This Weekend's Scan

As I said, we'll be doing more stock picking and I've already set up the scan I want to use. Here's a look at the conditions and set up.

The conditions for this particular scan are as follows, price needs to cross below the 50-day moving average and on a multi-day high volume surge so we know that traders have been stopped out, at the same time 3C needs to be negatively divergent. Our first conditions are filled at the yellow arrow and where price is painted yellow. After that, as the market almost always does, there's typically a retracement back up to the moving average, so we want that to happen, but this time on below average volume. We want price to mov above the 50-bar moving average as this will sucker the longs back in as they have an affinity for the 50 day moving average. 3c still needs to be negatively divergent and at this point, the stock is a short candidate. We can use multiple timeframes and other indicators to look for a tactical entry, but even if we took the first entry signaled by the red price candle in AMAT at $15.61, watch what happens next as we are playing on the predictability of traders and Wall Street's predictable response.

After the entry, it's just trade management. Using the Trend Channel, AMAT would have stopped out in October with a 25+% gain. The Trend Channel can be set for swing trades or as in this case, a trending trade, furthermore, exits can be tweaked by using 3C and other indicators to give us earlier warning as to when a possible reversal or stop is taking shape.

AMAT wasn't cherry picked, it just happened to be the first symbol on my watchlist alphabetically sorted.

Take a look at AAPL which I have been posting recently.

I have been posting AAPL for the reasons I outlined in my Tech post, it had nothing at all to do with this scan, but it did have to do with a head fake yesterday which is still at a profit today and another head fake today, I think it just shows that this scan has called AAPL a short the last two days that we are taking advantage of the predictability of traders and Wall Street. I find it ironic that at the place the scan would have called for a short that we saw a beautiful head fake entry yesterday that quickly failed to the downside. So AAPL broke the 50-ma on increased volume, rallied back up to it, but the fine point is a head fake above it to draw in longs and it did so on weak volume, sounds like a great set up!

I'll be posting candidates this weekend.

Oil, Silver, Gold, Copper and the $USD

This chart may be a little hard to follow, just pay attention to the right side; it shows the relative performance of Oil, Gold, Silver and Copper vs. the $USD, all have an inverse relationship with the $USD.

For a while now I've suspected something is not right in Gold, perhaps a bubble or an intermediate top. Other then all of the GLD posts this week, this chart makes clear, Gold is lagging other dollar linked commodities.

The $USD is in green m gold is yellow, silver is white, oil is light blue and copper is salmon. Note how copper performed the best overall, oil and silver were nearly identical, but gold lagged badly.

IBB Biotech Index

I should have posted this with today's earlier JAZZ biotech short idea, this is the Biotech Index. I prefer that the index as well as the individual stock are both showing weak underlying action.

From long term to short

 The long term weekly 3C chart for IBB going back to 2002. Accumulation areas in white, distribution areas in red. Currently the Index is leading negative, which helps the JAZZ trade as the Industry group typically has the second most powerful gravitational pull on a stock's price with the general market having the greatest influence.

 The hourly hart for IBB also leading negative with clear tops in July and November.

 The 15 min chart is excellent for reversals of swing length trends as we have seen recently, it appears the Index has seen a lot of short selling in to this last run up.

 The intraday 5 min chart shows accumulation sending IBB higher and distribution appears to have started pretty early on, it is also no leading negative.

Again, if you have questions about the JAZZ trade set up let me know. I'll be spending a lot of time this weekend scanning for individual stock trades rather then market directional trades as we are starting to see some industry rotation or at least industry lags as has been apparent in financials.

AAPL Short Setting Up

Similar to yesterday's swing trade short entry in AAPL, we have a nearly identical situation, albeit on smaller scale.

 Today's breakout, apparent head fake, much like yesterday's

A longer term chart showing yesterday's entry point as well as today's

JEF Still Intriguing

Even at this level, JEF still looks like a decent add to or new short position.

Not any of the risk basket

 Commodities are way off for the day so it's probably not related there.

 High Yield Credit is going the opposite direction

 Guessing it's not a European rumor as the Euro hasn't moved up

 Not rates...

And not financials...

Like I said, I didn't/don't trust it and it looks like t's moving back down.

The latest market move...

I don't trust it, not sure where it came from, but it is near the 3 p.m. rumor time. It kind of reminds me of yesterday's false breakout in AAPL.

 The 1 min chart didn't show any positive divergences so it seems to be a rumor or some kind of head fake.

 The 2 min chart would suggest that whatever it is, it's being shorted.

 As well as the 5 min chart.

 It wasn't financials as you can see

 It wasn't the market chasing the Euro

And while tech followed as well as energy, AAPL surely didn't which is a bit strange considering the weight there.

And ES isn't supportive in 3C either.

I'm going to pull up the risk assets, but I don't trust it.

JEF Update

Earlier I mentioned the parabolic move up in JEF and to keep an eye on it f you are interested in the trade (short in the model portfolio), true t form, it lost momentum, tested the highs and failed.

Here's the intraday update.

 JEF goes leading negative at intraday resistance.

And longer 5 min chart confirmation. It looks like one last hurray

Doc Copper looks interesting here-FCX short

Strategically FCX looks pretty bad, so if you like the idea of shorting FCX, it's just a matter of finding a good tactical entry and it looks like we may have found one. If you are in the Chinese hard landing camp, this may be one way to play that (commodities warned of trouble in China and China's Non-Manufacturing and Manufacturing PMI both confirmed a slow down, actually contraction in both).

 On the linear regression channel, it looks like FCX is kissing the channel good bye and on light bounce volume.

 It is also kissing the moving average and MACD as well as RSI are both negatively divergent.

 As for today, here's the short term 1 min which looks like FCX did what it wanted to do, hit the moving average and the LN Channel, now it looks to be losing all underlying strength and momentum.

 The 2 min chart confirms and is worse looking.

 The 5 min hart also looks like mission accomplished and now it is time to say good bye to the channel.

As I said, strategically on the long term 60 min chart, things don't look very good for FCX, so today may just be that tactical entry you were looking for on the short side.

Market Update

Starting to see some lateral rounding price movement..

 DIA 5 min

 IWM 2 min

 QQQ 5 min

SPY 2 min

Finally the VXX which moves inversely to the market is showing a leading positive divergence.

Trade Idea JAZZ (Short)

Recently I said we'd be moving back toward stock picking and recently I also said that Technology is starting to look like a candidate and within technology, for the reasons I gave which include R&D funding, I'd be specifically looking at Biotechnology. Well, here it is, JAZZ and I like this one!

 It would be difficult to fit a linear regression channel to this one, but the change is price character should be very obvious as recent lateral volatility has exploded, the easy money of trend following is over and it looks like we are at the end of stage 3 distribution, stage 4 decline is next.

 There are a few different options for a top here, I have gone with a triangle, but a case could be made for a slanting H&S top as well, either way, price volatility has exploded and JAZZ is no longer trending, a clear sign that something looks very ready to change.

 Working from the Macro to the micro, the daily 3C chart shows accumulation in late 2008 and a decent amount, it seems that after the accumulation period, there was a very healthy mark up period and distribution of what appears to be a large accumulated position seems to have begun in early 2011, it has only gotten worse since then.

 The hourly chart provides more detail as to how much worse it has become and this is without a doubt one of the ugliest hourly leading negative divergences I have seen, almost all taking place in the top area.

 More recently the 15 min chart is also leading negative as every parabolic price move up has seen heavy distribution and then a massive failure.


 Recent activity on the 5 min chart shows one of those cycles mentioned above with some accumulation, a parabolic/gappy move up and  leading negative divergence at the top of the move. All of this recent trading action is very negative and makes sense as to why the longer term charts look so bad.

 As for the Trend Channel, it has held two separate up trends very well and shows where each has ended at the red trendline with a close below that, so as of now, the Trend Channel is saying the uptrend is over.

 I'm using a longer version of my crossover screen as this is a volatile stock and I want to reduce noise and reveal the trend, you can see the long signal in white and there hasn't been a signal confirmed sell signal until recently. RSI, one of the components of my Xover screen is also showing a negative divergence (RSI is one of the few contemporary technical indicators that I like, but not for oversold/overbought, but as a divergence indicator).

The bottom line is the price pattern gives us an implied downside target which happens to be $19, however if this reverses trend and really falls apart, these targets are almost always overshot to the downside, remember, with the market, the pendulum almost always swings way too far one way and then way too far the other and this is a perfect stock for that analogy.

All of that being said, it is very volatile and would probably require a fairly wide stop on the initial entry, or you can look for a high probability entry on a bounce or break below the triangle. IF you are interested in the trade and have questions or want to get a second opinion, feel free to email me.

JEF (Model Portfolio Short)

Keep an eye on JEF's parabolic move today, you may be interested in taking a position or adding.

 JEF making a parabolic move today, which I view as emotional outbursts and often can be taken advantage of as they tend to reverse in the same parabolic fashion.

 The 1 min chart could easily confirm, but it has not and remains negative.

 The 5 min chart remains negative

 As does the 15 min

 As well as the 40 min above and 60 min below.

You may want to watch price for a reversal if you are interested in JEF on the short side, which obviously I am as it is in the Model Portfolio.