iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
4,121 Blog Posts

Stick Save

I am still pressing my QID position.  I do not like the picture we are painting on the Nasdaq yet.  Yes, this may end up being an anchor, dragging along the sea bed as I gun my twin outboard motors in high beta stocks and short dated options, but I will see this idea through.

The day is wrapping up for me.  I will come again to market this afternoon and determine if it merits additional intervention.

I sold my March $60 calls in FSLR and now must hunt an opportunity to buy the Aprils before this name keeps rolling rolling rolling higher and higher.  In the meantime I bought a large ENPH position.  This stock usually beats me like the arrogant bastard I am, let’s see if today is different.

I had a strong hand in NASDAQ opening swing action today.  It makes everything else so easy.  Come by this weekend and we will talk about it more.

Now I am off to stroll the parks and smell the land as it unthaws.

Is this song’s chorus sounding like someone in the psyche ward after 10 or 20 repetitions? I still like it:

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Mean Revision

NASDAQ futures are currently trading just above the high print on yesterday’s trade in an overnight session in a relatively quiet and balanced overnight session.  The first test above yesterday’s high occurred early this morning and found responsive selling by price since stabilized and is holding the high water mark.

We printed a trend day yesterday which started with a strong opening drive and continued making successful auctions higher for most of the day.  Once a trend day is recognized, a consistently profitable play is to find a place to get a trade on in the direction of the trend and hold the position into the following session.  That is because any entry during a trend day offers a near risk free entry into the following session meaning, at some point in the following session price will trade beyond the direction of the range of the trend.

The short term auction is buyer controlled.  This can be seen in the migration of value back higher and the buying tail present on our current profile.  As we approach the cash open, price action has stabilized near yesterday’s highs and is coiled tight.  It appears the market is waiting for news of catalyst before deciding short term direction.  We have an FOMC meeting this afternoon which may be what has the market on pause.  I have highlighted a few scenarios for this morning as well as interesting levels on the following market profile chart:

NQ__MarketProfile_03192014
The intermediate term auction is back in balance.  The sellers were quick to lose control of the intermediate term.  Yesterday morning it appeared they may sustain control by holding Monday’s high and printing another lower high.  However and entrance by the long term participant drove price through most areas of resistance and reverted price back to the mean or volume point of control at 3699 (or 3700 if you prefer round numbers).  Price and value always converge it is just a matter of how they do so.  In this case, price reverted back to value and not the other way around.  This suggests the current value of the NASDAQ is perceived as about 3700 by buyers and they were aggressive buyers until the level was reached.  This begs the question then, why did I begin shorting the index yesterday?  My hypothesis is that value is actually a bit lower, more around 3678.25.  Therefore I want to participate in the discovery process by selling into this two day rally.  I have highlighted the intermediate term balance on the following volume composite chart:

NQ_VolumeProfile_intermediateTerm_03192014b

Even though I am confident in my short and willing to add to it upon further strength, I realize the long term auction still favors they buyer.  Thus this trade carries a lower probability then a mean reversion long trade.  I am willing to cut this loss if price is accepted above   ~3715.

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A Message from Your Comrade Raul

It will take much more than this simple two day rally to convince me all is well in Western finance.  There is little I can say about the violent pin action in small bombs to back my case for lower equity prices.  It is something I dream of, like a dog dreams of green pastures, while I nap in the warm embrace of sunlight.

This year we do not only sit idle in our longs, waiting for them to make the Great Move.  No my friend, instead we primp and prune at each and every market junction, slowly, enjoying the process as if it was a warm piece of German Chocolate cake.

In the event of any weakness this week, even a modest gap lower, I will reduce my QID long.  This position has a leverage element and what did we discuss last night about leverage and time?  These two they are not friends, they are like villains of each other.  We know that if our timing is right our gains are doubled.  This is modest leverage, nothing like a futures contract.  This position is like old man who sits and feeds the pigeon, slowly luring the dinner in close before snatching it into his purse.

I can buy more QID if we go higher, but I have a clear stop in mind, something that will take a strong effort from the long term buyer to trigger.

It could happen, I am only market speculator, not magician sent here to trick you.

Keep away from my precious RVLT.  This one is mine, with cost basis dating back to February 2013.  The fact that my position is larger than any prior record is irrelevant, like dog on cross country ski slope.

Sleep well, eat a hot dinner and vodka, for tomorrow will be a red victory.

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RAUL BUYS

I am not so convinced all is well in the world and we are destined to V-shape into outer space.  I sold into this rally a bit this morning, covering my Z calls a tad soon.

Then I came back to market, saw the zealous nature of the tape and put on a full size QID.  I do not think things are so simple this time with the big picture a bit of a sloppy mess.

Just in case we decide to keep stocks in a microcosm, I bought BBBY short dated risk.  This type of trade is something to finance my new set of pots, pans, and what have you.

My cash is high (23%) and I have the eye of a skeptical guy.

I am up nearly a percent today even with this odd mix of market exposure.

You should too.

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Respect The Seller

Index futures are higher overnight after briefly taking out yesterday’s low late last night.   Yesterday the low of the day was printed within a few minutes of the cash markets opening for trade at 9:30am when an opening drive erupted.   The opening drive gives us a sense of the responsive buying demand that exists down at these bracket lows, and it gives merit to the idea that the intermediate term may sustain balance.

The long term auction in the NASDAQ Composite shows control by the buyer.  This control can be seen as a series of higher lows and higher highs on the weekly price chart.  Two weeks ago, we printed an outside candle on the weekly candle which is yet to confirm as a reversal candle lower.  We need to see follow through downward before considering the potential for a reversal on this long term timeframe.

On the daily chart, the auction is still buyer controlled after their success in holding the support at 4250 from Friday-to-Monday.  We are closely watching for the next leg higher to make new highs, otherwise the recent support becomes vulnerable.

The intermediate timeframe auction is seller controlled.  Their control can be seen dating back to March 7th when a series of lower highs and lows began to print.  We briefly breached intermediate term bracket lows on Friday before gapping back into the balanced bracket price yesterday.  The key here is to not be stubborn, and if the market succeeds in printing a lower high to consider the intermediate term to be back in balance.  Note how the low volume node at 3668.50 was converted into resistance with relative ease by the sellers.  For now, we remain seller controlled.  I have highlighted the intermediate term auction on the following volume profile chart:
NQ_VolumeProfile_intermediateTerm_03172014

The short term timeframe is interesting.  Yesterday’s opening drive produced a wide initial balance.  So wide in fact we never breached it for the rest of the session.  This is called a normal day and they are anything but.  Normal days show a lack of directional conviction by both parties to the auction.  However, in not losing sight of the intermediate term, it was clear the up move was likely to fade.  Couple yesterday’s afternoon fade with the overnight action and you can see we are balanced and indecisive in the short term.  I expect some chop early on today as we deal with the imbalance of the overnight session after yesterday which was a relatively big up day.  I have highlighted a few scenarios and the levels I will be watching on the following market profile chart:

NQ__MarketProfile_03182014

 

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How Would Pareto Trade?

There are thousands of ticker symbols in the stock universe, a handful of which I keep a close eye on.  But the NASDAQ, I watch every single characteristic of this market.  To me and the stocks I follow, it is the major tell.  Most importantly, after 300 days of watching every single open, intraday, and close on in the front month future of the NASDAQ, I am realizing 80% of the daily action takes place within minutes of the market opening.

Thus with the right strategy, one should be able to earn as much if not more from the open as they can spending the entire day stalking the futures.  Moreover, one should be able to deduce the daily direction and whether to add, reduce, or press your favorite stock picks.

Today I only had time to actively watch the first hour and a half of trade.  The opening drive was unexpected and never printed an opening swing low.  This is a peculiar type of open and the outcome can be crippling for the leveraged trader.  Fading this type of open is stepping in front of a firehouse of buy orders.  Yet that was exactly the right move today.

The rest of the day was flat on the index.  The hawks and Pelicans managed to find intraday momentum in individual stocks because they are masters, but I want to be as proficient a futures trader as the world has ever seen.  The outcome of any economic decision should be measured both on profit and time.

Time is not the friend of the leveraged trader.

1.5 hours of live trading.  The 20% of the day that produces 80% of the intraday opportunity.  If I can trade even less, perhaps 1 hour, then I will.  Then given the information reveled by the morning auction I can choose the best suited algorithm for the hypothesized afternoon order flow conditions.

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Sold the Pop, Off To See About a Pint

We have a new saying in the domicile of Raul.  It’s an old Irish motto, “Less is more.”  If I can properly interpret the opening action, then I can correctly jostle my portfolio and make some money intraday in the futures.  The second piece is still in beta testing because we are not rushing the use of leverage.  We only use leverage of the futures variety with well calculated plans.

I booked RGSE before the little guy gets away from me again.

I am up a little bit year-to-date.  My cash position is over 30% and Elroi is calling for the ball.

I am turning him on to stalk the market while I head to the nearest pub on foot.

May your robots interpret intraday orderflow well fine lads.

http://youtu.be/ncvRBWG2gwE

http://youtu.be/jaOJOZYKtq4

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Trading The Overnight Strength

Equity futures printed an abnormally large range overnight, one that began with a selloff before finding strong responsive buying activity which triggered a rally in the Globex hours.  As of this post, the NASDAQ futures are set to open inside of Friday’s range but outside of the value area set Friday.  These conditions are slightly out of balance and present an elevated risk/reward environment.

The long term control of the auction is buyer controlled.  This can been seen on a weekly chart of the COMPQ, however the daily chart is not as clear.  The daily chart still presents a picture of buyers in control, however that control is being tested as we made a slight lower low on Friday verses March 1st.  This week we will be closely monitoring any sort of bounce that materializes and the potential of price to form a lower high.  This would change the character of the long term auction from being buyer controlled to balance.

The intermediate term timeframe is seller controlled.  We have seen prices make a series of lower highs and lower lows dating back to March 7th.  The price action has been fast and choppy with the momentum edge favoring selling.  Price slid out of balance Friday and closed near the lows.  Above we have a large overhang of supply.  How the market reacts to this supply will be telling this week.  I have highlighted the intermediate term volume composite on the following volume profile chart:

NQ_VolumeProfile_intermediateTerm_03162014

The short term auction is balanced.  We have overlapping value areas and price stabilizing inside of these value areas.  The overnight inventory is long, thus I am looking for prices to press into these overnight longs.  Early on, I will be on watch for a gap fill trade back down to 3621.25.  If you refer to the intermediate term profile above, you can see we are set to open on top of a volume cave.  Price can quickly move through this area which would aid sellers in pressing for the gap fill down.

I have envisioned a scenario for today on the following market profile chart:

 

NQ__MarketProfile_03172014

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Opening Swing: Inaugural Edition

Welcome to Opening Swing.  This is the first of a series of analysis on the behavior of price during the first few minutes of trade, and the subsequent trade that follows. Initially our attention will be on NASDAQ futures because I think we will see more volatility in equity prices this year and I view index futures as a smart vehicle for playing this potential.

The opening swing is a high and low that is set by the initial auction right after the market opens.  It is independent of time and is not the same as the opening range or initial balance.  The opening swing is the high of the first push up and the low of the first push down or vice versa.  It measures how far the Market On Open (MOO) orders take the auction right after the open.

The plan is to use less words and more charts, but if any of these charts begin showing a similar trading picture or tradable opportunity, my plan is to discuss it and hopefully solicit some input from some of the more seasoned traders hanging around these parts.

Without further adieu, let’s look at this week’s NASDAQ openings swings.  They are presented in chronological order and free of any indicators, moving averages, etc.  This is pure auction analysis.  Keep in mind, the context analysis done every morning gives more insight into to these opening swings, and combined form the basis upon which we can consistently trade for profit.  Therefore it would be of your benefit and mine to take each opening auction and compare it to my morning context report to form a solid understanding of the early auctions that take place.  Again, don’t hesitate to use this forum to ask questions or suggest methods of trading this auction behavior:

NQ_OS_03102014

NQ_OS_03112014

NQ_OS_03122014

NQ_OS_03132014

NQ_OS_03142014

NOTE: Most days I report the opening swing inside 12631.  I like using 12631 not because I want to be exclusive from all the wonderful people I learn from and interact with on Twitter, but because the chart room has so many dynamic tools that I can use to review my messages.  12631 members can review my live opening swing calls (as I will be) to see how accurately I am calling the opening swing in real time.

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Retooling

I completed a micro test today of observing and navigating the morning trade and then turning my focus to more pressing matters like driving around in the sunshine.  But how does one cope with the potential for missed opportunity?

When the daily ranges on the NASDAQ are blowing out like this, as they have all week, there is money to be had by providing and obliging the order flow.  All of that range has some lovely meat on the bone.  As a swing trader, I am slowly building into names I want for a few months, buying.  As an order flow trader however I had zero desire to go long today.  That is because the day after a trend day favors the direction of the trend.  Thus trades should be taken in the direction of the prior day trend.  But the devil is in the details, yes?

Getting short can be challenging because if your timing is off the market will blow a geyser of buy orders up your rectum.  Think of it like the market getting an enema before the action really gets loose.

We will discuss all these topics, and more over the weekend in our first edition of Opening Swing, a study of how the market opens and the opportunities it presents.

I just don’t know if I will feel right avoiding afternoon trade.  I have discussed my concern with my helper robot, Elroi, who seems to think he is up to the task of trading the afternoon.  I will tell you this, Elroi is one blood thirsty robot.  It is a beast forged in Baalzebûb’s furnace who thrives when markets are liquidating.  Especially in the afternoon apparently.  He went 4-for-4 while I was out procuring cured meats and beer today.  He may just be the tool needed to curb  my urge to stalk the markets minute-for-minute.  I have a pretty good idea when to turn him on, too, but that I am keeping close to chest.  Check out today’s beta performance per a hypothetical one contract position:

Elroi_Perf_14March

I bought more GOGO today and did little else.  I like cash even if we bounce because it makes hunting new deals that much more important.

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