Turnaround Tuesday

There was an interesting occurrence this morning right before we printed the low of the day.  Price traded down to the overnight lows and then completely stalled.  This was right about when the POTUS took to the podium.  Then, as I had suggested may occur, we breached the overnight (yesterday) low briefly, the flow of stop losses created a temporary oversold condition, buyers reacted to seeing the weak sellers and a sharp buying tail printed on the /ES market profile. We also snapped the following trend line lower, finally:

I bought the YGE full sized amidst all this.  It was very lovely execution that brings a little sparkle to Raul’s eye.

The velocity of the move was enough to put plenty of shorts in the hole.  It should make for an interesting afternoon as value is being set higher then I expected in my scenario 1 balance hypothesis.

With today’s YGE purchase, I am about 85% long, mostly crack rock stocks—stocks like CREE, RVLT, YGE, AMBA, MHR, FB, RBCN, and CLF.

Can you believe I am nearly up 100% on my FB common?  I’m holding steady until at least $100.

The weak-to-strong closing type would be a change of character in the recent market activity and we may be looking at an inflection point.  It is a bit early to tell, but I like my aggressive positioning here.

I intend to use my winnings to finance the purchase of a Tesla Model S, the greatest automobile currently in production.

The correction lower showed early signs of stabilization overnight by balancing out amidst weak Asian markets.  The sellers however still hold the upper hand in the current environment, especially given the pace with which we distributed lower.  Less active participants who bought the #NoTaper headline may be considering trying to reduce exposure on any upward move which makes them whole.

As the USA comes online, I am already seeing a bit of sell flow creep onto the tape.  It will be interesting to see if early selling is enough to press through the overnight low at 1689.50.  Thus far they have not been able to breach this level, which was also the low of yesterday’s cash session.  A break could trigger sell stops and enough order flow to push to 1687 and if price accelerates 1684.25.  I am suggesting that the order flow from taking out the lows could be a temporary phenomena and a buying opportunity.  However if these levels do not hold we need to be very keen on 1681.50 which is a huge value area high dating back to 09/11 before the gap up.

On the upside, price needs to sustain above 1693.50 to show acceptance of yesterday’s value instead of value continuing to migrate lower in search of balance.  That would be the first accomplishment.  Next would be trading above 1698.50 which could trigger a squeeze.

I’ve highlighted most of these levels and drawn on some scenarios on the following market profile charts:

The intraday volatility was certainly in place today as risk came off the table.  The S&P printed ten handles of selling with a few healthy rotations to allow short entry.  The Euro dollar via the /6E was confirming risk off too, trading in tandem with the /ES before going flat around noon.

Since around 1pm the market stabilized and balanced out.  The question on every bull’s mind is are we at an inflection point where this countertrend rally comes to an end?  I saw an interesting tweet from @StevenPlace that we have only had four consecutive down days twice this year.  The sellers certainly have been effective in erasing the euphoria that ensued post #NoTaper so perhaps a third data point is on the docket.

I will cover key levels to monitor on the S&P tomorrow morning to gauge sentiment and a potential turn around Tuesday, but as we close I get the feeling we will see overnight rotations and a sizeable gap to manage in the morning.

My portfolio is down a sultry two percent, championed by the broken wings of RVLT.  The weakness in RVLT neither surprises nor upsets as it has been my expectation for weeks.  Hell, I think it prints fresh swing lows to really get people off their rockers.  Ah, the stock market can be so cruel.  I will continue to dollar cost average.

I earned about 50% of what I made last week today trading futures.  It is good to see some intraday life coming back into the market as we enter Fall trading.

I cut off my Zillow loss early on and moved the funds laterally into AMBA.  I may be early to the AMBA party here as it is still consolidating.  Dash cam, FTW.

Top picks into Tuesday’s tape: AMBA and ELLI (no position currently in ELLI #want)

I also want some Miley:

The S&P is on the move still.  The weak Friday action is continuing as US markets come online this frosty Monday morning.

The futures gapped higher a bit Sunday evening and methodically rotated the gap off before initially holding the Friday lows.  Around 5am price took out the overnight highs and was met by sharp-reactive selling which makes 1707.50 an interesting level to monitor today.

The selling is accelerating as a write, and it has effectively erased all of the gains from the no Taper Fed announcement.  Therefore, the broad index will have an overhang of supply as we start the week.

After a fairly long period of quiet consolidation both before and after the Fed last Wednesday, the S&P certainly seems out of balances which could increase intraday opportunities for the astute trader.

I have highlighted key price zones to measure sentiment upon today, and also a few profile scenarios on the following market profile charts:

I opened up the request lines yesterday afternoon offering my services to anyone who wanted to ask anything about trading, algorithms, or stocks.

Only Bob asked, so Bob gets his own post.

Bob, I like where you are at owning MOS, GE, and BRKB for many years.  MOS and GE offer you a dividend greater than anything you are earning in the money markets, and GE is one of the best companies in our country.

MOS used to be a real hot shot back in 2007-2008 with hot money and momentum guys getting their kicks in the name.  After the steep correction the dividend program started up and since then the stock has traded a bit more benign.  I can practically draw a straight line through the price action from mid 2009-to-present which to me presents a stock I would find little interest in trading, with my style.

The recent earning’s gap lower was a quick move to range lows and we have seen a snap back since.  Many of the other AG plays made a similar move and the industry overall is starting to gain the attention of value guys.  When you consider seasonality, we are coming into a five month long period of historical strength in MOS, and October is an especially strong month for the entire ag-chem industry.

The beat down may have put many investors underwater so overhead supply becomes a concern, but buying weakness verses about $37.50 and looking for a mean revision trade back to the low $50s may be a viable consideration with the seasonality winds at your back.

BRK/B has been a fantastic performer over the last few years and the long term trend is still up.  You have a well diversified position.  I see no reason to overly analyze this position.  It was looking weak for a bit last week which was one the primary motivators to my SKF position.  I stopped out on SKF because strength came back in.  I would take a weekly chart, put your favorite moving average on it, and buy dips as close to that moving average as possible.  If you want to reduce exposure, that is always okay too.

You could have incurred fees to have some money manager do exactly what you took upon yourself to accomplish.  For avoiding such expenses and keeping things simple, I tip my hat to you.

Finally, I work on very short time frames mostly Bob, so take my thoughts with a grain of salt and always use your own best judgment given your financial conditions and needs.  I do not own any of the stocks mentioned in this post and nothing written here should be considered advice but rather educational.  For a full disclaimer, please see the fine print at the bottom of the website:)

We could get together around a campfire and complain about the stock assassins and their research.  We could heat up a pot of baked beans while we jeer about the move in precious metals in the fifteen minutes leading up to the #NoTaper Fed announcement Wednesday.  Then we could sleep next to each other on the dirt staring up at the cosmos and cursing algorithms.

But that’s all loser talk, and I only like small doses of nature.

Instead, let us focus directly on what we can do.  Solutions if you will.

We can manage risk.  MHR is a different approach to entering stocks, I bought weakness.  Normally I enter alongside strength.  Traditionally I would have MHR on my watch list like it was, but I would wait for pricing greater than the last two days to show strength and momentum.  Then it would stall out like it did today and I would sit through a drawdown.  That method still works for me, but I’m working on anticipating the move a step earlier.  I could have already taken a profit in the name, but I am moving purposely slower on these stocks.

Zillow caught me off guard.  I saw it break my range, but I prefer to give stocks the benefit of the doubt meaning let’s see where it closes.  The volume profile below was very thin, we cut right through it.  I did not cut my loss.   Perhaps I will regret this but the stock behaved constructively after the panic abated.  I have managed myself out of uglier head fakes, and I have fumbled losing trades.  That experience helps.  As it stands, I am -6.43 % on a 10% position size.  Oh the humanity.

Zillow and CLF did however knock me off my high water mark.  CLF has not done me wrong yet.  Is the trade wrong?  No, it is only taking heat.  I will take my loss when it is wrong.  I lost my vision on this trade for a bit, but RaginCajun reaffirmed my vision.

There is gap supply coming into CREE.  You have to imagine all of those underwater folks are eager to cash in now that they are being made (partially) whole.  I put some trading capital into this name that needs to be separately managed from my investment.

A trade like RBCN makes up for 3 or 4 losers, this has been a forgiving market for longs.

I was green trading the ES this week, holding my own through some big waves.  This is the most exciting part of my week.  I cannot wait to build upon it next week and also to review my trades over the weekend.

I shut El Roi off before the Fed and have not turned him back on since.  I would imagine he is chomping at the bit to get his grubby algo hands back on the tape but first I must go through the ceremonial revamp of optimizing and chanting and such.

Overall I am just happy to be here, banking coin alongside some of the most insightful minds in trading.  If you have any tickers of interest or general trading/algo questions ga’head, ask me…I will answer them as best I can.

I’m on the wrong end of this one right now, getting lemon juice squeezed in my eyes:

Citron Research was clearly upset I called their masculinity into question.

Overnight the markets were very tranquil, perhaps even complacent on an international scale after yesterday’s consolidation tape.  If you look back to 09/18 and the volume profile it produced, you can see how we settled the unfinished business of filling in the volume cavern.

What is important now is which way we break from yesterday’s value.  We may even see a head fake.  But I will be looking for an hour or more of trade above or below yesterday’s value as acceptance away from the value and a cue going into the weekend.

I have highlighted the value area high and low on the second volume profile chart.  The prices below 1712 are very slippery due to the thin profile.

The market has been unable to compel me into action today.  Instead I have sat here drinking coffee and watching my peers rip the faces off of shorts with supreme ultra-violence.  My goodness, RaginCajun extracts a solid win off of EGLE, passes the baton to Le Fly and here we are, winning the relay.

One of my twitter buds was all over the shippers move too, well done @Apoms24 on the DRYS.

The day after a huge move, overnight or RTH, tends to be tricky intraday.  Therefore, I sat in the bleachers and enjoyed the view.

Book largest-to-smallest: CREE, RVLT, RBCN, AIXG, Z, MHR, FB, CLF, LO, F, IMMR, MJNA, and O

Cash: 20%

Tickers of interest: YGE, FSLR, ONVO, ZNGA, FRO, END, and GMCR

Once an oil man, always an oil man, until I am told otherwise by our Chief Market Strategist.  With shippers ripping the cover off the ball today, I see no sector pairing better with the action than oil exploration.

I’m currently long MHR but END is the biggest winner thus far today. It is also the stock with the highest combustible energy (short float).  Shorts will point to management incompetency and fallacious oil discoveries.  I’ll point to the price chart—it is going higher in the face of these intelligent misfits whose knowledge base may be better suited for building doomsday shelters.

That being said, END is coming into resistance at six bucks.  Watch it.  Keep it on a wish list and see how it behaves at these levels.  Supply (sell flow) should stall price out.  Should it not, should short covering instead ignite a rally, END could become an eight dollar stock in short order.  That leaves room for over 30% in gains for the mathematically challenged.

I cashed out my END shares a few weeks back.  I threw in the towel a tad too soon, booked five percent and went on my way.  Therefore my own pride pushed my buy trigger over to MHR.

Keep the space on watch, especially if oil firms up.

Other tickers of interest include: BBG, BCEI, BRY, CAK, CEO, CXO, EGY, FANG, GST, KWK, KOG, NBL, PBR, and FST