Wolf on Wall Street

Friday, June 7, 2013

It looks like MCP is Going NOW

I may either open a long equity position or add a July Call

For an Equity Position of VXX Calls... UVXY Long

This is a 3x leveraged ETF, basically VXX 3x long. I prefer to use this as a quick trade, luckily that's my intention.

Opening VXX June Monthly $19 Call

This will likely be about 1/2 of a normal speculative position

I'm thinking of grabbing some more assets like the XLF puts (FAZ long is a good choice for equities) as a hedge, it's starting to look more like this pullback will have some guts to it and will last longer than an end of day move, I'm guessing maybe the EOD today and in to Monday at this point.

So I'm thinking as the market is bouncing a little here, I may grab some more hedge protection (market shorts-but trade shorts like FAZ, GLD long, SQQQ, UVXY, etc).

Here's what I'm seeing.

SPY 1 min showing today's negative divergence and a new slight positive sending it up a bit right now.

The overall 5 min is still in a very good long position, but the 5 min chart today does suggest a pullback bigger than just an 1 or 2 hour move.

Where it really matters at the 15 min SPY, it's still strong as ever so again, a pullback at this point would be a gift, but I want to take calls and get that momentum and add them back after a pullback is confirmed to be ending. This should certainly lock in shorts.

HYG's intraday charts 1, 2, 3, 5 min etc all suggest a pullback like the SPY, but again the important 15 min is leading positive, that is supportive of the market when it makes its move.

However assets that suggest a pullback (like the SPY 5 min chart) are confirmed with assets like TLT 5 min positive, so TLT long or a call for a pullback move would be an obvious trade.

At 10 min there's nothing in TLT, this confirms the SPY (and other averages) strength on the 15 min along with HYG, the bigger move.

VXX is also positive at 5 min, suggesting it and UVXY run higher and the market lower, but again...

at 10 mins it's leading negative.

SO I may add some pullback hedge positions as I think they'll last in to Monday, then I want to add the calls back for the Bear Trap Squeeze.

I told you they wouldn't make this easy.

MCP Update

I've liked this one for a while, so much so that I have a pretty decent loss in a call option, but it expires the 22nd so I think I still have time and if the right scenario plays out, I will add to it.

Here are the charts, when you get to the 2 hour and daily, you can see why it has been so appealing to me and how much upside potential this one really has-this may be one of my favorite trading longs and not based on any bear traps, based on its own charts only.

I'm going to leave most of the analysis to you due to time, you should know what I'm pointing out.

2 min

5 min trend

5 min up close

10 min

30 min

2 hour

1 day-

This has been building a large base, it came out of stage 4 and looks to be completing a new cycle at stage 1.

What would cause me to add? What usually happens right before a reversal?

SLV

I would think SLV would track GLD pretty close, it doesn't have the same signal, which is just barely enough to enter a spec position, it has 1 chart that's decent, that's the 3 min, after that, especially at 10 min, it's leading negative.

Another trade opportunity is to set alerts for the gap fills and you should be able to initiate a lower risk short position in GLD and SLV, the market should be just about to turn back up around the same time.

Went With GLD Calls, Weekly June 14th $133.50

GLD VERY Speculative Long-

I'll probably give this a shot, this is the same as the intraday pullback trades, very speculative, but I think GLD could fill the gap so I'll use a call that's in the money, but as soon as that gap is filled or I get a signal, I'm out of there.

The 2 min positive today

3 min positive today-that's all we have on the long side to trade, after that there's nothing.

As you saw with the others, like the market's 15 min charts very positive, the GLD 15 min is very negative so a gap fill maybe, but not much more.

VERY SPECULATIVE, but I think it can work if you are nimble.

IBM As an Example

I wouldn't encourage a trade in IBM either way right now, but this is what the entire risk asset market looks like so it's a fair example to delineate between an intraday pullback and trying to day trade that, vs the short squeeze bear trap of this entire week.

IBM's 2 min intraday shows a negative divergence today, but put in to scale, you can see it is nothing compared to the positive, I do believe it is enough to pull IBM/the market back which does what we need and collects more shorts, but it also shows how an IBM pullback would be a market gift to add or start new positions to ride the bear trap.

The 3 min chart shows an even smaller intraday negative and larger positive trend, even the time or reversal process to the downside is not big enough to be any serious threat.

Then the IBM 15 min chart, this is the main mid term trend, not long term because eIBM is a core short, but this is the bear trap positive divergence and why I'd want to add to positions/Calls on a pullback, this is the highest probability for the pattern of the last 1+ week and then it's on to building and filling out shorts.

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.