Precious Metal Spots

Out of all the commodites we trade we probably are the most careful when we trade precious metals.   We pick spots we love and if they hit, great, we take the trade.  If they don't, we don't get involved and focus on other sectors.

Here are some support long trades we're interested in -- on average they're around 7% away.  Maybe they'll get hit, maybe they won't, but we will not get involved early (i.e. before they trigger).  Buying the FIRST test of major support in oversold panic dives down is one of our favorite strategies.

Edited -- added two gold trades that are ready right now.   Silver we'll still wait on (even though we imagine it will bounce with gold). 

We will definitely get involved, for a trade, on GLD 124 long.   Quite a bit away, but again, for us the edge is there and if we don't get our trigger, we won't be involved.


Note how trend-line, daily support and 200 SMA all converge near the same area -- exactly what you want for a support trade.

Update:  a few of the gold miners look like they want to bounce.

AEM holding on 200 SMA -- decent risk reward here long. 

GDX oversold into 50 SMA,  like it right here right now for a trade. 

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First test of SLV 24.5  (SI_F 25) should be good for a trade.    

CDE 21 we like.

EXK at 5

HL at 7.5

PAAS at 29

SLW at 28.4 area

SSRI at 21

The more stocks in the same sector that hit support simultaneously the higher the chances the support will hold.   Many of these are around 7% away -- if we can get a number of them to hit support on same day, while in oversold status (we don't like basing above on daily) then we will get involved aggressively.

This post is supported by scrap gold

Bulls and Bears: Market Talk

We're wary of breakouts but at the same time we're still interested in buying support:  by saying that it means that we're assuming market will go down more but it won't experience a straight out rout.   We're still seeing some rotation, mostly into the stodgy more conservative sectors (take a look at Dow Jones versus Russell for example of this rotation from high beta to low beta).

Let's start with the bull case:

Nothing wrong with SPY technically here as it seems to be digesting the huge move and still above all major moving averages and firmly within a bull trend.   

Whether you trade it or not as a trader you can't deny the importance of GE as it has a finger in many different types of business.  Stock is booming. 

Semis have given back a bit of exuberance but still firmly in the bull territory.    

The financials also are off their highs but still looking pretty healthy technically.

The Dow looks great -- symbolic here of safety over momentum as many stocks in the index are holding strong (for example CAT CVX DD DIS GE HD IMB KFT MMM PG UTX WMT XOM).

Now let's take a look at the bear case.

FCX is one of our favorite tells for the last few years as commodities have led this market.  Unless this relationship has changed this is a huge red flag for overall market.

FCX broke through the 50SMA and looks like it's heading to retest the 100 level and to be stuck in range for a while.

China has been underperforming for months and still can't find a bid.   

The Russell shows more the true nature of what happened last week (at least on stocks that most traders like to trade) as it got spanked hard.  We think that the 50SMA is going to flatten out here and we'll be stuck in a range without making new highs intermediate term. 

Trannies are also another great tell that we always watch -- same thing here as the index barely got a bounce on the 50SMA.   Look for it to flatten out and possibly break as a new lower range is carved out for the intermediate term. 

KOL also flattening out on the 50SMA and we expect coal stocks to be dead money for a while. 

GDX hit major support and managed a small bounce. We're out of our gold bounce names now and will be watching this sector for deeper support levels (still quite a bit away).

And last but not least:  AAPL earnings really could not have been any better.  Has there ever been a company this big with this type of growth?   And what did traders do?  Sell it, and then sell it some more.

AAPL most likely will be dead money for a while even though we would be surprised if the stock turns out and completely rolls (quite possible it tests the 300 level though).  We'd be buyers of the 280-285 level which would be a 15% hair cut from here.  Asking for a bit too much?  Most likely, but that's where we see the best edge.  

Too mixed a scene for a new bear market, thus far anyway, but also too many cracks in the foundation for this to be a short-term (i.e. one week) pullback. We believe there will be a rotation into more boring, stodgy stocks (we're scanning through medical appliance stocks for longs!) while high-beta momentum tech and commodities chop around trying to find a new range. 

So how are we trading this?  A few longs, a few shorts, and some decent commodity support levels coming up.  Everything pretty short term and taking it one day at a time with no big bets either way.  We'll go through the sectors every weekend to come up with clues on near-term (the only timeframe we care about) direction.

Support Buying Talk

The best support buys are the ones in which multiple stocks within the same sector hit at the same time.  This makes the success rate go up exponentially compared to a singular stock hitting support.    Gold a good example today as three of the major stocks in the sector all hit support and bounced today.  We think this will be a short term bottom in gold.

ABX BVN AEM  all hit major support today.

What a base

We're long SHLD in our long term account (1/5 starter from 75.2 which we unfortunately never added to) and we like how it's looking.  The pattern is still wide and ideally needs more time but with today's momentum it might not wait too long.   Great base that breaks out at 79.

Just last night we wrote in our newsletter: 

"Our Long Term account still holds 1/5 BRCM SHLD.   We thought about selling them today and buying them further down but it's a small starter position and we're just going to sit.  If things get ugly we'll probably will add (and post it in newsletter when we do)." 

 

 SHLD very difficult to trade short-term and we prefer to put on a small longer term position as long as pattern is valid and just sit.    

Market Talk

Two notes:  as tweeted this AM sold out of SLW BRCM swing longs in trading account.  Trading account now all cash.

As we wrote here yesterday and for our readers last night -- we simply do not have any good set-ups right now which usually is a great indication that we're in for some choppy action.   If market is resting we should get longs in a few days.  If market is topping we'll start to see shorts soon.  But for now it's a good time to relax and let the others fight it out.

A big part of trading successfully is simply knowing when to step on the pedal and be aggressive, and also when to stop, get out of the car and go for coffee. 

Market Talk

On the bullish side we've had six triggers today from our newsletter and all are green and gave a good trading opportunity  (in that they all gave at the very minimum 2 x risk/reward).  

As extended as this market is we will only stop looking long when we see two things happen:

1) broad sector/breadth sell-off instead of rotation
2) support buying stops working as dip buyers stop showing up.

However, one note on the cautious side:   our best set-ups, one's we have been stalking for many days on the newsletter, all triggered today (MELI CAT ATI CRS CMI AGU).    We don't have that many good set-ups left and what this often indicates is that the market is heading towards increased volatility.   Because of this we'll only be swinging partials on any trades initiated today and only the ones that give us a comfortable cushion.
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Update: we ended up swinging no positions from any trades that were initiated today (even though ATI CRS were decent candidates we opted to just cash it in and raise cash)  and only have left partials on SLW BRCM in our trading account from last week.    (BRCM SHLD in LT account).

Longer term charts

For position trader readers here are 3 longer term charts that we absolutely love.   We're very confident that all three will trigger their breakout prices (BRCM 50, OXY 100, SHLD 79)-- but we just don't know when!


We already have a 1/5 position in our long term account from 45 in BRCM and will add on any pullback.   We love the multi-year base under 50 -- just a matter of time it goes and this year could be the one as smartphone story gains momentum. 

OXY 100 has been on our list for a long time and we love the potential of this chart - however we would prefer it to carve out a flattish phase now under 100 to work off the extended nature of the move from late 2010.   

 SHLD can be a demon to trade on a short-term time-frame but we like it for longer term swing once it tightens the pattern under 79.  Very nice base. Started 1/5 position in SHLD at 75.2 to join BRCM in the long term account.  Expecting a lot of basing and filling under the 200 SMA/79 resistance but wanted to get involved with starter position. 

Market Talk

We aren't too active today with only 2 trades triggering -- both alerts we've had for days in our newsletter.  FSLR 136 breakout which didn't do much but was good for a quick trade and NFLX target trade 185 (target trade meaning you enter below the number on a base and break/Indy -- in this case it set up at 184.1 at 11:55AM and take first partial out AT the 185 alert. Anything beyond is bonus).


SPY third test of 126.2 support held again which shows the astounding bid in the market right now.   As our readers know we LOVE buying support but as a rule we buy the first test of support and never the second (if short time has lapsed between the tests) and certainly never the third.   Nevertheless, it worked like a charm today and dip buyers were again victorious laughing all the way to the bank.   No regrets though on missing this one especially since we didn't have any support alerts trigger at the same time.

We had a good question today from a reader who asked us "doesn't support become more valid the more times it tests the number?".    The answer is yes and no.  If for example stock HCPG has tested 50 support three times in four years then yes this is a very important support that has to be respected.  But if a stock keeps banging on support within very short time intervals (and 3 tests in 5 days certainly qualifies as short time interval) then no, the risk-reward of buying support for us becomes too low.

Usually what one sees when stock keeps repeatedely bouncing on support is that the bounce becomes weaker and weaker until it finally bases on support and falls through.   However that being said that pattern is a lot easier to trade on stocks than on ETFs (we rarely short breakdowns on ETFs, almost always our shorts on ETFs are resistance shorts, and not breakdown through support shorts).


It's a mixed picture out there and we don't have that many breakout longs nor breakdown shorts.   As always, do remember that all talk is just that, talk, and all we do in the end is trade the set-ups.

Why we hate predictions

Crude is down 5% from its highs earlier this week, gold down 4%, and silver down over 7% and yet the Nasdaq hit a new high today.   The Nasdaq being a better comparison than the S&P 500 as it doesn't contain nearly as many commodities and is the "momentum" higher beta index.  Financials are not even 1% away from their highs.

This is evidence, thus far, of classic rotation.    The big million dollar question of course is IF the commodity sell off accelerates, will the market finally be pulled down?    However, attempting to predict the answer, for our type of trading, is completely irrelevant. 

This is all we do:  everyday after the close we go through a core set of stocks looking for set-ups.  We add alerts, put them in newsletter, send it off, and then trade accordingly the next day.   If market starts to crack, we'll see it in the set-ups. 

Don't worry so much about the big, bad correction.   All markets correct, and eventually we'll get one, be it next week, next month, or next quarter.   But it won't happen instantly -- you're not going to wake up to a 5% gap down and then see market die for next 3 months.   Trends as strong as this one are like giant ships -- it takes a while for them to turn around.  Thus far we've had an important red flag and that's the commodity weak price-action.  Commodities are often early indicators of corrections, but not always.  Basically,  as long as there's no contagion to other non-commodity sectors, it cannot be construed as bearish for entire market.

Before getting grizzly bearish we'd want to see financials die, tech leaders such as AAPL GOOG get hit hard, transportation stocks roll over, and most importantly, we'd want to see support buying cease to work.   Bear markets don't care about support.  They eat them for breakfast.  Support buying is our specialty and we'll be the first to know if it ceases to work.   Until that (very sad day) occurs in that we get stopped out on our support buys instead of seeing green, we'll be buying the dip on oversold sectors hitting support.    

So relax, take it one day at a time, and don't worry about predicting anything.   Just watch the price-action, trade your set-ups, take your profits, respect your stops, and trade accordingly.  That's it.  And leave the market predictions to the CNBC "gurus".  

Market Thoughts

Today's big rally decimated our alert list (we had 8 long trades trigger including our best set-ups that we had been stalking for weeks, including NTAP 56, VMW 92).   As a rule we never go counter-trend if we have a lot of alerts that still have yet to trigger, i.e. we never go short if our list is full of long alerts that haven't triggered yet.   However every once in a while a big rally empties our alert list such as today and when that happens we give ourselves the green light to go counter-trend.  We're expecting choppy action going forward (also note the divergence between market and commodities today which printed some exhausted candles) and are in scalp mode with a focus on shorting euphoric spikes up.

However all this being said: even a few days of flattish action would set up a number of new long alerts.   Definitely too early to call a top but can't be blind either to signs of a tired, extended market, especially if you have a very short time-frame such as we do.   Traders with longer time-frames have less to worry about as the market could simply base before grinding higher. 

ANR, one of our favorite trading stocks,  a good example of what we're talking about as it printed a gravestone doji today:

When we see exhaustion moves like this then we often go short for daytrades.  Not shorting weakness, but shorting euphoric buying as panicked longs chase exhausted moves up.

Huge run on ANR -- and extended from the base at 56.5 (where we had alert on the HCPG newsletter last week). 

QQQQ 55 talk

From our post on November 05 we wrote how QQQQ 55 would be the target we constantly had our eyes on (and how we wouldn't short in front of it).

Market indeed did go to 55 target and turned around on this significant resistance zone.    Any pullback now would be bullish as we are too extended to take out this wall of resistance.    The pattern is bullish and it wouldn't surprise us if we based under it for the intermediate term before breaking out into higher territory.   As we've preached over the years, the easiest trade is to stay long into the target instead of attempting to buy the breakout.   This year we've focused a lot on target trading and that's a theme we're going to run with into 2011.  

Focus on a few and then hit them hard!

As we wrote in our last blog post, ideas are a dime a dozen.  What's key is to be able to hone down the list into an actionable number.   There are literally dozens and dozens of "ok" set-ups one can fill one's watchlist with every day.   But in our experience the more mediocre set-ups you watch the less money you will make.   Focus on only the best and then hit them hard.      These are ALL the trades that triggered for us for the last trading week winners and loser complete with the reviews the next day that we wrote for our subscribers.    As you can see each day only 2 or 3 trades triggered.  Not less, not more.     

Last Friday's triggers:

"We had waited for this MON 64 breakout for weeks and had written on Thursday night that it was our best set up going into Friday.  We wrote to watch for base and break 50 cents under and indeed that's close to where it set-up.   Nice run for over 1.5 points.   We're still swing long partial of the daytrade that we did not exit.    We had on pretty big size in this trade -- we had waited weeks for this (including an aborted target swing trade), and we would be damned before we missed our MON breakout!"

"DECK we wrote was a "high-end" set-up which means for the most part to hit and run.  We wrote on Thursday to watch for base and break between 83.4-84 for a run to 85+.  Worked very well at 84 and a lot of you daytraders caught this.  Nice. "

"WYNN we wrote needed one more day to set-up at 107 (it was a one day touch on daily).    It didn't wait and ruined the spot on Friday.   One touch spots have a relatively high failure rate and this one was no exception.  Too bad as it could have been a nice spot on a good runner."

Monday's triggers:

"AMZN opened at our 179 number, ran up two points, and then reversed down to base on R2, made higher low, and then ran up to 182 secondary breakout for a decent 5 point move from our alert.  A bit of a roundabout approach (common to crowded trades such as this one) and we imagine most of you who were involved caught the opening rip but fewer caught the secondary move."

"CRM 134 short alert technically worked for a daytrade but it was very extended by the time it hit our alert and was not a good risk-reward entry.   If you wanted it short then possible entries were against the 9EMA this morning as it was trending down.   Even though 134 short was successful for a quick daytrade that's not the type of trade we'd want you to take."

Tuesday's triggers:

"APA 118 clean set-up at number and travelled 80 cents before reverting back to number.   Somewhat boring but we don't expect much from big cap stocks in holiday weeks. "

"We liked how GOOG touched the minor spot in the AM -- this was a good type of trade to buy pullback in near the 9 EMA on reversal back from R1.      At 603 it was Indy type set-up as stock was riding up the ascending EMA with 603 resistance on top.   If you didn't get in before entry was 603 with stop on 20EMA which at that time wasn't even a point (incredible for a 600 dollar stock).   However stock didn't do much  as it bumped up a few points and closed on the alert.  "

"MEE had some news this AM and opened at our number and did nothing all day. "

Wed triggers:

"DVN based at 75 and then had a decent 1.6 point run. "

"SU opened at our old 37 spot and rose for 2%.  If you're holding swing prepare for some choppiness in the 38 zone -- long time resistance. "

Thursday (today) triggers:

"We had been watching this CF 130 spot for a long time -- and it really set up for this breakout yesterday.  Two days ago we wrote that it still wasn't ready but last night we wrote "Looks good for breakout anytime now".   Very nice 4 point rip. "

"GM 35 was an old alert that came back in play yesterday.   Very nice little trade here from our spot. "

Remember, focus on the best and then hit them hard!

Happy holidays to all our readers -- stay safe and see you next week.

It's the execution stupid!

There are abundant good money-making ideas running through StockTwits every day.  Yet there are also thousands of traders who read these same ideas but just can't seem to work their away above "churn/grind" status (not to mention the number who actually lose money).   Why is that?

Because it's the execution of the idea that makes the difference between a profitable trader and a non-profitable trader.  Develop an execution methodology and then filter all external ideas from others through that framework; otherwise you'll be lost in the noise.    What does this mean?

Basically you have to figure out what kind of trading you want to do before you trade anyone else's ideas.   And no one can do that for you -- that's the hard work that many  wannabe traders avoid.   

We have a very defined methodology that revolves around support and resistance.    It's the only thing we do and the only way we've traded for now 13 years.   We've taught it to our subscribers for almost 5 years now in the HCPG newsletter.    We don't do options, we don't trade gaps, we don't trade small-caps, we don't trade earnings, and  we don't trade news.  But what we do every day is trade in a very specific way around support and resistance on a small set of stocks (around 200 candidates, with a high percentage in momentum and commodity). 

Even though we have opinions on what the market will do they become completely irrelevant once the market opens.  We might feel bearish but if our long alerts trigger and set-up well ( conditions being good volume, and set-up under two intraday strategies we've developed, base and break and Indy) we will go long.  It really is as simple as that.    What we believe and what we do have very little to do with each other.  Of course one's bias helps one's conviction but in the end the set-up will always trump everything else in our trading.   This is the beauty of having a pre-defined watch-list -- it removes your opinion from the equation.  

We keep it very clean and very simple.  We focus on very few stocks for each day and all the homework is done the night before.  We rarely trade any stock which was not on our watchlist from the night before.   We often watch the same stock for days before our we finally pounce as our alert triggers.   This gives us conviction in the trade as we have become familiar with the stock's behavior.    This is our methodology.  What's yours?

Figure it out before you jump on our or anyone else's ideas. 
 

Update

We sold GD NBL for profit and ATPG exit near break-even.    We're done with swings here until we enter what we feel is a better risk-reward environment.    Back to daytrading.

Swing and Day

Daytrades worked very well today but swings are in a mellow mood.

These are the daytrade alerts that triggered from this weekend's newsletter (CLF AAPL gapped above).

JNPR 36 alert:  ripped right from the open.

MA was the nicest set-up of the day and our best trade today -- we wrote to watch 255.7-256 for set-up (alert was 256).

MA perfect set-up at 256 for a mini Indy (Indy refers to an HCPG strategy discussed often in newsletter and blog)  as R1/alert were the upside resistance and stock squeezed by the 9EMA from bottom.   Entry was 256 itself with stop under 9EMA, around 1 point with first partials not taken until 260 for 4 point profit.  Excellent risk-reward.

SCCO was target trade for 42.5+.  

SCCO another Indy set-up riding up the 9EMA and basing under 47.2.    As Indy pattern gets squeezed there comes a "do or die" time -- most of the time it's "do" and no exception here for a nice breakout of 47.2   Stop is always on a reversal of whatever EMA the stock is riding.    Other possible entries were along the EMA with stop under.

VECO alert was at 49 -- just like JNPR it ripped right through from the open for a nice move. 

We outlined all our swing trades with stops in the newsletter -- ATPG holding well,  MON we're not crazy about and sold it today for break-even, GD still holding well but have moved up stop to today's low, NBL we noted in newsletter that we would add near 50SMA which we did -- stop now under 81, and SOHU we wrote in newsletter we'd take the loss on 75 which happened today.

All in all, good day.   Very good daytrades and remaining swings (ATPG GD NBL) all have stops nearby and look decent.

Our positions

Update:

1.Sold partials on the VMW for just under a point on the breakout test (if we go under we often take some off into target of breakout alert).   We now have our stop around breakeven on a move below 88.

2. SWN keeps threatening to stop us out but at the last second moves up and away from our stop.  A move through 35.5 today would make us exit.

Everything else looking healthy: we're green in VMW GD ATPG NBL and down 0-1% in SWN SOHU MON.   The more extended the market the less "Cowboyish" we are with trades and the tighter our stops.

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Update II:

at 3:50 PM on Friday. Booked the rest of VMW for 1 point gain; bailed on SWN for 20 cent loss and took partials across the board for gains (GD ATPG NBL) and losses (MON SOHU) on this market rip as we're feeling uneasy due to how extended market has become.  Still long partials in GD ATPG MON NBL SOHU. 

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We're swing long 7 positions now (5 of them we bought lower from selling earlier this week and 2 new ones).

 We sold SWN earlier this week near 38 and bought it back on the 50SMA bounce under 35.9.   SWN testing 50SMA right now and we might bail on this for 30-40 cent loss on a close under 50SMA.

 MON we sold near 63 and picked it up again near 61 on bounce on 20SMA-- has support at 60.5.  Close below that would likely take us out.

 ATPG we sold near 16.5 resistance on Tuesday and picked up again for 4% lower -- we like how its basing under 16.5 resistance and are just going to sit on this for a while.   Our "bail" point would be a loss of the 50SMA.

 GD we sold over 69 and picked back up aournd 1% lower -- we like this for a break-out of 70.

 NBL we sold Tuesday at the open near 87 and picked up again today at 81.76 just above the 50SMA.  If it loses the 50SMA and then 80 support on a closing basis we'd probably take the loss.

 SOHU small swing here on today's dip at 77.5 in anticipation of 79 break-out.  Smaller size than previous positions because support far away.   We'll play this one by ear as there is no real support nearby.

 Same thing for VMW.  We picked this one up today at 88.07 in anticipation of 89 break-out.  Again though, smaller than all the other positions (save SOHU, same size) because no real support nearby.   Another one we'll go by feel for stop.

We're less aggressive than last time we put on swings (12 positions, all bigger) as commodities are still weak and we feel more confirmation is needed before we put on more size.