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Everything is a Remix Part 2 from Kirby Ferguson on Vimeo.

Strength in utilities a warning sign for the market

One of the many advantages of being a small trader is the ability to get in and out of the market quickly.  You are able to go from 100% invested on the long side to 100% invested on the short side very quickly, within a matter of minutes.  The big institutions however, aren't afforded this luxury.  They are forced to move their money around to safer sectors.  The utilities being one of those safe sectors are often a great indicator for what is in store for the market.

The XLU, S&P Utilities sector is just now breaking out of a relative strength downtrend that has existed since early Sept 2010 vs the S&P.  The two most recent occurrences of this show that in November 09 the RS breakout marked the beginning of a consolidation phase for the market, in April 2010 the RS breakout marked the beginning of a 20% correction in the SPY.

The SPY is shown in black below while the XLU is green.  Vertical lines mark prior relative strength breakouts.

Breakout Setup

You may have noticed that the majority of my recent Chart.ly charts have something in common.  Stocks that are near their 52 week highs, if not all time highs, that have had huge runs and are consolidating near their 50 day moving averages make for excellent long candidates.  Specifically they exhibit often offer some really nice risk / reward entries.  Let's take a look at four recent examples.

The most obvious recent example is in the market itself.  The SPY had moved up substantially from its lows in September of 2010, pulling back and bouncing off the 20 day moving average (red line) no less than 5 times between September and November.  Once the 20 day average had broken the 50 became the next natural area of support.  You can see in the circle that the SPY held the 50 day well and the optimal entry was to buy the open of the day that the downtrend broke, 12/1/10.  Since then it's been smooth sailing for the SPY ETF.

The setup on FTNT was gorgeous.  You can see that this recent IPO, which began trading late in 2009, hadn't done much through August 2010.  In late August 2010 the stock began moving.  From then through late December the stock ran from about 18 to just over 36, doubling in a few short months.  You'll note that there are no pullbacks to the 50 day during that period.  At some point even the best stocks need to consolidate their gains.  In November and December FTNT drifted slowly higher, allowing the 50 day moving average to catch up to the stock, all the while forming a symmetrical triangle pattern.  On Dec. 27 the stock tested the 50 day moving average for the first and only time.  It bounced there, consolidated for a few days and then proceeded to break out.  Buying the breakout above 32.65 yielded a 10% move in three days.

The setup in ACOM is somewhat similar to that in FTNT.  The stock breaks higher in September 2010, out of a 4.5 month consolidation.  From there the stock runs up nearly 50% in just over 2 months, without pulling back to the 50 day moving average along the way.  Like FTNT, a buy at the breakout of the declining tops, just a few days after touching that 50 day gave the buyer a fast return on their investment - 10%+ gains in 2 days.

The TZOO setup varies only slightly from ACOM and FTNT.  You can see that TZOO had never come near the 50 day in the three months it took to triple from 15 to 45+.  The consolidation occurring between Dec. 13 and Jan. 4 allowed the stock to get closer to the 50 day than it had been since the beginning of the run.  The stock tightened up above that 50 day and the declining tops, along with the horizontal tops at 42.34 together, offered an attractive entry on the breakout that occurred on Jan. 5.  An entry at 42.45, 11 cents above the prior high, has yielded a 12% return as of the close today - in 5 days.

More Setups - AIMC, RDCM, FTNT, SOL, KRO, MEAS, CVU, DHX, LINE, LCRY, ROSE, SFLY, SIGA

Great looking breakout on the weekly here, though the move may have started back in the 15's.  Watch for signs of a reversal to the upside after a pullback to the 18.75 level and a bounce.

3 months of consolidating for RDCM and it may be time for it to move again. 

Already long FTNT and the setup here looks great for more.  Sell a move below the 50 day.

Nice little setup here.  Pulled back to trend line and horizontal support on the weekly while setting up a little wedge on the daily.

Continues to hold that 50 day.  Long here with stop just under the 50 day or wait for new high.

10 years of sideways action below the 30 level.  Long on a move to new highs.

Nice tight consolidation on the daily chart.  

Watching for new highs here.

Setting up just below highs, though I wish the pattern was trending slightly down instead of up - beginning to slowly take on the look of a bearish wedge.

Small dollar stock with tiny volume that looks good on a move over 10 / share.

Love this base, the second in the move higher that began on the breakout of 27.

Watching for new highs in SFLY.  Best setup would involve a few months more of sideways action at these levels.

Watching for a move to new highs here.

Stocktwits 50 Setups I'm Watching

Broke out recently, weekly setup for me

Broke IPO Highs recently and now basing for another move.  

Watching for a pullback on ILMN

Watching for a pullback to IPO highs, which is also the 50 day at this point.

Both weekly and daily charts look great.  I'm long from 15.29

Setting up just under all time highs, buy the breakout for a quick move.  Not a stock that is going to make you huge money fast.

Love the look of SPRD.  Long at 18.47 which is a bit high, stops below horizontal level at 17

New 52 Week Highs

Chart.ly Stock Chart Postings

I regularly post updates on stocks I'm looking at on the Chart.ly website. Be sure to take a look at that site for more frequent commentary from me.

My Chart.ly charts are found at: http://chart.ly/user/johnsontrading

2010: Stock Trading Books - Required Reading List

Personal Favorites


Coursework - Chartered Market Technician Level 1 Exams:



Coursework - Chartered Market Technician Level 2 Exams:



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Watchlist for tomorrow

Below you'll find my watchlist for tomorrow.  Should give a little insight into how I view stocks in Telechart as well.  Earnings are vitally important.

The categories I can sort on at the top are, from left to right,
Price Percent Change from 3/9/2009 (Market low),
EPS % Change Last 1 Year
EPS % Change Latest quarter

EPS % Change 2nd quarter back

EPS % Change 3rd quarter back

EPS % Change 4th quarter back

BIDU Trade Walk Through

Frustrating trading today - FAZ and MON

Today was very frustrating.  I finished in the black but I was close to having a remarkable day if I'd just made the most of FAZ and MON.  I had great timing on my trades but was too careful to book profits instead of hold for real money.  Examples are below. 

Trades not taken: MON long - likely $2-3 gain with about .10-.20 cents risk.  Should take that trade every time.

Trades taken that I didn't make real money on: FAZ short.  The financials have gotten clobbered and were due for a bounce after gap downs.  I shorted FAZ at the perfect moment about 6 minutes into the trading day.  Covered for a nice little gain.  But... I settled.  I should have covered half, and let the rest run.  I thought the stock would fill the gap and it eventually did that and much more.  No reason for me to not ride that trade and make 10 points or so.  Later in the day I initiated another FAZ short, once again with perfect timing.  I closed it too for a quick little gain but if I'd held through the end of the day I'd have made 6 points and the stock never went any higher than where I covered.  Frustrating to have the right ideas but for some reason lack the conviction to stay with them.

FAZ:

 

MON:

 

FAS

The FAS rallied today after yesterdays brutal sell off.  You can see below on the 60 minute chart that the time to buy was on a move upwards through the 8.47 level.

DXO out of the declining tops

I was a chicken these last couple of days and never established a position.  Now that DXO has broken out of the declining tops I'll wait for some semblance of a pullback to jump in.

Linda Raschke's Market Thoughts

The Dow, SP, Russell have had well defined downtrends on both the daily and the weekly time frames. Currently, the weekly charts are correcting an oversold condition which should lead to further upside. However, it would take an incredible amount of work to turn the daily time frames, as well as the weekly time frames from downtrends to uptrends. That is unlikely to happen in the next few months, so on these indexes at least, you are still looking at a corrective rally in terms of structure.

Watch to see what type of volume comes in over the next week. Naz has already had a clean upside breakout. So - that is my two cents worth - the market can still have upside potential from here, but much of it is coming from rotation, which never supports a sustainable long term rally.

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SKF intraday setup