So You Want To GoPro...

GoPro Inc  (GPRO)

 

If you want to read my previous post on GPRO click here

 

 

This is a DAILY chart of GPRO - Moving Averages Only

Click the chart for a larger chart of GPRO

• Let me start this post by reminding everyone that GPRO is still a "new issue".  We don't have much history to rely on.  But we are going to run with what we have.  Remember you can always look at an hourly chart too if that makes you feel better.

 
GPRO has been on a tear for the last 4 days.  Although I missed the initial trigger for this latest move, lets look at a couple things that are pointing at a potentially positive longer term story.
 
The first things I want to focus on are pullback levels.  The first time GPRO corrected, it came all the way back to about $36.  The second time it corrected, it came back to about $38.  Pullbacks are constructive in a stock.  Pullbacks to higher levels is an indication that big time traders & investors see value at a higher price than they used to.  So does this mean GPRO will pull back to an even higher level the next time it pulls back?  Maybe  :)
 
The second thing I want to focus on is the moving averages.  I like to pay close attention to the 8, 21, & 50 day ema's.  The 8 should be above the 21 and the 21 should be above the 50.  You can see the 8 was above the 21 until there were a couple days of decline in the stock price.  Now the 8 is trying to get above the 21 again with the recent positive price action.  If the 8 does go above the 21, you could say GPRO is beginning to act like other uptrending stocks.  You might feel like GPRO has run too far too fast.  And you may be right.  But if the 8 day ema gets above & stays above the 21 day ema then GPRO is a good long going forward.
 
 
 

I want to be a TECHNICIAN when I grow up...

 

 

This is a DAILY chart of GPRO - Trend Lines Included

Click the chart for a larger chart of GPRO

** I just noticed a "UT 2" note on the bottom left corner of the chart.  Please ignore it **

• If you are not a "Linear Trader" or "Linear Investor" as I am you may feel overwhelmed by what you see on the above chart.  But give me a few minutes and I will explain it to you.

 
Let's start with the gray horizontal lines.  You may have to look at the hourly chart to see where some of these came from but they are all levels I deemed important early on.  For instance, if you look at the candle representing the first day of trading you will notice I have a horizontal line at the top and bottom of the candle.  I believe the first day's trading range is important so I marked the top & bottom with horizontal lines.  All the horizontal lines have significance to me.  They are not arbitrary and most were created in the first week of GPRO's life. 
 
The horizontal lines are potential support & resistance levels.  If you read my previous post (the link is at the top of this post) you will see that I talked about these levels and how they might help us in the future.  It turns out that $38ish was a very important level recently.  Before that was the $36 level.  I didn't see the $36 level and therefor don't have a horizontal line for it.  $38ish is the best horizontal support we have at this point.  Why?  Because GPRO came back to $38ish twice and has turned higher both times.  I would say $45ish is the best resistance we have so far.  Why?  Look at how many times GPRO has touched the $45ish line and then immediately turned lower.  Big time traders & investors are not convinced that GPRO is worth $45.  So when it gets there they sell it.  At some point this will change.
 
What about the shaded box?  What is that?  I said in my previous post that GPRO has lived in the $41 to $45 range for most of it's life.  I am still willing to say that.  So if you want a pretty high probability trade you can buy shares at $41 (or $38 if it gets that low) and sell them at $45.  that's a 10% move that took about 10 days last time it happened.  We are on that same road again only it started at $38.  If you are long now you have to look for a change in direction around $45.  More precisely, hold your long position as long as the closing price stays above UT 2.  Once the price breaks the UT 2 trend line you have to prepare for lower prices.  If I was going to take a guess I would guess that this might happen around the top of the shaded box.
 

• Let's talk about UT 1, DT 1 & UT 2...  For me, these lines are guides.  They help me decide what may be coming.  But they are only guides.  They are not "tomorrow's newspaper today". 

 
UT 1 is an uptrend line that starts at the low of day one and touches the most recent lows from last week.  I use this line as my ultimate stop or line in the sand.  If I am long GPRO I will sell all remaining shares if the price closes below this line.  I say all remaining because I always look for ways to limit my losses & keep most of my gains.  In other words, I should have sold some or most of my shares before the price dropped to UT 1. 
 
DT 1 is a downtrend line that starts at the highest high and then touches the next lowest high.  I use this line in two ways.  I see it as potential resistance, a place where the stock may turn lower.  But I also see it as an area of momentum once the price closes above that line.  If everyone thinks GPRO will turn lower at DT 1 and it actually goes right on through to even higher prices, some big investors & traders are going to jump in for the next leg higher.  That jumping in will increase the price even more.  And that's a good thing if you are long.
 
UT 2 is an uptrend line that gives me clues about the shorter term.  If I was lucky enough, or good enough, to get in between $38 and $41 I don't want to let the market take away my profits.  So I use UT 2 as a sign that the stock may rest.  When GPRO closes below UT 2 I would sell some of my stock.  Then I will wait to see if GPRO bounces off UT 1 or maybe closes below it.  Then I would buy or sell accordingly. 
 
 
 

Trade What You See...Not What You Think, Or Feel, Or Hope, Or ...

The Trend Is Your Friend...Until It's Not

Limit Risk & Protect Your Profits

 
 
 

Twitter, JC Penny, Facebook, El Pollo Loco

Twitter  (TWTR)

 

This is a DAILY chart of Twitter

Click chart above for a larger chart of TWTR

Twitter recently reported pretty good earnings.  How good is evidenced by the jump in the stock's price and the increased volume for a couple days.  Problem is investors like stocks that "Gap & Go".  Twitter didn't.  Twitter gave investors 5 straight down days after the gap up.  Then a few days of basing.  And now we have had 4 straight up days. 

So what is next?  I would say that twitter has given a couple reasons to be optimistic. 

If you look back to July 1, TWTR put in an intraday high of $42.95.  After the earnings gap up, when TWTR was dropping and basing, we never saw a daily closing price less than $42.95.  All I am saying is resistance of about $43 prior to earning became support after earnings. 

If you look at the 8, 21, & 50 day ema's you will notice they are in the right order and the price is above the 8 day for the last 4 days.  Moving averages are a powerful tool.  As long as TWTR continues to close above the 21 day ema, stick with your long. 

The next interesting level for this stock is $50ish.  That is the high of the first say of trading. 

JC Penny  (JCP)

 

This is the DAILY chart of JCP

Click chart above for larger chart of JCP

JC Penny reported earning on Thursday after the close.  So Friday's candle is the market's reaction to JCP's pretty good earnings...  I am beginning to wonder if investors will ever believe, and give credit for, the apparent turn around happening at JCP. 

JCP went through an accelerated downtrend for about 2 years.  That downtrend was broken in March of this year.  Since the break of the uptrend, JCP stock has traded in a fairly tight upward sloping channel.  The bottom of the channel is about $8.75.  So if you want to start a long position I would advise using the bottom of the channel as your stop.  If you still believe JCP is a short, let the short trade trigger by breaking below the bottom of the channel. 

A quick word about the moving averages.  The 50 week ema is above both the 8 & 21.  If this stock is going to continue upward, then the 8 & 21 must cross above the 50 week.  Once that happens more people will jump into JCP or change their mind about JCP.  But that is long term since we are talking about weekly moving averages.  If you look at the daily moving averages, JCP seems to be riding the 21 day ema with its intraday lows.  Notice that the daily closes are at or above the 8 day ema for 7 days now.

Facebook  (FB)

 

This is a DAILY chart of FB

Click chart above for larger chart of FB


Facebook recently reported pretty good earnings.  How good is evidenced by the jump in the stock's price and the increased volume for a couple days.  Problem is investors like stocks that "Gap & Go".  Facebook didn't.  Facebook gave investors 6 down days after the gap up.  Then a few days of basing.  And now we have had a few up days. 

So what is next?  I would say that Facebook has given a couple reasons to be optimistic. 

If you look back to March of this year, FB put in an intraday high of about $72.  After the earnings gap up, when FB was dropping and basing, it came right back to that $72ish level.  All I am saying is resistance of about $72 prior to earning became support after earnings. 

If you look at the 8, 21, & 50 day ema's you will notice they are in the right order and the price is riding the 8 day.  Moving averages are a powerful tool.  As long as FB continues to close above the 21 day ema, stick with your long. 

The next interesting level for this stock is "higher".  FB is trading in uncharted waters now.  It is higher than it has ever been except for the intraday high of $76.74 after earnings.  Once it closes above that level just keep an eye on trends, higher lows, and moving averages.

For those of you who noticed, yes I just copied & pasted from TWTR to write this about FB.  That says a couple things.  One, FB & TWTR are trading very similarly at the moment.  So if one is a good investment then so it the other.  Two, don't reinvent the wheel if you don't have to. 

El Pollo Loco  (LOCO)  -  How loco are you ??

 

This is an HOURLY chart of LOCO

Click chart for a larger chart of LOCO

You did read that this is an HOURLY chart right?  This is an IPO with little price history.  I chose to post an hourly chart because it "feels" like we are looking at more history.  OK.  Now that we are all on the same page...

LOCO had a few great days out of the gate.  But then the novelty began to fade away.  There was a quick drop then a quick rise (to a lower level).  Then a semi steady decline that brings us to today. 

I will point out that the last two days have conformed to an uptrend line.  It may look significant on this hourly chart but it's only two days...  With that said, if the price stays above the trend, a long position is relatively safe.  But if the price falls below the uptrend line, get out of the way.  Just as a reference point, the opening day saw prices in the mid 20's.

Let's look at the moving averages.  Notice that they are opposite of  the right order.  They are upside down.  The 8 is under the 21 and the 21 in under the 50.  Although I love the chicken & pinto beans at El Pollo, I do not like LOCO at this point in time. Give me a couple days.  If the downtrend is broken I may change my mind. 

Here are a couple price levels I think are interesting:
$29ish - LOCO has pulled back to here twice on the hourly chart.  I would say this is a pretty strong level of support.
$31.25ish - This is where LOCO pulled back to just before starting the most current 2day uptrend. 
$33.75ish - This is where LOCO pulled back to after its initial run up.  At this point, $33.75ish is a place where LOCO could find resistance and turn back down.  But $33.75ish is also a level that could be descent support after LOCO closes above it.

Thanks for taking the time to read this post

 

Trade What You See - Not What You Think, or Feel, or Hope, or ...

 

The Trend Is Your Friend Until Its Not, Use Support & Resistance Levels,  Limit risk

Correction or No Correction ???

The S&P 500 and a 20% Correction


Why are so many calling for a large correction?  I am sure there are lots of good reasons but let me try to explain what the chart might be saying. 

The S&P, as an indicator of the general market, got up to about 1550 in the year 2000.  Then it gradually declined to about 800 by 2003.  After that decline, the S&P gradually rose back to 1550 again.  But again it turned down and this time declined to about 700 by the year 2009.  Notice the horizontal line on the chart below.  Also notice that the first two times the S&P gets to about 1550 it turns around and heads lower.  This is classic "resistance".

In 2009, after hitting 700, the market began going back up and really hasn't stopped.  In the recent past we have seen a high of almost 2000.  Wait!  What happened to 1550??  Looks like we skated right on through that level this time. 

Now that the S&P has gone through that 1550 level should we just forget about it?  I don't think so.  It may come back into play sometime in the future.  Remember that resistance can become support.  If it does, that means the S&P will revisit that 1550 level and then turn and go higher. 

In case you missed it.  I will ask the question again and answer it again...

Why are so many calling for a large correction?  Because if resistance becomes support, then the S&P has to go back down to 1550.  IF (the caps are not a typo) the S&P goes back down to 1550 then the market will have to drop about 450 points from the intraday high we saw in July.  That equates to a better than 20% drop in the market.

Does all this make sense?  When you hear someone say, "the market may decline 20ish% in the next 6 months" just realize all they are really saying is that they believe the S&P may revisit that 1550 level. 

This is a Monthly chart of the S&P 500

Click the chart for a larger chart of SPX

 

 

 

Let's talk about UT 1, UT 2, and the ellipse at the top

UT 1 is an uptrend line that started back in 2009 and has held strong ever since.  UT 2 is an uptrend line that started in 2012 and has held strong since.  Notice that UT 2 is steeper than UT 1.  That indicates faster price growth.  The ellipse at the top is just meant to call your attention to this area of the graph.  I would say that many investors are looking at the August candle to see if it will close below UT 2.  They will keep looking at new monthly candles until they see a shift in sentiment.  All of this is inside the ellipse.  If a candle closes below UT 2, then the next trend line it may ultimately fall to is UT 1.