Still Alive

I am clawing back some gains in this marketplace, with the bulk of the progress spearheaded by the action surrounding Weibo.  I did not take a position in Weibo but my plan of attack on SINA began to fruit and I took a nice trade in Twitter.  My book is now down a mere 11% year to date.

The question now is whether I should be raising cash.  This is my third month of seeing many options vanish from my portfolio and good riddance to the lot of them.  My book is clean now and I intend to sell more of it.  But for now it stands as follows:

Largest-to-smallest: LO, TWTR, AMBA, SINA, CREE, RVLT, DDD, YGE, FCEL, OESX, TSLA, and GRNH

I plan to peak out at 12 positions but may go as far as 15 if I simply cannot close a position.  I am questioning some of my favorite plays for their merit.

Futures trading went well, my algo traded well too.  This was day two of all systems running in harmony and my system showing me tons of confidence.  I will continue testing however into the more aromatic sessions as the month progresses and “Sell in May” becomes a discussion.

I am in no rush.  I can tell you this, with confidence, if I had some sort of urgency for keeping a roof on my head and food in my belly, then I would certainly fail.  One must wear a few hats to properly pursue their dreams, IMHO.

Have a great Easter holiday and enjoy a working day with the market closed.  These working days always blow my mind, the amount of work I am able to complete with the market closed.

Peering Through The Looking Glass

Nasdaq futures were set to drift lower overnight after some mixed afterhours trade in Google and IBM added a layer of uncertainty into the trading environment.  Drift lower they did until about 7am when a low volume ramp higher occurred.  Since then we had jobless claims which was received initially with a push higher.  We are currently trading inside balance and inside range from yesterday which suggests a lower risk/reward environment.

The intermediate term auction is interesting.  Sellers came in where I expected yesterday, which was a patch of low volume nodes on the composite profile.  Their response was perhaps exaggerated a bit by the afterhours earnings which kicked off the selling.  Sellers still retain control on the intermediate term, but the most recent swing bounce has been the sharpest yet which leads me to wonder if the velocity will be enough to get us higher.  Above yesterday’s high we begin to enter a zone of fast trade.  First let’s observe the intermediate term trend:

NQ_VolumeProfile_intermediateTerm_04172014

Now we can increase the magnification and observe the short term auctions.  Tax day, 04/15, we printed an outside day where price exceeded both the high and low of the prior day.  In this case, it was actually the prior two days.  Yesterday confirmed the outside day by migrating value higher.  These two bits of context tell me buyers control the short term auction.  Volumes are lower given the holiday climate, but you can still see a clear distribution formed yesterday.  One subtle footprint however is a spike of volume near the highs.  Normally we would expect to see volume thin out at the extremes—if we are in balance.  This suggests increasing prices facilitated more trade and that an imbalance may exists.  I have highlighted this occurrence a few other observations on the following market profile chart:

NQ__MarketProfile_04172014

 

The Invisible Hand Giveth

My tech heavy portfolio is earning back some unrealized losses but I expect the ride will not continue to be smooth sailing for very long.  After the bell we had soft earnings from big new tech Google and big old tech IBM.  Both are lower afterhours.  You can read all about these announcements elsewhere, I’m sure, but I want to talk about Alibaba.

If you are in the trades then you have utilized this site.  There really is no way around it and without it our world would seem so much bigger than it actually is.  I use alibaba to generate 20 offers on a product in minutes.  This type of quotation capability is like old school stock market and I personally consider it one of the most interesting tools in my arsenal.

I like LED lighting.  So does everyone else in China apparently.  I am getting reports from my foot soldiers that there are about 3,385,749 LED vendors at the Guangzhou Canton Fair this year.  In market talk, this means there is an overwhelming number of intermediate term sellers in the market.  So many, that we are very likely to begin seeing serious incentives offered by these inventory heavy middlemen.  The key is to wait for these weak short term hands to become desperate and then begin accumulating an inventory below fair value to then flip onto the eager masses.  These supply constraints are pressuring many domestic LED companies who hold aging inventory.  Aggravating the situation more is Haitz’s Law which forecasts the steady improvement of LEDs much like Moore’s Law of computing power.

We could write off the entire industry and their stocks based on this fundamental information, or we can take the thought a bit further and consider who is likely to benefit.  Foremost, this does not jeopardize Cree.  Cree is a driver of innovation, researching and developing on the forefront of the technological edge in LED lighting.  They will prosper over the next ten years.  But will RVLT?

Revolution lighting is currently a hodgepodge of LED technology concentrated under one Nasdaq umbrella ticker symbol.  They offer everything from fabric LED strips for inside your cabinets to municipal grid systems with integrated software and controllers.  The problem is the model.  They have thousands of products and an untrained distribution force who struggles to properly communicate the benefit of LED lighting.  That and their prices are too high.

Hell, all LED lighting prices are too high.  This is a big fail for the industry, they need to get the prices down.  And whether they like it or not, market forces are hard at work behind the scene massaging price down with their omnipotent invisible hand.

This price drop will drive many business models into a negative cash flow environment, much like a scalper in the futures has seen their edge diminish as algos outperform them.  From disruption comes opportunity for leaner organizations to fill the demand void left behind.  This is all occurring as we speak.

In summary, Alibaba is making a fortune via shrinking international trade down to a few mouse clicks.  LED lighting is one of the most heavily peddled products on their site and it is moving by the container load as prices drop.  There is an LED inventory glut and it is nearly obsolete.  This is a unique opportunity for a lean organization to swoop up discounted product.  Businesses and individual consumers will have the opportunity to update their lighting to energy efficient LED at much better prices soon.

Finally an actionable stock, AIXG.  This chart reminds me of FSLR before they released their FY15 guidance and a massive rip ensued.  They are German which says precision to me.  I have viewed their strategy and what I like most is the clear expectations and measurable goals they have set.  They have also made a heavy drive into strengthening their corporate culture.  I have seen this type of strategy play out and it can be very potent.  I have no position in this stock, but it ranks high on my want list.

In completely unrelated news, my algos are performing well, as am I, in the testing grounds.  We will see how the numbers look by month end, but great strides are being made in the race to develop a consistently profitable futures trading hybrid strategy.

And just slightly aside, I cannot believe jackass NY attorney general subpoenaed a number of HFT firms. Prepare to be on the receiving end of a wave of angry algo robots throttled to full speed.

Building Expectations for The Day

NASDAQ futures worked higher overnight building upon the afternoon strength buyers were able to muster.  The responsive buying ignited soon after price took out the year-to-dates lows on the /NQ contract.  Instead of the new lows bringing more sellers into the marketplace, we saw volume dry up at the levels and then a sharp response from buyers.  The bounce that materialized has the potent look of a durable swing low for the next few trading days.

The long term auction has been disrupted after being controlled by the buyer for over a year.  Today the picture of the NASDAQ composite has changed a bit.  I perceive the long term auction as in balance which dates back to November 11th, or 11/11/13.  I do not choose these dates at random but instead observe the past market activity and how it relates to our newly revealed information.  My largest moving average (99EMA) is starting to turn lower on the daily chart but we do not have clear alignment of the moving averages which would add to a case for seller control.

I have built the intermediate composite volume profile to span from 11/11 to today so we can observe the volume taking place inside the auction.  It is hard to see, but 3515.25 is the volume point of control or the largest tip on the profile.  These are prices that both buyers and sellers consider fair and we conduct large amounts of trade at.  My goal currently is to sell some of my swing long exposure above this level.  Intraday, if I see price building acceptance above this level then I will look to trade a long beyond it.  I have highlighted this level was well as my swing trade targets on the following intermediate term profile:
NQ_VolumeProfile_intermediateTerm_04162014

The short term auction shows buyers with a strong response.  They need to build on it and yesterday they accomplished a response with the potential to be build upon with some initiating buying.  However, should they be overwhelmed with supply price could reject back down into three days of overlapping value.  Standing between sellers goals is a very interesting low volume node at 3485.50 which is also in confluence with several value area highs.  This level is my key pivot intraday between long and short bias, until a level more influential materializes.  Buyers show us gaining acceptance into the upper profile which has prices up to around 3545:

NQ__MarketProfile_04162014

 

We have jobless claims at 8:30am which could have a material effect on the picture we see coming into the open.  We also have Philadelphia Fed announcement around 10am to be aware of.

Stop Kissing All The Babies

The NASDAQ and equities in general treated my tattered tech portfolio to a bit of respite while I toiled away at various campaigns of industry and trading methodology.  My trading plan and its autonomous counterparts continue being built and optimized into a plan I intend to take live.  There is no amount of planning I consider excessive by this point in my trading experience because I have seen what this market can do to a person, intraday, without the rights set of tools and planning.  One must exude a high amount of discipline and execution to have even a chance at success in the futures markets.  The same rules apply to stock trading too.

The blood moon crests over our heads at night and its presence brings the parts of our life that we may be reluctant to address to the forefront.  The big white moon acts like a giant mirror and shows us where our shortcomings exist and then paints them blood red.  It can be a very unpleasant experience but it can also end well if we take the time to digest the introspective and use our stronger abilities to foster and settle our weaknesses.

My weakness is an excess of hope and opportunism.  I will run 100 miles per hour into a wall by over committing to all the opportunities I see.  This is how I end up with 20-25 positions.  This is also why the long term sellers of equity introducing MORE opportunity into the marketplace via IPOs troubles me.  If I don’t get a wrangle on my desire to peruse all the business opportunities out there I will end up in a sanatorium.

In summary, I plan to tighten up my book into 2-3 intermediate term trades lasting anywhere from 1-12 days, and 3-5 multi-quarter investments.  That way I can give proper focus to order flow trading in the futures market and my other enterprises—which I will not be expanding upon.

Sometimes I get lucky and I can trade around an investment like I am doing to Twitter right now.  Twitter is one of my top three stock positions and I took some YOLO options for a spin this afternoon with precision.  The harder I work, the luckier I get.  This trade was entered minutes before news hit the wires that Twitter headhunted some big time Google Maps fella.  I already have taken scales because I couldn’t care less about making a huge win on this trade.  Instead I am managing risk and putting a winner in the book.  Blood moon knows I need it after this string of April losers:

YELP, KNDI, WUBA, GOGO

I suppose one of those goof balls may still toss a hail marry to my egregious strike prices, but I am not expending too much hopium on that happening in the next two days.

Other action today was stopping out IMGN at nearly a -30% and ENPH for about a -15% if I recall correctly.

Less, more succinct trades and going easy after a win is how I am going to improve from here.  This applies to all timeframes of trade.

+1.3% on the day, -13% on the year, Elroi the algo still in testing (grr)

Hunting a Trading Range

It has been a busy morning in the futures market as premarket participants digest CPI data as Janet Yellen prepares to speak.  The reaction thus far to a slight uptick in CPI was a pop and fade.

The intermediate term auction continues to appear seller controlled with swing trades showing a series of lower highs and lows.  The question now is whether market supply will continue driving prices down on the intermediate term, or if instead price will stabilize and revert to the mean.   There is data supporting the latter outcome and that my expectation.  However, I respect the trend playing out on the intermediate term and must be willing to shift my stance should my expectation not occur.  I would not change this vision of a bracketed trading range developing if we took out our recent swing lows, but it would be a progressive step.

On the day timeframe auction, little changed between Friday and Monday.  We printed an inside day where our daily range was within the range of Friday and we also printed a neutral day with range extension to both sides of the initial balance.  Both of these characteristics suggest indecision on the part of buyers and sellers.  We printed an excess low yesterday which suggests we may see some follow through by swing buyers today.  I have highlighted this excess low as well as a few other observations on the following regular trading hours NASDAQ market profile:

NQ__MarketProfile_04152014

Still on The Give

My portfolio continues to eroded with each wave of selling.  The upward progress made in the NASDAQ was not reflected in my portfolio, a basket of high spec technology.  Instead today’s theme was energy and hourly reminders that Dick Costello has no plans to sell any Twitter shares.

I sold some RVLT today, thinking earnings were on deck.  It appears however that was not the case.

A few pieces of the market caught my attention today.  First is ONVO which was absolutely crushed today.  They are liquidating any 3D printing company as if each was a flaming bag of garbage.  As far as sentiment goes, these stocks are incredibly unpopular to the point of excess.  Does society no longer stand to benefit from the prospects of 3D printing?  I still sense there is something of a breakthrough near for this industry.  Second was the neutral print on both the NASDAQ and the S&P.  We saw legitimate buying interest today.  Perhaps it was the fair weather of the weekend creating a sense of optimism or the illustrious glow of the blood moon.  Regardless, we are seeing signs of buyers down here at a potential bracket low for a very large range. Range trade would be a welcomed change for me to unleash my algorithm.

I spent most of the day working out the kinks in my algorithm.  I am nearly ready to unleash him back into the marketplace.  Futures trading can be stressful if you let it.  Often times this is due to position sizes that are too large and stops that are too tight.  Testing, lots of testing, can reveal where your stops should be.  Then once the conditions merit a given algo, turn it on and let the entry automatically happen.  At this point I can adjust targets and stops to logical price levels and mainly stay out of the way.

In summary, we may be entering a trading range here, but that may just be the thoughts of a hopeful optimist.

The Edge of Balance: The Reward Zone

We have some early strength in the NASDAQ index futures.  The question on everyone’s mind this morning is whether we will see the early weakness get faded by strong sell flow or whether the higher advertised prices encourage buyers to enter the marketplace.  The former has been more prevalent for the last two to three weeks.

For today’s presentation of the intermediate timeframe, I chose to build out the volume profile based upon the 72 trading sessions completed thus far this year.  From the volume profile emerges some unique clues into whether the intermediate term is balanced or readying to explore lower for value.  The pattern of lower highs and lows gives sellers a clear momentum edge on the intermediate timeframe, but what is volume suggesting about value?  We do show some consensus of value around 3550 which you will notice is below the midpoint of our annual profile.  This suggests value has built lower and adds support to the idea of a continued migration lower.  However we do show a semblance of the bell curve too which makes the mean revision trade still a viable thought, although one which needs to engage sooner than later.  Also, any bounce which materializes much be carefully observed verses the very low volume node at 3580.  If price cannot gain acceptance above this level we would further expect price to continue lower.  I have highlighted these observations and a few others on the following annual volume profile distribution:

NQ_VolumeProfile_intermediateTerm_04142014

The short term auction suggests buyers have an edge this morning.  We had a rather thorough auction during our globex session which built an excess low which can be seen as a thin tail below the profile.  This suggests responsive buying and sellers drying up.  As the USA comes online we are seeing the large value area from Friday gain acceptance via volume building higher on our current profile.  This creates the expectation for trade through Friday’s value.  I have highlighted Friday’s value area and the key levels inside of it on the following market profile chart:

NQ__MarketProfile_04142014_afternoon

Taking our attention out to the long term we can see the buyers no longer clearly in control of the long term auction according to the daily chart.  We are trading below our moving averages which are flat at best and some moving lower.  We are still above February lows and we may see a balanced, bracketed trading range form.  Overall the long term auction is in balance until we take out the February lows.

Opening Swing: It Takes Tools To Make a Swing Go Right

I started live trading the first range extension after the opening swing is printed.  I was using a DOM for trade entry and I immediately remembered why I dislike the DOM so much.  It is a very distracting tool, in my opinion.  The market is noisy enough as it is.  When you add the flickering of this device into the mix trading becomes even more obscure.

I will continue testing the strategy next week and I am setting chart trading up over the weekend.

One of my observations from trading this setup live is how incredibly fast it happens.  I can sit here in retrospect and circle the idea, but the live environment gives you seconds to get your entry in.  Also, the trade can take immense heat in seconds.  Without a rock solid plan and execution, this high probability scalp trade is destined for failure.  It appears the best approach is a limit order set in place beyond the opening swing on the chart.  Then as price exceeds either extreme your entry is hit and filled.

I thought the overlapping of opening swings on Tuesday/Wednesday was an effective piece of context.  I was a buyer of swing longs against it.  However, the prices did not hold off sellers who cut through them with a slow grind lower.  I am so familiar with being on the right side of the slow grind.  Usually sell flow is much more knife-like.  Anyhow I found it odd and powerful to be on the receiving end of a grinder (Thursday afternoon).

The infamous Elroi can be seen on my charts today.  He has been getting chopped up pretty good during the opens.  I have always found his signals to be more potent later into the session but I like to see the signals because they give me insight into how other algorithms are performing.

Here are this week’s opening swings in the NASDAQ.  Feel free to share your thoughts and observations:

MONDAY

NQ_OS_04072014

TUESDAY

NQ_OS_04082014

 

WEDNESDAY

NQ_OS_04092014

 

THURSDAY

NQ_OS_04102014
FRIDAY

NQ_OS_04112014

Headstrong into The Hole

The NASDAQ cannot find a solid bid as the month of April progresses.  Interestingly enough, many people live a grand life outside of the market, sashaying about the globe without much worry about the financial markets.  To them, this has just been another month of doing whatever their preferred vocation is.  Yet here we are, some of us flexing on the short side and others fighting the tape.  I am fighting the tape, the latter party to this fiasco.  The one who is being clunked on the head 5-6 times per working day.

I have not put together a winning position once this week.  As of the closing bell I was all in.  I have a slight shade of old man with one position, LO.  The rest is pure momentum crack.  I am certain this book would cause a stroke in most:

CALLS: FB 62.50s (-70%) KNDI 17.5 (-95.69% they’re dead) WUBA 50 (-52%) YELP 82.50 (-98% dead) GOGO (-84% still alive)

STOCK: AMBA (-7%) CREE (-9% on my LIFOs) DDD (-8%) ENPH (-13%)  IMGN (-25%) OESX (-11%) RVLT (-12% on my LIFO) SINA (-4.5%) TSLA (52.15%) TWTR (-21%) and YGE (-11.7%)

Rest assured, most of these stocks will snap back with great vengeance and vigor.  Sadly, all of them will not.  But, these are questions for Sunday strategy and decisions for next week.  Have a great weekend, rest, get outside, eat a good sampling from Costco, for Monday we must navigate our down dogged market.

 

-16% YTD

Still Alive

I am clawing back some gains in this marketplace, with the bulk of the progress spearheaded by the action surrounding Weibo.  I did not take a position in Weibo but my plan of attack on SINA began to fruit and I took a nice trade in Twitter.  My book is now down a mere 11% year to date.

The question now is whether I should be raising cash.  This is my third month of seeing many options vanish from my portfolio and good riddance to the lot of them.  My book is clean now and I intend to sell more of it.  But for now it stands as follows:

Largest-to-smallest: LO, TWTR, AMBA, SINA, CREE, RVLT, DDD, YGE, FCEL, OESX, TSLA, and GRNH

I plan to peak out at 12 positions but may go as far as 15 if I simply cannot close a position.  I am questioning some of my favorite plays for their merit.

Futures trading went well, my algo traded well too.  This was day two of all systems running in harmony and my system showing me tons of confidence.  I will continue testing however into the more aromatic sessions as the month progresses and “Sell in May” becomes a discussion.

I am in no rush.  I can tell you this, with confidence, if I had some sort of urgency for keeping a roof on my head and food in my belly, then I would certainly fail.  One must wear a few hats to properly pursue their dreams, IMHO.

Have a great Easter holiday and enjoy a working day with the market closed.  These working days always blow my mind, the amount of work I am able to complete with the market closed.

Peering Through The Looking Glass

Nasdaq futures were set to drift lower overnight after some mixed afterhours trade in Google and IBM added a layer of uncertainty into the trading environment.  Drift lower they did until about 7am when a low volume ramp higher occurred.  Since then we had jobless claims which was received initially with a push higher.  We are currently trading inside balance and inside range from yesterday which suggests a lower risk/reward environment.

The intermediate term auction is interesting.  Sellers came in where I expected yesterday, which was a patch of low volume nodes on the composite profile.  Their response was perhaps exaggerated a bit by the afterhours earnings which kicked off the selling.  Sellers still retain control on the intermediate term, but the most recent swing bounce has been the sharpest yet which leads me to wonder if the velocity will be enough to get us higher.  Above yesterday’s high we begin to enter a zone of fast trade.  First let’s observe the intermediate term trend:

NQ_VolumeProfile_intermediateTerm_04172014

Now we can increase the magnification and observe the short term auctions.  Tax day, 04/15, we printed an outside day where price exceeded both the high and low of the prior day.  In this case, it was actually the prior two days.  Yesterday confirmed the outside day by migrating value higher.  These two bits of context tell me buyers control the short term auction.  Volumes are lower given the holiday climate, but you can still see a clear distribution formed yesterday.  One subtle footprint however is a spike of volume near the highs.  Normally we would expect to see volume thin out at the extremes—if we are in balance.  This suggests increasing prices facilitated more trade and that an imbalance may exists.  I have highlighted this occurrence a few other observations on the following market profile chart:

NQ__MarketProfile_04172014

 

The Invisible Hand Giveth

My tech heavy portfolio is earning back some unrealized losses but I expect the ride will not continue to be smooth sailing for very long.  After the bell we had soft earnings from big new tech Google and big old tech IBM.  Both are lower afterhours.  You can read all about these announcements elsewhere, I’m sure, but I want to talk about Alibaba.

If you are in the trades then you have utilized this site.  There really is no way around it and without it our world would seem so much bigger than it actually is.  I use alibaba to generate 20 offers on a product in minutes.  This type of quotation capability is like old school stock market and I personally consider it one of the most interesting tools in my arsenal.

I like LED lighting.  So does everyone else in China apparently.  I am getting reports from my foot soldiers that there are about 3,385,749 LED vendors at the Guangzhou Canton Fair this year.  In market talk, this means there is an overwhelming number of intermediate term sellers in the market.  So many, that we are very likely to begin seeing serious incentives offered by these inventory heavy middlemen.  The key is to wait for these weak short term hands to become desperate and then begin accumulating an inventory below fair value to then flip onto the eager masses.  These supply constraints are pressuring many domestic LED companies who hold aging inventory.  Aggravating the situation more is Haitz’s Law which forecasts the steady improvement of LEDs much like Moore’s Law of computing power.

We could write off the entire industry and their stocks based on this fundamental information, or we can take the thought a bit further and consider who is likely to benefit.  Foremost, this does not jeopardize Cree.  Cree is a driver of innovation, researching and developing on the forefront of the technological edge in LED lighting.  They will prosper over the next ten years.  But will RVLT?

Revolution lighting is currently a hodgepodge of LED technology concentrated under one Nasdaq umbrella ticker symbol.  They offer everything from fabric LED strips for inside your cabinets to municipal grid systems with integrated software and controllers.  The problem is the model.  They have thousands of products and an untrained distribution force who struggles to properly communicate the benefit of LED lighting.  That and their prices are too high.

Hell, all LED lighting prices are too high.  This is a big fail for the industry, they need to get the prices down.  And whether they like it or not, market forces are hard at work behind the scene massaging price down with their omnipotent invisible hand.

This price drop will drive many business models into a negative cash flow environment, much like a scalper in the futures has seen their edge diminish as algos outperform them.  From disruption comes opportunity for leaner organizations to fill the demand void left behind.  This is all occurring as we speak.

In summary, Alibaba is making a fortune via shrinking international trade down to a few mouse clicks.  LED lighting is one of the most heavily peddled products on their site and it is moving by the container load as prices drop.  There is an LED inventory glut and it is nearly obsolete.  This is a unique opportunity for a lean organization to swoop up discounted product.  Businesses and individual consumers will have the opportunity to update their lighting to energy efficient LED at much better prices soon.

Finally an actionable stock, AIXG.  This chart reminds me of FSLR before they released their FY15 guidance and a massive rip ensued.  They are German which says precision to me.  I have viewed their strategy and what I like most is the clear expectations and measurable goals they have set.  They have also made a heavy drive into strengthening their corporate culture.  I have seen this type of strategy play out and it can be very potent.  I have no position in this stock, but it ranks high on my want list.

In completely unrelated news, my algos are performing well, as am I, in the testing grounds.  We will see how the numbers look by month end, but great strides are being made in the race to develop a consistently profitable futures trading hybrid strategy.

And just slightly aside, I cannot believe jackass NY attorney general subpoenaed a number of HFT firms. Prepare to be on the receiving end of a wave of angry algo robots throttled to full speed.

Building Expectations for The Day

NASDAQ futures worked higher overnight building upon the afternoon strength buyers were able to muster.  The responsive buying ignited soon after price took out the year-to-dates lows on the /NQ contract.  Instead of the new lows bringing more sellers into the marketplace, we saw volume dry up at the levels and then a sharp response from buyers.  The bounce that materialized has the potent look of a durable swing low for the next few trading days.

The long term auction has been disrupted after being controlled by the buyer for over a year.  Today the picture of the NASDAQ composite has changed a bit.  I perceive the long term auction as in balance which dates back to November 11th, or 11/11/13.  I do not choose these dates at random but instead observe the past market activity and how it relates to our newly revealed information.  My largest moving average (99EMA) is starting to turn lower on the daily chart but we do not have clear alignment of the moving averages which would add to a case for seller control.

I have built the intermediate composite volume profile to span from 11/11 to today so we can observe the volume taking place inside the auction.  It is hard to see, but 3515.25 is the volume point of control or the largest tip on the profile.  These are prices that both buyers and sellers consider fair and we conduct large amounts of trade at.  My goal currently is to sell some of my swing long exposure above this level.  Intraday, if I see price building acceptance above this level then I will look to trade a long beyond it.  I have highlighted this level was well as my swing trade targets on the following intermediate term profile:
NQ_VolumeProfile_intermediateTerm_04162014

The short term auction shows buyers with a strong response.  They need to build on it and yesterday they accomplished a response with the potential to be build upon with some initiating buying.  However, should they be overwhelmed with supply price could reject back down into three days of overlapping value.  Standing between sellers goals is a very interesting low volume node at 3485.50 which is also in confluence with several value area highs.  This level is my key pivot intraday between long and short bias, until a level more influential materializes.  Buyers show us gaining acceptance into the upper profile which has prices up to around 3545:

NQ__MarketProfile_04162014

 

We have jobless claims at 8:30am which could have a material effect on the picture we see coming into the open.  We also have Philadelphia Fed announcement around 10am to be aware of.

Stop Kissing All The Babies

The NASDAQ and equities in general treated my tattered tech portfolio to a bit of respite while I toiled away at various campaigns of industry and trading methodology.  My trading plan and its autonomous counterparts continue being built and optimized into a plan I intend to take live.  There is no amount of planning I consider excessive by this point in my trading experience because I have seen what this market can do to a person, intraday, without the rights set of tools and planning.  One must exude a high amount of discipline and execution to have even a chance at success in the futures markets.  The same rules apply to stock trading too.

The blood moon crests over our heads at night and its presence brings the parts of our life that we may be reluctant to address to the forefront.  The big white moon acts like a giant mirror and shows us where our shortcomings exist and then paints them blood red.  It can be a very unpleasant experience but it can also end well if we take the time to digest the introspective and use our stronger abilities to foster and settle our weaknesses.

My weakness is an excess of hope and opportunism.  I will run 100 miles per hour into a wall by over committing to all the opportunities I see.  This is how I end up with 20-25 positions.  This is also why the long term sellers of equity introducing MORE opportunity into the marketplace via IPOs troubles me.  If I don’t get a wrangle on my desire to peruse all the business opportunities out there I will end up in a sanatorium.

In summary, I plan to tighten up my book into 2-3 intermediate term trades lasting anywhere from 1-12 days, and 3-5 multi-quarter investments.  That way I can give proper focus to order flow trading in the futures market and my other enterprises—which I will not be expanding upon.

Sometimes I get lucky and I can trade around an investment like I am doing to Twitter right now.  Twitter is one of my top three stock positions and I took some YOLO options for a spin this afternoon with precision.  The harder I work, the luckier I get.  This trade was entered minutes before news hit the wires that Twitter headhunted some big time Google Maps fella.  I already have taken scales because I couldn’t care less about making a huge win on this trade.  Instead I am managing risk and putting a winner in the book.  Blood moon knows I need it after this string of April losers:

YELP, KNDI, WUBA, GOGO

I suppose one of those goof balls may still toss a hail marry to my egregious strike prices, but I am not expending too much hopium on that happening in the next two days.

Other action today was stopping out IMGN at nearly a -30% and ENPH for about a -15% if I recall correctly.

Less, more succinct trades and going easy after a win is how I am going to improve from here.  This applies to all timeframes of trade.

+1.3% on the day, -13% on the year, Elroi the algo still in testing (grr)

Hunting a Trading Range

It has been a busy morning in the futures market as premarket participants digest CPI data as Janet Yellen prepares to speak.  The reaction thus far to a slight uptick in CPI was a pop and fade.

The intermediate term auction continues to appear seller controlled with swing trades showing a series of lower highs and lows.  The question now is whether market supply will continue driving prices down on the intermediate term, or if instead price will stabilize and revert to the mean.   There is data supporting the latter outcome and that my expectation.  However, I respect the trend playing out on the intermediate term and must be willing to shift my stance should my expectation not occur.  I would not change this vision of a bracketed trading range developing if we took out our recent swing lows, but it would be a progressive step.

On the day timeframe auction, little changed between Friday and Monday.  We printed an inside day where our daily range was within the range of Friday and we also printed a neutral day with range extension to both sides of the initial balance.  Both of these characteristics suggest indecision on the part of buyers and sellers.  We printed an excess low yesterday which suggests we may see some follow through by swing buyers today.  I have highlighted this excess low as well as a few other observations on the following regular trading hours NASDAQ market profile:

NQ__MarketProfile_04152014

Still on The Give

My portfolio continues to eroded with each wave of selling.  The upward progress made in the NASDAQ was not reflected in my portfolio, a basket of high spec technology.  Instead today’s theme was energy and hourly reminders that Dick Costello has no plans to sell any Twitter shares.

I sold some RVLT today, thinking earnings were on deck.  It appears however that was not the case.

A few pieces of the market caught my attention today.  First is ONVO which was absolutely crushed today.  They are liquidating any 3D printing company as if each was a flaming bag of garbage.  As far as sentiment goes, these stocks are incredibly unpopular to the point of excess.  Does society no longer stand to benefit from the prospects of 3D printing?  I still sense there is something of a breakthrough near for this industry.  Second was the neutral print on both the NASDAQ and the S&P.  We saw legitimate buying interest today.  Perhaps it was the fair weather of the weekend creating a sense of optimism or the illustrious glow of the blood moon.  Regardless, we are seeing signs of buyers down here at a potential bracket low for a very large range. Range trade would be a welcomed change for me to unleash my algorithm.

I spent most of the day working out the kinks in my algorithm.  I am nearly ready to unleash him back into the marketplace.  Futures trading can be stressful if you let it.  Often times this is due to position sizes that are too large and stops that are too tight.  Testing, lots of testing, can reveal where your stops should be.  Then once the conditions merit a given algo, turn it on and let the entry automatically happen.  At this point I can adjust targets and stops to logical price levels and mainly stay out of the way.

In summary, we may be entering a trading range here, but that may just be the thoughts of a hopeful optimist.

The Edge of Balance: The Reward Zone

We have some early strength in the NASDAQ index futures.  The question on everyone’s mind this morning is whether we will see the early weakness get faded by strong sell flow or whether the higher advertised prices encourage buyers to enter the marketplace.  The former has been more prevalent for the last two to three weeks.

For today’s presentation of the intermediate timeframe, I chose to build out the volume profile based upon the 72 trading sessions completed thus far this year.  From the volume profile emerges some unique clues into whether the intermediate term is balanced or readying to explore lower for value.  The pattern of lower highs and lows gives sellers a clear momentum edge on the intermediate timeframe, but what is volume suggesting about value?  We do show some consensus of value around 3550 which you will notice is below the midpoint of our annual profile.  This suggests value has built lower and adds support to the idea of a continued migration lower.  However we do show a semblance of the bell curve too which makes the mean revision trade still a viable thought, although one which needs to engage sooner than later.  Also, any bounce which materializes much be carefully observed verses the very low volume node at 3580.  If price cannot gain acceptance above this level we would further expect price to continue lower.  I have highlighted these observations and a few others on the following annual volume profile distribution:

NQ_VolumeProfile_intermediateTerm_04142014

The short term auction suggests buyers have an edge this morning.  We had a rather thorough auction during our globex session which built an excess low which can be seen as a thin tail below the profile.  This suggests responsive buying and sellers drying up.  As the USA comes online we are seeing the large value area from Friday gain acceptance via volume building higher on our current profile.  This creates the expectation for trade through Friday’s value.  I have highlighted Friday’s value area and the key levels inside of it on the following market profile chart:

NQ__MarketProfile_04142014_afternoon

Taking our attention out to the long term we can see the buyers no longer clearly in control of the long term auction according to the daily chart.  We are trading below our moving averages which are flat at best and some moving lower.  We are still above February lows and we may see a balanced, bracketed trading range form.  Overall the long term auction is in balance until we take out the February lows.

Opening Swing: It Takes Tools To Make a Swing Go Right

I started live trading the first range extension after the opening swing is printed.  I was using a DOM for trade entry and I immediately remembered why I dislike the DOM so much.  It is a very distracting tool, in my opinion.  The market is noisy enough as it is.  When you add the flickering of this device into the mix trading becomes even more obscure.

I will continue testing the strategy next week and I am setting chart trading up over the weekend.

One of my observations from trading this setup live is how incredibly fast it happens.  I can sit here in retrospect and circle the idea, but the live environment gives you seconds to get your entry in.  Also, the trade can take immense heat in seconds.  Without a rock solid plan and execution, this high probability scalp trade is destined for failure.  It appears the best approach is a limit order set in place beyond the opening swing on the chart.  Then as price exceeds either extreme your entry is hit and filled.

I thought the overlapping of opening swings on Tuesday/Wednesday was an effective piece of context.  I was a buyer of swing longs against it.  However, the prices did not hold off sellers who cut through them with a slow grind lower.  I am so familiar with being on the right side of the slow grind.  Usually sell flow is much more knife-like.  Anyhow I found it odd and powerful to be on the receiving end of a grinder (Thursday afternoon).

The infamous Elroi can be seen on my charts today.  He has been getting chopped up pretty good during the opens.  I have always found his signals to be more potent later into the session but I like to see the signals because they give me insight into how other algorithms are performing.

Here are this week’s opening swings in the NASDAQ.  Feel free to share your thoughts and observations:

MONDAY

NQ_OS_04072014

TUESDAY

NQ_OS_04082014

 

WEDNESDAY

NQ_OS_04092014

 

THURSDAY

NQ_OS_04102014
FRIDAY

NQ_OS_04112014

Headstrong into The Hole

The NASDAQ cannot find a solid bid as the month of April progresses.  Interestingly enough, many people live a grand life outside of the market, sashaying about the globe without much worry about the financial markets.  To them, this has just been another month of doing whatever their preferred vocation is.  Yet here we are, some of us flexing on the short side and others fighting the tape.  I am fighting the tape, the latter party to this fiasco.  The one who is being clunked on the head 5-6 times per working day.

I have not put together a winning position once this week.  As of the closing bell I was all in.  I have a slight shade of old man with one position, LO.  The rest is pure momentum crack.  I am certain this book would cause a stroke in most:

CALLS: FB 62.50s (-70%) KNDI 17.5 (-95.69% they’re dead) WUBA 50 (-52%) YELP 82.50 (-98% dead) GOGO (-84% still alive)

STOCK: AMBA (-7%) CREE (-9% on my LIFOs) DDD (-8%) ENPH (-13%)  IMGN (-25%) OESX (-11%) RVLT (-12% on my LIFO) SINA (-4.5%) TSLA (52.15%) TWTR (-21%) and YGE (-11.7%)

Rest assured, most of these stocks will snap back with great vengeance and vigor.  Sadly, all of them will not.  But, these are questions for Sunday strategy and decisions for next week.  Have a great weekend, rest, get outside, eat a good sampling from Costco, for Monday we must navigate our down dogged market.

 

-16% YTD