Line in the sand

The line in the sand was drawn for many commodity stocks today. Take a look at these levels:

ANR bounced on the trend-line today. If you're a bull, you want this to hold:



The 50 SMA stopped the bleeding on BTU. Through this level and next stop is the trend-line at 40, and if that doesn't hold then the 200 SMA.




BVN, one of our favorite gold stocks, stopped on the 50 SMA level. Again, this level must hold or you'll see much lower prices.




CHK bounced on the 200 SMA (newsletter selection for support long yesterday). Again, this level must hold.




GLD bounced on the 20 SMA -- through here and it will have a date with the 50SMA.



MDR, a newsletter support long pick from yesterday at 20.2, bounced on the 200 SMA. Again, bulls need to hold this level.




OIH, along with many oil stocks, especially drillers, is rolling -- Very nice support at the 200 SMA area near 102.



Note how the XLE has been supported by the 50 SMA since late July. Also note today's second close under the 50 SMA. Like OIH we would not be surprised to see a 200 SMA visit on XLE near 50.

What a mess!

The SPY looks quite fragile up here -- we'll daytrade longs as usual but no swing longs for us until at least SPY 108 near trend-line/50 SMA. This is a complete battle now between the bears and the bulls: the bulls can't seem to re-take SPY 112 area and have failed every attempt at break-out while the bears haven't been able to get any kind of continuation on the downside. The conclusion? Tug of war with a tight range (SPY 110-112) which hopefully will break one way or another soon. The bulls have a lot of work ahead of them if they want to take this market higher into the New Year with gold breaking down, oils and financials sick, and the USD finally rallying.

Hat tip to our friend Dinosaur Trader who bought the USD and shorted Gold into the close yesterday. Sweet!

Market Talk

We have market close to a break-out into new YTD highs but oils and financials lagging badly. This means to us that even if we do break-out there is a higher chance than usual to fail, or that this is the last leg of the March rally before a correction sets in. Of course we could be wrong but how can the market have a healthy break-out with the financials and oil stocks under their respective 50 SMA? Small-cap gambling-type stocks are where the best action is right now --- again a not too healthy sign for the general market.

Having said all that, for the most part we're day-traders and if long side is where the action is, that is where we will be. But for you swing traders out there, especially in extended sectors such as gold, stay alert.

Free newsletter for tomorrow Dec 03

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Excerpt from tonight's newsletter -- Key points

Some key points before starting (again, long time readers have heard all this before but worth repeating for new members) :

1) as our long-term readers know we like to trade off our own pre-determined list (newsletter selections from previous night) and not look elsewhere during the day. This helps us focus on charts we already know well and reduces the number of mistakes we make. We don't use any scans intraday.

2) once the stock has broken-out and after you have made your exit, don't stop watching the stock. Drag it to a "triggered" portfolio and keep an eye on all stocks that have broken out. Why? a) if break-outs are working, buy the dip to EMA/pivot point and b) as a tell since watching triggered alerts gives you a very good idea whether you're in a trend day (break-outs/break-downs working) or range-bound day (multiple failures)

3) EMA's can be a valuable tool if you know how to use them -- find out which EMA is important each day. Watch 1 min, 3min, 5 min, and if you wish (we do) the 10, 15, 30 and 60 min charts and their respective 20 EMAs. We make our decisions based on the 5 min chart but we watch the 1 min to place our entry.

4) there is nothing better than a trend-day for buying pull-backs to the alert price or to the EMA (or even better a combination of the two if they line up).

5) we find EMA dip-buying works better earlier in the day than later in the day

6) for buying the pull-back always look for the ascending EMA -- flat EMAs have a much higher failure rate

7)

a) Trend days up buy breakouts, buy pull-backs to EMA
b) Trend day down short break-downs on daily, short rallies to EMA intraday.
c) Range bound days buy pull-backs to daily support, short daily resistance.

Don't get these two mixed up! Do your homework and always have alerts on your list for they serve as tells on market behavior.

8) mechanical percent based stops are useless for our type of trading -- look for the base and trade around that. The base is everything.

Trading Heaven

It's been a long time since we've enjoyed trading as much as we did today. Everything worked, not only break-outs but also pull-backs intraday, and even our two resistance shorts (NUE RIG).

Here is everything that triggered from last night's newsletter. We review all triggered alerts in every newsletter -- if you want to see our commentary (and explanation of the white arrows) or how we handled the trade, please sign up for a free trial . All these stocks were featured on our newsletter last night.

Line in the sand

Next important support in the market is SPY 107.5 on a minor gap fill and the 50 SMA. Note that the oil stocks (especially the drillers in OIH) and the financials broke through their respective 50 SMAs a while back. Best acting sector right now are big-cap momentum tech stocks (GOOG BIDU AAPL).