Disclaimer: The majority of these ideas come from the @Tickerville Saturday morning brunch. In fact, many of these are direct quotes that I use as a check-point during the week. Trade at your own risk. Any reference to "I" is from @tickerville. The blog author did not grammatically update that piece.
**Thanks to StockTwits for hosting. An excellent venue!
OK, I gotta admit, this week was a tough one. We ultimately meandered with individual trades to be had throughout. All in all, we round out a darn good month.
Questions / Thoughts / Ideas
Wow, lots of meat and potatoes this week. Hope I keep everyone's attention. You have entered my real world and head.
Just follow the chart and don't think about 'stuff'. The chart won't lie.
There are clearly some things that concern me. I'll touch on them all. We've run a long way, could use some pain here.
How do you 'fish'? - e.g. how to find good setups with good risk/reward ratios? It is dangerous for new traders learning to fish. I have taught traders for many years now. It seems that as soon as I begin with someone they want to find new ideas. I ask them always why are they so interested in finding stocks? Why not just play the ones others have already found.
Ultimately, what they don't understand is, it is not the stock that makes you money. It is the trading that makes you money. The first thing I instruct new traders to do is to stop looking for new stocks and start looking AT the stocks we're playing.
The BEST traders I know, focus on 100 or so core stocks and that's it. Some of the premier traders trade only e-minis. Why? Because they know that making money is not about finding a good vehicle, it is about learning to drive ANY vehicle. That is why Tiger Woods could clean my clock using only 1 club, yet I still believe the Nike blades will help my game. LOL Nope
OK, last week we talked quite a bit about the 'health' of the pullback. So many were looking to short, but we concluded that was wrong. The pullback had the proper character of being healthy and was needed after the fast and furious run. Now let's look at S&P and discuss.
Here is daily S&P 500. You can see we still have run quite a ways with big resistance overhead. CHART I have labeled an area on the chart that says 'Fair Game' to show just how much open space we have that we could pull back. But my point in this chart, is to understand we could go back quite a ways, and still put in significant higher low. So understand that, and should the bears start coming out and chest pounding, be on the look out for reversal and snap city.
Those looking to swing trade, must know that we could easily pull back to anywhere in this area and still put in a higher low. This is a reason you won't hear me talking about longer term shorts for a LONG time, unless we start challenging March lows. I will take shorts if they present day trading opportunities, but as swings, very unlikely.
Ideally, what I would LOVE to see happen, is for us to digest this recent move in some form or fashion. Sideways or down. If we continue to go higher without consolidation, it will make playing with size much harder because there is no clear support area. So, the point is...It's all about mindset, and more important THAN EVER at this stage is understanding your time frame. Meaning, if you're a day trader, you shouldn't care about that chart. You simply play the direction OF THE DAY. But if you're a swing trader as I am, you need to understand where the big river is flowing. Right now it is flowing up.
Let me recant something however, as there are individual sectors that do look interesting to me for swing shorts. IBB I started Friday.
Now, how about the QQQQ. This is a picture of clear leadership here. http://bit.ly/12zIuv Note how it already broke the big trend line going back to October, however has come right into overhead resistance from Jan and Feb. This is a very logical pullback point and any area into the Fair Game section is ok. This is the area we must keep on our radar.
So, now we have S&P, and QQQQ all looking extended, but much improved. Could pull back quite a way and still remain healthy.
Lastly, the heart and soul of the tape. The fins, ala XLF. Let's break her down. This next chart is the most important. Can anyone tell me why? They led us from the start, with everything following. http://bit.ly/lNPvc
This is so very important to understand. All rallies we have seen until this one, was led by garbage. Crushed commods coming up for air. Each time, stocks like steel, copper, coal energy etc, would run but nothing else sustained momentum. This time, we started a rally based on financials, and stealth sectors like Semiconductors saw massive inflows of money.
So, when I review this XLF chart, I see our biggest tell on where we go from here. When it breaks in either direction it will tell us. So, if you want to look like a genius. Keep the XLF in front of you and watch for a break down or a break up, out of the box. Then you can feel confident playing other sectors.
Understanding this, is what took me to heavy cash, because I did not like how the fins stagnated to end the week. So now I am in waiting mode to see. It's simple. $9.70 up, $8.67 down. I was initially concerned about the $XLF but when i review daily chart I see sideways action. We don't have to know the catalyst or care about it, much less agree with it. We just have to respect the chart movement. I am watching the Nov low. I think that is important.
Tech is leading us in % terms. No question, but they were more healthy than fins. Fins are our tell, like the engine. But trust me, if fins cooperate, areas like Semiconductors is where I want to be. That is seeing the new money flow in. I hope all that makes sense. We are at a critical juncture and to remain truly open minded and flexible, means you understand the tape.
Now, let's talk about a few things that concern me a bit, but I have to be careful not to cross into macro land. If market is running, why are commods not really participating? Glad that they didn't lead us, but they're really lagging.
Even though I work in silence, I still hear everyone yapping about re-inflation, yet the moves just aren't there yet. But, maybe we just have to be patient and give these charts time. It is why I keep coming back to them, wondering if they bust out soon because, this week a few areas showed up that would make sense to start a run here.
Rails and Infrastructure and these are areas I want to be in . Let's look at some charts.
Chart Time
CSX is one of my favorites that broke out on Thursday. The consolidation on Friday was very healthy. http://bit.ly/zF0yZ As noted in that chart, I would use 1 more day of weakness to start my position with a stop below Thursday's low.
NSC has a similar pattern yet I like the risk reward on $CSX better. http://bit.ly/RC3J0
I see excellent volume coming into these rail charts. So, rails have started to percolate. Interesting to note because as @aiki14 mentioned they transport 'stuff'. Yes, RAIL and ARII on my list as momo plays in the group.
Next up, and also interesting to note, that infrastructure plays started making themselves known this week.
JEC broke out of a multi-month trend line after consolidating early move. http://bit.ly/11Nyt
MDR also consolidating nicely above recent lateral break. http://bit.ly/tQVLr
And last but not least, the big boys who have not run and are lagging.
FLR http://bit.ly/MOLbK
FWLT http://bit.ly/4UTL
So, maybe not all trade worthy, but MUST go into the game plan. We have rails perking, infrastructure perking but commods lagging. It either means the run in the first 2 is short lived, or the 3rd will follow suit very soon. I think it is prudent for us to prepare for either. What you hopefully can see me doing and my whole point of this is how we can use charts to find themes. If commods follow suit soon, or actually lead after some consolidation, the media will paint it one way, but we'll have known far ahead.
Before we get into some other trade ideas, I want to talk about one chart that is rather concerning to me. I am long GLD and may cut. I am long GLD and starting to get a little anxious. I would suspect it to have followed through by now. http://bit.ly/pAbZG It needs to get back above the weekly trend lines ASAP or I cut it and move on. It also bothers me that it is the inflation 'no brainer' Whenever something is said to be a no-brainer, I get cautious.
Requests
GS broke over multi-month base. It can come in, but not too much. 50 day is important. http://twitpic.com/2bcwf
MOS which I like quite a bit. I want to re-enter. http://bit.ly/3B1rh
I like VMW quite a bit. watching and waiting. http://bit.ly/anzr
Lots of requests for O&G area. This sure is an area that looks like it could go either way. I believe this next chart shows the front lines of the battle in the O&G area. This chart will act as a big guide for me. I can make bullish argument and bearish for this chart. Outcome will tell me SOOO much about the group. http://bit.ly/16hUW2
Note the battle going on here in SLB. Again, bullish and bearish. Ultimate break will tell me where drillers go. http://bit.ly/DzO2
Much talk about commods and potential. I think this chart shows just how much potential http://bit.ly/cFV6T I want to participate in a move like that re: X even if it just comes back to the trend line resistance don't you?
RS Another Steel on my radar http://bit.ly/22UwCj
Lots of talk about commods. BTU is an attractive candidate should it break. http://twitpic.com/2bcmo/full
NBR is another I am watching closely for a similar trend break pattern. http://twitpic.com/2bcqn/full
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