PEIX POPS

PEIX was a long trade idea and yesterday it popped. These are speculative trades as they are low price and volume, but can often make huge moves. My general rule of thumb is to take all profits or enough to guarantee a profitable trade on any 1-day move of 10% or more (I'm speaking in terms of speculative trades only).

 Here's yesterday's 30+% move, much like the Put trade in BAC yesterday in which I took half off the table today knowing we'd see a bounce in the market today.

 This is my X-over screen set to swing trade (60 min.) and we had all 3 long signals on PEIX. A pullback to the 10 bar m.a. (yellow) is not uncommon.

 The hourly Trend Channel has easily held trends in PEIX and it would have a stop around $1.00, but do NOT put a stop near a whole number like that, either $.97 or $1.03, but not $1.00, it's too obvious.

 If I'm trying to hold the position but also give it a chance, depending on my risk tolerance, I either use the 10 bar moving average above as mentioned with a break below as a stop or this 15 min trend Channel with a stop at $1.04, maybe $1.03 would be better, the momentum on the pullback has slowed as you can see by the last two doji candles.

 All of the 3C charts have shown accumulation EXACTLY where I would expect it, this 60 min chart shows accumulation at the flat area in the white box, Wall Street loves to accumulate at stable prices and they want to do so quietly and not arouse suspicions and drive price up against them, it is for this reason that I always say a flat boring market forces me to be extra aware as that is usually when and where something is going on.

 The 30 min chart agrees that accumulation was heavy in the same flat area.

 As does the 15 min chart

 Short term intraday, we see the initial profit taking and that makes sense, we also see a bit of a positive divergence, combined with the loss of downside momentum, I think I would give PEIX a chance, after all, it showed a lot of strength on a very weak day yesterday. One of the things that I have always noticed about trades like this, what I call the "Cats and Dogs" is they tend to pop like this right before a major downdraft in the market. The best season for these trades is near the end of a bull market before the top. The reason is simple, people got burned on the previous bear market and are timid to re-enter the new bull move, after seeing the market up for a year or so, they finally say, "I'm missing the boat" and they tend to look for the cheap stocks that haven't already seen a huge run. Wall Street knows this and that is the season of the cats and dogs, when the least sophisticated investors finally jump in the market. Trading the C&D's is an art unto itself, but the point s, in any market (and the housing and gold markets are great examples), when the average Joe or housewife (and I mean no disrespect to housewives) start becoming speculators in something like the real estate market, something I have seen first hand, you know you are near the end, the same applies for the season of Cat and Dog trades.

For Swing traders not using my Trend Channel, the 50-bar 30 min moving average has held past trends well, this would be my choice for a stop using a moving average.