Wolf on Wall Street

Thursday, August 16, 2012

AAPL Charts

AAPL 1 min should see confirmation on a 1 min chart of an intraday move, but when it fails to keep up, goes negative and leading negative, something is going on.

Note there's no positive divergence that started this move, this is pure market correlation, I try to make this point often that the most powerful force on any given stock on any given day is market direction and how traders always look for trades in a backward way, they look for the stock first without understanding the market first.

AAPL 15 min

AAPL Update

I was asked several times whether AAPL was an add to and said, "Not yet". I want to add when I see underlying action that suggests that is what smart money is doing, this is why I try to always wait for a signal and one is building now in AAPL.

Charts coming, I'd consider adding here.

So far the UNG, GLD and BIDU entries look solid

BIDU and GLD are close to green, UNG is.

BIDU's very parabolic move which created a pivot

GLD also parabolic, reacting to 1 day of economic data, but I don't think it's enough for the big picture.

UNG entry

Tech Update

It's not just BIDU, but the Tech Sector in general.

XLK has posted a strong pivot, the stronger the head fake move, the stronger the reversal is the general rule and there are multiple Techs out there with little to no underlying support here.

Here's a pivot in the 3x leveraged Tech BEAR ETF, TECS.

TECS 15 min, when you see XLK (Technology ETF) below, remember the divergence in 3C in TECS (the opposite of XLK) and also the pivot created today as TECS makes the pivot on the break below the red trendline.

Here's the Pivot on a daily chart of XLK.

XLK 1 min chart isn't showing any confirmation/support here, intraday volatility. These are hard moves to short in to because they run counter-intuitive to you emotions, but they tend to be the some of the best entries and lowest risk. Emotions rarely serve us well in making decisions in the market.

XLK 2 min confirming there's no support/confirmation of this move, the market is just extremely correlated and one issue drafts off another.

XLK 5 min

And remember to compare the XLK 15 min chart here with the TECS 15 min chart at the top.

Can't Resist-BIDU Add To

I'm adding a speculative size position to the options model portfolio, BIDU September $130.

BIDU looks to be getting close

2 min leading neg.

3 min just caught in the transition to going leading negative

Starting GLD PUT Position

I'm opening a September $157 GLD Put position, this is a partial position, about 1/2 of a speculative position.

Charts to follow.

More on the intraday volatility

This appears to have been correlated to the legacy FX arbitrage, which is a bit strange, but either has something to do with news like, "Merkel extended her Canadian trip" or perhaps is an exercise in running stops and orders. Either way, it's very parabolic, doesn't look well supported and VERY early in the day.

Euro from the 9:30 NY open,

Euro resistance coming up, but more importantly note the parabolic nature of this move, these parabolic moves almost always end badly.

ES 1 min doesn't seem to have any support/confirmation behind the move.

For that matter, neither does the Euro (1 min should be able to easily confirm price action).

2 min Euro

The opposite of the Euro, the $USD (UUP) 3 min positive.

Kind of interesting, this may provide for some excellent entries, it's also providing exhaustion for me watching everything as closely as I can as this thin market moves fast.

Intraday volatility....

It almost seems as if there was some news, I didn't see any, however with volume this low, volatility is very easy. The only thing I see looks like a purely technical move.

DIA intraday resistance and a break on volume, not much after that, looks like they're shaking the tree.

Same in the SPY.

Will add about 10% to UNG Long

I have about 10% of the current equity model portfolio position in UNG I can add to bring it up to a full position without violating risk management rules, I'll be doing that. I'm not going to look at an options trade at this moment.

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.