MCP Update

For a stock that is a long time favorite as a longer term long position and more importantly, still in a base, I think we've had more double digit wins in this stock than most. I did a quick search of the archives just to see what past analysis and positions have been and there area number of +14%, +22%, +34% P/L posts.

However, we are where we are today, a lot of this is going to depend on the market, although the longs that I like have what I call, "Legs of their own", meaning they are stronger than the typical 2/3rds of stocks that simply draft the market, I think there's still a gravitational pull for MCP, just not at 2/3rds as it controls more of its own destiny.

I don't believe we have any open positions ion MCP at the time. Earlier in September I wrote, "I think we are pretty much done with gains for September."

MCP is complicated as there are so many possible trades on different timeframes (almost all bullish) so general market conditions will probably count for more than usual, I'll try to do my best to give you some ideas.

 A weekly (5-day) chart shows the broad strokes of a large base, check out volume which is characteristically low during a bear trend, then the larger volume of capitulation, churning, and ultimately accumulation. However as we get closer to the apex of this large triangle base, volume is falling off as it should, MCP is very close to a make or break it moment, but we can't exclude the probability of a head fake move and on a weekly chart like this, that could be significant in terms of days.

This is more recent action on a daily chart near the apex of the triangle above. The price pattern is a bullish ascending triangle with at least 4 points of contact, an upside price pattern implied target of $11-ish.

There are a bunch of technical and our concepts on the chart, this is why I like candlesticks, they give you so much more information than any other price representation. The numbers are just the points of contact, typically in any size consolidation we have 5 before a move. The letters are events or concepts.

First the overall pattern is an Ascending Triangle which carries an inherent bullish bias and is EXPECTED by technical traders to break out to the upside which makes a breakout to the upside very likely, but a head fake move below the lower support trendline to fuel a short squeeze breakout to the upside, even more or just as likely.

A) Large volume, even on a strong day can be bearish when we have a long upper wick like the first and second day (B)  both have, the candlestick is telling us (along with the volume) that higher prices could not hold, but while prices were extended there was a "Churning" event in which smart money handed off their shares or "sold high" to dumb money. The two consecutive days along with overhead resistance made a downside reversal very probable.

C) Is a decidedly more bearish looking candle that opened high on a large gap up and closed lower around the previous day's close, but not before testing higher prices (the long upper wick) and not only seeing them rejected, but also forming a "Tweezer Top" candlestick formation with "A", the fall was rapid after Institutional support evaporated as all shares were handed off to weak hands through churning creating a downside snowball effect.

D & F) Are both gap fills, since HFTs have dominated market liquidity and nearly replaced the middle men (market makers and specialists), almost all gaps are filled, which is a shame because in the past, gap support and resistance were the best support and resistance based on actual supply and demand and not a self-fulfilling move as those created by popular moving averages that would otherwise have no value other than that which traders attach to them. Break away and Exhaustion gaps were valuable information that is largely gone from the market, they survived centuries of trading from rice to stocks, but didn't survive HFT.

E) Is a churning move similar to (A) with a long upper wick and increased volume as it was also a head fake move in the form of a failed breakout, the next day's candle was a bearish Engulfing candle, gapping up above the previous close and closing deep below the previous open so it swallowed the entire body of the previous day, this also confirmed the bearish reversal (Note the head fake move at an important reversal).

G) is a recent close, similar to a bearish reversal candle called a "Shooting Star" or what the Japanese rice traders called, "Trouble overhead". The increased volume (it doesn't have to stand out like a sore thumb, but even though it doesn't readily stand out on this chart, it is nearly double the local volume) makes the reversal pattern at least 50% more likely.

 My X-Over System to avoid false moving average cross-overs and it can be used as a stand-alone trading system with pullback probabilities and targets as the trade proceeds as well as warning indications or a probable change in trend. The top two m.a.'s are a 10 and 22 , the middle window has a custom indicator (yellow) with a 22 bar moving average applied to it and in the bottom window is Wilder's RSI period 14. You can probably figure out what is a sell/short signal and what is a cover/buy signal as well as what would be considered a trend and any noise that might otherwise kick you out of the trend is confirmed or denied by all 3 indicators working together, this is an excellent swing/trending system.

I mentioned "warnings" such as the divergences in RSI vs price, these may not be enough to close a trade, but they are a warning that you should maybe take partial profits, have a trailing stop or keep a close eye on it.

The current likely pullback areas  are $6.79 and $6.53, however this signal is so new that it is unlikely that these are great pullback areas until there is a clear trend established which means a breakout above the ascending daily triangle and a breakout above the 5-day symmetrical triangle-watch for head fake moves below either or both triangles at the same time, THESE HEAD FAKE STOP RUNS WILL BE YOUR HIGHEST PROBABILITY ENTRY IN TO MCP FOR WHat should be the one trade we haven't had yet, a trending trade of some size and duration.

A multi-day (2) 3C chart with great downtrend confirmation by 3C, several smaller price moves that were certainly tradable and the start of, and increasing 3C accumulation. 

 The 4 hour chart, you can see the various divergences especially the leading positive right now, also several other concepts such as a tweezer top and two symmetrical triangles that Technical Analysis expected to break in the opposite direction (Head Fake moves).

 Closer to home, the breakout from a bearish triangle to the upside (another head fake move) is seeing distribution, this is why I've been patient with MCP. However, it is worth keeping an eye on, remember all new divergences like a positive that may make this negative divergence unimportant, will start on the fastest timeframes first and if they are strong enough, they will migrate to longer timeframes.

 The 2 min chart is still negative, it was positive at the head fake breakout from what was suppose to be (according to Technical Analysis) a bearish consolidation/continuation pattern, however it was a clear head fake set up as 3C was already showing a positive divergence as it formed. There was another positive at the dip/correction, but a leading negative on a parabolic-ish price move recently.

If we see this chart start to go positive, then we may have a high probability trade in MCP that  would be at least swing, but considering the 5-day chart, could go to a position/trend trade.

Here's more recent action on a 1 min chart with a Bearish "looking, "Descending Triangle, although it's in the wrong place as it should follow a preceding downtrend, either way, traders are focussed on the triangle and / price pattern and not so much the rules. A head fake break below support would possibly create enough stop losses and perhaps some short selling to give Wall St. enough supply to accumulate, if so, then the intraday 3C charts that are negative, will start to turn positive and we will have a HIGH probability long trade, but the break below or even above, must be confirmed by 3C as either a head fake or a real breakout, I probably wouldn't trade a real breakout without the head fake move. There could be a "Crazy Ivan" shakeout with a failed upside breakout followed by a head fake downside break down and if we have 3C accumulation on the second leg I'd consider entering long there as we then have a High probability, low risk, excellent timing position.