UNG Follow Up

Tomorrow is Thursday and that means at 10:30 the EIA Natural Gas report will be out, which typically drives some intraday volatility in UNG.

UNG is one of my favorite long term long positions and a great example of seeing a change in character, seeing accumulation and not really knowing what it's about, but trusting it because usually by the time you find out what it's about, the money was already made. When we first started watching and buying UNG and trusting in the base, we didn't know what was going on with Nat Gas. Ever since then, it seems every month we get another reason as to why Nat. Gas is looking like it's going to be one of the next leaders in the market and many of us got UNG in the mid-teens.

In any case, the last update was posted on Thursday, March 28th. It looks like that update was pretty darn close, the next 4 charts and comments are from the last update linked above...

 "Perhaps "all gaps must be filled" as some contend now that HFT is here to stay, that means yesterday's gap up and +2.35% gain leaves room for a pullback to fill the gap, otherwise the trend in UNG has been pretty darn impressive since mid-February on a double bottom."

"Even the short term X-Over screen is long UNG, the second pullback is usually to the blue 22-day price m.a., although a pullback to the yellow 10-day would fill the gap."

 "A weekly Trend Channel, note the weekly candles also signal a loss of momentum and yesterday's gap looks a little like exhaustion."

"However where it counts, the trend is confirmed, the chart is signaling a pullback/consolidation, but not dramatic."

Now lets take a look at the same chart, just current (because there are some good concepts to note)...

 At the time of the last update we had the gap up at the two yellow arrows, we were expecting the gap to be filled. Both days were smaller bodied candles signifying a loss of momentum, the second day was a true "Star" and both days were on increasing volume. Increasing volume on reversal candles (bullish or bearish) tends to just about double the probabilities of the reversal candle being the real thing. The pullback is on lower volume which is good and the price pattern is pulling back opposite the trend in a sort of parallelogram (similar to a flag) so all of the signs of the pullback look healthy.

Also note that the pullback on the gap up is right in the area of significant resistance, a breakout above this level will take UNG from a stage 1 base to stage 2 "Mark-up" and that's where the trend or the "easy money" is to be found; so I'd much rather UNG pulls back and consolidates, takes a rest and gathers some energy before taking on that important resistance zone.

 This is out X-Over Screen which is seen above from the previous update. The point of this screen is to qualify crossovers so we have a better idea of what is a true cross-over and what is just whiplash. For a long signal the yellow 10-day has to cross-over the blue 22-day, the middle window has a custom indicator with quite a few different conditions that need to be met and that must cross over it's 22-day moving average in blue. Finally RSI 14 in the bottom window must cross above the zero line or actually the "50" level.

This screen is also useful in trade management. The first pullback is almost always to the yellow 10-day price moving average, all indicators must keep the long signal. The second pullback (depending on the type of stock) is usually down toward the 22-day blue price moving average. We saw an early pullback after the signal was given so the next pullback to the yellow moving average around the $21.25 area was not surprising. In the previous update as seen above I said, " the second pullback is usually to the blue 22-day price m.a." and it looks like that's exactly where it's heading.

 I had mentioned the 5-day chart and the candle, "the weekly candles also signal a loss of momentum and yesterday's gap looks a little like exhaustion." Last night I talked about price action being fractal in nature, meaning the same price patterns and behavior we see on a daily chart tends to repeat on an hourly chart, a 5 min chart or a 5-day chart. The candlestick pattern in yellow is a classic reversal signal with a strong first candle followed by a loss of momentum and a small bodied second candle (usually a Star or a Doji, both reversals in yellow are Stars at the second candle) and followed by a third candle that is a larger bearish candle that closes lower than the open and closes near or at the low of the day, these are considered confirmation of the reversal pattern; so it's likely UNG has a little more downside left in the pullback and a move to the 22 day moving average would be consistent with the 5-day chart's candlestick pattern.

Just like "3C" is a reminder to "Compare, compare, compare", looking at a 5-day chart (or longer) and its signals can often give you extra information that a daily chart doesn't have enough perspective to show.

Finally the 60 min 3C chart from left to right shows the head fake / false breakout which would be difficult to determine whether it was a real breakout or a high probability "false move", we had a lot of signals telling us it was likely a head fake move and there are a lot of reasons for a head fake move right at that spot, here are two links to the first two articles, "Understanding the Head Fake Move": Part 1 and Part 2. The price action following that head fake move is exactly why there was a false breakout there, it helped price make the move lower where it formed a "W" base with good 3C accumulation and the break out of the "W" base that show a confirmed breakout trend at the green arrow and finally a small negative divergence suggesting a pullback as noted in the last post, "the chart is signaling a pullback/consolidation, but not dramatic."

I think for some of the reasons laid out above (the 5-day candle stick pattern, the X-over chart's probable pullback area, etc.) UNG has a little more downside to go ad we'll likely see am upside candlestick reversal which we don't have now. I think UNG will be in a very strong buy/add-to position as the pullback comes to an end. We should also see strong 3C accumulation as it ends which is starting, but not quite there yet.

 The 5 min chart is just starting to work on a relative positive divergence, this should be leading by the time the pullback is done.

The 10-min chart shows the negative divergence where the pullback became very likely, but 3C is still in line with the price trend, this chart should also go positive by the time the pullback is over and that's when we'll want to look at buying or adding to positions if you have an interest in UNG.

As always, use your biggest edge over Wall Street, show patience and pick and chose your battles. I think UNG will be in an excellent area to buy or add-to very soon, I don't think it's quite there yet. As mentioned at the start of this post, this is one of my favorite long term long positions, I think this probably has years of gains ahead of it.

IOC POSSIBLE SHORT ENTRY

Last night I covered IOC as a longer term short sale candidate, I like it on a longer term basis right where it is as an equity short (Not as an option /Put because of timing issues), more or less a longer term trending trade.

This is already an open (profitable) short equity position for many of us at higher levels, but I still like it here for new trades or add to positions.

I mentioned the possibility of a little bounce making IOC an even better short entry (better entry, less risk, netter timing) and also mentioned possible using a phased in entry and risk management allowing you to add at higher levels. Please see last night's post for details.

Here's what I'm seeing now that may be worth setting some price alerts.

 This is the H&S top mentioned, it's fairly large at over a year and at least 40 points in the pattern.

 That makes the pattern implied target somewhere around $10, maybe $20, still if you use my technique to "Make more than 100% in a short sale", this has the possibility if not probability of being a very lucrative position.

 This sort of large ascending triangle (which is too large to be a consolidation pattern) appears to be the right side of the shoulder of the larger H&S and there's a possibility that it at least moves back in to the triangle if not above it which would be around $78 which is the area I said I would add to IOC if I entered a partial position here.

The 30 min chart has much higher probabilities than the 2 min intraday chart above as far as the bigger picture and the underlying smart money trend and this is a clear leading negative divergence which would suggest very heavy distribution, so any chance to add IOC at better levels as a short is something I'm very interested in.

Charts Looking Better

All charts are looking better, this is still very much on the short term timeframes, earlier I said that some of the averages' had positive divergences. but really didn't look that good. They as well as the Index futures are looking much better, this doesn't change the short term/longer term at all.

Here's 1 example of the improvement in the ES/SPX futures.

 ES 1 min positive divergence from earlier, a little after 1 p.m.

ES futures now

Asked About WTW long, I like it

I looked at WTW for another member and as far as the price pattern goes and the 3C charts, I like WTW long here, I think I would prefer not to deal with any time decay factors as this does have positives out to 60 min, a case could be made for even longer divergences so I think I'd prefer an equity long position eather than options.

I'll try to get some charts up in a bit.

IWM Calls Filled at $1.11

Going with SPECULATIVE IWM 4/12/2013 $91 Call Position

Really Want to go long IWM calls-weekly

I really want to get some weekly calls for next Friday's strike, not this Friday, but it's been really hard with the price action. I think I'm going to go for speculative size, basically a small position that won't hurt too bad if it fails, but will really pay if it is right.

AAPL Update

 Short term upside, this gap would be an obvious target.

 AAPL 1 min

 AAPL 2 min

 5 min leading as AAPL is just above the gap.

AAPL 15 min leading, this is where all of the short term "Spiky" divergences have been accruing.
 

The 30 min chart is for the first time positive and it has a very clear trend so this divergence is significant.

Averages Update

Again there's nothing that's really changed about very short term looking like it will make at least 1 more run and longer term (defined pretty much as after 1 more run) looks like it will see significant downside.

 DIA 1 min

 DIA 10 min

 And the bad side, 15 min

 IWM 2 min

 IWM 5 min

 IWM60 min makes the larger trend VERY clear.

 QQQ 1 min

 QQQ2 min

 QQQ 3 min

 QQQ 5 min-none of these charts are particularly strong.

QQQ 15 min again makes the trend pretty clear and it's not far away.

 SPY 1 min

 SPY 2 min

Again these are intraday timeframes, not particularly strong divergences...

And 30 min makes the trend clear, that's a problem for the bulls.

Index Futures

 ES intraday positive

NQ intraday positive

Quick Market Update

The SPY has filled the gap, the R2K way filled it, the DIA hasn't filled it and the QQQ is VERY close to filling it.

There are positive divergences in the averages, especially the R2K that make it look like the market will be moving soon.

The arbitrage levers are being pulled, I'll show you that in another post.

The futures for the SPX, NDX and RUTX are all leading positive as well.

I'd say we are very close to an intraday move to the upside.

EUR/USD

Since we have so many people trading the EUR/USD off yesterday's signals (more FX trades than normal) here's an update (plus it's part of the market analysis as well).

 This is a 5 min chart of the EUR/USD, my feeling yesterday was that the pair would see short term upside, I had a lot of charts yesterday suggesting that would happen as it has, I didn't have any charts suggesting it would be a move that holds, so it's in line with market expectations. $1.29 is possible, the ECB was defending $1.30 for a while, I doubt they will defend that level again.

 The next resistance is coming up around $1.2878.

 This is the 1 min EUR/USD, unfortunately I can't get any signals beyond 1 min, I think because it trades in such small units (pips). It would seem there's at least a small positive divergence, perhaps it builds to a larger one.

 This is the single currency Euro and then USDX. Again 1 min has a small positive.

 5 min is in line, no divergence.

 15 min is leading negative which makes sense from our expectations.

 30 min is negative as well.

 USDX 5 min has a small relative positive, this is 5 min and this is not a strong divergence, it could just as easily fail.

 The 1 min is very volatile in USDX, I'm not sure what to make of it.

 The 30 min is clear, positive which suggests the EUR/USD's move to the upside is short term and the longer move will likely stay within the downtrend in the pair above.

USDX 60 min positive as well, just reinforces that view, bottom line I think it can make it to the next resistance level, but as far as $1.29 or higher, I'd expect at least a pullback at the next resistance level and if we do get that, we can see how the pullback acts to determine whether resistance can be broken to the upside or not.

Market Update- Filling the Gaps

So far most of the action since yesterday started to turn sour around noon has been simple gap filling, since HFTs have been dominating the market, the days of the VERY useful break-away and exhaustion gaps and any other gap, are long gone. It seems EVERY gap is filled which has always been a staple of Technical Analysis, but they weren't filled so ruthlessly and there were break-away and exhaustion gaps that lasted a long time.

Here's the update for the market averages, I'll cover the futures in a different post.

 DIA 1 min with the gap from yesterday's open, the mostly negative action in the afternoon yesterday as well as a head fake move on the closing ramp to VWAP and now a relative positive divergence, DIA still has more to go to fill the gap.

 DIA 2 min from Monday afternoon's positive, the gap up Tuesday a.m. and the largely negative action yesterday afternoon and a relative positive divergence which is the weakest divergence.

 DIA 5 min, all the same themes as above with a current relative divergence. I'd guess as the DIA fills the gap the divergence will start to look better, maybe start leading.

 DIA  10 mins is where the divergences )positive) stop and it looks like the DIA has more downside to fill the gap with a slight leading negative.

 IWM 1 min leading positive

 IWM 2 min leading positive

 IWM 3 min leading positive

 IWM 5 min leading positive.

 At 10 min the divergences in IWM stop and it is in line.

 QQQ 2 min strong relative positive

 QQQ 3 min a relative positive inside a larger leading negative from yesterday.

 QQQ 5 min also a relative positive inside a larger leading negative from yesterday.

 QQQ 10 min is where positive divergences stop and you can see QQQ has some more work to do to fill the gap.

 SPY Arbitrage is seeing progressively higher positive arbitrage readings this morning, I need to check the assets (HYG, TLT and VXX ) to see what's really going on with the arbitrage moving positive.

 SPY 1 min with the gap filled and a relative positive divergence

 2 min relative positive

 3 min relative positive

 at 5 min al positives stop, the earlier positives are weak as well all being relative positives.

There's a slight positive tone to the TICK as you can see in the TICK/SPY trend and the Custom TICK histogram.

So far with a.m. trade and the gap, I'm not too concerned with the action.