Wolf on Wall Street

Monday, August 15, 2011

Another Pullback in USO

You can see where the first neg. divergence sent prices lower, there was no accumulation for the 11:15 rally and we still have a negative divergence so I expect another pullback shortly.

On Friday, July 12th I brought you the PT long trade idea, up about 3.25% today.

Check out the original idea, but here's an alternate I'm looking at that may help you set some targets and expectations.

This could be the left shoulder and the head of a fairly large inverse Head and Shoulders bottom, if so, then as PT approached the neckline just above $9.00, we should see some short term distribution, it may be an area to take profits and the bottom trendline may be an area to re-establish a new long position looking for the breakout, which would imply a target of at least The mid $10's, but think more likely closer to the $12 are. If you are in the trade, keep n contact with me as these levels are reached.

RIMM Trade

I mentioned RIMM about week back, heres the current chart and the game plan.

Here's the important range in RIMM, with their new models rolling out they should get a little boost, but in won't be until their complete redesign before they really are any competitor for Google's Androind based phones and AAPL's I phone. I would keep an eye out for a break above the bottom resistance trendline at $25.60, especially on volume, you may want to ride a little swing trade as I think t will break the upper resistance at $30.25 and may move toward the gap around $34.50. It's in that area would start looking for a short set up in RIMM to take it too new lows on the next leg down.

LDK LONG TRADE FOLLOW UP

On 8/11 I said would start to take profits in LDK and look for a new entry at the 50 bar m.a on a 15 min chart

This is the importance of having a charting system to set those price alerts.

LDK pulled back almost exactly to out target area, a few simple alerts would have you at a 7+% profit already today.

Let me know if you need help finding a good charting program.

Market Update

This looks to be about the area for a pullback in the market to commence, we may get 1 more negative divergence, but it''s not needed.

DIA

QQQ

SPY

USO UPDATE

I'm still looking for that pullback

The USO 1 min divergence has grown worse.

USO is trading inversely to the dollar which just took a hit moving down, but it will likely stabilize near this area and USO should pullback.

USO-Early look

Earlier USO confirmation is falling apart suggesting pullback on the 1 min chart.

The 10 min chart also suggests a correction

The 30 min chart suggests that after the correction, which should be a decent area to buy, USO has upside to it.

I'm guessing this is about where the correction is heading.

Goldman Sachs-

Here's a near perfect example of how Wall Street works. GS lifted IBM to a buy. Now if Goldman says, "Buy a Bridge!" you can be darn sure, they've got a bridge to sell.

IBM is up nicely today...

Here's the 3C chart of IBM... Notice the positive divergence/accumulation in the base (who do you think is behind that?), the breakout is stage 2 mark up and that's where they usually start feeding out shares in to demand. If GS says IBM is a buy, then we are probably at our rally. Stops should still be wide, the head fakes are still out there.

Early Look at SLV/Silver

SLV's recent trade over the last 2 days has been that of a bearish ascending wedge, suggesting some short term downside after a false upside breakout. There's also an area of resistance that's held several times right here.

You can see how 3C has backed off each time resistance was approached, well it's doing the same thing now. I'd think SLV will pullback to continue in the range for a bit longer.

Early Update

So far a nice gap up, 3C 1 min is confirming the gap and is trading in line (confirmation)
with price thus far. However, as we all know, the first 90 minutes of trade is largely centered on taking advantage of retail so we'll keep an eye on the situation and be on the lookout for some volume to come creeping in.

Financials (XLF) will be crucial, they need to firm up, last Friday they were the weak link.

3C Quick Start

Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.

The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.

We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.

You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.

Welcome to Wolf on Wall Street.

The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.

Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.

Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.

I do use other scans and systems when market conditions warrant their use and may change strategy with market conditions.

The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.

Position Sizing

The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.