Reminder: Harlan is available to chat with Members, comments are found below each post.
Yesterday we said:
The big question today is if yesterday’s weakness WAS the end of the C wave as shown in the short term charts. We’ll know in the next few days.
Quick answer when looking at the charts below obviously says no. However here we are tracing out an abc down of c as shown below. Funny thing about waves and moves. One can know per a particular theory as to what wave we are in however nobody knows just how far that move is going to go.
Moving on to the bigger picture, lets take a look at what is causing all the ruckus. I’m not willing to go out on a limb and say we are in defcon 2 or 3 as when I look at the two charts below I see structure that tells me otherwise.
Namely the Euro has 5 waves down with this being an ending down wave. And then we have that major support level as shown in blue. So should we short the euro and buy the dollar?
Should we short something that has been falling for the last 8 months? Not me, I know better than to show up at a party late and I don’t chase buses. So if I’m not willing to chase that bus here on the shortside should I chase the bus on the chart below on the longside also knowing its got 5 waves up and in an ending wave here?
And on top of that hasn’t a trend been dollar up stocks down? So if the dollar is in a 5th wave which is an ending wave what does that say about stocks right here? Or more importantly about shorting or stopping out of stocks right here (Think JOY)?
Also over the weekend we talked about the triangle and how a possibility was that we could pullback for a number 4 as shown below and sure enough here we are.
And while I’m at it see today’s lows on the NASDAQ comp.? Know whats so special about them at this moment in time? From the November lows to December highs today’s lows are a 61.8% Fibonacci retracement level (1st chart of this newsletter).
So you see even though its a bad day there is still a lot of structure here.
So what are we going to do here today? Nothing, we’ve been selling off for seven days all believe it or not in a controlled sell off as shown by the trend channels, albeit today’s the wickedest of them all which isn’t out of line. Why is it not out of line? Because a theme we’ve been seeing and by now should know is that the lows and the highs tend to be of the spike variety and that is what we are getting here.
Sure we could still work our way a bit lower from here when you view the triangle but for now a lot of damage has already been done and we are much closer to that major triangle support level than we are to its resistance level.
Game Plan For The Week Of December 12 thru 16
We’ll use market weakness in issues with chart structure that we can work with and continue to nibble on the long side. Our long side watch list has a slew of NEW names that COULD participate should we go on a run here sometime between now and the Holidays. Another theme that we all need to continue to be aware of is that of a Jack be nimble Jack be quick type of market that can spin on a dime in both directions so be aware of that. Things could get rather fast the next week or two. Don’t worry about it just watch the chart structure and not the news. That’s another reason we’ve had the success we’ve had through one of the most difficult times we’ve seen in years.
BIG PICTURE BULLISH AND BEARISH COUNTS
We’ve moved this conversation to the newsletter achieve in the paid subscriber site and anytime we need to update it we’ll do so and send out an update to it. Believe us it ought to come into play next year.
SHORT SIDE WATCH LIST
12-5 This is a WATCH LIST and we stress WATCH. DO NOT SHORT ANY OF THESE NAMES JUST YET.
GMCR
12-14 This name gets deleted as its really fell apart and there is no topping pattern to work with currently.
LNKD
LONG SIDE WATCH LIST
"Only The Best And Forget The Rest "
"We Trade What We SEE, NOT What We Think, Hear Or Fear "
12-13 Our whole game plan from here on out till year end is to pick and choose on the long side names that we don’t have to chase that have chart structure we can work with. All from a hit and run trading standpoint.
SWI
NEW NAME
APA
CXO
HITK
12-12 That 36 level gets my attention. Its not only uptrend support its also the 50 day average. Speaking of the 50 day average? As you scroll thru this watch list you can see a lot of names are pulling back to it. Nothing wrong with that I tell ya, its actually quite positive.
12-11 Ask yourself, What is the overall trend of this stock. bottom line its in a clearly defined uptrend that has pulled back off highs (POH) to near the 50 day average. What’s not to like.
CAT
12-14 Gets deleted as we have better names to look at.
RHT
12-14 Gets moved to shortside watch list after today, albeit today’s lows match the lows of the blue 4.
AKAM
SNDK
CVLT
CURRENT POSITIONS
"Let Your Stocks Tell You What To Do By The Action They Exhibit"
NOT YOUR EMOTIONS!
LONG SIDE POSITIONS
VHC (We are long 300 shares of this at 21.64 as of 12-13-11)
JOY (We are long 150 shares of this at 87.13 as of 12-13-11)
12-14
I was fine with joy at the open as it was sitting on the big green trend channel support level, but then about 10-15 minutes into the day the markets fell off the face of the earth and pow.
Given the markets been selling off for 7 days now and the Euro is in the 5th wave down at MAJOR MAJOR MAJOR support should we bail out?
Like it or not I’m willing to sit tight and deal with the garbage of JOY today. Why? how can I be willing to deal with it? Trade size risk management folks that’s why. Not to mention everything we talked about in the index action section at the beginning of this newsletter.
In addition to that? Sure we’ll probably take a loss on it BUT I’d rather do so on strength. Currently this is just a moment in time subject to the next moment in time, the world is not ending at this moment in time for those who are not in control of they’re emotions.
We’ve seen it time and time again around these parts where had we just dealt with the market garbage we tend to be able to walk away at much better prices down the road a bit. Just look at BIDU and AAPL amongst others that at one time we were underwater in and in the same boat with. When all said and done? We ended up washing on them for the most part. BIDU for example was bought at 136 and sold off to 118 then ran back to 134 for us and we walked away and now its back at 118. Same deal.
Yesterday we said:
Its your call as to hold or fold before the close, Im fighting with it. Given the chart pattern and tightness of it coupled with it being above the 50 day average I’m apt to take my chances here. That’s us, you have a choice too you know. You can choose to live or die by the sword with us or you can walk away before the close. I do this knowing full well the issue is a 50/50 proposition. Odds favor one of two things are going to happen here. Big pop or big drop and no in between.
Now the one thing we also want to point out that allows us to be ok with hanging on is that our risk is limited due to trade size risk management. this position makes up 7.2% of our portfolio. A 15% hit in the form of a drop has an impact to the total value of our portfolio of 1%. So you see again its all about trade size risk management. If it pops? We walk away and lock down some gains. If it drops we’ll take a close look at whether we want to hold or fold.
ATHN (We are long 250 shares of this at 59.53 as of 12-9-11)
Gosh as for a stop loss? One could use any break of the 50-day average on a closing basis or just a break. BUT beware of the trade bots out there who have a habit of popping stops for stop orders that are showing on the books of broker dealers. When you place an order on the books, a physical order you are showing your hand and everyone can see it , everyone is the market makers and the high frequency trade robots so be aware of that.
Us? We adhere to trade size risk management and we could take a 20% loss on the issue and the impact to our portfolio would be about 1% to the whole. That’s one way around the trade bot search and destroy popping of stops for ya. Just saying if food for thought.
NUS (We are long 250 shares of this at 46.42 as of 11-28-11)
12-14 Playing with the 50 day average here. So no big deal as of this moment in time.
12-1 Looking ok here. A break below the C (red line) and we have to walk away.
