The Cats and Dogs

It all started last week with our 4-day 215% gain in XOMA. As I've been saying though, this rally won't last long and when the trades trigger, you need to be on top of them pretty quick using good risk management. I prefer not to risk more then 1-1.5% of portfolio value (as per risk management formula-which does not mean you can only buy 1% worth, in some cases, you could invest your entire portfolio following the risk management plan-however, that would not be prudent and if you read the link at the top right about risk management, you'll see that I prefer to never invest more then 15% or so of my portfolio in any one idea). 


In any case, obviously the CATS and DOGS are working, when you don't risk more then 1-1.5%, you can afford to try the trades and the way it's been going, you're pretty likely to nail a few of them.


The other component is knowing when to take a gift. With the Cats and Dogs trades, these should be considered gifts, not so much trades because as I've said, they rarely last more then a few days. So my rule is any double digit gain, I take either most or all of it off the table, consider it a gift and wait for the next one.


The winning trades that triggered just today and yesterday have shaped up like this-

XING doing great today up nearly 32% triggered yesterday

CFW made a 1 day gain of 30% triggered yesterday, but you see in this trade, it's a gift and needs to be taken or your gift will be taken from you. There's little room for greed when you get a gift.

WEST seems to be doing pretty well, I'd like to see a strong close on volume for potential follow through

EEE is up 19% and as high as 30% today-a gift

FBP was a trade from last week at $.33 it's currently up 42%, intraday as high as 60% . I think I'd be locking this one in or at least a major portion of it.

FTK triggered today, again we're looking for a solid close on good volume, if that happens, we might just get that follow through buying.

I've placed a few more trades on the list today and I'll be looking for more tonight, but this C&D rally seems to be winding down. If you decide to let a trade ride, be sure that you have locked in enough gains so that it does not become a losing trade for you.

Market Update

Some interesting charts below...

 DIA isn't negative on the 1 or 5 min, but is showing a negative divergence on the 10 min which is more substantial, but not as timely.

 The Q's on the 1 min are in confirmation with the price trend, meaning we haven't seen much in the way of institutional money trying to push it around in one direction or the other.

The SPY 5 min is negative here. I'd expect to see some selling pressure relatively soon. I don't think it will be a clean reversal because the TICK Index is kind of all over the place showing a lot of volatility.  However, the longer term charts are building negative, perhaps it's for year end selling as the trading year is just about over.

THERE ARE A FEW NEW TRADES ON THE LIST I JUST ADDED

Be sure to set alerts on them.

FTK from the Trade List Just Triggered a Breakout

GNK charts

I just told you about a triggered alert for GNK on a break of support, here are the charts:

Here's the daily chart showing an area of support that has been falling apart.

This 10 min chart shows the intraday price action around that support level, we saw a break on heavier volume, a test of what is now resistance (when support is broken it becomes resistance) and a failure of that test on heavier volume again.

 The 3C 1 min chart shows 3C is trading inline with the decline, confirming it and more interesting, the attempt to break above resistance in the red box shows a 3C negative divergence at that moment meaning there was distribution/selling on the attempt. This area now becomes stronger resistance and we saw a pretty fast move down from there on an intraday basis. Ironically just last night I showed you the rates shippers are receiving for Dry Goods shipping, which made them a target for me and I put several on watchlists with alerts.

Take a look at the trade, it's not in bad position at all, of course it is a short sale trade.

Take a Look at GNK Short

Last night I showed you the Baltic Dry Index -this directly affects shippers, GNK is in that space and just triggered an alert on my watchlist by breaking some recent support. I'll try to get a chart up in a bit.

SRS UPDATE

 SRS 5 min positive divergence

SRS 15 min Positive divergence

Yesterday I suggested SRS may be near the end of its pullback, we are seeing some positive divergences and it's at a low risk entry (using risk management of course). I'd maybe put a stop below yesterday's lows on a closing basis, this way the risk is pretty minimal and you can take a shot at what appears to be a reversal in SRS which is a leveraged short ETF on Real Estate.

EEE Just Triggered

This is another of the Cats and Dogs Trades that I listed Monday night and that have been giving us double digit 1-day gains. EEE just triggered, check it out.

BAC Still Can't Take Out Resistance

I've mentioned BAC, a bank that I would think still has large troubles ahead of it. I've been talking about the resistance at $13.40 and BAC's inability to close above $13.40 or breakout through that resistance level. Before the recent rally BAC has seen, it saw a nearly 7 month downtrend, uninterrupted; a real nice trade.

BAC may offer up another trend down, but we are at a critical point and $13.40 is the level in which we have to watch.

 Here 3C 30 min shows the negative divergences at the tests of resistance at $13.40-right now we see a negative leading divergence. I like the trade short if it breaks below support at $13, but you can also enter the trade in this area with a stop above $13.40 on a CLOSING basis, no intraday. In this way your risk is fairly low, the break of $13 is higher probability, but the trade up here is lower risk as it's only several cents from a stop. I would not place the stop at $13.40, it's too obvious and once stops pile up at that resistance zone, it may be tempting for the market middlemen or HFT's to run those stops and take BAC above $13.40 for a day or two on a false breakout. Remember, they are still chasing volume to make their money. So a stop with a little more room makes sense, maybe $13.52 or something that's not so obvious and is not a whole number like $13.50.

On an intraday basis, we see at least 6 attempts to hold above $13.40, all failed.

Update..

The SPY and DIA have small 1 min negative divergences, they may grow, but I'd expect some temp. intraday weakness soon.

VISA TRADE

Visa (V) is giving us a low risk trade right now, take a look at the setup.

Visa (V) made a new lower low intraday this morning, this is usually a decent area to enter a trade, this one would be a short trade after the diminishing volume bounce it saw the last week or two. The Stop would be above the recent high put in yesterday at $71.80-that gives you about $1.15 risk per share which isn't too bad so long as you use position sizing to make sure your risk on the trade does not exceed the limit expressed as a % of portfolio which you are comfortable. Usually I use 2% of portfolio, but right now I may lower that risk to 1% of portfolio. You can always add shares if the trade continue to work in your favor.

If you need a refresher on the risk management aspect that will in the long run not only allow you to survive the markets, but thrive in them, here's the link to the article I wrote on risk management.

Other Triggered Trades

STEM which triggered yesterday looks decent this morning. Also FBP from Wednesday is now up over 25%. There's still quite a few trades that haven't triggered so make sure you set those alerts.

If you don't have a way to do that, you can use www.FreeStockCharts.com which is the only free realtime service I'm aware of, there's no 20 minute exchange imposed delay and you can set alerts there.

URZ Which Triggered Yesterday Is Up 8% This Morning

Actually, it's up nearly 9%.

Another day of NOTHING. The 3 major averages came in at an average gain of .05%. As I warned Sunday night, this would be a low volume, high volatility market, we have seen that volatility through morning gaps, but there's no follow through in either direction. What we have is a bunch of computer driven HFT trading systems running the market up and down, but with no conviction, no bias, no price discovery. This even explains the lack of reaction to the news which hasn't been very good of late. Come January we should see some movement, trades like WMT should show some conviction. In the meantime, we can keep nailing these Cats and Dogs trades. Today, one of our Cats and Dogs trades that triggered this morning (this is why it's important to set alerts ), CFW made about 28% for our members who jumped in the trade as it triggered at the limit price set last night-CFW closed up on good volume 31.25% for the day. There's a good chance we see follow through on this trade tomorrow, like XOMA last week, but remember, these are quick trades, not trend trades so when you get a gift from the market like that, you take it. Whether you take it all or take half or your profits, that' up to you, but don't loose those gains.

One interesting chart I looked at tonight was the Baltic Dry Index. This is the rates charged by shipping companies transporting dry goods. Falling prices in the index are indicative of economic activity. As you can see, the trend is solidly down.

Vs the S&P you can see that the index is diverging badly from equity prices, this is obvious manipulation of the market. Which brings to mind the PIMCO coined phrase, “The new normal”. Every time we see bubble like activity we always hear the same thing, “It's different this time”-it never is and the phrase alone is indicative of a market that is overheated or in a bubble.

The only other notable event today was the ramp up in precious metals. Silver being the most anticipated trade, once again failed to break the $30 level.

As you can see above the high was $29.65 and a close of $29.53. Tomorrow may be an iinteresting day in the PM space.

Here's the SLV 5 min 3C chart

As you can see, today there was profit taking/distribution in SLV-earlier I showed you the same and the accumulation that led to today's move up. This may turn into a solid trade, but not until $30 is taken out.

Asian markets were higher overnight in mixed fashion, Dow futures were also slightly higher overnight so we may be looking at another gap up in the morning, watch those trades on the list, make sure alerts are set and if you are inclined to take the trade, I'd be quick about taking the trade. Today's move in CFW was profitable, but the amount gained depended upon how quickly you entered the trade. Just remember the risk management aspect which will allow you to take a shot at these trades without risking more then .05 to 1 or 2%. 

For now, keep your alerts set and take advantage of these double digit one day gains. I'll keep adding trade ideas throughout the day, as they develop, I'll be going into further depth on these trades.