Technical Picture - Distribution Day

Significant downside pressure in early trade gave way to stabilization and a retracement in the afternoon. Another distribution day, the third in the past week and a half. IBD will be changing its current outlook from "Market in confirmed uptrend" to "Uptrend under pressure" tonight.

After retracing 38% of the Nov.-Dec. rally, the $USD spiked this week for a retest of the rally highs.



Stocks gapped wide and swooned. Gold stocks gapped and attempted to stabilize, giving traders a chance to enter a trade.

ABX gapped below S2 on the daily pivots as depicted in the 5 min. chart above. I've recently decided to plot daily pivots on the lower timeframe and weekly pivots on the higher timeframe (15 min.) so that I have wider perspective as far as potential targets. Of course, things don't always work out as perfectly as the ABX trade. But, the weekly pivot is stable over the course of the week which is helpful when reviewing charts the night before.

Continuation Play - Cephalon, Inc. (Public, NASDAQ:CEPH)

The first chart of CEPH is the daily. We note that yesterday it broke out of a seven month base and today we filled the bearish gap. Prices closed near the highs of the day, so the gap fill didn't give rise to profit taking.

The 15 min. and 5 min. timeframes show the day trades. Two low risk entries followed each by vertical expansion. Intraday pivots used as guides for support/resistance.

The last chart is the 3 minute timeframe of the trading channel since CEPH broke out of its base. The next level of resistance is $62.50. Price is testing the lower channel into the close.

Day Trade - Amazon.com, Inc. (Public, NASDAQ:AMZN)

Thursday night we said that each time AMZN tests it's 50 SMA on the 15 minute timeframe, it results in a higher high. We also said that a lower high under weak market conditions could setup a shorting opp.

Friday's market conditions were not weak with each of the three major spiders SPY, DIA and QQQQ printing inside days on lighter volume (consolidation). AMZN set up a long when it found support in the ambush zone of the last leg up, after breaching the 50 SMA and snapping back as depicted on the 15 min. chart above.

The reversal back up was on light volume, so we suspected a short was setting up when price could not hold R2 (blue line), resulting in a lower high from the PDH. As depicted on the 5 minute chart below, we partialled out at the initial sign of weakness and after another lower high, we exit the balance of the position and shorted simultaneously. Volume on the short side wasn't enough to get past the median daily pivot P (black line) and the short trade was stopped out for a small gain.

Price moved all the way back up to the initial base on accelerating volume, so we took a long entry into the close. Once the intrday high was taken out, the shorts were in a squeeze which propels price higher at a much faster rate.

From the daily chart below, we see a flag pole (high volume)/ flag (declining volume) and BO ie. extension. The only caveat is the lack of volume on the extension. Volume increased on the BO day, but has since failed to follow through, so price is moving slowly. This looked to be setting up as a failed BO and that's why I said I would look to short on a lower high if the markets were weak. Now we adjust the strategy because if there's a big enough short float, price could move higher faster. If that pans out, we'll wait for a euphoric volume spike before we attempt to short AMZN. For now, buying pullbacks is the way to go.

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.

Failure Leads to Fast Move - Barrick Gold Corporation (USA) (Public, NYSE:ABX)

Entered ABX long on a mini base & break. Price rallied up to R2 - whole $ level and carved out a tweezer top reversal, putting the position into a slight loss. As price exit the retracement zone, I sold twice the size for a short. Failures usually lead to fast moves and that's exactly what ABX gave us. Took a partial after 3 WRBs and exit balance at S2. ABX is a usual suspect for me and I mentioned gold in last night's technical post.

Someone requested that I explain how I use MAs. I use them for support/resistance. On the 5 minute chart below, we note that price never closed above the downsloping 5 EMA until the primary target S2 was met. Price and the EMA are like magnets, so if price gets too far ahead of the EMA, expect a retracement.

Crossovers are good indicators of the bias. If the EMAs crossover above price it is very bearish and vice versa.

Profit Taking - Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

POT took out PDH and extended 50%, printed a big hanging man, retested the highs but couldn't push through R2. The second hanging man, strategically placed at R2, provided a very good clue that POT was going to come into some profit taking.

SCO and BIIB were from the gapper focus list. BIIB was a coil and move back to ORH, followed by a long, almost painful, wait for the anticipated C&H to develop.

SCO was an ORBO with extension following the gap fill consolidation.

SLB, also from the gapper list, was a good intention for a H&S BO, but I missed the entry. Hope you got involved.

The key criteria for H&S tops are big volume on LS and Head and relatively little volume on the RS. SLB meets the criteria and delivers a fast trade - gap fill and perfect measured move - 100%