several cases below, and I will discuss it further after I run through these examples. I do not want to get caught up in a bunch of writing without some hard evidence.

MeetMe, Inc (MEET)

The company is volatile, cheap, and heavily shorted. It has been in a harsh downtrend, but I was able to make a play off of the 30 day, 30 minute chart. The chart is below.

Screen shot 2013-07-20 at 2.51.14 PM

The trade that I took is highlighted and labeled by the number 3. As you can see, I was able to catch a nice 10% move higher the next morning. I highlighted and labeled 1 and 2 because that is where The PPT had previously marked this stock as oversold. Look at those returns. Unfortunately, I did not take those trades because I did not see an emerging ascending triangle pattern of higher lows. After I took my trade, the stock fell back to the trendline and price responded by putting in what looks to be another higher low. The PPT is currently marking this as oversold yet again (hopefully the Fly does not kill me for saying this). Maybe this ascending triangle pattern will be resolved this week through busting the upper range, and press on higher to kill the shorts in the name. I would have remained in stock and let the pattern resolve itself, but a 10% move is hard to not take any gains from.

BioMarin Pharmaceuticals (BMRN)

With the biotechs recently taking off, I was pleased to find one that had pulled back a little. The PPT produced an oversold reading at the base of what appeared to be an emerging bull flag pattern. The daily and 30 minute charts are shown below.

Screen shot 2013-07-20 at 3.32.01 PM

From the daily chart, you can see that the stock is in a clear uptrend. I felt better going long in this name than with the previous MEET trade. The clean pullback made me look for an entry point.

Screen shot 2013-07-20 at 3.30.25 PM

The flag can be better seen from the 30 minute chart in the month of July. The PPT measured an oversold reading in the highlighted area marked with the number 1. That oversold area happened to be at the base of the emerging pattern. The average return for this reading was over 10%. Instead of waiting for the breakout to trigger, I was able to get an early entry. The flag did indeed break higher, and if you were to try to get filled it would have been a little tough as the name trades fairly thin. I would still be long this name, but I had to exit early due to the fact that I was traveling. I think this will trade higher and run up into earnings this upcoming Thursday. It had a very nice hybrid change of over 50% in the last session.

Harman International (HAR)

This trade in particular was extremely fun to play. I love stocks that are flagging on their daily time frames while at or near all time highs. Out of all the stocks I have detailed, this is by far the healthiest chart. I was lucky to find an oversold reading in this name. The daily and 30 day, 30 minute charts are below.

Screen shot 2013-07-20 at 4.16.14 PM

Notice the highlighted daily candle in the flagging pattern (it can also be viewed as ascending triangle I suppose). That was where The PPT had marked this stock as oversold. It was a real cliffhanger of a close, as it pressed right on to the lower trendline in the final moments. It held the previous days low, and The PPT was displaying that it potentially had, on average, a 6-8% move in the works.

Screen shot 2013-07-20 at 4.18.15 PM

A closer picture of the price action displays the flagging formation in a better light. The highlighted area with the number 1 on the chart depicts where The PPT marked the stock oversold, and this is where I had initiated the trade. As you can see, this is right on the support of the lower trendline. The stock raced higher the next morning, and ended up reaching the traditional breakout entry point. This is where I would typically first scale into the stock. Since I am already long, I can pour on more capital. The weekly chart looks ready to rip higher as well.

Ruckus Wireless (RKUS)

Many of you may have already heard about this from either Option Addict, RaginCajun, or the Fly. It is a hot stock right now and a lot of people are playing this breakout. The daily chart does not show much, so I have just pasted the 30 day, 3o minute chart below.

Screen shot 2013-07-20 at 9.33.33 PM

This chart depicts a very interesting case. The symmetrical triangle of lower highs and higher lows had broken lower after probing the highs of upper trendline. The brief slice through this trendline was a traditional entry point, but a late day fade and some harsh selling the next session hit a bunch of stops. The stock failed to breakout. The PPT registered an oversold reading when this occurred. Again, it is represented by the highlighted area marked with the number 1. The move that happened the next two days was incredible. I was playing this trade alongside RaginCajun and other 12631 members. We were originally stopped out, but we had all re-entered at the breakout to make back our loses and more. Many PPT members bought on the oversold reading alone, which gave them an opportunity for quick gains. I think this brings up a great point of discussion. What happens when the technicals of a chart are broken? Where would the entry for a trade occur?

The trades I ran through above all contain one common denominator: emerging chart patterns. Being that the system utilizes oversold readings, the results will always contain some type of “buy the dip” style. When doing this in the context of a pattern, it can be extremely powerful. Having statistical knowledge of how the stock has behaved in the past at oversold levels will allow for greater accuracy. If the trade does work in your favor, then you have a margin of safety and flexibility. Gains can be taken early, or more cash can be applied to the trade at traditional entry points. However, a trade failure with an oversold reading and technical breakdown does present a slight problem. I think a logical stop loss would be the next important or relevant price support. In the RKUS trade, that would have been a break through 12.85.

The oversold and overbought readings can also be particularly useful in day trading as well. In fact, I was able to pull off two great day trades in LL and RAX this week using such readings. The names were on the oversold list with great stats, and I used some technical insight to buy an intraday dip. I will detail this in a different post if you guys are interested.

As you can see, there are a wide array of uses with this oscillator that is embedded in the screener. I will continue to explore it to find more opportunities and filters to apply to my trades. Again, no one at iBankCoin told me to write this. I just found it interesting to apply a tool that has been tailored and backtested to a specific stock. Please feel free to leave ideas, suggestions, or questions in the comments section below!

Trade Ideas

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The current market is frustrating to trade. When the Dow Jones and the S&P 500 are selling off in the midst of a rally in the Russell, it definitely goes without saying that things can become confusing. However, I think that the market will trade higher from here, and that we are climbing a wall of worry off of the lows. I am not placing big bets on that opinion as I am 40% long and 60% cash. I want to stay defensive here with summer tending to be a rangebound grind in the markets.

Today I managed to make two good trades in GNW and FIO using the ACD opening range method. I will start posting charts on my entry and exits points using that process, but I would like to perfect it more before blogging about it. If anyone wants those indicators, just let me know.

I also bought ATRS after reading Zenhunter’s post about it. The chart looks ripe and if a catalyst kicks in then we should see some nice action to the 4.50 area.

Should the market melt up, I have gathered a few long ideas from all areas of the market.

First up is SVU. I picked up a position in this today because of the potential for a short squeeze to occur in these market conditions. The daily chart demonstrated a clean breakout from the channel down pattern. The move did lack volume; however, I discounted that on the premise that it was a shorter week. Minor dips were bought throughout the day and the close was very strong. Also, check the weekly chart to see the clean bull flag. The daily chart is below. Screen shot 2013-07-01 at 10.39.53 PM

Next up is a stock that has shown some relative strength, and worked off overbought conditions on its weekly chart. The name is IPG. The weekly chart bull flag is very clean and manageable. The daily chart is perfectly coiled. It may need a little more time, but a move through 15.00 should send this higher. The weekly chart and daily chart are below.

Screen shot 2013-07-01 at 10.38.39 PM Screen shot 2013-07-01 at 10.39.17 PM

 

I would also be watching the candidates for a hundred dollar roll. Some of those charts look ripe for a breakout. I like WLK, MCD, BLWD, and IWM (haha).

The last trading idea is purely for entertainment. I won’t take it. It is MJNA. The chart looks surprisingly great, and I wouldn’t be surprised if a bunch of newsletters began to pump it. There is a tight pennant with a cleanly defined range settling above the 20MA. I am think this sees a test of its 50MA, and more if the newsletters choose to pour some volume into it. The daily chart is below.

Screen shot 2013-07-01 at 10.38.16 PM

Have a great trading session tomorrow!

 

Revisiting Influenza Charts

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A couple of months ago I posted a blog with two flu stock ideas technically set to trigger. The names were INO and VICL. I have no positions in either of the names, and probably will not initiate one. However, I do like to track these names for my own entertainment. Had I acted on INO, I would be sitting on some fairly hefty gains at the moment. 

The first chart is a 5 year weekly of INO. The formation of a tight base is apparent, and it certainly is worth a look now that it has arrived at its actionable trading point. Take a look. Screen shot 2013-06-30 at 11.47.11 AM

Now take a look at the two year daily chart, and note the strong volume pouring in the past few days.

Screen shot 2013-06-30 at 11.47.36 AM

 

Now take a look at VICL. If you don’t like buying on the breakout, then maybe it’s time to buy this on the dip. The trade is relatively manageable from a risk perspective. Check out the 5 year weekly chart below.

Screen shot 2013-06-30 at 11.48.02 AM

 

Have a great rest of the weekend! Leave comments below as any discussion is much appreciated.

An Update

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I have been away for awhile tending to other business, but my trading continues to be very active. I have been spending my summer days within 12631, and the guys in there have really helped me protect my portfolio in this current rough patch in the market. I am currently following chessNwine’s swing trades with a couple of my own.

Summer provides me with the opportunity to take on the markets full time. I am a perfectionist at heart, and thus constantly attempt to micromanage my positions. In order to ease this need, I decided to find a disciplined approach that will allow me to day trade.

My first attempt at being a day trader was horrific. A couple of years ago, I was cocky (still in my teens) and given egregious amounts of leverage from a prop firm. The combination only spelled disaster. I made it out alright, but the psychological aspect of it made me never want to do it again. I would bounce around from being king of the market one day, to being the slave of the market the next. It was dumb, and no one could make a living doing what I was doing. I knew one day that my account would hit zero, so I closed it out and left. I began to manage my own swing portfolio, which had a decent degree of success (and a lot of luck).

So here I am again with some spare time, wanting to constantly participate in the market throughout the trading day. Over the course of the past year, I have been reading and re-reading The Logical Trader by Mark Fisher. The book outlines the ACD method that can be applied to all trading time frames. It uses the opening range of an instrument, and applies aspects of volatility and time to increase the probability of a trade working in a certain manner. I have finally coded (with the help of others) the indicators necessary for the method to work within the thinkorswim platform. I am very interested in this method, and I want to start blogging about it here on iBankCoin. Look for some material on that to come your way, and if you want the indicators, just comment below.

Finally, I will leave you with two trading ideas. The market is extremely volatile here, and I don’t know if we have bottomed yet or not. No one does. But I feel these two ideas have prime entry points at the moment. First off, I like SLCA here. I blogged about why I liked the company a couple months ago. The company is fundamentally poised for growth, and there are shorts piled in the name. Jeffries reiterated a buy rating on the stock today. I think this thing can get squeezing soon. The other idea is UNG or natural gas. I think natural gas is ready for a bounce, and it broke the most recent downtrend in today’s session. This is a purely technical trade.

Good luck trading the rest of the week, and give this market some space!

The Cash…it’s Flowing

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Today was one of my best trading days of the year. I was up over 5%, and was aggressively banking coin. Immediately at the open, I took down positions in OREX, LXRX, and RBCN. I am typically passive during the first minutes of the market, but the cocaine like high that I felt through a rise in my USG, WNC, and SLCA positions resulted in me coming back for more. I was not expecting a breakout of such size in OREX, but it indeed happened. It spiked north of 13%, and I didn’t sell off any of my position. LXRX traded around aimlessly, and RBCN held its ground.

The market then threatened to head lower, so I took advantage of selling USG just off the highs for a nice gain. The stock could head higher to 30, but I was forced to raise cash in these now volatile times. I love the company as a fundamental play on the housing cycle, so don’t be surprised if I add it back. That stock pick was a gift to me from the Fly.

The watchlist that I posted yesterday was on fire today, as all of the names were ripping. They each finished slightly off their highs, in nice, flagging consolidations. I am trading those using the hourly timeframe, so my stops are pretty tight. The charts and tickers on the watchlist are found here. I think that they all have the potential to extend their gains, just beware that they have already made their initial moves. One name on the list that did not trigger yet is LPHI. The chart is coiled, and I will be stalking it tomorrow.

I ended the day with 25% cash, holding my new positions overnight.

Memorial Day Charts

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I’ve been sifting through some charts this weekend and have found a few worthy of mentioning. These are all hourly candlestick charts. I believe they are coiled and ripe for a move, so let me know what you think. If you have any other suggestions, then please leave them in the comments section. The tickers are: TVL, OREX, LPHI, KMB, HMA, HCSG, and GALEClick here for the daily Finviz charts of these names.

TVL OREX LPHI KMB HMA HSGC GALE

 

Enjoy the rest of the long weekend!

Portfolio Update

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I haven’t posted in a while, as I have been out of pocket tending to other business. As of now, I am holding my core positions in SLCA, IMUC, USG, WNC, and VHC. I am also holding MCP as a follow trade from RaginCajun. I booked gains in BV and ODP.

The market is finally showing some signs of volatility. Yesterday, I saw all of my positions surge higher. I was seeing all kinds of paper profit, and was consumed by the euphoria. Then, I was crushed by the dreaded intraday reversal. I quickly raised my cash levels and cut my chart trades. I felt satisfied as the Nikkei plummeted later that night. Perhaps I became too defensive too quickly. The mess of a morning gap down in the US markets was immediately bought up. I missed out on a lot of money. Specifically, I am upset about missing the dip in SLCA.

I have some cash (about 30%) that I am willing to put to work tomorrow. I want to buy NVAX and COOL. Both of these trades are being spoken of within 12631. I am looking forward to spending my summer trading time within those halls.

More this weekend…

 

 

Stuck on the Charts

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First and foremost, let me give you a portfolio update. I sold off my RTEC position to raise additional cash. I added an extremely small ODP position in hopes of a short squeeze. My cash levels now stand slightly above 25%.

Does anyone else sense the threat of a bear rally here? Maybe it was just me watching the close of the major indices today, but the sell off was quite harsh. My portfolio was thrown around throughout the session. At one point I was up about 2%, and then everything went to hell in a hand basket. It was led by the late day selling pressure in SLCA and USG.

Screen shot 2013-05-16 at 6.44.51 PM

 

Above is a 30-minute chart of the SPY with a volume profile. The two purple lines represent high volume prices, and the red line represents the highest volume price. We tumbled off the highs and are now riding on the lower volume support. Considering the market at its current stage, this is a critical point. I think there are two scenarios that can play out tomorrow: an inside day, or a further fall to the downside. Should we break the support, we head to 163 in short order. I’m not betting on a top (I am 75% on the long side), rather I believe that there is a pullback in the cards. This is what forced me to cut one of my positions today.

The Ascending Wedge and the Homebuilders

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The FED’s no taper “surprise” has provided another opportunity for the housing trade thesis to revive itself. Immediately after the announcement last Wednesday, housing stocks saw sharp and fast move higher. However, the market did not allow the sector to rip higher for the remainder of the week. To be honest, I thought that the move would instantly produce a drift higher. I took to the charts and noticed a subtle technical chart pattern occurring in the near term. The pattern is know as the “Ascending Broadening Wedge.” Click here for the information page on Bulkowski’s chart pattern site.

Below are the charts (60 day, 2 hour candles) for both the iShares U.S. Home Construction ETF (ITB) and the SPDR Homebuilders ETF (XHB).

Screen shot 2013-09-22 at 1.45.17 AM Screen shot 2013-09-22 at 1.45.02 AM

 

The ascending broadening wedge is characterized by a series of higher highs and higher lows. These types of patterns can be difficult to trade due to the fact that they can serve as bullish and bearish triggers. While the longer term broadening wedges are indicative of a topping process, shorter term wedges are typically a continuation pattern. According to Bulkowski’s website, the continuation win percentage is an impressive 76%. My argument in this case is that the current wedge forming is a bullish continuation pattern.

A typical pattern will sport three touches to the bottom trendline before a fast break higher that pierces the upper trendline. This is what is known as the breakout point. Prices can then fall to establish what is known as a “partial decline” and this is quickly bought up prior to another touch on the bottom trendline. Currently, prices in the above ETFs are participating in this very partial decline. Monday and Tuesday will be highly important in terms of the pattern resolving itself either higher or lower.

Sorry for keeping this post brief. I did not want to use too many words to describe the above charts. It makes a lot of sense when you line those charts up with the Bulkowski article examples. Please leave comments as any discussion is welcome!

PS: To the guys in 12631. I have exited the trading room for now because I have to tend to both classes and internships. I will be back in soon (probably like a month or so) when the dust settles. I learned a lot trading in there over the summer with both Chess and RC. The methodical approach that Chess takes to trading is elemental to both portfolio success and risk management. Even if you are not following his exact positions, noting his levels of cash and participation on the long or short side is extremely helpful and it prevents being caught out of position in a choppy market. Meanwhile, RC possesses a unique momentum approach to trading with the same risk management principles as Chess. His winners move fast and big, and he is able to spot what is working in the market with his legendary “Intraday Runners” screen.

Thanks again guys for making that room a place to learn and to make money each and every day. Also shout out to all the members that make that room great. You know who you are. I’ll be back in soon.

Trade Ideas

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Despite the market maintaining a rather boring posture relative to the past couple of months of trading, there continue to be plenty of actionable trades forming beneath the surface. After sifting through The PPT and some charts, I have prepared a decent list of setups that should remain relevant throughout the month of August. I have both long and short ideas. To keep things interesting, I will start with the short side. Forgive me for being rather brief in my explanations, but I believe a chart says a thousand words.

SHORTS

At the moment, I am really bearish on Healthcare REITs. I think there have been a lot of technical rising wedges that continue to demonstrate the potential for further downside. That is, they all remain weak. Have a look at VTR. I believe they have already announced and digested their earnings report, so that should mitigate any risks associated with the pressure of time.

Ventas, Inc (VTR)Screen shot 2013-07-30 at 12.53.05 AM

I think a short trigger would be a breach through the 68.00 level. I rarely short the market considering the trend we have been in, but the success of chessNwine’s recent shorts within 12631 has made me reconsider being narrow-minded in a market that permits both long and short ideas. Anyways, we will see how this one pans out. I think the odds are fairly high IF the trigger is hit. The stock may very well consolidate here before ripping higher, as we have seen in bull markets like the one we are in. I like my odds here because the entire sector is pretty weak. I could go through all of the other charts, but they essentially look the same as the one I posted above.

LONGS

Now to the long ideas. I have several, and they aren’t necessarily in the same industry or even sector. These are charts that caught my eye, or The PPT‘s eye for that matter.

PPG Industries (PPG)

Screen shot 2013-07-30 at 12.31.43 AM

I like how price is pushing higher after a pullback from testing all time highs for this name. Some overhead supply may have asserted itself, and now the price is ready to make its real move. I believe earnings have already gone by for this name as well.

PerkinElmer (PKI)

Screen shot 2013-07-30 at 12.30.59 AM

The name looks very coiled here as it is not yet extended. Should it break this downtrend, we may see a powerful move to the upside. Earnings are August 1st after the market closes.

Pitney Bowes Inc (PBI)

Screen shot 2013-07-30 at 12.30.19 AM

Same type setup as PKI. I like it over 15.00. Earnings July 30, but a scalp or daytrade is still possible.

Verizon Communications (VZ)

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I am currently long this name from 51.00. I took a position at the open this morning. I believe that there is plenty of upside left in the name. I like the uptick in buy volume. This is the type of breakout I am looking for in PKI and PBI. Earnings have already been reported.

United States Steel Corp (X)

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I am currently long this name through options. I believe that they reported another loss after the bell. The after hours trading does not show too much damage, so it should be interesting to see what happens tomorrow. The obvious trigger for the trade would be over today’s high, but I jumped the gun.

Valero Energy Corporation

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I sold out of this name today. I was long the stock with calls throughout July. I dumped them today because I think that this has the potential to move sideways for a little longer. With that being said, it will probably rip to the upside tomorrow. I want to buy some common stock should it break the highs of the pattern. My target is the gap above. It also does not hurt to have this in your portfolio throughout the Hurricane season. Earnings have already been reported.

I believe those ideas should shape into something interesting at least into the first half of August. I still see a lot of potential for breakouts, but I will plan on scaling into trades before committing all of my capital prior to the move in the stock.

Meanwhile, I am messing around with some screens inside The PPT. Throughout the week, I will be tracking names that have a high hybrid score change, yet almost no change in price. The objective here is somewhat obvious. I want to see the potential edge that The PPT can provide prior to price making its move. However, I will have to sift through the historical score archives to establish whether or not a hybrid-price-divergence is a good or bad thing in each specific case.

Combining the PPT with Technical Analysis

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When glancing over the S&P 500 year-to-date chart, one can easily discern the change in the character of the market (aside from the fact that this market seemingly only goes up). The early morning gaps higher and the late day fades have made this v-shaped move extremely hard to play, especially if you are a swing trader. Breakouts from weekly bull flags and other powerful technical set ups have been working for the most part in the hot sectors like the biotechs. However, there is still a vast amount of false moves occurring. A breakout will trigger, then fade and hit stop loss orders, only to press on and rip higher within the next couple of days. With these types of games being played, I decided to experiment with the oversold algorithms in The PPT.

First and foremost, I am not one for indicators. I like to strictly play price action and technical set ups. I do not like to deviate from my technical style too much either, for in the long run (in terms of win percentages and probability) it is key to remain consistent. With that being said, I am always open to applying new filters to my trades to increase my odds at winning. It is necessary to do this because the market character as a whole is constantly changing. If you have a tried and true method as your backbone and are open to apply a tool or analysis to refine the trades that you take, then your system will ultimately be more versatile and successful in the long run. We all want to achieve profits in the long run with our capital, right?

I am not trying to pump The PPT here, but I am just being honest and demonstrating that it is useful for providing that necessary filter discussed above. With each of the algorithms resetting in their respective time frames, it always allows the current dynamics of the market to be integrated into the system. I took some trades this week using my technical style in conjunction with the oversold readings of The PPT (I looked for trades that were hybrid oversold). I deviated from the traditional style through not waiting for a breakout to occur. Now that may have decreased the probability of the trade working, but I leaned on the backtested results of The PPT to carry me through that line of logic. It is hard to say what is more probable at that point. In this analysis, The PPT wins.

So the basis behind these trades is this: find a technical setup that contains a good risk reward ratio, and layer that into the oversold or extreme oversold readings of The PPT. I filtered my selections of the oversold readings by screening for stocks that had greater than 5% return with over 80% accuracy. For those of you who are not familiar with The PPT, it gives timeframes for the stock to make its move. Those timeframes are 1,3,5,7, and 10 days. I did not really pay too much attention to that when using this method. As long as it was greater than 80% accurate for the 3 and 5 day timeframes, I was fine with it. This is where I leaned on the technicals of support and resistance in my traditional analysis.

The results were great. I have detailed several cases below, and I will discuss it further after I run through these examples. I do not want to get caught up in a bunch of writing without some hard evidence.

MeetMe, Inc (MEET)

The company is volatile, cheap, and heavily shorted. It has been in a harsh downtrend, but I was able to make a play off of the 30 day, 30 minute chart. The chart is below.

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The trade that I took is highlighted and labeled by the number 3. As you can see, I was able to catch a nice 10% move higher the next morning. I highlighted and labeled 1 and 2 because that is where The PPT had previously marked this stock as oversold. Look at those returns. Unfortunately, I did not take those trades because I did not see an emerging ascending triangle pattern of higher lows. After I took my trade, the stock fell back to the trendline and price responded by putting in what looks to be another higher low. The PPT is currently marking this as oversold yet again (hopefully the Fly does not kill me for saying this). Maybe this ascending triangle pattern will be resolved this week through busting the upper range, and press on higher to kill the shorts in the name. I would have remained in stock and let the pattern resolve itself, but a 10% move is hard to not take any gains from.

BioMarin Pharmaceuticals (BMRN)

With the biotechs recently taking off, I was pleased to find one that had pulled back a little. The PPT produced an oversold reading at the base of what appeared to be an emerging bull flag pattern. The daily and 30 minute charts are shown below.

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From the daily chart, you can see that the stock is in a clear uptrend. I felt better going long in this name than with the previous MEET trade. The clean pullback made me look for an entry point.

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The flag can be better seen from the 30 minute chart in the month of July. The PPT measured an oversold reading in the highlighted area marked with the number 1. That oversold area happened to be at the base of the emerging pattern. The average return for this reading was over 10%. Instead of waiting for the breakout to trigger, I was able to get an early entry. The flag did indeed break higher, and if you were to try to get filled it would have been a little tough as the name trades fairly thin. I would still be long this name, but I had to exit early due to the fact that I was traveling. I think this will trade higher and run up into earnings this upcoming Thursday. It had a very nice hybrid change of over 50% in the last session.

Harman International (HAR)

This trade in particular was extremely fun to play. I love stocks that are flagging on their daily time frames while at or near all time highs. Out of all the stocks I have detailed, this is by far the healthiest chart. I was lucky to find an oversold reading in this name. The daily and 30 day, 30 minute charts are below.

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Notice the highlighted daily candle in the flagging pattern (it can also be viewed as ascending triangle I suppose). That was where The PPT had marked this stock as oversold. It was a real cliffhanger of a close, as it pressed right on to the lower trendline in the final moments. It held the previous days low, and The PPT was displaying that it potentially had, on average, a 6-8% move in the works.

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A closer picture of the price action displays the flagging formation in a better light. The highlighted area with the number 1 on the chart depicts where The PPT marked the stock oversold, and this is where I had initiated the trade. As you can see, this is right on the support of the lower trendline. The stock raced higher the next morning, and ended up reaching the traditional breakout entry point. This is where I would typically first scale into the stock. Since I am already long, I can pour on more capital. The weekly chart looks ready to rip higher as well.

Ruckus Wireless (RKUS)

Many of you may have already heard about this from either Option Addict, RaginCajun, or the Fly. It is a hot stock right now and a lot of people are playing this breakout. The daily chart does not show much, so I have just pasted the 30 day, 3o minute chart below.

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This chart depicts a very interesting case. The symmetrical triangle of lower highs and higher lows had broken lower after probing the highs of upper trendline. The brief slice through this trendline was a traditional entry point, but a late day fade and some harsh selling the next session hit a bunch of stops. The stock failed to breakout. The PPT registered an oversold reading when this occurred. Again, it is represented by the highlighted area marked with the number 1. The move that happened the next two days was incredible. I was playing this trade alongside RaginCajun and other 12631 members. We were originally stopped out, but we had all re-entered at the breakout to make back our loses and more. Many PPT members bought on the oversold reading alone, which gave them an opportunity for quick gains. I think this brings up a great point of discussion. What happens when the technicals of a chart are broken? Where would the entry for a trade occur?

The trades I ran through above all contain one common denominator: emerging chart patterns. Being that the system utilizes oversold readings, the results will always contain some type of “buy the dip” style. When doing this in the context of a pattern, it can be extremely powerful. Having statistical knowledge of how the stock has behaved in the past at oversold levels will allow for greater accuracy. If the trade does work in your favor, then you have a margin of safety and flexibility. Gains can be taken early, or more cash can be applied to the trade at traditional entry points. However, a trade failure with an oversold reading and technical breakdown does present a slight problem. I think a logical stop loss would be the next important or relevant price support. In the RKUS trade, that would have been a break through 12.85.

The oversold and overbought readings can also be particularly useful in day trading as well. In fact, I was able to pull off two great day trades in LL and RAX this week using such readings. The names were on the oversold list with great stats, and I used some technical insight to buy an intraday dip. I will detail this in a different post if you guys are interested.

As you can see, there are a wide array of uses with this oscillator that is embedded in the screener. I will continue to explore it to find more opportunities and filters to apply to my trades. Again, no one at iBankCoin told me to write this. I just found it interesting to apply a tool that has been tailored and backtested to a specific stock. Please feel free to leave ideas, suggestions, or questions in the comments section below!

Trade Ideas

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The current market is frustrating to trade. When the Dow Jones and the S&P 500 are selling off in the midst of a rally in the Russell, it definitely goes without saying that things can become confusing. However, I think that the market will trade higher from here, and that we are climbing a wall of worry off of the lows. I am not placing big bets on that opinion as I am 40% long and 60% cash. I want to stay defensive here with summer tending to be a rangebound grind in the markets.

Today I managed to make two good trades in GNW and FIO using the ACD opening range method. I will start posting charts on my entry and exits points using that process, but I would like to perfect it more before blogging about it. If anyone wants those indicators, just let me know.

I also bought ATRS after reading Zenhunter’s post about it. The chart looks ripe and if a catalyst kicks in then we should see some nice action to the 4.50 area.

Should the market melt up, I have gathered a few long ideas from all areas of the market.

First up is SVU. I picked up a position in this today because of the potential for a short squeeze to occur in these market conditions. The daily chart demonstrated a clean breakout from the channel down pattern. The move did lack volume; however, I discounted that on the premise that it was a shorter week. Minor dips were bought throughout the day and the close was very strong. Also, check the weekly chart to see the clean bull flag. The daily chart is below. Screen shot 2013-07-01 at 10.39.53 PM

Next up is a stock that has shown some relative strength, and worked off overbought conditions on its weekly chart. The name is IPG. The weekly chart bull flag is very clean and manageable. The daily chart is perfectly coiled. It may need a little more time, but a move through 15.00 should send this higher. The weekly chart and daily chart are below.

Screen shot 2013-07-01 at 10.38.39 PM Screen shot 2013-07-01 at 10.39.17 PM

 

I would also be watching the candidates for a hundred dollar roll. Some of those charts look ripe for a breakout. I like WLK, MCD, BLWD, and IWM (haha).

The last trading idea is purely for entertainment. I won’t take it. It is MJNA. The chart looks surprisingly great, and I wouldn’t be surprised if a bunch of newsletters began to pump it. There is a tight pennant with a cleanly defined range settling above the 20MA. I am think this sees a test of its 50MA, and more if the newsletters choose to pour some volume into it. The daily chart is below.

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Have a great trading session tomorrow!

 

Revisiting Influenza Charts

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A couple of months ago I posted a blog with two flu stock ideas technically set to trigger. The names were INO and VICL. I have no positions in either of the names, and probably will not initiate one. However, I do like to track these names for my own entertainment. Had I acted on INO, I would be sitting on some fairly hefty gains at the moment. 

The first chart is a 5 year weekly of INO. The formation of a tight base is apparent, and it certainly is worth a look now that it has arrived at its actionable trading point. Take a look. Screen shot 2013-06-30 at 11.47.11 AM

Now take a look at the two year daily chart, and note the strong volume pouring in the past few days.

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Now take a look at VICL. If you don’t like buying on the breakout, then maybe it’s time to buy this on the dip. The trade is relatively manageable from a risk perspective. Check out the 5 year weekly chart below.

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Have a great rest of the weekend! Leave comments below as any discussion is much appreciated.

An Update

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I have been away for awhile tending to other business, but my trading continues to be very active. I have been spending my summer days within 12631, and the guys in there have really helped me protect my portfolio in this current rough patch in the market. I am currently following chessNwine’s swing trades with a couple of my own.

Summer provides me with the opportunity to take on the markets full time. I am a perfectionist at heart, and thus constantly attempt to micromanage my positions. In order to ease this need, I decided to find a disciplined approach that will allow me to day trade.

My first attempt at being a day trader was horrific. A couple of years ago, I was cocky (still in my teens) and given egregious amounts of leverage from a prop firm. The combination only spelled disaster. I made it out alright, but the psychological aspect of it made me never want to do it again. I would bounce around from being king of the market one day, to being the slave of the market the next. It was dumb, and no one could make a living doing what I was doing. I knew one day that my account would hit zero, so I closed it out and left. I began to manage my own swing portfolio, which had a decent degree of success (and a lot of luck).

So here I am again with some spare time, wanting to constantly participate in the market throughout the trading day. Over the course of the past year, I have been reading and re-reading The Logical Trader by Mark Fisher. The book outlines the ACD method that can be applied to all trading time frames. It uses the opening range of an instrument, and applies aspects of volatility and time to increase the probability of a trade working in a certain manner. I have finally coded (with the help of others) the indicators necessary for the method to work within the thinkorswim platform. I am very interested in this method, and I want to start blogging about it here on iBankCoin. Look for some material on that to come your way, and if you want the indicators, just comment below.

Finally, I will leave you with two trading ideas. The market is extremely volatile here, and I don’t know if we have bottomed yet or not. No one does. But I feel these two ideas have prime entry points at the moment. First off, I like SLCA here. I blogged about why I liked the company a couple months ago. The company is fundamentally poised for growth, and there are shorts piled in the name. Jeffries reiterated a buy rating on the stock today. I think this thing can get squeezing soon. The other idea is UNG or natural gas. I think natural gas is ready for a bounce, and it broke the most recent downtrend in today’s session. This is a purely technical trade.

Good luck trading the rest of the week, and give this market some space!

The Cash…it’s Flowing

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Today was one of my best trading days of the year. I was up over 5%, and was aggressively banking coin. Immediately at the open, I took down positions in OREX, LXRX, and RBCN. I am typically passive during the first minutes of the market, but the cocaine like high that I felt through a rise in my USG, WNC, and SLCA positions resulted in me coming back for more. I was not expecting a breakout of such size in OREX, but it indeed happened. It spiked north of 13%, and I didn’t sell off any of my position. LXRX traded around aimlessly, and RBCN held its ground.

The market then threatened to head lower, so I took advantage of selling USG just off the highs for a nice gain. The stock could head higher to 30, but I was forced to raise cash in these now volatile times. I love the company as a fundamental play on the housing cycle, so don’t be surprised if I add it back. That stock pick was a gift to me from the Fly.

The watchlist that I posted yesterday was on fire today, as all of the names were ripping. They each finished slightly off their highs, in nice, flagging consolidations. I am trading those using the hourly timeframe, so my stops are pretty tight. The charts and tickers on the watchlist are found here. I think that they all have the potential to extend their gains, just beware that they have already made their initial moves. One name on the list that did not trigger yet is LPHI. The chart is coiled, and I will be stalking it tomorrow.

I ended the day with 25% cash, holding my new positions overnight.

Memorial Day Charts

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I’ve been sifting through some charts this weekend and have found a few worthy of mentioning. These are all hourly candlestick charts. I believe they are coiled and ripe for a move, so let me know what you think. If you have any other suggestions, then please leave them in the comments section. The tickers are: TVL, OREX, LPHI, KMB, HMA, HCSG, and GALEClick here for the daily Finviz charts of these names.

TVL OREX LPHI KMB HMA HSGC GALE

 

Enjoy the rest of the long weekend!

Portfolio Update

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I haven’t posted in a while, as I have been out of pocket tending to other business. As of now, I am holding my core positions in SLCA, IMUC, USG, WNC, and VHC. I am also holding MCP as a follow trade from RaginCajun. I booked gains in BV and ODP.

The market is finally showing some signs of volatility. Yesterday, I saw all of my positions surge higher. I was seeing all kinds of paper profit, and was consumed by the euphoria. Then, I was crushed by the dreaded intraday reversal. I quickly raised my cash levels and cut my chart trades. I felt satisfied as the Nikkei plummeted later that night. Perhaps I became too defensive too quickly. The mess of a morning gap down in the US markets was immediately bought up. I missed out on a lot of money. Specifically, I am upset about missing the dip in SLCA.

I have some cash (about 30%) that I am willing to put to work tomorrow. I want to buy NVAX and COOL. Both of these trades are being spoken of within 12631. I am looking forward to spending my summer trading time within those halls.

More this weekend…

 

 

Stuck on the Charts

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First and foremost, let me give you a portfolio update. I sold off my RTEC position to raise additional cash. I added an extremely small ODP position in hopes of a short squeeze. My cash levels now stand slightly above 25%.

Does anyone else sense the threat of a bear rally here? Maybe it was just me watching the close of the major indices today, but the sell off was quite harsh. My portfolio was thrown around throughout the session. At one point I was up about 2%, and then everything went to hell in a hand basket. It was led by the late day selling pressure in SLCA and USG.

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Above is a 30-minute chart of the SPY with a volume profile. The two purple lines represent high volume prices, and the red line represents the highest volume price. We tumbled off the highs and are now riding on the lower volume support. Considering the market at its current stage, this is a critical point. I think there are two scenarios that can play out tomorrow: an inside day, or a further fall to the downside. Should we break the support, we head to 163 in short order. I’m not betting on a top (I am 75% on the long side), rather I believe that there is a pullback in the cards. This is what forced me to cut one of my positions today.

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