Wolf on Wall Street

Monday, August 20, 2012

Update 2-charts

Here's a somewhat random sampling

DIA 2 min trend

3 min over the last 2 days

ES looks like it's going to make another new lower low in 3C.

This is a leading divergence in the Q's, just today.

This SPY leading negative of just today is one of the steepest.

Also AAPL, inred, just today on a breakout new high, VERY High probability head fake move.

The Euro just today

GLD the last 2 days, these are some of the steepest leading negative divergences I have seen.

The VXX Short Term Volatility, it looks like someone is betting big on a lot of volatility, this moves opposite the market, so this would be a negative sign for the market.

Energy with an already impressive negative divergence, the last 2 days is just as I said before, I haven't seen many this bad.

Tech leading negative really bad and look where it's happening. Another high probability head fake move.

Tech intraday only

Market Update 1

Intraday momentum is getting REALLY bad, this looks ready to break. Charts coming.

TECS Update

TECS is the new Technology 3X Bear ETF that replaced TYP.

3 min trend seeing a lot of momentum the last few days

As has the 5 min in the same period.

Overall the 15 min looks good, but...

Considering the Trend Confirmation, the first base and now the second base ("W") the 60 min chart looks the best.

Quick Market Update

Whatever positives were on the earlier charts (even though they were in the context of a bearish environment), they are rapidly dissipating.

DIA 3 min

QQQ 2 min

SPY 1 min

ES leading negative below all overnight and Friday lows.

GLD Charts

Other than the fundamental reason behind a bearish position on GLD which is a little involved, this is exactly what I look for on a head fake move.

All 3 timeframes leading negative right at the breakout move, this is high probability, if I don't take a signal like this, then there's no signal worth taking.

2 min trend

3 min trend.

I have mentioned often that the primary driver of any given stock on any given day is market directionality, the second most influential force is Industry directionality or rotation. As Tech broke down, at the exact same time we saw weakness in GOOG and AAPL.

Tech, not quite there yet, we want to see a break below support first in the $30.60 area.

AAPL's momentum has faded, it's open to a reversal, breaking support levels will cause downside momentum to pick up.

At the same time GOOG turned down from its triangle head fake breakout.

AAPL Update

If I could, yes I would and here too, I'm already full size in the equity and options models portfolios and feel just fine with it.

Here's the update...

Going in to about June, we had 3 trend assumptions based on the charts, the first was the smallest, that was to be a decent pullback, maybe create a head fake low followed by a very strong move up, this move up would be very impressive, it needed to be to give bulls confidence to enter the market, we even talked about it potentially hitting new highs, that's what we are seeing now, it seems Draghi's market pumping comments were right about the time the pullback should have come. The Last trend assumption was the primary trend emerging in a strong bear move down. AAPL has done what we expected to see in trend 2. However you can see there isn't massive institutional involvement on the long side, the volume is so out of character you can just see something is not right with this picture.

Here's the long's biting on the key levels, these will be key on a move down as well.

Intraday 1 min AAPL i running out of steam

2 min shows heavy distribution of today's move.

5 min shows the exact look of a head fake move and what institutional money does on one.

The 30 min chart from confirmation to what was a sharp negative divergence at the first top to a much, much worse negative divergence now.

Keep an eye on Tech

Tech looks close to turning, although I'd rather see it later in the day, it looks like it will take everything with it, yes, even AAPL.

FB Update

I'll be adding to the equity long in FB that I started, I'm phasing in to the position and will probably add about another 1/3 of total position size here.

FB 1 min positive leading

3 min positive leading

5 min positive leading

And this is why I'm ok with going as big as 2/3rds position size here, just as with tops, double bottoms often see the exact same head fake move below support, plus the leading divergence is only stronger at an area they could have picked up a lot of shares on the IPO lockout passing.

The 60 min chart at a "W" like base which is what I suspected would happen from the first bottom we saw, a larger base would form.

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.