US Steel (X) and Freeport McMoran (FCX) have been building bases for a few months and are poised to continue higher. Looking at the charts X offers the most upside potential and a good reward vs. risk setup with a stop below the rising trendline.
Prices are at strong supply leves, so I remain vigilant for false breakouts.
It looks like TLT is forming a topping pattern that could breakdown in the next few days. I have a short position in TLT via TBT. My target is $106 – $104
TLT Topping
The market has been showing strength for the past month and is reaching a critical supply level here. However, there are a few stocks that have been showing signs of accumulation and are poised for a breakout. Take a look at X, BTU and FCX. They are showing flag patterns after an extended period of accumulation and already breaking out. Beware of the looming resistance drawn in red. If price clears and hold above, then price can move up substantially. These stocks are not for the faint of heart as they have large daily moves. Perfect for traders.
I have positions in GLD which are about to hit their targets. I expect GLD to find supply around 160-161.
With all the news out of Europe, the market is having a hard time finding direction. I am currently looking at GLD and SLV as their price action is forming clear patterns that are about to resolve one way or another. My bias is that both will resolve to the down side to meet a more sustainable long term trend. But my job is really to trade what the price action dictates. So I’ll wait patiently for confirmation of a break in either direction and trade any followthrough.
I find that remaining on the sidelines is just as important as identifying trading opportunities. I often follow a very simple strategy in volatile markets that keeps me out of trouble. Look at the charts below that show the NYSE Advancers and the SPY for the past 10 days. There were really only three days where it made sense to place trades Nov 9th to short, and the 10th and 11th to go long. I don’t use the Advancers as a trading signal, but it does have a significant weighting in deciding if I should trade or not.
And it means that I have been sitting on my hands most of the time in the past few weeks.
Writing the analysis prior to entering a trade in my journal has helped me identify when to stay out of the market.
Advancers Vs. SPY 5min
I have made a few profitable day trades in X, BTU, TBT and FCX. The price expansion continues as shown by the ATR line. The key here has been to stay nimble -even intraday- and to establish positions once a trend is establish for the day. We have run into siginificant resistance this week and it is reasonable to expect reversion in prices after a very strong run. The slope and direction of both 20 and 50 DMAs are very similar in the charts of TBT, BTU, FCX and X. They are turning up and getting ready to cross. I am still day trading only and not even thinking about swing trading. I continue to write my observations in the journal to document the market action and my own reactions.
I have been on the sidelines for a couple of months to stay away from the chop. Oversold opportunities are beginning to appear again and I am ready to put in some day trades. I am looking at a few key levels to buy in FCX, BTU, ACI and EEM. Patience and tight stops are key in counter trend trades. In addition, I plan to short any rallies when the market gets overbought as well, but I’ll wait for the price chart to form clear levels of resistance moving forward.
TLT has gone beyond parabolic and it is getting ripe for a fall. I am keeping an eye on volume to confirm the top and I’ll short it via TBT when the time comes.
I have some alerts setup and my Risk calculator handy. Now, I’ll just wait for confirmation from the print during the day.
The same playbook that worked so well last month is playing out again. Quite a lot of parabolic moves appear to have climaxed last week. Last week I traded TBT to short the parabolic move in TLT and BTU and ACI on the long side. I am looking to fade any rally in GLD as well. The combination of very steep price action with increased volume is a high probability topping or bottoming signal. But I am not willing to stick my neck out for more than a day trade due to the increased volatility and price expansion.
My plan this week is to sit tight the first half hour of trading to and see if a trend develops. If it does, I’ll enter some day trades with tight stops.
Stop loss orders not only help traders minimize losses, but they also weed out the weakest stocks. In previous posts I outlined trades of oversold / mean-reversion opportunities I saw in the market. Most of them have turned out profitable while I was stopped out of a few positions with small losses. Now, I am managing those winning positions to protect the profits. First, I always have a 3.5 x ATR based trailing stop as headline protection. And second, I look at the price charts to see if it makes any sense to partially sell out of a position or buy more into a position.
I am currently accumulating in pullbacks for ACI, BTU and IO and I progressively sold out of WYNN and INTC and closed them out today.
Here are the charts:
One of the biggest challenges traders face is not letting emotions affect their decisions. It is very important (and often times difficult) to remain objective when reading price action. In my case, having well defined entry and exit rules help me stay the course. In the chart below, you can see the entry and exit for WWWW which reached its target today. The stock might go higher from here, but there is a great risk of a turn lower after touching a previous price area where it found a large supply. Specially within the context of the negative price action in the market.
Coming up with a trading plan is not easy and it is not the end of the road. A good trader always keeps tabs on the plan’s performance. I programmed this basic free trade analysis tool to help you see how well your strategy is performing. Of course, more advanced performance analysis features can be used in the Journal.
WWWW Target Reached
