All Entries Tagged With: "Chart Reviews"
Stretched is an Understatement
July 8, 2011 at 9:19 am
To say the run of the past two weeks has made the market stretched to the upside is clearly a major understatement. It’s been a face-ripping rally for anyone caught on the short side, while underinvested bulls gnash their teeth in nearly equal frustration.
It’s been a tricky environment in recent weeks, yes, but there is still opportunity if you search for it. The momentum run has offered some nice day trades, even if it has left many stocks overbought on the daily charts. Even a few days of rest would do wonders for those charts.
Speaking of rest, this market is poised for it, but will we get it?
The reaction to the jobs number this morning offered the perfect sell-the-news scenario as extremely overbought readings (no matter how you gauge it) left the market badly in need of some profit-taking, some lateral price action, or both. While the result of the turn lower this morning remains to be seen, we do know this: the buyers are finally standing aside to take a breather at the very least.
Thankfully, as short-term traders we don’t have to predict what’s going to come of this market in the next few days. What matters is that we continue to work the charts and trade what’s right in front of us.
With that said, a pullback here for a few days or even some short-term trading range price action would help to establish some new patterns and bases from which to take multi-day plays, one way or the other. That may not mean excitement for a few days (if we do get a rest), but it would certainly mean greater opportunity on the other side of it. I, for one, am excited about that possibility.
Those who have walked away for the summer have already missed considerable movement, and yet the market promises more going forward. Are you ready for it?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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
