$XLF – Fighting an urge to short the bank stocks

The banking stocks appear on their charts ready for a quick flush down.

If anyone ever doubted the birds in a sector fly together, those charts below should relieve the doubts. Again and again, the major bank stocks’ charts look the same as history repeats and repeats, and again it looks like time to tumble.

So why do I say “fighting the urge”?

Simply put, there are extenuating circumstances. While they all stalled together Friday with XLF, the financial sector ETF, even ending the week in a dreaded doji and GS setting up a clear black-candle of indecision, long-term and short-term breadth in the general market, measured by the McClellan Oscillator and Summation Index on the NYSE advance-decline line (the NYMO and NYSI) remain positive.

Note the last time these stocks sold off in mid-March (see the charts below), the NYMO/NYSI was negative. No so this time, which probably means any drop here will be no more than a dip.

However, for nimble traders, scalpers, there could be a shorting opportunity on breaks below Friday’s lows on these stocks with Friday’s highs as an initial stop loss level. It might be easier to to buy puts for the same play. One thing about a trade like this, if it doesn’t do what the setup says, nothing is done. If it does, there could be a quick profits. And sometimes a scalp like this can get carried away into a real decline and a bigger profit.

And after essentially an eight-day rally across the board in the market (SPY is up eight days in a row), there is a chance a surprise could come to the down side.

If so the bank stocks will feel it.

(click on the chart for a larger view)

#Coal – waving good-bye to Cloud Peak Energy $CLD

Haven’t done much in this sector for a couple of years since Trump started promising to bail out the companies with taxpayer subsidies, but in recognition how much time and how many times I spent shorting these stocks in the past I’d like to wave good-bye to CLD, Cloud Peak Energy, the latest in a long line of stocks in this dying sector flushing sharehold equity down the shaft — Patriot Coal, Walter, Energy, Peabody Coal (bankrupt and reorganized), Arch Coal (bankrupt and reorganized), Westmoreland Coal.

This company, CLD, actually planned at one time to ship coal to China through my backyard but the environmentalists in the neighborhood took care of that.

Good riddance to the Cloud Peak’s stock!

CLOUD PEAK ENERGY ANNOUNCES SUSPENSION OF TRADING

P.S. This news forced me to take a look at the sector. I should have been paying attention. Almost every stock’s chart looks like BTU (see the chart below CLDP). They all feel apart at the same time, in June. Something must of happened. Maybe investors realized someone was not necessarily true to his word. Duh.

(click on the chartS for a larger view)

#Stocks – Recent IPOs for the long term

This is a reminder that this is the easiest trade in the market and a followup to recent IPOs bought for the long term as per this strategy:

Buying IPOs For Dummies

The high and low of the stock’s price on its first day of trading creates the levels at which to buy and sell. The basic strategy is to buy on a close above the high of its IPO day, using either that price or the low of the first day as the stop loss to protect capital.

Presumably, investors in IPOs want to buy and hold for the long term.

Below, are the charts of a selection of IPOs since February — GOSS, SOLY, TCRR, FHL, SWAV — that have signaled buys and continue to advance or at least hold firm. As a group, they happen to be up 18% in less than two months, led by SOLY up 59% and GOSS 19% individually.

Every time an IPO is launched, like the much anticipated upcoming ones for Lyft and Uber, it’s just a matter of paying attention to the first day’s price levels to make the trade. There is a lot of hype around each launch but one must have the discipline to wait for the stock to reveal its likely long-term direction. Some of these stocks go straight down from day one (a lot actually) but the stock of every major company in market history eventually made a move above the high of its IPO day and many of those never looked back.

With persistence, experience and discipline, it is the easiest and safest way to invest for the long term in the market.

(click on the chart panel for a larger view)

#MarketTiming – from bearish to bullish to bearish again…

On Monday, this blog posted that this stock market at this juncture is —

TRICKY, TRICKY, TRICKY.

No kidding.

At that point, for Monday, the market, according to many technical indicators, was poised to sell off, ending the splendid rally from December. But then it didn’t sell off.

Instead, yesterday, it gave a tentative, but likely, indication it was going to continue to go up into a typical bull-market cycle advance, and today on the opening gap and with its pre-lunch follow-through from the open, it appeared the snorting gods were in their heaven and all was right with bull world.

Then, during the day a quick slide took everything negative. Not by much, hardly enough to notice on daily charts at the end of the day, but it was enough to turn long-term breadth negative again (see the dots on the chart below), which makes being long the market dangerous and while short-term breadth did peek above the zero line for a day a look back looks pretty bearish (the yellow line on the chart below) with highs below highs generally all the way back to the beginning of the rally.

Tricky.

I’ve long said this is the rally to make everyone believe a bear market did not begin in September of last year, that the bull market from as far back as Obama’s first term was resuming and continuing and it may still be (it sure looked like it yesterday), but it will not surprise me if a benign dip like today turns into a raging grizzly while the buy-and-holders sitting at The Palm or at Smith & Wollensky are wondering why the steaks are taking so long.

For today I’m posting my “Black Candle” chart. Black candles shows up when an index or ETF or stock or whatever one’s trading closes higher than the day before (usually on a gap) but lower than its open. There are candlestick names for these kind of chart patterns but just plain “black” is fine with me.

Today, notably, we had black candles on SPY (below) and TQQQ, and remarkably on FNGU (the leveraged ETF for the FANG stocks). They don’t always signal tops of swings, although I can’t think of anything else that comes as close (see examples on SPY below), but they are alerts. They do signal sudden indecision. And they are useful markers, pretty much as simple as it gets — go long above the high of the black candle, go short below the low of the black candle as the indecision gives way to a direction either up or down.

(click on the chart for a larger view)

#MarketTiming – Bulls doing what they needed to do

What they needed to do was to push the market up some more.

In the process, the all important long-term breadth (the NYSI) has turned positive to go along with the short-term breadth (the NYMO) and price indicators with SPY finally edging above its 280/282 resistance (see the charts below).

That would suggest more advance to come. The upturn in the NYSI is buy signal for tomorrow’s open

But maybe not without a dip first, a “turnaround Tuesday”?

There are shaky signs that remain in this tricky time in the market. It’s kind of scary to jump in now with the market already up essentially six days in a row, both the Russell and the Dow at at the moment lagging the Nasdaq and the SPX as if not all the generals are as yet on the battlefield. My nifty-50 stock list has 29 stocks on buys and has been declining since last week, even slipping again today from 31 on buys Friday. CNN’s Fear and Greed Index is at a “greed” level and still working on divergence trailing the market’s up move these last six days.

Still, at this point there is no choice other than to be long until further notice.

Given that the NYMO/NYSI is positive and also has a cycle that usually runs ten to fourteen weeks (the sell down ending six trading days ago was in the 10th week) breadth could launch the market into rally into say…May…and maybe making a new high along the way.

I’ve been asked to explain what’s on the the triptych of stock charts below. They are an illustration of what I talk about over and over again as I try over and over again to simplify, simplify, simplify.

The top part is whatever is being traded on the signals. In this case TQQQ. Could be AAPL, GE, NFLX, options, whatever. The middle part is NYMO and NYSI. The next lower part is obviously SPY. Also use the Nasdaq composite here on other charts. And finally the bottom part is the profit reading, set for $100,000 in order to easily see the percentage move. The white flag on the lower left is the booked profit percentage on the signal year to date. The white flag on the lower right is the current profits if the signal is in play.

The chart on the left is the short-term breadth signal for March, in the middle is a pure price signal for March, and on the right is the long-term breadth chart, YTD (it is set to go long again tomorrow).

Remember this is day trading and swing trading, no long-term buy and hold in my world (far too risky).

(click on the charts for a larger view)

#MarketTiming – tricky, tricky, tricky…

So the market did not go down Friday as expected here.

And it may have switched gears to rally some more to the upside.

While long-term breadth, as measured by the McClellan Summation Index ($NYSI), continues to decline, short-term breadth ($NYMO) turned up Friday with a low above a low on its chart (see the green circle on the charts below). In bullish times, that is an aggressive traders buy signal. In bearish times, not so much.

Now if the Summation Index turns up, which it needs to do in short order (like Monday…), it could be the start of several weeks of rally. And if it doesn’t, and the low above low on the NYMO is canceled out, which seldom happens in bull markets but is common in bear markets, we will again, immediately be looking at a likely down swing again. One that could be big.

A lot hinged on Friday’s market action and now more may hinge on Monday’s.

The the first chart on the left below is based on the long-term breadth signal year to day. Because of this monster rally that ended at the end of February, TQQQ, the leveraged ETF for the Nasdaq is up 48% for the year. It is flat now but will go long if the NYSI turns up. TQQQ on the center chart is riding the short-term breadth signal and is currently up 14% for the year. It will go long on tomorrow’s open (Monday’s open). The chart on the right is a purely a price-base signal (I say “buy the yellow, sell the blue”). It has booked 3.1% profits and is currently up 5.1% on this latest on-going upswing.

If the market rallies tomorrow again, it is likely all three will be long at the same time. That is truly bullish.

IF not, then it won’t be bullish. As I said, much hinges on Monday for now. Tricky, Tricky, Tricky.

(click on the chart panel for a larger view)

#DayTrading Stock Options – Puts

The quote from this link three days ago continues to be my prevailing opinion on the market action for stock options:

#DayTrading Stock Options in the Fool’s Game

With the all-important long-term breadth now declining, stock options trading has shifted to the puts.

Long-term breadth turned down on 2/28 triggering sells, and bearish swing context for the general market from the open of 3/1. Despite the blip up Friday, market direction remains most likely to be down.

In additions, short-term breadth turned down today in negative territory, and prices across the indexes reversed a gap up on the day.

Hence, going long puts. See posts below for more discussion on criteria for the trades.

Today, the big four bellwether stocks I’m using for this options strategy — AAPL, BABA, NFLX, TSLA (see charts below) — racked up a 57.4% gain for the $10k committed to the trades ($5,341).

Still, for the record, today’s gain merely brings the week’s total so far to breakeven. Although the market turned negative with long-term breadth turning down, the rollover to the downside has been slow, and has just begun to register in the options day trading.

In general, the market could bounce here. There is news tomorrow – the employment numbers — and the trading going into he rollover was so tight the market is getting overbought rather quickly on the pull back. None of that matters to this day-trading strategy, which opens each day some time (and only sometimes) after each open and always is closed on each close. On an overall positive day it’s likely the buy signals in the puts will not trigger.

(click on the charts for a larger view)

#MarketTiming – today’s “gasp” in the slow rollover…

Yesterday in this link below it was suggested that there might soon be a collective market gasp as the fierce bear-market rally might becoming to an end, possibly as soon as today:

$SPY – the slow roll over?

The rollover didn’t show up all that much today in the indexes but if the leverage ETFs across the most prominent sectors are any indication (see the illustration below), this could be the start of something big for the bears.

Besides the solid gains in these leveraged ETFs (see percentage change column on the chart below), 42 of the stocks in my nifty-50 stock list were in the red. That was mass selling, a veritable blood bath on the day. SPY puts in or at or near the money on the open, expiring today, were up a minimum of 93% from today’s open (the 279 put was up 243%, showing there is nothing “slow” about a rollover on an expiration day).

In addition, CNN’s Fear And Greed Index appears to have topped again at an extreme greed level and turned down (see the SPY chart below). And the VIX has edged up above 15 again, a key level in the ebb and flow between bull and in this case more importantly bear markets.

Again, as it was coming into today, the market looks primed for more down side. As long as the breadth indicators (NYMO/NYSI) are negative, shorts are in play.

(click on charts below for a larger view)

(click on the chart for a larger view of SPY in relation to CNN’s Fear And Greed)

#DayTrading Stock Options in the “Fools’s Game” Part II

(CLICK ON THE CHARTS FOR A LARGER VIEW)

TSLA at the end of the day – net up 94%.

BABA at the end of the day – net up 52%.

AAPL at the end of the day – net up 14%

.

NFLX at the end of the day trade – net down 43%.

#IPOs for “Dummies” – $GOSS, $ALEC, $HARP on buys

Took a look at some recent IPOs since this is one of the easiest trades any trader and investor can make.

I don’t mean being on the inside, or some investment house’s favorite client, or some politician on the take. This when to buy a newly-issue stock offering AFTER it come public.

The strategy is outlined in this post below:

Buying IPOs For Dummies

Don’t mean to insult all those guys who went to Harvard and Wharton and Stern, but simple is best and there is no simpler trade than this.

Note the range on the first day of the IPO’s trading. The buy signal is a close above the high. It is too difficult usually to short these stocks so let’s set that aside for now. The stop loss after the buy is up to the individual trader’s or investor’s risk tolerance. It a can be as close as the price coming back below the first day’s high or as far away as falling through the first’s low.

Below are the charts of the selected recent examples for the stock symbol GOSS, ALEX, and HARP. I have no idea what these companies do nor how qualified they were to sell stock to the public.

This purely a technical analysis entry signal. GOSS was a buy above $19 on today’s open is currently up 1.9%; ALEC was above 19.50 on today’s open is up 4.9%; and HARP was a buy on Friday’s open and is at the moment up 6.1%. The numbers in the white flags on the lower right of each chart is the dollar gain per $10K invested.

Needless to say, as indicated by those quick gains, the first-day high is an important line to play.

(click on the chart panel for a larger view)