Choppy Friday

FSLR forming a continuation symmetrical triangle. Today, in early trade, it formed a base at the edge of the retracement zone of the PDH/L for a nice thrust back up to resistance of yesterday's shooting star.

SOHU and IDCC - inverse C&H - very slow and wide spread at times, so cover in the retracement zone because there's support from previous days.

I shorted the failed BO of POT. Covered when it broke back above narrow base. Re-shorted the ambush (62% retracement). Partial on hiccup at 50% FE and covered on higher high. Then it formed a H&S top and ripped 2 points lower, but I wasn't there.

Technical Picture - Broad Based Advance

The markets closed near session highs following another broad based advance. The advance was helped along by earnings and a satisfactory treasury auction. Tech outperformed with solar leading, along with big tech names. Another accumulation day for the NASDAQ as prices near full retracement of the Feb.- March slide. Financials held and printed a NRIB (NR7) on the day. I see some C&H patterns forming on dailies in health/biotech (HUM, AMGN, CEPH). Technicals are extended. I've added the McClellan Oscillator (NAMO) to the bottom of the Comp chart, and as indicated, we have an extreme overbought reading. As John mentioned in the comments, probably much of this is due to month/QTR end window dressing given the exceptional bounce off of the lows.

Solars Rule

Solar complex gapped up this morning. All of these gapper trades have the same characteristics - bullish shallow rounded base, NRBs, and big volume on the expansion. The traditional (old style) Trader-X gap long is back. Must be the start of a new bull market! Place fibs from PDL to ORH or early reaction high.

YGE from Briefing.com; FSLR from WL and PAYX (not a solar) from Trade-Ideas scanner.

Technical Picture - Fractional New Recovery Highs

Markets gapped up on favorable economic data, but after setting fractional new recovery highs, they chopped around and eventually succumbed to weakness with steady selling from midday to the last hour, where prices reversed and rallied into the close. As you can see from NASDAQ futures chart below, buyers stepped up when prices came into gap support. The CPC has printed a higher low and is moving back above extreme bullish zone - this could foreshadow more profit taking to come.




Gold is forming a bullish falg versus the $USD which is forming a bearish flag.

Cup & Handle - Myriad Genetics, Inc. (Public, NASDAQ:MYGN)

MYGN gapped open and sprinted higher. The gap and early thrust consolidate over time with several inside bars. Volume contracts as the handle forms just prior to expansion. Partial after 3 WRBs and exit when price gives up the 50% FE of the ORL to the base.

JPM and WFC gapped up and chopped around the upper retracement zone of the PDH/L. After carving out lower highs, they submitted to the sellers.

SOHU - 2 IBs before continuing pullback to the retracement zone of March 19th gap day trading range.

Technical Picture - Markets Falter after Retest of Highs

Fractional new highs for the DOW and S&P, unconfirmed on the NASDAQ, before faltering and selling off in late afternoon. I see gap support as depicted on the XLF for both the S&P and NASDAQ futures. The NASDAQ appears stronger as it has yet to break the trend channel. I'm expecting more weakness by virtue that XLF and S&P failed to recapture their respective channels.

Overbought Trading Opp - JPMorgan Chase & Co. (Public, NYSE:JPM)

Yesterday, I missed most of the morning session, but was able to catch a few C&H patterns in the afternoon. JPM was my favorite with a parabolic like finish into the close. Today I placed my fibs to cover the last leg up to PDH. Price opened in the retracement zone, and eventually made its way back up to PDH, edged above it and came back in quickly, setting up an overbought short.

GS continued moving higher in early trade, but after a lot of choppy sideways trade along the outside edge of its upper channel line, it came back in for a quick short.

SOHU was a gap short last week and I placed my fibs from the ORH to the low of that day. Since that day, it has consolidated in a narrow range below the R-zone. Today, it gapped lower, but held support and rallied. Eventually, it printed NRIB NR7, for a low risk long. I took a partial at the top of the retracement zone and stopped out on balance.

SOHU could break down on next test of lower fib. line, so set an alert.

Technical Picture - Pullback Extends on Triple Witching Expiration

Accordong to IBD, Friday's triple witching pullback came in on much higher volume, thus compiling 2 distribution days for the S&P and one each for the DOW and NASDAQ since the 3/12 follow through day. IBD defines distribution as - an occurrence where trading volume is, without any price appreciation, higher than that of the previous day. Accumulation occurs when prices advance on higher volume. Accumulation and distribution occur with higher instituional particiaption. Stockcharts.com show lower volume for SPX and DOW on Friday, which is suspect given that OPEX usually takes place on aggressive volume.

Anyway, we have a star with long upper shadow on the weekly, so a cautious outlook going into next week. Over the near-term we expect further consolidation and pullback into the retracment zone of the 2 week rally. Retracements well beyond the R-zone will likely mean a retest of the lows, but we're not there yet.


Financials pulling back to R-zone.


Oil is approaching heavy congestion zone near $55.00.

Gold as per the $XAU, is breaking out of inverse head & shoulders pattern.. If this succeeds, the measured move target longer term is 100% from the bottom of the pattern to the BO point.

$USD is forming a bearish rising wedge on the weekly.

Using AAPL as a proxy for the strength of the tech rally, let's watch to see if it can BO of the base. A failed BO could be a good shorting opp.

Click on charts to enlarge

Taking some time off for personal business this week, so posting will be light.

Technical Picture - Minor Profit Taking

Commodities and commodity related plays logged in solid gains on the back of a weak $USD. Financials, on the other hand, submitted to profit takers, undercutting the broader market from start to finish. Tomorrow is options expiration, but in this kind of market environment, it may not be as choppy as usual.

I've added the open interest (CPC) as an indicator on the SPX chart to save from posting two separate charts. Extreme bullish reading of 65 retraced but still in bullish zone.

Financials hit with some profit taking after a 60% surge off of the lows. Watching to see if the R-zone of the most recent reaction high/low will hold as support.

Bearish dark cloud cover on the daily.

$USD getting crushed but support from trendline and rising 200 SMA will be coming into play near term.

Question on WL and Stock Selection

Anarco ask the following question(s) in the comments and I feel it is a very common question: I typically start my morning with my WL and a few other stocks (gapers, earning stocks, etc) and as I go through the charts, I keep narrowing down the ones I want to focus on. But many times I find myself not making the most optimal selection and, of course, I realize that after I am already in the trade. So my question is: do you feel that making “good picks” is simply a matter of gaining more experience? Or do you feel there are other factors to consider? For example, do you find that the action in the daily chart (previous day/s action) is a deciding factor?

Anarco, your question is one that I ask myself and worked on for a long time (and continue to ponder at times). So, I was writing an additional response (after Jamie's response in the comments) and it got so long I decided to post it. I hope you don't mind. As Jamie said, experience is a key factor. Additionally, the following observations may help.

1) When I use a non-dynamic WL (not tweaked day-by-day) I typically focus only on the top & bottom ~10% based on %change (per Jamie's recommendation). Example: For a WL of 50 stocks, I will only focus on and trade the top & bottom ~5 sorted by %change for any given day. Of course the stocks that appear in the top/bottom will change or rotate day-by-day. Using this approach alone (without pre-market planning), I find good trades but my confidence tends to be a little lower and I am slower to initiate.
2) Pre-market analysis of the daily charts from my WL stocks will add some confidence. Example: Suppose I have noted 2 days of range contraction in stock Z. If stock Z happen to show up in the top/bottom %changers, I am ready and more aggressive in initiating a trade.
3) Pre-market analysis and day-by-day tweaking of a WL (based on EOD scans, etc.) can also improve confidence and increase the number of good setups in your WL. However, often what I predict should move, does not; and what I don't expect to move, does.
4) A TraderX like method is to build your entire WL from gaps or other highly active scans just after the open. This is fruitful but can lead to trades in stocks that are not familiar.
5) What I have been doing of late is a hybrid method. I keep a very small core WL. I add to this using scans for gaps and highly actives during the first 15mins. From the scans, I tend to select stocks that I recognize or have traded before.

Today I had a WL of less than 25 that included: CLF, X, NKE, SOHU
Notice that Jamie traded X, NKE and SOHU today. My focus was on CLF (top of my %changers) and SOHU (bottom of my %changers). The result on a choppy day was two great long trades in CLF and a short trade in SOHU. I'll bet you can pick out the two longs in CLF and Jamie posted the short in SOHU.

So, shift your focus to the extremes of your WL - it makes a lot of difference!

Gapper / Cup & Handle

The lower $USD was a good opportunity to focus on lagging commodities, steel and coal, or as some people are calling it, the reflation trade.

X gapped up, carved a couple of inside bars, and broke out of its base with a fast move to the 50% fib. extension.

ACI also ripped higher after gapping up, but I caught the secondary play, after it consolidated the first leg, or the C&H breakout. As you can see from the chart, it was a slow, but steady move.

SOHU gapped lower and carved out an inverse C&H. I especially liked the price/volume contraction at the base of the round $ number just before the BO. Ultimately, I was expecting a wider extension from such a perfect base, but it didn't even reach the 38% FE of the ORH to the base. I thought it might form a mini bear flag and continue but it didn't.


The finer details of entry and exits are highlighted on the 1 minute chart below. The straight blue lines are the initial base, followed by consolidation points on the way down. See how the blue lines come into play as price retraces and then begins to fall down again.

NKE was an earnings gap that looked way too choppy in the early going, but eventually, it carved out a C&H base. The second BO bar, was a shooting star and I moved my stop just pennies below the base and BE. Surprisingly, after such a whip saw start, it rallied up to the next $ level and the 38% FE for a fast trade to cap the day.

The Next Generation of Cost Cutting

IKEA has announced its intention to buy GM

Trader Eyal links

Technical Picture - Rally Extends - 50 SMA in Play

Markets were just modestly lower in early trade, with much of pre-FED trade in a tight, choppy range. The FOMC boldly announced that it will increase the size of its balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities and an additional $100 billion of agency debt. The Fed will also purchase up to $300 billion of longer-term Treasury securities over the next six months. This triggered a plunge in Treasury yields, a surge in gold and a broad based extension in the stock market with Financials pacing the way.

The NAZ outperformed closing above its 50 SMA. SPX surged into heavy resistance and the 50 SMA. As you can see from the extreme readings on the NAMO and Open Interest below, we have reason to believe the markets will correct over the very short term, but in a momentum driven market it's best to wait for the markets to signal. The correction could be shallow.

If memory serves me well, most post FED announcement days are narrow range as the markets consolidate the news.



The safe haven play in gold versus a weak market is done, but gold isn't done, because now gold will act as safe haven vs. a weakening dollar. The bold move by the FED underscores just how weak the U.S. economic situation really is. Gold likely to retest $1,000.


Financials are close to a full retracement of the Feb.-March slide.

Gold is Back in Play - Barrick Gold Corporation (USA) (Public, NYSE:ABX)

My SU short (stop out from yesterday), fired off on the open. As you can see from the chart, the weak uptrend was broken on the first stick. The straight blue line was early resistance yesterday, and then acted as support later on. So I wanted to short below the blue line but as close to it as possible.

I drew in the fibs. from the ORH to the early swing low to give me a target. I held into crude inventories at 10:30 with a stop just above $25.00.

FED Trade

Most of my FED day trades are focused on the QQQQ and gold. Why gold? As a general observation, interest rate cuts are bad for the $USD and gold usually rallies off of a weak dollar. I wasn't expecting a rate cut, but Big Ben said on 60 Minutes this weekend, that the FED would do whatever it takes to save the economy. Little did we know what tricks he had up his sleeve.

Anyway, this trade is setup before 2:15 with buy/sell stop orders on either side of the blue/red lines. If the BO is lame with lots long shadows, take some off, or abort the trade. Also, check UUP for a reading on $USD but don't trade it because there's no liquidity. I didn't even bother with the Qs today because gold was euphoric.

BTW, this setup is called "Gambling". If you are risk averse, don't trade the FED.



I'll post the charts for $USD and gold in tonight's Technical Picture.