XOMA -92% 2 day gain

XOMA was listed as a long trade pre-market this Monday and again during market hours Monday. We now have a nearly 92% gain in two days, almost a double. What we are seeing is the concept of "Follow Through". When we get a candle that closes near the top of it's range, like yesterday -on heavy volume, more often then not we get a second and sometimes a 3rd day of follow through. XOMA has certainly past it's initial price target, however if you missed the trade, there's a good chance that it will continue higher after a pullback. Watch for a pullback in the coming days to or near the 10 day moving average. At that point XOMA may be worth a shot for further gains.

Risk and Uncertainty

Volume of course is low being a holiday week, it's likely to remain fairly low next week as well. However, we have a shortened week due to Christmas. As you know, the #1 enemy of the market is uncertainty.

As I have mentioned in past articles about the tensions on the Korean peninsula, South Korea looked weak in the face of the artillery barrage the North set loose on a South Korean military base, killing civilians. The minister of defense lost his job and since, the South has stepped up efforts to bolster the weak image of the south due to inadequate responses to a number of North Korean provocations. Now the South appears to be trying to repair that image. Reuters reports that the South is set to start a rather large drill that is likely to inflame the North. Being as unpredictable as the North is, there is uncertainty in the markets, especially over an extended weekend.

Here's the story from Reuters


The bottom line, as we approach the end of the U.S trading week, I'd expect to see profit taking. This story is certainly one I would keep an eye on as you browse the news.

Residential Update

This morning brought bad news to the residential sector; mortgage applications decreased 18.6% last week and refinancing fell even sharper to -24.6% from the prior week. 


FULL STORY HERE


Here are some charts of stocks that have been on the trade/watchlist




SRS

 Above on the 5 min 3C chart you can see the pullback in SRS (short on Real Estate) and recently the accumulation taking place.

 Here's an intraday chart showing what also appears to be a rounding bottom

And here is the bullish descending wedge in SRS. You can see that today it found support. SRS remains one of my favorite ETFs to play weakness in housing.


Some of the real estate REITS on the trade-watchlist include:

SNH, BRE, CLP, SPG, GGP and SLG

Here are some of their charts today, it appears their bounce is ending.

 BRE is in a downtrend-note the lower highs, lower lows. Also today's candlestick is a shooting star reversal candle.

 CLP also showing a shooting star reversal candle at what appears to be the end of the bounce.

 GGP is even worse, the candlestick today is a bearish engulfing pattern, gapping up this a.m. and swallowing yesterday's range.

 SLG -Another shooting star.

 SNH is another in a deep downtrend, the bounce appears to be over as we see another candlestick-shooting star reversal. Also note the volume declining into the bounce. 

SPG, another with declining volume into the bounce-this is bearish volume activity and the shooting star here suggests the bounce is coming to an end.

One way to play any of the above REITS is to enter the short trade on them and place a stop at the highs of today, that way you have a fairly high probability trade with fairly low risk.

Financials Update

 XLF 1 min showing distribution into the rounding top, 3C is now in a negative leading divergence.

XLF 5 min chart, you can see about a day and a half of accumulation which is indicative of a bounce. Above, the 1 min chart is the first place I'd expect to see a change in character as we are.

FAS-ETF long financials on a 5 min chart showing distribution into the highs, it looks like the end of the financials bounce

 FAZ 1 min looks to be under accumulation on this 5 min. It's also the opposite of FAS above and it is showing a positive leading divergence into the rounding bottom today.


 FAZ 5 min showing good accumulation today into the rounding bottom and a strong positive leading divergence.

 FAZ checked on a second version of 3C, also a 5 min chart, showing the same accumulation into the lows and a very positive leading divergence into today's rounding bottom. For this reason, I don't think XLF/Financials are seeing just typical profit taking otherwise there wouldn't be accumulation in ETFs like FAZ which are inverse or short financials.

Here's today's rounding bottom in FAZ, price and volume should both round. Volume should pick up in FAZ shortly.

 BAC-Bank of America, a good bellwether for financials, this 1 min 3C chart also shows distribution into a rounding top.
 

BAC's 5 min chart is showing the same distribution and a growing negative leading divergence.

Update SPY Divergence

This is a chart of the SPY negative divergence I mentioned in the last post.

Note that 3C is now in a leading negative divergence hitting lows for the day.

Still a Sleeper, but...

The SPY finally put in a negative divergence here (intraday)

Update

Not much to report, the market's not doing much and volume is light as expected for a holiday week. The DIA and QQQQ are putting in the first sign of intraday negative divergences.

More Trades

Today was a pretty good day for a few of our members taking the XOMA trade which has closed up +70% today with a 78% intraday high for a one day move.

One member in particular seems to hit a lot of the big mover trades. In our email exchanges, his success in hitting the big winning trade ideas is not his ability to sort through my list or having exceptional timing, his secret is simple... Risk Management. What do I mean by that? I mean he takes on a lot of the trades, some he loses money on, some he breaks even, and usually the big winners he catches. He has a variation on my risk management style which you can read about HERE, but it's largely the same. I'm not sure how big his portfolio is, but he enters a majority of the trades. He's good abut not entering correlated trade (i.e.: he doesn't enter 3 REIT trades, he chooses 1 REIT) and then he follows risk management. As I said he has his own variation, which is centered on the amount of risk per trade, he takes an approach that allows him to make most trades he enters the same size (I.e.-he doesn't trade $2000 on one trade and $10,000 on another, his trades are all roughly the same amount), but most importantly, he keep his losses small. In following a 1% or 2% rule, his losses stay very manageable on trades that don't work out, that allows him to live to fight another day and hit trades like XOMA today which ended the day up 70%.

Since this member is having such good success, I figured I'd share with you what he's doing so far as I understand it through our emails. He also s not shy about emailing me for updates on specific trades, nor should you be.

Since XOMA and biotechs generally seem to have rotated, keep an eye on the BCRX trade mentioned in these two posts from Monday 

Here are some other trades. I prefer to show them to you with charts rather then just list them in the trade sheet, however, give me some feedback. I feel the trade sheet doesn't show the premise of the trade as well, it saves me time, but what do you prefer?

Another trade that looks like its going to have some good success with a little patience is FBP.

The current stop on FBP is $.32 using the Trend Channel

A few other trades...

LLNW was a favored long, I posted on LLNW on Monday, October 18^th . In that analysis I thought the target would be $9-$10. Since then it's seen a 36% closing gain and an intaday gain of +46% nearly hitting the target, making it to $8.97. Since then and since it has done what was expected, it looks like there may be another trade brewing on the other side.

As you can see, the 50 day moving average has been treated as support and resistance. Recently it broke that support, which has now become resistance and it's failed a test or two of the average.

The 60 min 3C chart shows the parabolic spike which hit our target and the negative divergence there-it was time to take profits. Since, 3C has shown further distribution. I like this short here, but a bit of upside would make for an even better entry, say $6.75 or an intaday move above $7. Right now the Trend Channel stop is $6.80 on the tight end and $7 on a little looser stop, which is the one I'd prefer initially.

HOV Long

 HOV Daily 3C chart looks very positive and lends credibility to this being a base under accumulation for a move quite a bit higher.

 HOV base, I've seen a couple of other decent looking home builders for whatever reason. The two upper trendlines represent the resistance levels HOV needs to breakout of to enter Stage 2, "Mark Up".

The Trend Channel stop here is around $4.07, a little wider stop would be $3.90 and that would be the one I'd prefer on a new move to break out of a base where volatility can be strong.

The implied target=$6.10

CRIS Long

 CRIS daily 3C with a very positive leading divergence. You can also see the base, the breakout and support after the breakout at former resistance.

 When all  3 conditions are met, this screen gives a long signal, you can see them in the green boxes. This chart also gives you a closer look at the breakout through resistance and where the pullback found support at former resistance. The last green box to the right is an area on which this may pullback to. I'd prefer to start phasing into this position now though.

 This is the Trend Channel and the red arrow shows the current stop around $1.70, note that the Trend Channel has held the uptrend from $1.30 for approximately 3 months with so false stop signals.

Back in June, the big gap down on extreme volume looks a lot like the end of stage 4-"Capitulation, which allows CRIS to start the cycle again -Stage 1 base (complete), Stage 2 "Markup"-current position/stage.

VISN long with a stop of about $3.75

 VISN daily 3C chart with a current leading positive divergence.

VISN giving a long signal-MACD also is trading as it should and we have a breakout above recent resistance. I'm looking for a follow through move shortly. 

LNET long with a stop of $3.71

 LNET 3C daily with a strong leading positive divergence

LNET breaking out from resistance and a consolidation. Stocks consolidate two ways, through price correction and through time, this is an excellent example of correcting through time and it is the more bullish of the two in my opinion.

MACD looks exactly as it should as does volume. Very few charts that are advancing show this kind of technical strength.

ATEC Long

 ATEC looks like it saw the end of stage 4 "decline" with capitulation in the white box. Since it has built a small rounding base and is very close to resistance. A breakout above resistance will put this one into stage 2, Mark-up-this is where other traders will notice it and start bidding it up.

You can see that 3C daily chart went into a strong positive divergence/accumulation, at the same time the rounding base began. You may want to phase into this one or to wait for the breakout, which you lose a little profit, but gain higher probabilities.

As for today's market, the Price/ Volume relationship observed last night was just as bad today, being it's two days in a row (Price Up/Volume Down-the most bearish of the 4 P/V relationships), it is possible that the P/V relationship is signalling an overbought condition.