Technical Picture - Late Day Rally Pares Losses from Weak Jobs Report

A firmly negative start on Friday in the wake of the worse than expected non-farm payroll and private payroll numbers (previous month revised lower as well). As we can see from the SPY chart below, price held initially at this week's narrow trading range floor, but the rebound stalled 30 minutes into the day. A second wave of selling accelerated into mid-morning with the SPY unable to stabilize until it almost completely filled Monday's gap. To make matters worse, Goldman cut their 2001 GDP forecast. This left prices trading in a tight, narrow range for several hours. Eventually all that coiling, produced a breakout to the upside as prices rallied in the last 90 minutes leaving the indices with only minor losses.

On the daily we have a either a hammer or hanging man. Keep a close watch on the trendline for a potential breach and some retracement.


If the market weakens, play defense with biotech/healthcare sector. Large caps biotechs such as CELG and AMGN look poised to move higher.

Swing Trade Update

From the RIMM chart above, we see that Friday's strength (bullish engulfing bar) sets up a perfect ambush long. I trimmed my short position by another 25% and tightened the stop as depicted above. Barron's unfavorable article this weekend may help tomorrow.

Day Trade

As mentioned Thursday night, Cramer's ill-timed Mad Money recommendation to buy POT and other sector names, after such a huge move, could provide the perfect storm for a shorting opp. The sector gapped up Friday morning as his disciples blindly jumped in. As soon as prices fell below the PDH, I shorted POT for a nice swoon to fill Thursday's gap. Notice the negative divergence of the RSI to higher prices on the 15 minute chart above.

Technical Picture - Consolidation Ahead of Jobs Data

The S&P has spent most of the week in a tight consolidation trading range in the upper half of Monday's gap day. After weaker than expected initial claims data, stocks spent most of the session playing defense. A late day surge filled the gap.

Tomorrow's jobs data will set the tone.

$CAD broke out of symmetrical triangle. $USD is still trending lower, but has paused at the 200 SMA. A strong job report tomorrow would really help the $USD.

Ag/Chem sector should pause anytime now to work off the overbought posture. Long term, the sector has more upside.

AAPL is in a tight trading range, printing narrow range bars - coiling. The BO, when it occurs will be explosive.

Swing Trade Update - Potash Corp./Saskatchewan (USA) (Public, NYSE:POT); Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

The daily chart above depicts the swing trade entry and exits. As you can see the trade has become extremely extended (distance from trendline and moving averages). I'm sure POT and the sector will go higher, but for now I felt I needed to lock it in and wait for a retracement.

Yesterday POT trended higher. It carved out a ambush of the last leg up in early afternoon which I day traded as depicted below. When I closed out the day trade I also locked in 25% on the swing trade.

This morning it gapped up again when the market gapped lower. I locked in the last 25% when it failed to hold $115.00.

I'm hearing that Cramer recommended the fertilizer sector on tonight's show, so many of the names (POT, AGU, MOS, IPI ...) traded higher in after hours. I hate shorting strong stocks, but Cramer might have setup a perfect storm. We'll see how it plays out tomorrow. AGU, and MOS printed a shooting stars on the daily today.

The RIMM swing short hit the first support level today and I covered 25% on my position. Plan to lock in more at the next support level as depicted on the chart below.

ABX short was stopped out on Friday. It has since broken its downsloping trendline and is basing at $43.00. I'd like to see a matching pattern develop - inverse H&S before going long.

Ambush Trade

Ambush trades were developed by Hubert Senters of Trade the Markets. I believe he uses the setup mainly to trade futures. I find it also works well with trending stocks, stocks that gap, and stocks that test support/resistance in the opening range.

The first example below is FSLR's earnings gap on Friday. Price started to move lower, retraced into the ambush zone (50-62% retracement) and reversed. The basic rules are price must breach the 50% and cannot close beyond the 61.8% level. Wait for confirmation and enter the trade. Ideally, we target the 50% Fib. extension, but if price pauses and attempts to reverse at the base, take a partial.

The second example is PRGO today. PRGO fills yesterday's gap in the opening range, moves up to test resistance and retraces into the ambush zone. Wait for confirmation and take it long.

NFLX initially looked like a good ambush setup until price closed beyond the 61.8% retracement level.

AMZN initially looked like a good ambush setup until price closed beyond the 61.8% retracement level. In this case, the setup did give the desired result, but we have to establish rules and stick to them. I'm still experimenting with this setup and may eventually work around this problem.

Swing Trade Setup:

RIMM filled it earnings gap today and sold off on high volume. I think she's done here and will be looking to swing swing short below 20 EMA ie. trendline break.

Technical Picture - Gap Extension to Multi-Week High

An impressive start to the month with a gap open and extension on the strength of overseas markets. A broad based rally with commodities providing leadership - Coal, steel, Oil Services all added 4+% on the session. Ag/chem continued higher as well, gapping above the 200 SMA. The sector is overbought but propels higher on the supply/demand issues priced into crop futures. Another bad day for the $USD vs, $Euro. As depicted on the $USD down below, price is fast approaching the 200 SMA. A technical bounce is due so it's important to keep an eye on it and it's effect on commodity related plays. Canadian markets were closed due to holiday.

Day Trades

Ambush short for AKAM which is weak since earnings last week.

MOS tested the ambush zone of the last leg up in opening trade. Wait for confirmation, enter long. Partial as price approaches resistance and let the balance run.

BTU was a HCPG pick from last night's newsletter. Looks like a box play and extends 100% before lunch. Sweet!

Floored, a film about floor traders is available for viewing at TraderTV blog.

Technical Picture - Best Monthly Performance in One Year

A gap down open on the SPY following disappointing GDP data, saw buyers step in at the 50% retracement of the last leg up. Better-than-expected Chicago PMI (62.3 vs. consensus 56.3) and Michigan Sentiment (67.8 vs. consensus of 67.5) helped lift the market and close the gap into midday. Choppy backing and filling into mid-afternoon led to an ambush setup for the final thrust upwards.

For the month the S&P carved out a bullish engulfing stick and its best monthly performance in one year.



Friday's leading sectors included healthcare/biotech, Ag/chem, and Gold. Solars, semis, and banks represented the laggards.

The $CAD looks poised to breakout of its symmetrical triangle. The $USD remains weak but due for a bounce. $Euro weakened on Friday on speculation of further debt rating cuts in Europe. Gold rallied.


Ag/chem rallied on higher crop futures for corn, wheat and soybeans.

Swing Trade Update / Gold - $USD Technicals

POT reported strong Q2 earnings and had an upbeat conference call regarding supply/demand issues which are improving - inflection point is near, which it describes as a point where demand reemerges, supply tightens, and pricing opportunities return. Recent supply and demand developments are favorable. In Russia grain production is expected to decline by around 20%. While Canadian wheat production is forecast to be down 23%. China which places a priority on food self sufficiency is facing significant challenges as a result of adverse weather and nutrient imbalances.

As depicted on the chart above, we can now draw in a trendline because POT broke out of its base and printed a new high. Next resistance level is the 200 SMA. Today's volume spike is very bullish as well.

Day Trade - POT retraced and carved out a bullish hammer reversal stick just below the ambush zone. Normally, we prefer that price close within the ambush zone, so in this case, we have to wait for confirmation. Enter long above the base (blue line segment), partial at the weekly pivot R2. Price rallied just shy of the full fib. extension.


ABX had strong earnings and increased the dividend by 20%, so price gapped on the open. I didn't panic and cover my short because GLD was weakening in pre-market. I placed a stop at 62% fib. retracement of last leg down as depicted on chart below. When price filled the gap and reversed, I covered half my swing short.

We'll see how this plays out. Price closed just below daily 200 SMA.


USD and Gold Weakness:

The $USD is trending lower and will likely remain weak until the economic data, and more specifically, the employment data shows a meaningful improvement. However, we are extremely oversold, in a congestion zone, approaching the 200 SMA. So, expect a technical bounce back to the trendline in the near-term.

The last chart shows the $USD (red) vs. GLD (pink). During the crash the $USD was a hedge against falling stock prices. During the recovery, GLD was a hedge against the falling $USD. Earlier this year, the $USD and GLD started trading in the same direction as a hedge against a falling $Euro. This last hedge is out of favor because the $Euro is making a strong recovery.

The gold hedge vs. the $USD will likely come back into play if the slide continues. We just have to monitor the charts closely for any tells.