Trade Ideas

Above is an example of what I was talking about last night, Channel Busters, although last night we were looking at a linear regression channel, this is my Trend Channel. The first example is the doubly serious upside, downside move that snowballs due to the false breakout. The second example is a smaller example of the same.

On the daily chart above we see the serious move down after the parabolic false breakout. The question is whether the current gap up is also a false breakout?

The 15 min 3C chart suggests it may be a false breakout, this could of course lead to a snowball sell-off effect.

The 5 min chart suggests the same, although we are seeing a positive divergence suggesting a bounce, which could be helpful for better risk management entries.

There's obvious resistance around $39. If you like the trade, you can put it on an alert watchlist and wait for a bounce, or you could phase into the position. With world events happening as fast as they are, technical bounces could be irrelevant.

You know how I feel about the Real Estate market, MAC may prove to be a Chanel Buster.

The first part is complete, the bounce looks to have failed at the lower LN line.

Both bounces that are of concern on this chart show up as negative divergences on the 15 min 3C.

Again, you can wait for the bottom channel to be penetrated and look for a possible “kiss goodbye” or you might consider phasing into the trade. The Trend Channel stop out for the uptrend is at $43.65, that may be another potential area of interest for an entry.

Here's another possible channel buster-FOE

The daily chart shows this breakout as a negative divergence as this looks to have seen a long run of distribution. The parabolic moves or channel busting tends to come at the end of the trend. I would be interested in this trade if it were to move below the top channel.

shows the same negative divergence on the channel breakout.

The 1 min chart shows a leading negative divergence.

AAPL's most unambiguous charts

 10 MIN


60 MIN

1 DAY

USO Update

While the 30/60 min charts have not changed and still look bullish, the 1 min is showing a negative divergence.

Financials Bounce?

 XLF 1 min positive relative/leading divergences

 Same for the 5 min chart..

The hourly chart shows a relative positive divergence.

Some members have commented that based on the dollar's strength in today's session, it seems the market is being supported from a much more vicious fall. I'm inclined to agree.

Fundamentals Update

Last night I talked about the obvious things-with an analogy “keep your eye on the prize/the ball” and suggested looking where the focus is not. This may not be the best example, but as tensions in the Korean Peninsula dominate press coverage, one of the most risky things that could happen in Europe, Spain needing a bailout, just got worse. Overnight Spain's spreads widened to record highs. Last night I said I thought the EU had Ireland under control and could probably absorb a bailout from Portugal as well, the real trouble would be Spain. It seems I may have been wrong, very wrong. The German Finance Minister said this today in a budget speech to Parliament:

"In this context, I want to say very clearly that our common currency is at risk,"

"We have to assume responsibility," he urged. "If we can't defend our currency effectively as a stable currency, the economic and social consequences for our country and the people in our country would be incalculable," he warned.

We haven't even reached the details of Ireland, much less a Portuguese bailout.

HERE'S ANOTHER ONE OF THOSE WEDGE PATTERNS WITH A NEGATIVE DIVERGENCE I LOVE LATELY IN THE FXE EURO TRUST ETF-If we get a close around this area, I think we are reasonably out of the breakdown range of volatility and a decent entry zone.

In addition, the Swiss are sounding early alarm bells regarding the strength of their Franc which is killing their exports. The Eurozone is looking worse everyday. There was a website that took all kinds of bets regarding everything from sports to elections and it was pretty accurate, I wonder what their current bet looks like on the EU totally collapsing?

Last night at Trade Guild I published this article,

“The SEC Grows Some Misplaced Teeth” 

In addition to this article, the NY posts that the next target are the HFTs (High Frequency Trading Firms) and prop trading, which is an ongoing battle that has been in the works for years. Basically day traders can get a series 7 license and wok-and I use that term very loosely, for the firm. They trade their own money and have access to absurd levels of margin. Now don't get me wrong, I'm all for a more transparent and level field in the market, it's just this manipulation ad inside information has been going on for over a century with almost no action from the SEC, and now the Justice Department and FBI. The question is why now? Could it have something to do with the HFT firms effectively replacing the institutional bank's market makers and specialist system? I really don't know, but this is not a new issue in the markets, the SEC actions are new and it makes one wonder, “Why now?” when they've spent decades doing nothing other then picking on some high profile societal figures like Martha Stewart? UPDATE-Hedge Funds are now being targeted as well!

Last night I tangentially mentioned bank runs, well guess where they are now commencing...? Ireland and the money s going into Switzerland, which is exacerbating the problem noted above in the Swiss currency. Again how long before the E.U. Just totally collapses? With contagion running on it's own despite what the EU does, it seems the Union's destiny is already written on the wall. One word... “FXE”

Another hint the Tech sector is falling apart. BRCD beat by a penny but gave weaker guidance then Wall Street expected. BRCD is currently down over 9%. While BRCD is probably not the best fit within SMH, I've recently showed charts of SMH showing weakness in the tech ETF. Here's a more current update.

 SMH 10 min chart breaking at the highs on a negative divergence

SMH hourly showing the larger problem in the tech space, especially semis. If we do see a bounce, we may very well see sector rotation, to what? I'm not sure, financials, PMs, etc.

Asian shares traded down due to continued fears of China tightening and raising interest rates

 Here's that wedge pattern I love with a positive daily divergence and a breakout that looks pretty safe from the initial breakout volatility area.

A close here or higher looks like a pretty decent area to enter the trade as it has moved out of the volatility area. The last 2 night's I've ben discussing how successful these patterns have been and how they are showing up as shorts in the sectors that have been pumped lately.

South Korean President Lee Myung-bak escalated tensions on the Korean peninsula by ordering his military Tuesday to strike North Korea's missile base around its coastline artillery positions if it shows signs of additional provocation.

As for today's POMO, it came in weak, it should be a non event.

Updates coming ....

USO

USO, thus far is in better condition the I would expect. I mentioned last night this may be a snap back trade in which the dollar (this rarely happens) doesn't mater due to the oversold nature of USO.

 USO 1 min showing a negative divergence on the 1 min chart last night, we got the gap down and a positive divergence early on this morning. Right now we even have a leading positive divergence.

 The 5 min chart has showed the more important accumulation going on as USO headed lower, this is the underlying strength of a security that I mention. Right now, we have a confirmed price trend.

The hourly chart which has been the most important in the bounce analysis has shown a 3 day positive divergence. I think considering everything, USO looks surprisingly good.

ADBE

THE FLAG IS BROKEN. This is a trade I just featured on the short side...

 ADBE 30 min 3C and the flag portion...

The daily ADBE chart...Watch volume, it is already increasing. I think this trade can be entered in a number of different ways, including a stop in the flag or phasing in. The target is at least $20 according to the measuring implications of the flag. I don't see anything currently that suggests a bounce.

For those who entered long positions today

On the SPY and QQQQ there are the first hints of possible 1 min positive divergences that may form, the DIA is not showing that. So far the Euro is showing no signs of letting up on the downside.

The US Dollar

As you know the dollar has an inverse correlation with most commodities, including the P.M.s and equities. I've ben talking about these wedges with divergences being some of my favorite patterns.

The daily chart of UUP. If the chart closes anything like it looks like now, I'd guess that we are out of the breakout zone of volatility these charts have been seeing and the dollar or UUP more specifically should have an upside target of $25 or so.

The P.M.s

GLD is a bit stronger today as it was deeply oversold, but I think the strength in the dollar is having a negative effect on the precious metals.

 GLD 1 min with a recent negative divergence that may turn this trend around in the near term intraday.

 GLD 5 min showing the white positive divergence leading to the move up, the 5 min is in a leading negative divergence.

 The 10 min GLD has not confirmed the move up yesterday and today

 The trend is rather new, so I don't think it's made it to the 30 min chart as we just see green confirmation. The red divergence was the pullback.

 The hourly chart is likely also not seeing the recent shorter term chart action yet and is showing a confirmation, but relatively speaking it is still too low compared to the highs at the left to be considered a leading positive divergence.

 SLV 1 min shows the negative divergence late yesterday and a slight positive divergence this a.m.

 The more serious 5 min chart is still in a negative divergence. Right now the 1 min chart is not showing strong enough positive divergences to effect the 5 min chart.

 The 10 min chart is also showing a negative divergence.

 The 30 min shows the start of accumulation on the 17th leading to the latest move up, but we are seeing a negative divergence now, reflected in greater detail on the 10 min above.

The hourly chart still looks pretty decent.