Lies Exposed

The entire Greek debacle from Friday was pretty transparent and embarrassing, I felt embarrassed for the EU finance ministers as it was so obvious that they were lying and skating around the question of a Friday meeting to deal with the Greek issue.

It's now official, they lied. The story can be found here.

Believe what you want of it, the facts are pretty plain vanilla. Greece has no credibility, they need a restructure of their debt, they needed one less then 6 months before they got their bailout and they want better terms. So what leverage do they have? "Give us what we want or we take the entire Union and currency down". No matter what is admitted, that' the bottom line using plain vanilla common sense.

Unpredictable

In describing silver and oil stops, I said that they were unpredictable. The organizations which are raising margin want to catch the hedgies and others so it's less likely that we'll get a leak of this information, judging by how many big oil funds were nailed recently, they didn't see it coming.

And just tonight, oil margins were just hiked by 25%!

Apparently the crossover through the first line of resistance didn't sit well with the powers that be.

Here's the first line of resistance with a breakout and some momentum into the close out of a mall consolidation.

The margin hike which was after hours was obviously meant to inflict the most damage possible in an illiquid market. However, as you can see by the light blue hash marks next to price, the reaction has thus far been pretty mild.

Again, I believe this is Bernanke trying to wiggle free of the Chinese finger trap.

PSLV Stop Adjustment

I'm reading more and more ( there's an article out today about how a bunch of hedgies got taken to the cleaners on the oil/silver move down. Remember that the leverage being utilized on commodities and FX is much greater then that used on equities so even a small move can impact a portfolio dramatically. Additionally, these guys are so big, by the time they get selling anything meaningful, the volatility in the market or choppiness kicks in and they're at another loss. THIS IS the edge I talk about that you have as a small investor, you cannot only pick your battles, but you can get out of the way reasonably quick when you need to.

So as per my post earlier today describing how Mr. Hunt was burned when he went to collect physical silver by the Comex margin hikes, which had a glaring conflict of interest where nearly half of the board members were short billions of dollars of silver, it becomes a very unpredictable environment. 

However, if there's to be additional silver upside then the 60 min trend channel for now, i the correct channel to be using as a stop. You can see that it's been able to hold swing moves fairly well and at this point, I see no reason to count on silver producing anything more then a swing move, if that changes then the stop will change as well, but for a swing move, this hourly TC seems to be the best fit. Again, it depends on your disposition toward the trade, is 10% enough for you to take a profit or are you looking for the bigger move? If 10% or so is reasonable for you considering the unpredictable environment and if that many hedgies got burnt, it's an unpredictable environment, then you may want to stick with the tighter stop, in which case it's a 30 min TC and currently at $17.00

USO stop

Earlier today we looked at USO and possible stops.

 This trendline represents an area we were watching for a breakout, there's some volume there, but not much and a little consolidation has formed.

 The 5 min chart is in pretty god shape, there's a small neg. divergence which I believe is the consolidation.

 The same is true of the 10 min chart, but all in all it still looks pretty healthy in the short run here.

 Here's the earlier 15 min TC stop I mentioned, which has locked in more profit on the upside, from about $39.50 this a.m. to close to $40.50 now.

 Depending on how you feel about commodities and potential margin hikes, I think it's reasonable to consider a little wider stop, this is the 30 min TC I also posted which probably wouldn't get hit even if w had a reversal (unless it was a waterfall sell-off) until about $40.25 and it gives a little more room for a pullback.

If you are of the mindset that you don't really care about a 2%-3% gain and want to try to play this for a larger move, then you might want to consider expanding the stop out to a 60 min trend channel, it would probably still take you out at break even if the trade went down the tubes, but would allow for more in the way of a consolidation. Looking at the chart right now, I'm guessing that a consolidation is underway and that we need another move higher to see some volume pump into this. The consolidation breakout point as of now is around $40.80, volume would probably pick up near $41.

PARD-(long)

This is another biotech, but extremely speculative.

 Daily

 60 min

 30 min

 15 min

10 min

I'd guess this one will see some upside in the next few days. Remember at this price and volume, this is an extremely speculative play, but also the kind that can see triple digit returns.

XOMA (LONG)

It looks like something may be brewing in XOMA

 This is the biggest volume in XOMA in ever. Note the lateral trade before the move of 200%, very similar to the lateral trade now and accumulation tends to take place in low volume lateral environments.

 3C hourly.

 3C 15 minutes.

This is an hourly trend channel, I'd prefer to give it a little more downside room, certainly a stop under $3, absolutely not at the even number of $3. The daily trend channel is around $2.85, that's probably the area I'd prefer. This isn't a true C&D trade, but it is speculative.

PCLN

Take a look at this post on PCLN from Friday the important part was this,

" Here's PCLN breaking that support level on heavy volume, but don't take a victory lap just quite yet. This is a perfect place, being a bunch of traders have been shaken out, for PCLN to stage a "Hope Rally". Note that the break is there, but it's not a decisive break, just enough to hit a ton of stops."

 Here's PCLN's daily, just taking out the support level on Friday, enough to trigger stops and allow some accumulation on those triggered stops.

 Note the late day accumulation on the 10 min chart, it's also where the stops were triggered.

 Here's the 5 min chart of Friday and today thus far, same conclusion as above.

And the 1 min chart, so it looks like it's not a particularly strong move as far as underlying indications, whether it's enough price wise to convince bulls to buy back in (which would be the point before shaking them out again), I'm not sure.  We'll have to continue to watch developments, but so far, it's playing out as expected on Friday and has a lot in common with the SPY chart just mentioned in the last post.

SPY Update

 The red trendline represents the area in which the market broke out, it's also the area in which we wanted to watch for a false breakout. Much like PCLN that was in the same situation on Friday, having crossed below the breakout area, I warned that PCLN would likely see a bounce from there, it's just how the game goes down.

The positive divergence noted Friday in the SPY has continued so we're seeing some upside gains right now, at this point it is unclear how long they may go on, I would lean toward this being a simple reaction to the important trendline just below and the typical volatility sen around these areas when first approached.  We'll look at PCLN next as it relates to the action in the SPY.

At this point I don't have any reason to believe this is part of a big move up, but there's always a purpose to running price up after an important trendline breach so the action after a breach like that isn't usually luke warm. While the big picture may not be in question, most traders aren't looking at the big picture and rather tend to focus on short term moves. This is why I say the action is rarely luke warm, Wall St. is looking for a response when they run price up after an important breach and usually that run up needs to be believable enough to gain the bulls' confidence.

USO Update

Thursday night I did not issue a buy call on USO like the one on silver via PSLV. However, I mentioned we should be watching for accumulation and late Friday around 3:30 I posted this

USO is up about the amount I'd expect from the divergence on Friday.

A candle stick that has a small centered body with high volume like Friday's is often a reversal sign, A lot of shares exchanged hands that day.

 Here's the late day 15 min positive divergence on Friday

 Here's the current 10 min positive leading divergence. I suspect we are seeing a small double bottom and the red trendline is the resistance/breakout area.

 The 5 min chart and Friday's late day positive divergence at the lows. Right now we have another leading divergence.

 This is a 15 minute Trend Channel stop, a tight one. If you bought on Friday, it should preserve some gains or at least keep you from a loss in the trade.

This is a bit wider at 30 minutes, it should move up a bit and lock in some more gains. At this point, we'll continue to watch the underlying action and determine whether the stops should be widened. If the trend line I showed you is indeed the breakout level, then today with the leading divergences could be considered part of an accumulation period.

Euro Zone Comedy Relief

Last week it was the US government coming out with different explanations of what happened on the OBL raid. It's amazing that the government as big and powerful as it is can look so inept and foolish with all of these different accounts. If transparency was the "TRUE" goal, then as the president, 'd have the 40 (or how ever many it really was) raid team sitting in the Oval Office and telling me directly what happened.

To watch the day to day flip flopping really makes them look like amateur hour at a Karaoke bar in some backwoods bar.

Last Friday the E.U. showed us it doesn't sing very well either with the Greek debacle. As if the denials, no comments, "There's no meeting", "Uh there was a meeting" wasn't enough, we get an official typed denial from Greece and an investigation into Speigel, probably the only ones who don't need to be investigated.

To add to this comedy today, a German government advisor, which is convenient for plausible deniability (remember that the German populace is voting against anyone who supports EU bailouts, just as the Finns did) came out with an apparent shot right back at Greece or at least acknowledged that the Spiegel article wasn't that far off base and partially fulfilled my long standing belief that the E.U. in its current form will NOT survive intact.

From the government advisor: Eurozone needs a very comprehensive solution, or may not remain intact over next 12 months


Here's the whole story at Reuters

PSLV

On Friday we used a tight stop on PSLV, I mentioned if conditions warrant we'd expand that stop later in the day, at 3:10 I did adjust the stop wider and it held the trade that wider stop allowed us another 6.5% gain thus far this a.m.

 The 10 min 3C chart looks good still, although I doubt today's price action has impacted it yet. There seems to have been about 2 days of accumulation.

 The 1 min chart "looks" like we have good confirmation, but....

 When zoomed out a bit, you can see 3C is not as high as it should be.

 I would probably continue to use that 30 min Trend Channel stop, you can see the area of the stop as price would take a little time to pullback to the stop while the stop moves higher locking in gains.

Here you can see PSLV is at a "resistance zone" If you choose a tighter stop to lock in profits, then I'd look for a break below the trendline as the signal. This would be a tighter stop then the trend channel.

4 Speculative Trades to Start the Week

These are what I call the "Cats and Dogs Trades", meaning they are speculative because of price, volume or both. These trades in the past tend to yield double digit returns, but you are best off usually taking the profits or at least some of the profits once they hit the double digit area. After that, a tighter trailing stop for the remainder. They can be entered here for maximum profits, but your probabilities are a bit less or on a breakout where you lose some of the profit potential, but the trade is higher probability. Risk management should reflect the speculative nature of the trades, I never treat them like a normal full position, I usually reduce my risk by about half. 

ANX

 This is a wedging bull flag, volume looks right for the pattern.

 This is one of the few trades that has stayed in the trend channel for well over a month, so I provided a trend channel stop. If you buy a break out of the flag, then you'll probably want to lift the stop to just below the breakout area, although in this market I favor as wide a stop as possible given risk:reward ratios.

BPAX

 Another Bull Flag and volume looks right for the price pattern.


 These C&D trades often have gaps in intraday price which makes using 3C difficult with them, but there is a 15 min positive divergence which is rare to see not only in C&D trades, but within any consolidation pattern.

 As you can see, BPAX has puled back to the 10-day m.a., but the 22 day has held the trend longer. So once again, a wider stop may yield better results, it's all calculated in share/position size.

 The Trend Channel has also held this trade for nearly 2 months, I would personally consider the TC stop, however, I wouldn't want it at $2.20, I'd prefer a bit below or if the channel moves up some more, then a bit above, just not on the even number.

DYAX

 This is a bull pennant and very close to the apex which means it is close to a directional move. Volume is also correct for this price pattern.

 The Trend Channel has also held this trade for nearly 2 months and would be my choice for a stop.

 We have a nice crossover and a pullback to the 10 s.m.a.

VICL

 This is a trade we have been in and out of, I was suspicious of it nearing the end of its rally and closing in on a deeper pullback, RSI is also warning, but there could very well be more upside, I would watch RSI 14 for improvement if you enter this trade, otherwise, I'd keep a tight stop on it.

 Here's a 1 min positive divergence from late Friday.

 Here you can see the Trend Channel held the swing move up. I'd probably try to use the TC again, but maybe incorporate a tighter trailing stop if the trade hits double digits to pull out some profit.

Notice that if you used the 10 bar s.m.a. on an hourly chart, you'd be taken out of the trade a bit earlier, the 22 bar s.m.a. provided a little extra gain, but not much.

The Euro

Continues to lide this a.m. Last time I looked this a.m. it was forming a bear flag, which could have also been the start of a reversal after the Greek restructuring that seems imminent and the claims that it was all a non-issue. Apparently there are still some skeptics.

There's the bear flag I mentioned.

Don't forget the Dollar action from last week

What I Learned Over The Weekend

They say every joke has a little bit of truth to it, they say. I personally found out this weekend that stereotypes (not all, but in my experience , some) are very true.


First I found out that it's better not to have an argument or raise an issue on your anniversary weekend, no matter how correct or important the issue seems. Secondly, I've found out that this rule applies to most every other day as well. I also found out, (in my case any way), it seems best to try to get her to think it is her idea and that it will end in a shopping spree at Victoria's Secret (mental note-be careful what bait you use as it will be cashed in on).


On stereotypes, I've mentioned this to a few members in emails and might as well put it out there. When returning from a 3 week trip to Eastern Europe, I had a very quick connection flight in Milan, I ran to the concourse to only find out about another stereotype, flights are perpetually late and my quick connection turned out to be an 8 hour wait in Milan. I also found out in 3 of perhaps 6 trips overseas, the airlines really do lose your luggage, I had to spend 3 days without my clothes and spent a ton of money buying new clothes while I waited as it was the dead of winter-alah "Meet the parents".


Back to my trip, this isn't a stereotype so much as an interesting aside. In Eastern Europe, you wouldn't expect to see many African Americans, in different airports I've connected through, I have seen a lot of true Africans, they always have interesting, colorful robes and very uncomfortable looking, oddly shaped shoes. In any case, after 3 weeks in Eastern Europe, I hadn't seen anyone other then caucasians so when I was running through Milan to the concourse, I noticed a man of color. It was then I realized, "Wow, I haven't seen anyone other then caucasians for 3 weeks" so I took a quick glimpse, the man was wearing huge black sunglasses, a blind man's walking stick and had a smile from ear to ear as his head swung left to right, I suppose this was a personal stereotype as the man was Ray Charles!  


After finding out about my 8 hour delay, I sat on the floor staring at my ticket. A very young woman who weighed 90 pounds or so asked me in English if I was also on the flight to Miami. I knew right away she was a model. What I didn't know was how true the stereotype of models actually were, at least in this case. You'd think a young guy (at the time) like myself would have enjoyed her company. However, it was literally 8 hours of who she knew, how her boyfriend was the hottest photographer in Milan-30 years her senior (I think there's another stereotype in there). She offered to pay for first class tickets on a flight leaving sooner, of course I could never accept and she really didn't mean it as she sat the entire 8 hours as well. After hearing everything about her, especially the often repeated "My friends all hate me because I'm so beautiful" -she really said that, many times as well as, "If I had breast enhancements, I'd be as popular as Gisselle", I finally decided to make a break for it. "Well, nice to meet you Gina Marie, but I'm going to the news stand", to which she replied, "Oh, I'll come with you, I want to show you something"; there she was on the UK version of Glamour on the front page.  Then I tried to escape to a cafe, to which she assured me that I wouldn't be able to order anything if I didn't speak Italian, so she ordered for us in Italian, although the girl at the counter spoke perfect English. I'm not really doing the story justice, because you can't describe 8 hours of someone talking about themselves the entire time, suffice it to say she didn't even ask my name, nor did she ask anything about me.


Continuing with what I've learned this weekend and stereotypes. The Greek government came out with a denial of the Spiegel article. The whole thing is now being dismissed as a way for the Europeans or someone else interested, to lower the value of the Euro, which is of course a benefit to the Euro-zone. However, I find this logic hard to swallow. The Friday emergency meeting planned to deal with this threat DID take place. In the news this weekend, Junker, the head of the Euro Group  said after a meeting of finance ministers last Friday, "we believe that Greece will need a further program". This is the meeting that was denied or side-stepped by numerous finance ministers to deal with the Greek threat. So I suppose we have another stereotype, that of the dishonest government (Greece in this case as well as every other country involved in the meeting who denied it and Friday's story). Junker also said something along the lines of "Greece leaving the E.U. is absurd", which again side steps the question of whether they threatened it, but in any case, it seems Friday's meeting is the start of  Greek debt restructuring, and Ireland wants to talk about the same as well.


The Stereotype of Wall Street manipulation I've know to be true, I just didn't realize that when the Hunt Brothers tried to corner the silver market by taking delivery of the majority of silver out there, that the Comex, who raised margins then much like now to kill the Hunt Brothers attempt, had 9 of 23 board members short 38 million ounces of silver as they hiked margins when the Hunt's went for physical delivery-that would have been a cumulative position of $1.88 billion dollars of short exposure the 9 Comex Board members had. The margin hikes thy voted for killed the Hunt Brothers attempt and protected the 9 board members.


Here's another stereotype or lie that seems to be gaining some credibility. Iraq just cut their 5 year estimate for oil output nearly in half. The idea is that the Saudis will come to the rescue and offer to boost production as they did with the Libyan crisis, however, with the Libyan crisis, they never actually did boost production. So it seems the myth of Saudi reserves is exactly that, a myth.


One final noteworthy event, last week some of the world's largest energy hedge funds took a double digit loss to their portfolios with Crude's drop. So it seems that smart money is not always that smart or ahead of the game, at least as of right now.