Technical Picture - Modest Gains on Favorable Jobs Report

INDU is testing February highs. I'd like to see a retracement here so that we can carve out an inverse H&S pattern, before attempting to move towards the top of the channel.

Small caps are testing 2007 highs.

The SPY gapped up on the favorable jobs data, but a mid-afternoon swoon brought us back to the base. Black candles can be bearish as they highlight gap fades. I'm interested to see if new money will come into the market as we begin a new month, or if we get some sort of constructive retracment before attempting to make new ground.


My main concern is the NASDAQ which has yet to confirm the price action of the other major US markets. We saw late day selling in AAPL (20% of the QQQ), weakness in a number of cloud names, and the SMH appears to be falling out of bearish rising wedge with volume (see SMH chart below COMPQ). Also, copper, a leading indicator, is printing lower highs. These are red flags. The broader markets can't continue higher if the COMPQ fails to confirm and pulls back.

Watch List Stocks

AAPL looks vulnerable to further selling. Friday's late day sell-off had volume. If it fails to hold the retracement zone as support, it will likely retest the base (blue line).

ALXN is testing $100.00 resistance again. Large scale buying into the close, pushed the stock just above $100.00. I would prefer to go back and fill the gap before breaking out, but ALXN might not wait.

ISRG attempting a big level here. Breaking out on good volume. I'd like to see a few days consolidation (coiling) in the upper shadow of Friday's stick, before moving above $350.00.

RIMM bear flagging, closed near lows on Friday. If the BO closes below next support at $54.60, I'll hold for a swing. There's virtually no support between $54.60 and $50.00 as we had two WRBs on the BO of the base back in October. That's why I find this setup so compelling.

AKAM setting up a mini inverse H&S pattern. Measured move target 100%.

RVBD looks like it might be forming a H&S top.

FFIV - The Fibonacci symmetry on this chart is a thing of beauty. After gapping down on earnings, price retraced to the ambush zone and the downsloping 50 SMA and extended to the Fib 1.27 level. We retraced to Fib 1.0 and now it looks poised to extend further. $80.00 seems like a realistic target, if FFIV fails to hold the 1.27 level.

Day Trades

GES caught my eye on the open because of the gap up. I placed my fibs from the late day handle to the opening swing high and waited to see if it would set up a reversal in the ambush zone. It did, so I took it for a long. My target was the high of the earnings gap down bar on the daily (blue line) on the chart above.

VRUS was a gap continuation play. If we ignore the opening range, we see an orderly base on base setup. My target was $81.00 which represents a full measured move on the daily. (See Thursday's post).

I thought the third test of the support zone on RIMM would finally break, but there some large buyers sitting on support and I took a small loss. Price rallied back towards the 5 day EMA, carved out some bearish looking upper shadows, formed a base and broke back down, so I shorted it.

Technical Picture - Consolidation

Stocks opened on a firmer note following some favorable overseas debt auctions offsetting yesterday's concerns. Leading stocks paced higher topping out around midday when the DOW failed to confirm higher highs in the Comp and S&P. Stocks pulled in slightly ahead of the Beige book which was a non-event. Choppiness ensued into the close.

As we can see from the S&P chart above, we are flagging at the cusp of the down trend line in the upper range of last week's flag pole. However, many momo stocks such as AAPL (chart below) and GS are testing resistance from the August highs. Also, I'm seeing a number of long upper shadows on the dailies of my WL.

The CREE short setup was highlighted by Steve Place on Stocktwits TV yesterday. Short on break of ORL. Price closed at the round number $50.00. Other names breaking down with volume today include V and MA.

FFIV tested resistance from last two sessions. Placed my Fibs from the low of the outside day to the upper base. Missed my exit when price suddenly reversed just shy of the target.

MTL was a HCPG pick from last night. I ignored the false BOs and placed my fibs on inside support/resistance. Worked out perfectly for a full extension.

NTAP broke resistance and rallied two points. Now it's really extended. We have a mini double top on the 15 minute timeframe. I'd like to see a retest of the base at $45.00. Could setup up a fast move lower on a trendline break.

Also watching gold names as they retrace back to their trendlines.

Advantages of Work - VIX and SKF

Many times, working and checking the market occasionally throughout the day has its advantages. Today was one of those days. I missed the whip saw action - early bear trap (weakness late yesterday followed by gap up open) which turned into a bull trap a couple of hours into the session. When I checked the market, the volatility index (VIX) had reversed, formed a flag pole, and was well into the formation of a bull flag on a slightly rising 20EMA (15min chart). An upturn in the VIX indicates increased fear and/or risk (i.e., market selloff).

From my WL, I found SKF (inverse ETF) forming a consolidation between its 20EMA (15min chart) and its 5-day MA. I waited for range contraction (NRIB) and entered aggressively when it appeared the 5-day MA would give way. I closed half after 3 bars and carried half for a swing. I even threw in the execution window for those skeptical of success in the whip saw action.

Low Risk Dummy Trades - GIL, SNDA

GIL - analyst upgrade from neutral to BUY. Two NRIBs at the base of the whole $ level on the 15 min. and 2 NRIBs in the upper shadow of a bullish WRB on the daily. That's very bullish.

After topping out at $17.00, I shorted it (blue line segment) back down to $16.00. The reason I'm exiting at $16.00 as opposed to holding on until price meets the rising 20 EMA, is because of the whole $ level and because price based a long time at $16.00 on the way up, so that provides support (matching congestion).

SNDA from my WL, had a small gap and a perfect entry on break of ORH which I missed. It then carved out a flag pole (high volume) and flag (declining volume) setting up the next leg higher. For chart patterns such as flags, we look for a measured move of 100%, so I placed my fibs from the ORL to the BO point of the flag.

Yeah, I missed the rest of that move, but who knew after that shooting star?

VIX Impulse and Flag - SKF

Similar to yesterday, a gap up opening in the broad market was met with immediate selling. The difference today was that the volatility index (VIX) showed an implusive move up (flag pole) which took out the previous day's high and then formed a flag. The implications of decling and rising VIX have been discussed recently in comments.

The mid-day flag on the VIX correlated with flags in individual stocks and ETFs. SRS (inverse real estate ETF) was the %change leader on my WL. However, the mid-day "bull" flag (inverse to the market) in SRS was not clean. I found a much cleaner flag pattern on SKF (ultrashort financial ETF). The 15min charts below show the impulse and flags in VIX (left) and SKF (right). The flag in SKF setup on top of the 15min 20EMA. I partialed after three 15min bars and a trailing stop on the remainder was hit soon after.