BAC will trigger a short entry for aggressive traders on a break below the S1 support zone shown here on the daily chart. Price may find some support on the yellow (lower) uptrend line. However, a end of week close below the uptrend line on the weekly chart will trigger a swing short entry for more conventional traders and/or an add-on position for aggressive traders. Daily & weekly charts below:
I’ve spent some time in updating both the Trade Setups category as well as the Active Trades category. Trade Setups are trade ideas that are either currently offering an objective entry, such as an active long trade that has pulled back to support, for example. Stocks or ETF’s that are setting up in a bullish or bearish technical pattern but have not yet triggered an entry fall into this category as well. As such, trade ideas are often assigned more than one category as they are not mutually exclusive. A description of each category can be found at the top of the page when selecting those sub-categories under “Trading & Investment Ideas” on the top menu bar of the site. All completed trades, whether successful (one or more price targets hit) or unsuccessful (stopped out or removed early) are archived indefinitely under the Completed Trades category.
The following trade ideas will be removed from the Active Trades category. About half of these trades were successful, such as VHI, which hit it’s second price target on June 19th for a 19.7% gain, continuing lower to a 30% gain just three days later but then reversing shy of the third & final target, moving sharply higher since & triggering any logical stops. The other half of these trades did not reach a profit target and either exceeded their suggested stops or no longer look very attractive from a R/R perspective.
BAC, ELLI, FDO, FL, IACI, MW, OCN, IWM, VHI
Regardless of the relentless bid under the market lately, the Too Big To Fail banks still look bearish from a technical perspective at this point. Although the current divergences and bearish price patterns can & will be negated should prices go much higher, at this time these key financial stocks have not yet reached that point (of undoing the bearish technicals).
I realize that the will of most flexible/short-side traders has been broken lately with the markets powering to new highs on a near-daily basis in spite of bearish chart patterns and divergences. There are times where technical analysis simply doesn’t work and usually that happens to bullish patterns during a downtrend and bearish patterns during an uptrend (as is currently the case). Therefore, one should be very selective with any short-side trades until we at least return back to a short-term downtrend once again. At this time, the trend on all major time frames (long-term, intermediate-term and short-term) is clearly up.
With that being said, I always strive to keep both long and short trade ideas on the site as even during a strong trend, some traders or investors might be looking for counter-trend trades to hedge their existing positions or maybe an aggressive trader is looking to position in front of what could be a sudden reversal. As I plan to continue to remove many of the existing short trades that no longer look attractive, I am going to add all 4 of these stocks as Active short trades at current levels with stops & targets to follow asap. Essentially, the stops will be very tight as these stocks are approaching the upper-limits of where the bearish technicals will become undone. For example, if prices were to make a solid move back inside of a bearish wedge or the MACD and RSI both take out their downtrend lines. Therefore, in spite of “the trend that just won’t end”, I view these 4 stocks to be objective short entries here with the appropriate stops in place. Objective should not be confused with a high probability of success. Rather that the expected measure of loss, if wrong, is more than outweighed by the potential gain on the trade, if correct. With BAC, for example, I’m looking for a 30% correction from current levels but my stop will be less than 10% overhead. Updated daily charts of JPM, BAC, C, & WFC:
Although there are many key stocks and indices that I’m following which are in the process of backtesting a recently broken key uptrend line or bearish pattern, I’ll just share a few here below. The first is a weekly chart of XOM, the world’s largest company (as measured by market capitalization). As the largest component of the S&P500, where XOM goes will likely have an impact on the US markets. Following XOM are the daily charts of the $DJIA (Dow Jones Industrials) and BAC, another top component of the S&P 500 and proxy for the health of the US and global financial industry.
Note: These charts were made earlier this after but I was unable to access the site due to what my web hosting company described a dual-failure on both upload links to their East Coast server. That was the cause for the site being down earlier today but issue has now been resolved. On a related note, we are still working on restoring the feature that allows those subscribed to receive email notification of new post to select or deselect specific categories such as market analysis, trade setups, etc. and hope to have that completed asap.
… but not too big to short. As a follow-up to the recently posts on the XLF short trade, here are the updated charts on the major TBTF banks; BAC, JPM, C, & WFM:
Two weeks ago I had stated that a correction in the banking sector was likely as evidenced by the bearish charts of $BKX (KBW Banking Sector) as well as a few of the heavy weights of the financial sector, BAC, C, and JPM. At the time, JPM was the only one of the three which had already broken down from it’s bearish rising wedge pattern but since then, BAC and C have also clearly followed suit and although they are getting close to my first minor support levels, which may or may not produce a decent bounce, I believe that the charts continue to indicate significant downside over the upcoming weeks and quite possible months. Of importance to watch is the $BXK, which is quickly approaching that key uptrend line shown on the last weekly chart (which is the bottom of the wedge pattern on this updated weekly chart. A break below said uptrend line would likely bring the $BKX back to the 43 level, taking the banking sector back to levels not seen since June 2012. Previous & updated charts:
I’m considering shorting some of the large bank stocks but I’ll just share these charts as “unofficial” trade ideas for now, possibly adding them as soon as I clean up the Active Short Trades category. I’d like to cull out some of the Active Shorts that may not have triggered a stop yet, many of which are even profitable but just not offering as good a risk/reward profile at this point as I’d like to see. Therefore, I plan to remove some of those trades soon to make room for some new short ideas that offer a better R/R profile at this time.
Here’s the weekly chart of the $BKX (KBW Bank Index) along with the daily charts of three of the largest TBTF (Too Big To Fail) but not too big to short (or drop in price). TBTF means that the US Gov’t will do whatever it can in it’s power to keep the doors open and lights on at the banks but in no way (contrary to the widely held belief of the general public) does this mean that the stock price of these banks is immune to significant losses and even the possibility of a total loss, should another financial crisis occur in the future. GM is one of many examples of this. The Gov’t essentially bailed out GM and kept the lights on for the company while the GM stockholders, prior to the 2009 bankruptcy, were wiped out. The GM shares that trade today were NEW shares from the post-bankruptcy company and the previous stockholders were not compensated or given any stake in the new company. Anyway, I’m not predicting any major collapse of the bank stocks, at least not at this point in time. Just looking for a likely 15-20% drop (possibly more) from their recent highs. $BXK weekly chart followed by the daily charts of JPM, BAC, and C:
I’ve put together a comprehensive video analysis of the S&P 500 index including technical overviews on 22 of the largest components of the sector, similar to my recent $NDX/QQQ top 10 holdings video. I do have to warn you that at 39 minutes, this is my longest video yet. Therefore, this is my gift for you insomniacs, masochists and those who are gluttons for punishment. All kidding aside though, if you don’t want to sit through the entire video you can skip to the sections that you might be interested in. The video starts with an overview of the $SPX beginning with the monthly charts, weekly chart, then the daily time frame (plus the targets on the SPY daily) and then goes on to cover the following stocks in this order: XOM, AAPL, MSFT, PG, IBM, GE, JPM, BAC, T, CVX, BRKB, CSCO, KO, PFE, GOOG, INTC, MRK, HPQ, WMT, C, ORCL, PM.
Some of these stocks are active trades on the site while others look like objective trades at current levels as well. To view the video, click the link below to where it will open in YouTube. As always, make sure to select the 720p HD playback quality setting and “Large Player” or “Full Screen” size for optimal viewing quality.