Cam at the Close 2.2.12

Orange_Black_ChartIt was a very choppy day in the markets today with no clear direction. Gold and Silver continue to show signs of strength. GLD closed up another 0.87% to $171.05 while its crazy cousin silver closed up 2% to $33.41. It appears as though Natural Gas (UNG) has made a short-term bottom around $5.00. UNG closed up 7.32% to $5.42. It carried many names up with it. Alpha Natural Resources (ANR) broke its 20-dma and closed up over 7% to $21.66. The most explosive natural gas play today was GMX Resources (GMXR). The stock gapped up 10% to $1.10 in the morning and then EXPLODED 50% higher to $1.54 by the end of the close. The stock traded 13 million shares, which is 13-15x normal volume.  Watch this name closely for tomorrow; there could be a continuation. Over the last two days, the SPY has failed to rally into the close. This is a shift from the normal behavior that we have seen so far in 2012.

Earnings Trade of the Day (WYNN) 2.2.2012

Reason I like this Trade: WYNN is a stock that has not moved that much on earnings within the past couple of quarters.  As I talked about on Bloomberg during my Interview, it is a sloppy chart and it will not break through the 100 Day Moving Average at $120, I wanted to make a play that it will not have much movement, so I am making an even money bet that this stock will not move the implied 5% move.  If you have any questions please email me at [email protected].

UPDATE 2.6.2012 On Friday this trade expired and WYNN closed right at $115 even.  I decided to buy the Feb 115 Puts I was short for $.10, so I did not have to determine if I was going to be assigned on those Puts over the weekend or not.  When I am short an option and it expires right at the strike, it is a guessing game to know if I get “assigned” on the option over the weekend.  If I am LONG the option and it closes at the strike, I determine if I want to exercise the option or not.  So, I turned $.10 into $2.45 and the trade is over.  Time to move on to the next trade.  


Cam at the Close 2.1.12

The market was very strong intraday, but then sold off at the end of the close. In the last hour of trading the DOW sold off 50 points. I am starting to see some signs of exhaustion in the banking sector. Take Goldman Sachs (GS) for example. Stock has been very strong since breaking from its descending trend line on January 10th. Once it cleared its 100-dma it looked like a straight shot to the 200-dma at 116. This is exactly what happened today, except it failed to close above the 200-dma. This failure clearly shows that there is intense selling pressure in the $115.50-$116 area. The Directional Movement Index is also near extremes as you can see below. I also still strongly believe Sears Holding Corporation is a great short here. It failed to get above resistance at $43.50 after breaking through this area yesterday. The problem with SHLD is that finding shares to short is extremely difficult. I believe the majority of traders who were heavily short this stock have covered when the stock went from $30-$50 in seven trading days. SHLD could very well make new lows. Technically some would argue that SHLD is developing into a bull flag, but I feel the fundamental issues of SHLD outweigh technical in this specific case.

cam1 cam2

 The gap between the (DI + and DI –) has not been this high since March 10, 2010 When the Reading was DI + (41) and DI – (9) which = a spread of 32. At this time Goldman was trading in the $170-$180 range. In the two months after this extreme reading was read Goldman fell 40 points and ended up in the $130-$140 range. Currently the spread of (DI + and DI -) is 30. The failure of the 200-dma could be the first sign that Goldman is about to switch directions and head to the downside.

Trade of the Week (SONC) 2.1.2012

Reason I like this Trade: There are unusual options activity orders then there was this order in SONC.  A customer bought 4100 March 7.5 Calls for $.25 and that was 75 times usual volume, yes 75 times usual volume.  I like to give my trades more time, so I bought the June 7.5 Calls for $.45.  This is a great risk vs reward and it seems as if the stock is breaking out and can trade up to the $8 level again.  I will look to piece out of these Calls if the stock trades higher, but I am very confident with this trade.  Please feel free to email me with any questions at  [email protected].

UPDATE 2.2.2012 I took 20% of my position off for a 33% profit, but I am holding the rest for more upside.  This was a great trade and I still think it will work out.  These Calls are currently worth $.65

UPDATE 2.3.2012 With the stock exploding more than 7% these Calls have doubled from $.45 and today traded $.85.  I will leave these on for more upside and a break to $8.20.
 
UPDATE 2.6.2012 The stock is not moving much today, so I will leave this trade on and since they do not have earnings until April I will leave this trade on.  

UPDATE 2.7.2012 With stock ripping higher and hitting my first target of $8.20, these Calls are now worth $1.20.  I took another piece off and a have half of my position left.  This was the “Trade of the Week” and is working out as planned.  

UPDATE 2.14.2012 This would have been an example of the
trade of the week, only the biggest highest probable trades.  These Calls are still worth $.95 and good for a HUGE winner.

UPDATE 2.15.2012 This would have been an example of the trade of the week, only the biggest highest probable trades.  These Calls are still worth $1.05 and good for a HUGE winner.  

UPDATE 2.22.2012 This would have been an example of the trade of the week, only the biggest highest probable trades.  These Calls are still worth $1.05 and good for a HUGE winner.

UPDATE 2.27.2012 As I talk about, I get bored very easily, so I sold 75% of my positon remaining for $.90 and will move to the next trade.  I stay have a partial position, but another HUGE winner at KOTM.

UPDATE 2.28.2012 With SONC raging higher, these Calls are worth $1.05 and I took my Calls off a little too soon.  I am offering 25% of my Calls remaining for $1.20

UPDATE 3.9.2012 I sold 90% off my position for a HUGE profit and I am still long a small position.  These Calls are worth $.50, another reason taking profits and moving on never killed anyone.

 

From the Chart Room | AlexKOTM
Just a quick few things about his Chart, All of which are great attributes for a stock ready to breakout.
1.Stock has been “basing” for more than 3 months.
2.We are really close to key resistance levels being breached to the upside (trendlines & cloud)
3.Strong above average Buying Volume today, Also we are moving strongly away from a high volume point of control level at 6.75. Next significant Volume at price level is 9.00.
4. DMI Buy Signal, Money Flow Bullish
sonc 
 
 

Earnings Trade of the Day (CMG) 2.1.2012

Reason I like this Trade: Chipotle has been a beast lately and I can not fade this movement, but I can fade the movement of the ATM straddle.  CMG is implying a $20 move and it has only moved 5.5% once over the last 4 quarters.  In this strategy I will make money as long as CMG does not move more than $23.  I think this is a great way to play this stock and we have seen lack of movement in SBUX and MCD which gives me more hope that this trade will work out.  If you have any questions please email me at [email protected]

UPDATE 2.2.2012 With the lack of movement in CMG on earnings, this spread that I sold for $3.50 is currently worth about $.20.  With no catalyst and only one day remaining, I will leave this trade on in order to not chop up my P&L with commissions.  Moving on to the next trade.
 
UPDATE 2.3.2012 With only hours left in the day, this spread will expire worthless.  Another winner and time to move on to the next trade.
 
UPDATE 2.6.2012 This spread went out worthless, I am happy with the trade, on to the next one.

Harmonic Patterns

Harmonic Trading is a methodology that utilizes the recognition of specific price patterns and the alignment of exact Fibonacci ratios to determine highly probable reversal points in financial price cha

What Are Harmonic Patterns?

Harmonic Trading is a methodology that utilizes the recognition of specific price patterns and the alignment of exact Fibonacci ratios to determine highly probable reversal points in financial price charts. This methodology assumes that trading patterns or cycles adhere to natural harmonic mathematical ratios and repeat themselves, sometimes in a fractal nature. Once these patterns are identified, they can be used to enter or exit trading positions with very high degrees of accuracy. Although, harmonic patterns are not 100% accurate and sometimes fail, they have been historically affirmed as some of the most highly precise patterns to trade. The most comprehensive references to Harmonic Trading are outlined in the following books:

  1. Profits in the Stock Market – H.M. Gartley
  2. Fibonacci Ratios with Pattern Recognition – Larry Pesavento
  3. Trade What You See: How to Profit from Pattern Recognition – Larry Pesavento
  4. The Gartley Trading Method: New Techniques to Profit from the Markets Most Powerful Formation – Ross Beck
  5. Harmonic Trading: Volume One, Volume Two – Scott M. Carney
  6. Trade Chart Patterns like the Pros – Suri Dudella

Below is a Visual Reference Guide to Identifying Specific Harmonic Patterns

1. Starting at point X:
    –  The lowest or highest point in the pattern (depending on Bullish or Bearish).
    –  Usually a significant major high or low on a chart. (sometimes a capitulation High or Low with heavy volume)

2. Then identify a swing level high/low A.
    –  The move from X to A is the first move contra the previous trend.
    –  This move is going to be the primary basis for the macro pattern identification.

3. Identify & Measure B Retracement.
    –  The move from A to B is in the direction of the macro trend and is the most critical point in most patterns for projecting the final D point.
    –  (D=Potential Reversal Zone).

Using the Visual References note that the grey dashed lines that connect two points represent the level of retracement in % terms. Example for Bullish Gartley: B point is 61.8% retracement downward from the previous move of X to A. Point C is then either 38.2% or 88.6% retracement of prior down move of A to B. Then D would then be projected 113.0% or 161.8% downward from point C, using the length of B to C for the base length to be projected.

4. The last projected move D is the final and key point that we are trying to project for the potential reversal zone.
    –  The prior point B as stated before is most critical because serving as a reference point in space, level D is then projected using key Fibonacci levels.
    –  Additionally, the projected levels from D are also lined up with key retracements from the X-A move thus creating a precise parallax view point that projects an exact turning point from two previous reaction zones.

 *It is also key to note that a distinct AB=CD patterns do form in variations of these patterns. The simple Harmonic AB=CD and ALT AB=CD 4 point patterns do appear independently from 5 point patterns as well. Additionally, the Three Drives pattern is a obscure harmonic pattern that exists as well. For all these harmonic patterns, the point is to wait for the entire pattern to complete before taking any short or long trades.

*When I trade these patterns I do not see D as an area to blindly just place buy or sell orders, but I look for key reversal bars/candlesticks as well as other technical indicators to provide further catalyst for trade execution. And I always use a stop loss order.

BullGartley BearishsGartley
BullBat BearBat
BearishAltBat BearAltBat
BullishButterfly BearishButterfly
BullishCrab BearishCrab
BullishDeepCrab BearishDeepCrab
Bullish5-0Pattern Bearish5-0Pattern
BullishABCD BearishABCD
BullishALTABCD BearishALTABCD
BullishThreeDrives BearishThreeDrives
BullishSeahorse BearishSeahorse