The Sweet Spot

I may be a little quiet today, not because I'm not here or not going through as many charts as normal (probably a lot more), but because this looks to be the sweet spot I'm looking for.

Back in mid-May when we were looking for a head fake move above the range I was considering "Hitch-hiking longs", they are just a long play to take the elevator up, however the much larger play by far is confirming a head fake move and then finding the sweet spot to use it to short in to price strength, whether that be new positions or filling out partial positions.

This looks like the sweet spot and here's what I mean...

About 2/3rds of stocks or you might say about 2/3rds of the directional influence on stocks is the broad market, it is by far the strongest gravitational pull on any given stock on any given day. The sweet spot is aligning a reversal area in the market, here is perfect because you are getting a better short entry as a short is nothing but a long in reverse, you want the same thing, to sell high and buy low, you just sell high first with a short and buy low second.

This also gives you a lower risk profile, for example, there are reasons the only 3 places I want to short a H&S top are where they are.

Take a look at the charts...

 Yesterday I talked about the multi-month range and looking for a move above it BEFORE we can go lower, this is simply the head fake concept, at the time we didn't even have a shred of evidence to suggest it until the bear flag that showed accumulation in mid-May. In any case, I spoke of the move above the range in terms of the common reversal pattern that looks like an "Igloo with a Chimney", this is what I was talking about on a daily SPY chart.

I said Friday that I'd expect a slower move from this area to the $1900 area as the buy the dip crowd comes in, but a break into the range and/or below it would create strong momentum and fear moves about 5 times faster than hope.

So if we are at a pivot point in the broad market and it has the most influence over assets...

SPY 5 min and the 1 min positive yesterday that formed what looks like a right shoulder on a small H&S, really just a reversal process.

 then assets like these are giving us near perfect entries or just about as good as you can ask for...

Daily PCLN, the first place I want to try to enter is the top of the head, the second place is the top of the right shoulder, the last place is the shakeout after the neckline is broken.

I'd like to see a little bounce here for a better entry, but all in all, this would still be an ideal price level.

 NFLX is in the same situation, this is not coincidence that these are both at the top of right shoulders at the same time as the market is seeing strong deterioration the week I suspect we see the head fake move resolve to a failed move. We had short trade ideas on 6/3 in NFLX and a reiteration on 6/5.

This is the sweet spot, aligning the market, Industry groups and then stocks all at the same area or pivot is where we increase probabilities about as far as we can take them and at a great entry with low risk.

I have a lot of assets to look through, I will keep my eye on the market and I'll be updating the market when necessary.