27
Jan

Caterpillar CAT Shatters Support: Updating New Trading Levels

Caterpillar (CAT) shares shattered support at the $ 85.00 per share level on an earnings miss this morning.

Wall Street consensus estimated a gain of $ 1.55 per share yet the actual reported earnings were $ 1.35 per share.

Traders subsequently punished the stock with a downside gap and break of a trendline and key support level.

Here’s the Daily Chart, though the Weekly Chart will give a broader perspective with targets:

Shares initially bounced (rallied) up off the $ 85.00 per share rising trendline level, only to see this morning’s earnings gap collapse price straight toward the $ 80.00 per share level.

Let’s actually turn our attention – and planning – to the Weekly Chart where we can see the broader picture:

I drew a simple Fibonacci Retracement grid from the 2009 low near $ 21.70 per share all the way to the $ 110.60 high into 2012.

Price has traded between the 38.2% Retracement and the high ever since this high.

Notice the key support – highlighted – of the 38.20% level into $ 80.00 per share.

That’s our major focal point here – shares are bearish as a downside (sell) pathway opens under $ 80.00.

A simple sell-swing could take price back toward the midpoint or $ 70.00 per share confluence (target).

Otherwise, be on guard for a vicious Bear Trap which could trigger on an instant return above $ 80.00.

We’re often charting – and thus trading – price as it moves toward or away from a key level.

For Caterpillar (CAT) shares, this level is simply $ 80.00 per share.

The next few swing or short-term trades should take place within this context – a movement (trap) up away from $ 80 or else a breakdown/shatter sell signal under $ 80.

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Corey Rosenbloom, CMT
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26
Jan

Jan 21 Intraday Update and Big Trend Stock Scan

What levels are important in the market right now and which stocks are the top trending candidates of the day?

We’ll start our update and stock scan with our S&P 500 level chart:

Our key focal point will be the converging trendlines – namely the horizontal line near 2,027 and the rising lower trendline intersecting 2,023.

The S&P 500 should be deemed bullish above these pivot points and cautious/bearish for a breakdown beneath them.

A clean breakthrough above the 2,030 level suggests price can easily – and likely will – travel back to 2,035 or beyond.

What is Sector Breadth revealing about today’s session? Let’s discover together:

All sectors are bullish today with Energy (along with Materials, Industrials, and Utilities) showing relative strength today.

Our weakest sectors include Financials, Technology, and Health Care.

We have potential bullish trend continuation plays in the following stocks:

Big gapper Netflix (NFLX), China Mobile (CHL), Ctrip.com (CTRP), and Domtar (UFS).

Potential downtrending candidates exist in stocks showing relative weakness today:

CA Inc, Alder (ALDR), Avalanche (AAVL), and LendingClub (LC).

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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24
Jan

Support, A Breakout, and Missing Out in Netflix NFLX

If you didn’t catch Netflix (NFLX) off the critical support level, and now the breakout event, have you missed the boat on profiting from this rally?

Let’s take a look at the chart, key levels, and yes the upside targets to play for from here.

We’ll start with the Daily Chart:

Price gapped lower in October, pushing back from the $ 330 level to the underside of the falling 20 day EMA into $ 400.

Then, price pushed to a new low, creating a Double Bottom with Positive Divergence pattern off the $ 320 per share level.

Keep this level in mind – it was a critical Weekly Chart Support Floor (that built the foundation for the rally).

Volume surged with price on the two days prior to the big earnings breakout gap through the $ 350 resistance level.

After market close on January 20th, traders reacted favorably to Netflix’s earnings, instantly surging price higher above the 200 day SMA and $ 400 level.

Have you missed the boat on this trade?

For most traders, probably as we tend to prefer buying on retracements or into support.

Most traders don’t feel comfortable buying an outright breakout.  It’s riskier and more difficult to place stops.

However, the “breakout buy” strategy can work and yes, Netflix can continue trading even higher.

Right now, focus on the current price pivot into $ 440.

Netflix would trigger another breakout buy through “Open Air” above $ 440 to target the $ 470 level.

In the future, a movement above $ 470 opens shares to trade through another bullish pathway to new highs.

Here’s the reference chart on the Weekly Frame:

I simply wanted to highlight the importance of higher timeframe reference (support) levels which is the case here into $ 330 per share.

Note the examples where price traded into this level and buyers collectively bought shares at this key pivot.

Yes, the earnings surge sent price flying toward the highs, through the $ 375 cluster, and now we’re focusing on the probabilities of price continuing through $ 440 and $ 450 toward the $ 480 level or even higher than that.

It’s fine to miss out on opportunities – don’t feel horrible about them – but learn lessons so you can recognize and react without emotion to similar situations in the future.

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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23
Jan

Jan 22 Euro QE Market Update and Stock Scan

Like the expected knee-jerk reaction, stocks rallied on news that the European Central Bank will engage in a Quantitative Easing program similar to that in the United States (three rounds).

With the expected bullish outcome occurring, our job is to go with the money flow as stocks rally while being cautious of any sign of a reversal.

We’ll start our update and stock scan with our S&P 500 level chart:

At this point, it’s just buy the pullbacks and breakouts as traders react in knee-jerk reaction to the “Stimulus = Higher Stock Prices” thesis.

The intraday trend remains higher and money flow is still positive into equities.

We should thus continue to focus on the buy/long side while this situation (trend) continues.

Breadth strongly confirms the rally:

The grid above reflects a strongly positive situation in money flow across sectors.

The weakest sector is the defensive Utilities – then Energy – while all other sectors are strongly positive.

All sectors except Utilities and Energy are near 100% breadth – which means (almost) every single stock in the sector is positive today.

Again, we’ll focus on bullish candidates only.

We have potential bullish trend continuation plays in the following stocks:

Just to select four, Netflix (NFLX), EBAY, Agrium (AGU), and Yum Brands (YUM) (bonus – Dollar Tree DLTR).

Potential downtrending candidates exist in stocks showing relative weakness today:

None.

Do not focus on the short-side of this stimulus-news driven market.  That’s a great way to lose money quickly.

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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21
Jan

FT: Forex clearing slow in coming

Regulators are taking their time formulating plans to clear forex derivatives trading. Gavin Wells, chief executive of ForexClear at LCH.Clearnet, tells FT Trading Room editor Philip Stafford why they are treading carefully but expect soon to publish mandates.

FT Trading Room

21
Jan

Eight Top Intraday Trending Stocks for Jan 20

Jan 20, 2015: 4:36 PM CST

Which stocks topped our algorithmic list of strongest (and weakest) intraday trending stocks today?

Let’s take a look – plus we have a bonus after-market gap (surge) for two of these stocks.

Here’s our top intraday up-trenders:

Jumping straight to the point, our top trenders of the day include Netflix (NFLX) and Cree (CREE), both of which made the cut BEFORE their bullish earnings pop (even higher).

As I type the update, Netflix surged to the $ 390 per share area (after opening near $ 340) and CREE gapped straight up to the $ 34.00 per share level (coming off $ 31.00) thanks to a positive response to earnings.

Not to be outshone (which they are at the moment), Illumina (ILMN) and Jarden (JAH) join today’s top four.

Despite the bullishness, there’s always a “bear market” somewhere, especially with so many stocks to trade:

Today’s candidates for relative weakness include Dynergy (DYN), Lions Gate (LGF), along with retailers Buckle (BKE) and Ann (ANN).

Traders should focus on Netflix but don’t miss other bullish candidates due to the buzz and excitement of NFLX.

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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19
Jan

Trade Planning off the 2000 Key Level in the SP500

It’s time once again to plan our intraday and swing trades off the key inflection (pivot) level 2,000 in the S&P 500.

“Will it hold or will it break?”

What happens next on the movement away from 2,000 will define our bullish or bearish strategies.

Here’s a pure price chart to highlight this level and how price has behaved in the past:

Through the latter part of 2,000, we were playing the “Hold or Break” game with 2,000 with our trades.

We’re doing the same thing now as price clearly interacts with this level for the sixth time as shown above.

Earlier in January, buyers saved the market from another decline from this level but this time they collectively may not be strong enough to halt the selling pressure – and stop-losses triggering – on a clean break under 2,000.

Before that – in December – sellers won but were thwarted by positive reaction to the Federal Reserve announcement which catapulted the index to a new yet extremely weak high.

And now we return twice to this level.

Ultimately, sellers are favored here unless bulls/buyers surprise us once again.

Here’s a broader picture with targets and our indicators displayed on the chart:

Cutting straight to the chase, 2,000 is an important level not just from price – it’s also the 38.2% Retracement.

Our Fibonacci Grid shows 1,990 as the short-term pivot and if this level fails as may be expected, then the target play lower extends both toward 1,965 (the rising 200 day SMA – red) and then 1,958 (the 50% Fibonacci Retracement).

Failure at the 1,960 level opens another harsh sell pathway toward the 1,925 price and Fibonacci pivot.

For now, let’s continue focusing our attention on 2,000, the bearish pathway if this floor of support breaks, and of course any intervention surprises the buyers throw along way.

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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18
Jan

Documenting the Damage on the Swiss Franc Fallout

I wanted to highlight the ‘damage’ or intense price movement on select FOREX pairs because – probably – we’ll never see another overnight move like this in our lifetimes.

The Swiss National Bank shocked the markets with a “Black Swan” announcement that they will no longer intervene to stabilize their currency against the Euro.

For a great, succinct background piece, be sure to read “Here’s what the Swiss Central Bank did and why it’s such a shocker” via BusinessWeek.

And now, we view the damage – for educational and reference purposes – on the charts.

We’ll start with the weekly perspective of the Swiss Franc against the Euro (the focus):

To defend the 1.20000 level, the Swiss National Bank essentially printed francs (currency) and purchased Euros.

Notice the level of intervention at the cap level where the bank acted to thwart natural supply/demand forces which were persistently pushing the value of the Euro lower against the Swiss Franc (and thus strengthening the Franc).

The process worked, manipulating value against the Euro until yesterday’s announcement that the policy would be terminated.

Within moments, all hell broke loose, to use a colloquial term.

Here’s the damage documented on the daily chart (notice the scale):

The 1.2000 level was an artificial intervention/manipulation point in the market.

When the intervention ceased, normal valuation returned almost instantly with a vengeance.

The result was a gargantuan movement in value that took all participants by shock.

Here’s the chart of the Swiss Franc against the British Pound:

In FOREX pairs, the first currency (the Pound) is the numerator and the second currency (Swiss Franc) is the denominator.

A chart going up means the first currency – Pound – is getting stronger against the second currency which is getting weaker.

A movement like this – a collapse – means the first currency collapsed against the second … or in this case that the Franc immensely appreciated against the first currency.

Here’s one more chart of this surprise move, though we could keep documenting it on other pairs:

One of my favorite patterns is the “Arc Trendline” or exponential growth price pattern.

Generally, it is an exhaustion pattern that suggests a collapse after price breaks through the rising, eventually vertical, lower trendline.

While the US Dollar – which has been strengthening over the last few months – continued an uptrend against the Swiss Franc, the surprise announcement similarly collapsed the chart with the instant strength of the Franc.

The result meant that the value the Dollar appreciated against the Swiss Franc over the entirety of 2014 evaporated in a matter of hours.

While rare, one of the risks of trading is so-called “Black Swan” news or economic events that take everyone by surprise.

The Swiss National Bank announcement – and the rapid appreciation of the currency – is one of those events.

Let these charts – and similar FOREX pairs – serve as educational references to these rare events.

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Corey Rosenbloom, CMT
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16
Jan

Jan 16 Stock Scan and Reversal Market Update

After yesterday’s Swiss Franc surprise (see the “Aftermath Update” post from this morning), the US S&P not only stabilized but is showing signs of a bullish short-term reversal.

We’ll start our update and stock scan with our S&P 500 level chart:

Mainly, we’re focusing our attention right now on the 2,010 level for a possible breakout and bullish surge through “Open Air” toward 2,020 or 2,027.

For now, focus your attention on the 2,005 to 2,010 neutral zone with the bull/bear levels in play.

Note the lengthy positive momentum and TICK (internal) divergence, suggesting a possible rally.

What is Sector Breadth revealing about today’s session? Let’s discover together:

All sectors are bullish today with Energy (along with Technology and Health Care) showing relative strength today.

When all sectors are strong – or weak – there’s not much we can do except see this as a sign of strength.

We have potential bullish trend continuation plays in the following stocks:

Altisource (ASPS), BP, Activision (ATVI), and Sanofi Aventis (SNY).

Potential downtrending candidates exist in stocks showing relative weakness today:

Vornado (VNO), Myriad (MYGN), Caterpillar (CAT), and Align Tech (ALGN).

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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15
Jan

Jan 14 Selling Market Update and Trending Stock Scan

We have yet another sell session in motion, let’s take a moment to highlight key levels, read breadth, and find opportunities in the top trending stocks for the day.

We’ll start as usual with our S&P 500 level chart:

Ultimately, price is doing exactly what it should be doing, at least in terms of breaking out of the compression (see my prior update on “Support and Resistance Planning for the S&P 500 and Dow Jones“) and trading down toward the 2,000 target.

The focal point today certainly shifts to 2,000 and the “Hold or Break” (so far it’s breaking) outcome there.

Look to play bearishly on a movement down away from 2,000 toward the prior low near 1,980.

Otherwise, we’ll plan for bullish “bear trap” or bullish plays on an intervention that takes us back above 2,000.

What is Sector Breadth revealing about today’s session? Let’s discover together:

As would be expected, Sector Breadth is bearish with the strongest sectors in the Defensive Group.

Utilities tops the day with a 55% positive rating along with Health Care and Staples – confirming the bearish selling pressure or defensive market posture today.

We have potential bullish trend continuation plays in the following stocks:

Intrexon (XON), Monster Beverage (MNST), Diamondback Energy (FANG), and Omega Healthcare (OHI).

Potential downtrending candidates exist in stocks showing relative weakness today:

Allegheny (ATI), M&T Bank (MTB), BHP Billiton (BHP), and JP Morgan Chase Bank (JPM).

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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