Why today’s Gap up is significant

Of course, all gaps are significant, and we have had a few recently.  Analyzing the weekly and hourly charts shows some interesting characteristics of this move.

I’ve mentioned a few times that in the short term, if the SPY can get over the 121 level, it would signal a new uptrend and new highs.  It looks like that’s exactly what happened.

The market has moved comfortably over 121, the 23MA has crossed over the 50MA on the hourly, and the next key resistance short term is at 124.

More importantly, in my opinion, is the weekly chart:

The pullback of the previous couple weeks brought the SPY back to the 200MA of the weekly, and the strong move last week bounced it off that level on strong volume.  This is a key area here for couple different reasons.  Not only is the 200MA in this area, but the 61.8% Fib retracement level of the high 2007 to low 2009 bear market is around 123, and the market had struggled with this area earlier this year.

This gap up (should it hold) will put some distance between the SPY and these key resistance areas (which will now become support).  I believe this uptrend will continue unless some unforeseen events occur and drop the market back below these levels in the near term.

In any event, ignore the noise, and follow the charts.  There are lots of opportunities out there.

Trade well.

Quick update on last week’s ST50 picks

With a shortened holiday week, and couple of nasty days for the SPY, some of the picks worked out very well.  Others did not trigger yet, but did not go down.  A very good sign.

TRS: Long over 18
Triggered and currently sitting at 20.33 – over 12%  gain

EXPD: Long over 52
Triggered and reached first target of 53. Currently at 52.85 and looks good.

MSB: Long over 42.50
Triggered and reached first target of 45 – gain of 5%

AREX: Long over 19.25
Did not trigger yet but looks good. Setup still valid.

APKT: Long over 44.30
Triggered and reached first target of 45 with high of 46.90 – gain of almost 5%

CMI: Long over 94.50
Triggered and reached first target of 98 – gain of over 3%

UAL: Long over 29
Triggered and has not reached initial target of 30.50 yet. Setup looks very good.

LFL: Long over 31.80
Did not trigger yet but setup looks good and still valid.

HUSA: Long over 16.30
Triggered and has not reached first target of 17.30 yet. Setup look ok, but I’d probably be cautious with 2 consecutive dojis.

I’ll post new recommendations later.  Have a great weekend.

Favorite setups from ST50 for week of 11/22

I hope everyone is having a great weekend.

Last week the market continued with a correction with a rough day on Tuesday, but stabilized and moved higher on Thursday and Friday.  The hourly chart of SPY is showing some resistance at 120.35 and 120.90.  If we can clear these levels, then I believe the uptrend resumes and eventually make new highs.  It is not uncommon for the Santa Rally to begin the week of Thanksgiving.

SPY Hourly:

SPY Daily:

There are some fantastic setups again this week from the Stocktwits50 list.  Way too many for me to include all in this post.  So I am picking what I believe are the best setups:

TRS: Long above 18

EXPD: Long above 52 with first target around 53

MSB: Long over 42.50 with first target around 45

AREX: Long above 19.25 with first target around 21

APKT: Long over 44.30 with first target around 45

CMI: Long over 94.50 with first target around 98

UAL: Long over 29 with first target around 30.50

LFL: Long over 31.80 with first target around 32.80

HUSA: Long over 16.30 with first target around 17.30

Please do not forget to do some more research if you decide to use any of these setups, such as any news announcements, earnings, etc.

Have a great week.

Favorite setups from ST50 for week of 11/15

I hope everyone is enjoying their weekend.

Well last week we had a pullback that lasted more than a single day.  Looking at the daily chart of the SPY, we actually had the worst week since early September.  Quite a pullback, huh?

Actually, there really is nothing to panic about yet.  We are still above the upper trendline on daily and weekly, and still above the 20MA on daily.  Volume was a little higher last week, but nothing that would raise all sorts of red flags.  The selling was not of the panic type on massive volume that we see in a top, or that would indicate a trend change.  So for now, it is my opinion that we are still in buy-the-dip mode.

ACTG: Bull flag setup on low volume pullback.  Long over 26.70 with initial target around 28-28-50

QCOR: Bull flag setup on low volume pullback.  Long over 13.20 with initial target around 13.70

MIPS: Low volume pullback.  Long over 14.90 with initial target around 16.50. Beautiful looking chart – earnings are out were great.

ATML: Low volume pullback.  Long over 10.25 with initial target around 11.  Massive gap is still intact.

PCS: Sideways consolidation on low volume.  This stock wants higher.  Long over 12.25 with initial target around 12.75.

AXTI: Bull flag setup with low volume pullback.  Long over 8.40 with initial target around 9.30.

AVGO: One day late in finding this stock.  Long over 25.85 with initial target around 26.50

CNH: Long over 44 with initial target around 46.

ROVI: Low volume consolidation.  Long over 53 with initial target around 54.50.

TZOO: Low volume consolidation.  Long over 36.50 with initial target around 38.

XXIA: Bull flag with low volume consolidation.  Long over 16 with initial target around 17.50.

As you can see, quite an extensive list tonight – and I’ve left out a few good looking charts too.  But these I believe look poised for continued up trend, unless the overall market decides to collapse next week.  As usual, please do your due diligence if you decide to pursue any of these stocks and watch out for news announcements, earnings, etc.

Good luck and good trading next week.

Favorite setups from ST50 for week of 11/8 and other picks

I hope everyone is having a great weekend.  Last week the market reacted very positively to all the news events, from the election results, to the Fed to the NFP.  Some major resistance areas were cleared on the SPY and as the chart below shows, the next major resistance area is 126-127.

Most impressively, and importantly, the financials came life and broke out on huge volume as can be seen by the chart of XLF:

This not only validates the rally, but in my opinion, gives it new life.  I believe we are starting a new wave/trend up.  However, having said that, this market needs some consolidation period or slight pullback to digest these gains.  The market still needs new catalysts to go higher, and there is plenty of momentum to go up.

I took a look at the Stocktwits50 list today.  Twice.  All the stocks on this list have fantastic charts.  The only problem is that most (not all), are making new highs on lower volume, with some major divergence between price and MACD and/or Money Flow.  I am finding it very hard to get on board or recommend most of these stocks at these levels, without some sort of low volume pullbacks/consolidation.  The most promising ones I found for next week are below (only 2):

NXTM: Huge breakout last week on very strong volume. Long over 22.50 on volume.

VHC: Low volume consolidation the last couple weeks. Looks poised to go higher. Long on break of upper trendline around 19.20.

In addition to the picks from ST50, I believe we will see some of the stocks that are not at 52 week highs but broke out last week (like the financials) make a move in the coming weeks.  Some picks I tweeted late last night are:

COV
FWLT
HEV
IO
ITT
JEC
JRCC
KSS
WFC

I hope you have a great week of trading and as usual, please do your due diligence on any stock you wish to pursue, including earnings dates, news releases, etc.

Thoughts on trading this week

I wrote last week that I would not be trading much stocks because I felt we were at a critical point in the markets and I wanted to see the current levels of resistance broken before getting back into holding stocks for more than a day trade.

Well, not much has changed and this week is even more critical since the elections are tomorrow, the Fed on Wednesday and Non-Farm Payrolls on Friday.  If ever there was a catalyst to ‘sell the news’, it is this week.  Adversely, if the markets do not go lower, then we will see a new leg of the uptrend begin.

So, I am in wait and see mode and will concentrate on day trading the Crude Oil futures (CL) for the most part, perhaps some Euro (6E) and Russell (TF).  The plan is to trade smaller sizes and take quick profits.  If possible, finish early and take the rest of the day off.

I did not go through the Stocktwits 50 this week – I’ll resume next weekend once we get a clearer picture of how the markets want to move.

Please exercise your right, and privilege to vote on Tuesday.

Have a great week.

Favorite setups from ST50 for week of 10/24

I hope everyone is having a great weekend.  As usual, there were some fantastic and endless ideas and analysis on Stocktwits this weekend.

Let’s start by taking a look at the weekly and daily charts of the SPY:

Price action is right at the weekly 200MA of around 119, and the resistance areas on the daily can clearly be seen on the chart as well.  The persistent trend keeps grinding higher in the face of some overbought conditions, but as we all know, that does not necessarily mean we will not go higher.

Personally, I will be exercising some caution next week and will not hold any overnight positions should the indexes exhibit any signs of weakness.  Regardless, there are still some great looking charts out there.

Please do you due diligence on the picks (such as earnings, news releases, etc.).  The recommendations are only meant as idea generation and my own personal analysis on these stocks.  Additionally, please use proper money management should you decide to get into any positions.  This are my weekly picks from the Stocktwits50 list:

APKT, UNP, INFA, CGNX, TIBX, INTU, CMG.  Entry points and commentary on the charts below:

Good trading and good luck next week.

CL Analysis for coming week

Good morning – I hope everyone is enjoying their weekend.

Since I’ve been trading the crude oil futures a lot more these days, I wanted to share my thoughts on the longer term charts and some scenarios on how it might trade next week  I will start with the Daily chart:

The daily shows a very obvious tight range/consolidation since early October between 79-84.  The bounce off 38% Fib retracement shown on the chart is bullish and sets up a bull flag scenario with prices approaching 84-86, and eventual resistance in the 90-92 area.

Should it fail to breakout higher from this range, I would look for the 50% and 61.8% Fib levels to be tested, and if these do not hold, I would look for support in the 67-69 range.

Now, let’s look at the hourly chart below:

The tight range channel can be clearly seen here as well and the unexpected move late on Friday afternoon (on volume, I might add), brought the price right back to the top of the channel.

I believe this sets up a move above this channel and back to the 84 area in the very short term, but it all depends on the reaction of the markets to the G20 meetings this weekend.  Where it goes and how it reacts at the 84-85 level will determine the outlook for the next few weeks.

In any case, as I have written many times on this site, I am not in the business of predicting where prices will go on Monday or Wednesday next week or any time in the future.  I merely follow price action, understand where my support and resistance areas are, and take the high probability (and lower risk) trades.  Analyzing the chart setup helps me plan my actions and my trades during the week.  But I will not hesitate to change my bias at any given time should the chart show any significant changes.

I hope this helps.

Good luck and good trading next week

Anatomy of an Intraday Chart of CL (Revisited)

I wanted to follow up on the post from this morning regarding CL December futures 5 min intraday chart.  Below is an updated end-of-day chart:

Points 1-6 were discussed in the previous post.  However, on point 6, the support zone has moved since the chart was in an uptrend all afternoon.

7. 7a and 7b show the price touching the support area around 80.60 with the occurrence of a divergence on the MACD.  A bounce from here would give very good odds for a long entry, which is exactly what happened.

8. Minor resistance area was taken out around 81.30.

9. Major resistance area was taken out around 81.60 and price continued to 82.10.

Strange action so late on a Friday afternoon for CL, but it is what is. All we can do perform the analysis and make real time decisions on what we see.

We’ll see what Monday morning brings.

Good trading.

Update on my ST50 picks this week

I want to start following up on my picks from the ST50 each week and report on their performance.

While many stocks on this list did extremely well, this is a way for me to record my results as well.

Here goes.  These were my picks from the weekend:

CTSH : Setup was long over 66.80 (sorry, typo in the chart). Setup triggered yesterday and was good for at least $1.45 (2.2%)

AMZN : Did not trigger until today (post earnings and was a big winner), good for at least $5 (3%)

LXK : Triggered long at 46 on Wednesday and was good for about $1.30 (2.8%)

NBIX : 8.25 was triggered on Tuesday and was good for about 40c (4.8%)

MIPS - probably my favorite setup: Triggered at 10 on Monday and was good for around 50c (5%)

All in all – not bad at all.  But then again the market has been unstoppable.  Hope some of you caught some of these moves.

I’ll post some more charts over the weekend.

Have a great weekend.

Anatomy of an Intraday Chart of CL

Good morning.

I wanted to post and analyze a 5 minute chart of the CL Crude December futures.  Earlier, I talked about rising trendline, breakout, false breakout, etc. and wanted to share what exactly I was looking at.  Below is a 5 minute chart of CL:

There are 6 areas I’d like to focus on:

1. This is a horizontal trendline at 81.60, which also coincided with a major resistance area.  Usually at 9AM EST, there is a heavy move in one direction, and the thought process was if it breaks this level on some volume, it would breakout.  Which it did.
2. After the breakout, the next candle formed a Doji right on minor resistance at around 81.75.  At that point, some profit was taken and stops moved to breakeven.  Subsequently, the next candle dropped the price right back below 81.50 and the initial breakout/resistance area, signaling a false breakout.
3. Shows the rising trendline Tweeted about, going back from around 3AM EST.  As soon as it closed below it after 9:30AM, it moved lower to the first support area of around 80.90-81, where it has bounced briefly.
4. Shows the are of minor support at 80.90-81.00.
5. Shows the next area of support at 80.50-80.60.
6. Shows the next area of support at 79.35-79.50.  This area is a major magnet should CL decide to break below 80.50.

I hope this was educational.  Whatever indicators you use in your trading, on whatever timeframe, introducing and using trendlines and support/resistance zones will greatly enhance your trading, not to mention money management techniques (knowing where take profits, etc.).

Please do not hesitate to drop me a comment or tweet if you have any questions.

Good trading.

My favorite setups from the ST50 list for next week

I hope everyone is having a great weekend.

Well, it was certainly quite an impressive week with some phenomenal action in individual stocks.  Momentum names were up big, financials took a beating, and solars sold off hard on Friday to give up the entire week's gains.

I still believe there are some warning signs of a a correction - but it has not materialized into actual weakness in the indexes.  On the contrary, the markets held up extremely well in the face of a selloff in Financials and some semis including Intel.

Looking at the chart of the SPY, there are some major challenges ahead.  Some strong resistance areas are coming up in the 120-122 area.  The election is coming around soon, and the majority of earnings will be released the next couple weeks.

It is clear that there are some major hurdles to keep this rally going. It would appear a lot of good news has already been priced in.  But how much good news?  This market has managed to surprise and just like the Energizer bunny, it just keeps on going.

The following are stocks that I will keep on my watchlist from the Stocktwits50 list:

CTSH
AMZN
LXK
NBIX
MIPS - probably my favorite setup

Don't forget to keep an open mind and not be 'married' to a position or an opinion.  Things change on a dime and we must be prepared to adapt appropriately.

Good luck and good trading!

Trading radar Oct 4

Good morning! I hope everyone had a great weekend.

Futures a little down this morning. I have a slight bearish bias right now on the S&P. I would not mind a little breather here going into earnings.

Below are stocks on my radar (in addition to the stocks I posted over the weekend):

LONG:
MSCC
ISLN
TTWO

SHORT:
X, MT, STLD (Or any Steel stocks with the worst looking charts)
ATHR
NVDA
AMED
MRVL
XRTX

I'll post any other setups I see during the day on StockTwits. Looking for long opportunities in CL, EUR and GC.

Good luck and good trading.

Do you believe in Divergence?

One of the tools I find to be indispensible on a chart is the MACD. The boring, good old-fashioned MACD with default settings. In addition to its traditional use, the MACD is one of the best tools that can be used to identify divergence patterns with price action.

Divergence is when price makes a new high, but action in MACD is not confirmed - i.e. the MACD makes a lower high than the previous price high.

In the daily chart of SPY, I have highlighted the previous divergences on the chart. New highs in price were not confirmed by new highs in MACD. This can be seen in Divergence 1 and Divergence 4 on the chart. Subsequently, the SPY broke down and we had quite a drop in both instances. On the other hand, when prices made new lows, MACD did not confirm with new lows as can be seen in Divergence 2 and 3. Subsequently, prices went up.

We have what I believe is another such a divergence on the SPY shown by Divergence 5 on the chart. Recent price highs (which happens to be on a strong resistance area by the way), are not being confirmed by a high in MACD. In fact, the MACD is not only declining, but looks ready to cross over below 0.

Now this does not mean that prices will drop for sure, we may just rest here for a while, or make even higher highs. But it does make one be a bit more cautious, even defensive. Raising a bit more cash is not a bad idea, especially with the run we've had in September.

Personally, I always like to have two watchlists to use at any time - a long and a short watchlist. But this week, I will pay extra attention to stocks that are ready to roll over, and I'll be more aggressive with the futures if I see that we are indeed breaking down to lower prices.

Good luck and good trading!