MCP Update

MCP has been a position of long time interest, we've traded in and out of it many times, but there seems to be something there longer term.

Right now I'm carrying a partial position (about half) as a speculative play as the charts looked very good just before earnings (MCP Update/ Possible Trade,) of course earnings were not received well and MCP dropped like a rock (MCP Update,) but this reminds me a lot of the RIMM trade in which nearly the same exact thing happened, the charts looked very good pre-earnings, earnings failed to impress and RIMM dropped like a rock, but it maintained strong 3C signals and a few weeks later (approx.) RIMM shot up as the long time dual CEOs stepped down and there was a massive management shakeup. It appears that the positive divergences in RIMM were not earnings related, but management related and the position ended up being closed out at a nice profit after holding through the very rough weather.

Here are the charts for MCP now, if a few more things happen, I'll seriously consider adding to the position and bringing it up to full position size.

 Daily chart... This Descending Triangle (within a larger rectangle base that stretches back just about to the start of 2013) broke out on April 22nd which you would think is a good thing considering we were long MCP April 22nd as it broke out of the triangle.

There are several issues here, one was a smaller cycle that began April 11-15 which caused us to close an SQQQ short trade on the 11th (Closing SQQQ (long) Trading Position) and open a QQQ call trade on the 15th (Trade Idea: Opeing QQQ May $84 Calls) and by the 22nd it was flashing clear negative signals and some trades were exited such as MCP, ( Closing MCP Long Trading Position For Now ).

However, there were other issues with that trade that may not have had anything to do with the short term cycle. April 22nd in the post, MCP (long) Position Follow Up... the following was published...

"so far we have a parabolic move (granted there's nice volume) and very little in the way of intraday confirmation so far.... For now I am keeping the MCP long open, but if I don't see some improvement or I see deterioration, I may close out the trading position on today's move of +5.68% thus far.

The post continues...

"A breakout of a triangle like this at its apex is a clear technical trading buy signal, what bothers me is there was no head fake/ stop run on a very obvious support level, first. Thus, if I feel this is going to end up being a false start, I'd likely try to book the gains, get out and wait for what would more likely than not, be a head fake move below support, that's where I'd want to re-enter, but lets give this a little time and see how things pan out.

Shortly after on the same day...  Closing MCP Long Trading Position For Now

So the issue of the lack of a break below support "BEFORE" an upside breakout was bothersome back on April 22nd, well before the earnings drop. In fact, I had even said that the probabilities favored exiting this +5.68% (no leverage, just long MCP) one day move to re-enter AFTER there was a break BELOW support.

In this context, what happened after earnings, is not that surprising, although the move is extreme, but most head fake moves have to be extreme to achieve their goals. For more on head fake moves, see our two articles linked on the members' site:

* Understanding the Head-Fake Move Part 1

* Understanding the Head-Fake Move Part 2

This is a look at the triangle base inside the larger rectangle. Support for both the larger rectangle and the triangle was at the exact same place, right around the $4.50 area.

The first break to the downside did show positive 3C signals and came after Goldman had said something about MCP which leads me to believe (considering the signals just after the decline), that GS was an active buyer of MCP.

The next volume event was at a failed move to the upside, it looks like churning and then the break below support where stops would have been piled up at $4.50 as a nice round number.

 Looking at an intraday (60 min) chart, you can see the initial stops were hit and there was a secondary run just below at, wouldn't you know it...$3.00 even.

 This is the 60 min MCP chart right now, there's plenty of time/space for this chart to see 3C decline, but it hasn't which is one of the reasons I continue to hold the partial long position.

As far as the decline, as of Monday May 12th, one of my thoughts was we may get a dead cat bounce.

The reversal process thus far though is already larger than what I'd expect to see from a dead-cat bounce.

The 1 min chart is clearly leading positive, especially on the run of stops below $3.00

You can also see the 5 min chart positive on the break lower and even stronger on the break below $3.00. If you place your stop orders with your broker, no matter what they say about no one being able to see it, you have to assume that it si visible to Wall St.

The last stop I remember placing with my broker was when I was going on a short 4-day cruise and I placed an emergency stop just in case. Wouldn't you know it, even though I knew not to place it at an obvious area, the low of the day was my stop getting hit, then price moved up significantly and I missed substantial gains.

 10 min chart... Again, this chart is not so long that it hasn't had time to react and confirm the drop in price, however thus far it has refused to.

The same can be said of the 30 min chart and of course, it's not far off from the 60 min chart...

For now, I'll continue to hold MCP until I see something that doesn't fit, deterioration in 3C as this is a speculative partial position as it was opened just before the wild card of earnings.