The following Short Trade Ideas have all exceeded their previously suggested stop criteria and will be moved from the Active Trades to the Completed Trades category: JASO, MU, STT, C, & FITB. There are several other trade ideas, both long and short, that have not exceeded their suggested stops but may be removed soon to make room for new trade ideas that offer better R/R profiles at this time. The AVL long trade also recently moved below its previously suggested stop level and will also be removed. (The AVL stopped out trade will also be covered under a separate post, assigned to the Completed Trades- Long category for archiving purposes.)
In reviewing the current active short trades, I noticed that I had incorrectly typed 61.60 as the suggested stop on the previous update to the C short trade. My intention was to list the stop on a move above 51.60, where the red horizontal line on that last daily chart comes in. I’d assume that anyone who took the trade probably figured that out when viewing the chart but if not, I wanted to share that level and although this might be too late for some (my apologies if so), my preference is to see an close above that level in order to trigger the stop. C did manage to trade as high as 52.10 early today but has since fallen back below that resistance level. Again, the preferred stop for C is a daily close above the 51.60 level, which may or may not happen today.
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:
… 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: