Mar 142013
 

PEIX was a short trade entered just under a year ago which hit it’s final target for a 65% gain in less than 3 months (that trade and accompanying notes & charts can be view by clicking here or by using the “Post By Symbol” feature to the right).  Once again, PEIX is setting up for a potentially big move and as before, I must reiterate that this is a high risk, potentially high return trade so make sure that this trade is inline your trading style & risk tolerance and as always, DYODD (do your own due diligence).  My own preference on this trade, due to the increased risk, expected volatility and large potential returns (and stop allowance) would be to take about one-quarter of my usual position size (i.e.- beta-adjust my position to .25). The basis for adding this setup, although as a long-side trade this time around, is based primary on the charts.

However, a big factor as to whether or not this trade will play out is the heated debate over the US Government’s mandate to move from E10 to E15.  As an avid boater, I’ve been following the E15 drama for a while (Gov’t wants it, corn farmers & other interests want it, but it is potentially destructive for engines, especially boat & smaller engines such as motorcycles and lawn equipment.  The marine & automotive industries and even AAA are all against it).  Anyway, I don’t have time or really the inclination to discuss E15 beyond that other than to say there are ongoing debates in Washington regarding E15 so a quick web search could bring you up to speed on the issue if you are interesting in PEIX as a trade or even a potential long-term investment (I will be adding this trade to the Long-Term Trades Setups category as well due to the potential for gains over time, especially if they move forward with E15).  Keep in mind that regardless of whether or not that happens, PEIX is a penny stock and to be honest, I had expected them to have filed for bankruptcy protection by now.  Not many stocks plummet from nearly $300 (split adjusted) down to 26 cents in 6 years and recover from it.

Remember, the charts will almost always lead the news (as insiders and those in-the-know act on information before you or I read about it in the papers).  Therefore, I’m going to let the charts be my guide on this one, not what I read or hear about E15 or anything else that might effect the company.  A long entry will be triggered on a break above this downtrend line as show on the 2-day period chart below.  As of now, that would be on any move above 0.43 (0.44 or higher).  As a downtrend line moves lower over time, so does the breakout level/entry for the trade.  Assuming an entry at the 0.44 level, the first target of 0.52, although 8 cents doesn’t sound like much, would be an 18% gain.  As we won’t know the entry price until it happens, stops will be determined upon entry but should be no less than a 3:1 ratio to your preferred target.  Currently, T2 (0.80) is my preferred target with T3 (0.97) the final target and if this trade were to begin to play out, I may very likely add additional profit targets as shown on the weekly chart below.

Mar 142013
 

CBK daily 2If at first you don’t succeed…  CBK was a recently stopped out short trade which was added at the open on Jan 15th, only to be stopped out after being caught on the wrong side of a news-induced gap the very next day for a 75 cent loss.  The stock went on to flounder around for the last couple of months, going pretty much nowhere after making a new high on the day of the gap but now I am adding CBK back as an Active Short Trade at current levels (6.17).  Notice that nice gravestone doji candlestick put in yesterday as prices made a new mutli-year high with steep divergences in place on the MACD and RSI.  The bearish engulfing candlestick today (assuming that we close above yesterday’s lows at least) helps to confirm yesterday’s potential reversal stick.  Targets are the same as the previous trade with T3 being my preferred target.  I don’t expect much, if any, of a bounce off T1, although I will leave it there for those preferring to book quick profits, assuming the trade pans out.  Daily chart shown.

Mar 142013
 

Here’s the updated 60 minute chart on the NIHD long setup, which has continues to ride down along the top of the wedge.  This bullish falling wedge looks ready to pop but has yet to signal an entry (breakout above the pattern).  I continue to suggest being selective on new long-side entries right now and would consider using reduced position sizes when taking breakouts.  In fact, on the NIHD setup, I have added a resistance zone which could come into play not too far above current levels, assuming this pattern were to breakout soon.  Updated 60 minute chart along with a 120 minute chart below.

Mar 142013
 

HLF daily 8Trading HLF lately has been akin to hitting the “easy button” as it continues to reverse impulsively every time it manages to rally back up that that key downtrend line on the latest Icahn pump.  After the second official short trade recently hit T2 for a 19% gain just a few weeks ago (where it was advised to take some or all profits since a bounce was likely before T3 is hit), the stock did indeed bounce from there, running back to within pennies of that downtrend line, once again providing another objective short entry or add-on.  Since then, the stock has plunged nearly 10% in just a few days and the primary reason for this post is to point out the fact that the stock is now at a critical technical juncture.  HLF is now at dual support with prices at both the former T2 (second target) horizontal support level as well as the bottom of this triangle pattern, shown below on both the updated daily and this new 120 minute period chart.  I still favor at least T3 (current final target but additional targets may be added) but we must first see this support level give way to help increase the odds of T3 being hit.

HLF 120 minAs far as an objective stop level, consider any solid break and closing candlestick on the 2-hour/120-min time frame since that would be a bullish technical event.  Personally, I plan to give my position at least one daily close above that trendline as I’ve already booked enough profits from the previous trades on HLF to allow for a possible fake-out, Icahn jawboning induced move above this level, which by now is almost certainly being watched by the majority of traders.  My opinion remains in the very small, almost non-existent minority that, for largely fundamental reasons and contrary to the very popular consensus on the street, that Ackman will be vindicated on his short position while Icahn’s leveraged (via options) short-squeeze attempt may backfire very badly for him.  In fact, for all I know Ackman may have already exited most or all or his short position.  However, regardless of my opinion on how that plays out, the top of my stop range will not be far above 45.50, even on an intraday basis.  I want to reiterate that as profitable as these recent trades on HLF have played out, this remains potentially high risk trade due to the current veiled direct threats from Carl Icahn regarding making a tender for the stock in order to force buy-ins on a large portion of the outstanding short interest in the stock.  If successful, such an event could cause a very large gap in the stock, bypassing any stop-loss orders.

Trading any security has it’s risks, some larger than other but the one constant that I believe holds true in trading and investing is that risk and reward go hand in hand.  The bigger the risk on a trade, the larger the potential reward.  I don’t have a large enough HLF short position to do major damage if I am squeezed out of the stock but I have enough that if the stock sees the low teens or single digits, as I think is likely some time in 2013, then it will have been worth the risk that is being taken at this time.

Mar 142013
 

Just a heads up for those in the OSTK short that the trade is rapidly approaching the first target.  This trade, like the recent AAPL short and so many other recently completed and still active short trades which are in what I like to call “my own private bear market” are evidence that technical analysis still works (contrary to what I’m hearing from many traders giving up on technicals and finally capitulating and deciding the markets will rise indefinitely as long as Bernanke keeps printing).

The OSTK short currently has a 21% gain from entry and the stock has already fallen over 36% from it’s recent highs, nearly double the standard criteria for a bear market.  T2 remains my final target but every trader must decided whether or not to book partial or full profits at T1 or continuing to let the position ride.  Either way, consider lowering your stops to protect profits.  As “big” as a 36% drop from the highs sounds, keep in mind the original reason for shorting OSTK and giving it some room on the stops.   Like the recent Dow Industrials video, the primary time frame and reasoning for this trade was based off the weekly charts and as such, this trade was allow liberal stops to account for any brief fake-out/shake-out move over that weekly downtrend line.  Viewing the weekly charts below, note the scope and duration of every other weekly RSI sell signal over the span of this chart (a decade). The fact that prices temporarily broke above the downtrend only adds to the longer-term bearish case for the stock as fake-outs often have powerful, long lasting effects on a stock.  For reference, the first string of charts below are the daily charts, in order as posted with today’s updated chart last, followed by a string of the weekly charts.

Daily charts:

Weekly charts:

Mar 142013
 

AAPL 60 min 6I continue to watch the AAPL long setup closely for a breakout above the bullish falling wedge. Here’s an updated 60 minute chart showing a small ascending channel that has set up within the wedge pattern. My current thoughts on AAPL are this: First off, if you are a long-side only trader or longer-term investor, I think AAPL has offers one of the best R/R opportunities on the long-side right now. By that I mean that I believe the upside potential from current levels outweighs the downside risk by a fair margin. However, I also believe there is a chance that even if this setups triggers an entry (a break above the 4-hour or 60 minute bullish falling wedge pattern), that the breakout may get sold into just as it starts to look good… a lot like what I expected with the gold stocks and so far, seemed to have happened yesterday while I was traveling.

My concerns with AAPL has a lot to do with my concerns for the broad market. Chasing long side breakouts at this point, with the market so over-extended and numerous red flags, means that the odds for a fake-out (false breakout) is increased, at least until we get some kind of half-decent pullback in the market. However, an half-decent pullback would also increase the odds that my bigger-picture SPX rising wedge overthrown scenario might play out. Therefore, the bottom line is that if you take AAPL (or any other long trade idea at this point), consider keeping your position size on the light side for now as you can always add to the position if it just continues to climb or if we do finally get that long overdue pullback. Of course, regardless how small you adjust you position size, do not become complacent with your stops. Along with the updated 60 minute chart I have included my weekly chart on AAPL. This chart shows the price targets that I’ve had on AAPL for many months now and although we have now finally hit my first weekly downside target (432) and I do favor a tradable bounce off this level, I still think the odds are good that AAPL may see at least T2 (365) some time later this year. Maybe we get that bounce I’m looking for first (which could prove to be a lucrative, multi-month swing trade), maybe not.

AAPL 6-dayTrade the charts and don’t be married to any one bias of what AAPL will or will not do. From a pure technical perspective, as this 6-day period chart clearly illustrates, AAPL has only relatively recently broken down from this most recent primary uptrend line which has defined the previous bull market in AAPL that began in late 2008 and ended in Sept 2012. So far, AAPL has retraced just under 45% of it’s previous bull market gains (and as AAPL has fallen about 40% off that peak, it is well beyond the typical 20% drop definition for a bear market). Using fibonacci retracements, it is common to see a stock or index to retrace anywhere from 38.2% to 61.8% of the previous trend. As shown on this 6-day period chart (a weekly chart is a 5-day period), following the previous bull market in AAPL (April 2003- Jan 2008), the stock fell to around the 61.8% retracement before ending it’s bear market in late ’08/early ’09.  Therefore, although AAPL is already well with the “typical” retracement range, there is still plenty of downside left in that range, should the support level that the stock is current holding above give way and another wave of selling kicks in.

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