Technical Picture - Bulls Defend Support

Unfavorable data (Initial Claims 496k vs. 460k consensus; Continuous Claims 4617k vs. 4570k consensus) set the stage for the early slide. But no follow through developed as buyers stepped in to defend the support zone.

Dollar weakness also contributed to strength in Gold and commodities. I'm expecting the greenback to continue to consolidate, gently moving towards its trendline.


The 15 minute chart of CLF above is a good example of buying the 2nd test of support. Point A was a long entry last week. Point B was the first test of support of the solid base which formed a point A. Today's opening breach of support (point C) triggered some shorts, but the snap back led to short covering which propelled the stock in a decisive move back up to PDH.

I like to fade the second test of support/resistance (turtle soup setup). The third test is usually the BO.

Bull Flag - Acme Packet, Inc. (Public, NASDAQ:APKT)

Last week we highlighted APKT as a good swing trade candidate. As you can see from the daily chart above, yesterday's market sell-off didn't deter the stock as it notched a higher close.

After today's move, we see from the weekly timeframe below that we are testing resistance. Volume is very strong so I'm hopeful APKT will eventually retest all time highs.

If you didn't have a chance to swing long, you can still day trade long when the opportunity presents itself.

APKT opened strong, eventually carving out a bullish flag. Place fibs from ORL to top of flag to plan the target.

I took half off of my swing trade after price printed the red shooting star. Some consolidation at this level would be helpful.

Technical Picture - Broad Based Selling

We were expecting weakness in the ambush zone as the markets were technically overbought and last week's advance came on light volume. The 10:00 consumer confidence data was so far below expectation (46.0 vs. 55.0) that the bottom fell out leading to a broad based retreat into midday. Attempts to rally from there were lame, with the bears firmly in control.

POT and MA printed inside bars with long upper tails foreshadowing weakness. Both trades triggered at 10:00.

Flat Base Breakout - Direxion Daily Finan. Bull 3X Shs(ETF) (Public, NYSE:FAS)

FAS carved out a flat base as it consolidated early strength through a series of higher lows. The third test of resistance is usually the BO. Since the market is overbought, trade it conservatively. Here I placed my fibs from the ORL to the base to calculate my measured move target of 100%.

CLF moved into resistance and is extremely overbought after last week's run. Still, it spent most of the session grinding higher. Finally near the end of the day, it failed to hold R1, setting up a quick short into the close.



HGSI triggered in early trade on an analyst upgrade, but failed to follow through.

The SPY ambush strategy, discussed in last night's post is still in play. The ORH was the HOD, followed by low volume chop and a weak close ripens the setup for tomorrow.

Technical Picture - Bullish Price Action on Weak Volume

The SPY has retraced 62% of correction. Despite breaking above that level intraday on Friday, the close was on the line. Looks like an ambush play could be setting up early in the coming week. Ambush - price retraces 50-62% and then reverses back to initial trend, which in this case is the correction.

Last week's uptrend took place on sluggish volume. No accumulation days so we are still in a technical correction. Still a number of leading stocks in a few sectors had bullish moves. Biotechs CELG and ALXN are trading at 52 week highs. Another biotech, HGSI (chart below) looks poised to BO any day now.

JOYG forming a handle on developing C&H pattern.

MA didn't BO out of bearish flag as I had hoped, although it did grind lower. We'll give it more time.

CLF was one of my favorites this week as I was able to get two back to back winners as depicted below.

Keep this one on the WL. We have a bullish flag pole following earnings. Next resistance level is $55.00. Once that is out of the way, we go to $60.00.

Technical Picture - Low Volume Retracement

S&P has retraced almost 50% of the correction thus far. Volume is light so I don't expect we'll get much beyond resistance, unless we get some really good economic data, starting tomorrow with housing/building starts, capacity utilization and industrial production.

IAG on TSX was on my focus list this morning after Friday's big move. Looks like a bona fide breakout is underway, although I would've liked to see more volume. Holding half for a swing.



GS day trade - flag BO above resistance.

Flags for Swing Trading

MA forming bearish flag following earnings miss. Could BO anytime as price contracted over last few sessions.

APKT formed a bull flag following earnings beat. On a measured move it could go to $18.00 so it's not too late to jump in.

Notice how both names had huge volume on the gap days giving us confidence in the setups.

Earnings Gap - Baidu, Inc.(ADR) (Public, NASDAQ:BIDU)

BIDU gapped on earnings and guidance. After a shallow retracement, price found support from the rising 5 period EMA. NRIB - NR7 was a perfect entry point.

The bounce off of Friday's lows as depicted on the 60 minute chart of the S&P futures, is developing into a bear flag. If price doesn't rip through the upper channel line soon, wait for break of blue line.

Technical Picture - Hammer Reversal at Support

Volatility spiked Friday and market prices fell into support. When the USD finally reversed off its highs, commodities, gold and the markets ignited a short squeeze. We ended the session with high volume bullish hammer reversal sticks all round. That leaves the door open for retracements going into this week. The CPC level is too bearish which confirms the potential for a bounce.


$USD strength attributable to macro economic concerns over Greece, Spain and Portugal. But the move is extended into resistance zone.

Commodities and financials and many other sectors well positioned for technical bounce from oversold levels.


A couple of trades from Friday.

Trade setup in futures for this week. Price may pull back towards lower blue line, in which case we'll start scaling in ahead of the bigger move at the base.

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Technical Picture - Bears Own It

A gap down open followed by broad based selling. Actually, I was caught slightly off guard as I was expecting this sell-off to happen on tomorrow's jobs data.

The VIX had been forming a bullish flag and today's selling was a good opportunity to trade VXX.


TLT formed a bullish flag (gap is the flag pole).

AGN, courtesy of the Trade-Ideas momentum scan, formed a bearish tower top as it struggled to hold R1 weekly pivot.

Flags - Research In Motion Limited (USA) (Public, NASDAQ:RIMM); Baidu, Inc.(ADR) (Public, NASDAQ:BIDU)

RIMM formed a perfect bull flag. Entry on break of whole $ level. Price stalled midway to the 50% extension. It failed to hold the base as support, but snapped back quickly. Price finally reached the weekly R2 level .

Since the markets are in a confirmed bearish correction, lower the expectations on long setups. Most trades are not going to reach full measured moves in this environment.

BIDU, also a bull flag setup. Entry on break of hammer reversal bar. Then a lot of sideways chop, which held the weekly R2 pivot as support. Finally, volume kicks in and price manages to take out the ORH. Exit as price approaches round $ level.

Another try with GS generated another failure. The setup was an ambush play with support of 20 EMA. The trade was slow. Volume contracted as price attempted to retrace. Too much supply and the stock started to roll over.

Day Trade - Canadian Natural Resource Ltd (USA) (Public, NYSE:CNQ); Cephalon, Inc. (Public, NASDAQ:CEPH)

CNQ formed a C&H as depicted by the Fibonacci or inverse H&S at the blue line. I entered above the blue line but set my Fibs according to C&H pattern. Premature exit on the first sign of weakness.

CEPH formed a flat base over last week or so as depicted by blue line on daily chart.

Entry on break of handle on 15 min. chart below. Exit on weakness after stock forms tweezer top reversal pattern.


GS and POT also had similar bases, but did not extend in the desired fashion. So 2/4 isn't bad given that neither GS or POT generated a loss. POT looks promising for tomorrow. Also on the focus list for tomorrow is this box play in AMZN. On the daily we have a tweezer bottom reversal setup.

Day Trade - Toyota MTR CP ADS (Public, NYSE: TM)

Following the HCPG Blog and sampling a couple of their subscriber service emails has made me focus more on trading S/R at key MAs. If you trust the setup on the daily sufficiently to enter at a price extension/extreme (but at S/R where a reversal/pause is likely), you can sometimes get amazing entries. Today for example I had a great entry on TM (daily left, 5min right) off of the 200 day SMA. The nice thing about a good first entry is that it gives you confidence to reposition or add on the first retrace.

Edit: For the order fill highlighted, I intended to highlight my initial short fill (avg near 80.50) but instead highlighted the closing of a partial long position carried overnight. The previous day's long was initiated following a gap up and triangular consolidation breakout. It ran into stiff resistance at the 200 day SMA. That is how I knew that price level was in play.