JAZZ Trade Idea (Short)

Here's another one, remember we don't want to chase, we want to see weakness and let the trade come to us on our terms.

First lets look at the long term or strategic view, then we'll look at the tactical set up.

 At first look, JAZZ looks pretty strong, there are some RSI divergences, one very recent followed by a breakaway gap on heavy volume. It would seem that something is changing in JAZZ, but it is a bit difficult to define from this chart alone.

 Add a linear regression channel and it becomes more clear. JAZZ early in the trend was moving in the top half of the LN channel, strength. After the first break of the channel, JAZZ never recovered that same momentum and was stuck in the lower channel until the most recent break.

 The daily 3C chart tells the same story, nice powerful positive divergences early on in the trend, through late 2011 and 2012, the divergence is leading negative.

 A closer look at the daily chart, JAZZ broke down hard on a high volume gap, since it has filled the gap so the gap is not a likely target. We also have a bear flag in April, actually a bear pennant as the consolidation is a triangle, volume confirms this. TA traders are looking for the pennant to break to the downside and continue the bear flag's implied trend. I don't argue with the bearishness of the bear flag, I argue with the break of the pennant, I believe it breaks up and shakes out the shorts before continuing down, so if we can short JAZZ in to the strength of the upside break, we have a pretty decent position.

 JAZZ 60 min 3C confirms weakness in the area of the most recent top formation with a leading negative divergence.

 The shorter 15 min chart shows a positive leading divergence right at the bear pennant, suggesting the expected break to the downside, will actually break to the upside first, shaking out shorts and giving us a nice entry on price strength to short JAZZ.

This is a VERY volatile stock and Biotechs are not always my favorites, you may want to check if they have anything in the pipeline coming up for FDA review, but based on the 3C charts, as we just saw with HGSI, it doesn't appear that way. Since JAZZ is so volatile, I have a 5 day trend Channel stop on it, that puts the stop near $50, hopefully JAZZ can break out to the upside and lessen that risk , $46, $47 or something like that would make the trade a lot more appealing.

If you like JAZZ, I would set some price alerts to let you know if it is moving in our desired direction.

USO Update

Yesterday I entered some USO calls on some positive divergence, the EIA report came in with a build, although I have no idea what consensus was. In any case, shortly thereafter my calls got smoked as USO tumbled.

Did I sell the calls? No. Am I being stubborn? No.

Here's why I continue to hold USO calls.

 Here's the 2 min chart with a leading positive divergence, stronger than yesterday's

Here's the 5 min chart with a leading positive divergence much stronger than yesterday's. This is why I continue to hold the May calls.

HGSI-100% pop today

I'm not going to take bragging rights on this one, although I hope some members stuck with the trade, if you did stick with the HGSI long idea from Feb. 28th, let me know-I'd love to hear it.

HGSI Today...

Up 100% in 1 day.

The point of this post, it's not bragging right, it is more 3C related. Going back to the HGSI post of Feb 28th, here are a few excerpts,

"HGSI was an earnings play, we had several members make $500-$1000 in after hours. I would point out, that because of AH trade conditions and retail's willing ness to chase, that is usually where you will see maximum gains.

That being said, when HGSI was mentioned, I said this positive divergence could also be related to something else like a drug in their pipeline, FDA, etc. We saw something similar with the RIMM earnings which beat, but the next morning it dropped 9%, we held because the 3C charts still looked good, a few weeks later they had a MAJOR shake-up and replaced their dual-CEOs and RIMM rallied, we made money on that position despite the 9% drop.

So in short, I still like the looks of HGSI as a long trade, here are the updated and long term charts since earnings.

 Bottom line, I still like HGSI as a long."

Obviously the bold print is the key.

And why is HGSI up 100% today? 

Human Genome Shares Soar on Glaxo Bid

As I have said many times before, we can often see what smart money is doing, but if we wait for the reasons why, we will not profit from our observations.

Now, PLEASE, someone tell me they caught this move! 

AAPL Update

 AAPL is forming a triangle right at the $600 area, this would be considered a continuation triangle with traders expecting a break lower, this is almost exactly what I pointed out in the BEAV trade idea yesterday. Here's BEAV this a.,m. doing the exact opposite of what traders expect and exactly what we expected.

Although a much large triangle, it was below resistance and a continuation triangle as it is symmetrical, the expectation from TA is a break down, so Wall Street does the opposite and breaks it up as we expected yesterday.

 The 1 min AAPL chart looks like it wants to break to the upside.

 So does the 2 min, it is very close to the apex so any break should come soon, there may be a slight head fake move just as BEAV did this morning as well before a move higher.

Remember that 15 min AAPL chart that was looking strong and causing me some concern about a clean signal? Here it is breaking down, if AAPL moves higher the divergence should be deeper giving us that clear signal I wasn't sure if we'd get this time.

Market Update- Wall Street Arbitrage

This is a bit of an interesting update and this shows you the power of looking at things such as currency pairs rather than looking at MACD Histograms like the rest of the crowd. There's no edge in knowing what everyone else knows, the edge comes from seeing what everyone else missed.

Here are the 4 main averages, all 4 did the exact same thing. Recall one of my earlier posts today was that the EUR/USD currency pair is firming up. I use the EUR/USD because of all the currency pairs out there, this one carries the most weight in the US Dollar Index, 50% to be exact. That means that $USD weakness (which helps most risk assets from stocks to oil) can be tracked easily using the EURO as a proxy. If I were to use the $USD, there would be an inverse correlation that makes divergences hard to see, using the Euro, you get roughly the same $USD information, but it has a direct correlation with stocks, Euro up/Stocks up and that correlation is much easier to view when looking for divergences. You should check it from time to time and make sure the $USD is doing what the Euro suggests, but for the most part it is an easy way to view correlations. Traders don't give enough credit to what really moves the market and currencies are a big part of that.

On 1 additional note, I have to say, I'm surprised the market is holding as well as it is after the Spanish auction and Initial Claims missing, if I had to guess, I'd say the SPY $140 Friday pin is probably the cause as they can't let the market slide too far from that area, thus there's likely some Wall Street support.

 The comparison symbol on all of the charts is the Euro in white, the index in green. Here's the DIA/Dow, note the big shakeout in volume after 10 a.m. on a shakeout move, also note the Euro was making a higher high there, this is dollar weakness, which is helpful to the market. If traders saw this, the probably would not have been shaken out. This leaves a fairly good size position of shares Wall Street could accumulate as someone has to take the other side of the trade.

 Here the 5 min intraday chart shows such a positive divergence right at the shakeout, why wouldn't there be a positive divergence when Wall Street knows the $USD is weaker at this second dip?

 The longer term trend though is still very much intact since we first saw accumulation April 10th, there has been a persistent leading negative divergence indicating selling in to any strength or shorting.

 The same happened in the IWM, it made a lower low, shook out longs as the Euro made a higher low, why would they not accumulate this to support the market?

 IWM intraday positive divergence at the shakeout.

 Longer term IWM trend since April 10th

 QQQ

 QQQ positive divergence on the shakeout.

 QQQ longer term trend.

 SPY new low shake out, again higher low in the Euro-weaker dollar.

 Again, Intraday is shows a positive divergence right at the shakeout.

The longer term trend since April 10th.

So far so good for our analysis and expectations.

IBM is another to keep an eye on

IBM was also mentioned here yesterday as a short sale candidate, the premise of all of these ideas is "let them come to you, don't chase".

 Here are the two target zones

Here's IBM this morning looking like it has a little life.

Keep an eye on BEAV as well...

I also mentioned BEAV as a potential short trade yesterday , you may remember this one was in a triangle just below support, a triangle that most traders would expect to break to the downside, but we have some information that it will more likely put in a false breakout on a volatility move, making it a candidate to short in to price strength and a false breakout move. Well BEAV looks like it wants to try breaking out of that triangle...

 Here are two potential target zones...

Intraday on a 10 min chart, here's the triangle, remember this is the one technical traders would be expecting to be a continuation consolidation and break to the downside, which it briefly put in a downside head fake before moving higher.

Early Market Indications

We are seeing a little firming up, usually it would be a gap fill, but in this case it looks like the Euro is firming up after the Spanish auction slide, thus the $USD is weaker given the market some breathing room, for the moment anyway.

 Yesterday's close, the overnight ramp before the Spanish auction and slide after.


A closer view shows the Euro firming and the $USD weakening.

Keep an eye on the CBOE Trade Idea

Yesterday I posted the CBOE short trade idea, but first we needed CBOE to move up from a long slide it has been engaged in.

I know it is early to make any solid judgements, but the opening action suggests the slide has halted and CBOE is going to try to bounce.

 Note this morning's unusual volatility and volume as well as late yesterday afternoon, it appears change is in the air for CBOE.

On a daily chart the Doji like candlestick of today appears as if downside momentum has run out, we only need CBOE to climb about a point to the $27.50 area.

Overnight

Spain sold the debt they aimed to sell, the controversial 10 year auction was not pretty, the yield came in at 5.74% vs 5.4% in Jan, the highest yield in 5 months and the 3rd highest 10 year for Spain ever. The Ibex market is getting hit hard, Financials are leading he way down.

In fact part of the disappointment with the auction is close to something I mentioned yesterday, I said I wouldn't be surprised if the auction was cancelled at the last minute. Apparently analysts expected Spain to try to raise much more than the $1.42 bn they auctioned off, so it does appear they may have put up less for auctioned than initially planned.


ES as mentioned last night, popped in to the auction and then, well you can see what happened after 4:30 a.m.

Italian 10-year bonds have moved up to 5.59%, Spanish 10 year are at 5.9%,  credit remains off across Europe, Equities and Credit  are especially off in the Spanish market.

In the US, Initial Claims miss again...

Prior	Consensus	Consensus Range	Actual
New Claims - Level	380 K	365 K	350 K to 375 K	386 K
4-week Moving Average - Level	368.50 K			374.75 K
New Claims - Change	13 K			-2 K

This is the 9th miss in a row. Last week's 380k print has been revised higher, as usual, to 388k.

We have more data at 10 a.m.