Technical Picture - Bullish Response to FOMC

As discussed in my last post, the SPX chart above shows that since the new year started, we've broken out of the mean reverting pattern we were in over the past few months. The two fib patterns show two ambush setups. The second smaller ambush reached its 23.6% Fib extension target, and now we are moving towards the larger target - 1344.

Last Friday we were looking to BO of the first Fib extension. Monday morning, we blew past the 23.6% FE and drew a new extension (green), but failed to hold the 50-62% retracement. That failure resulted in a fast move back down the ambush zone of the stretched original FE. Buyers stepped in and managed to take price all the way half way back (grey fibs). As depicted below, the bears ambushed EOD and the counter-trend traded to the 23.6% target on the open Tuesday.

Today, bears failed after the release of the FOMC statement. Shorts were squeezed out of positions as price rallied to new highs.


Price reached the the 23.6% FE and now we stretch our Fibs and hope for a chance at a new ambush tomorrow.

Tecnical Picture - Bounce Extends

The market has retraced 62% of last week's slide on lighter volume. As depicted on the the 5 min. chart of e-mini futures below. Last Friday's jobs report gave us a wide gap, but formed a bearish rising wedge which eventually led to a complete gap fill. Monday's action was inside, and today we were finally able to extend beyond Friday's high.



SLV has filled the bearish gap more or less, but the bounce has been lame in terms of time and volume. It took three sessions to retrace one day's losses. Very choppy intraday action - not my cup of tea.

USO has retraced 38% of its slide, but needs to push up to 62% in order to fill bearish gap.

$USD is consolidating after breaching downsloping trendline.

Most of my morning trades were scratches but the afternoon trades turned things around. I have been keeping an eye on RIMM's decent. Today, it breached $44.00 for a minute or two and then snapped back - head fakes usually lead to good trades in the opposite direction.

RIMM is technically oversold (daily RSI below 30) and was a good candidate for an oversold bounce (short squeeze).

Enter long on break of NR7 following head fake. See the volume spike as price takes out the obvious resistance levels (blue lines). This is where the stops get triggered and the squeezes occur. Keep on WL for follow through.

CTSH looks well positioned for an attempt at a gap fill following last week's earnings gap.

Technical Picture - Minor Gains Ahead of Jobs Data

Both the S&P and DOW have made new recovery highs since last Friday's sell-off. However, the COMPQ and RUT have yet to confirm. If the markets rally on tomorrow's jobs data, that would be ideal for confirmation. Without confirmation, it's hard to get overly bullish at these lofty levels.

GLD set up a nice short squeeze today as prices formed a solid setup out of a wide base. Looking for a gap fill as depicted below.

Note the small handle that forms at the baseline before price squeezes higher.

USD - Oversold technical bounce on test of the weekly trendline.

AMZN - bearish flag

UA - bullish flag

NR7 (price/volume contraction ahead of expansion) daily focus list APOL, FNSR, HOG, VRX

Earnings Gaps - Gap down - CSTR, LVS, PWER Gap Up - JDSU

These are not recommendations to buy, sell, hold or sell short. Everyone needs to think for themselves when it comes to trading their own accounts. First, it is the only way to really learn, and secondly,you are the only one responsible for your trading decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. The plan includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.

Good Trading!

Momentum Day Trades - APKT, TUP, WFR, BRCM CCK

TUP - continuation from yesterday's big move.

APKT - Momo earnings gap

CCK - Failed bull flag BO.

WFR - Handle and extension

BRCM was a low risk short. I was looking for an extension to daily support at $42.00. Price formed a long handle at the base of weekly S2 and head faked lower. I covered the short and took it long into the close. Shorts were squeezed when price broke back above $43.00.

Technical Picture - Broad Based Accumulation

The markets gapped up in the wake of the post QE2 push. Gold and commodities were the leaders on a much weaker dollar, but overall the rally was broad based with few laggards (biotechs and education). In the final hour, financials broke out of a multi-month base.

However, as we can see from the chart of the S&P, we've breached the top of the Bollinger Bands and will consolidate/correct soon. Momentum is strong and the jobs data would have to be really bad in order to spoil the week IMO.

DW mentioned VMC in the comments a couple of days ago as a short squeeze play. Today, VMC gapped up, consolidated and extended a full measured move of the previous day's range. Good call!

Using the Trade-Ideas scanner - pre-defined scan entitled "Down 50 cents in last 5 min. on big volume", I found two perfect RSI divergence candidates. MUR ripped lower, bounced and then made a slightly lower low with positive divergence of the RSI, setting up a retracement long.

DLR had daily support at $55.00, so it was just a matter of waiting for price to hit the number. As depicted below, the positive RSI divergence, signals a buy at that level.

Technical Picture - Reversal Day

Today's reversal comfortably recaptures the baseline of the May/June lows on higher volume which means accumulation.

We may have put in a bottom last week when we tagged the the 38% Fibonacci retracement of the March 2009 lows to the April 2010 recovery highs. That would be a normal retracement in a strong uptrend. Technically, the markets were oversold and we were due for a relief rally. The lack of news and data today, seemed to set the stage for a bounce. But, we need follow through in the coming days, in order to confirm today's action as a key reversal day. As depicted on the SPY chart below, we closed at the bearish gap resistance level. Tomorrow's jobless claims and retail sales data will set the tone.


Oversold commodities got a boost from a weaker dollar. Shorts got squeezed as the morning strength persisted into the close. MOS and MON were leaders in the Ag chem sector. MOS paused to consolidate the initial thrust, setting up a solid base for the second leg up.

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.

Technical Picture - Short Squeeze

Futures dipped ahead of the open on initial claims, but after a minor dip, the markets quickly recovered. It felt like a short squeeze to me. At the EOD we have a WRB, a broken trendline, but low volume. We've retraced 40% of the slide and I suspect we are setting up for an ambush in the 50-62% area.

After hours POT lowered Q2 guidance to $0.70, down from $0.93, so the chart looks like this. Lots of sympathy plays in the sector - AGU, CF, MOS MON, IPI...

PAYX was an earnings gap down from the TI pre-market scanner. When a liquid stocks trades in a narrow range pre-market, I like to trade the open. The stop is the high/low of the PM range as depicted on the chart below. Although the fill wasn't great, it generated almost a pt, in 5 minutes.


CELG - bull flag, partial at recent range top and swing balance (as described in last night's post).

AMGN - IB forms below base we talked about yesterday, so take the trade.


SPY - low volume consolidation after early thrust sets up the second leg.

ABX - strong performer as gold reclaims its trendline. I suspect gold will pause to consolidate this three day upward move.

Technical Picture - Backing & Filling

After four consecutive higher closes, the markets gave back all of yesterday's gains. Bad data and weak earnings prompted the lower volume retracement. Financials lead the way down. Little on the plus side except Gold.



Wasted effort on this SNDK strategy to add to the swing trade on a break of the PDH. Ended up dumping the whole thing when the markets failed to bounce off of early weakness.

Missed the first leg up on ABX. After gapping and testing the PDL, ABX squeezed back up to the PDH, consolidated and extended 50% in the afternoon.

Base and break the NASDAQ futures. I was a little too confident of a gap fill lower and stayed in the second half too long. Should have had a stop at the 50% fib. level, but I didn't.