FSIN-Second Chance Short

This is why I closed out half of my short position in FSIN

I shorted and so did other members at the target area we were looking for-$7.20, it took a little patience, but we made it there and were handsomely rewarded in the trade. FSIN is bouncing on very weak volume, I'm not sure if it can make it past resistance around $6.50, but I would consider looking at this as a short position or add to around the $6.50 area, if it can make it a bit higher, all the better. There's a lot of potential downside in FSIN so keep it on your watchlist and set a price alert for $6.50 or so to take a look at it in the area. I can see this one trading down to $2 and maybe less, it's a huge multi-year top.

URRE Follow Up

Make sure you read the original idea....

The original idea came when URRE was down 6+% on the day, later that day it went on to recover and end in the green, a false breakdown.

URRE has now broken through the short term downtrend line.

Here's the 15 min 3C chart in a leading positive divergence.

I like the trade (long) around these levels. A tight stop can be used at the Trend Channel $1.47, if you prefer a wider stop as I usually do, then look at support at $1.52, it shouldn't head back down there if it's getting ready to make its move.

Market Update

SPY 1  min has now filled the gap as the opening divergence suggested, it's now going into a negative position.

The 10 min chart is also showing a negative divergence. I still think it looks a lot like the market needs that pullback we spoke of, the DIA hit the target, the SPY/QQQ which look the same in 3C, didn't come close.

There's a small 1 min negative divergence in USO right now.

I'd watch for a pullback to the 20 sma on a 10 min chart, much below that and I'd exit any long UCO/USO positions until things clear up.

As for UCO

Yesterday around 3:30 I announced my intension to hold some UCO (leveraged long crude ETF), I'm thinking about selling the position before the 10:30 EIA Petroleum report, just because of the knee jerk volatility often seen when the report first comes out. I may re-enter the position and if I see an opportunity there I'll be sure to let you know.

So far UCO is up 2.21% on the day.

Pullback Target

Yesterday 3C was showing signs that we'd see a pullback, thus far the DIA has hit the target I set yesterday in this post.

As for the open, the 3 major averages were positive at the open suggesting some early lift into the gap.

I still feel it's important for the averages to back and fill a bit before moving higher.

FOMC D-DAY

Today's the day, at 12:30 the FOMC will announce their policy decision and at 2:15 Bernanke will hold his second post FOMC meeting news conference, this is only the second time a Fed chairman has done such a thing. In any case, either event could cause a wave of volatility.

Finding Yourself

Back in 2006 when the spiritual craze was everywhere you looked, I wrote a piece at Trade-Guild.net called, "Zen and the Art of Investing" You'll see by some of the references, it's a bit dated, but I hope someday soon you'll take 15 minutes to read it as the conclusions are just as valid today as they were back in 2006.


I've spent years writing about the markets and sharing my experiences, I love what I do and I love to be able to help people who love the market. Friday I posted an email from a member who took my analysis of the market and what I thought the most likely close would be ($127.25) for the following day. This member created an options trade and made $1000 for the day. Another member who's been with us for several months has taken his portfolio from 40% down to regain all of the lost ground (nearly doubling his return) and is now in the green; that's amazing performance and discipline.


Today I received this email:


"Hi Brandt,

Thanks to your 3c analysis, I banked 70% on SPY calls bought from yesterday's lows to today's high. Dumped them right at the last move up before the close, it was on 10 contracts so paid for one year subscription fee and more."

This member has been with me a long time and I know his trading style pretty well. He often trades the Wednesday morning energy report when we find underlying action that is counter to the market's move. He's found a great niche in selectively using options and has had so many great trades I can't even begin to count.

The point of this is not what I did, I'm providing information and ideas, these members are applying that to their trading styles and are getting incredible results. I love to hear these success stories because I see WOWS achieving what I hoped WOWS could offer. It's not a pure stock picking service, or a newsletter, but hopefully a process and a different perspective on the markets and trading. I don't want credit for the trades and don't deserve it, I'm giving you the information you pay for each month. You guys are the ones making and managing the trades. I want that last sentence to be clear-YOUR SUCCESS IS OF YOUR OWN MAKING! It's important that you realize that.

I feel you are most successful as a trader when you have found your niche, what works for you; that's why I offer so many different ideas, we have so many unique traders. 

If you haven't found that snug fit yet, it's okay, it's a process and as the article mentions, a sort of spiritual journey. Risk management can keep you afloat long enough to find yourself when it comes to the markets. A trading journal is absolutely indispensable for finding what works for you and what doesn't. There's no one size fits all and the process of finding what works for you is a never ending series of adjustments, discoveries and lessons.

The message I really wanted to get across is, find yourself (in the markets) and success will find you.  

I'm really proud of the wolf pack, I've watched so many of you grow and I believe in you all. Just make sure when you send me your emails of success stories, you remember that the trade was of your own making and be sure to give yourself the credit you are due.

Now, quickly on to the markets, Japan and the Asian markets like what they see in the Greek vote. Dow futures were up about 16 points at last check, although a lot can happen in the next 10 hours. I still feel there's enough accumulation to carry this bounce higher, ultimately I'm looking for the daily 50-day moving average, and then I think the next plunge could be one of the worst we have seen in several years. One bridge at a time though.

I'll see you in a few hours-and congratulations S.Y.!

Today's Market Internals

I think the thing that stands out the most is the number of gainers. For +5% gainers and -5% losers, the number was quite strong with 303 5+% gainers including our NUGT position today. The -5% losers came in at 47 (and likely many of those were leveraged inverse ETFs).

There was no dominant price volume relationship, but for all NYSE stocks, gainers came in at 5523 and decliners at 1190 a 4.6 : 1 ratio.

For the Dow 27 advances, 2 declines and 1 unchanged.
The NASDAQ 100 saw 93 advancers and and only 7 decliners!
The S&P-500 448 gainers vs 51 decliners and 1 unchanged-a nearly 9:1 ratio which is a better measure of the market considering the NYSE composite includes inverse ETFs whereas the S&P-500 does not.
The Russell 2000 came in with 1671 gainers vs 181 decliners.

As for the charts...

Breadth

 The hourly NASDAQ 100 Advance / Decline Ratio spiked 2x last week, we also had two days of dominant price volume relationships that suggested a short term bottom by way of capitulation. Today's A/D line looks good as you'd expect from the internals I mentioned above.

 The % of stocks moving above their 60 min 50 bar moving average is also quite strong, with 80% now above the hourly 50-bar average.

It is important though to keep the big picture in mind, and this daily chart of breadth for the NASDAQ 100 shows you were things went badly wrong at the new highs in May.

As for today's trade...

 This is the SPY 10 min Bollinger Bands. It's extremely bullish when an average walks the upper band as we saw here until about 11 a.m. as we approached a resistance level. The longer the chart time frame, the more important this behavior of walking the bands is. Conversely walking the lower band is extremely bearish for an index. I think this chart simply points out the importance of today's resistance zone.

 This chart shows volume by price and once again, you can see sell-side volume had a much higher ratio to buy side volume around the resistance level.

Finally, as you saw all day with 3C, TSV 55 on a 5 min chart shows the same action 3C was showing and once again the resistance level and the subsequent test of that level saw distribution.

As to tonight's major event, the Greek confidence vote...

Panpandreou won the vote at 155 to 145, a pretty much straight party vote as his party controlled (I believe) 153 seats after two defections.

The Euro's reaction thus far (which I think we should consider to be knee-jerk) has been to sell the Euro sending the $USD higher. It's not yet a bloodbath or anything like that, more of a sell the news event. However, if this keeps up overnight, the dollar should strengthen and the inverse correlations like equities, could see some downside selling pressure, which would be roughly in line of a pullback that seems to be in order before the average try to move through today's resistance.

Here's' the EUR/USD pair as of 6:30

The Green arrow is where FX opened the week and the red box is the reaction to the vote.

In after hours trade, the market is down marginally, silver is up marginally and GLD is just a bit above unchanged.

I don't like reading too much into knee jerk reactions and will check the FX pairs in a few hours to see what sentiment is looking like.

I'm sure I'll most likely have a follow up post tonight, watching for any obvious changes in sentiment.

Miners Trading System Signal

This is one of those times when a trading system can't consider all the variables and there's an element of discretion.

System 1 which went long NUGT today actually moved out of the trade at the close. Considering NUGT posted a 5.17% gain (if bought on the open) you may want to keep the position open. The system's standard stop-loss is 3% below today's open @ $26.81.

The reason I mention this is 1) the signal to buy NUGT and subsequently today to sell NUGT tomorrow morning is the first system that has more false signals. 2) System 2 which has less false signals has moved closer today to triggering a long in NUGT as you'll see below.

System 2 is the blue line and a crossover above the red line is the signal to buy NUGT. Last night system 2 was close to a crossover, tonight it's even closer (last night's position is at the red arrow).

This is the age old dilemma of automated signals, whether to take the signals as the system offers them or can you get better performance by intervening when you feel there may be a good reason to do so.

As far as 3C, NUGT looks pretty good, there's a slight 5 min negative divergence suggesting a possible pullback a bit, but nowhere near what the market has been showing.

So I leave it to you.

The official system signals are:
System 1: Close NUGT in the a.m. and re-open DUST long on the open.
System 2: Continues to be long DUST (although it's very close to a NUGT long signal).

Feel free to contact me with any questions you may have.  (BT46N2 @ Gmail.com)