BIDU Core Position (Short) Update

On Feb 14th I presented BIDU as a new or add to short position, I've had ti for a while and in the green as a core short, but needed to fill out the position. On the 14th I said I'd like BIDU as an entry > $170, but in the larger scheme of things, it wasn't crucial, it's just a better entry with less risk.

BIDU made that move and is at $173, I still like BIDU a lot as a longer term core position, usually that means (when we are not in a trending market, but a choppy one or transitional one) that I want to give the initial position a wider stop as volatility and choppiness that are just hallmarks of transition could take out a tight stop with no good reason other than the stop was too tight.

As I said, I do like BIDU short here, either as a partial position, a new position or an add to, depending on your situation.

Nearly every chart since they were posted on the 14th has seen further deterioration.

The entry right now is VERY similar to our 2012 BIDU short that eventually gave up about 45% in gains with no leverage. The only difference between the two entries now and then is the scale, but as I often remind, "The Market is Fractal".

Take a look for yourself...

 Entry now has a bullish ascending triangle which technical traders will see and look for a breakout to buy, even though it's a bit too large to be a true consolidation pattern, their buying is what allows smart money to sell in to demand/higher prices, this is exactly what we did last time at the head fake move, that has already failed as you can see rather than make the next leg higher as TA traders would expect.

The bounce since has been market correlated, I don't think it is on any BIDU strength itself, like I said, 2/3rds of the market will follow the broad averages.

 This is the last big core short position we had in BIDU, a large sym. Triangle that is taken as bullish as a continuation consolidation pattern (continuing the preceding trend which was up). At "A" this is the increased positive Rate of Change in price that "looks" bullish, but is more often than not a red flag warning the asset is about to top, these are the changes in character you have to look for and often they are opposite of what they appear to be. At "B" is the sym. (bullish) triangle which was also too big to be a real consolidation triangle and more often they function as tops or bottoms depending on the preceding trend.

"C" is the breakout head fake move that retail chased and we shorted, this gave us the best entry with very little risk, BIDU ended up losing -45+% without any kind of leverage, it was a core/trend short.

 More recently, note the "Igloo w/ Chimney" to the far left. As I often point out, bottom / upside reversals are often much tighter than the larger umbrella top reversals, but they are almost always proportional (meaning the size of the base is proportional to the size of the following trend which is proportional to the top reversal process).

At 1, 2 and 3 we have a bearish daily Shooting Star candlestick which is a reversal (downside) signal, a bearish, "Hanging Man" following the Shooting Star and today a nearly perfect Doji Star (bearish loss of momentum and indecision which opens the asset to a reversal).

The only thing that's missing is a head fake move on the reversal process, the "Chimney".

 60 min chart showing most of the cycle from Stage 1 Accumulation/Base to stage 2 Mark-Up or upside trend to Stage 3 /Distribution/Top, the last and final stage in a stock's cycle is Stage 4, decline.

Note 3C's divegrence in the flat toppy area.

The 30 min chart shows the exact same, again, note the 3C divergence at the flat toppy area.

Intraday 1 min BIDU is seeing some trouble.

2 min as well

3 min

And 5 min is making a new leading low.

I'd like to see these a little more defined, but the larger/longer term charts show VERY strong bearish probabilities and I'd feel a little naked if I didn't have at least some BIDU exposure at this point in the market.

Trade Idea: Reiterating MCP Long

As you know MCP is one of the few assets I like as a long term long position, I don't mean as a trade, but as a primary bull market for the specific asset.

There are some short term signals that have been a bit ugly, but they have been contained to intraday charts and it seems they have done nothing more than consolidate MCP over the last several days.

The longer term or stronger charts that show heavier flows of funds, are showing large accumulation making its way back in to MCP which is one of the few stocks that can trade opposite the market as most stocks (at least 2/3rds) will follow the market directionally.

Here are a few charts to give you an idea of what I'm talking about...

 MCP 10 min suddenly leading positive in the range

MCP 15 min positive in the same range

You know I like it long term such as this 2 hour chart showing where GS came out with a rating update that knocked MCP down, I suspect GS has been one of the major buyers since it was knocked to the lower end of it's long term base/range.

And the 4 hour chart.

As far as a stop, since this is a core position I'd have a wider stop, but if you keep you losses small you can make multiple entry attempts if need be. This is the difference between pro and amateur traders, amateurs make one attempt, get stopped out and forget about the stock, pros will make several attempts until they get the position they want, the only secret is in keeping the losses small and I provide this stop with that in mind, not as a core position stop.

I'll let you know if I add to an already pretty full position, it would only depend on 1-3 min intraday charts.

Quick Update

As was laid out yesterday morning at 10:30 about the SPX possibly making a run above the clear resistance zone right in the area (I'd do it), and as I said in a recent post it's like "Free Change on the ground", there may be some signs of that. First of all the Op-Ex Max Pain pin is usually removed around 2 p.m. as most contracts are wrapped up by then.

Secondly, on an intraday basis I see some rotation out of treasuries, TLT to be exact, this is on an intraday scale, but for HFT's and fast traders, that rotation may be in to SPY for such a move, as long as they have the speed to get in and out.

I can't be sure about this, it was what I thought to be a probable scenario yesterday morning and seeing rotation out of a safe haven asset (but in small quantity) like TLT, means it's likely going to a risk asset like SPY since it's so close to buy limits.

It's something to keep in mind, especially if you are interested in a trade like AAPL long, this would likely be the best timing/entry on a trade like AAPL long if you were inclined to take the trade.

More as it develops.

VXX / UVXY Update - Protection is being Bid

The VIX futures just saw a big boost in accumulation, protection is being bid, this is apparent in the Short term VIX futures as well. Remember that VIX trades opposite of the market, a positive VIX divergence is a market negative signal.

 The real VIX futures just came alive with accumulation and a bid for protection, someone is getting jumpy.

To show you the scale of this accumulation, look at the leading positive divegrence to the right, this is a 15 min chart!

 VXX 1 min intraday is seeing the same thing, but the difference is, the pros knew the market rally was going to be distributed in to, they would rotate some of their assets out of protection and in to risk for such a move, but ultimately they know the probabilities as well and the asset reallocation would only be on a smaller trading scale, the major accumulation of VIX futures would be in place as it takes them some time to build a position that large, as we go you'll see that they only reallocated a small portion from safety to risk for the rally, they understand what's at stake.

THIS IS THE SAME REASON I LEAVE the UVXY long trading position open. The VXX February calls will expire worthless, the UVXY long position is not that far off and should be fine.

I may consider adDing a new call position with an April expiration, but I prefer to have an equity long trading position so if I do add to anything I'll let you know, AS YOU KNOW I DON'T LIKE TO CHASE.

 2 MIN VXX ...whenever there''s a yellow trendline I'm usually trying to point out a head fake move just before a trend reversal. There was VERY little distribution at yesterday's reversal and as you can see the divergence is now leading positive

 On a 3 min chart there's no distribution at the reversal which means it was very small, again we have a clear positive today.

The 5 min trend is in line at yesterday's highs, no distribution on this chart meaning it was VERY small and a positive divegrence building quickly today, this is part of a much larger positive as you'll see.

 On a 10 min chart from left to right, the distribution at the top is where the head fake move in the market averages was or the bear trap, smart money was well aware of this as we were more than a week in advance and rotated some money out of safety and in to risk, however the leading positive as the market ran higher (VXX lower) shows that they only rotated a little and did it at the very highs of VXX or very lows of the market, it looks like not only did they keep a large portion of the poposition intact, but added to it on price weakness.

The same 10 min chart on an intraday basis again confirms no strong distribution yesterday so whatever move "may" come in the SPX, they aren't worried about it or they would have rotated out of protection in size, the divergence only reaches a 2 min intraday chart which is very small.

The 10 min positive today alone is quite large.

Here's the 15 min chart, it shows in line on the move up in VIX and down in the market until the head fake market lows / VXX highs, even there the divergence at the top is not very large, the leading positive shows an increased ROC for 3C on the upside in to lower prices (the same concept as shorting in to higher prices if you know the probabilities), for a 15 min chart, this is an exceptionally large positive divegrence.

The market run which was one of the strongest we've seen in years did not have this much accumulation, that should tell you something.

If I can add to VXX or UVXY long, I want to do it in to intraday price weakness, otherwise I already have a position so I don't need to make sacrifices for the position, if it comes to me, I'll likely try to add what I can to UVXXY / VXX long for a TRADE, but a substantial trade.

Market Update

The USD/JPY is getting pretty negative intraday, but beyond intraday I'm going to try to show you where we are in terms of a few timeframes/trends and overall in relation to the strong upside move that was born of the head fake/bear trap , "From failed moves come strong reversals".

 USD/JPY 1 min intraday going leading negative to the right

SPY 1 min intraday, mostly in line

SPY 5 min intraday, has been in line since yesterday so seeing this go negative on an intraday basis is a good signal for timing.

30 min which is the trend that ran up just the last several weeks, you can see how close we are to resistance and this is what I was talking about yesterday in my "Scenario" post, it's so close and so easy to hit orders and make some extra money before you turn the market, it's like free change on the ground and I think that's a good analogy because it's not going to make them a lot, but it would be like change on the ground, but free.

The overall trend has deteriorated exceptionally bad considering I thought this chart might be able to hold up with a downside reversal all the way to SPX 200 day m.a. This is kind of what I was talking about with not taking a long in AAPL, these are the strongest probabilities, even though we can have short term moves above resistance, this is where the probabilities are and I don't want to bet against those without an amazing reason as we are at a trend pivot which is obvious just by the increased volatility, you don't even need the 3C chart to see that.

QQQ has not been acting well, this is the 1 min intraday, my theme was "Sell in to price strength", what I try to do is follow in the footsteps of those who move the market, it seems to be more than apparent that this is exactly what they are doing. A short here is in line with the highest probabilities and it's in line with the highest short term probabilities for the Q's

 The 3 min chart is leading negative ever since the divergence on the 18th, the green arrow just shows 3C moving in line, not positive, but this in line is within a leading negative divegrence so it's not a strong signal by any means.

 And the larger trend from distribution that turned in to a range that was the start of accumulation for the move up at the start of February, the head fake move that set the bear trap and short squeeze and the price move. This is the same chart I thought might hold together positive even with a move down to SPX's 200-day, it has fallen apart much faster than I anticipated, which changes the outlook for what happens at the 200-day, we'll see as we start moving that way, but I DOUBT WE ARE IN THE AREA AGAIN AND THIS IS WHY I HAVE BEEN LOOKING AT AND ENTERING SOME CORE SHORT POSITIONS.

IWM 2 MIN INTRADAY had enough accumulation from yesterday to create this move, but as you can see it too is failing like the Q's.

The 3 min chart shows migration meaning the failing divergence or negative is growing in strength since yesterday's expectations from the a.m. post.

And again the highest probabilities and the reason I want to enter core shorts in this area, note the leading negative from the far left start of the arrow and where price was to the far right current position of 3C/arrow and where price is, that's a lot of overall distribution which is exactly what we thought this upside run would be used for and this is documented as our view BEFORE anyone had a hint the market would move higher, everyone was still bearish. You see the range area where accumulation for the head fake started, the head fake/bear trap and distribution in to the run.

Again, this is about aligning expectations and trades with timeframes and probabilities.

AAPL Possible Trade

As I said yesterday, AAPL long is not a trade I want to take even with a set up which looks close to a move being it just put in what I think was its head fake move, that would also mean the base is about a day and a quarter or so, which for me means a smaller move and the need for leverage like call options.

It's not that I think the AAPL trade won't work, it's that the unpredictability factor/volatility has gone way up and in that situation I want to align myself with the highest probabilities which would exclude an AAPL long, in any other circumstance I'd be tempted to take the trade.

In any case, if you are interested, here's what AAPL is looking like...

 Yesterday's accumulation and the reason I closed the AAPL 535 puts which was the right call, we have a small head fake and those are generally seen just before a reversal (upside) with accumulation leading at that head fake so it's likely some stops were run and accumulated.

2 min with a strong negative divegrence, this positive is not on the same scale, but for a quick trade it doesn't need to be, it's just about using the right tool for the job and realizing that this is not likely to be even a swing trade long, but a short term trade, thus the need for leverage.

 3 min chart shows the current positive and also its scale vs the last negative

 And the 5 min chart is about as far as I'd go with this trade.

I think this 10 min puts a roof on AAPL's gains on a bounce, the positive is about the same time and size as the broader market and you can see it has gone very negative for the timeframe so this is the highest directional probability over a longer term-say week/s, but the 1-5 min charts are positive enough for a bounce which I'd guess would be to the $550 area or so.

UNG Follow Up

This is the P/L I was trying to protect in UNG...

UNG filled at $27.24 so the P/L of +30.31% is about right, not bad for a stage 1 base with no leverage.

 This is the weekly chart and when we noticed a change in character and started following UNG, note the increased volume during 2012 and then again most recently as UNG looks like it's finally ready to move to stage 2 mark up or trend.

 The daily chart base area and recent breakout, however there's resistance in the area.

Here's the resistance, 3 attempts and volume is very high for the region which is indicative of churning when no additional gains are made. To the right there's a textbook bearish Shooting Star on increased volume which acts as a downside reversal signal, the increased volume just about doubles the probabilities of the candle being successful in it's reversal bias; since we have only seen small bodied stars.

 The 2 hour chart isn't in bad shape, but I would never look for a pullback, even a strong one on a chart this strong or long (2 hour), however there are some recent signs.

At 30 minutes it becomes more clear, especially the resistance of the entire zone.

 The 15 min chart is where I'd look for pullbacks and this is exceptionally clear in the negative leading divegrence, especially on the last run to try to break resistance.

Intraday the 2 min chart is enough of a timing signal for me to take action, but as I mentioned, it may not be the best intraday exit, but I'm fine with that as the probabilities are heavily stacked on favor of a pullback, I'm not going to risk gains for an extra percent or so.

This is why I said it may not be the best intraday exit, the 1 min chart was positive in to the close yesterday giving us this gap up which is in line, but this is not enough for me to stay in the position any longer.

I will look for a pullback to re-enter a new core long UNG position as I believe in this as a primary bull market asset over the long haul.

UNG Trade Management

As you know, for nearly 2 years we have been tracking the changes in character in UNG since its 2011/2012 downtrend and large base. I love UNG as a long term primary long position, I think it will be entering its own bull market independent of the broader market and as such I've almost  always had a long position there except when I see pullbacks coming that look obvious, then I take profits, wait for the pullback to end and re-enter. 

As you know, the DGAZ trading long has been hammered (on an expected UNG pullback), but I've maintained it because I believe in it, which also means I believe UNG will pullback significantly which will open new opportunities for those who want to get involved.

However for now, even though intraday this may not be the best place, I WILL BE CLOSING THE UNG CORE LONG (I took partial profits last week). I'll have some charts up shortly, as I said there may be a better intraday exit, but I'm not too concerned with a percent or so here or there, I'd rather have the dry powder ready to go for new opportunities.

THIS HAS BEEN AN EXCEPTIONALLY DIFFICULT DECISION TO MAKE BECAUSE I BELIEVE IN UNG, but I think the probabilities are high enough that a pullback is in the cards.

IOC Trade Update

IOC has been in the trading portfolio as one of the few non-market correlated longs. I liked IOC because of a major capitulation event followed by a fairly substantial base, the trade is in the green and it looks like it's just breaking to stage 2 (very early). If you liked the idea of the position, it's at a reasonable level here and an intraday pullback or fill of today's gap would make for a low risk entry.

 5 day chart showing the capitulation event and following base and as volume starts to rise, price is breaking out to stage 2 mark up and we are able to apply a Daily Trend Channel Stop now.

 My custom, DeMark inspired Buy/Sell Indicator shows several buys and sells, it has been fairly accurate with tops/bottoms and is currently on a long signal.

 60 min 3C chart showing clear distribution just before that nasty break and capitulation event, smart money knew something in advance. Since, IOC has formed a nice base and has a good signal. I CONSIDER THIS A LONGER TERM TRADING POSITON, BUT NOT A CORE POSITION, IT MAY BE MONTH/S.

 The 30 min chart where accumulation picks up on a head fake move lower and ever since.

5 min chart in line, but positive at the head fake move, this is when IOC's character in the base changed toward the bullish and it's a much larger base than I originally anticipated  which means it can support a much larger upside move than originally planned for.

The daily trend channel can now be applied as it is just breaking out and there is some trend to track, the current stop on a closing basis is < $52 so with a slight pullback this could be a nice entry with lower risk, if you like it you might want to put in some price alerts. For those in the position, this is when we just let the Trend Channel do its thing.

A.M. Observations

After having looked at futures last night and this morning, I don't think there's anything that's exciting or any  different than the expectations laid out yesterday at 10:30 a.m., I think they are likely still in effect with Options Expiration in play which "should" be the dominant force today. As far as the expectations, I covered them in last night's Daily Wrap, but they were first posted yesterday morning in "Scenario"and I think they still hold.

 Overnight the Index futures simply did what the USD/JPY did, example...

 USD/JPY (red/green bars) and ES (purple), moving tick for tick overnight and this morning.

 ES 1 min saw a negative divegrence at its overnight high and as it slipped a positive divergence that simply kept it from slipping too far, I think this is for the opening and Maximum Pain Options Expiration Pin.

 The 5 min chart of ES (SPX Futures) went leading negative in to the overnight strength which is what I suspected yesterday in my early morning scenario, namely that any higher prices are a gift to sell short in to or sell as pros were clearly doing.

 The longer 15 min trend which is negative (ES) also reinforces that plan.

Most importantly, looking at the bigger picture of ES on a 30 min chart shows clear distribution in the rounding area, without even seeing this chart yesterday it was my opinion that price strength should be used to sell short in to, this chart should make that clear, that is what pros are doing WHICH SHOULD MAKE CLEAR AS WE PREDICTED JAN 31ST, THAT'S WHAT THIS ENTIRE MOVE UP WAS ABOUT IN THE FIRST PLACE.