iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,484 Blog Posts

I Sold Half My DDD Position Today

I want to very quickly share with you why I decided earlier today to sell half of my DDD position. After riding through the downdraft in the name, the pump occurring over the last few days offered reprieve and put the position back in positive territory. DDD is a company I want to hold intermediate-long term, but I would like to get my cost basis lower. By selling half today, I locked in around 2.5% gains on the position, and now feel in a position of strength to buy any pullbacks in the name. The stock could continue to run higher without pulling back in any significant way. However, ignoring my charts and what they are telling me would be a greater frustration than riding the name higher with a half position ONLY.

I’ve highlighted two divergences occurring on the DDD chart. The first is a momentum divergence, with my CCI not confirming price’s new swing high, and the second is a volume divergence from the previous swing high:

I interpret the price action to suggest a weak handed short getting squeezed, which has the market for DDD stock getting a bit ahead of itself in the short term. The scenario I’m envisioning is either a time or price based consolidation occurring, which will allow me to put my full sized position back on.

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Bonds Slosh About, Suggest Increased Risk Appetite

The Euro dollar future contract is trading north of the key $1.3000 price level highlighted last month, and bonds are adding to the case for an increased risk appetite:

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Diverging Dilemma: Crosscurrents

Whether or not you consider our current market to be weak is heavily dependent on the individual names making up your portfolio.  For example, the relative strength of the finance sector continues, but high flying tech longs are getting their clocks cleaned.  The energy complex was strong yesterday, but refiners are getting lit up today.  We’re operating in a mixed bag of sorts.  I highlighted 1.3000 in the Euro dollar future a few weeks back and the price level is also still a place where I lean on my bias.

Taking to the S&P via the SPY ETF, we see the financials buoying the market decently, and looking at the momentum divergence on my CCI, if we see buyers begin to assert themselves later into this week, they could really get things moving to the upside:

As for the NASDAQ via the QQQs, the index is trading below the 33 EMA, and although it’s sporting a similar CCI divergence as the SPY, the “wormed apple” and other names have put the QQQ bulls on their heels, and they have much work ahead of them if they want to regain the edge:

Finally, the demand for risk free Treasuries remains high.  The short duration (3 year) auction that took place yesterday pushed yields below 40 basis points.  The longer duration Treasury ETF TLT could be forming a right shoulder here, and bond bears could be backing off a bit:

All these cross currents have me considering raising cash, but I’m waiting for one of the above instruments to “tip their hand” and confirm.  Until then, I will practice patience and eating sandwiches.

SIDE NOTE: COST showing us how you really do the $100.00 dollar roll.

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TRADERS: A Setup You Can Leg Into

Last week I wrote a piece about the price action we’ve seen in American Apparel stock recently and implored you to consider these price levels as an opportunity to enter the name.  As you know, I’m currently long the APP.  However my position is only 1/3 sized as I used the recent strength to lock in some profits.  Since then I’ve patiently waited for an opportunity to get my size back on.

]It’s important when adding to an existing position to consider the risk of the added piece, and how it pertains to your entire position.  That is why I like to have a clear, defined setup for reentry.  Last week we talked about seeing how APP traded around the $1.30 level.  What drew my attention to the level was my 33 ema, which is for all intents and purposes my center of the universe.

We often discuss price levels, but what exactly do we look for to determine the opportunity a support level presents?  For me, it’s having a clear definition of where to say, “WRONG” click.  That level was established today by the long tailed daily candle, to be ~ $1.27.  Taking a look at the chart we can see buyers rejected prices attempt to head lower by reacting to the advertised sales prices with aggressive buying.  The long tail is the footprint they left behind.  I’ve stripped my chart down to only the 33ema to emphasize what I’m watching:

Tomorrow, should the overall tenor of the markets be turnaround Tuesday-esque I will be adding to my position.  I continue to implore you to keep the name on your radar.

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Greeks Unite The Clans

I’m not finding much information this morning on the Greek banks merger situation but it appears bullish.  Taking to the charts, we can see that NBG has been playing along with the strength in the financial sector, the strong tenor of the Euro dollar, and the overall easing of tensions in Euroland.  Shares are currently halted:

It will be interesting to see where we’re at when trading continues. A continued advance in the Greek bank’s share price is a key piece of confidence for the entire equity space.

UPDATE: Reuters reporting on the the situation

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Sexy American Reentry

I’ve been a longtime fan of American Apparel and their simple design concepts.  Their marketing has consistently been edgy to the point of going viral and occasionally being saddled with lawsuits.  The company has spent the major part of the last two years clinging onto solvency and the stock price has reflected that, sustaining trade below $1.00.

Distressed situations require heavy due diligence for an investor and aren’t for everyone.  However led by the flamboyant Dov Cheny, the management team has continued to tread forward.  Fundamental analysis is not one of my strengths, but the sheer panache of the management team paired with strong and sexy branding keeps the stock on my radar at all times.

At the beginning of August, APP began showing signs of life.  Since then the stock has gained momentum to the upside.  It broke free from a multi-month consolidation and retuned to $1.70 where again we saw supply enter and slow price.  Check out the action on the weekly chart:

On a daily timeframe, we see the power behind the breakout.  If you recall, the retail sector as whole had a strong thrust over the last few months.  Check out XLY’s chart showing strong demand in the consumer discretionary space since the beginning of August.  APP participated, and since finding resistance, has pulled back.  What I want to see is how we trade at the $1.30 level.  Today, the stock is reacting positively to some good same store sales reporting and a healthy demand for retail stocks.

I’m long since the $1.00 roll, and considering adding more.  I’ll be very patient with my add and may miss the opportunity, but I implore you to keep the name on your radar. As always, following @twosmuth on twitter will make you the first to know when I’m buying.

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Stubborn Bonds

A critical component to equity inflows is the unwinding of the massive flight to safety over the last two years which has seen TLT, the ETF tracking long term treasury bonds, up well over 40% since the beginning of 2011.  TLT is a capital hog, but the daily chart has tipped in favor of downward momentum as I noted a few weeks back.

Updating my thoughts on the name, I still like the picture we’re presented in TLT and still give the edge to the downside; however it is becoming increasingly difficult to stay patient on the name.  Redman59 commented on a more neutral choppy bias, and thus far that seems to be the case.  $125.00 looks like a critical price level for bears to defend, and I could see stops being trigger above.  Downside confirmation I want to see is price below my 33 EMA on a closing basis (~$123.50).

Although my positioning in TBT won’t expire like other contractual positioning, being an ultra it does have time erosion.  Thus the stubborn bond buyers holding price in the stodgy high volume area has me taking to twitter regularly to decree “DIE TLT DIE!”  And as is always the case, cheering for positions on twitter makes you look like an overly emotional piker.

Indeed, we’ve rallied well despite the precipitous advance of TLT, but should we see the trade lose steam, well, that capital has to go somewhere and I believe it will seek refuge in the mega cap stocks.  All this would bode extremely well for a bullish fourth quarter USA#1 rally.

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DDD Sporting a CCI Divergence

In what could be described as profit taking in a name that has been strong all year, the selling pressure in DDD has moved price lower all September.

Today the stock has pulled a bit of a turnaround, as buyers reacted to the discounted prices and began buying in the morning.  The buy flow has continued throughout the day and I’m watching as we enter the afternoon session to see if buyers continue to dictate price higher.

The CCI indicator below my charts is something I monitor to get a feel for momentum.  I use a shorter timeframe to gauge the small swing, and a longer for the intermediate move.  This most recent move lower has set up a divergence.  Price has moved lower while the indicator failed to make new lows.  It’s a signal we could be seeing downside momentum decelerating.

FD: Long with a cost basis of $38.75

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Looking at Our Good Friend the Euro

The last time we checked in on the Euro dollar contract was at the beginning of the month. At the time it was suggesting bullish undertones pared with a slice of healthy auction. Since then bulls have moved the price much higher, nearly five percent, to achieve a significant land grab and target destination of the composite high volume node. This price level, 1.3160, represents the price where the highest volume of transactions has occurred on data dating back to January 2010. The matter in which the price target was achieved is most impressive. A thrust, if you will, that even the V.King would appreciate.

Since then price has auctioned in a manner that suggests mild profit taking, and a healthy rotation lower to revisit some low volume pockets left behind during the aggressive mid-September pump. Taking to the daily bar chart we can see the composite volume on your right along with some annotations:

Going forward, the psychological barrier of big round 1.3000 paired with it being the range high of this very low volume pocket makes the price level my bias line. I’m have a bullish bias above, and bearish below, for the unwashed until further notice.

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TLT on TILT

The 20 year Treasury bond ETF has put in three significant swing points since its late July peak, and I’m positioning for what I expect to be significant point four (second lower-high) and the potential for significant point FIVE (lower-low, momo hoes).

Have a look:

I bought TBT this afternoon in anticipation of the above scenario. You will notice it’s a near mirror image of the TLT chart. I will look to take my first 1/3 scale if price trades into reference point “(3)” to lock in some gains. Not rocket science, just a bit of risk management wrapped into a momentum mentality.

Beyond that, I’m planning some grandiose events for this upcoming weekend to welcome the gentle seasonal change.

Cheers,

http://www.youtube.com/watch?v=GR8jOJZERhs&feature=youtube_gdata_player

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