Market Gives Way to Recent Lows

I wrote yesterday that while the market could break the current uptrend I was leaning more bullish on the production of small caps and biotechs, risky positions that did not indicate any significant fear.

Well…

IBB - 1D - 2015-03-25

IBB – 1D – 2015-03-25

IWM - 1D CDL - 2015-03-25

 

Last night while drawing on $ES_F (S&P 500 Futures) I found the $2083 are likely support. I awoke this to find the alert had triggered but after pulling up the chart found a bounce to the $2086 area. The market in general respected this boundary though IWM was not participating in pre-market, getting as low as $125.30 before trying to work back up.

My thinking at this point was as $SPY and $QQQ were holding well (and even $IBB was green close to open) $IWM would likely try to take an opportunity to fill a gap shown on previous charts. Closing this gap, in my mind, would allow $IWM to run again to test the upper bollinger bands and leading the market higher.

Clearly, that did not happen.

IWM - 5m CDL EMA - 2015-03-25

IWM – 5m CDL EMA – 2015-03-25

I bailed on all long positions before going into a meeting. Later I was a bit surprised to see just how bad it was getting. $IBB was contributing as well.

IBB - 5m CDL EMA - 2015-03-25

IBB – 5m CDL EMA – 2015-03-25

I didn’t realize at the time just how bad $QQQ was getting hit.

QQQ - 1D CDL SMA - 2015-03-25

QQQ – 1D CDL SMA – 2015-03-25

Today’s candle is the biggest marubozu on that chart. Well done, bears.

We’re already at another inflection point where the major indices are back on significant support. Small caps lost the 20SMA. $QQQ is just above the 50SMA while $SPY lost the 50SMA.

It’s not likely we get another big selloff tomorrow but I certainly don’t expect a rally. We may just get a chopfest rising channel before a continuation move down.

SPX - 1D CDL SMA - 2015-03-25

SPX – 1D CDL SMA – 2015-03-25

You can see we have a couple of important support points coming in with the intermediate uptrend and the 50SMA. The cluster near $2010 is next logical support.

Talk will ensue soon, if not already, of a potential double top which would be a break of the $2040 to $2045 area. This is not unlikely and would even mean a retest of the late 2014, early 2015 lows. The weekly 50SMA is currently at $1994 while any double top target would be around $1990.

Something to keep in mind.

Look for early weakness for signs of clues. If bulls don’t take control we could be in for another down day though not likely as sharp as today. If you don’t see something solid and have a plan, sit on your hands. This isn’t the time to play hero.

 

Jumping Early on Twitter

I was not the only one watching Twitter (TWTR) the past few days/weeks. Yesterday it finally seemed prime to take off.

TWTR - 1D CDL SMA - 2015-03-24

TWTR – 1D CDL SMA – 2015-03-24

Notice the past two doji’s beneath the trendline. After the gap up Friday morning TWTR didn’t give much room back but did do so on Monday and rebounded well to close on at least a positive note. This set the stage for today’s rally.

Let me stop here and kick myself in the ass. I had bought Mar 27 $50 calls last Thursday in anticipation of this rally but got stopped out Friday afternoon on a panic move. I lost my cool and got too emotional. Ten contracts at $35 that I sold for $27; an aggravating habit that I still struggle with…

On yesterday’s action I got quite a bit bullish purchasing a $48.50/$49.50 bull call spread at $42 and buying 50 shares at $49.12. The entry wasn’t the best either as TWTR would pull back. Getting sucked in is another continuous struggle.

BOT $48.50/$49.50 bull call spread Mar 27 expiry $TWTR $42/ea

— Tim Trice (@timtrice) Mar. 23 at 10:22 AM

Added $TWTR common at $49.12

— Tim Trice (@timtrice) Mar. 23 at 11:36 AM

Today I wanted to jump back into the $50 calls I had last week but TWTR never gave a chance.

TWTR - 5m EMA - 2015-03-24

TWTR – 5m EMA – 2015-03-24

Prime entry obviously would’ve been from the opening bell but it just didn’t happen.

I sold the short side of my bull call spread late (which I didn’t even know I could do with the new broker) from $45 to $218 for a gross loss of $172 per. I held the long side a bit longer from $87 to $300 for a gross profit of $213.  That actually gave me a gross profit overall of $51, just shy $58 target. Unfortunately, the long calls ran +$25 more after I got out up to $325. It happens.

I remain long stock and will comment on Twitter and Stocktwits when the position is closed.

Back on the daily above you see TWTR halted at resistance from the last swing point high near $52 which is part of the reason I didn’t hold the calls overnight (the other part not being sure, especially with weeklies, if TWTR would continue tomorrow or breathe).

I’ll look for new positions to catch runs using this weeks and next weeks contracts. Otherwise, I have the common so don’t need to force anything.

Market Analysis for Wednesday, March 25, 2015

Another mixed day as overall the market continued to consolidate after last week’s rally.

SPX - 15m - 2015-03-24

SPX – 15m – 2015-03-24

$SPX reset to a crucial test of the minor uptrend and the expectation is we should get a positive reaction here (but of course beware if we don’t). On the daily the downsloping 20SMA is coming in around $2088 but would prefer not to see that get tested. Not tomorrow anyway.

You can look on the flip side and ask what if channel support fails? It’s not unlikely. However, I lean bullish because of the approaching 20SMA. In addition, I look at risk-on positions such as IWM and IBB.

IWM - 1D CDL SMA - 2015-03-24

IWM – 1D CDL SMA – 2015-03-24

As you can see above there’s no fear in the small caps. IWM has been leading the market on this most recent rally and seems ready to overtake $QQQ as the market leader.

IWM QQQ - 1D LIN - 2015-03-24

IWM QQQ – 1D LIN – 2015-03-24

In the very-risky biotechs $IBB has reset back to test broken resistance which will also be a good tell.

IBB - 1D CDL EMA - 2015-03-24

IBB – 1D CDL EMA – 2015-03-24

A hold of today’s low of $355.72 will be a good tell. Notice on this chart the ever sustaining 9EMA is also coming into play. So I expect this are to put up a big fight at least in the short term.

Simply put, we want to see IBB and IWM pull away from today’s lows and we want to see IWM specifically overtake QQQ on strength. We don’t need a strong IWM for a bull market. But it’s very hard to be bearish if it is.

Market Analysis, March 19, 2015

S&P 500 takes a breather while small caps makes new highs. IBB and SOCL in beast-mode.

As hoped, the S&P 500 ($SPX) took a rest yesterday falling back into the intermediate channel then consolidating around the $2090’s. Technically, the S&P closed back below the 20MA but only by pennies which I don’t really consider a break unless we get follow-through today.

S&P 500, 15-minute, Mar. 19, 2015

S&P 500, 15-minute, Mar. 19, 2015

We have three channels to watch; the intermediate which is the dominant uptrend at the moment, the current downtrend which I’ll call the minor channel and captures all price movement from the recent rally. And the current micro channel we’re trading within.

The S&P futures has been carrying this same micro trend consolidation pattern overnight. This channel support is currently in the $2089 area. Reisistance is in the $2094 area. This micro channel should break early as $SPX approaches the minor channel resistance. The question becomes, which way does it break? And this, I’m not sure.

A break below the $2089 area keeps the minor channel intact but also opens up a retest of intermediate channel support currently in the low $2070’s. This would not be a negative as long as the trend remains intact. This could also be a great opportunity for new buying.

Should the micro channel break up then this also breaks the minor channel and we’re looking at a retest of the $2105 area with room up to $2010. I’ve added a second channel resistance trendline based off Wednesday’s spike (and to give credit to Richard Chappell for pointing this out yesterday on his website).

S&P 500, Daily, Mar. 19,  2015

S&P 500, Daily, Mar. 19, 2015

This Wednesday spike, though, is really very interesting to me. It almost seems like over-jubilance. There are no warning signs in the market (which I’ll explain in a moment) so take this piece with a grain of salt. Often we see false breakouts in these channels which tips the hand towards the other way. Now, we’re not seeing this as of yet. But do not get overexcited with how the market has been acting the past few days.

Assume for just one minute Wednesday’s high was a false breakout and that we’re actually due for a breakdown from this intermediate channel. On the daily, this simply would look like we’re finishing a correction with more downside likely to at least the $2040 area (and quite possibly the $2006 area or 200SMA).

This is not what I’m expecting to unfold. However, if we lose the upper $2080’s early this morning I will be considering this as a very strong possibility. And we must be open to all possible scenarios.

I do lean bullish if only because of biotechs and small caps. The Russell 2000 ($RUT) continues to make new highs and is now channeling near those highs which I consider bullish. $RUT is now trading between the upper channel bollinger band (10, 1) and 20, 1 which is very bullish. As long as the upper 10,1 band holds (currently at $1244.40) $RUT should continue to lead the market higher.

Russell 2000 Small Caps (RUT), Daily, Mar. 19, 2015

Russell 2000 Small Caps (RUT), Daily, Mar. 19, 2015

The Biotech iShares (IBB) is another of those that just continues to blow up. IBB is now trading above the 10,1 upper BB and actually closing above the 20,2 upper band which is stronger than $RUT. IBB also busted through with impressive volume consolidating resistance that had kept it contained since late October.

Biotech iShares (IBB), Daily, Mar. 19, 2015

Biotech iShares (IBB), Daily, Mar. 19, 2015

It’s just too difficult to be overly bearish with risk-on’s like small caps and biotechs leading the way.

Laslty, Global Index Social Media Fund or $SOCL:

Global Index Social Media Fund ($SOCL), Daily, Mar. 19, 2015

Global Index Social Media Fund ($SOCL), Daily, Mar. 19, 2015

Facebook (FB) led the way with this breakout and Twitter (TWTR) may follow today (I have Mar. 27 $50 calls). Look for the index in general to slow a bit and consolidate before any additional run.

Good luck today!

Market Rallies and Small Caps with New Highs

One of the toughest things to do is to get an idea of what an index or stock will do at a particular decision point. This can often hamper trading as you try to keep an open mind but must act to protect wins. The market was filled with stocks that just meandered or drifted down for most of the morning. But, right on cue, $SPX got a lift and launched.

S&P 500 Index, 5-minute, March 18, 2015

S&P 500 Index, 5-minute, March 18, 2015

The 5-minute chart above shows this liftoff well. The 15-minute chart below shows it better:

S&P 500 Index, 15-minute, March 18, 2015

S&P 500 Index, 15-minute, March 18, 2015

I was tweeting throughout the day as it unfolded. While I had an IWM trade going (which I closed for +18% but before the massive rally I’ll discuss shortly), I wanted to stay focused on the market trend. You can see in the 15-minute above I had two channels going. The intermediate and currently the dominant channel sloping up from $2040 to $2090 and the downward channel $SPX traded in most of the day.

While I would have liked to see $SPX break the intraday channel early and test the $2090’s early on, the market did stay true and was very easy to follow as I described below.

My humble opinion on $SPX is we see low 60’s today. My thinking is if get there before 70’s then <40’s next. http://stks.co/g1z6M

— Tim Trice (@timtrice) Mar. 18 at 10:29 AM

While the break over $2070 was only by pennies, it did come before the 60’s which held the pattern intact well.

$SPX $2030 or $2070 next. — Tim Trice (@timtrice) Mar. 18 at 12:56 PM

My guess is $2070.

— Tim Trice (@timtrice) Mar. 18 at 12:56 PM

After the news broke:

$SPX $2073 to $2074 to be precise — Tim Trice (@timtrice) Mar. 18 at 12:59 PM

$SPX after reset off this run look for $2095-$2100.

— Tim Trice (@timtrice) Mar. 18 at 01:04 PM

This last one was actually wrong. There was no reset. Just parabolic (at that time).

It’s sometimes easy to get caught up in how well things go, especially when you don’t have money in the game (clear head). But this intraday pattern was just beautiful. The only breach was right before the Fed minutes were released into the low 61’s. But $SPX found channel support right to the minute.

Sometimes these quick moves can be false and I wondered if that were the case. By eyeing $2070’s early if this area held as resistance then in my mind it would’ve opened wide the $2030’s. But $SPX just blew right through it.

So, anyway, now we’re above channel resistance and the 20SMA (daily) and now the question becomes: what next? It’s crucial $SPX hold the 20-period. At the same time, the more the index moves up the more likely it is to fail. Another downsloping channel develop which would take it back into the multi-day channel. A consolidating rising flag pattern would open up a retest of recent highs but at risk of a greater failure. I think the first idea of getting back into the channel may be the better option. The channel is irrelevant as long as the 20SMA holds.

Russell 2000, daily, Mar. 18, 2015

Russell 2000, daily, Mar. 18, 2015

I had $IWM $123 weekly calls and closed before the minutes to lock in +18% and not get distracted; $0.97 to $1.15. Not bad (a win is a win). They got over $2 at the peak of the rally.

Damn.

Expect chop and consolidation tomorrow. Any continuous rally is likely a short going into Friday (selling SPY or IWM call spreads).

Hanging Man Leaves S&P 500 Hanging for Fed Day

Today is supposed to be yet another announcement from Janet Yellen of the Fed (that’s all I know, to be honest) and the market has made some decent advances which is promising. However, though the small caps closed at new all-time highs, the S&P 500 Index ($SPX) was not as lucky.

The hanging man candlestick is interesting for several reasons:

  • It gapped down and never filled (0.4% so not too significant)
  • It never attempted to retest the open coming closest at -0.10% in the waning hour of trading
  • Came about 0.43% of the 20SMA
  • The tail was 50% longer than that of the body
S&P 500 Index, Daily, Mar. 17, 2015

S&P 500 Index, Daily, Mar. 17, 2015

The actual performance of the hanging man candlestick is negligible but does reflect indecision in the broader market. What I do find interesting is where it occurs which is in the same are of December’s high and the 10SMA retest in late February. The March 9 candle also attempted to retest this possible broken support and failed (sandwiched between two massive marubozu’s). This gives the impression that the overall market may struggle for additional gains today and I’m very weary of the 20SMA not being too far above.

S&P 500 Index, 15-minute, Mar. 17, 2015

S&P 500 Index, 15-minute, Mar. 17, 2015

Looking at the 15-minute intraday I want to see if there are any particular patterns that give insight as to how the day may unfold and what yesterday’s action may mean. We’ve reached the target price of the double bottom already and now we’re trading in a down-sloping channel which tends to be a bullish continuation.

My impression with this is that we should see a breakout of this channel  today with a setup of the $2090 area and test that 20SMA. I’m further inclined to believe this area will be crucial due to the broad support break from the Feb. 20 and Mar. 4 lows. We did get somewhat of an immediate retest but if we should break out of the channel today my suspicion is we’ll get much closer to a complete retest than before.

In addition, a retest of the $2090 area can still be contained by the upper trendline currently in play.

I’m also cautious of a false breakout which I think would be confirmed if $SPX gets to the $2081 area and gets rejected back down into the channel. I think this will open a path back to lower channel support currently in the lower $2060’s.

If $SPX does not breakout of the channel right away and seems to want to test lower channel support I’ll be watching the $2065/$2066 area for clues. Quite often in these channels price action tends to move down but will not come close to channel support before breaking out. Currently, futures are suggesting a red open so I’m leaning towards this scenario. But, we can’t trade what we think, only what we see.

To recap, the 20SMA will or should offer some resistance if we can get there. Look for a retest of mid $2060’s ($2065/$2066) in early trading and see if $SPX can immediately close any gaps. If this area fails expect a test in the lower $2060’s. If the area holds, look for a breakout of the channel which opens $2090.

There is no reason channel support cannot break today. Should this occur, the $2040’s are back in play and would likely fail another test. Good luck!

How to Make a Bad Trade

Last night, ANTH popped up on one of my scans and I found the heavy selling candle interesting for a number of reasons. One, the MA alignment was very bullish while ANTH closed on the lower band. I like these patterns but only when I see follow through.

Anthera Pharmaceuticals, Inc., Mar. 17, 2015

Anthera Pharmaceuticals, Inc., Mar. 17, 2015

So, this morning, ANTH gapped up which wasn’t too surprising and moved well to close the gap. At some point due to other reasons I stopped watching. I came back later to find a very strong move which was aggravating….

Anthera Pharmaceuticals, 5-minute, March 17, 2015

Anthera Pharmaceuticals, 5-minute, March 17, 2015

Enter the revenge trade. This has to be every trader’s worst nightmare at some point. After missing the fill around the $4.60’s I saw it run quickly to $5 and hesitate. “Well, it’s flagging again,” I thought to myself. I waited for a bit before taking a position around $4.92. I knew better. But that part of my brain shut off. I was not going to miss the fill again.

And you see what happened.

I should’ve known better. I did know better.

For fuck’s sake…

You cannot chase this shit. My obvious first mistake was losing focus in the morning. Perfect entry would’ve been when ANTH bounced at the lows then retested the 20EMA around the $4.20’s. Stop just below yesterday’s close would be rather normal.

But the absolutely dumbest thing to do is chase especially after a 20% gain in the first couple of hours.

Just stupid…

Shorting Apple on Bear Flag Highs

Apple has been consolidating for several days between $121 and $125. On the 15-minute this looks like an upsloping channel but could easily be a pennant as well. Either way I’m expecting this to breakdown with a stop or push over the daily 50SMA with conviction.

Apple, Inc (AAPL), 15m intraday, Mar. 16, 2015

Apple, Inc (AAPL), 15m intraday, Mar. 16, 2015

The rising 50SMA should offer support and the expectation of buyers stepping in. So the plan will be, if we get the breakout, to ride it down to the $120 area then exit with the expectation to flip on any reversal candle.

Apple, Inc (AAPL) daily

Apple, Inc (AAPL) daily

$AAPL in Mar 20 $122 puts at $0.71. Looking for rollover here shorlty. http://stks.co/r1hPc
— Tim Trice (@timtrice) Mar. 16 at 09:51 AM

Russell 2000 temporarily takes the lead

Small caps have taken the lead these last couple of days (COMPQ overwhelms, though in the big picture) as this chart clearly demonstrates:

Russell 2000, daily, Mar. 12, 2015

Russell 2000, daily, Mar. 12, 2015

Depsite market weakness yesterday $RUT took the lead and wasn’t afraid to run though I’m sure many people were questioning the legitimacy of the move. Today, $RUT made clear yesterday was no fluke.

Look at where it bounced yesterday? Despite the 50SMA not being too far below $RUT didn’t wait, found support on the lower band and didn’t look back.

What I find even more interesting was the failure to close the gap this morning:

Russell 2000, 5 minute, Mar. 12, 2015

Russell 2000, 5 minute, Mar. 12, 2015

I thought for sure the small caps would try to at least test the gap open and this is where I thought we may see market weakness. But it never threatened (IWM did test the gap open briefly then resumed the uptrend).

When small caps are taking the lead this is a risk-on position. All of that talk last week about improving economy, jobs, etc that may lead to increased rates which many blamed for this pullback – blah.

Blah blah blah blah blah

Just listen to $RUT.

Beautiful Trend Day in Amazon

This Amazon chart from today is, well, just beautiful. For anyone trading stocks or options you just can’t ask for a better trend day than this:

Amazon - 5 minute candles, Mar. 12, 2014

Amazon – 5 minute candles, Mar. 12, 2014

While my Twitter stream was filled with NUGT, NFLX and AAPL, I was just enjoying the ride in AMZN. Despite the close I kept the position open overnight (weeklies expiring tomorrow). My expectation is for a continuation move along with the rest of the market and I suspect AMZN may attempt to break $378 where downsloping averages may be an issue.

While the chart above is a relaxing chart for the swing trader, I was pointed later on to the chart TASR put in below:

TASR, 5m CDL, Mar. 12, 2014

TASR, 5m CDL, Mar. 12, 2014

Ouch! So close…