All Entries in the "Chart Reviews" Category
FCX 7% in 3.5 Days, Time to Lighten Up
July 4, 2011 at 12:56 pm
Last Tuesday I pointed out FCX as not only a potential market tell (since copper has proven to be a leading indicator many times), but also as a breakout play through a trend line after holding key support. That post was published as the stock threatened to break $50.
Fast-forward 3 1/2 trading sessions, and FCX now sits at $53.50, or 7% higher. That’s a quick pop (which I hope you caught a piece of at the very least), so the fast money has been made. While the stock looks great for an intermediate-term position play, for short-term traders it’s time to lighten up.
A pullback is going to come, so for those only interested in grabbing the initial move, this is it. Ring the register and move on to the next play.
Here’s a look at FCX, showing the push through the descending trend line and a rally past the previous high from May 31. Not bad for a freebie:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Tricky Times
July 1, 2011 at 11:08 am
I’ll begin this post with a plain and simple statement that is always true, including now: the market is tricky. It is never easy, and anyone who tells you it is easy is either lying or an ignoramus.
With that said, if you’ve struggled of late, you have company. Traders of many timeframes have found these past several weeks to be quite challenging. During the past 6 weeks, here are a few phases we’ve witnessed:
Swift move lower. June kicked off with total abandonment of stocks as the indexes shed several percentage points in the opening days of the month. It was flat-out hard to get on board if you missed the initial turn. It rewarded chasing.
Whippy trading range. Following the initial slide, the market settled into a trading range marked by volatile shifts of direction and frequent reversals. It offered zero follow through. Chasing rallies or selloffs resulted in immediate pain as prices turned on a dime to revert back to the other end of the range. It rewarded fade trades.
Aggressive ascent. After a selloff and indecision, in recent days we’ve seen the market ramp relentlessly higher with upside gaps and rips inviting bulls off the sidelines while forcing bears to cover their shorts. Again, chasing has been rewarded.
Chasing strength or weakness isn’t inherently wrong, and you can make fast money if you’re good at it. Likewise, fade trading within ranges isn’t wrong either, so long as you know what you’re doing and you stick with your discipline. But for the trend-following trader who prefers to see stocks run, base, then run again, this market has offered little for you. It has been tougher sledding of late, regardless of whether you’re a bull or a bear, a momentum trader or a continuation player, a day trader or a swing trader. It has been a mess, so if you’ve struggled, that’s part of the reason.
Here’s a look at SPY showing the three phases of the past 6 weeks:
Good News
There is good news.
First, from a technical standpoint we know that the further this rally carries, the more likely the March & June lows are to hold. It just gives the market more breathing room for the next pullback (and we will see one).
Second, conditions are always changing. Just as in recent weeks we’ve seen nonstop selling, complete indecision, and then aggressive buying, going forward we’ll see a variety of conditions as well. That’s good, because it means at some point your ideal trading environment is going to arrive again. But you’ve gotta be ready for it. You can’t have your head down and be busy bemoaning the fact that you’ve missed a couple of moves.
Finally, this is a reminder to step up your game. It’s an opportunity for growth – a wake-up call. Missing out is only partly the market’s fault – the rest is in your hands. Learn some new methods, learn to assess conditions better, and understand which strategies are best suited for the environment you’re facing. Don’t be stagnant, or else you’re going to continue to find frustration anytime the market doesn’t cater to your current skills. Build your skills and become a more complete trader.
Attitude Matters
At all times you can complain and look back and wish you had seen a move coming or had the courage to join the momentum crowd. That’s always something you can choose to do, but honestly, it’s not going to help you. That’s not a winning attitude.
But take heart if you’ve struggled lately. Things will smooth out and when they do, you’ll have experienced a few more market moves to file away in the mental vault – ideally to serve you again later – and that means you’ll more readily identify opportunities you used to miss out on.
Stay on your toes, the market gives nothing away.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
RVBD at Key Resistance
June 30, 2011 at 9:32 am
Trading ranges or channels tend to stay in effect until, well, they’re no longer in effect. One name right now caught between support and resistance is RVBD.
This computer hardware maker rallied huge from last summer into the first part of 2011, and has since then been basing in a high channel. Rallies to resistance have predominantly been sold, while pullbacks to support have consistently been bought during this time. That’s the routine for a channeling stock.
With the stock currently at the top end of this range, you have to wonder if this is an opportunity for a downside reversal (particularly with the broad market short-term overbought), or perhaps a breakout failure and a subsequent pullback into the lower end of the range. No predictions, just an observation.
Here’s a look at RVBD, showing the trading range it has spent essentially 6 of the past 7 months inside of, with the only time outside the range between mid-Feb to mid-March:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
FCX On the Move
June 28, 2011 at 1:05 pm
Copper is an important market tell for many, so it’s certainly worth noting that the copper poster child FCX is getting going here as it threatens $50. The stock has repeatedly found support in the $46’s in recent months, and in recent weeks has pulled back quietly beneath a descending trend line.
Today, that trend line is getting crossed, indicating this stock may be ready to leave this congestion pattern behind. There’s room to climb higher, not only for this stock, but potentially for the broader market. We have yet to know if the market pullback has ended, but if copper proves a leading indicator, this could be a bullish sign to pay attention to.
Here’s a look at FCX, showing both lateral support around $46 as well as today’s attempt to push beyond the descending trend line:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Two Ranges to Watch
June 21, 2011 at 11:28 am
Last week we saw an important test of the March lows in the NAZ and RUT, while the S&P 500 held slightly above support from the spring. Those March lows give us a well-defined area to trade against, even if it’s a long way back up to the May highs. Stated otherwise, we may have just carved out the low end of a very wide range.
But that’s not the only range found in this market. We also have the NAZ caught between the 2700 area (late-Feb low & mid-April low) and the 2600 area. It’s working its way back up toward 2700, so the key will be if that level can be reclaimed on a closing basis.
Here’s a look at the NAZ, including both the wide and narrower ranges previously mentioned:
The S&P 500 has a slightly different situation here as it held above the March low and is currently flirting with the 1294 area which has proven important. We saw the late-Feb selloff end at that level, as well as the mid-April pullback finding support at 1294. More recently, that level was broken on June 6 and has yet to be reclaimed on a closing basis. A push back up through there could certainly help this index, although it still has plenty of rebuilding work to do. It has a higher intermediate-term low in place for now (June vs. March), but still stands a considerable distance from prior bounce levels (most notably 1345 from May 31).
Here’s a look at the S&P 500 chart along with the noteworthy levels right now:
Needless to say, this market remains interesting and there should be no shortage of movement going forward.
On another note, the premium newsletter turns 7 today, so for those of you who are members and have stuck around from the beginning in 2004, we appreciate you and remain committed to providing ongoing, exceptional value which adds to your trading process!
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Caught In A Trap
June 16, 2011 at 5:44 am
Anytime the market tanks like it has lately, astute traders realize that shorting after a decline of this magnitude and momentum is a real potential bear trap. A sharp rebound could come at any time, leaving late shorts in a world of hurt.
I can’t and won’t argue with that – in the short term.
But the further this market declines in the intermediate term, the growing group of trapped traders are the bulls. Keep in mind that the past few weeks have been a big shift of character for this market, with the prevailing mantra moving from buy-all-dips to sell-all-rallies. Technically, that’s very important to recognize.
And while a sizeable bounce will eventually arrive, the important issue for most bulls is “from what level?”
Head Games
That brings into play the psychological aspect of this change of character, whereby not only do bulls become fearful, but the bears gain confidence. Bulls who bought virtually anytime over the past few months are now underwater, and the deeper this correction goes, the more that late-to-the-rally-party group wants out.
That could quite easily play out with bulls selling on the way back up – just the opposite of a few weeks ago when trapped bears covered on every little dip. By the same token, just as a few weeks ago we were still seeing underinvested or aggressive bulls put more cash to work on even minor pullbacks, the deeper this correction goes, the more the bears will be using bounces to remount short positions. That means what used to be buying by both camps is quickly morphing into selling by both camps.
A spring back up will at some point arrive, so fear not – this market is still a 2-way street. But for now, respect for the tape should remain very high, because anything is still possible. Whenever the inevitable recoil of this selloff kicks in, keep in mind that it too could get faded, and therefore will have to earn your trust.
Here’s a look at the S&P right now with the March lows coming quickly into view at 1249 (which may need to get broken before a real bounce happens):
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
MON Day Trade Review
June 10, 2011 at 10:13 am
Lately I’ve not trusted the price action much when it comes to swing trading, and that’s largely a product of how this market has been moving. Just a couple of weeks ago we saw a late-May ramp which produced trend line breaks for several of the indexes. However, that move was quickly erased, and the market continues to correct as I type.
The sharp rally and turn-on-a-dime reversal to the downside of the past couple weeks negated most bullish patterns which were building in the charts of individual stocks, and the nonstop selloff since then has taken with it anything which looked remotely bearish. Clearly, there just hasn’t been much in the way of high-quality bases and the kinds of clean patterns I really prefer to see when swing trading.
My preference is to swing trade for overall account growth, and day trade to create cash flow. Operating on multiple timeframes allows me to not only maximize the use of my capital, but also to benefit from directional moves which don’t even have to be correlated. I may be short on a swing basis to participate in a multi-day correction, but there will be intraday bounces along the way which are worth day trading. That kind of approach works best for me, and forces me to not only stay aware of current conditions but also to keep an open mind for what could happen next.
So with little available in the way of swing setups in recent days, I’ve focused on day trading. I wanted to walk you through one of yesterday’s trades (highlighted in Wednesday’s Broadcast) and show you how finding a setup on the daily chart and then managing it via the intraday chart can benefit you.
The Setup
MON broke support in mid-May, but it proved to be a headfake and the stock turned sharply higher and tacked on a quick 10%. It pulled back early this month (along with the market), yet showed some nice relative strength by giving back only a portion of the previous move. There also was a clean descending trend line, which happened to be rather steep, marking the pace of the pullback. That offered a well-defined pivot for getting long, so I used $68.30 as my trigger for a long entry on Thursday. Here’s the setup:
The stock cleared the trend line shortly after the open on Thursday, pushing past $68.30. About an hour later, it pulled back, but held above the prior intraday low (noted below). From there, it started to creep back up, allowing me to draw a very clean uptrend line which I then used as my get-out signal. Here’s the intraday chart:
Late in the session, that uptrend line was broken to provide a technical exit and the stock slid lower into the closing bell as traders rushed to lock in profits. Here’s the chart showing the late-day break:
Takeaways from the Trade
Risk/Reward – As per my day trading strategy, my standard risk for day trades begins at 1% and is adjusted for volatility in the stock. This one required no special treatment, giving me an initial stop of 1%. As the stock trended higher in the opening hour, it made sense after a gap up open to expect that gap to hold, so I adjusted my stop to the low of the day (less than 0.5% –> even better!).
Intraday Trend – with the stock making regular higher lows intraday, it became clear that a change of that trend would warrant an exit. The emergence of a very clean uptrend line not only gave the stock a sustainable pace to rally, but also allowed for a well-defined, tight stop in case it were broken. I love finding setups on the daily chart and then trading them according to the intraday trend, and this is why.
Time of day – As the day progressed and the final hour arrived, MON made a new high by 1c as it cleared the previous high from 90 mins prior. Headfake. That break produced no follow through, which indicated that the high-level consolidation was in fact more of a battle than a rest. That alerted me to the idea of a failure at resistance, which happened soon after. The well-defined uptrend line was not far from price, so once it was broken it was clear that this was the time to ring the register and call it a trade (which traders did en masse). Grabbing a pain-free $1.60 or 2.3% isn’t bad for a few hours.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
