MCP Long Call Position

As I said earlier, I'm not thrilled about going long much at this point, however MCP has been a ;long position we've been interested in and have traded several times, but even here it looks like if this sets up it will be a short term trade, thus the reason for the ;leverage, it does not look like the ;longer term continuation of the next leg higher.

 The last long equity position in MCP was closed Monday, July 22nd for a +14.25% gain with no leverage, here's the P/L "After Action" report.

June 21st was the last significant long call for MCP, "For a new position or even an add to... MCP" which should sound familiar to you, "June 21st", in MCP's case it was the day just before the final low and MCP's run higher of nearly 50%.

I do think MCP will make for a nice, trending long position, but I don't think the pullback is sufficient or in the right p;lace for that trade yet. MCP is still in a stage 1 base, unlike one of our other longer term favorite longs, URRE that broke out to stage 2 "Mark Up" and closed up another +28% today for approximately a +113% 7-day gain, but most importantly it has shown good follow through on a stage 2 breakout.

I think MCP will make it to a similar stage two breakout and even in URRE's case, this is VERY early in stage 2, it should have significant upside ahead of it, just like MCP.

However, once again I DO NOT see this as a longer position trade in MCP and will likely approach it with leverage (calls).

 This isn't a textbook, "Bullish descending wedge", the volume is not correct, but this is how bullish descending wedges have been behaving over the last several years and bearish ascending wedges have been acting the mirror opposite which is not at all like what Technical Analysis textbooks will tell you.

A wedge like this "Should" break out to the upside once the apex (point) is reached, we see a number of different head fakes, sometimes a break below the apex as technical traders will see that as a failed move and they are taught, "If a price pattern fails, reverse your position", in this case, go short. Then we get what would be a "Crazy Ivan" with a head fake breakout to the upside which knocks out the shorts and brings in new longs. At that point we typically get a move back down below the apex knocking out the new longs as well, they are very nasty price patterns, but because technical traders are so predictable, it's so easy to take advantage of them.

The real behavior we have seen time after time in either variation of wedge is after the head fake moves are over we get a base in this case and a top in the case of a bearish ascending wedge, rather than an immediate breakout in the correct direction, we see a longer term base with a breakout eventually in the correct direction and that's the base MCP has been working on.

 This is the long term daily chart, also one of the strongest 3C divergences we see. Note the confirmation of 3C and price on the downside move and then the leading positive divergence during the base, that's a large divergence for a daily chart.

 While the 15 min chart is interesting and looks decent, it's only the last few days I'm interested in, charts beyond 15 minutes show that MCP is not ready for the next significant leg to the upside which should be a stage 2 breakout.

 The 10 min chart and again, I'm only interested in the most recent day or two of activity, this is also why I'd be using a call rather than an equity long, the divergence just isn't squared away for a longer term position.

 The 5 min chart is the perfect time frame for today's leading positive divergence, other timeframes confirm, but this is about what I'd expect to see all things considered.

 From the shortest chart, the 1 min is leading positive today

As is the 2 min which shows migration, also the break below the red trendline hit stops as you can see by volume making that a suitable head fake move as the stops were accumulated, a quick way for smart money to pick up quite a few shares on the cheap, quickly and without anyone paying much attention as someone has to take the other side of the trade.

The 3 min chart is also leading positive, so we have migration of a positive divergence as we should, we have several decent timeframes out to 15 minutes, a head fake move and what most technical traders would consider a bear flag.

The ideal entry would be a break tomorrow below the bear flag with accumulation, a call bought in that area would be ideal in my view, the downside momentum creates another head fake, it reduces the premium on the call and sets up a high probability/low risk position.

Again, I do not consider this to be the start of the next ;leg up in MCP, just a short term move, which I believe also says something about market expectations if we do indeed get an upside move tomorrow as many charts from tonight's "Daily Wrap" indicate.