Friday Opportunities

The market caught a downdraft overnight that both my algorithms and I were modestly surprised to see.  We’re still riding through choppy indecisive waters, but the sellers have the early edge.

We’re catching a bit of a rally off the globex low of 1686.25 and it will be important to see how the market treats 1690.50 early on.  This level represents the value area low of yesterday’s session and if sellers are able to reject price away from the above value zone, the market could work to discover value lower.

If you look below at the orange scenario on the 24 hour profile, it would also come as no surprise to see the market work back through this large value zone and take out the double top at 1697.

I’ve presented these possible scenarios and relevant price opportunities on the following market profile charts:

I only took one trade today on the /ES as I had more important matters to attend to, but I must say this was one of the most high opportunity trading sessions I’ve ever seen.  The market took on a lovely rhythm and formed a near-perfect sine wave across time and price.

We opened right below key resistance at 1697.25, price stalled out a tick below at 1697 soon after the open as sellers aggressively reacted by rejected the perceived premium priced into the market overnight.  After reverting to the mean, the momentum of the sellers was enough to press us deep into yesterday’s session where we saw an aggressive entrance by the buyers only ticks above the low volume node highlighted as support in our morning report.

At these lows, the volume delta gave us a wonderful shade of red indicating heavy volume being done on the bid by either panicked longs or very aggressive short sellers.  Their combined activity, I believe, and the quick reversal put many participants in the hole. Then heavy volume rolled in, but price was stabilized and the traders down in the hole acted like combustion inside a rifle barrel.  Their rush of trades propelled the market at a high velocity.  Five handles of progress was made in an hour’s time and then seven more taking us right back where we started.

May there be many more days like this, in a time where I’ve committed my full attention

Check out the morning report where these levels were highlighted as opportunities

http://www.youtube.com/watch?v=hVFgkirUakM

The Yen walked down the stairs lockstep with the SPY rise, like mirrors of one another—starting around lunchtime, which pleases me.

Anytime I trade counter-trend, taking a high quality and back tested setup, and I extract money from the market, I feel like I’m getting away with a sophisticated robbery.  I did it to EXK last week and over the last few weeks I’ve done the same long the Japanese Yen.  Now I’m out and a heavy hand is walking the currency lower.  This gives today’s move a carry feel and suggest we need to keep the carry not in the forefront but more so the back burner of our mind as we progress.

Solar stocks are getting the back ally beat down like they were flashing too much swag in the hood, which they were.  However, YGE is Bruce Lee, water, and deflected the aggressive bear bludgeons with finesse. They put out positive guidance before the bell that had everyone a bit taken aback  because they suggested shipments growth was “significantly better” than expected.  So they’re not jawboning about their FUCKING LEADS, like FSLR, they’re talking shipped product.  They’re shipping that Hanna Montana like Rick Ross, from the Phantom.

RVLT is cooling off a bit post earnings and I’m sitting here wondering if I’m about to get AMBA’d aka ambushed by sellers.  So I’m holding back the additional capital I intend to commit to this name.  But rest assured, I intend to own many more shares of RVLT before the year is through.  CREE on the other hand continues to rise, wall of worrying the old men on the sideline.  In other LED news, RBCN spiked lower after reporting unimpressive revenues but the dip was bought.

My only action today was to take a small position in USU.  I’m playing hot potato with a nuke in this name, but I figure I hate solar so much I might as well diversify my energy holdings.

Here’s my book of energy-type stocks, largest to smallest:

YGE, USU, KWK, BPZ

Goldman caught a nasty fade into the bell, I’m not sure how I feel about it, obviously I would have preferred some follow through since it’s my largest holding.  We’re practically back to my cost basis and all I have to show for it is the lint in my pocket as no scales were taken.

For in the futures I took one scalp, to the short side, in the middle of that big afternoon move higher.  I earned a modest $62.50.

My swing book made almost a percent today.  At one point it was up nearly 2 percent.  Cash level is 25 percent.

http://youtu.be/Gf4QSFK1dRE

The market pressed higher yesterday evening during the Asian session and spend most of the early AM hours consolidating the move before going on another rally as we wake up in the USA.

I was watching the how the market formed a double top at 1689.50 yesterday and made note of the level as vulnerable.  Sure enough we’ve traded through it and should we trade back down to the level I’ll be looking for signs of buy flow.

If we see price holding above 1695, it may not take much effort to lift us back to Tuesday’s high at 1700.50.  Low volume profile tails, in this case a selling tail, tend to get back filled.

I’ve highlighted a few scenarios on the 24 hour chart, and marked up important levels on the RTH profiles:

It has been one hit after another this week in the solar space, with a big EPS (LPS) whiff by SCTY, the Star Trek of solar stocks.  I don’t really have much to say about this, I’ve always known solar was bipolar with bouts of manic optimism followed by the cold knife of reality.   GREEN ENERGY AFICIONADOS, prepare to receive the thrusting sword of reality to your torso.  Solar has failed you, as will your wind turbines.

We need something better, something nuclear.

Moving on, I see nobody read my call to action at lunchtime, obviously catching turning points in the stock market is of no excitement to people of the internet.  My crowning achievement on the day was riding /ES shorts through the early move lower, booking my gains, then slapping on a full size GS long a few pennies off the low of the day.  Grace under fire it was, executing that move while YGE gets lit the fuck up.

The afternoon was mostly quiet, scalping a long, and then a short amidst the /es chop.  I still hold 30% cash in my swing portfolio, but the net is now long, no hedges to anchor me down should the market set sail Thursday.

For the day, I was down 1 percent in my swing portfolio and up 200 bones or clams or bucks on my futures.

Business owners, do me a favor and go buy some solar panels would ya?

Make sure they’re “Made in China”

Thanks,

Raul

You know I am.  Today’s weakness is a good opportunity to look at your favorite names, the real winners, the ones that got away from you, the kippers, the big salamis, and draw out some risk profiles.

So far I’ve bought GS and RVLT.

I’m considering adding to my existing CREE repertoire, I will do so, slowly.

Remember AWK?  A blast form the past…I have my eyes on some for my slow money.

I sold off my FXY long, a pseudo hedge of sorts.  All the profits I had in the name could literally vanish with five or six words from SHINTZO ABE.  No thank you, I’ll talk my payday and move on.

I could be seen in the globex market shorting the $ES_F early on, it went well.

RAUL IS ALL OVER THE FINANCIAL WEBS, A FAST MOVING GHOST OF SORTS.

Cash levels have been reduced to a more reasonable 30 percent, which I’m eager to deploy into further weakness.

Think Zillow.

http://youtu.be/inqfLNb9zQQ

We’re seeing some follow through in the overnight hours of Tuesday’s weak trade.  The sell orders began rolling in again during the Asian session and stabilized into a chop along the lows during the European session.

Yesterday’s cash session (RTH) shows characteristics of long liquidation, or risk off, with a long selling tail followed by the market balancing out.  The auction that took place was healthy, albeit downward, putting in a good looking low at 1688.75.  This level will be in play early on.

At risk to the buyers is a rotation down through the large balance area we built prior to launching to new highs.  There’s potential downside support at 1683.50 then 1682.50.

I’ve highlighted some upside observations of resistance in the following market profile charts:

After FSLR reported weak numbers after hours we saw shares of YGE making a sympathy move lower.  As you all very well [should] know, I sized up my YGE position yesterday.  In fact, I made it full size.

A quick yet perhaps excruciating read of my reactionary opine may give you insight into how I really felt upon receiving my judgment from the market.  Since The STOP Method© is not only preserving but building my emotional capital in futures trading, I thought it best to apply the tool to my YGE trade.  Let’s have a look, shall we?

The cue on the YGE trade is a slight variation.  I haven’t yet been stopped out but from what I saw taking place afterhours and the overall sell flow in the indices, this trade may take some heat.  We’re being proactive.

THE CUE: “WE GONE TAKE SOME HEAT”

THE ROUTINE: Stop Method

• S – Score trades compliance with the trading plan:

Here’s a post on the YGE plan, but I’ll tell you the main talking points and show
you the chart:

Like I said, I corrected course and I’m still riding the name, including taking half my position up Friday’s ramp, so I’m still pretty excited about this trade, all things considered.  Now that I’ve booked some profits, and have a green cushion, I’m sticking to the following plan for the YGE trade, including riding though earnings, if necessary, to achieve my $5.00 target.

The trade carries risk down to $3.25.  And to be honest, that price level is a bit mushy.

I sized up around four bucks and I had a 1/3 position hanging around from $3.09.  The buys brought my cost basis up to $3.70.  I’m targeting $4.30 for my first scale and ~ $4.85 for my second.

The trade carries around a 2:1 risk/reward, and my plan for trading stocks is pretty simple: Trade the pullbacks in trending stocks.

Is YGE trending?  I trade from daily charts, yes it is.

Is YGE pulling back? Yes

At full size on $3.70, with a stop of $3.25, the trade is risking 1 percent of my portfolio.  Perfect.

Trades compliance with the plan: 100% “Oh yeah”

• T – Target logical price levels:

• O – Observe the trend:

• P – Patiently wait for your next opportunity.

For this situation, I’ve fired all my buy bullets, and I have three of four sell bullets loaded in the chamber.  My only opportunity at this point is to stop the trade out, or scale profits.  Until we reach logical levels, I have no reason to sell in any way, shape, or form.

So now we wait as that stock operator fellow who killed himself said.  Odd his writings are immortalized when he’s such a coward, no?  Here’s to hoping evil algos don’t read my blog!  ::clink clink::

Oh and also, let us not forget the reward for such actions…

THE REWARD: BOSS

http://youtu.be/2YcIgow6TDk

Years of desensitization from a 90’s childhood playing Grand Theft Auto and Doom, watching ultra-violent movies like American History X, and witnessing the opening of the proverbial floodgates via the World Wide Web has made it very difficult to get me excited.  Perhaps that is why I simply cannot get excited about solar technology.  Or, just maybe, it’s because it lacks POWER.

The Italians get me excited with the eCat, but nobody has proven anything yet.

You may be asking yourself, “Why then, Raul, do we see you taking positions in solar stocks so mucho?”  I could cite the momentum as a reason or I could cite our current administration, but the real answer is I just don’t know.  It’s such boring technology.  Remember, I live in one of the least sunny places on the planet, so I’m sure that weighs in on my bias.

FSLR whiffed on earnings, the highlight of their conference call is their ‘pipeline’ of deals, which we’re to believe they’ll close on, and a new partnership with General Electric.  Cool brah, I have a pipeline of deals too, they just keep ignoring my emails (spam).

Solar just doesn’t spin the turbines yet, which brings us back to my primary 2013 thesis, LED lights.  A business can invest in itself TODAY, replace all of their lighting TODAY, and reduce their electric usage by over 20 percent.  The payback period on the investment is quick, one to three years.  Large shop spaces with high intensity discharge lighting can save even MORE.  THIS TECHNOLOGY, my friends, is a step in the right direction.  AND IT MAKES SENSE TO BUSINESSES, because they’re cash flows aren’t jeopardized for ten, fifteen years.  Silly solar salesmen sitting on their leads.

YGE is Chinese, so they have that going for them.  And by that I mean souped up books and a Chairman that will handle any insolent workers.

Aside from being on the wrong end of the FSLR call, I traded spooz really well.  I pulled out my weekly nut today, fading the down moves early on, then fading the up moves in the afternoon.  It was pretty great, 5 planned trades, 0 unplanned.

I bought KWK thinking it could squeeze.  It didn’t, yet.  I still think it’s priced for certain death and with earnings out of the way and our Mideast Embassies closed, perhaps the energy complex could be in for a bit of summer time madness.

I eyeballed OCZ but missed adding, I’m still long.  Something is about to go down in this name, I can feel it in my bones.

To think, I almost sold CREE today.  I can’t belive that thought crosses my mind, ever.  It’s a stupid thought.  Stupid brain, always getting in my way.

I’m off to mop the floors and brood.

We get to hear from First Solar after the bell today and the stock is price for uncertainty.  It has been priced for uncertainty since falling off its trend a bit in mid-June.  Since then we’ve seen a long consolidation trade.  I’m betting the earnings announcement breaks us out of this grind, but in which direction?

I would prefer higher, of course, so as to give the entire industry a fresh thrust of inertia.  You won’t find a clearer picture of bracketed price action than the FSLR daily chart:

The next move should be a meaningful one.  Full Disclosure: I’m long quite a bit of YGE.