I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
4,040 Blog Posts

Bulls at Every Dip

One of the recurring characteristics in the S&P future contract is buyers showing up at the value area low of the prior session.  They defended the key level again today, stopping sellers at the VPOC from yesterday just above the value area low.  We are certainly experiencing aggressive appreciation in many equities.  While I continue to note levels that could signify a change in sentiment, the bulls are continuing their march into the weekend once again.

A close near the high of today’s session could signal increased conviction by the buyers.  As we approach three PM (show time) I want to clarify what I want to see to stay constructive on my longs.

I key off the S&P and if we near the close trading above 1494 and better yet the VPOC at 1495.50 I’m keeping all my exposure.  I may consider cutting one of my weaker names should we lose these levels, but everything else will stay in place unless we take out the low of today.  Taking out today’s low would put many new longs into question going into the weekend.  2013 is the year of certainty we don’t have time for weakness.

Aside: Listening to Icahn last night and his tangent on the reverse-Darwinian nature of CEO succession stirs up the little voice in the back of my head.  I’ve never fancied myself a corporate type, what with the schmoozing and the stupid luncheons and the hierarchy.  I spend much of my life here and for what?  A salary I make bi-monthly on my own?  I may have to take the leap hear soon folks (no suicide, yes full entrepreneurship).  Oh the humanity of losing dental and health.  I really only need the catastrophic coverage as my body age is 18.  I’ve stood at the lip of this crevasse for nearly a year, contemplating the leap.  Eight out of ten say don’t do it.  Developing…

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Temporary Phenomena and Stock Picks

The market continued its bull run yesterday with an aggressive morning pump.  The rest of the session played out first with the formation of a “P” profile which suggests the action to be temporary phenomena in the market known as a short squeeze.  I’ve split the TPOs from yesterday’s session and split them to the right for you to see.

Notice the letter J TPO which fell out of the developed P and the subsequent auction that occurred afterwards.  We tested the lower extremes of the sessions and the buyers bought the dip, we tried to reenter the upper distribution afterwards (the meat of the P-shaped profile) on to see rejection.

All of that unique auction action at 1494 is why we need to closely monitor how we trade relative to that level, that is where I will decide if I need to reduce cash from 40% to something less into the weekend.

Otherwise I may cut additional weakness and lock in gains to increase cash.

Names I’m watching should I need to add: FLT, CSE, TWGP, HTHT, GTAT, and BTN.

Trade’em well ladies and gents.

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Handling Tough Situations

The raging pump we experienced this morning gave way to a nasty little fade.  As much as my stocks participated on the way up, they have decided to participate 1.5x as hard on the way down.  Two of my newer positions have changed their behavior.  They’ve gone from watching my docile niece who enjoys computer games to chasing my barbaric nephew who front flips off furniture and drinks too much Kool-Aid.  I love them the same, but each requires a different approach.

It’s easy to pick stocks when everything goes up 3-5% after a pullback.  That’s exactly what the market has been since we started the year.  Just buy dips, scale your 5% rips, and keep a runner to make the cream.  When the positions don’t work right away it’s a different story.  Or like ANR where I watched a nice gain turn into a loss before I scaled anything off.  Now it’s time to manage a position.  This is where traders are defined. 

A knee-jerk reaction to your position flipping from green to red is to clap the sell button.  The knee jerk reaction when you’re on the roof and suprised by your nephew’s head popping over the edge because he’s climbed the ladder is to run over and grab him.  The better approach is assessing your risk and the options you have.

With my nephew, if he sees my face expression of shock I may scare him.  If I drop the chimney cap I’m mounting it would make a loud noise and could also spook him into falling.  Instead I continued working, quickly pinning the cap in place while keeping him in my peripheral only.

“What are you doing kid?  Did you want to help me?”  He nodded yes.  “Okay let me help you onto the roof, here I come.”  Remember to breath.  Once I had a hold of him I suggested we go check on the dogs instead.  Done.

With ANR it’s much simpler, and much less frightening.  I defined a price before I entered the trade where I determined I’m wrong.  I don’t give the brokerage a hard stop order at this level.  I always have a drop dead stop well out of the way, but I like to watch live how the market treats a level before I decide to close.  Once the position is on, it’s up to the market to decide whether or not I’m right.  It’s a coin flip.  Do you sweat a coin flip?  Perhaps you have too much money on the line.

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Clean Up Unfinished Business

Good morning traders,

My first order of business is to sell my MLNX shares.  Their earnings were a nonevent until their dropped horrid guidance on the street.  Shares are down about 20% premarket.  The key here is to sell and move on/continue to monitor what this market is telling us.

The session yesterday was thorough and into the bell the bulls had the edge, closing near the highs.  However, the overnight session saw futures lower, especially with the weak action from AAPL. I’ve highlighted the overnight range in blue on the below chart.  The range was wide and we have an 82% probability of breaking either the high or low from this overnight session. To my eye it seems a break of the low end is more likely.

I’ve also highlighted in orange an area that is lacking thorough auction.  Seeing the market produce a thorough auction of these levels as opposed to a swift move lower would tell me this market is still very constructive.

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UPDATE: Drinking From Goldman’s Cup

The ramp the market has experienced in shares of Goldman Sachs has no doubt been a contributing factor to the improved sentiment of our market.  They were early to the party and have been steady appreciating a solid six months after dropping several no-so-subtle technical clues.  In tones of near disbelief (I hear tones through twitter) someone commented, “Their MBS business is picking up.”

I’ve been in nearly the entire duration of this move, including a table pounding.  With that in mind, and appreciating anyone who has read the scrolls housed in iBankCoin’s poorly lit halls, I want to update the cup-and-handle swing trade.

The cup and handle is a measured move from the lip of the cup to its bottom.  Don’t sweat pennies, the move measures thirty five dollars giving us an ultimate upside target of $160 BEHOLD:

Am I sitting here, sipping gingerly from the cup of the Sach [sic] telling you price will go to one sixty?  MmMm, No.

If I could change one thing I’ve done during this trade it would be selling my shares prior to their most recent earnings.  I missed around 2% of the upside that day, but I bought right back in the next AM so I feel pretty good overall.  But here we are, having ripped and held overbought levels for some time.  This current move may have more gas in the tank, but to my eye not much.  I’m going to continue to move slow with this stock, making the market take me out, but I am considering getting very light in the name and positioning for a pullback.  Perhaps size it down to something relative the to the position I initiated in CREE today.

It’s still important to keep the final target of the cup-and-handle in our minds, especially since it aligns with an interesting level in price action.  The bulls completing this advance, and the time it takes is an important piece of market context.

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Keeping Your Cool


Yesterday and today I have been faced with the increasing challenge of keeping my cool during a missed opportunity.  I participate in the markets primarily as a trader who sashays in and out of high probability chart setups.  But I also like digging into a company or sector occasionally and getting a feel for their business.  This is exactly what I have been doing with Cree over the last two weeks.

It is one of the stocks I identify as aligned with our current administration.  We know our government is into wealth redistribution so we might as well try to position some resources on the receiving end.  Companies and municipalities can convert their existing lighting infrastructure over to LED at a relatively reasonable rate to place themselves in the grace of our Premier.

CREE is the pure LED play and their new technology is reducing the price point verses traditional lighting options.  And the increased efficiency per lumen is making the recuperation rate a much shorter duration.

I was going to put on a little teaser position into the close yesterday.  And I didn’t and they crushed earnings.  The stock was up big after hours.  I listened to the conference call and like where their strategy is and the way they communicate with Wall Street.  I planned to buy them today on the first dip.

The market opens up and the stock goes parabolic, +20% and I watch, waiting like a sun soaked lion.  It starts to pullback and I’m like, “Oh God, yeah.”  Now I’m just waiting for signs of buyers.  It keeps coming back to me, I keep watching, very happy about the development. 

10:23AM:  I’m loving the action, it’s come in quite a bit, and I’m waiting for the heavy lifters to step in.  *RING RING* “We need you in (insert bologna corporate agenda here) meeting right now.”  You’ve gotta be kidding me.

I oblige, we talk about nothing for a bit while a decrepit fossil figures out the projector, talk about what? Nothing, and I get out a little after eleven.  Instantly pull up a quote, up nearly 50 cents, awesome, risk=higher.  I reassess risk and buy as fast as my fingers can click like a good button presser.

Sashay, sashay, then a pump.  And here we are and I have a small 1/4 positon, fully willing to ride an entire gap fill.  Though I doubt we will see it.

Moral: keep your cool, always define risk, and one of my favorite Fly axioms:

When’s the best time to buy a winner?  Always.

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New Buy: $CREE

I started a new position in CREE. If you buy CREE because of this post, if you buy 20% pops in stock prices, you enjoy pain and may lose money.

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Welcome To The Highlands

I’ve marked up the profile chart to get a picture of what I’m seeing.  There are several interesting reference points on the auction charts.  I merged the “unorthodox pump” potion of the Friday session into yesterday’s session because it better fit into the auction that occurred yesterday and gave a clearer picture of the distribution of trades.

The resulting profile shows value at new highs, but still within the range of last week.  Just above the normal distribution is a low volume node then the trending action from yesterday.  Halfway through the session I commented the auction was very methodical.  I was referencing the fact that buyers sat back and watched the open, allowed price to tag our bias line (prior day VPOC) exactly as we highlighted then stepped in with their buy orders.

It still would not be a major blow to the bulls to see some retracement, and more and more traders want this to occur.  Therefore I’ve highlighted below levels that you may want to consider cutting weak longs or adding on hedges.

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Book Talk: Notorious AIG

AIG is one of my current longs and I like the way it is setting up today.  I was impressed by the strength in the name last Wednesday and started my position.  Since then it has been flat/down.  However if it can hold today’s strength into the close the setup looks even better to my eye.

I like the alignment of the EMAs and the strong thrust through the 9ema.  It is showing promise for making a new swing high.  I may add to my position.

The chart has me hypnotized.  The company not so much, this is just a trade. Notice the prior behavior of price @ $35.50. Should we be unable to sustain trade above this level, I will cut the trade.

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