Technical Picture - Low Volume Chop

$USD consolidating gains in orderly fashion. Looks well positioned to go higher.

SPX versus VIX - Time for some retracement?


AAPL just broke out to all time highs on low volume. Can it hold? Today's bearish engulfing bar foreshadows a failed BO. It may be just a retest of the BO point, or not. Keep this one on the radar. Remember, failed BOs lead to fast moves in the opposite direction.

Continuation Play - Cephalon, Inc. (Public, NASDAQ:CEPH)

The first chart of CEPH is the daily. We note that yesterday it broke out of a seven month base and today we filled the bearish gap. Prices closed near the highs of the day, so the gap fill didn't give rise to profit taking.

The 15 min. and 5 min. timeframes show the day trades. Two low risk entries followed each by vertical expansion. Intraday pivots used as guides for support/resistance.

The last chart is the 3 minute timeframe of the trading channel since CEPH broke out of its base. The next level of resistance is $62.50. Price is testing the lower channel into the close.

Handle - Cephalon, Inc. (Public, NASDAQ:CEPH)

CEPH gapped up, printed a wide, bullish OR, followed by a handle in the upper range. The handle leads to price expansion and a full measured move as measured using the Fibonacci tool from the ORL to the ORH.

REGN was found through the Trade-Ideas scanner using the momentum scan. Again, a small, tight handle with NR7, leads to a full measured move of the last leg up.

Stock Picks

FLR $44.00 should be good to go long. Tuesday's WRB had high volume. Price is consolidating the move in the upper range (3 NRBs - price contraction before expansion). Looking for another WRB on the break.

POT closed on support Friday, but I expect it might go lower before it retraces ( closed on lows with big volume). Hoping for a hammer reversal bar tomorrow, followed by a retracement to the ambush zone.

$USD versus Gold

The first two charts show that the $USD has had thrusty move off the bottom to a resistance zone. The RSI is flirting with 70 so its likely to pause to consolidate or retrace somewhat at this level.



The last three charts show how gold rallied out of an inverse H&S pattern, approaching a full measured move of 100% from the BO point in relatively little time (parabolic move), but stalled , carved out a bearish island reversal pattern, followed by a steep decline back to the accelerated trendline. Price and the accelerated trendline are on the edge of the ambush zone of the last leg up, so this is a possible area for a retracement.

Click on charts to enlarge

Day Trade - Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

$USD vs. Gold still in play; SPX remains range bound. Watch as the greenback and gold approach for a kiss. Will they reverse or will they cross?


A failed setup in POT followed by a long, very tight, narrow range chop finally succumbed to weakness in the last hour after failing to take out the downsloping 20 EMA. The shooting star is the tell.

Amgen Inc. (Public, NASDAQ: AMGN)

AMGN daily had a nice setup today with respect to the 50-day MA. Often when price gets sandwiched between a couple of key MAs on the daily, it will ping-pong between them. Today AMGN broke down from the 50-day MA and moved toward the 200-day MA with a nice setup on multiple timeframes (15min "h" pattern). RIMM is also currently bouncing between key daily MAs.

Day Trade - First Solar, Inc. (Public, NASDAQ:FSLR)

Last night we said FSLR was setting up a bullish flag. Today it broke out on good volume. Price stalled at $140.00 round number, but there's still a long way to go to fill the gap, so we'll be watching for follow up trades this week. CSIQ also BO of its base with volume today.

I wanted to get in at $136.00 (early flag pattern) but decided to wait until R2 was cleared.

Technical Picture - Yawn

The SPY is stuck between two trendlines. The price/volume contraction at this intersection would have us believe that the expansion, when it comes, will be worth the wait. I suspect many investors hanging in until January to postpone the capital gains tax to next year. In the meantime, try not to lose money in the daily chop.

Rather than trading the markets, it's time to really focus on sectors. For strength we're looking at airlines/transports, retail, utilities, aluminum and Reits. For weakness, the obvious choices are gold and oil, but these will likely get a technical bounce when the $USD takes a breather.

A few charts of interest on the long side - FSLR - flag forming

BLL - high volume thrust to the base followed by NRIBs in upper range.

AA - High volume move towards upper base line.

COF - B&B
TIF - Target trade to base

Short side - RIMM was weak on Friday, setting up a low risk short on NR7 trigger bar.

At the end of the day we have a bearish engulfing stick on the daily.


POT sold off Friday as well. The daily could be setting up for a failed BO.

And, last but least, the Tiger Woods stock play - sharp sell-off into the base, followed by low volume bounce, foreshadows a BO to the downside.

Day Trade - Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

The first chart is the RIMM daily. From this timeframe we had a mini B&B setting up at $61.50 - $62.00 (red line segment).

RIMM gapped higher on the open, but quickly retraced for a partial gap fill. I entered long on break of R1. I exit on weakness following lower high. Price consolidated in a narrow range midday, eventually carving out another base from which to go long for round two.

The bigger base on the daily is in play as price finally closed above the 50 DMA which was lost on the earnings gap back in Sept.


AGU has been in an uptrend. The midday pullback to the ambush zone was a perfect setup for a retest of the morning highs.

Trading Pre-Market Data - SPDR S&P 500 (ETF) (Public, NYSE:SPY)

Friday's narrow range ahead of the much awaited job's data was a perfect low risk setup. Place buy and sell stop orders on either side of the range as depicted by the blue lines just one minute before the data is released. Fast money!

A good way to anticipate a reversal is to monitor the strength of the move back to the base of support. Friday's early euphoria on strong jobs data didn't last due to the strength of the $USD and its effect on commodities. Initially price pulls back on lighter volume, but once the 20 EMA gives way, volume on the downside accelerates forming a flag pole into support. Flags form on declining volume and once they break, volume accelerates all the way back down to pre-market levels and culminates in a mini-capitulation.

Friday's Trades - Research In Motion Limited (USA) (Public, NASDAQ:RIMM); Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

HCPG daily spot for MOS on Thursday night's newsletter was $55.00. Juxtapose the MOS 15 min. and the POT 15 minute timeframes and they are identical. So, if we can target trade MOS to the daily spot, we can also target trade POT to resistance of Wednesday's high. I'm not suggesting that you trade both, I'm just saying, if like me, you prefer POT, trade POT. Get your inspiration from the HCPG newsletter, borrow the setup from MOS and apply it to POT, or not. Either way, both trades are winners.

The trade is executed on 1 minute. Price forms a handle at the base, breaks out for a gap fill, consolidates and extends to the target.


RIMM was an ambush setup on the daily. RIMM turtle souped (printed a lower low on initial test of support of the PDL and reversed). It chopped around and eventually carved out a tradeable triangle on the 1 minute timeframe. After the BO it moved quickly to close the gap, consolidated and rallied up to PDH.

More consolidation in the upper half of the day's range led to a second entry.


Friday's market action was narrow range and choppy, but also on the bearish side, so that tells us that we don't want to over stay our long positions. Target trade and get out.

N.B. Turtle Soup refers to a Linda Raschke trade setup I read about in this month's Active Trader magazine.

Q&A - Risk Management

Q. Jamie, Love your trades! You make it look so easy! I have a question for you in regards to risk management. I was also watching POT the other day for a break of 105 but didn't like the risk associated with taking the entry off of the 15min candle with a stop below that=94 cents risk. So I didn't take the trade. When price breaks such a major level like that are you buying the break of the level with a stop at the base of the 15min candle that's forming or are you dropping timeframe and managing risk off of the 5min candle? I know you like to see a candle close strong before entry.

A. There's no guarantee that we will get a NRB at the base prior to BO, so it's a good idea to size up the potential risk ahead of time. You can mitigate risk of loss in a number of ways. Here are two examples.

Option 1 requires looking for a mini base within the bigger base. This way you can possibly get a head start, and secondly, if the bigger base fails, you have time to scratch the trade and move on to something else.

Higher priced stocks frequently require wider stops. I like to look and the underlying price action of higher priced stocks such as POT, before committing money to the trade. Ideally, you want to see price and volume contraction during consolidation and expansion as price moves into the base. You can't see that on a 15 min. chart, so it's a good idea to drill down. Subtle hints on the 1 minute timeframe can often alter your confidence level in the setup.


Option 2 works well when the base is wide ie. price travels far to get to the base, so it has to consolidate shortly after the BO. But don't expect this to work on a tight narrow base. You risk missing the trade if you employ this strategy on a narrow base such as the handle in C&H pattern.


Q. I was also watching GS for a break of the 175 level but was uncomfortable with the risk that setup gave me as well. I did enter the break of the bear flag that day but missed my original entry idea because of the confusion as to where to put my stop. If price consolidates at a major level than it's not a issue where to put my stop but if price blows thru a major level and is extended from the last consolidation what's your stop placement rules on that scenario? Thanks.

A. I see the base at $175.50 as opposed to $175.00. The bear flag forms at gap support and the target is a gap fill. The setup is somewhat risky in the sense that it prints two dojis (indecision) prior to breaking. The bear flag is a pause prior to the attempt at a gap fill. If you don't see the whole picture and are unsure of the target, you are wise not to take the trade.

Technical Picture - Technical Correction of Overbought Market

The markets are technically overextended, so a minor bounce in the dollar and some weaker than expected data, gave rise to some profit taking. Most of the selling occurred in the first hour, after which, it was a slow drift sideways as OPEX came into play.

The trendline from the 2007 highs to the May 2008 retracment as depicted on the SPY chart below, is in play ie. providing resistance.

As noted above, stocks sold off sharply in the first hour, but sort of drifted sideways thereafter. Good low risk setups were hard to find, but I did spot a nice bear flag on GS and this bearish h pattern in ESRX.

Minor setup in RIMM - Ambush play - 62% retracement of the last leg up.