Review and the Note

Our newsletter consists of 2 parts:  the first is a review of ALL trades that trigger the alerts from the previous newsletter, win or lose.  The second is a fresh list of new alerts for the next day.   We wanted to share with you the first part of the newsletter that just went out to our subscribers:

——————–

We wrote last night that “Our focus tomorrow are the gold and silver miners” and we wish we had remembered that this morning when we kept getting chopped around in everything else. Note we didn’t list SI_F or SLV last night in the support list– the edge we think is now with the miners and not the commodity.   In the afternoon though the miners set-up and we got off a decent trade but everything else was tough.   Let’s review everything that triggered:

CLF we wrote would be “cute” to break 90 and quickly scum to 89.3.  It actually worked very well if a) you caught it and b) you took the quick trade.  After that it grinded down all day.    One thing that came up repeatedly today was our rule of  “buy the first test but never the second”.    First test 89.3 worked fast and well, second test was a complete avoid or short.

UA didn’t come close enough to our 62.5 alert for us to get involved but we wanted to include it to show what a nice support long-set up looks like — see how it’s choppy without an stair step down movement?  That’s exactly what you want.  The stair step down moves following descending EMAs are the most difficult support longs to catch.    Stock spiked down away from EMA into S2 and bounced.

DE we bought on first square and it worked well until it hit 9 EMA, after that it re-tested and stopped us out (second square) and wasn’t enough of a bounce to take partials.    Scratch trade.

WLL bounced on 64 near the open (64.02 bounced 37 cents) but second test was failed.   If you wanted it long after that then the place to do was after the EMAs flattened out (blue rectangle).   It doesn’t always work but if you want a support long trade and missed the bottom, then that’s the place.

We got in near on reversal at noon  near our alert on MOS but took an early scalp exit in it as by that time all we wanted to do was un-do the damage and go green.  We nailed the 200 SMA bounce alert though and know some of you banked coin in this- nicely done.

Here’s the reason we went red in the morning — AGU 83 we tried catching 2x and lost on both.  Finally got it again when it stabilized but just like MOS, by that time all we wanted to do was to go back green and made a hasty exit and  missed the big run.   AGU had earnings out this morning, and had a lot of volume and was just stair stepping down.  We should have left it alone or gone in with smaller size and wider stop.

Up until we hit the miners we kept churning our account, barely green.      Here’s what went down in the afternoon (we put out real-time tweets of entry and exits so hopefully that helped).

GDX SIL hit our supports and even though we didn’t have much confidence left after our morning we thought it would be worth to go small and put some feelers out there.  We bought the basket GDX SIL GDXJ.   As we wrote last night GDX 57 was pretty huge number, with 2 trend-lines and 200 SMA all converging (reason we wrote that miners would be our focus for today).

We bought small near 37 and SLV bounced on 50SMA, so far so good.  Then we noticed that SI_F GC_F was starting to weaken but miners were not.  We thought about our divergence post that started our whole silver short obsession http://highchartpatterns.net/its-never-different/

What got us interested in shorting silver was the fact that the miners were pulling back while the commodity went ballistic.  Today we saw the miners hold their ground while silver made a new low — miners sold off first, they will likely bottom first.   As we tweeted at this time we added to the basket (4x add on position size) as the divergence gave us more confidence.    Trade worked great and we hope many of you caught it.

GDXJ didn’t come to alert but we added it in basket anyway.

Very nice bounce at 37

SIL 25 alert worked perfectly

And GDX 57 even more perfect.

We wrote in the newsletter last night “Our focus tomorrow are the gold and silver miners” and on top of that the last thing we did last night before going to sleep was to write this note (to re-affirm focus) and leave it on the keyboard:

GDX 57  GDXJ 36.5 SIL 25

Follow us on Twitter

Conjecture?

Last Sunday night we were glued to the screen.  Silver had suddenly been shot in the head diving down 13% (!!) while ES_F stayed green, up 4 points.   We couldn’t figure out what was happening but were amazed ES would stay green while silver was being shot dead.    Then the news came that Osama had been killed — we had quite a bit of conviction that the good news (in a very extended market) would be sold.   We quickly put up our Osama Top post when futures were up 12 at 1372 (now down 24 points from that call) and warned in our tweets that we believed that the rally would be faded.
We’ve been on twitter for over a year and  have put out a newsletter 5 times a week now for 5 years.    We respect a lot of pros on our stream  @dinosaurtrader @gtotoy @zortrades @szaman @peterlbrandt  (just a few names among many that pop out — all our 36 follows rock) and for the most part we’ve earned the respect of our followers.     And then once in a while we get tweets like this — which came our right after our Osama top post:


Of course it’s conjecture.  What else would it be?   The best any trader can do is to made an educated guess based on their strategy and experience.    Man….

Follow us on Twitter

Ag support

Back to stocks:
We like to buy support when a whole sector hits it simultaneously (in our experience it increases the odds of success exponentially) –  several of our favorite Ag stocks (POT CF AGU MOS) are looking like they want to test their respective 200SMAs.    Let’s take a look:

MOS is the closest one — we’ll probably try a day-trade there but don’t really expect it to hold for too long.


We like CF near 120 — 200 SMA  and daily support.

AGU is on trend-line now — again, we think this will break and eventually could test the 83 zone.

POT we like 51 for a trade:

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