CHK- Trade Opportunity

I get a lot of emails in a day, typically 50-75 on an average day; most of them are trades individuals are interested in. CHK is one that I have been updating for a member since May 11th.


Here are some excerpts of my replies as the emails went back and forth-May 11th:


"Wow, there's a lot of game playing/manipulation in that stock. I don't know what the news events were, but 3C called the top at March 20th, then was showing a small positive divergence on 4/27 and it popped on 5/1, it showed that 5/1 move as not supported or a head fake, and then called another negative divergence early morning of 5/10."

The next email on 5/14 with the attached chart...


"CHK still has a lot of proving to do, but this is a start."

The next email on 5/15...


"CHK is putting in positive divergences from 1 min to 15 min, I would think it's going to pop higher on a move that is more defined."




Email May 21...


"CHK on the 1 min is getting a little frothy here, looks like it may consolidate or pullback a bit, the 5 min is still in line so that's good. The 15 min chart is very positive, it looks great. The 60 min chart was positive at Friday's lows, but the 15 min looks the best."


What CHK looked like at that point...

The member bought some CHK on 5/22 as it did take a little breather.


Here's what the 15 min chart looked like as of that email on 5/21

At this point it seemed pretty clear someone was accumulating CHK with several positive divergences on a meaningful timeframe.


Here's CHK as of today (15 min)

From left to right, distribution at the top, trend confirmation in green, several positive divergences and a change in character.


CHK closed up 3.31% today and is up another 2.5% in after hours. Why?


Chesapeake (CHK) Shares Surge as Bloomberg Reports Icahn Now 'Major' Holder
3:39 pm ET 05/24/2012 - Street Insider

Shares of Chesapeake (NYSE: CHK) are jumping in late-afternoon trade as Bloomberg is reporting Carl Icahn is now a "major" holder in the company. Bloomberg said Icahn may now own more than 4 percent of the company.


From Reuters:

BlackRock group ups Chesapeake stake: source

(Reuters) - BlackRock's (NYS:BLK - News) Global Resources team increased its Chesapeake Energy Corp (NYS:CHK - News) stake to 4 million shares from under 1 million shares, a source familiar with the situation said on Thursday


I decided to post this for a couple of reasons, 1) in one of my last posts I mentioned how a lot of intraday and day to day movement is created by market makers and specialists trying to fill a large order. 2) Apparently as you can see, 3C caught the action of filling that order so the 3C signals aren't academic, there's real institutional activity going on and 3) Judging by the accumulation zones, the institutional position is probably somewhere averaged out around $15 so CHK should have some upside in it as they'll look to push the stock higher, that's the reason they announced their position in it.


As for our member who is long CHK, best of luck, it was probably a little grueling at times, but it looks like you're going to do fine with CHK.

ES Update

 ES accumulation around as it broke through afternoon support (less defined), note the upside momentum toward the close and increasing volume as ES has now broken above the intraday highs.

ES-VWAP, for those of you not familiar with a VWAP, it is used frequently by institutions to gauge the effectiveness of the middle man who fills their orders (Market maker on the NASDAQ and Specialist at the NYSE). VWAP= "Volume Weighted Average Price"; the idea is that if a middle man fills an institutional order, for example a long order, at or below the VWAP then they did a good job and will likely get more institutional business. For a short they want to fill the order at or above the VWAP. A lot of the head fake moves and intraday movements are (although less frequent than years past because of High Frequency Trading) simply market makers/specialists trying to get price to an area in which they can fill a large order.Note how ES retreats from the channel representing 2 standard deviations from the VWAP, also note how there's support at the lower channel. Many people think that large volume spikes are institutional orders going through, more often than not, when orders are being filled volume is low and price is flat or moving in a favorable direction (down for a long order being filled). The volume that comes on a move like this is usually the result of limit and stop orders being hit which anyone with Totalview and to a lesser extent, level 2 can see. Wall Street's order book is much more extensive so they know what levels need to be hit to trigger volume, momentum chasers, etc, this is all part of mark up.

Quick Market Look

As I type this ES is closing in on the intraday highs, I suspected the Euro move below support was a head fake move, especially after what Goldman said followed by their Greek puppet (former GS employes and former Greek RM), Papademos-thys wanted to accumulate on the cheap, it was very obvious yesterday, it became obvious today after the market broke afternoon support on the Euro break of support.

Actually since uploading these charts, Es is challenging the intraday highs right now.

 The theme is pretty much the same for all the averages, an opening negative divergence as the FX correlation was pretty divergent after the market put in a strong afternoon rally yesterday that ran ahead of the correlation. Taking the market higher in to a declining Euro/strengthening dollar today would have created a lot of risk of a big drop as arbitrage would have been a big issue, thus their attempt to keep the market relatively neutral. If there weren't market manipulation as we have seen being set up for weeks now, the market would be a lot lower today based on the FX correlation. The point here is the head fake in the Euro-yet to be confirmed, but I'm fairly certain it will be, then a move below intraday support at the red trendline, look at the 3C accumulation on the move below afternoon support. DIA 3C is now leading at a new high on the 2 min

 IWM, same theme, distribution on the open, an attempt to keep the market in a consolidation, the afternoon break under intraday support as the Euro broke another support level and a strong positive divergence as the day went on. I purposefully scaled this chart (it looks a little less positive than it is) so you can see the support trendline broken and the accumulation occurring after that.

Tech wasn't shining today, although I'm pretty sure it will be back in rotation with a vengeance. Again, afternoon support broken and a positive divergence in to the lows.

The same story is the SPY which is at a new leading high, remember Financials lit the fire and the SPX is financial heavy vs the NASDAQ which is tech heavy.

Euro Momentum

 Price alone in the Euro looks set to see upside momentum, very likely head fake move in the Euro today

 Recent 1 min Euro positive

 2 min leading positive

 3 min trend positive

5 min trend positive

Risk Assets

I had to cut this short...

 SPX is always green-Commoditis v. SPX today are showing more relative weakness, remember this is a Wall Street run cycle, they don't have as much control over commodities as we have seen on the long term charts of the 2012 rally. Commods are more in keeping with the $EUR/$USD correlation while stocks have seen more support keeping them somewhat range bound, especially vs the FX correlation.

 Multi day commod trend broke to the upside the day after we first saw something was going on with Euro/Dollar.

 Commods, SPX and Euro in blue, Commods are tracking more in line with the FX correlation, but still stronger than they should be

 Overall, the risk asset High Yield Credit is supportive of market gains

 Yields which are an excellent leading indicator-like a magnet for stocks are outperforming the SPX today

 They have been outperforming for nearly 2 weeks now, something is definitely up, glad I added the longs yesterday as a hedge.

 The $AUD is not yet giving the typical leading signal, China probably has a lot to do with that, but it is more supportive than it has been.

 The Euro/SPX correlation today, the market is holding up much better than it should, this is typical of a Wall Street initiated cycle or what is otherwise known as market manipulation.

 Euro on a longer term, remember it was the 15th we saw Euro accumulation and $USD distribution, the Euro trended higher while the SPX trended lower. I still think today's move in the Euro is a head fake move courtesy of GS and their cronies like Papademos.

 High Yield Corp. Credit is holding fairly well

 The longer term trend, at least HYC Credit isn't dropping like a rock, which it was until a few days ago.

 Here's the initial move in financial momentum I saw,

 Here is is a few minutes later, Financials are rotating in, I thought they would yesterday and thus the reason for adding FAS long.

 Tech is not in rotation today.

Secotr rotation, Financials are moving in as suspected yesterday, Basic Materials, Industrials and Discretionary. Energy should rotate in with the Euro. The defensive sectors are in rotation: Health Care, Staples and Utilities, I suspect they will start to rotate out.

Financials Momentum giving the market a lift

I was right in the middle of a risk asset update when I saw the relative Financial momentum jump huge.

This is what is moving the market.

More posts coming...

Interesting Sector Rotation

Financials for one are showing strong recent momentum vs the SPX, Risk Asset update almost complete.

Look for some changes in character shortly.

Euro Breaks Another Support level

I have to say, relatively speaking, the market is holding its own considering what the EUR and USD are doing, but this last break was 1 too many.

However lets not forget what caused the move down yesterday that we were able to buy in to, the GS "We're Bearish" which as we addressed yesterday means they are buying followed by the statement and retraction by former Goldman Sachs employee and Former Greek Prime Minister, Papademos.

In other words, it's hard to trust anything you see right now in price action as the last time Goldman put out a sentiment call, they were bullish at the March highs.

So just keeping up with today's events...

 The first and second break of support areas in the Euro today...

The SPY broke below an intraday support level on that last Euro move below a support level, however as mentioned, overall, relative to the Euro/USD, the market is still holding up much better than it normally would.

There are negative divergences in the $USD as it broke above resistance, both short term and intermediate term and there are positives in the Euro both short and intermediate term.

Head fakes?

The only real news out of Europe is an opinion poll (remember the last one and then the elections shocked the investing world as they went 60% anti-bailout parties whereas the pro-bailout parties were supposed to win).

From Greek opinion polls...

• GREEK OPINION POLL SHOWS 85% IN FAVOR OF EURO
• GREEK OPINION POLL SHOWS 12% OPPOSE EURO

However...

30% (a new high) support the anti-bailout/anti Euro Syriza party. So while Greeks (according to the polls in a country that doesn't have enough money to print tax documents) an overwhelming number of voters want to stay in the Euro, while at the same an overwhelming number of voters are supporting the 1 party that is most likely to take Greece out of the Euro.

Another example of EU insanity and why nothing ever gets fixed.

Market Update

This congestion today is just playing havoc with the indicators, yesterday was beautiful, nice clean signals that contradicted price, excellent entries in some long positions and the move that 3C was showing so clearly.

The Euro situation is just making a mess of intraday charts. I don't think this will effect the probability of a strong move higher, but it would b nice to sustain some momentum especially going in to a 3 day weekend. I'm going to take a look at the Risk Asset Layout after this and just get a feel for what other underlying asset classes other than the Euro are doing.

Euro support/resistance/congestion and a possible head fake move below support, I'd guess a probable head fake move, but timing is still an issue.

 DIA 1 min is a bit more negative than price, but I suspect there's a lot of reaction to what the Euro is doing and if that is a head fake move, it could turn around quickly.

 DIA 2 min declined on negative divergences but is giving an ambiguous relative positive divergence now. These just aren't the strong clean signals like yesterday, but I suppose the fact they aren't completely falling apart is good and goes back to the early theory of the averages trying to maintain in the area while waiting for the Euro to catch up. If you think about today's price action, you can see why  the averages are loathe to move higher while they are so disconnected from the Euro, it would open up a very volatile, risky potential for an arbitrage move down which would be quite nasty if the averages continued higher without FX support.

 IWM 2 min looks a lot like the DIA.

 So does the 3 min, you can see yesterday's clean signal and today just looks like congestion in price and underlying trade.

 IWM 5 min

 QQQ 1 min is almost perfectly in line with price action.

 The 3 min looks like the positive current divergence in the DIA/IWM

 QQQ 5 min which is mostly in line today also shows that same positive.

And there it is on the SPY too.

ES/Market Update

This is interesting...

 At the last ES update I showed you a leading positive divergence (white box), since then ES has put in another positive divergence and it has been holding at some support.

Now look at the Euro, it broke just below support in the yellow box, yes ES is putting in another positive divergence and holding. It may be that the 1 min chart is lagging a bit, but it should be fast enough, I have to wonder if this is the typical head fake move we see before a reversal, meaning a shakeout in the Euro below support before it tries to break intraday resistance.

We'll see shortly.

USO Update

It's been a while since we looked at USO specifically outside of the Energy Sector. I think what you'll find in looking at USO is that the same theme is playing out in the near term across a whole array of risk assets, whether the averages, currencies, individual stocks, ETFs and Sectors. I like to see that kind of action, a lot of confirmation via very different asset classes.

 First an overview on the daily chart, as you'll probably remember, I've been bearish (long term) on oil since late 2011. At (A) oil was pretty much lateral, during this period tensions were highest with Iran and oil simply refused to respond to the geo-political risk, which made me believe that the risk at that time wasn't much more than saber rattling. I expected oil to start to decline, at point (B) it started trending lower. At point (C) oil broke the downtrend to the upside, the media was saying it was because of heightened tensions with Iran, but the truth was tensions were higher during period (A) so I suspected that the move up was a short shakeout or head fake move. 3C confirmed it and the breakout at point (C) started trending down again, we had 1 last head fake move which is not marked here, but it was a brief move above the downtrend channel of (D), you can see price swing up, it moved just above the downtrend and as usual, that head fake move preceded a nasty drop down. For newer members, we almost always see a head fake move like this before a big reversal move (reversing the April 2012 move up).

 On a daily 3C chart you can see many of the signals, a positive divergence at the October market lows, distribution in the lateral channel (point "A"), 3C confirming the downtrend (point "B"), the negative divergence/distribution on the head fake breakout (point "C") and the leading negative divergence as oil picked up downside momentum at point D. If you look close you can even see the April 2012 head fake move above the downtrend channel had a negative divergence. Long term TSV 55 confirms all of these moves, but with less detail.

 The 30 min chart shows the negative divergence in to the point "C" shakeout (yellow box), around April 30th that's the head fake move above the downtrend chanel I mentioned, it too saw distribution. Currently on the 30 min chart we have a relative positive divergence, suggesting the probability of a move up as we have seen in nearly every risk asset we have looked at.

 The 15 min chart shows more detail in this current positive divergence which is leading positive. Again you can also see the distribution on the late April head fake move above the downtrend channel at the red arrow. The point being, the current positive divergence is on par with what we are seeing every where else.


 As for timing, the 1 min chart was confirming price action, it has been trending up in a leading positive divergence

 The 2 min chart shows where the strongest recent accumulation has been, yesterday's lows and it is in a current leading positive divergence.

 The 3 min chart also shows accumulation at yesterday's lows, confirmation of the move up and in yellow, rough confirmation of this congestion area today.

The  1 min chart today is nearly perfectly in line with price in the congestion today.

So it looks like oil wants to run higher in the near term like many other risk assets, the intraday situation is pretty much the exact same as what we have seen all day in the market.