FB After Earnings & a Note

* First let me mention that the Daily Wrap will be a bit later tonight as I have a Board meeting to attend, but basically what we have been seeing is there. There's a major break and while I don't want to repost all of these charts that have been posted a dozen or more times over the last week showing all the details as you know what they show, to summarize I'll get in to some of the ins and outs, why and why not. Essentially the strategic break is huge, it's there, but I closed AAPL puts because of tactical concerns, I left the less leveraged shorts open because I'm not concerned over tactical issues with 2-3x leverage, many of which have remain unaffected even as the market went higher.

I'll get to that later, first though I wanted to go over FB as I saw it a bit before the close and the short term charts looked like something was up, in fact my terminology was,

"At first FB had some pretty nice intraday charts, they look better than the overall market, however as I got to longer charts, the damage there was obvious. FB may be good for a rip and dip, but it's just not strong enough for me to take on as an earnings play."

One quarter I wanted to show that there were earnings leaks or at least somehow smart money knew, it wasn't widespread, but it happened. So we took a quarter and I looked at just about every major company reporting, I can't even tell you how many charts, but of all of those I believe it was 22 that were selected as earnings trades as they had signals jumping off the charts that just couldn't be ignored, our hit rate was about 90+% on these, however don't forget that these 22 or so were only a fraction of the hundreds, maybe thousand+ I looked at.

FB seemed to have something that looked like a leak because it had been sent down where it could be accumulated cheaply very recently and the accumulation (all short term, not positional) was way above what I was seeing in the market in general. However I have very strict standards for earnings plays because they are such a wild card, I thought FB would likely rip which it did after earnings and eventually dip so it will be the Dip trade (the longer trend trade) I'll be watching for.

This is the kind of behavior that looks like an earnings leak, even though it's only a 2 min chart, for one the stock acts different than the rest of the market and in coming down off the 10/18-10/21 highs, the lower prices give those in the know a chance to buy a larger position on the cheap. 

That leading positive divegrence is a lot more vertical than most, so it looks like there was a very strong push to accumulate FB, still there's not enough time for this to be positional, it's short term trade, like earnings.

The 3 min chart also doesn't look like much else in the market, while everything else is seeing distribution and leading negative divergences, this chart is at odds with the market as a whole, that's a common marker in leaked earnings.

 This is where the longer term (beyond an earnings rip) trouble is, this is very much in line with the market on a 4 hour chart so that's a significant signal.

 The hourly chart is showing trouble too, it's not as bad as it could be and I'd imagine any upside in FB off earnings will see this chart turn to more distribution as they almost always are selling in to demand and higher prices so this chart makes even more sense after earnings.

The same can be said for the 10 min chart, it shows the accumulation period (not earnings related) and the in line trend confirmation and a relative negative divegrence, but it's not in the same kind of trouble as say the IWM, that means higher prices over the next "X-days" are very likely to see this chart deteriorate badly as well as higher prices are distributed in to.

That's where we want to look for a longer term trending entry, at higher prices on deteriorating charts, the same as we want to buy pullbacks showing strong accumulation as I suspect gold will do as it moves lower.

FB is on the radar. I just hope FB can hold prices long enough to see these charts deteriorate, I'll get in to that a bit too, but it has its roots in last night's late post on Hedge fund activity.

I'll be back later tonight after my board meeting and wrap it up, but I think for the most part everything is looking pretty clear between the massive negative divergences and the very short term positive toward the EOD.