I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,666 Blog Posts

Disney and News Flow Kick Up A Wave

The recent downdraft in Lululemon stock and the behavior that lured me back into shares of American Apparel had me turning a curious eye on the whole textile and apparel industry this evening.  A few swipes into The PPT on my Windows 8 touchscreen laptop and I’m laser focused on the industry’s stocks and The Fly’s robot brain is spewing diagnostics across my screen.  I’m multi-touching, feeling like Tom Cruise in Minority Report finding future pumps and looking awesome.  The future is good so far.  I’m glad to be living in it.

The chart is the final arbiter when determining whether to place a trade, but I love adding layers, measuring results, and building context.  I especially like to poke around and see what kind of news flow is occurring.  After observing the following chart, I turned an eye to the news flow.  First just look at the chart and observe the volume on this pump:

I figured something was afoot so I fired up the finviz news feed.  Look, they’re getting all giddy and noisy about a new CEO:

Early December, Bloomberg reported the prior-rumpled CEO was getting sued:

So here’s our context.  The company’s chief was sued, he was quickly and kindly shown the door and they brought in a hot boy replacement (so homo).  They brought in Andy Mooney.  He came to QuickSilver from Disney where he was chairman of consumer products.  And the market loves the news.

Take that context and layer it onto our context on the big indices, currencies, and industries and you’ll have a lovely feel for context.

This stock looks as overheated as the rest of the market.  The stock could certainly pullback before ripping higher.  Pull out to the weekly chart and you will see we’re nearing a critical price level.  Sellers are going to be at work up here, but we’ve rammed up here aggressively and on volume.  For a trade only and if it fits the whole markets behavior, I may grab a few shares on strength tomorrow.

On the swing timeframe the stock looks good down to $4.25.

Don’t be afraid to grip and rip, just make sure you define your risk.

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Things Have Gotten A Little Too Social Here

In all the excitement last week of stocks pumping hard from their pullbacks, I began buying and selling with great disregard for the underlying companies.  My hon3y hole was showing up everywhere and I was simply grabbing on to the letters presenting my setup.

Next thing I know it’s closing bell and my portfolio is riddled with social media stocks.  Holy moly, I own FB, ZNGA, OPEN, Z, and SINA.  Yeah that settled in this morning like a hangover.  But I must say, the charts say yes.  I’m just wondering if the Facebook event is a sell the news type situation.  They’ve certainly intrigued me.

As for the twitter and blogosphere, I’m thrilled to have all my new followers and I look forward to adding value to your trading day.  I’d like to extend a special thank you to RaginCajun for highlighting me on his new #FF blog series.

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Auction Complete – Waiting for Hand Tip

The morning trade in the S&P played out in the constructive manner I suggested in my morning posting.  We’ve seen a thorough auction of yesterday’s upper range.  The market has sustained these levels even with the overall weakness from the financials.  I think that adds a layer of constructive bullishness to this mild mannered auction.

There are only three scenarios as we wind down into the close of the week:

  1. Close within the auctioned range from today
  2. Upside breakout
  3. Downside breakdown

Scenario one and two are both bullish.  However, should scenario one occur, I will be more apt to scale long exposure off.  I would consider such a move a bit euphoric.  Scenario three isn’t damning to the bull case unless we lose the key support I referenced this morning.

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Bulls Need To Clean Up


There are times when the profile formed by a day session doesn’t look quite right.  Often this is a result of price being jerked around by the indecisive participants jostling their books.  Specifically, the upper range yesterday looks poorly auctioned.  It looks toothy, with no clear distribution of TPOs or volume.  One of the most constructive things the market could do today is properly auction the upper range from yesterday.

Overnight the S&P found support at 1465 but to my eye what’s most important today is where we sustain trade relative to the upper volume distribution noted below in blue.  Notice the very Gaussian form of the distribution, with a high volume node (point of control on the day) residing near the middle of the distribution.  This is a healthy auction.

One last note, the aforementioned distribution makes up the upper half of yesterday’s value area.  I’m giving yesterday’s value area a bit less significance since the lower distribution isn’t as uniform.  However, if we begin trading below the VPOC at 1462 a slip down to the value area low becomes very likely.  If we visit the value area low and whether the bulls show up at that level will speak volumes to the conviction of longs going into the weekend.

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Busy Day Trading Recap

This morning I defined a price level where I wanted to position for the pump.  That way, even if I get pulled into a meeting to talk IRS bullshit or jerked around by my favorite underlings I can always pick up my chart and see where we’re trading and whether I should act.  It turned out to be a busy day.

When it comes time to buy into a rally, I want to buy.  I bought SE early on, thinking the market would hold my pivot at 1460 on the S&P March contract.  When the level broke, I cut TIVO.  For all I know, TiVo could rip tomorrow.  But when it was weak in a strong market and the market began giving back its early gap, I cut.

Next my eyes turned to Zale Corp to see how it was behaving after TIF missed on revenues.  They dropped some hot same-store data too, double pumparoo.  ZLC loved the news.  People who can no longer afford Tiffany but still need to get iced out can shop at Zale’s.  Shares ripped hard off their 200 day moving average and I hunted a dip to buy in.  I barely caught a riskier secondary entry after the primary entry vanished as soon as I loaded up the chart.  When I bought the stock it was already up almost 10% so it felt sketchy.  Thus I only purchased a 1/3 position.  The position was in question all day.  My swing setups are all based on how the stock closes.  Obviously I had no clue where the stock would close at 11am, but given the strength of the market and the strength in the name I gave it the benefit of the doubt.  It closed strong.  Nice.

Just before lunch I took a small ¼ scale in FB.  I usually scale in thirds, but the stock has been far too beast.  I’ll ride peak-to-trough if needed to see higher prices.  However, it’s always prudent to take gains when you’re at prior levels where price has demonstrated curious behavior.  I also purchased BGMD near the highs of the day only to sell the degenerate stock near the LOD.

Coming into the closing hour of the day it became apparent the market was accepting higher prices.  All I wanted to do was get longer.  I bought GOOG to bring my cash levels down.  Then I bought APP.  I know, busy day.

Finally, I scaled off 1/3 of my full size SINA position.  It seemed a proper sacrifice to the stock gods.

All this action and I still have 35% cash in case the hanging man candle forming on the index wants downside follow-through.  It was the only warning indicator flashing to my eyes, but it could signal buyer exhaustion.

I have to go swim now I have far too much energy.  Take care and get out of that chair friends.


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Baking a Layer Cake

We’re starting to get several layers of profiles building upon one another.  Seeing this tight consolidation after the monster run we had to start the year is impressive. It suggests a strong bid is present in the market.  Support levels are holding.  I’m always on the lookout for a rug pull, but I continue to give upside the benefit of the doubt.


First level I want to draw attention to is 1456-1457.  I highlighted the price level yesterday morning for its confluence of multiple reference points.  Yesterday added another reference point to the mix after trading above the level for most of the day only to give it up going into the afternoon.  The result was a very low volume “slip” zone.  I won’t look too far into the level except to say interesting activity has occurred at the level and where we sustain trade relative to this price is our tell going into the weekend.

Key overhead resistance for reference today is the VAH from 01/04 which also was the globex high as of this writing.

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Hijacking The Fly’s Time Machine

In my last post attention was drawn to the Independent Oil & Gas sector after seeing it exhibit unique seasonality performance with a high count of stocks excessively outperforming and underperforming their January seasonality.  That tells me the industry is all over the place (read: tradable action) thus I got lazy and asked the Fly to provide me his top pick in the space.  I wanted the space alien magician pick.  Then I realized he’s a very busy man, piping conference calls into his brain and abstaining from profanity.

I then at that very moment realized I was being very lazy.

Interestingly enough, The Fly leaves the keys to his time machine lying around for the tabbed bloggers.  It’s a work perk.  I’m sure some of you get cocaine or hookers from your degenerate bosses.  We keep it classy and get data.

Without further adieu, here is the stock plucked from The Fly’s computer brain.  LONG LIVE THE FLY:


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Digging into January Seasonality

Seasonality is new to me, and like all new things in life, it brings out my childlike curiosity.  This same curiosity, mind you, killed the cat.  With that in mind, when I approach anything new that can impact my little purse (very homo) I like to get my hands dirty.  All covered in nasty data.  Okay this is getting weird.  I like it.

I pulled some very basic seasonality statistics from The PPT into excel to get a sense of normality.  Specifically, I analyzed the following:

Month To Date Returns – Average January Monthly Returns

The idea behind the above function was to get an idea of how far stocks have deviated from their average January returns to get a grasp of what is “normal” and what is not.

This is not normal

I define normal using histograms. Similar to the value areas I’ve been writing about in the mornings, I want to find where around 68% of the data falls. I consider any outliers as unique and perhaps warranting attention.

Using all PPT stocks that trade more than 500k shares on average, I built the following model:

You can see the model skewed to the high side, over the 0% line indicating an outperformance of January seasonality is happening in more stocks. Also you can see the range or value area where most performance deviations lie.

The top two tables tally the lower tail (below -1.5%) and bottom tables the upper tail (above 6%). I know, it’s backwards. You’re backwards. See below:

So what’s the play, the action? Well you can see biotech ranks high on both lists like a good lottery ticket. Fly told us this early this morning, so no insight gained there. Gold as an industry and a gaudy jewelry is failing big time in 2013, perhaps you game the mean-revision. Also note two oil industries making the underperformance list. Is our old nemesis the dollar to blame?

Turning our attention to the industries loaded with stocks outperforming the outperformers we see independent oil and gas. Just like the lottery action in biotech, the same is happening in this industry. HOWEVER, the difference is several fine folks in these halls know a thing or two about this industry. I must assure you I am not one of them. But if anyone (ehm, Fly) would like to suggest a top pick in this industry I’m all ears.

Solar made the list (obviously) and so did Business Services and Shipping. I don’t really have more to say. I’m just presenting the data to you. I would love to see some bravery and have some interpretation of the data in the comments below. Ga’head:

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Gaps Filling – Stocks Chilling

My portfolio enjoyed a slight loss today mostly due to the shake down I received in shares of RGLD and CEDC. Moody’s decided today was a good day to throw hot potatoes at the Russians by downgrading their debt. I don’t entirely see how this company’s tiny debt matters when a Russian billionaire has taken the stock under his wing. Their debt is peanuts to him. Fund it.

Royal Gold on the other hand is whipping around, undecided on whether or not to hold this very important price level. I don’t intend to stick around and find out after Fly damned the entire space.

Finally, I added to my shares of SINA near the highs. I still like the name.

Banks caught a slight downdraft too (sans my Goldman).

All of these losing propositions were muted by my Facebook position.

Overall, the market traded lower in a rather orderly manner, especially the S&P which spent the day filling its opening gap.

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