The chart in play is that of the S&P 500 short term chart below that zooms in on this whole bear channel that we’ve been developing.
As you can see this index is in the process of breaking the bear channel to the downside. The tricky part is the into the close after the lunch time retail crowd here has their emotional say.
We really want to short CAT, DE, WCC and buy some inverse ETF SDS. We will most likely will do so on any intraday strength in here today but let’s see what happens after this normal lunch time daily occurrence here. Let’s see if Uncle Ben and his wild rice gang show up into the close with a magic stick save.
The OTC Comp on the other hand has that look of it breaking the Pink Bear channel to the downside here. Keep in mind the OTC more often than not leads, couple that with the sloppy action we’ve been talking about the last few weeks?
As of this post it’s questionable, sure it looks like its breaking down but we need to see what the program trading robots have to say about that into the close.
Either way for us it doesn’t matter as we have no long exposure and the action in the leaders the last few weeks was telling you something anyway with its sloppy choppy action not to mention all the change in trend patterns that have been developing and talking to us with their chart action vs. what the drive by media has been saying.
So what do we all do about it? Well for us we’ll take it one step at a time and add to our short exposure one step at a time here. The top two names on our list to do that with is SDS which is the inverse of the S&P 500 index ETF times two and CAT with the options on deck as well.
The other place that a lot of action is occurring today is that of the leaders getting whacked pretty good in here with a lot of red across the board as well as our short sell watch list.
AAPL, CMG, AMZN, VMW, FFIV, OPEN and APKT — see that trend channel resistance/double top? RAX, FNSR andNFLX just to name a few.
Sloppy and choppy the last few weeks is often a precursor to a change in trend and today’s action is a good reason why we’ve been opting to not jump into the fray on the long side here recently. Aren’t you glad you listen to what the leaders and charts have been saying the last few weeks?
Below are some standouts:
APKT
AAPL
For both of these, it’s going to take the blue line to get us interested on the long side here.
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WHAT EXACTLY DO I WANT TO ACCOMPLISH WITH MY OVERALL Virtual PORTFOLIO IN 2011 REGARDLESS OF WHAT THE MARKET DOES OR THROWS AT ME?
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SHORT SELL WATCH LIST
See below we’ve got a few names POTENTIALLY setting up
Now if over the coming weeks we sell off to the 50 day or prior supports, (2-25 Been there already did that) bounce (2-28 Now doing so) and then fail? We’ll get short in a major way. Should that occur it will set up a lot of double tops and first thrust down snapback rally chart patterns. Below are a few examples of what Double Tops and First Thrust down patterns look like.
MOTR
BCSI
Classic first thrust down, puts in a bear channel, snapback rally call it what you will in pink, breaks it and it’s bombs away. One catch, the bombs away was earnings related. BUT that’s the pattern we want to see on the short side with names.
SLAB
Well there you have it, first thrust down, snap back rally and bombs away we might add.
All of the below fall into the realm of watching for a Double Top breakdown to occur.
ARMH
Maybe that spike to 31 was it.
ADTN
Classic double top with a shake out high. This is why we don’t buy breakouts AFTER A TWO YEAR RUN in a mature market with numerous names showing developing change in trend patterns. But you all already knew that right?
CAT
For those of you who are do it yourselfers our notes from Friday pretty much called the ball at this moment in time. So far so good for you folks. For us this is one of the highest short sells on our list. Keep in mind this issue is a index component and its super short term chart much like the first chart of this update shows that it tracks very close to the same way the SPX does.
The risk of shorting right here right now it that of the "Into The Close". A smoke and mirror push higher into the close about 20 minutes into the close due to the release of Market On Close orders published by the NYSE is what will do it. Then we’ll know. Still, if we see it push higher into the close? Great all the better for shorting purposes. If it doesnt ? Wellllllll? Gosh then right here is fine BUT BUT BUT be aware this stock is played with a lot by the programs.
So let’s say we short it right here and it bounces into the close? No big deal for us as 90% of this is getting in the zone and 10% is sweating it out while in the zone. The 10% mark is where we’d find ourselves with it.
DE
This issue here too is in threat of breaking down. This issue too can be shorted right here with say an 11% stop loss. And upon an entry? Well then it’s all about the mechanics of reality after that.
WCC
As you can see this issue too is in the process of breaking a double top to the downside right here. Any intraday strength and we would consider taking it on as a short sell. Don’t be surprised to see a trade trigger soon.
RJF
Here too, breaking to the downside of the bear channel. Next stop? Technically speaking of course would be the 50 day.
AXE
And here we have another one breaking to the downside of a potential double top with a first lower high.
Over the weekend we said and specifically the bold blue print:
As you can see with all the names on this list that yes they are still above the 50 day average HOWEVER they are all starting to show classic All About Trends "Change In Trends" patterns from up to down.
Should our markets break to the downside here either after it stages a retest of the recent highs or breaks the pink bearish channels in the indexes to the downside these names ought to get hit right along with everything else out there. That’s what we want to be prepared for from an opportunistic standpoint in the event that it does transpire.
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LONG SIDE WATCH LIST
If I were to put money to work here. Where do I put it?
SDS- INVERSE ETF at 2 times market risk. Remember that works for you and against you.
Both AAPL and VMW get put on the back burner here as we see too many developing change in trend patterns. In the meantime we are adding SDS to the long side watch list. Remember this is an INVERSE index fund of the S&P 500.
Going long this issue is the equivalent of being short the S&P 500 Times 2. What this means is that if one were to take 10% of they’re virtual portfolio as an example and put it into this name you are effectively short to the tune of 20% of your virtual portfolio due to the leverage of this issue.
As for Energy?
Until we see a Pullback to the 50 day average there is nothing to talk about with regards to putting new money to work. It’s all about a grand slam to the 50-day in all of them to get us interested in the long side.
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All About Options In The World According To All About Trends
NOTE: The exchanges recently started WEEKLY EXPIRATIONS of options. Going forward, make sure that you check to see which ones you are buying. Let’s stay with traditional options expirations which are the ones that expire the 3rd Saturday of every month.
CAT- On the PUT options side.
The ones we want to WATCH here are the April 110 puts to open.
Refer to the notes on CAT above in the short side watch list.
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CURRENT POSITIONS
"Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
NONE
SHORT SIDE POSITIONS
CY (We are now SHORT 350 shares at 20.89)
CYMI (We are SHORT 200 shares at 47.66)
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To our NEW SUBSCRIBERS
What we’ve tried to do is break our watch list down into chart pattern recognition structure from a visual standpoint. Learn the patterns and the components of patterns and you’ll blow those Wall Street MBAs away. You don’t need a $3,000 software program either. All you need is a BURNING DESIRE to be the best that you can be and we’re here to help.
We have a lot of new folks here and we thank you! We want you to take it easy, get to know how the routine works around here for awhile and to feel comfortable.
We hope you all aren’t here because you are chasing performance. For us it’s more about educating and making you the best you that you can be first (that’s what we focus upon!). Like many of our long time subscribers they have all found out that they have no use for traditional Wall Street (and we don’t blame them) and it’s our hope that over time you’ll have acquired enough knowledge from us to say the same with conviction.
One of the most important things we want to stress is that of RISK MANAGEMENT via POSITION SIZING. You don’t need to stack your account with just a few big positions as we’ve seen it time and time again that those who get into trouble are the ones who take large positions and do not employ any risk management system IE shoot for the fences. Those are the people who live on the fringes of extremes and yes ultimately get burned.
As a guideline a good initial system is that of the following example.
Let’s say you have a $100,000 virtual portfolio and let’s say that as a guide you never place more than 10% ($10,000) into any one position. Now let’s say that one day a news driven event hits (over which you have no control over anyway) and one of the positions tanks 20%. On its own that position is sporting a $2,000 loss, while that may seem devastating on its own its really no big deal overall.
Why? Simple its all about risk management being properly employed. What is the impact of a $2,000 loss to the TOTAL VALUE of the virtual portfolio in this example.
Answer: A whopping 2% LOSS. Now you know why we say no big deal.
We can also tell you new people here that you will get stopped out of names and you will take hits. There is nobody on the planet living that has ever hit 18 holes in one and there never will be. We’d rather get you grounded in reality right away vs talking about pie in the sky all the time like a lot of other sites. In so doing your head is screwed on straight from the start and when those days happen (and they will) mentally it won’t mean a thing to you. To us that’s what’s most important is YOUR state of mind as it’s your most important asset. We hope you appreciate our honesty.
We have a very good retention rate here at All About Trends and a lot of great outstanding people here. We like to think that a part of that is being upfront about what can happen (in both directions). Verses those up 500%, I turned $50,000 into $3 million or some other absurd number to get you to bite. That’s not who we are.
WELCOME ABOARD!
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Lastly with regards to taking any trade:
Remember the moment you take a trade you are at the mercy of the market and have no control except when to sell. If you are not willing to take the risk and are not willing to pay that price do not take the trade. We are willing to take that risk knowing full well the end result could be a loss. That said make sure that virtual portfolio management trade size is used accordingly. With any position you may take make sure that should something go awry the amount of total impact to your account does not devastate your acct. Try to stick to a 5% position That’s the key to virtual portfolio management, not biting off more than you can chew.
Remember the mechanics of reality with regards to the stock market states a stock can only do one of three things: Up, Down, Nowhere. The moment you hit the enter button you are at the mercy of the market therefore the only control you have is when to sell/cover. You can’t manage your gains as you have none to manage initially. Knowing this in advance it allows you to stay in outcome, that being you will either:
1. Make a gain
2. Wash
3. Get stopped out at a loss
Remember the market IS the boss. IT is going to do what IT wants to do.
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SUBSCRIBER ONLY WEB SITE
Don’t forget you can view updates in the middle and the end of each trading day complete with current charts, along with our current performance at our subscriber only web site.
