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Multiple Levels Of Support.
When one looks as the index charts below we see multiple levels of support and that is a good thing as it gives us some reference points to use as our guide.
The two main support levels we want to key in on here is that of Trend Channel Support (Green Line) and the 50 day moving average. As long as we stay above the 50 day average we are good. Another development we have brewing out there that can give us a clue as to short term direction can be found in the chart of the S&P 500 below.
One look at the S&P 500 shows that we have a pennant forming. On the surface a lot of people talk about whatever way it breaks that’s the way you trade. We get that however if it breaks to the downside we still have the 50 day average support level to contend with so to us it’s really not a big deal. While in the truest sense we don’t know what way it’s really going to break but odds favor we know the way it will break right? Can you say the word " GAP"? Would it surprise you? It has been a theme lately has it not?
That all said, right or wrong the way we’ve always learned them was to count them from where they start. If they start at a low to a high (and this one is) one needs to watch for a break to the upside. The other thing that one wants to lean to is that they typically break in the direction of the current trend and in this case off the October lows the trend is up.
Moving on to the 60 minute time frequency charts
When one looks at the full stochastic in the daily charts you can see we are nowhere near overbought yet and could have a fair amount of upside action to go here. However in the micro term (few hours to a few days) we are overbought in the 60 minute charts. This tells us we could be down at the open and as far as we are concerned good, as it will allow us to nibble some more on weakness.
That is exactly what we’ve been doing. Not in a haphazard way mind you but in a controlled objective way all based upon trading what we see vs, think, hear or fear and all in the world of basic technical analysis.
Current Game Plan
So here is the bottom line through year end. We buy weakness and we’ll use the multiple supports to define our risk once in a position.
SHORT SIDE WATCH LIST
NONE
LONG SIDE WATCH LIST
"Only The Best And Forget The Rest "
"We Trade What We SEE, NOT What We Think, Hear Or Fear "
TIF
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FOSL
Back On the List
11-13 While it looks sloppy overall there actually is structure here. One could say a double bottom and now trying to work its way out of its correction. At this point in time it’s all about an upside crossover of the pink line POH trend channel and the 50 day average. Keep in mind over the last year there have been numerous times when we’ve seen a lot of name come from the depths of dispair only to ultimately come back and retest their highs. Just look at a chart of CXO
NUAN
NEW NAME
RAX
NEW NAME
11-13 Completed cup and in the handle folks
ALXN
NEW NAME
11-9 Still has nice structure, down to the big picture green trend channel support and check out the full stoh’s below the chart. Just because it broke the 50 day means nothing as a lot of stocks will flirt with that "zone". We’ve seen it tons of times where a stock breaks the 50 day, people freak out and then it turns tail without them right back up. Not saying its going to happen but just pointing out a "It Comes From Experience" situation.
BJRI
BIIB
11-11 Sure enough right down to the 20 day and into the gap. A key point we want to make is that a lot of times money waits for issues to fill the gap. We have to tell you more times than not over time we’ve seen issues come into the gap but not fill it then they reverse right back to the upside. We’ll see if that ends up being the case and this one is on its way.
CELG
One Minute time frequency below. Nice retest of the lows and big bounce off of it.This issue MAY have just dodged a bullet.
RP
11-11 Looking good here.
AMZN
11-13 Given the 60 min. index charts are sporting overbought and we’ve got a gap in the index charts that COULD get filled lets see if this issue backtests over the next few days. Then I’d consider going long some of this name
11-13 To sum it up folks there is a lot of positive structure showing in the charts and this is how the market talks to us — via chart patterns. For us we’d rather listen to the market this way than to listen to what’s next in the circus called the EU.
FEATURED BUT NOT TRADE TRIGGERED BY US LIST
GLD
11-9 Gosh before you know it this issue will be testing its highs, which is resistance by the way.
OIH
11-3 This index actually came down and tagged the 50 day average.
CURRENT POSITIONS
"Let Your Stocks Tell You What To Do By The Action They Exhibit"
NOT YOU’RE EMOTIONS!
LONG SIDE POSITIONS
11-13 One look at BIDU,WFM,BWLD and even AAPL and you can see they are overall in "What’s Not To Like " mode. We say this as they are all in clearly defined uptrends as defined by the green trend channels.
BIDU (We are long 100 shares of this at 136.25 as of 11-11-11)
VHC (We are long 300 shares of this at 21.64 as of 11-11-11)
11-11 If it takes off? We’re there. Think GLNG today, gapped up and took off.
FIO (We are long 250 shares of this at 33.55 as of 11-11-11)
WFM (We are long 150 shares of this at 66.48 as of 11-10-11)
BWLD (We are long 125 shares of this at 64.13 as of 11-4-11)
(We are long 75 shares of this at 62.33 as of 11-10-11)
11-11 Yesterday’s action and today’s follow thru was exactly what one wants to see. Tagged the 50 day on weakness and POW lift off. Has a definite completed cup look to it. What happens If it follows thru and all the novice IBDers jump all over it on a break into a new high? Simple, we’ll be up 10% already vs them just getting in. Alternative entries folks alternative entries.
Like we’ve said, buy the dips and let them come to you.
11-10 On 11-6 we said:
If this issue were to also get slammed to the 50 day or just general market weakness we’d consider adding to our position as well.
And that is exactly what we did today. From here? Its all about sweating it out while waiting for a rip. Same goes for all our other names.
AAPL (We are long 25 shares of this at 398.56 as of 11-1-11)
(We are long 25 shares of this at 391.78 as of 11-10-11)
11-13 Recently we saw a few blurbs about how this issue is totally damaged because its below the 50 day. We get that on the surface HOWEVER look at the overall trend of this stock. It doesn’t trade off the 50 day, it trades off of a big green trend channel.
11-10 So lets play "What If" . What if this issue goes to the green trendline? Well first off its a support level. So would we want to stop out there? Knowing its a support level? And if it were to blow thru there and head to the 200 day average at 262 would we want to stop out there? Knowing its even more major support?
What impact would that have to the total value of our portfolio IF (not saying its going to not saying its not as I don’t know neither does anyone else) it went to the 200 day?. Let’s see we own 50 shares at 395.17 and this issue makes up 11% of our total portfolio. So IF it were to go to 362.00? we’d be down on the position 8.3% on its own. But what about the total impact to our overall portfolio? 9/10ths of one stinking percent!
On top of that? IF we would go there and stop out (which we wouldn’t do because its only a moment in time subject to the next moment in time) it would be a 1658.00 dollar loss. know what? We are up 3300.00+ for the month. So now how much damage would that be to us.
By using trade size risk management it really allows us to never really get flustered or in trouble. This allows us to always stay centered and objective because it really doesn’t mess with our most important asset which is our state of mind. Folks use this conversation as an example for yourself to think things forward and thru. It really helps calm the mind.
MAKO (We are long 100 shares of this at 37.37 as of 11-1-11)
Well? We may have just dodged a bullet here. Still though there are much better fish to fry elsewhere so on strength we’ll consider walking away.
SHORT SIDE
NONE
