Wolf on Wall Street: Friday, July 22, 2011

Friday, July 22, 2011

Q's

It looks like the Q's are going to hold support for the close, but not looking good.

MCD Trade Idea (short)

MCD popped big on earnings today, but there hasn't been much underlying support. It may be a decent short here with a stop above today's highs.

Today's closing candle is a shooting star, very bearish and the volume indicates churning.

60 min.

15 min.

10 min.

MCD Trade Idea (short)

MCD popped big on earnings today, but there hasn't been much underlying support. It may be a decent short here with a stop above today's highs.

Today's closing candle is a shooting star, very bearish and the volume indicates churning.

60 min.

15 min.

10 min.

INTC Short Trade

INTC is looking like a decent short here.

INTC 15 min negative divergence.

Potential stop around $23.30

This may be it..

The Q's and the SPY are falling apart, the DIA never really got anywhere, this could be a head fake reversal n the Q's we were looking for.

This may be it..

The Q's and the SPY are falling apart, the DIA never really got anywhere, this could be a head fake reversal n the Q's we were looking for.

Now That's Follow Through Selling

BJRI

DUG Trade Worth a Shot Here (long)

Frst here's DUG's inverse counterpart, DJUSEN, the Dow Gas and Oil Index.

60 min negative divergence

30 min negative divergence

15 min negative divergence

10 min negative divergence

5 min negative divergence

1 min negative divergence

Here's DUG, the inverse or short ETF of DJUSEN. 30 min positive divergence

15 min positive divergence

10 min positive divergence

1 min positive divergence

That's pretty good confirmation. I don't see anything wrong with trying out a trade in the area, so long as you have a reasonable stop and don't swing for the fences.

USO's breakout is still not getting underlying support, lading me to believe it will fail. I've started a small position in SCO- a leveraged inverse ETF- I figure with the stop so close, what can it hurt.

Breakout from the bull flag, I thought this scenario might develop to send USO bak to the bottom of the flag range to accumulate for a real breakout.

Here's the breakout's 2-day resistance level

All of the following charts are in a negative divergence- 1 mn.

10 min

15 min

30 min

and even a small 60 min negative divergence.

I just don't see how USO can make a move of this with no underlying support.

The SPY/IWM breakout levels...

The b/o in the SPY would be above the triangle consolidation which is to most retail traders a bullish continuation pattern, this would set up a decent head fake.

Nearly the exact same s true for the IWM, there's a bullish ascending triangle/continuation pattern (continuing the preceding trend). There's also a resistance level in the same area, these would be the breakout levels for each. The DIA/QQQ breakout levels are more significant.

The DIA finally to move?

1 min positive.

decent looking 5 min positive.

BJRI and the importance of setting alerts

BJRI was a short some of you may have missed the first time around, you'd be at a 7% profit in just a single day. I updated the trade yesterday again and said I'd short or add-to the position on any strength, that happened this morning. If you had an alert set and moved quickly, you'd be at a profit of at least 7%, maybe 8% in just the last 4 hours and 15 mins.

I can't stress enough the importance of setting alerts on trade ideas.

Worden looks to be running a program on their site in which you can live demo TC-2000 (click the link), which has the capability of transferring all of your charts, watchlists, scans and more to your android mobile device or I phone and that is a free app. I like TC-2000, a more advanced version of TeleChart, especially for their alert system which not only includes price alerts like TeleChart, but also trendline, moving average alerts and more.

The only hiccup s it doesn't display 3C properly, but they're working on it. I use TC-2000 for my alerts that are based on trendlines as Telechart doesn't have that capability, only price. Whatever charting system you use (I'm partial to Worden's because I've used it for 11 years), make sure you have a good real time alert system and be sure to use it. These trades happen fast as we are competing with ultra fast HFT trading firms. If you don't already have it, believe me, it's worth the investment.

If anyone knows of a free service with real time alerts, let me know and I'll pass it along to all of you.

Trade Idea HBI (short)

I like this top, it comes complete with a false breakout, heavy downside volume on the failure of the breakout, a negative RSI and more.

Here's the daly 3C calling the false breakout on the test of resistance.

The same distribution can be seen on the 60 min chart

As well as the 15 min chart

Currently there's some 10 min distribution on this bear flag.

We see it again on the 5 min chart.

The first top was called as well by ADX turning down, as it did at the second top. The Trend Channel has held the swing moves well and I'd consider it as a stop in the $32 area. I like the trade right here. There's about $1.40 risk in the trade and the first target around $26.00 giving us at least a 3:1 risk:reward ratio. I think ultimately there's even more downside, I just see $26 as an area where a consolidation will occur.

The Q's Break Through

This is what I've been talking about the last 3 days and it's a great set up thus far.

The bullish ascending triangle undoubtedly helped give the Q's a lift through resistance as we can see on this 5 min chart, now we are where I'd like to be and can start looking for the signal of the head fake/reversal. I think the Q's will stay strong until the Dow catches up.

The DIA breaks the bear flag, which draws in shorts, a move above the bear flag will encourage short covering, giving the DOW a boost, resistance isn't far off around $127.20

Here's the 3C break of the flag (1 min.)

And the 10 min chart remans strong enough to make the move through resistance.

3C Quick Start

Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.

The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.

We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.

You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.

Welcome to Wolf on Wall Street.

The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.

Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.

Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.

I do use other scans and systems when market conditions warrant their use and may change strategy with market conditions.

The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.

Position Sizing

The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.