Wolf on Wall Street

Thursday, April 5, 2012

Last Post

I have to get to a 3:45 Dr. Appointment, looking at the 3C charts and other charts in general, the market is moving against all correlations again. It seemed like we saw noon selling from traders planning on leaving early for a long weekend and not it seems more algo driven trade, but I need to take a closer look. The positive divergences on the 5 min chart are ruined for the most part, at least for the SPY, IWM and QQQ, the DIA maintains some semblance of a divergence, however tomorrows NFP print will be the main attraction which won't be acted on until Monday.

I'll update the market and what has gone on in the lat hour of the day later, I suspect though with fewer players/less liquidity, volatility should be expected to be higher.

See ya soon

AAPL Update

AAPL is in a triangle right now, it's probably highly visible, I'd expect several moves around the apex.

The triangle intraday

a 1 min positive divergence

2 min is leading negative, the difference between the 1 and 2 min charts is pretty extreme.

5 min leading negative

Long term the 60 min is leading negative with most of that coming in the last month.

Market Update

The SPY and the DIA picked up a small intraday positive divergence, the IWM didn't and is inline and the Q's didn't, they are leading negative.

DIA 1 min

IWM 1 min

QQQ 1 min

SPY 1 min

ES Update

After the European open, ES sold off on bad economic news and most importantly, ever widening spreads in Spain, which seems to be the country of most concern right now. There were positive divergences pre-market before the NY open which makes some sense with the positive divergences yesterday, however 3C showed a negative divergence at ES's top and has been leading lower ever since.

During regular market hours, there was a lot more volume as ES was above VWAP, I seriously doubt that was aggressive buyers paying up above VWAP, it would seem much more likely that it was aggressive sellers above VWAP and 3C would seem to confirm that idea.

TICK Chart

This is no quiet pullback thus far, the TICK chart just hit -1480, an EXTREMELY low reading.

Also Taking position in FAZ (long)

I don't like loading up too much before a long weekend, so even though I'm already a bit heavy, I'm going to take FAZ May 21 Calls.

FAZ 60 min

FAZ 15 min

FAZ 5 min

Basically I'm a little heavy on Tech and wanted to balance it out a bit with financials.

I went with AMZN May 195 Puts

Looking at a 1/2 AMZN position

I really thought AMZN would do more today, so I'm looking at a 1/2 size position in May Puts, I'll add on strength if it develops.

Market Update

DIA 2 min

ES is now leading negative

Q's look worse 1 min

2 min

5 min

And the SPY looks worse

QQQ Update

The Q's look like they are running in to some trouble here...

1 min negative leading

2 min leading negative

5 min leading negative

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.