Apr 092014
 

The SPY (S&P 500 tracking ETF) has set up in what appears to be a bear flag continuation pattern. The projected measured target for the pattern, coincidentally or not, comes in right around the final near-term target at the 179.30ish area that was added to the last 120 min SPY chart posted a week ago.  With the SPY now approaching the 38.2% Fibonacci retracement of the previous thrust lower (which is the flagpole of this bear flag pattern), I will be watching closely for a downside break of the pattern which could be the catalyst for the next thrust lower in the markets. If this pattern were to play out, the move towards that 179.30ish downside target would likely be as impulsive as the previous thrust lower as the symmetry on both the move leading up/down to a bull/bear flag and the subsequent move following the breakout of the pattern is usually pretty close.

SPY 60 minute April 9th

SPY 60 minute April 9th

Zooming out to a 120 minute time frame on the QQQ (Nasdaq 100 Tracking ETF) we can see that the near-term downtrend that has been in place for just over a month now is still very solidly intact. The Q’s have now retraced 38.2% of the previous thrust lower (from the April 2 & 3 highs) and could turn lower at any time but there’s also plenty of upside left before the bearish near-term trend is called into jeopardy, particularly a break above the yellow downtrend line on this chart. Being that the market has now retraced about 38.2%, a level which is typically the minimum retracement for a counter-trend bounce, this might be a good time to start adding or initiating short exposure. As such, I plan to post some new short setups and possibly highlight any existing short trades that look to offer objective entries or add-ons.

QQQ 120 minute April 9th

QQQ 120 minute April 9th

Apr 082014
 

I received a couple of questions regarding the previously posted potential bear flag/bearish pennant formation on GDX and figured that they were worth passing along.

Q1:  I see the pattern you mentioned in your post. However, can it possibly be an ascending triangle (spanning over the last 10 days) with a target of $26 ? I am new to technical analysis and would appreciate if you could point out the flaw in my view.

A:  Yes, GDX could also be in the latter stages of an ascending triangle pattern if one were to use that 24.75 horizontal resistance line as the upper boundary of the pattern. However, ascending triangle patterns are typically bullish continuation patterns meaning that the pattern is formed immediately following a distinct uptrend. I will say, though, that I have seen both ascending & descending triangle patterns (the latter being a bearish continuation pattern) break in the opposite direction and when this happens, it often leads to a pretty powerful move. Maybe that’s because the majority of traders watching the pattern were caught off guard while positioned for a break in the expected direction (continuation of the prior trend).

Q2: Also did you actually mean $23.50 area target instead of $20.50 as mentioned in your post.

A: No. As ugly as that sounds, the measured target for the bearish pennant/flag pattern posted earlier would be around 20.00-20.50. To determine the target on a bearish pennant or bear flag pattern (both similar patterns & both are also continuation patterns) you simply take the distance of the flagpole and subtract it from the top of the last tag of the uppermost trendline. Keep in mind that there’s no need to pull out your calculator. I usually just draw a trendline marking the flagpole, then drag that trendline and place it on the correct point of the flag or pennant. In fact, the chart that I posted earlier & the one below are using log scaling. To get a more accurate pattern projection when using the trendline drap & drop method, arithmetic scaling is more accurate (giving a measure target of 20.00 on GDX right now, assuming that prices don’t move any higher within the pattern).  After identifying the measured target of the pattern, I like to align that “rough” target with the nearest horizontal support (or resistance) level and/or any key Fibonacci retracement levels to zero in on my own preferred target (which I have not done yet & only plan to do if & when the pattern breaks to the downside).

One a final note, the reason that I reduced exposure to the mining sector on the gap up today was exactly because of the conflicting or ambiguous technical posture of GDX at this time. If I can’t make a solid case to be long or short a position, then it’s only prudent to book some of all of the profits on that trade. I’d rather give it a couple of days to see how this current consolidation on the mining sector resolves itself and not risk getting caught on the wrong side of a sudden breakout from this trading range.

GDX bear flag scenario April 8th

GDX bear flag scenario April 8th

GDX ascending triangle scenario April 8th

GDX ascending triangle scenario April 8th

 

Apr 082014
 

GDX (Market Vectors Gold Miners ETF) is indicated to gap back up to 24.75 resistance level which is also the top of this potential bearish pennant pattern. The 24.75 level is the first near-term target listed on the prior string of 15 minute charts.  If GDX can make a solid & sustained break above the 24.75 level, there is a thin zone up to the next near-term target of 25.20ish that is likely to be filled. However, should GDX once again turn down from this resistance level, as with the two recent failed attempts to take it out, that could send prices back down to the bottom of the bearish pennant. Should GDX break down from the pennant, the measure move on the pattern projects to around the 20.50 area. Personally, I plan to reduce exposure to the miners on the opening gap but may add back exposure should GDX make a solid break above the 24.75 level.

GDX 60 minute April 8th

GDX 60 minute April 8th

GDX 15 minute April 8th

GDX 15 minute April 8th

 

Apr 072014
 

In order to make room for a slew of new trade ideas that I’ve found over the weekend, I’m working on the long overdue task of updating the Active Short Trade ideas. As a tool for referencing past trades as well as tracking performance, all trade ideas are updated when they are moved from the Active Trades category to the Completed Trades category (either stopped out or upon reaching the final price target). In doing so, I noticed that the QIHU short has not been updated since the first profit target was hit back in 2013.

After hitting T1 for a quick 4.5% gain shortly after entry, QIHU slowly worked its way down to my second & preferred target of 74.10 for a 13.7% gain from entry. From there, as expected, the stock bounced but continued to climb, exceeding any reasonable stop and should have been moved to the completed trades category. For future reference, the previous & updated 60 minute & 4 hour charts on this trade are shown below.

Apr 072014
 

The LNKD (LinkedIn Corp) short trade has hit the third profit target, T3 at 166.30, for a 26.5% gain from entry. Consider booking partial or full profits and/or lowering your stops, depending on your trading plan. T4 at 127.20 remains the final target at this time although the odds of a near-term reaction (bounce or consolidation) around the T3 level are elevated at this time. Previous & updated daily charts below:

Apr 072014
 

The third near-term target (of the 60-120 min time frame targets) on the QQQ has been hit with the Q’s down almost 6% from the where the recent bearish rising wedge pattern was first highlighted. Although a reaction (pause or bounce) here is likely, I continue to favor more downside before any substantial (3%+) move higher. At this point, with the short-term trend bearish for exactly one month now (the QQQ/$NDX topped on March 7th) and the intermeditate-term trend moving closer to bearish territory, to  I start to turn my focus more on the daily charts in order to help determine the most likely path for the markets going forward. Doing so helps to determine which profit target(s) to use in closing out my short trades. Although things can change quickly in the markets, at this time I believe that any rallies are likely to be relatively minor in scope and duration and a move down to the T4 level on the 120 minute chart (which is also T1 on the $NDX daily chart) in the coming days is likely. With that being said, the markets are getting oversold on the short-term time frames and with both the Q’s & SPY at support (the SPY is back to the top of my 60-120 min T1 zone), in general I am not interested in adding any more short exposure with the exception possibly being a very attractive short trade bouncing back to a solid resistance level or some other very compelling, high R/R entry.

The charts below are the most recent string of the 60 & 120 minute QQQ charts. This move down so far has been nearly textbook with the first 60 minute chart posted back on March 5th highlighting the QQQ at the top of the most recent bearish rising wedge pattern. From there, prices went on to make one final tag & bounce off the bottom of the wedge, breaking down below the wedge shortly thereafter, followed by a near-perfect backtest from below and the Q’s continuing to fall from there while making a series of lower highs & lower lows (i.e.- a downtrend).

Apr 042014
 

AAPL (Apple Inc) is currently trading well below the symmetrical triangle. First downside target would be the 200ema/515.60 area.  click here to view the live daily chart of AAPL

AAPL daily April 4th

AAPL daily April 4th

Also keep in mind that the 200-day EMA, which is the same as the 40-week EMA, has done an excellent job of defining major bull & bear trends in APPL in recent years as evidenced on this 10-year weekly chart. click here to view the live weekly chart of AAPL

AAPL weekly April 4th

AAPL weekly April 4th

 

Apr 042014
 

SNDK (Sandisk Corp) looks to offer an attractive R/R with a short enter here on what looks to be shaping up as a shooting star (a potentially bearish topping candlestick formation). A stop over today’s high of 85.37 would provide about a 3 point downside risk while my preferred target range on this trade (exact targets TBD) would be at least 10 points lower & quite possibly nearly 20 points lower, if this trade & the markets continue to play out as expected. If conditions are favorable, I will occasionally enter a short trade at the top of a rising wedge pattern (or the bottom of a bullish falling wedge pattern for longs) as the potential gains on the trade, assuming that prices reverse and go on to break down from the wedge and continue to play out to the measured target of the pattern, are very large compared to downside risk if stopped out as tight stops can be used. Shorting the top (or long at the bottom) of a wedge typically has a higher chance of failure on the trade (vs. waiting for a breakout of the pattern) but when factoring in the above average R/R, on balance I’ve found these type of trades to be very profitable.

SNDK daily April 4th

SNDK daily April 4th

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