Aug 072014
 

ANR (Alpha Natural Resources) is one of several long-side trade ideas currently on my watchlist that are showing some bullish developments on both the daily & weekly time frames. With many of the coal stock firmly entrenched in a bear market, these should be considered counter-trend, fairly aggressive trades at this time. For those who may have an interest in the coal stocks, to help adjust position sizing for each trade idea in order to account for the total target exposure to the sector, I currently have six coal stocks on my watchlist that are at or close to triggering an entry that may also be added as Trade Setups and/or Active Trades soon. In addition to the potentially bullish developments on those individual coal stocks, the DJ US Coal Index may be forming a right shoulder of an Inverse Head & Shoulders bottoming pattern following a divergent low at the formation of the head.

ANR will be added as long entry here around 3.60 following yesterday’s breakout on average volume. Suggested stops for those targeting T1 (4.08) would be below 3.40 while longer-term traders targeting T2 or higher (additional upside targets likely to be added) might consider a stop below 3.10 as well as considering a scale-in strategy to allow for a possible backtest of the downtrend line. The last trade on ANR was entered on a break of this downtrend & hit T2 for a 34% on Nov 4th. ANR is once again being added as both a typical swing trade (Active Long) and a Long-Term Trade idea on this breakout. However, longer-term & more conservative swing traders might wait for a solid weekly close (end of day Friday) before establishing a position.     click here to view the live daily chart of ANR     click here to view the live weekly chart of ANR     click here to view the live weekly chart of the DJ US Coal Index

 

Aug 072014
 
$SPX daily Aug 7th

$SPX daily Aug 7th

As we have seen some very significant technical developments lately in addition to a substantial increase in new trade ideas, I just wanted to summarize my current positioning & thoughts on the market. My positioning & outlook for the market has been pretty consistent since the beginning of the year: The risk/reward for equities in general has been unfavorable while gold, silver, mining stocks & select commodities have offered some of the most attractive R/R’s. With the U.S. markets essentially flat for the year ($DJIA & $RUT slightly negative and the $COMPQ & $SPX slightly positive YTD) and my expectation for considerable downside in the broad markets before year end, this has most certainly been a stock pickers (i.e.- traders) market and most likely will continue to be in the foreseeable future.

Even the precious metals & mining sector, which has comprised the bulk of my trade ideas this year, has been much more conducive to market timing (swing trading) than a buy & hold strategy. For example, in the gold mining sector we have experienced two strong rallies, one strong correction (retracing nearly 80% of the late Dec to mid-March rally) and the recent sideways market trading range in where prices have gone essentially nowhere for nearly 7 weeks now, in which I was able to side-step, just adding back exposure this week shortly before the breakout in gold. Equity trades, both long & short, on balance have been successful and have also benefited from a very selective market timing process. Since the start of the third quarter of 2011, barring a few relatively minor corrections, this market has been unusually conducive to buy & hold investing and BTFD (buy-the-*$%#@-dip) has most certainly been the mantra during this time.

While anything is possible in trading, my read on the charts indicates that buying the dips going forward, including this one, might not work out so well. As such, my current strategy is to sell or short the rips (back to resistance) and cover the dips (down to support) while continuing to be very selective in the sectors and individual stocks that I trade long or short… i.e.- trading the most attractive stocks, not the market (SPY, QQQ, etc…). As is often the case, my preference is to trade a long/short portfolio, consisting of the most attractive stocks and sectors, both bullish and bearish. Doing so provides the benefits of both diversification (amongst various sectors & industries) as well as hedging (holding both long & short positions), should my read on the overall direction of the market or particular sectors prove wrong.

With that being said, I have several new trade ideas, both long & short, to share and I also plan to remove some of the “dead money” Active Trades in order to streamline the trade ideas and focus on the most promising trades at this time. The broad market became quite oversold on the near-term time frame as the $SPX hit the primary uptrend line on the daily chart (above) and has been clinging to that key support level like an exhausted swimmer to a life preserver since it first fell to that level last Friday. Note how all previous tags of that trendline in the past resulted in nearly immediately and powerful reversals, i.e.- shorts covered & the dip buyers aggressively stepped in. So far for nearly a week now that has not been the case, a potential sign that the supply-demand dynamics of this market have finally shifted. Of course, with prices still hovering around that key support level, it’s still too early to declare victory for either the bulls or bears. A very impulsive intraweek move below that level and/or a solid weekly close below would certainly bode well for the intermediate & possibly longer-term bearish picture while a solid move back above the trendline would indicate that there are still more willing buyers than sellers out there at this time.

Aug 062014
 
LYV daily Aug 6th

LYV daily Aug 6th

LYV (Live Nation Entertainment) was posted as a Short Setup on July 29 & went on to trigger an entry on a solid break below the uptrend line two days later on July 31st. The stock gapped down the next trading session to hit the first target of 21.62 for a gain of 8.0%. As expected, the stock has experienced a reaction by pausing or consolidating around the T1 level since then and has started moving lower today. T2 at 20.14 is my current preferred target for this trade and with prices starting to move below that first target level today, I do think LVY has a good shot of getting there soon.

Looking at the chart I would expect a decent reaction off the T2 level, especially if we get there soon. At this point consider one of two stop options: A more conservative stop just above the bottom of Friday’s gap, around 22.40 or a more liberal stop above the top of the gap, around 23.20. The latter, more liberal stop would only make sense for those that took the entire position on the initial trendline break as that would assure at least a breakeven on the trade but a loss for anyone who waited until after the earnings induced gap to initiate a position.

click here to view the live, annotated daily chart of LYV

Aug 062014
 

I’ve added a few extra annotations to some of the global stock indices in which links to the live charts were posted yesterday. I’ve also posted some those charts in an easy to view gallery format below. Simply click on the first chart to expand, then click anywhere on the right of the chart to advance to the next one (or click on the left of a chart to view the previous chart). Live links to each of these chart are available under the Live Charts page.

Aug 062014
 
GLD 60 minute Aug 6th

GLD 60 minute Aug 6th

GLD made a solid gap higher at the open today, breaking above the wedge and most likely kicking off the next leg higher in gold. Although my recent focus with GLD has been on the intraday charts (60 & 120 minute), that was merely to time my re-entry back into the trading positions in the metals & miners that I booked profits on in late June. Therefore, my focus will now turn back primarily to the daily charts, watching for a break of the July 10th reaction high as the next bullish event for GLD. SLV also made a nice gap up today but has quite a bit more work to do from a technical perspective as it still has yet to take out the top of the June 19th gap (defined as S1 on my previous 60 & 120 minute charts).

Aug 052014
 

I received a comment on the previous update on GLD & SLV as to the fact that the 120-minute SLV chart did not have positive divergence in place. Although that is the case and although I often look for bullish and bearish divergences as supporting evidence for a likely reversal on a trade candidate, it is not a must. The basis for adding exposure to GLD, SLV & the miners as they’ve fallen to these recent support levels is that my longer-term read on the charts remains bullish and as such, my preference is to add back the exposure that I reduced just over a month ago at the areas that I think a reversal is most likely to occur. Various factors go into my analysis with support & retracements levels given the largest weighting and divergences and other variables also factored in.

As I attempt to keep my analysis & the charts that I post as streamlined as possible, I didn’t show it previously but you can see on these 60 minute charts that those horizontal support levels in GLD & SLV, which are both defined by the bottom of the  Fibonacci retracement levels to both GLD & SLV (from the June 3rd lows in GLD & May  30th low in SLV to the July 10th highs in both) come in either just below (SLV) or exactly on (GLD) those horizontal support levels that I’ve been targeting. In technical analysis, at least in my book, pullbacks to combined support levels of both Fibonacci retracements and price support are about the most objective & high probability areas to position for a reversal, especially when the price & momentum indicators and oscillators, such as the MACD & RSI confirm a likely reversal off those levels, as they current do.

 

That actually brings me to my final point: Time Frames. When positioning for a trade based primarily off the daily charts, I will often use the intraday time frames (e.g. 30 or 60 minute chart) to help hone down my entries and exits. In the case of gold, I’ve already made the case, right or wrong, that a new cyclical bull market may be underway. That largely drives my overall bias for trading gold & the miners at this time although as I’ve mentioned, there’s still some work to be done on the longer-term charts in order to say with a fair degree of confidence that the bear market in gold that started in 2011 is behind us. Continue reading »

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