The Break Is Your Context Today

Strong earnings from the likes of MSFT and AMZN propelled the NASDAQ higher in the afterhours session yesterday while the S&P mostly consolidated and balanced.

We are again being presented with the concept of consolidation on the S&P where it can be clearly seen we have a confluence of buying and selling—often referred to as a flag or pennant.  Sustaining such a formation up at all-time highs supports the idea of a performance chase into the end of the year.

Of course the flipside is sellers win out, and do so quite aggressively, pressing the market lower and leaving the chasers with their heads underwater.

However there is no reason fret such an outcome because we can see the relevant price lines and adjust our stance accordingly.  I have highlighted price areas I consider significant in measuring the success of each party to the auction and also a few scenarios to help form your contextual stance on the following market profile charts:

This has been an incredibly difficult market if you think too much and play too tight.  As the trend matures more and more I see trades requiring a heavy pain tolerance.  Take ADHD for instance.  Sure, I could have cut the loss at ten percent, but that just so happened to coincide with a logical level of support.  Then the trade lost my attention for the moment and it was off 20 percent.  I completely mismanaged this trade and that makes today’s move feel unearned.

I know the trade wants to discourage all the hot money.  The market loves creaming people like me, complacent sugar junkies who are high on recent gains.  We make for an easy kill.

The enemy does not fully understand Raul however.  One I have access to The Fly’s time machine and two I come to these exchanges with the demonic purpose of extracting money.  We’re traders and we get paid to take a beating.  Trend trading is a sham if your pockets aren’t deep.  It can take time, a whole lot of precious time, and it take money for an overarching trend to assert itself.  If your trade has you fretting about the next mortgage payment: game over, flip.

There are algorithms and market makers specifically designed to weed out the hot money.  They will push markets to drastic extremes, working diligently until a force of equal or greater power stops the flow.  That force is a trader or collective they that is much more powerful than you or me.

I made some money in the port today and took two good /NQ trades.  But like I sense amongst the stock picking class my gains feel a bit muted.  Like a good American I want more.  I pressed my book 95% long against my best judgment because individual charts are set up nicely today.  Tomorrow they could all look like death and I suppose then I will sell something.

Until then, earnings have been strong (sans CREE) and people are banking coin at criminal rates.

Get yours tomorrow.

There are crazy moves, both ways, going down in this market of stocks.

Early on we had a pretty solid read on the Nasdaq and S&P and we were talking through the psychology inside the 12631 pay wall.  I trade little blips in the gyrations of the NASDAQ and my current goal is not to earn money but instead to consistently identify, trigger, and manage one trading picture.  I have set the lofty goal of being right 75% of the time.  This is for me to prove TO ME that I have the fortitude to trade futures before committing adult money to the venture.

But I was watching my move play out and I started noticing excessive aggression from the sellers.  Have you ever walked up to a girl and started talking game only to quickly find out her husband or boyfriend is close in tote?  Said boyfriend often puffs out his chest and behaves like a primate because he feels threatened.  This is overreacting and once it happens you can almost rest assured you have won…something, life, the momentary affection of the women, whatever.  Market participants do the same thing all the time just before they lose.  The more you watch the tape, the clearer it becomes.

Anyhow, sellers started acting like scared bitches just before eleven and the S&P was trading up into the key battle line highlighted this morning.  This is what had me buying WDAY and WLT.  I got in before the pop and used most of my money doing it.  I am now 95% long and uncomfortably so.

So I went into my portfolio and tried really hard to find something to sell before the market makes me sell and I came out empty handed.  I know, it is completely negligent to be 95% long way up here but I cannot justify selling any of my positions where they stand.

I honestly feel as pickled into a catch 22 as I have ever felt in my trading career.

Off topic: I have sustained myself on water and candy ONLY today.  My eyes feel like they want to explode and gush sugar all over my keyboard.

Not chocolate nutty candy either…just the crack: taffies, lemon heads, now and later cubes, dubble bubbles (apropos), and jujyfruits.

Gallons of water.

Somebody convince me to sell one of these holdings, largest-to-smallest:

ONVO, PPC, RVLT, USO, LO, WLT, GOGO, ADHD, CREE, WDAY, SLW, F, LEDS, FXY, IMMR, MJNA, and O

The market found some buyers overnight and pressed over 1750 for a bit before settling a bit lower.  The action left a gap below and it will be interesting to see how the sellers manage to fill the gap.

I have highlighted levels I find very interesting at this juncture and also a few relevant scenarios to guide your contextual feel in the following market profile charts:

I wound up only lopping one point five percent off my portfolio today despite being off by as much as three percent.  My portfolio oscillates quite aggressively even though I have 15% of my assets in cash and another small chunk in FXY.  That’s because I hold large positions in wiry names like RVLT, ADHD, ONVO, LEDS, and PPC.

PPC is not supposed to trade like a greased pig but there is a big salmonella scale at Costco and while the FDA sorts out the origin of these tainted meats.  I just so happened to be fortunate enough to put a full size position on a mere 14 hours before this announcement.  We did not get a solid response from PPC’s leadership like Elon doing a full analytical of his car fire.  Instead we just sit here, in limbo, hoping support holds.

So far it is.

I have this GOGO too.  This is my go-to tech story for the next year.  I love the private jet class as they are good people in need of constant internet.  And every time I fly, I buy internet because it is my crack rock.  If I went to church, it seems no stretch of the imagination to envision me perusing charts on my ToS app during the Sermon.  GOGO stopped going down today and that is important if you want your stock to go up.

The market is teetering at the highs and we haven’t had our day of sheer terror yet.  I want my day of sheer terror so my FXY trade earns a few bucks.  Hopefully said day of terror propels oil prices highs for some random reason.

It has been a week in the losing camp for Raul, but what the hell do you expect when I exhibit complacency.  Perhaps Ford(s) will get things going tomorrow.

My book is down over two and a half percent today and as you may imagine I am a bit salty today.  There was a broad market selloff last quarter when CREE disappointed.  It tends to exacerbate this brutality.  Thus my best line of defense right now is to sit on my hands and brood.  The broad sell off inflicting pain upon all LED stocks is completely without merit and reflects the irritating nature of humans to overreact.

Have you ever gone around a left-hand curve on a freeway during rush hour?  If one person overreacts in the fast lane (and they always do) then the entire fast lane comes to a halt.  Then the contagion spreads to the next lane over.  Now you have the two ‘fast’ lanes parked on the freeway while Raul zips by in the slow lane at posted highway speeds.  This is humans overreacting.  Bad humans, smack yourselves on the nose with a newspaper.

Sometimes even with clever tricks you get swept up in mess overreacting humans create.  Such is the case today with LEDS.  It is best to breath, stay calm, do not get angry, and simply waiting things out like a gentleman.  Perhaps call an old friend and catch up.  Eat some good food.  Do whatever it takes to stay calm.

I want more CREE shares because they are a fantastic company and their positioning in the marketplace is divine as leaders.  But I am waiting.

The pain I am experiencing in the LED trade isn’t bothering me.  It is more like being sore after a heavy workout.  It’s good pain that will make me stronger.

On the other hand I have let two trades get away from me: PPC and ADHD.  I am down nearly 20% on ADHD.  What was once a ¾ position has become a half position and I have no intention of buying more.  This Israeli pharmaceutical company trades like complete crap intraday and it’s putting any and all chasers in the ringer for the sake of punishing their gluttony.  I have been punished my whole live for being hyperactive so this feels natural to me.  I will keep taking pain and eventually scratch this dumper for break even.  It is too bad they aren’t cooking stimulants in their lab because that would make everyone more bullish.

PPC is being beaten so other bigger players can back the truck up at lower prices.  This is the overplay for the underlay.  I have never been more certain in my life.  Holding.

LO put out solid earnings and I like where this company is focused.  They acquired a British e-cigarrette business this month and blue Cigs have established a 49% share of the market place.  First-to-market edge FTW.

I can’t trade futures in this salty mood and the only adjustment I have made is buying SLW.  I have a half position and will trade this slowly.

Now I am off to read Department of Energy documents to affirm the LED edge further.  Good day

There were a few clues in the market profile print yesterday that could have clued you in to the potential for a down day to follow.  The first was an excess high or selling tail printed at the top of the profile.  This is represented by the single prints of TPO along the top of the profile.  The prints show an aggressive seller reacting to prices deemed too rich.

The second clue was the gap that remained unfilled during our regular trading sessions.  A gap-and-go type of trade rarely occurs at such elevated levels.  Instead they tend to occur as a sudden burst of order flow breaks us from a long period of consolidation.

The gap down filled overnight and now we get to see if buyers are capable of filling this morning’s gap above to 1749.50.  When we start getting into an environment where overnight moves increase in size, it makes sense to raise your guard and consider either hedging or elevating cash levels.

I have highlighted price levels of opportunity and also a few scenarios on the following market profile charts:

Nothing CREE is doing has me frustrated with the company.  I think their team is making solid decisions and I think their decisions are driving market adoption of LED lighting technology.  They truly are the ambassador of LED technology and I think that theme will become more evident over the next few quarters.

They are doing all the legwork to bolster the entire industry higher.  Are they doing it because they are nice guys?  No, they want to make money and the business has a solid margin on their rapidly growing lighting segment.

I still consider the retrofitting of traditional fixtures and bulbs to LED lighting as the greatest business opportunity of my lifetime.  And I have LOTS of lifetime left.  I have nothing but lifetime old chaps, and I intend to make a fortune during it on the backs of industrious men like the leaders of CREE.

I have loosely defined my plan for accumulating CREE.  I really do hope to buy the 99 week exponential moving average.  I intend to buy back in slowly.  See that double top?  That is people like me, but of course with much less conviction, getting high on hopium then Mike Tyson knocked the hell out twice in one year.  They’re on the mat and may not get back up.

Let them die, then feast on their carcasses.

Below my current plan is a throwback to last quarter’s plan of attack.  I succeeded then.  I look forward to doing so again.

When the /NQ busted loose to the downside I was working an offer trying to board the short bus.  The market simply would not pull back enough to allow me entry into a short.  When I finally did get my short on I was taken for a wild, spine twisting ride higher.  I doubled my short and booked a small gain on the double down and close the initial entry for break even.  At that point, given the velocity of the marketplace, I turned Elroi the trading algo on and went out for chicken.

The more I trade the better I am at having awareness that my edge is dull.  The action today is better suited for my emotionless robot to trade in a very average manner.  The algo may not take any trades or may take some very average gains from the market, but it beats an emotional me executing orders.

I have CREE earnings after the bell.  My position size is smaller than what I carried into last quarter but still meaningful at about 6% of my portfolio.  There was chatter online that CREE is interested in buying RVLT.  I hope this doesn’t happen because I want to see RVLT grow to become the most successful retrofit company in the United States.

I have not felt the urge to swing any shorts this entire summer/fall until today.  Where the market stands, I feel like I need some hedge action so I started buying FXY.  I love the consolidation we are seeing on the weekly chart and should we see risk fly off the table some of it will find its way into the Yen.  Plus there have been big moves kicking up in the currency markets and they have my interest.

It seems the macro picture is morphing a bit this week.

Of course, should the cocaine get dusted over the market again I will likely be back on the chase.

ADHD is failing me and next to go

GOGO needs to shape up

The chicken trade is not dead yet.  May it arise and smash the doubters.

The markets did very little overnight and continue to hold these elevated levels with a modicum of rotation.  This tight range is much like the base of a lamp where the more narrow it is, the easier it is to tip the lamp over.

Therefore we should define some reference points where the market may spill over in either direction.  Daily highs and lows are a simple measure of balance disruption and effective, but I like to envision what a balanced profile shape would be.  That way I can observe if moves away from value are normal parts of the current auction or an attempt by price to explore elsewhere.

I have drawn a few scenarios out and highlighted prices of opportunity on the following market profile charts: