AAPL YHOO TSLA C : It's always your call...

Don't let someone else tell you how to invest your money!

It's always your call...

• It is natural to look for an easy way to start investing.  Or an easy way to continue investing because you are tired of losing money.  What you really need is more knowledge.  More experience.  More time to learn.  And a good teacher.

• I am not saying you shouldn't subscribe to some investing service or some trading room.  All I am saying is that every time you spend your money it should be your decision.  You should know why you are hitting the "submit" button on that order.  You should also know when, and how, you are going to cut your losses if the trade goes bad.  This is not easy people.  All of us struggle with the reality that we made a bad decision.  And what if the trade goes good?  When do you get out??  Sometimes this is an even harder decision.

• If you are invested in AAPL or YHOO you may be wondering what to do now.  If you are not invested in anything but you want to get involved because "everyone else is making tons of money", realize that some people are making money.  But there are definitely some people losing money.  Even in this market which is at all time highs.

• Let me circle back to my opening paragraph for a moment.  More knowledge will come as you read more.  You have to learn to distinguish between facts and opinion.  More experience will come as you make more trades.  But it will likely come with a financial cost.  Unless you are "paper trading".  Let's be honest, paper trading is great when you can walk away from a "paper loss" and start over.  But paper trading SUCKS when you make a huge "paper gain" because you got a trade just right. 

• And about that good teacher.  Good Luck to ya.  There are some traders / investors out there that would make great teachers.  But they aren't accessible to you and me or they want more money every month than is affordable to most.  By the way, there is never a guarantee that you will make money.  And you can't expect one.  This market isn't a place where guarantees work. 

• So why am I rambling instead of showing charts?  The charts are next.  But investing is rarely like going to school and having someone show you exactly what to do.  You have to learn by taking little bits from many sources and putting the bits together to form a cohesive plan.  I hope this blog is one of your bits.

C  -  Citigroup
      It's your call...

This is a daily chart of C

Click the chart for a larger chart of Citigroup

• Citigroup has been in a range (between the two gray horizontal lines) since about March of 2013.  The price did dip below the range once in 2013 and rose above the range once in 2014.  You will need to look at a 2 yr chart to see it clearly.

• What I am trying to show you is two things.  1) The lows have been getting higher & higher since April of 2014.  Notice the green uptrend line that touches the lows.  2) The price just approached the top gray horizontal line and now looks like it is heading lower.  Notice the short red downtrend line that touches the highs. 

• If you want to invest in or trade Citigroup you have a decision to make.  If you think it will go up from here then it needs to stay above the 21 ema (yellow).  If you think it will go down from here then is has to stay below the red downtrend line.  It's your call...

TSLA  -  Tesla Motors Inc

      It's your call...

This is a daily chart of TSLA

Click the chart for a larger chart of Tesla

• Tesla has been following the same uptrend line (UT 1) since mid 2013.  Going long when TSLA is close to UT 1 has been a great investment.  Take a look at a daily chart that includes all of 2013 and you will see what I am talking about.  

• I know there are several lines on this chart so it may seem confusing at first.  But let me explain...  If a trend line doesn't have a UT or DT label then ignore it.  Those are old trend lines that I am not talking about in this post.  I guess I could have removed them but I didn't.  Focus on DT 1, UT 1, and UT 2.  We have already talked about UT 1 and how it has been intact for about 1.5 years.  UT 2 has only been intact for about 3 weeks.  But it is crucial that you realize the price of TSLA is following UT 2 at the moment.  DT 1 was intact for all of September & October.  What is important about DT 1?  The fact that TSLA's price is now above it.

• How do we invest or trade TSLA from here?  If you think it will continue higher then it has to stay above UT 2.  If you think it will go down from here then I guess it has to stay below the gray horizontal line.  

• If you were short while TSLA was following DT 1 then you should have exited that position at the beginning of the week.  If you were waiting on the sidelines for a hint that TSLA was done going down, that hint came at the beginning of the week when the price closed above DT 1.  

If you initiate a trade right here, 

how do you know if you made a bad decision?

• One way is to only allow 3-5% of your money to be lost.  But that is arbitrary and only you can make that decision.  I like the range but if you don't enter a trade at the right time you could loose every time.

• Another way is to use a trend line.  If you feel TSLA or C are following a particular trend line and that trend line is breached, then you should get out of the trade.  What about the percent range?  You would've known how many percentage points you were risking before you entered the trade because you know where you were buying and you knew the price level of the trend line at that point in time.  If you weren't willing to risk that many percentage points then you shouldn't have entered the trade.

• Let's look at C first.  If you go long right here, you have to realize that C could go all the way down to the Uptrend line...  Ouch!!  That is a drop of about $4 from here or 8%.  Not my idea of a good entry.  If you go short right here, you want the price to stay below the red downtrend line.  Which is about $0.60 above Friday's close or 1%.  I can accept that kind of risk.  Either way you have to constantly evaluate your trade.

• Let's look at TSLA.  It you go long right here, the price has to stay above UT 2.  If it crosses below UT 2 you should sell because chances are good it will go to UT 1.  You could buy it back when it gets there.  If you go short right here, I would call you crazy  :)  But seriously, I would wait until the price closes below UT 2.  If it gets that low, watch for a turn back up at UT 1.  If it gets below that, I will short it with you...

Anything can change at anytime!  You have to constantly evaluate your trade.  If it is working, hang in there, adjust your trend line, and be patient.  If the trade is not working, get out of the way!  Don't be patient, don't hang in there, don't adjust your trend line.  You can always try another trade later on down the road if you still have money left because you were disciplined enough to get out of a bad trade...

Trade what you see...  Not what you think, or feel, or hope, ...

The trend is your friend... Until it's not.

Limit Risk & Protect Profits!

Is BABA a buy at 95??

Alibaba  (BABA)

At the beginning of the month I began to notice that BABA spent most of its time between $87 and $90.  That was comforting since I think BABA will be a good investment.  But I am the guy who always reminds my readers to, "Trade What You See... Not What You Think, or Feel, or Hope, or...".  So in order to follow my own guidelines, I had to begin to evaluate the "risk" as BABA dropped below that $87 area.  If you read my note on the graph you will see my rationale.

 

This is a DAILY chart of Alibaba



Click for a larger chart of BABA



The gist of my thought process is that BABA came public at $68 (IPO price) and jumped into the $90's on the first day.  When it didn't continue higher I figured consolidation is better than going down.   But as it trended lower I needed justification to stay positive.  My justification is typically technical analysis of some sort.  And notice I said, "stay positive" and not stay long.  I do my best not to be long a stock that is trending lower on the daily.

In this instance I looked to Fibonacci Retracement as my justification.  I couldn't draw the Fib lines on the chart because BABA never actually traded at $68.  So after some simple mathematics I realized that the 38.2% retracement line was between $83 & $84.  A stock that bounces off the 38.2% retracement is typically a strong stock.  So stay positive as long as it bounces around $83.

You can also notice the red downtrend line on the graph from 10/9 to 10/15.  On 10/15 BABA's daily candle closed above the red downtrend line.  That is one sign that it may be time to "go long".  The next sign was when BABA's price crossed above the daily high from 10/15. 

If you did buy on 10/16, how could you have protected yourself from a false breakout?  You could have used the 10/16 low of about $84.  Anyone who did this is still in the stock today. 

So what now?  Do you buy in here?  Wait for a dip?  Buy puts or short (it's the title of another one of my posts) because "it has to come down"?  Some people actually trade like that... 

Take a look at an hourly chart of BABA.  The price has been above the 21 hour ema since 10/16.  Much of that time the price has actually been above the 8 hour ema.  If you want to buy in here, I would do it on a bounce off the 8 or 21 hour ema.  If you want to wait for a dip, I'd say look for a dip to a horizontal line where resistance became support.  And if you want to buy puts or short, you should wait for a break below the uptrend line that started back on 10/15.  Your target could be the $85ish area.

Whatever your decision, good luck to you!  Decide what you see in the chart and invest accordingly.  Use a stop loss so you don't loose too much money if you are wrong.  No one is perfect.  If you get out of an investment because you made a mistake, you can always come back and try again another time.  But if you don't get out of the investment you may not have any money left to try again.

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

The Trend Is Your Friend...  Until Its Not

Limit Risk & Protect Profits

 

Quick Post on YAHOO! ($YHOO)

Everyone is talking about YHOO & AAPL this week.  As you may have noticed, my last couple of posts have focused on the trend lines in weekly charts.  For a change, here is a quick post on an hourly chart of YHOO.

YAHOO!  (YHOO)

Here is an HOURLY chart of YAHOO!



Click the chart for a larger chart of YHOO



• Remember this is only an hourly chart.  Why would I repeat myself?  Because an hourly chart gives very short term signals that may not last very long.  But the trend lines look the same on short term charts and long term charts.  Just remember where your signal came from and you will be ok.

• Inside the shaded box - Notice that YHOO crossed above the red DT line yesterday afternoon.  The opening candle of today tested the red DT line but didn't break it.  That was a good indication that it could be bought.  Small size initial position was prudent.  The opening candle high of today also matched the top of a candle from yesterday afternoon.  So that tells us there is some resistance at $43ish.

• UT 1 has been a good trend for a week now.  I like it as my "line in the sand".  But it is interesting to note that, after yesterday's low, UT 2 began to take shape.  It is well defined at this point and can be used as a "tight stop". 

• Although these are short term signals only to be used for short term trades.  If you want to try one you could go long close to but above UT 2 and use UT 1 or UT 2 as your stop.  If the trade doesn't work out just get out of the way.  If it does work out, you may have a descent winner on your hands.

• Things to look for...  There is resistance at $43ish so expect some turbulence there.  The price of YHOO has to stay above UT 1 to stay in the trade.  Once YHOO gets above $43, I would expect it to go to $44ish.  There may be some turbulence there too as it would match the high from a couple days ago.

Trade What You See...  Not what you think, or feel, or hope, or ...

The Trend Is Your Friend... Until Its Not

Protect Profits & Limit Risk

Z, WFM, TRIP, AMZN, TSLA, AAPL : Selling Short & Buying Puts - Sept 12 Update

Let me begin this post by saying THANK YOU!

 

Last week's post was the most read of any of my previous posts.  I have to be honest, I am not sure why.  But none the less, I am thankful that so many of you took the time to read the post.

 

If you want to read last week's post, click here

 

I am going to update all the charts from last week and add a couple more.  I watch about 45 stocks each week.  So there is plenty to choose from.  I really love investing and I love sharing what I see.  I hope what you read here helps you in some way.

Zillow (Z)

 

Here is a Weekly Chart of Zillow

Click the chart for a larger chart of Z

Last week I talked about the weekly candle closing below UT 2 and that it may indicate lower prices for Z.  We did see lower prices for Z this week.  This week's candle closed right at the 21 week exponential moving average (ema).  Remember that moving averages are places where prices can turn around.  So be ready just in case.  Use stops to limit your risk.  Since we are talking about following DT 1, it makes sense to have a tight stop at $133ish and a line in the sand at $137ish.

_______________________

Whole Foods Market (WFM)

 

Here is a Weekly Chart of Whole Foods Market

Click the chart for a larger chart of WFM

Last week I gave some levels to watch and use as stops if you think WFM is going lower.  Everything still looks good.  Stick with the plan. 

• WFM is going sideways for the most part and has been doing so since the big drop in price a few months back.  Sideways movement is "consolidation" or indecision on the part of investors.  For whatever reason, there are investors out there willing to buy at $36ish but feel compelled to sell at $43ish.  You could always just play along while it goes sideways in the channel.

• It is noteworthy to mention that WFM has been making steady gains over the last several weeks.  But this week was a red week.  I would also point out that WFM broke the most recent uptrend line (not shown) that started at the beginning of August.  This could be a sign that we will see $36ish sooner rather than later. 

______________________________

Trip Advisor  (TRIP)

Here is a Weekly Chart of Trip Advisor

Click the chart for a larger chart of TRIP

 

TRIP doesn't look quite as negative now as it did last week.  It is still below UT 1 but it saw lower prices during the week and then was able to recover from them to close near the highs. 

 

• One thing to note is the high of this week never got as high as the previous week.  Yes it was only $0.23 away.  But it is a moral victory if nothing else.  Lower highs & lower lows are important if your are betting TRIP will continue lower.  TRIP is still below DT 1 so feel free to play it to the down side.  Just remember to use stops to limit your risk.  I would have a tight stop at $100ish (top of the 9/5 candle) and a line in the sand at $102ish (half way up the 8/29 candle).  If it tests DT 1, you may have another opportunity to play TRIP to the downside.  If it goes through DT 1, you still have $ to begin a long position. 

 

_____________________

 

Amazon  (AMZN)

 

 

 

Here is a Weekly Chart of Amazon

 Click the chart for a larger chart of AMZN

 

 

I feel like I cheated all the people who read last week's post because I didn't include this chart. 
I talked about it but that was all.  Here it is in all its glory.

 

• This chart is one of my favorite charts at the moment.  It is a clear example of  UT vs DT.  Which will win?  Say what you want about AMZN but the price has gone up for two years!  It is hard to argue with that.  If you like fundamentals, you probably have many arguments about AMZN.  Remember, I am a technical investor.  I trade what I see.  At the moment, the only thing I know it AMZN's price will break either UT 1 or DT 1.  When it does, I will be ready to follow it.  Which way?  It doesn't matter.  I know how to make $ either way :).

 

• Speaking of trading, I want to remind you that speculating is not technical analysis.  If you buy or sell short now, while AMZN is between UT 1 and DT 1, you are speculating.  Technical analysis says wait for a break above DT 1 to go long or wait for a break below UT 1 to go short.  I encourage you to wait...

 _____________________

 

 

Tesla  (TSLA)

 

Here is a Weekly Chart of Tesla

Click the chart for a larger chart of TSLA

 

TSLA : Too far too fast.  The multiple is unsustainable.  The valuation is absurd.  Even Elon Musk is cautioning investors that, in the short term, TSLA's stock price may be too high...

 

• Everything in the previous paragraph is a "fundamental" view of TSLA.  Technically, if you bought TSLA in early 2013 you are VERY happy!  Now "technically", how do I get into TSLA so I can get happy too??

• TSLA is obviously following an uptrend line (UT 3).  How long will it continue?  No one knows.  But if you want to try to "get happy" you could begin a long position right here and stay in it as long as TSLA stays above UT 3.  You will need a tight stop because if TSLA closes below UT 3 it could go to UT 2.  If it gets there, I would rather lose a little bit of money with a tight stop at UT 3 and then retry a long position at UT 2 instead of being way underwater at UT 2.  A $40 loss is never a comfortable position to be in.  UT 2 is $40 below UT 3 at this point...

• Another feather in the cap for anyone who wants to be long is that TSLA closed above "all time highs" 3 weeks ago (on the 8/29 candle).  Many times, when a stock closes above all time highs, it will continue higher. 

• One more thing about TSLA.  Notice that this week's candle is "inside" the previous week's candle.  So if it gets above this week's high of $285.49 you can expect it to go higher.  If TSLA goes below this week's low of $273.66 you can expect it to go lower.  Remember there are no guarantees in investing.  But the "inside candle" rule is a great indicator.

___________________________

Apple  (AAPL)

 

Here is a Weekly Chart of Apple

Click the chart for a larger chart of AAPL

 

 AAPL is a great example of a stock in an uptrend.  How can I say that if there are no trend lines drawn on the chart? 

• Let's talk again about moving averages.  There are 4 of them on this chart of AAPL.  They are the 8 exponential moving average (ema), 21ema, 50ema, and 100ema.  If you are long a stock, the moving averages should be in order.  The 8 above the 21, the 21 above the 50, the 50 above the 100, and the 100 above the 200 (not shown).  This is a weekly chart so these moving averages are "weekly moving averages".  As opposed to daily moving averages or hourly moving averages. 

• Starting in May of this year, AAPL's chart turned a corner.  Although the moving averages have been properly aligned for almost a year, the price of AAPL didn't give a clear picture.  Notice that the price has closed above the 8 week ema every week.  There have been a couple weeks that closed right on the 8 week ema, but those were just great buying opportunities.  This week we see the same scenario.  AAPL closed right on the 8 week ema.  If you wanted to get long AAPL this may, again, be a great time to do so.  IF the stock price reacts like it did in the past, we should see higher prices next week.  Remember, the past is not always an indicator of the future...

• If I started a long position here, I would have to be willing to lose a little money and sell if the stock closed below the 8 week ema (currently $98.81).   If a new long position didn't work out right here, I would probably wait for AAPL to close around the 21 week ema.  Then I would try again.  Remember, stocks can turn around wherever they want.  Moving averages are potential places but there are many others too. 

• If you are one of those who is thinking about playing AAPL to the downside, you could try it after the price closes below the 8 week ema.  At that point you should be able to draw a DT line and use it as your stop.  You could also use that same 8 week ema as your stop.  This is just my opinion but there is a lot going on with AAPL right now that is potentially positive.  Personally, I would be hard pressed to try a short position.  I think I would rather stay away from the stock versus shorting it.  By the way, I don't use an iPhone.  So that is not clouding my judgment.

______________________________

Trade what you see... Not what you think, or feel, or hope, or ...

The trend is your friend... Until its not

Limit risk & protect profits

 



Z, WFM, TRIP AMZN : Selling Short & Buying Puts

Let me begin this post by saying I am not making a call on the market.  Nor am I saying that any of these companies are beginning a long downturn.  But they might be...

I will also say that many investors seem to feel like this rising market is getting long in the tooth and many are asking for a small correction for overall market health.  Some are predicting large corrections and some are predicting doom & gloom.  If any of these scenarios come to pass, stocks will go lower.  Weakest stocks will fall the fastest.  Weakest stocks during a correction are typically weak stocks in a rising market.  This post talks about 3 weakening stocks in a rising market.

All charts are weekly charts so they do take a longer time to show changes.  Take that any way you want.  Technically, these stocks currently  look like they are going lower from here.



Zillow (Z)

Here is a Weekly Chart of Zillow

Click the chart for a larger chart of Zillow

When I draw my trend lines on my chart, I see that the last candle closed below the uptrend line (UT 2) that started in May and has held ever since.  If I am right about Zillow, next week's candle has to close below this week's candle.  If you want to try a short position or puts, you can start your position now and keep it as long as Z is below 140ish.  Please use a stop of $140ish or $144ish to protect yourself.



Whole Foods Market  (WFM)

Here is a Weekly Chart of WFM

Click the chart for a larger chart of Whole Foods Market

 

In October of 2010, WFM began an uptrend line that lasted until April of this year.  For the last year, since April of 2013, WFM followed an accelerated uptrend line which ended in November of 2013. 

If I were long WFM, I would like to think that I would have sold some of my position in November of 2013 when the accelerated downtrend (UT 2) ended.  Now I will admit that I may have lost some money when the price went through the longer term downtrend line (UT 1) because I would have been looking for a bounce that didn't materialize.  Hopefully I would have used a tight stop and got out quickly.

Once the price went through UT 1, it would only make sense to start thinking about "Puts & Selling Short".  But would I have done it?  I honestly don't know.  This is really the whole point of me writing this blog.  I guess I am trying to convince myself that it's just as acceptable to try Puts & Selling Short as it is buying calls & going long.

I know the rules!  I really do!  Take a look at the downtrend line that has developed since UT 2 broke.  All you have to do is realize that WFM is not going meaningfully higher until it is able to cross above DT 1.  So buy puts or sell short when the price is close to DT 1 and use a tight stop.  I would go a step further and say that $42.50ish was resistance in mid June and may very well be resistance again the next time the price gets there.  So I would say it would be prudent to try puts or selling short around $42.50ish and use a stop just above DT 1.  It is interesting to me to realize that in about 4 weeks, the horizontal resistance & DT 1 will both be at $42.50ish.  That would give me two reasons to try puts or sell short.  I consider myself an optimist.  It just seems weird to bet that a stock is going down.  But the reality is I also feel I am smart enough to recognize the signs of a stock that may go down.  Now I just have to pull the trigger and build some confidence. 




Trip Advisor  (TRIP)

Here is a Weekly Chart of TRIP

Click chart for a larger chart of Trip Advisor

TRIP began UT 1 in November of 2012.  The price broke UT 1 for the first time in February of 2014, the second time in April of 2014, and the third time last month.  Each time the price dropped below UT 1, it came back up above it.  Will this time be different??

Here is what I see in the chart.  TRIP put in a double top from March to July of this year.  Also UT 1and DT 1 crossed and the price followed the downtrend line.  At least that is what has happened so far. 

Last week's candle closed lower than the previous week's.  And last weeks candle didn't get even half way back up into the previous week's candle ($101.74 is half of the previous week's range).  Last week's high was $100.23. 

If I were going to start a short position through puts or selling short, I would use $101.75ish as my first stop.  If I needed another stop I would use DT 1 ($104ish next week). 

If you think TRIP is just "having trouble with UT 1" and will continue to go higher then here is an investing / trading plan for you.  First thing you need to do is draw an uptrend line from the lows in April to the lows in August.  You can call it UT 2 if you would like.  But in my world, UT (x+1) is always above UT x.  You will need to open a math book if that last sentence freaked you out  :)

Now you should notice that last week's low was right at your new trend line.  It held so that is good.  In the coming weeks, TRIP has to stay above your new trend line.  If it does, the real test will be when your new trend line meets DT 1.  Whatever happens there should be your insight into what may come next. 

The cool thing about investing is that no one really knows the future.  So when you look at a chart and say, "I think it is going up/down from here", you have a 50/50 chance of being right.  Those are great odds.  Trade what you see.  It is just as correct, at the moment, as what anyone else sees.  Time will ultimately prove you right or wrong.

The key is to give your thesis some parameters.  You should pick an event or $ level that proves you are wrong.  If that event or $ level occurs, then admit you are wrong and get out of the way.  You can decide to stay away for a little while and then try again or you can choose to invest or trade with the price action that is actually taking place.  If you struggle with this aspect of trading then "join the club".  We all struggle with this...



Amazon  (AMZN)


All the financial media is talking about Alibaba (BABA).  Fact is Alibaba is bigger than Amazon & Ebay put together.  Also, Alibaba has profits and Amazon doesn't.  Which stock would you invest in?

I know that I tend to "raise money" to get into a better investment.  Do big investors do that too?  I think they do.  If I am right, that may explain why AMZN has been dropping since the beginning of this year.  Then again, maybe there is no correlation at all.

Although AMZN has been a great investment since 2009, is AMZN going to continue to be a great investment now that BABA is almost available to own.  Hedge funds like to choose one stock to play to the upside and another to play to the downside.  Could that combo be AMZN (down) and BABA (up)?

AMZN is currently between an uptrend line and a downtrend line.  The downtrend line is at about $355ish for next week.  If AMZN is going down it shouldn't get above there.  The closest uptrend line is, although very short, is about $340ish.  The next closest uptrend line is in the low $300s.  If it gets below there, the next uptrend line is in the high $200s.  There is some potential gain right there if you are short or buying puts...

What if AMZN goes up through the downtrend line?  Well then you should be playing it long.  There is potential resistance at $365ish, then at $380ish, then at all time highs of $405 to $410.  There is some potential gain right there if you are long or buying calls...

__________________

 

 

As you can tell by my scenarios, I am not making an up or down call.  I don't know the future.  All anyone can do is invest or trade based on what they see. 

Trade what you see... Not what you think, or feel, or hope, or ...

The trend is your friend... Until its not

Limit risk & protect profits

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.

What's next for GoPro (GPRO) ?

GoPro (GPRO)

• The cool thing about an IPO is that it's new & exciting.  Then again, new & exciting can be deceiving...

Any technical investor will tell you that it's nice to know where a stock has been in order to ponder where the stock might go.  An IPO doesn't give the investor that luxury.

So what can you do?  You can pay attention to shorter time frames while using the same investing & trading rules that you normally do.  Just realize that you will get more buy & sell signals so you will either buy & sell more often or you will take on more risk.  Caution: if you don't watch your stocks every day you probably shouldn't be investing in an IPO.

• GPRO started trading and was off to the races.  After a couple days we all wondered where it would stop. 

 

I don't have time to finish this now as it is very" early in the morning" and I need a little sleep.  I will try to come back and edit this post soon but check out the pictures below.  They tell a pretty good story on their own.

Remember to always look at multiple time frames.  In this case I am using the weekly, daily, and hourly.  You could look at the 30 minute, the 15 minute, the 5 minute, etc and see a lot more UT & DT lines.  The important part is seeing when the price crosses the lines. 

That is where the change in direction occurs.  Have fun...

 

OK. I'm back...

Turns out GPRO stopped right around $50.  Ever heard anyone say "round numbers are like hurdles"?  Now you know why.  Is there any way you could have known that it was going to stop there?  I don't think so.  But I do think you had some clues right up there at the top.  Take a look at the hourly chart below.  After a steady run up, the price crossed below UT 1 (look inside the circle near the top).  When that happened it was a clue.  Yip, just a clue.  But you can act on clues.  This was a clue to lighten up or just take notice.

 

On July 2nd, GPRO opened down.  That's not good.  Then it closed the first hour below the low of the previous day (July 1).  That was your second clue.  Yip, just a clue.

• Fast forward a couple days and you will notice the price creates a trading range.

GPRO trades between $40.50 and $44 for five days.  I call that indecision.  It is only a matter of time before the investing community decides what they think.  If they think GPRO is worth more than $44 then it will go above the range.  If they think it is worth less than $40.50 then it will drop below the range.  It is your job to wait for decision to be made and show up on the chart.  Then follow!

This is a weekly chart of GPRO - please ignore the lines on the right

Click here to enlarge this chart of GPRO

This is a daily chart of GPRO

Click here to enlarge this chart of GPRO

This is an hourly chart of GPRO

Click here to enlarge this chart of GPRO

• If you are looking at this hourly chart and you believe that GPRO may continue to fall, what is the next level to anticipate?  And the next?  And the next?  One more please.  What if it goes below there???  Let's just say I hope you used one of the circle areas to get out of this stock with a profit.  That way you can try shorting it if you like or just sit back and watch.  It will stop going down at some point.  When it crosses a downtrend line you can use some of your winnings to try to make more money :)

Answers to the above questions...

Price level below $40.50 ish is $38.00 ish / Price level below $38.00 ish is $35.00 ish / Price level below $35.00 ish is $32.00 ish  / Price level below $32.00 ish is $28.65 ish - why $28.65 you ask.  That was the opening print

__________________________

• Going Down???  I feel like this post is getting a little long in the tooth but here is some cool stuff that happened today

 

Take a look at the hourly chart that includes today's activity.  It clearly shows a downward continuation at the open and then some sideways movement for the rest of today.  First, it is nice to see things like that long red candle at the end of Friday that broke the trading range and have a clue that it might lead to more downside.  Second, it is nice to notice the indecision for most of the day today and realize that there will be a clue about future direction when it breaks.  "Breaks" doesn't necessarily mean keep falling either.

 

If you are short GPRO, you can stay with your short until the price closes above DT 2.  Remember that it is normal to make slight adjustments to UT & DT lines as you get more candles. 

 

If you want to get long GPRO, you should wait until the price closes above DT 2.  Be cautious, limit your risk, and get out of the way if you are wrong.  Don't take it personal.  You are trying to predict the future.  That isn't easy for anyone I know.  Making mistakes is part of the biz.  Keeping enough money in your pocket to be in business tomorrow is imperative.

This is an hourly chart of GPRO from 7/14

Click here to enlarge this chart of GPRO

• If you made it this far I thank you.  I think you deserve something a little above and beyond the basics. 

 

This chart includes Fibonacci Retracement lines.  It is amazing how well the UT & DT lines work but when you add in the Fibs you get even more information...

 

Take a look at the 5 day area of indecision.  It had a low right at the 38.2% retracement line.  Coincidence??  Now take a look at the low end of the candles for today (7/14).  Notice the lows are very close to the 61.8% retracement? 

 

Remember that all of these retracement lines are common places to look for price to change direction.  The faster it happens the stronger the stock some people say.  All I am going to say is that it pays to pay attention to UT & DT lines, previous levels of support & resistance, and Fibonacci Retracements. 

 

 

 

 

This is an hourly chart of GPRO from 7/14

with Fibonacci Retracement

Click here to enlarge this chart of GPRO