iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,500 Blog Posts

Traders All Know a Relief Rally

The morning commentary from Twitter and blog traders has identical sentiment from bulls and bears alike: this is a relief rally and may last a few days but will eventually run out of steam.  This sentiment is echoed by some of the more noble people I read.  Actually, it’s echoed by too many traders.

I see the following two scenarios most likely as we enter Monday afternoon:

All short-timeframe traders will begin front running each other and we’ll have a weak close

or

We close firm, with markets closing above their midpoint on the day

I’ll use today’s close as a hand tip, and my expectation is we see one of these scenarios play out, listed respectively to the above outcomes:

A Weak close leads to weakness throughout the short week, and then we go higher

or

We go mildly higher this week, than much higher the week after

I know and accept that markets rarely give such binary outcomes and I keep an open mind to the possibility of a sharp clawed bear market. Many trader’s favorite charts are broken.  However, I currently hold a portfolio of strong charts, and they look ready for another leg higher.  Have a look:

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Should You Want a Turkey Rally Position…

…I implore you to keep two names on your radar, both of which I’m long:

The chicken don, aka, MACHO TACO, Pilgrim’s Pride chicken manufacturing PPC

and

The royalist, a Gint special, Royal Gold RGLD

These are my top picks, and I do believe the gods of rally will elevate both names into the grandest feast of the year, if only for a stock picker’s benefit.  We will eat birds from golden forks, friends.  I’ve made my sacrifice to the gods, selling out of WFM, which is death spiraling.

Should the turkey gods besmirch me by taking the year off, ordering Chinese food instead like a COMMIE, I will sell said positions and use the proceeds to buy bulk quantities of soap, firewood, and ammunition (RGR).

On a personal note, I will be attending the local gun and knife show this weekend, popcorn in hand, to enjoy the crazies.

BACK TO BUSINESS, how I see it:

Trade’em well.

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Raising Cash

The morning has been kind to my longs and I used the opportunity to take scales in a variety of names.  I have not entirely closed any positions since I would then be without my stocks.

Cash at 15% and may go much higher if I sell TBT.  A directional bet in TLT is 50/50 at this juncture.  If it stays firm, I’m closing the position out which will bring my cash north of 25%.

I did initiate a long in VHC early on.  It’s a very small, riverboat position. The chart picture is tantalizing, albeit irrelevant to the actual fate of price.

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Quick Thought on Marathons

Our populace really loves polarizing events and happenings.  Be it football rivalries, films like Footloose, elections, or chilled NYC residents inundated first by waters and now by trite “26.2” tourists.  These events put the spotlight on how fucking stupid an extreme opinion is.  You stand for nothing, except the desire to bring attention to your otherwise anonymous life by joining an argument.

I’ve run marathons, they’re spirited, sure.  In Detroit, we run over to Canada for a brief reprieve, then it’s back to running past piles of burning tires and shit.  I kid, slightly.

As for NYC and its diverting of “precious public resources” to having a marathon, I don’t go extreme and you shouldn’t either.  Wouldn’t it be frustrating to cancel and rework travel itineraries?  Marathoners also spend months in a training regimen that “peaks” on race day.  It would get their spandex in a bunch to waste such efforts.

If there was a tree shoved up my Brooklyn home’s ass, it would be modestly entertaining to toss firecrackers at the runners while huddling over a barrel of burning garbage.  If I was a resident, I’d certainly make lemonade from the situation; perhaps setting up a small card table and offering the runners a refreshing drink, that’s actually a shot of cinnamon.  Poof CINNAMONED FOOL!  Or maybe some locally sourced (from the subway tunnel) water.  Get creative and really have fun with it.

And although you won’t because life’s one big internet popularity contest, calm the fuck down.  Most of us are just sort of meandering down the opinion road, like water, living our lives.

STOCKS…TOP PICK: WFM — they’re coming for you.

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Resilient Bond Bulls Take Thrust Formation

I’ve been positioned short long term treasuries for many weeks via TBT, riding through a reverse split and three gyrations of waning momentum to the downside.  The correction beginning in the late summer had two very promising rotations downward, but since then has failed to make new lows.  Worse yet, when we take our view out to a weekly chart, it looks like we may have experienced a false breakdown.  Oftentimes the most violent moves occur after a highly visible chart pattern fails to fruit.

There have been calls for a generational trade in shorting the risk averse bonds.  A short bias has even been touted as the trade of the decade.  Many of the methods for obtaining bearish positioning on bonds contain elements of decay.  This decay has been eating away at the bears for quite some time.  Looking at the zoomed out weekly chart, you can see the correction has been mostly time-based.  This is die slow action for any decaying bearish position:

Be prepared for the possibility of new highs in the bonds.

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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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