Dec 022014
 

The recent trade ideas and market commentary on RSOTC have been primary focused on precious metals and commodities, as that has been where my focus has been lately. I have started searching for new equity trade ideas and with the recent sharp rise in the broad markets, finding long-side trade setups offering both objective entries and attractive risk-to-return ratios (R/R) has become very difficult. As always, I strive to present a balance between long & trade short ideas and will continue to do so going forward. With that being said, the few attractive trade ideas that I’ve come across so far this week (GMCR, AVGO & ILMN) have all been short trades.

note: An email notification of the AVGO short trade setup & entry was not sent out. That trade idea, along with charts can be found on the home page of RSOTC.com. The ILMN short trade idea will follow shortly.

With the short, intermediate, and long-term trends on most US equity indices still bullish, short trades remains aggressive, counter-trend trades at this time. As always, do you own due dilligence (DOYDD) on each trade you enter and always trade inline with your own risk tolerance and trading style. As far as my outlook for the US equity markets, many of the breadth divergences, such as the percent of stocks trading above their 200-day moving average (below) continue to build and have now reached extremes not seen since the final stages of the previous bull market leading up to the late 2007 peak. These divergences have been pointed out for a while now and actual have resulted or preceded several healthy corrections in US equities but the fact that each correction has been followed by another, essentially continuous set of divergent highs (i.e. stock prices moving higher while the % of stocks above their 200-dma moves lower) warns of a the likelihood of much deeper and prolonged drop in stock prices as this is a direct indication that fewer and fewer stocks are lifting the market. However, divergences are not a sell signal, merely an indication or waning momentum and a likely (but not guaranteed) precursor to a trend reversal. The take-away from these powerful divergences, as mentioned above, is that they may help us to gauge the extent of the next move lower in the US equity market, once a likely trend reversal has become evident, i.e.- once sell signals have been triggered.

 

$NAA200R Dec 2nd

$NAA200R Dec 2nd

$SPXA200R Dec 2nd

$SPXA200R Dec 2nd

 

Dec 022014
 

Following this most recent divergent high, shorting AVGO (Avago Technologies Ltd) here around the 92ish level with a stop above the recent high of 94.43 offers an attractive R/R to any of the 3 downside price targets (up to a 9:1 R/R to final target of 69.20). AVGO is currently trading at 91.93.

The previous short trade on AVGO earlier this year was good for a quick 8.3% gain, with AVGO reversing right off the support line located just below the T1 level. As back then, AVGO has recently put in a divergent high although this most recent divergent high is also accompanied by a more powerful double-divergent high on the weekly chart (below). As the short, intermediate & long-term trends in the broad market are all bullish at this time, any short trades should be considered aggressive, counter-trend trades. As always, trade according to your own personal trading style & risk tolerance.

Dec 012014
 
SLV daily 2 Dec 1st

SLV daily 2 Dec 1st

With the extreme price volatility over the last two trading sessions, coupled with the fact that I had received several inquires on the precious metals over the weekend, I wanted to add to the previous comments on silver. Shortly after that last update, SLV ever so slightly exceeded the 16.05 resistance/buy trigger due to the extreme momentum-fueled run-up earlier today. Brief overshoots of support & resistance are very common when the momentum is very strong leading up to a key technical level (basically, “inertia” for a stock or etf). However, prices immediately reversed from there and moved right back to the underside of the downtrend line. For those that were/are considering going long SLV, it might be preferable to wait for the next break above 16.05 (or even better, 16.10) before establishing or adding to a position if you have not done so yet.

For those already long, my take is that today’s very bullish price action (over 100% recapture of all of Friday’s big loss in SLV) tilts the near & intermediate-term outlook from SLV back to bullish following Friday’s “win” for the bearish case. Once again, with gold & silver chopping around key support/resistance levels lately & volatility ramping up, longer-term investors & more risk-adverse traders might opt to just sit aside while the bulls & bears battle it out here.

My bias for gold & silver (short, intermediate & long-term) remains bullish but I believe that solid technical case, bullish or bearish, can be made either way right now. Quick, nimble traders might take advantage of this volatility to trade the metals long and short while more aggressive swing traders or investors might opt to continue to scale into long or short, depending on their outlook for the metals. The important thing is to make sure to not become married to that position and allow losses to get out of hand, if wrong. Best of luck & don’t hesitate to contact me if you have any questions.

-Randy Phinney

Dec 012014
 
GMCR daily Dec 1st

GMCR daily Dec 1st

GMCR (Keurig Green Mountain Inc) offers an objective short entry here around the 140 level following the recent long-term uptrend line break & the more recent bear-flagging price action. T3 is both the current preferred & final target at this time. Suggested stop over 155 or lower (if only targeting T1 or T2).

GMCR was added as a short trade setup on Sept 25th with an pending entry based on a break below the 125.35 level. The stock has remained above that level since then but just recently went on to breakdown below the 2+ year primary uptrend line and has set up in what appears to be a bear flag pattern over the last several trading session. With the GMCR appearing to break down from that flag pattern (best viewed on the 60 minute time frame) by moving impulsive lower today, the stock offers an objective short entry around current levels. Please note that the price targets have been modified since the previous short entry was posted a couple of months ago. Updated daily chart shown.

Click here to view the live, annotated daily chart of GMCR.

Dec 012014
 
SLV daily Dec 1st

SLV daily Dec 1st

So far, we have some very bullish price action following the post-Thanksgiving selling in gold, silver & oil on Friday. Although a break above the downtrend line could spark a rally towards the T1 zone, a break above 16.05 remains the higher probability entry/add-on to SLV.

Note: A new target zone (T1) has been added with the former T1 now re-sequenced as T2. Updated daily chart of SLV (Silver ETF):

Dec 012014
 

While I was away on Friday, precious metals & crude oil were both down sharply on the historically low-volume, day-after-Thanksgiving holiday trading session. While I’d imagine that some traders long USO pulled the plug on Friday as USO exceeded the lower-most suggested stop criteria, a 3:1 profit-to-stop ratio based upon the highest profit target of 33.82, I received several emails over the weekend inquiring about my thoughts on how to manage a position if still long or for those who bought into Friday’s selling. Keeping in mind that stops should be solely dependent on one’s unique risk tolerance, trading style & of course, entry price(s), following that high-volume, potentially capitulatory sell-off in crude oil it might be prudent to wait about 30-60 minutes after the open today, then place a stop slightly below the morning’s reaction low on USO. This would help mitigate any further downside losses while providing the potential to recapture some or all of the losses and possible go positive on the position, should Friday’s plunge in USO prove to be a flush-out.

Regarding silver, more specifically the SLV long trade setup posted last week, SLV has yet to trigger an entry on a break above the 16.05 resistance level. With that being said, for those already long SLV or considering entering/adding to a position here, a stop somewhat below the Nov 5th reaction low of 14.64 might be prudent. At this time SLV will remain a Long Trade setup with the same entry criteria (a break above 16.05) although an aggressive entry around Friday’s close of 14.83 with a stop below 14.64 might provide for a quick bounce trade or even a longer-term entry, should SLV go on to break above 16.05.

Friday also saw some technical damage inflicted to the chart of $GOLD (spot gold) and GLD (gold etf) with prices moving back below the recently regained 1180/114.50 support/resistance levels. As with silver, the next key support level would be the Nov 5th reaction low (109.67 GLD) with last week’s reaction high of 115.96 as the next key resistance level. To reiterate, Friday’s price action in gold, silver & oil clearly inflicted damage on the near-term & intermediate-term bullish case. Longer-term & less aggressive traders might consider standing aside and wait to see whether Friday’s drop in the PM’s & oil was just a one-day wonder or the kick-off of a new leg down. As I’m still catching up after returning from my trip, I will post some updated charts & additional commentary asap.

Nov 262014
 
USO 60 minute Nov 26th

USO 60 minute Nov 26th

USO (crude oil etf) is currently backtesting the bullish rising wedge pattern following the recent breakout. My expectation is for a successful backtest (i.e.- prices reverse soon & move higher) but if that does not prove to be the case, the suggested stop criteria for this trade remains a 3:1 R/R calculated on the average entry price to the one’s preferred price target (T1 – T4).

As this updated 60 minute chart notes, bullish divergences are still in place as USO prints this marginal new low. As such, USO still offers an objective new entry or add-on with the appropriate stops set not too far below this backtest level.

On another topic, there are a few administrative items to mention: First, I will be leaving town today for the Thanksgiving holiday, returning over the weekend. As such, market analysis & trade updates will be few, if any, for the remainder of the week.

Next, it has recently been brought to my attention that some users may be experiencing intermittent or ongoing issues when trying to access Right Side of the Chart. We are currently working on determining the cause and extent of this issue and would appreciate any feedback from anyone who has recently or currently had issues accessing the site. If so, please click here to contact us, providing any details such any error messages, your location and the frequency of the issue.

Finally, when using the Contact form (located under the Resources tab on the menu at the top of the site), make sure to verify that your email address is entered correctly. Occasionally, after replying to a question on a trade idea, market commentary or some other inquiry, I will get an “email not delivered” auto-reply due to an invalid email address. Every inquiry received at RSOTC is replied to, typically within 24 hours (M-F). If you do not receive a reply from an inquiry that you sent via the contact form, please re-send it, verifying that the correct reply-to email address has been entered.

Happy Thanksgiving!!

s2Member®