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.

Technical Picture - U.S. Markets Rebound from Japan Meltdown

The U.S. markets gapped aggressively lower on the Japanese meltdown overnight following nuclear power plant fires. Buyers stepped in as the S&P came close to 1260 support, a key level I noted in my last post. This level corresponds to the 2010 highs, an area we based at for the last seven sessions of 2010. Volatility spiked as depicted below.

Swing Trades

Buying support on the open isn't easy, so I decided to to take some of the nail biting out of my support strategy by trading from my swing account rather than my day-trading account.

HCPG gave us POT $51.00 and I also liked POT $50.00, so I wanted to buy somewhere in between.

In the end, I hesitated and decided to go long weekly S1 which is much closer to $51.00. I took a partial midday.

I was looking to hold my partial swings overnight if we made a higher high than yesterday on decent volume, otherwise we're just on a path of lower lows and there's no point in taking the extra risk of a swing. So POT took out yesterday's high intraday, and we'll see what happens tomorrow.

I'm three for three with SU, but still not holding overnight because we keep printing lower highs and/or lack of volume.

TCK breached my initial, narrow support target on the open, so I decided to put this name aside and wait to see how things develop.

I took TCK long on a NRB, low risk, entry as depicted below. I took a partial at resistance, but it just kept on going on accelerating volume, which was perfect for my swing strategy.

Dummy Day Trades

For daytrades, I've been trading the old standby - low risk, dummy trades over the last two days. I look for stocks that gap with volume. Not too hard to find these days.

SHAW is a contractor with several nuclear power plant contracts set to begin in the U.S. and China. Following news of the Japanese nuclear disaster is gapped down wide on Monday. Two really nice trades yesterday and one today as depicted below.

I take all the high volume pre-market gappers and first hour pt. gainers/losers that catch my attention and create a symbol list in my Trade-Ideas scanner which I run the 15 min. NR7 scan. NR7 signifies price/volume contraction (narrowest price bar over last 7 bars) and foreshadows expansion. For longs I want price, to close above 5 EMA (pink line) and for shorts, below 5 EMA.

MCP printed a few NR7s and carved out a NRIB (narrow range inside bar). Took it long on break of small handle or base. My target was a retest of the intraday high. Not very fond of MCP as it can get really erratic at times, so just take the money and run.

Also traded PEP ( not pictured) NR7 plus hammer, but it went nowhere for a scratch.

Technical Picture - Accumulation Day

The markets gapped higher on better than expected initial claims in anticipation of a good jobs report tomorrow. We had broad based buying (accumulation) across most sectors except precious metals which are affected negatively on good jobs data due to higher interest rates. Subsequent downticks in oil off of overnight highs also contributed to the bullish tone. Bullish price action persisted until late afternoon. Small and midcaps outperformed today.

In reviewing my usual suspects charts EOD, I don't see a lot names that hit it out of the park today, the exception being momo stocks which had big Q1 earnings gaps and maintained relative strength throughout the recent pullback. Names such as ARUN, PNRA, TUP, TBL, PCLN...

A weak jobs report could set the tone for some early downticks, however, it's how we close that's more important - how we close the session and the week. I'm not saying that investors will be indifferent to a lousy jobs report, I'm just wondering if today's momentum will carry-over into the end of the week despite a weak jobs report. The bears have made their presence known over the past two weeks and until we make a higher high, I'm still leaning bearish.

ARUN formed a bullish handle at the base of resistance and pushed through to the next resistance by midday.

AGU formed a C&H with a very tight handle for a rally into the close.

JDSU printed NR7 NRIB on the daily. I'll be watching for expansion tomorrow.

Day Trades - TCK, CLF, TBL

Bear flags have been hit and miss in this market. Mostly they've been fake outs. So why was TCK a good short? From the daily chart above, we noted a huge volume spike on the Feb. 9th drubbing. So we see a huge red stick with volume, plus bear flag with NRIB observing the downsloping 5 ema as resistance closing at the base of support. This bear flag felt like it could work.

Small size on break of $58.00 and added at the first consolidation BO. Took a partial after 3 consecutive WRBs on 15 min. timeframe (not depicted). Got stopped on balance as price capitulated into $56.00 and bounced.

CLF gapped up on earnings. Price chopped around in the first hour and then started basing in an increasingly narrow range, forming a flat base at $99.50, and setting up a gap fade.

Price breaks down, retests the base and runs lower for 3 consecutive 15 minute bars. Take a partial as price approaches $98.00. CLF snapped back sharply. I thought the second half was going to get stopped out at BE, but, it came back down and I was able to salvage a decent profit on the second half.

Looking back at the 15 minute chart, there just wasn't enough volume expansion on the initial leg lower to expect continuation.

TBL was another earnings gap from the Trade-Ideas scanner - gap up min. $1.00, RSI on 15 minute timeframe minimum 60.

TBL gapped and ripped then spent most of the rest of the session in a tight narrow range. Normally, I like to buy the BO of the upper range, but time was of the essence, so I decided to buy the bounce off of the bottom of the range, then if the BO failed, I would have some profit from the trade. Turned out to be a good strategy as price/volume expanded into the close. The base BO also set up perfectly with a low risk NRB on the 15 min. timeframe.

Entry and exits depicted on 1 minute chart below.

WatchList: RVBD, LVS, INTU, CSTR, OVTI, AAPL

RVBD - has held in the upper range of recent rip. Bull flag developing and could BO anytime.

LVS - Filled prior gap and sold off on high volume. Looking for further weakness.

INTU - Looking for retest of recent highs and possible extension to 1.27%

CSTR - Bull Flag developing in addition to Friday's NRIB NR7. $65.00 looks like a good spot.

OVTI holding earnings gap - Darvas box type setup.

AAPL - Last but not least, NRIB NR7 at base of pre-earnings high. As noted previously, AAPL has yet to close above its pre-earnings high of $319.00. Now, it is basing at $319.00 and looks ripe to resume the uptrend. Weekly timeframe has formed a bull flag.

Technical Picture - Bulls Defend Support

A modestly weak open was quickly bought to fill the opening gap. Despite strength in tech, the broader markets couldn't find any momentum because the $USD gained strength causing commodity prices to weaken. After the 10:00 turn, prices fell and printed lower lows. They tried to consolidate at Thursday/Friday lows, but failed as prices swooned to a partial gap fill at support from Wednesday's base.

The partial gap fill signaled a long entry on positive divergence of the RSI to lower prices as depicted on the 1 minute timeframe below.

The rally off the lows was slow at first, but managed to retrace most of the day's range by EOD.

As you can see from the 15 minute chart above, we have strong resistance at $120.65 if we manage further gains tomorrow. That level held as support on a few tests last week, and will difficult to break through unless we have a catalyst. If GDP data provide an upside surprise, we could see higher prices ahead of FOMC minutes tomorrow afternoon. Otherwise, I would expect narrow range trade.

$USD and GLD are developing as planned.

Today's trades include AMZN which expanded after Friday's NRIB NR7 on the daily. Why can you take this trade on the open? The base at $165.00 is solid as it was tagged three times over the course of two previous sessions. If price breaks out, it will retest the base before failing, giving buyers a chance to scratch the trade, if it looks like a failed BO.

NTAP tested support on the open and bounced. No follow through in the afternoon.

FFIV - shallow retracement and held in upper range as markets corrected. A good long opportunity and daily BO at $128.00.

Back to my beloved Habs. We're up 2-0 against the Flyers, midway through the 2nd period.

Day Trades - RIMM NFLX MOS CMG FFIV WYNN

As noted yesterday, RIMM had broken out of a multi-month base. Today, I placed a buy stop order above yesterday's high. Took a partial at the 62% Fib. extension. The balance ran up to 150%. The last 50% of the move was euphoric as we can see from the volume.

On the 15 minute timeframe below, we see that RIMM breached the top of the upper BB on a euphoric volume spike, marking the end of the move. Like capitulation, this is a tradable reversal setup.

Short RIMM on 1 minute timeframe.

NFLX and MOS were HCPG picks from last night's newsletter. I wasn't in love with the NFLX setup until it printed a NRIB - NR7, one of my favorite entry points. Price/volume contraction ahead of expansion.

MOS was entered on the pullback.

CMG took out post earnings gap highs, formed a base for the next leg up. I'm posting both the 5 and 15 minutes.

FFIV - Fib. retracement trade on 5 minute timeframe.

WYNN - Failed setup.