Technical Picture - Consolidation - Markets Mixed

The markets consolidated ahead of tomorrow's jobs data and in the wake of the big move from the March lows. The DOW and S&P had minor losses whereas, the NASDAQ and Russell printed minor gains. As depicted on the chart above, we are testing the top of the congestion zone which formed prior to the correction. Normally, we would expect matching or similar congestion areas to form prior to breaking higher. If that's the case, we need to consolidate through price and not just time.

Normally, strong jobs data leads to higher interest rates and pressure on gold. The GDX chart below shows that we are on the cusp of breaking out of a symmetrical triangle. How does it work? Well, strong jobs data suggest the need for continued QE (quantitative easing) by the FED, may be coming to an end, sooner than later. Whisper numbers are always higher than consensus, so this is always tricky.

Day Trades

TSLA gapped up, and flagged into the rising 5 period EMA on the 15 min. timeframe. As we can see from the daily chart above, we had two targets, gap resistance and gap fill. I took a partial at resistance and was stopped out on balance. Eventually, formed a bearish base, which I shorted.


Early weakness in RIMM formed a bearish flag near daily support which I shorted hoping for a BO, but there was a huge buyer lurking around $56.85. The trade was aborted when price formed a base just under the flattening 5 period EMA. Just like the APOL trade from a few days back, the failure sets up a long entry. The next test of this level should break.

From the daily chart above, we see that a measured move of the bear flag pattern would bring prices down to $50.00, a solid support zone.

DECK - not a winning setup, but I was hoping that the bear flag would break and extend to the low end of the congestion zone.


VRUS was a momentum gap. Price rallied, retraced and consolidated, forming a base and setting up a low risk entry (NR7). VRUS is blue sky, but on a measured move basis, it should top out between 80 and 81, and consolidate.

Potential H&S Swing Trade

GOOG has a H&S pattern with support around 556. That support level happens to coincide with the 50 day SMA. A measured move down would test the range/support levels formed in February. This scenario is more likely to play out if the broad market starts to sell off from the current extended (upside) levels.


Update: The charts below (30min and daily) show what happened with the H&S pattern. After forming a more complex right shoulder and testing support several times, GOOG gave a good test down (yesterday and today) into support as shown on the daily chart. A sharp reversal from that level brought it back to the H&S breakout level by today's close. The test down did not achieve a full measured move (height of the H&S pattern), but it was a good move down in an overall bullish market. The possibility still exists for achieving the full measured move before trading above the H&S pattern, however the strong reversal today lessens that chance.

Good Daily Charts to Study

Jamie mentioned POT (top chart) in his Technical Picture post last night. It broke through resistance right on que today. AGU (bottom chart) is in the same industry group - agricultural chemicals - and also broke out with a trend day. Compare and contrast the two charts. Both were excellent daytrading opportunities today.

Edit: Note that POT reports on Thursday.

Short Side Vigor

Overall volume was light today (Columbus Day) as the S&P tested recent highs. Per recent comments, I have been favoring the short side at these levels. Yesterday I tried a short in NTES and ended up scratching. Today, my short side trades showed a bit more vigor. NTES responded much better than I expected. BIDU had a nice matching congestion pattern (looks like small H&S, but not at top of recent price action) that was good for a quick downside pop. Note that the first hour or so in NTES was also a matching congestion with yesterday's action.

H&S and Gap - RIMM

Over the weekend, Jamie mentioned a potential H&S top in POT. RIMM had a similar setup on the 15min chart and setup beautifully today with a gap down on heavy volume, followed by a consolidation on declining volume. The entry was a NRIB near the 5ema on the 15min chart.

The following chart is in response to a question by Day Tradr. Key features are shown for the last couple of days - none of these trades were taken. There was a clean 3 PP entry on Friday. Today there was loose base that led to a retest of the OR and $20 level. A small consolidation (low ADX, left shoulder) setup the retest of the OR and then turned into a small intraday H&S formation. Notice the matching consolidation (low ADX, right shoulder).

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?

Technical Picture - Profit Taking

Before I left for vacation we said that the S&P was forming an inverse H&S bottom and that we expected some symmetry (matching congestion) areas on the way back up. That's pretty much how it played out as we can see from both the weekly and daily timeframes.

Taking a closer look at the daily, we note that last week's profit taking was on lighter volume, and thus implies, that the rally is not over. I'm watching support at 875 as we consolidate between the two blue line segments. I wouldn't be surprised to see prices rally to test the January highs before beginning the longer consolidation process of carving out the right shoulder in the inverse H&S bottom.


The $USD took its sweet time before finally succumbing to a trendline breach. Thus far the breach is minor and could easily bounce for a retest. If so, gold and commodities, which rallied on USD weakness could come under short-term pressure.

Oil, is already pulling back to retest it's BO point.

Gold consolidating at it's base. I like how all of the moving averages have formed a bullish cross.

The rally in financials is also consolidating just below the downsloping 200 DMA.

Jim did an awesome job on the blog while I was away and I really appreciate it. The depth and variety of content is great and I look forward to more if he has time. Read his post below for analysis of key technicals in play.

In the next week or so I plan to respond to emails piling up over the last seven weeks. I'm feeling really jet lagged so I expect things will be a little slow in the next few days.


Good Trading!