CSE is Back-Trade Idea (Short)

CSE was a long trade back on October 26, 2010. The pattern was a bull flag and the market was still in bullish territory. Just for a mental note, bullish patterns like a bull flag are infinitely more successful when the market is in a bull trend, the bullish patterns become very unreliable when the market is topping or bearish, statistically speaking.

 Here's the trade idea at the white arrow.

If you used my Trend Channel as a stop, then you netted a 35+% gain before t stopped out at the red arrow. Note ADX turned down from a very high reading of 72 indicating the strength of the trend was now fading, only days later the Trend Channel stopped out the trade.

Now CSE is back on the radar, but as a bearish trade.

 Here we have two potential necklines for the top, note volume in the area.

 Both support lines are now broken, but note the volatility dance that is so often seen when support is first broken. Now that CSE is beyond the volatility dance, t makes for a better trending trade prospect and I prefer trending trades above volatility and chop.

 I really like to see the daily 3C chart confirm an uptrend as we see here at the green arrow (3C makes higher highs with price), it lends more credibility to a change like the negative divergence seen at the top. The daily chart remans negative and confirming the downtrend.

 This s the volatility zone between two support levels. Note the hourly 3C chart caught each attempt to break above resistance and identified both moves as head fakes or false breakout. The white arrows simply show accumulation getting ready for the head fake moves up, Wall Street will trade swings too, especially market makers and specialists.

 The 15 min chart can't show as much history, but confirms the negative divergence on the last false breakout and is currently confirming the downtrend.

 Here the 1 min chart is showing a positive leading divergence, note the downside momentum earlier today and how it faded to a lateral trend once the positive 1 min divergence began. This fits well with my theory that the market will bounce a bit before the next leg lower, which also allows us to get better positioning with less risk on trades like this that may bounce. The overall character of 3C s negative/bearish, the 1 min chart is not significant regarding the primary trend, it's just showing us what a counter trend move might look like which again is an opportunity.

Using the Trend Channel to define the long term trend, the stop out region or area we may expect a bounce to start to deteriorate would be around $6.50. If Wall Street games CSE, they may take it a bit higher then the last reaction high, still in the $6.50 area. I would view this as a longer term trending trade and would allow for a stop in that $6.50 area. You may do well to show some patience and see if you can't get better positioning on the entry. You can always phase in to the trade as well. My initial trending target is in the $4 area, if the market falls apart as I suspect it will, then these pattern implied targets in a bear market are often on the conservative side.