HMN (Horace Mann Educators Corp) was posted as a Trade Setup on Wednesday of this week and went on to trigger a short entry yesterday on a move below 28.33. I’ve added the 200-day ema to this updated daily chart to illustrate how well that moving average has acted as support and resistance, defining the recent up & down trends in HMY. With prices currently sitting on the 200 ema, any solid break below will trigger the next sell signal in the stock and increase the odds of this short trade reaching the price targets.
Just to elaborate on my previous market comments, any bounce that may or may not materialize around the current support level on the Nasdaq 100 is expected to be a counter-trend rally in what I still believe to be the early stages of a much larger downtrend. Today the $NDX hit the first of four downside profit targets that have been listed on the $NDX live daily chart for some time now. My expectation at this time, which could change depending on how the charts play out going forward, is that before all is said & done, the $NDX will have fallen to my 4th & final (at this time) target which comes in around the 3150 level or the primary uptrend line on that chart, whichever comes first. That could take as long as several months or a short as several days, should the nearby support levels give way quickly.
With that being said, in order to most effectively utilize the trade ideas on RSOTC one must align the entries & exits of those trades with their own unique trading style and typical time frame. For example, very active, short-term traders like myself might opt to micro-manage a swing trade listing multiple price targets by booking profits as the earlier targets are hit (assuming the short-term charts confirm that a bounce is likely) while re-entering the position on the bounce with the intention of swinging the trade down to the final target(s). A less active, longer-term swing or trend trade might opt to ride out any short-term counter-trend bounces in the position with the intent of holding out for the 3rd or 4th target.
The bottom line is that trying to time all the minor swings in the market is not always easy and typically something best attempted by more seasoned traders. Those traders or investors that are longer-term bullish at this time should focus on initiating or adding to positions on pullbacks to support or breakouts of bullish chart patterns. For example, I’ve recently highlighted how well the 40-week EMA has defined major bull and bear trends in AAPL (Apple Inc.). After breaking down from the recently highlighted symmetrical triangle pattern on the daily chart, AAPL has now fallen to the 40-week EMA (which is the same as the 200 EMA on the daily chart), thereby offering an objective long entry, again for those who believe that the current correction has most likely run it’s course. Those with a longer-term bearish view could wait for a solid weekly close or two below the 40-week EMA in order to establish a swing short position on the stock.
Again, we may or may not get a tradable bounce in the $NDX from this current support level and as such, I plan to update some of the trade ideas that still offer an objective entry for those looking to add any long or short exposure at this time. As I might be updating a number of trade ideas today, email notification may not be sent out on each update so best to check the site throughout the day or over the weekend if looking for any trade ideas at this time. On a final note, for the most part, I try to avoid establishing any new positions on a Friday, especially towards the end of the day due to the extra overnight risk associated with weekends. Based on all the volatility lately, chances are that the market is going to gap one way or the other on Monday and that gap could be sizable.
When trading individual stocks (usually my preference over trading the broad market such as SPY, ES mini-futures, etc..), I will typically align or modify my profit targets with the broad market. For example, I’ll use the EVR Active Short Trade as an actual example. EVR was posted as a short entry at a price of 54.89 on April 3rd, listing two profit targets on the trade (T1 & T2). Although T2 remains my final swing target at this time, I have decided to book full profits on my EVR short at a price slightly above my first target of 48.75. EVR hit a low of 48.79, just 4 cents above my target but being that the $NDX/QQQ, which I consider the leading index at this time and as such, I am putting a heavier weighting into my analysis than the $SPX/SPY, has hit my final near-term (60-120 minute) and first daily targets and as such, is likely to bounce, I have opted to reduce my overall short exposure. In doing so, I look for my existing trades that have hit or are near a price target and then make a determination on whether to book partial or even full profits or to let the position continue to ride.
That decision is based on various factors including the technical posture of each position but a big weighting in my decision is what my expectations for the broad markets are. As stated earlier, the odds for a meaningful bounce are elevated at this time and as such, if a position, such as EVR has not yet hit the price target that I was focusing on when I entered the trade but is close enough, I may opt to book profits a little early as a bounce in the broad markets, i.e., a rising tide, is likely to lift all ships. Even if my take on the broad market is wrong and prices continue to fall sharply below current levels, trading is all about weighing the potential risk vs. the potential reward. I’d rather not risk giving back some nice gains by holding out for higher profits with the markets becoming oversold on the near & intermediate-term time frames while at resistance with potential bullish divergences forming. To me, remaining aggressively short here does not offer a very favorable R/R.
On a final note, as the possibility that the markets do manage to slice through support and continue to move toward my additional downside targets, I have opted to place relatively tight trailing stop loss orders on many of my other short positions (vs. closing out the trades). The advantage of relatively tight trailing stops is that it allows you to “let your winners run” while also helping to lock in most of your profits, should the trade start moving against you.
Again, the decision to book profits or let a trade ride with stops in place is dependent on various factors such as my preferred target and the individual charts of each position. The most important thing when trading is to have a plan in place. This holds especially true when shorting as stocks usually fall much faster than they rise. I find that being flexible in your plan as far as booking profits earlier or even extending your price targets, depending on how the bigger picture (broad markets) is developing. The markets (charts) are dynamic, not static, and as such, a trader must constantly review & revise his/her game plan.
The fourth & final near-term target on the previously posted string of QQQ 60 & 120 minute charts has now been hit. This is also the same as the first target that has been listed on the $NDX daily live chart for a while now. Therefore, the odds for a bounce from or around this level are elevated at this time. Adding to the case for a bounce from these levels is the fact that we have some pretty steep potential positive divergences forming on the 60 minute time frame, a criteria that I look for during a market correction to signal the likelihood of a meaningful (tradable) bounce or end to the correction & resumption of the primary uptrend. This potential divergence (at least in my book) will be confirmed once we get a bearish crossover on the MACD, thereby putting a higher low in place against a lower low in prices on the QQQ (and a higher low in the RSI as well).
As such, I have reduced a considerable amount of short exposure and may take some longs in order to hedge or possible go net long for a bounce. However, it wouldn’t surprise me to see one last thrust below this morning’s lows before a meaningful rally takes place. The possibility of a continued sell-off towards my lower price targets on the daily charts can’t be ruled out at this point either. Translation: Although I am leaning towards a bounce from around current levels, my degree of confidence isn’t very high and as such, I am moving towards a more market neutral positioning until the dust settles and I have a better read on the next direction of the market. Also, my best guess for a “micro-call” on the market action today would be for one more thrust to a marginal new low today (below the LOD put in shortly after the open today) before a meaningful rally in the market. Again, that’s just my best guess and calling all the minor zigs and zags of the market can be difficult. Best of luck in your trading.
Updated 60 minute QQQ & the daily $NDX charts below. Click here to view the live daily chart of the $NDX
This trade setup in SNYA (Synaptics Inc) was passed along to me by a follower of the site (thanks D.C.) yesterday and broke below the uptrend line on a sharp move lower today. Since my price alert didn’t trigger until just before an hour before the close, I decided to hold off on posting an entry as I usually avoid late day pattern breakouts, especially if they are caused by a strong move in the broad market as today. With that being said, I still have numerous trade ideas to share so I figured that it would be best to post this one now for those who are looking for some short-side trade candidates. As I’m posting this setup after-hours, my preference would be to establish a short entry on SYNA if the stock is trading close to or above where it closed today (56.18) or higher, as long as prices remain below the trendline. Targets are listed on this daily chart with the specific suggested buy-to-cover levels to be added soon.
When I was in my early 20’s, I found myself at the blackjack table while vacationing in the Bahamas. Never having played the game but chock full of liquid courage, I was blissfully ignorant of the fact that I was rapidly hemorrhaging cash, losing many more hands than I was winning. However, before my losses got to the point of doing any major damage, I received a bit of advice from an unexpected & surprising source.
After playing numerous hands without hardly a word spoken from the dealer, suddenly he muttered something indiscernible under his breath.
WFC (Wells Fargo Corp) will be added as an Active Short Trade at the open tomorrow as prices have recently broken below this second sub-uptrend line. A longer term bearish case for the stock is also made on the weekly chart below. Price target levels are marked on the daily chart with the exact suggested buy-to-cover levels to follow. Suggested stop on a close above the recent high of 50.49.
Today’s late day rally, which was sparked by the release of the FOMC minutes at 2pm ET, not only stopped cold literally one cent shy of my former downside target (T2) from my QQQ 60/120 minute time frame (remember: support, once broken, becomes resistance) but it also stopped to the exact penny at the previous posted former support, now resistance level at 187.15 on the SPY 60/120 minute charts. Although the potential bear flag highlighted on the 60 min SPY chart posted this morning did not pan out (nor did it come close to triggering a sell signal & hence, the pattern was not validated), the more bullish of the two scenarios from this morning’s QQQ 120 minute chart is playing out so far with prices peaking exactly at the top of that scenario (the former T2 level at 87.88).
Below are the previously posted 60 & 120 minute charts for the SPY & QQQ along with the updated end of day charts. As stated earlier today, there’s still plenty of upside left before the current downtrend is called into jeopardy and with the markets closing right at resistance, we’ll just have to wait until tomorrow to see if these scenarios continue to play out with the markets moving lower tomorrow (even allowing for a possible gap & crap at the open which would briefly overshoot these resistance levels).
Whether or not this was the end of a counter-trend rally or not, as only time will tell, one thing that I feel strong about is the fact today’s bounce back to these resistance levels, which also lined up perfectly with the 61.8% Fib retracement of the prior move down in the QQQ, was about as objective an area to add short exposure as it gets (assuming that one’s bias is bearish, of course). For those who are bullish, my suggestion would be to wait for at least a solid move (and 60 minute candlestick close) above these level before adding much more long exposure. Although I added a fair amount of short exposure into the close today, going forward my preferred will be to add any more short exposure on market weakness, not strength.
SUSS (Susser Holdings) looks have a lot of potential as a longer-term swing short trade. Based on my interpretation of both the daily & weekly charts, I would say that the 4 year, 700% run in this stock is in the terminal stages right now. I’m looking at SUSS as a long-term swing trade candidate with the potential for a nearly 50% drop from current levels. However, this trade idea has yet to trigger an entry & is only a trade setup at this time.
SUSS is currently flirting with a confluence of major support as the stock wedges higher with substantial divergences in place on both the daily & weekly time frames. The first major support would be the primary uptrend line generated off of the April 2010 lows. Not far below that SUSS has both horizontal support around the 57.50ish area as well as the 40 week/200 day exponential moving average, which currently comes in at 57.47. Although I often short trendline breaks, I will typically hold off if there is decent support not far below. An objective short entry would be on either any intraweek break below the Jan 26th reaction low of 57.26 (plus a penny or so) -OR- on a weekly close below both 57.26 and the 200-day/40-week ema. Using a weekly close when trading off of the weekly chart, as shown below, helps to reduced the chances of being stopped out, should the stock make a brief, intra-week break below support. The benefit of taking the intra-week break of support is that it may provide a better entry price, should the stock continue to move down sharply by the end of the week. Which entry criteria one chooses would depend on their own unique trading style and risk tolerance.
LUV (Southwest Airlines Co) looks to offer an objective short entry here around the 24.00 area as it backtests the recently broken bearish rising wedge pattern. The first price target, T1, is 20.32 with T2, my preferred & final target at 19.08. The suggested stop for either target would be on a move above the 25 level.