Wolf on Wall Street

Friday, March 4, 2011

SPY, USO, SLV

SLV

SLV 1 min 3C is confirming the move up this a.m., however...

Not so on the 5 min and the breakout could represent a false breakout, if so, SLV will be set for a swing short trade, we need to se the red trendline broken on 1 min distribution.

SPY

Still, the downdraft is being confirmed in the SPY 1 min 3C chart.

The 5 min has an obvious negative divergence which is partly what led to my post yesterday suggesting I feel comfortable saying the distribution cycle from the bounce up has started.

USO

1 min chart is suggesting at least profit taking here, we'll see if it develops into something more important. Remember to catch my post this morning "What You Need to Know About USO"

So far, the 5 min isn't too bad off, it isn't in confirmation, but it can take some time and this early in the a.m. I wouldn't expect it. However if we don't see improvement here in an hour or so, it could suggest that the 1 min chart above is showing more then just profit taking.

Here's an intraday stop, a 22 bar m.a. on an hourly chart should roughly approximate the Trend Channel setting here. Don't let a winning trade go against you!

With Libyan oil reportedly burning, the Euro is not liking the news.

Key to Europe's oil needs will now be Nigeria where rebels have attacked oil facilities numerous times over the last ear or so. Nigeria produces nearly 10 grades of oil, many suitable for replacing Libya's low sulfur content-unlike Saudi Crude. Watch events in Nigeria very closely, this is a fulcrum and instability there will have profound effects on Europe, thus the market and commodities complex.

Saudi Arabia Heating Up Again

Here's the latest Naval Deployment Map, it'll be interesting to see if the CVN-70 Carl Vinson moves west, if so, then things may be a little hotter under the surface then we are being told.

Some recent protests

There are quite a few new videos on Youtube as well.

USO gaining on reports of Libyan Oil Well Burning

Could this be the start of a Gadhafi "scorched earth" campaign much like Saddam in the first gulf war?

While the Enterprise should be close to transiting the Suez Canal, one must wonder if a strike on Gadhafi's airbases may come before the Enterprise reaches the Libyan shores Sunday/Monday?

CDTI from last night (long) Just triggered

The coming Libyan conflict....

The rebels are pretty ineffective, yesterday I saw a picture of one holding a portable shoulder fired heat seeking anti-aircraft missile, he thought it was a RPG. the Libyan airstrikes using outdates miigs have been just as ineffective. I'm starting to wonder if the US/NATO is looking to establish a base of operations in MENA through Libya to deal with future conflicts?

This would of course raise anti-American/Western animosity and you can be sure the Arab League will be up in arms, but part of the reason we are in Ira is to project power. Note where our bases are, on the boarders with Syria and Iran and our supply route through Kuwait.

Trade Alert-NGAS (long)

My Trigger is $.60 for a long-remember this is very speculative.

I like the set up with the little false downside breakdown. volume is up as well.

60 min positive 3C divergence indicating accumulation

15 min positive divergence and accumulation at the false break down.

Market Update

It's still very early, but here's yesterday's forward looking market comments about The Distribution Cycle and further comments on Price volume Relationships yesterday

So what we see thus far seems to fit very well with distribution having taken place, possibly still taking place and this is where I'm looking to get a little more aggressive on shorts, not a lot more aggressive, but making sure I have some positions I like at least started.

Below is the DIA, IWM, QQQQ and SPY 1 and 5 min 3C charts, all in negative or leading negative divergences.

DIA 1 min

DIA 5 min

IWM 1 min

IWM 5 min

QQQQ 1 min

QQQQ 5 min

SPY 1 min

SPY 5 min

The Dollar is down, but is it out?

FXE Euro Trust 1 min negative divergence

FXE 15 min negative divergence

UUP seems to confirm with a 1 min positive divergence

And a 15 min positive divergence.

Remember, a higher dollar will lower the price of oil, in fact most commodities and equities, historically any way.

PEIX from late last night deserves a look here (LONG)

Last night's charts

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.