Trade your plan

As many of you know we have been obsessed with silver in the last month.  First we wanted it short against 50 and talked about it in several posts, especially The elusive silver top and we got our trade short.      Then we backed off for a while but kept talking about the trend-line long, here State of Affairs and posted a few charts on that 41 spot:





And finally posted it when we went long on the stream real-time at 40.79.    It took us two tries, first tried 41, got stopped for 14 cents, and then went for overshoot.  At this point we had a lot of conviction.  Why?  Because we had talked about it so much.   At the time it actually felt awful — it was kind of grinding down, heavy as hell, looked weak and we could have easily talked ourselves out of it.   But the only thing that helped us is that we had talked about that level so much, posted about it so many times, that we trusted it.    We hope that our posts help our followers in that we give them good ideas but the newsletter and stocktwits also helps us because it re-confirrms repeatedly levels that we think deserve to be acted on — levels like the trend-line on silver.

We took off all our positions save one last SI_F contract into the bounce:


If felt hairy and our hands were shaking but at the same time, we had so much conviction, enough to buy multiple contracts of SI_F, YI_F and for good measure, SLV (39.78 av).    Don’t ask why all three, not too logical, but somehow it helps us slow down the exits.   Do your homework before and when the time comes, trade your plan.     That being said, don’t be stupid either.   Trade your plan but don’t forget about risk management!
p.s. we have 1 contract $SI_F left with stop over entry – if 41 breaks we go flat.
p.p.s  stopped out of last contract.  Gave up nice $$ on that but we never regret losing potential profit on the last partial — we like to keep that in these type of trades for potential home-runs.
Follow us on twitter HCPG

Osama Top?

Update:   We now have the answer to our question as to why ES_F would stay green while whole commodity complex went red.   News was already being traded that Osama was dead.    ES_F now up 12 points but US dollar also catching a bid.   A sell the news effect could take place if  DX_F can continue on tonight’s move (not as easy as it sounds as every rally has been faded lately).    A multi-year low on the USD, multi-year high on market, the Osama top?
Lots of excitement for a Sunday night.
Follow us on Twitter.

State of Affairs

Proving to be a very exciting interesting Sunday night with silver absolutely pummelled, at one point down 13%.   And no good explanation that we have read so far (not Comex raising margins, not China tightening, nor Bolivia putting a pause on its nationalization plan).   Possibly a dump from a fund but why would they pick a thin illiquid Sunday night for such activity?
Trend-line at 41 on the SI_F– even with all this blood (down 20% from highs already!) it’s still in a bull trend.

We’ve shown this trend-line now a few times on copper — it broke on Friday and continuing to weaken tonight.

Crude off from its highs but nothing interesting

Gold off its highs after silver dump but again, nothing too drastic.


The most interesting chart for us is actually the ES_F, holding green up 4 points!    The entire commodity complex is red (including grains now) and we don’t even go flat? Wow.




Follow us on twitter

Reverse Engineering using Stocktwits 50 and Finviz

Almost all our trading alerts are found manually as we go through our master list every day.     However if you don’t have a master list or are new to the game, here are some alternative methods to finding alerts and to building your own master list.

Start with stocks that know how to move.   A good starting place is just to look through the   Stocktwits 50 list.

Now do two things:  1) look for themes and then when you find something you really like, 2) do reverse engineering.

Look through the sectors of these momentum move type stocks.  Is there one sector that keeps popping up? Or is there one stock which is moving really well?



There are a few sectors that keep coming up, and one of them is Oil and Gas Equipment & Services.    The second stock mentioned, RES, belongs to this category. Now go to www.finviz.com and plug in RES on the right hand corner:




RES chart pops up and below it you’ll find a  link to all the stocks in the same sector:



Sub sector of Oil and Gas that RES belongs to comes up.   Now from here comes the manual work.   A good start would be to filter out anything under $20 and trading under 1 MM volume.
We don’t often use this strategy because we like trading stocks that we know well (currently around 230 stocks).  However, if you’re new to the game and you want to build up a list, this a great way to go using two great free resources available to everyone.

Follow us on Twitter

Four Sector Focus for the week

Most of our favorite set-ups for the week  belong to the following four sectors:  Oil and Gas, Semis, Machinery, and Software
Here’s a sampling and also a few hints on how we look for sector moves:

Oil and Gas:
$OXY has been our favorite in the sector for a while.   We caught a nice break-out at 106 for our subscribers on Friday for an 8 point rip.   OXY is best of breed in the sector and one of our favorite trading stocks.  Disclosure:  long.

Three stocks that are setting up in the broader oil and gas sector are $UPL $APC $COP





Do you remember thic chart we kept posting on the $SMH?   After $INTC earnings the semis gapped above resistance and never looked back.  The sector is hot.

Some aren’t quite ready and some look better, but the names on our radar in this sector are $CAVM $ARMH $SWKS $SPRD






Software:  ORCL caught our eye this week.   Stock is too slow for our type of trading but very impressive move for the big daddy of the software sector:

So you think to yourself, wow, $ORCL is a leader of software stocks, what else is setting up?
You hit Application Software in FinViz (the greatest tool for sector scans and free to boot), adjust volume and price to your liking (over 1 mil, over $20 for us) and voila out comes  the result:
The best set-ups in the sector are $CRM $NUAN $RHT





The last sector is machinery.   We had patiently waited for $CAT to set-up for a while but it gapped over our buy spot.   We focused on the sector and found the following which still have not broken out:
$DE $TEX and one for the low-volume lovers on the stream $ASTE




Getting primed but not liquid– not our cup of tea but we know some of you love these thin ones:

Futures levels

We’ve promised our readers to add some future levels to the newsletter as we’ve started trading them more this year.    We had always imagined commodities to be more “difficult” and thought of them as more “risky”.  The truth is that we have found them to be easier to trade than stocks this year.  It’s still early and we don’t want to mush things, but so far so good.   Yes, the leverage can be dangerous but we haven’t been in the business for 14 yrs without learning a few pointers about risk management.  Stops are stops.    We find commodities to be “cleaner” and technically easier to read.    So are we going to give up on stocks?  No.  Of course not.   Our modus operandi this year has been the following: when we have good set-ups in stocks, that’s our priority (for example tomorrow we finally have a few alerts that we really like and stocks will be our focus).   When we have no good alerts (like earlier this week) then our attention wanders off to futures.
Our field of opportunity has now increased, and that’s never a bad thing.   What we have always been very good/disciplined at is not trading unless there is something with an “edge” to trade.   If there’s no edge, we won’t be involved.  If we could ever point to a “secret” of being successful at daytrading,  that would be it.
Here are the futures that we currently have on our radar:

Copper is hanging on to the lows of the trend-line — not what you want to see if you’re a bull.  A break of the trend-line would be a decent opportunity for a short as most likely that area will be filled with stops.



Nothing in corn for us to do until a) gap fill near 693 and then support at 660

Crude too extended from any base for us to be involved long and no interest in shorting.


Gold too extended from base for us to be involved (even though we have been waiting patiently for junior gold miners to set up long for a while — much less extended there $GDXJ) and no interest in shorting.



Silver– as you know we were looking for a short in silver (and mentioned the symbolic 50 last weekend).  Silver retraced 10% from its highs and for us the short trade is over.   We never short the second test of a high so no interest there in shorting 50 either.   We would be interested in silver long if it can consolidate the recent move and set-up long under 50, but a base that would satisfy us would take weeks.  The silver trade is over for us for now.

Soybeans coming into a level of interest — through trend-line down could be a decent short (and then overshoot support long)

Wheat interests us on the trend-line as a long (first test).

$ES_F not extended enough for us to go outright short without a reason but if the dollar can pick up we’d be probably be involved dark.

Trading Hours:   http://www.cmegroup.com/trading_hours/index.html
http://www.cmegroup.com/trading/agricultural/files/AC-268_Grains_FC_FINAL_SR.pdf
http://www.cmegroup.com/trading/Price-Limit-Update.html

Great Read

Thanks to Reformed Broker for his link to this very interesting interview with Peter Brandt
Read the whole interview as it has many interesting insights, but here’s a small excerpt which made us laugh and is uber- relevant to anyone who puts information out there on blogs, twitter, etc.

PETER BRANDT: I knew then that I wanted to start trading for myself. So I started dabbling a little bit, accumulating a little bit of money, starting in ’78, doing some trades… and I didn’t really know what I was doing.

One of the first trades I did came from my friend in Evanston who was the bean trader. I was just learning the business, and he had told me he was really bullish on soybeans: “Peter, I’m REALLY bullish on these beans.”
And so I watched them for a few days – I think they were around $5.50 or so – and I’d saved up a few thousand dollars to speculate. And they crept up like ten cents, and so I bought a contract, and they went up like five more cents – and then they went down twenty cents.
And so I got out with my loss, and eventually saw John again and said: “John, so what about those beans?” And he said “Yeah, was that a magnificent move or what?”

JACK SPARROW (laughing): Oh no…

PETER BRANDT: Yeah, and I said “What are you talking about?” And so it ends up that John is a scalper. He never takes a position home at night. He trades the beans for half a cent to a penny, and he had such a conviction on beans that he had a position he was willing to carry for three or four days. Well I find this out after the fact. He takes ten cents out of the bean market, which for him is a gigantic move, and I wasn’t even thinking that way!
And that was a good lesson. Traders at the Board of Trade would constantly say they were bullish or bearish, and it was a good lesson that the words “bullish” or “bearish” did not mean anything. I would have to ask, “What’s your timeframe? How long do you hold trades? How much money are you looking for in a trade? Where are you wrong – what will tell you that you’re wrong? Why are you bullish or bearish, what do you know?”
And so I learned really early on that bullish or bearish didn’t mean squat.

Newsletter excerpt Silver

Big move in silver today — it threatened to break 44.61 today but reversed sharply just before with the FOMC decision, and then went insane to the upside when Bernanke actually took the stage.  It stopped for the day right at resistance/R2.    Our “edge” here is gone for now, be it shorting against 49-50 or buying over 44.61.   We’ll probably leave this alone for tomorrow.  We won’t short against 50 as now it’s the second test and technically a buy.  However it’s too extended for us to go long through 50.   This means we’ll probably stay to the side-lines until we see a good risk-reward set-up in it form over the next few days.

The reason we’ve been so focused on silver lately is simply because that is where the best action (edge) has been.   Once this shifts back into stocks we’ll happily return our focus to equities.

Support being tested

Copper and Silver are close to testing short-term support levels — if those go it could accelerate selling.    $USDX has some early strength which of course is not helping the commodities.
Copper bounced right on our support line and “short-term bottom” call from last week — the more it tests it now the weaker it becomes.

Silver also threatening to break-down out of the 44.61 support.


Lots of Fed appearances today so as we wrote in our newsletter last night, not a bad time to step off the pedal and take it easy.

Update:  Ben, the dollar killer, out with FOMC decision and commodities catching a bid and USD resuming death spiral.   Next up press conference at 2:30 PM.

Daytrading Silver

We wrote last night ” note how trend-line broke and now has been regained.   For day-traders the low 44.61 now is the first floor.”      Today’s low was….wait for it…..wait for it…..    44.625.     As long as that holds now the bias is day-trade long.    Note how 60 min chart/20 EMA which had been resistance (boxes 1 and 2 which were great spots to short against) has now flattened out (3) and is turning the other way.   This is another argument for day-trade long bias.


Update: Already working, now through the 20EMA on 60 min chart:


Couple of points:
1) we’re only talking day-trades here.   No serious support on daily for a while.    If 44.61 goes then bias goes again short or at least neutral for us until next support areas on daily.
2) FOMC rate decision out at 12:30 PM tomorrow — if that somehow lights a fire under the moribund $USDX then expect pressure on all commodities.

Silver Road Map

We’ve been talking about shorting the silver top (and alluded to wanting 50 reversal on weekend) now in one post after another.   Last night silver traded up 7%, possibly at least partially on rumors that China would start dumping USD for hard assets.    Silver rallied to the very symbolic 50 level and reversed, now down 9% just from last night’s high.

If you want to buy the dip, here’s your road map.   In our experience it’s never a good idea to start picking at bottoms on the first day of a reversal.  The price-action is simply too heavy.
We wrote a few times about the change of angle of ascent — something that often precedes short-term tops.   Note now that silver is testing the steep trend-line.  We believe this will break soon.  The second line of defense is much sturdier, and it currently is around $40 on the $SI_F.    We’d be buyers on this secondary less steep trend-line.


What if you don’t trade futures?  Well, let’s take a look then at $SLV.   Instead of the 50 top we have here the $47 top.  Note how strongly it bounced today on the steep trend-line.  This most likely will break tomorrow.  Again, be careful going long on the steep trend-lines.  Risk/reward is often much better on the longer time-frame, milder ascent trend-line.
Secondary trend-line is currently also at $40.


If you want the silver miners there is a great spot coming up near 26.5 on $SIL


If you like the junior gold miners (plus a few silver) then $GDXJ has a nice support area near 36.

No more silver obsession from us

Silver 8% pull-back from last night’s highs for us constitutes the short-term top we were looking for and enough of a pull-back for us to stop our obsession.  If we can now enter a consolidation phase under 50 and let the SMAs catch up we would walk down to the bull camp.    Big IF of course, especially since USD still has not been able to find a bid in this reversal.
As an aside, it’s somewhat funny that silver would run up last night 7%, possibly at least on rumors that China would start shifting away from USD and into hard assets.  As we wrote last night, if this were true, why would China want to pre-announce this?  So everyone front runs them?  And they already have trillion dollars worth of US debt, not exactly in their best interest to make toilet paper out of the USD.   Could rumors from abroad about dumping USD scare the Fed away from QE3?      Interesting times indeed.
Here are all the relevant charts:

Silver reversed under the big symbolic 50, and now back at very steep trend-line.  We expect this to break and for silver to go into a consolidation phase.  We’re not interested in shorting it anymore.
We pointed out the silver miner/silver commodity divergence a while back — note how miners have not been able to find traction. We’re still interested in buying the trend-line test.