I've been looking for something worthwhile to post but just don't see any short-term trade ideas that look compelling right now, plus, I think trading might be difficult today and possibly throughout the week with the markets grinding around in a fairly unpredictable range. I am seeing some interesting developments in the energy sector, including the oil & gas exploration sector as well as some of the coal stocks but I want to study the charts some more before deciding whether to engage those sectors or not. The miners still look fine although they are certainly getting stretched (overbought) in the very near-term so at this point, I'm going to hold off on adding any more exposure until we get a pullback & if I see an objective entry, I'll likely add a GDX long and/or DUST short as an official trade idea (also see my recent comments posted below). Bottom line: I'm keeping things light for now, meaning that I unless I come across a compelling day trading opp or swing trade setup with an very objective entry, I don't plan to trade today.
Here are a few of my recent comments posted in the Trading Room this week, which expand on my some of my thoughts at this time (in reverse chronological order, starting with the most recent):
- (in response to the fact that LABU & XBI are still listed as Active Short Trade ideas): Thx Cheri- I missed re-categorizing one of the posts on HSY when I moved it to the Completed Trade on Sunday, fixed now.
I assume that you meant XBI instead of EBI. XBI is an alternative for the LABU short trade that was initiated in this post back on Aug 7, 2015: http://rightsideofthechart.com/biotech-sector-breakdown-confirmed/
On Sept 29th, right off the lows thevery day the biotechs bottomed from the first wave down in the new bear market they are in, I posted closing all my biotech shorts and reversing to a long position while also stating that ” I’ll leave LABU on as an Active Short Trade for the time as I still believe there the biotech sector has more downside in the coming months although it appears that the odds for a meaningful rally are quite elevated at this time.” http://rightsideofthechart.com/closing-all-biotech-shorts-reversing-long/
As an Active Trade, I often reverse a trade to game the counter-trend bounces along the way to the final target. I intentionally left LABU on as an Active Short trade for less-active traders that don’t have the time, experience or inclination to actively trade. Also, LABU has some of the worst decay of any 3x leveraged simply due to the fact that biotech stocks are in one of the most volatile sectors… hence the decay from the large daily price swings makes LABU a great candidate for less active trade to tuck away & hold as a long-term short trade during a bear market.
As evidence of the decay that I am referring to, LABU has lost about 80% of its value since that short entry on Aug 7th & I still believe it has considerably more downside in 2016.
- (in response to whether I plan to add GDX or NUGT as an official trade idea): I’d like to see it come back in somewhat for a more optimal entry on an official trade idea & I was also waiting for a solid weekly close back above 13.00 for additional confirmation. With that being said, official or not, the price action has been quite bullish lately so if your analysis meshes with mine or you’re bullish for other reasons, there’s no reason to wait for GDX (NUGT or a DUST short) to be added as an official trade idea as whipsaw signals, such as the recent false breakdown, can be very powerful bullish technical events, with the initial rally often very strong, offering little, if any, pullbacks to allow longs to get in.
My personal strategy, which I shared with a few here that inquired via private messaging or the contact form, was to take small position on the breakdown (as gold was holding up & the odds for a false breakdown in GDX were still good), adding once GDX reclaimed the 13.00 (which it did slightly on Friday & the solidly on Monday with the gap up) and today I started scaling into a short position in DUST (the other trades were GDX calls, as they were selling relatively cheaply on the breakdown as there were a lot more sellers than buyers & GDX was below key support, trading a new lows).
At this point & especially if GDX continues to run, the premiums on the calls will swell to the point that it just won’t be worth it, hence, the reason for now starting to use a DUST short as a long proxy but again, only starting a small position today which I will continue to add to either on strength OR weakness down to, but not below the 13.00 level.
- (in response to a question on WEAT and the other agricultural commodities that I have recently posted as official or unofficial trade setups): I ever-so-slightly modified the downtrend line on SOYB recently although it was the same one shown in the update posted last night. SOYB is still trading just below. To help minimize taking a false breakout, probably best to wait for SOYB to take out Friday’s high of 17.62, which will have clearly taken it above the white downtrend line.
The rest of the grains/beans still have some work to do as well. I have WEAT still about 16 cents or so below it’s downtrend line as of right now. Of course, that downtrend comes in at a lower price each day so WEAT could break out any day now. Bottom line is that those ag commodities still have a little more work to do before triggering a buy signal. One could take a small starter position now in anticipation of a breakout but of course, those agricultural commodities could continue to drift lower for a while before breaking out, assuming they even break out at all (which I still believe is quite likely to occur relatively soon).
- (in response to the big selloff in the POT Active Growth & Income Trade idea on Monday): cheri- FWIW, I’m still holding POT in a couple of long-term accounts (IRAs). My preferred target is T3 so I’m sticking with suggested stop of a weekly close below 14.90. Apparently, the stock is trading down on fear of a dividend cut. The big question is was most of that potential dividend reduction already priced into the stock or not? If so, I’d expect the stock to snap-back by the end of the week (very likely marking an end to the downtrend) and if not, I’ll let it go if it is poised to close below 14.90 on Friday.