MCP Follow Up / Trade Set up

For newer members, MCP is a position that has been basing and one that I like for a longer term trend trade, we do trade in and out of it on a trading basis every now and then so you might here me talk about a "Core long position" which is the longer term trend trade and "trading positions" which are shorter term trades up and down.

Last week on April 22nd MCP broke out of a large triangle base on a strong price move of  at least +5.68% when I wrote about it, but something didn't look right and I exited the trading long position that day, here are the posts from last Tuesday and excerpts.

MCP (long) Position Follow Up... 1:33 p.m. April 22nd

"I'm not sure yet if today's move is the start of mark-up or a transition form the stage 1 base to stage 2 mark up, I'd like it to be, but so far we have a parabolic move (granted there's nice volume) and very little in the way of intraday confirmation so far, that can change in a hurry.

For now I am keeping the MCP long open, but if I don't see some improvement or I see deterioration, I may close out the trading position on today's move of +5.68% thus far...

A breakout of a triangle like this at its apex is a clear technical trading buy signal, what bothers me is there was no head fake/ stop run on a very obvious support level, first. Thus, if I feel this is going to end up being a false start, I'd likely try to book the gains, get out and wait for what would more likely than not, be a head fake move below support, that's where I'd want to re-enter, but lets give this a little time and see how things pan out."

Closing MCP Long Trading Position For Now 3:21 p.m. April 22nd

"I don't mind holding any core long MCP positions, but there's just not much confirmation on the parabolic move up today, thus I'm going to free up some space considering where the market is at and no real confirmation today."

Here are the charts since and right now...

 This is the large triangle, it is a descending triangle that is usually taken as a bearish consolidation/continuation pattern, but at this size it's way too big (daily chart) and these triangles typically act as bottoms or tops depending on the preceding trend, this would be a bottom.

April 22nd is at the white arrows where there's a technical breakout, the kind technical traders buy as they see it as price confirmation, it was pretty strong, actually a little too strong as it had a very parabolic look as I mentioned that day and I rarely trust parabolic moves.

However, the thing that really made me suspicious is the clear support of the triangle never saw a head fake move (Run of the stops) BEFORE the upside breakout, technical analysis doesn't really look for that, they look for exactly what you see above, but reality is that Wall St. runs these obvious support levels all of the time, I conservatively estimate 80% of the time before a significant reversal and on any timeframe. In fact, the head fake move is so reliable that we use it as a timing/trade entry indication as they typically occur just before the reversal or breakout in this case.

 This is the parabolic move I mentioned on the 22nd last week (Tuesday), that was my second bit of suspicion (the first being no run of the stops before this breakout of the triangle. I don't trust parabolic moves, I have seen them fail more often than not and usually they fail just as spectacularly as they begin, sometimes much worse.

With MCP coming down with some momentum, long stops from the breakout last week will be inside the triangle, tight below the upper (former) resistance trendline , at the apex of the triangle and below the lower support line so a move below the apex of the triangle will likely give us that move below that I would have expected before a breakout which also means that another long set up in MCP is likely going to materialize that can be used either for longer term core long trending trades or just a trading long position or both.

 This is a 3 min chart of MCP with enough accumulation to create the breakout, but it's not so significant that it looks like the strong type we see right before a real move,  this looked like a false breakout on Tuesday, it looks more like one today.

You can see the lack of confirmation even on a very fast short term 3 min chart at the red arrow, this is what I was talking about last Tuesday, "The lack of 3C confirmation of the breakout" and why I was watching it closely and considering exiting the newly formed breakout even though I was long MCP. *This is essentially the exact opposite of what most technical traders would think, they'd see a strong breakout from a perfectly shaped triangle with good momentum and volume initially increasing, although hardly anyone expects volume from this market since 2009.

 The long term 60 min chart at the triangle looks beautiful, this is why I like MCP as a longer term trend trade and why I think MCP will likely set up a head fake move below the triangle on the daily chart, likely accumulate and confirm a false break under support and give us a very high probability, low risk, cheap long entry.

If you are interested in MCP I'd set price alerts below $4.55 (support) as that will have to be taken out for the set up to work.

Also look for some initial loitering around the apex at $4.60 or so, we should see a move lower after that and that's where MCP gets very interesting as a long.

THESE ARE MY FAVORITE KINDS OF TRADES, THEY REQUIRE SOME PATIENCE, BUT THEY COME TO YOU RATHER THAN YOU CHASING THEM AND THEY HAVE TO PROVE THEMSELVES BEFORE YOU ENTER.