Technical Picture - Another Distribution Day

As you can see from the monthly chart above, the S&P has notched four consecutive higher closes. June is just marginally higher because we spent most of the month consolidating the big move from the three prior months. Also note that the June highs are a key pivot point (support/resistance) over many years and secondly, that the entire move off of the lows took place on declining volume. It is unlikely that we successfully break through without a reasonable retracement.

On the daily, we had another distribution day (lower close on higher volume), that's four in three weeks. Open interest crossed above the neutral line once again. The weak consumer confidence data initiated some profit taking resulting in a fast move down. Choppy sideways trade persisted throughout most of the afternoon with some trimming of losses at the end of the day.

Light crude feels like it wants to retest the highs but it's been choppy and the RSI has pulled back to the mid-range, so clearly it's a tough slog.

The OIH (oil services index) is forming a bearish flag or H&S top, either way, it looks bearish as the MAs converge over price. We would need to see a move back above 105 to neutralize and invalidate the bearish bias.

The $USD has an impact on commodity prices including oil. Currently in a sideways chop. watch for the RSI to test 50. A break above 50 would give the greenback the strength to retrace back to its downsloping trendline.

Day Trades Short - AEM, ABX, FUQI, RIMM

Short gold on break of support. AEM was the obvious trade and ABX was the sympathy play.

Not sure what to call the FUQI setup other than inverse C&H. But if you see a big thrust higher, consolidation, and a big move back down, just draw in the lines and wait for the handle to form. Approx. 100% measured move down, if we measure the pattern from 21.50 to 20.50, target 19.50.

I shorted RIMM when it failed on a BO attempt. Not a big move today, but I still think RIMM is going to setup a swing short when it breaks the lower trendline of this bearish pennant.

Technical Picture - Window Dressing

Since last Monday's sell-off, we've had some institutional quarter-end window dressing. Still, no accumulation as the up days are on declining volume, excluding Russell re-balancing which doesn't count. I'm expecting that the bounce will fizzle out once the window dressing is complete. S&P /SPY may be setting up for an ambush back down as it approaches the 62% retracement of the previous leg down.




Day trade CELG after breach of support reverses with a hammer-like stick. Easy to spot these if you have S/R lines mapped out ahead of time.

Perfect World - No Counter Trend Impulse

Earlier tonight I exchanged comments with another trader about a failed trade. He was trading a gap up, with the trend, and took an entry after a shallow (38-50%) test into the intra-day ambush zone (38-62%). The only sign of a problem was somewhat of an impulsive (counter-trend) move coming into the ambush zone.

A key is to look for non-impulsive counter-trend corrections to trade. I traded PWRD (from scanner), and even though it was a bit choppy and it was a short in an overall up market, it worked for a late retest of the AM low. Notice the absence of any significant counter-trend impulse in the bear flag (15min and 5min charts). It also helped that the bear flag formed near the ORL and below the PDL.

Technical Picture - Short Squeeze

Futures dipped ahead of the open on initial claims, but after a minor dip, the markets quickly recovered. It felt like a short squeeze to me. At the EOD we have a WRB, a broken trendline, but low volume. We've retraced 40% of the slide and I suspect we are setting up for an ambush in the 50-62% area.

After hours POT lowered Q2 guidance to $0.70, down from $0.93, so the chart looks like this. Lots of sympathy plays in the sector - AGU, CF, MOS MON, IPI...

PAYX was an earnings gap down from the TI pre-market scanner. When a liquid stocks trades in a narrow range pre-market, I like to trade the open. The stop is the high/low of the PM range as depicted on the chart below. Although the fill wasn't great, it generated almost a pt, in 5 minutes.


CELG - bull flag, partial at recent range top and swing balance (as described in last night's post).

AMGN - IB forms below base we talked about yesterday, so take the trade.


SPY - low volume consolidation after early thrust sets up the second leg.

ABX - strong performer as gold reclaims its trendline. I suspect gold will pause to consolidate this three day upward move.

Today's Trades - NTES, FLS, ABX

NTES, SNDA, SOHU all opened strong. NTES was the obvious entry because of the IB, but SNDA was the big winner.

FLS was a trade idea from Briefing.com Swing Trader, Scott Smith. C&H entry on 1 minute timeframe. It ran into resistance today, but the chart is very orderly so I'm keeping it on the WL.


ABX - hammer reversal at support from PDH.

RIMM was not a trade for me today, but I'm posting the chart as a possible Dead Cat Bounce - shorting opp. I'd like to see it retrace a bit more and fail on the third test of the trendline.

Also, watching CELG (box play -$46-48) and maybe AMGN $51.50 after getting stopped out on the 2nd half of last week's swing.

Technical Picture - Mixed

Markets gapped up and extended into late morning on good earnings from ORCL and much better than expected durable orders. But the mid-afternoon FOMC announcement disappointed and the markets sold off, ending with a 38% retracement into the close.

As we can see from the chart above the morning rally stalled at the downsloping trendline. The long upper shadow is bearish. Volume was light. Looking ahead to tomorrow morning, there are important economic releases - at 8:30 AM EST, initial claims are scheduled to be released with current expectations at 600k and the final first quarter GDP number will be released, expected to remain at -5.7%. Those numbers could give direction.

The $USD got a lift from the FOMC and gold went the other way, but still managed to hold on to some of the day's gains.

Technical Picture - Narrow Range Chop Ahead of FOMC

As expected, and after a mixed start, the markets took out yesterday's lows amid choppy trade following weak data. The afternoon provided no relief, in fact it just got tighter and choppier.

At the EOD we have a spinning top type candlestick which foreshadows the end of the near-term move.

Tomorrow's FED meeting might give us a reason to trade, but it could be quiet leading into the announcement at 2:15 EST.

The markets have priced in no interest rate changes. The $USD which had formed a bullish base, has now backed off. Gold which breached its trendline, looks like it will attempt to regain it from an oversold level.

Few trade opps today, but ABX and several large cap gold plays, set up early ambush trades as they failed at the 62% Fib. retracement of the PDH/L. After breaching yesterday's low, ABX reversed and set up a long.

Technical Picture - Bears Step Up

Last weekend I wrote in the chart notes of the weekly chart, that I wasn't optimistic that we could hold the January highs and declare a new bull market. Since then we've pulled back, and judging from today's action, the bears are finally stepping up their game.

So, just to be clear, the rally off of the March lows was a bear market rally. The criteria for a new bull market was to clear the January reaction highs. That was tested and failed. Now, assuming the lows have been made, we now need to clear the June highs. The June highs mark the beginning of the RS, if in fact that pattern proves itself. For the time being we'll assume it will and target a retracement back to the ambush zone - 50-62% Fibonacci retracement of the March-June rally.

What's the point of all this? The key is not to get of ahead of ourselves. In order to have a new new bull market, we have to form a proper base and break out. That has not happened., which leaves the door open for a retest of the March lows. For the time being, I'm still betting on an inverse H&S bottom until the price action confirms, or proves otherwise.

FOMC on Wednesday afternoon will be interesting.

On the daily chart I'm drawing in a new down sloping trendline, and now we look to short rallies. Today's aggressive selling and late day slide keep the door open to additional short term downticks with next support at 890/888 followed by the May trading range floor at 880/878.

The NAZ looks to be forming a H&S top which will take weeks to confirm. We closed below the neckline and should see a further decline to the shoulder line soon, before the RS begins. Typically, we should see light volume on the RS to confirm the pattern.

Short-term we are approaching oversold.

Today's trades - short SPY and CME. The entries are key because we don't want to get in too soon. The SPY couldn't catch a bid at support and CME filled a bullish gap and consolidated in the low end of the range with NRBs. Both trades were executed on the 5 minute timeframe.

Need some help with short selling? Try this post by John Lee - a good primer on bearish patterns.

Friday's Trades - Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

On Thursday we said the trade idea for Friday was RIMM, which had carved out a C&H pattern in after hours trade. The bullish pattern did not follow through the next day. RIMM opened weak and couldn't hold $76.00 so I started scaling in short. I added to my position after a series of NRIBs. The obvious target is $73.00. Why $73.00? Because that is the pivot where it formed a base and rallied in after hours trade the night before. That's not to say it can't go lower, but buyers will step in at $73.00, so it will pause or reverse. Knowing that, we want to book some profit. I closed my position because the trade was orderly but slow. The smaller bars as price approached the target are spinning tops, foreshadowing the end of the move.

FUQI continued its ascent in early trade, pulled back for an ambush setup. Price couldn't hold R2 (whole $ level) so I exit and decided to short. Price eventually retraced and found support at the rising 50 MA on the 5 minute timeframe.

Technical Picture - Consolidation

A quiet, choppy session ahead of OPEX tomorrow. Better than expected economic data gave us a lift in the morning but little follow through developed after that. Strongest sectors were healthcare related and financials.

Morning star reversal pattern on the S&P foreshadows upside, but it's tricky because price is below 20 EMA.

POT - A tale of two charts - the first chart is POT from the NYSE, and the lower chart is POT from the TSX. The Canadian chart is clearly broken from yesterday's trendline breach. The U.S. chart has a few points to go before it tags the trendline in the area of the $90.00 baseline. Both charts, however, have bearish gap resistance from yesterday. That gap is wide with high volume.

I'm inclined to trust the U.S. chart over the Canadian by virtue of volume. Higher volume generally makes for a more orderly chart. That said, and notwithstanding any further bad news, we could see a tradable bounce as price approaches the base and trendline support.

The trade idea for tomorrow is RIMM. Price swooned on the earnings release and retraced fully on the conference call, forming a cup & handle. Watch to see if analysts weigh in with target/ratings changes in pre-market.

Day Trades - AMGN, WLP, FUQI

AMGN pulled back to support from yesterday and the rising 50 period SMA in early trade. As soon as it started to print green, I jumped in for a day trade (separate account from swing trade). Shortly after taking out resistance, it came back in, but it's all good - I like the way it closed.

WLP from Briefing.com comment at 9:38 EST. A quick look at the daily and I see a B&B setup, so I jump in. Only noted, after the fact, that this was a Cramer pick. It took all day, but finally managed a point.
Stewie nailed the holy grail setup on FUQI in his blog post last night. NRIB at the base of the whole $ level and it was good for a fast move to the next resistance level.

Sector Rotation - Long Biotechs - Amgen, Inc. (Public, NASDAQ:AMGN) ; Celgene Corporation (Public, NASDAQ:CELG)

Sector rotation as the markets correct, biotechs a defensive sector is starting to gain momentum.

Last night we said we wanted to swing AMGN on a BO of the base at $52.00. This morning it popped on the open out of yesterday's C&H pattern. It paused at $52.00 and carved out NRIBs on 5 minute timeframe before extending the full measured move (100%) of C&H pattern. I locked in half and holding the balance with a stop at $51.00.

Next level of resistance on daily is 200 SMA, followed by $56.00.


On the CELG daily chart above, I was looking for an ambush setup after the late May - early June thrust. CELG retraced 50%, printed some NRBs, so I was able to see an entry at the base from the blue line segment.

As you can see from the 5 minute timeframe below, the CELG trade is much wider than AMGN. It was about 30 cents shy of retesting the upper fib. line, so I expect it needs to consolidate a bit before breaking out to the next level.

N.B. - The POT trade we talked about last night was foiled when Germany's largest potash producer reported disappointing earnings and guided lower for the year. The whole Agchem sector went into a black hole on the open and POT barely got a bounce at key support - $97.50 -$97.00.