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

Twitter Inc (TWTR) : More Perspective with Fibonacci

Twitter Inc  (TWTR)
 

This is a continuation of yesterday's post titled "What Happened to TWTR ??".

 
 

• Let's talk quickly about Leonardo Fibonacci.  He is historically credited with giving society The Fibonacci Number series.  There is some drama associated with this credit but let's just go with it.  The beginning of the list of Fibonacci Numbers is 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, ...  If you want more info on Fibonacci Numbers just Google it.  There is more info out there than you want to know. 

 

How do Fibonacci Numbers apply to Investing?

 

• We all know that stocks go up and down.  If you like this blog you probably agree that stocks tend to rise and fall in trends.  What you may not have realized is that after a stock price rises to a peak, it may then fall to a Fibonacci Retracement level.  There are investors out there who have spent a lot of time on this.  Let's just accept it as another form of technical analysis. 

 
If you are curious how the Fibonacci Retracement levels are found then here you go.   If not just scroll down to More TWTR Perspective with Fibonacci Retracement.

0.618 or 61.8% :  If you divide any (large) Fibonacci Number by the one after it, your answer will be close to 0.618. 
 
0.382 or 38.2% :  If you divide any (large) Fibonacci Number by the 2nd number after it, your answer will be close to 0.382
 
0.236 or 23.6% :  If you divide any (large) Fibonacci Number by the 3rd number after it, your answer will be close to 0.236
 
** There are more retracement & extension levels available on your Fibonacci Retracement tool.  Some of those values can be found with similar rules.  Other values like the 50% retracement level are not actually Fibonacci Retracement levels.  These non-fib levels were added by investors over the years because they are relevant in investing.
 

                             

 

More TWTR Perspective with Fibonacci Retracement

 

• Let's focus on the word retracement.  We all know that retracement means a reversal of direction.  I think we would all like to know how much of the rise in stock price (uptrend) the reversal will take back.  There isn't anyone out there that knows the future before it happens.  So take all those price predictions you have read and realize that they are no more than someone's opinion.  You can also take this Fibonacci Retracement stuff and realize that it is no more than a potential guideline. 

 

• So how much of a rise in stock price will the reversal take back?  Maybe this reversal will take back 23.6 % of the increase.  Maybe it will take back 38.2% of the increase.  Maybe it will take back 50% or 61.8% of the retracement.  We don't know the answer to the question but for some reason, these retracement levels are quite commonly places where the reversal ends and a new rise in the stock price begins.

 
 

Here is a Daily chart of TWTR with Fibonacci Retracement levels



Click here for a larger chart of TWTR with Fibonacci Retracement Levels
** Typo : 28.2% retracement level should be 38.2% **



• Fibonacci Retracement levels have merit weather you are long or short.   In the case of TWTR we can build some perspective into Friday's reversal.  We may even be able to use Fibonacci Retracement levels to decide what to do next...

 

• Let's all agree that Friday's reversal felt POTENT.  It may have even felt painful depending on where you went long.  But in terms of Fibonacci Retracement, the reversal didn't even take back 38.2% of the uptrend.  This could get a lot worse...  If you are long the stock you should consider getting out of the way of this reversal.  What if the reversal eventually takes back 61.8% or more of the uptrend.  Now that would be painful!

 

• If you want to be long this stock then look for a new uptrend to begin somewhere around one of the Fibonacci Retracement levels.   The next lower retracement level from here is the 38.2% retracement at about $61.  If TWTR bounces around there then go long again.  But wait for the bounce.  Don't assume it's going to happen.  If the stock continues to fall through the 38.2% retracement then start watching the 50% level at about $57.  Continue this method until an uptrend actually begins.   You can, and should in my opinion, also look for a new uptrend to begin by using trend lines like the red & green ones on the chart.  Yesterday's post "What happened to TWTR ??" should help with the trend line method.  Remember, Fibonacci Retracement is nothing more than a potential guide.  So use it as such.

• I wouldn't advise anyone to stay long indefinitely and see what happens.  The thing everyone forgets is that you can always get out of a stock and then get back into it at a better time.  If a better time presents itself.  I am not a big proponent of averaging down either.  If you get long when a downtrend becomes an uptrend and you use a stop loss incase you were wrong on your entry, then you won't need to average down.  This method works on all timeframes. So I am not just talking to the "Fast Money" crowd. 

 

• Let's say that TWTR goes down to about the 50% retracement level and then turns up to begin a new uptrend.  What is the next area where you might expect a little turmoil?  I would say the next higher retracement level of 38.2% or around $61.  If it closes above the $61 area then look for it to get to the 23.6% retracement level or around $66.  Are you seeing how this works?  What if the price gets back to the All Time High (ATH) of about $75.  Then what?  Are there any guidelines for how far TWTR may run before another reversal begins?  You bet.  I am not going to get into it now but that would be called a Fibonacci Extension.  Google it if you are interested. 

 

• If you want to be (or already are) short this stock then realize that your max profits may be obtained when the stock price reaches these same Fibonacci Retracement levels.  It would be prudent to lighten up on your short position at the 38.2% area for instance because that is one potential level where a new uptrend may begin.  If the stock price closes below a retracement level then you should be safe adding to your short again.  So if the stock price closes below the 38.2% level or $61 then increase your short position again if you want.  You could then see if TWTR gets down to the 50% retracement level of about $57.  And so on.  You could do this all the way down to the eventual spot where the new uptrend starts.  I don't expect that TWTR is going out of business so I do expect that there will be a new uptrend at some point.  We all know the uptrend was a great long trade.  But it is yet to be seen how good of a trade this downtrend will be for the shorts.  Be careful.

 
 
 

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

What Happened to TWTR ??

Twitter Inc  (TWTR)

• What did happen to Twitter this Friday?  You can find lots of folks on the blogosphere and on platforms like StockTwits & Twitter that will "tell you the reason for the big fall".  If you believe everything you read on the internet, then I am a French Model - Bonjour!

• If you are anything like me, you may feel like there is probably not one simple answer to explain the dramatic fall.  Yes, I know TWTR was downgraded but that alone is the reason?  Yes, I know that TWTR is up HUGE in a very short time.  Everybody had to be get in but on Friday lots of people wanted out?  The bottom line is I don't really care to spend the time sorting out why the dramatic fall happened.  The reason(s), whatever it is (they are), will probably not help you stomach Friday's $10 loss any easier.  But there is a lesson to be learned here.  This isn't the first time this has happened and it won't be the last.  Let's take a look at some charts.

My intent in this post is to help you put things in perspective.  Let's start with a weekly chart.

This is a Weekly chart of TWTR

Click here for a larger chart of TWTR

• Here is some perspective for you.  TWTR is still following an Uptrend line that started in late November or early December.  If you bought this stock for your grandkids when it came public as a long term investment, you are still making money for them.  Next week the green uptrend line will be about 60.  If it falls below there, that is where I would begin to worry.  If you bought this stock hoping to just make some quick big money, you should have sold already.  Use stops to protect your profits if you can't watch the chart develop all day long. 

• Remember that TWTR is still a "new issue" and therefor we don't have much history to guide us.  But using what we have, we can look for price levels where this stock may gravitate to on the way down.  We can also look forward to potential levels on the way back up. 

• Notice that during the week of the 13th the high was almost 60, during last week the high was about 60, and during this week the low was about 60.  Out of 8 weeks of being in existence, 3 of those weeks have highs or lows around 60.  You have probably heard the phrase resistance becomes support.  Why should we be aware of the 60ish level?  Because the drop could be over when the price is around 60.  I would guess that many investors will either consider getting back in around 60 or actually pull the trigger on a small trade just to see what happens.  These small trades will probably create some up & down turmoil on the intraday chart.

• If the drop doesn't stop around 60 then I would say 54 is the next potential destination.  Notice that 54 is last week's low.  After the 54 area you could be looking at a test of 50.  Why 50?  Because it is the high of the first day of trading for TWTR.  If you have read my posts you have seen that the first day's high & low for an IPO are important price levels.

• Let's just say that TWTR gets to the green uptrend line and turns higher.  Where will it go?  No one knows.  But I will say that it has to get above 63.75 (this weeks close) to show any sign of strength.  Then eventually, if it wants to continue to be strong like it has been, it has to get back to the all time high of 75ish.  Get the picture now?  There is no crystal ball next to my keyboard.  I am just watching price levels that have happened in the past.  Closing above them shows strength.  Closing below them shows weakness.  This is a very simplistic approach but it should help any struggling investor.

 

                                                  

 



• Now lets look at a daily chart of TWTR.  Notice the circles were great places to get in.  Will we get another great place to get in?  Will the price just keep falling and go below the green uptrend line?  Those are both really good questions.  You can find lots of folks on the blogosphere and on platforms like StockTwits & Twitter that will "tell you where to get back in".  If you believe everything you read on the internet, then I am a French Model - Bonjour!

 

This is a Daily chart of TWTR

Click here for a larger chart of TWTR

• If I had to guess I would say there will be another great place to get into TWTR.  The thing is there is no telling when it will happen or how much profit you will get from your entry.  You will have to monitor your investment. 

• The end of a downtrend is a great place to enter a trade or investment.  You can see two examples of this on the daily chart.  Yesterday's candle allowed the creation of a new downtrend line.  Let's see how long it takes for the price to cross above it.  Maybe it will happen around the green uptrend line.  Maybe not...

• What is the major difference between a daily & weekly chart?  You get more timely data.  There is a candle for every day instead of a candle for each week.  How does it help?  It gives you more price levels to use for guidelines.  For example,  Thursday's close was at 73ish.  Once the price dropped below that level, some investors sold shares.  When the price dropped below Tuesday's low of  70ish, some investors sold even more shares.  All of this is a mechanism to protect profits and limit risk. 

• If you look at every daily candle you should notice that as TWTR was increasing in price, tomorrow's low is typically higher than today's low.  This is how the green uptrend lines are created.  you can use a trend line or the higher lows to make decisions about your long investment. 

• Even though TWTR is technically still in an uptrend, please realize that a stock can retrace back to a trend line at any time.  You have to protect your profits when the price is high above the trend line.  That way you can buy the same shares back at a lower price if you still like the company as an investment.

                         

 



Here is a Daily chart of TWTR with moving averages

• Why do I show you this chart too?  Because I want you to notice that Friday's close happened right about at the 8 day moving average (the light blue line).  In general, stocks that can stay above their 8 day moving average are strong and in a nice uptrend.  I also want you to notice the dark blue line.  That is the 21 day moving average.  Stocks that stay above the 21 day moving average are not as strong as stocks above their 8 day but can still be pretty good. 

• You should also be aware of the fact that the 8 & 21 day moving averages are good places to anticipate a change in direction.  Maybe TWTR will try to turn up right around this 63 level.  Maybe it will try to turn up when it gets to the 21 day.  Maybe it won't.  Remember, these are places to anticipate.  There is no way to know, for sure, what this stock will do.

• If I was long this stock, I would use the green uptrend line as a place to try to get back in.  It is a logical place for a change.  If the stock crosses above the red downtrend line before getting to the green uptrend line, then that too is a place to look for higher prices. 

• If I was short this stock for most of Friday, I would have taken some profits at the end of the day.  I would consider adding to my remaining short if the price drops below Friday's low and below the 8 day moving average.  I would then use Friday's low or the 8 day as a stop loss for my short. 

• At the moment, the trend is down.  So short the stock or strategically lighten up on your long position.  Don't try too hard to push your luck going long until the chart gives you a reason to. 

• Remember, stocks go up & down.  That is just what they do.  It's your job to be long on the way up or short on the way down.  This is a lot easier said then done.  It is also your job to protect yourself from reversals like the one we saw on Friday.  This is done by strategically lightening up on your position. 

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

Chart of AAPL

Apple Inc (AAPL)
** While I was writing this post the AAPL / CHL deal was announced**

• There are many examples of stocks that have peaked, dropped into a valley, and then come back to the old peak and even surpassed it.  Could AAPL be another one of those companies?  It just might be.  Especially with the looming CHL news.  But don't count your apples before they are ripe.  The deal between AAPL & CHL isn't official until it's "officially" announced.

• On this weekly chart of Apple you can see that the old peak was about $700 and now we are at about $550.  You can also see that the high weekly price over the last three weeks has gone lower & lower.  The red downtrend line is your guide if you want to go long.  Once the price crosses above this downtrend line it should be safe to buy again.  If the price breaks the green UT 2 line, then going short would be a consideration.  But let me just say that going short with CHL on the horizon is NOT SMART...

This is a Weekly chart of AAPL

Click here for a larger view of the Weekly chart of AAPL

• The daily chart is more encouraging to me than the weekly.  Why? Because I can see that since the double bottom, AAPL is following UT1.  And since September AAPL has been following UT2, an even steeper uptrend line.  As I have said before, the red downtrend lines represent opportunities to strategically get into AAPL.  If you look at the most recent red downtrend line you will notice that it is fast approaching the green uptrend line I call UT2.  If the price breaks UT2, then look for it to bounce around UT1.  If it breaks the red DT line, look for higher prices.  If the break of the DT line happens in conjunction with a CHL announcement, the price may go much higher.  I would say that the most recent high of $575ish could easily be in the cards in short order (oops!  That was an opinion).  Let's just say that once the red DT line is broken, the $575ish level is the next anticipated level if AAPL is going to continue along the uptrend.
• What are my expectations?  Well considering all the "leaks" of a deal and some great investigative work by the investment community, I would say that a deal is coming.  When?  Soon.  But no one can give a date except AAPL and CHL.  I am long AAPL in anticipation.  This deal could be huge for both companies...  

• If you want to get in, you just have to look for more red downtrend lines along the way.  It is also pretty safe to add to positions once the price surpasses a previous high (peak).  If you really study the chart below you may see places where you can take some profits and wait for a better time to redeploy.  If you have trouble seeing what I am talking about then drop me an email at LinearInvesting@gmail.com.  I am happy to respond (time permitting).  

This is a Daily chart of AAPL

Click here for a larger view of the Daily chart of AAPL

Good luck in your trading / investing.  Trade what you see.  Not what you hope for.  Protect your profits.

Apple Inc (AAPL)

I am going to start this post by giving you a longer view of Apple Inc. 

This chart begins late in 2012 when a share of AAPL was going for about $700.  This chart ends at present day. 

This is a Weekly chart of AAPL

Click for a larger chart of AAPL



• I find that many of us forget to look at the big picture.  Instead we get caught up in the smaller one and miss out on some details.  This chart of AAPL shows me some pretty handy info yet it is clean, simple to read, and lends itself to interpretation. 

What's on the chart? 

 

• Let's start with the long red downtrend lines (DT).  They show the decline from $700 to $400.  All three of them were drawn during the downtrend.  One of them follows the initial downtrend from $700.  The middle one starts at $700 and touches the top of an uptrend late in the downtrend.  The last one is similar to the middle one as it too starts at $700 and touches after an uptrend occurs.  Why draw these lines?  I was looking for the bottom...

• The smaller red DT lines are places you could have gotten into AAPL after the run back up began.  Do you ever hear people saying it's too late to get in?  They might be right.  But when you can draw a short downtrend line and the price breaks above, it is probably safe to try going long.  Don't worry that you didn't catch the uptrend at the Double Bottom.  Most people didn't.  It's ok to begin an investment after the beginning of a trend.  Just plan your exit so you limit your losses if the investment doesn't work out.  There is more detail about places to get into AAPL later in this post.

• The green line labeled "Double Bottom??" is exactly what it seems.  I was asking myself if this could be a double bottom.  If it was I knew there was a chance it was a sign that AAPL had seen the lows and it would be a good time to go long the stock.  Looking back it was a great time to go long.  That was about $150 per share ago...

• The green uptrend line labeled UT 1 shows the trend that AAPL has been following since that double bottom.  UT 2 is an accelerated trend that the price has been following since September 20, 1013.  As long as UT 1 holds, I will be long AAPL...

• The horizontal dashed lines are Fibonacci Retracement lines.  You don't have to have a Math degree to understand how to use them and what they mean.  But if you are in the Math degree club you probably know a little more about Mr. Fibonacci than you care to :-)  Anyway, I find it very interesting that AAPL came back to the 50% retracement line before turning up again.  It is common for downtrends to become uptrends around retracement lines.  The big question is always which one.

• My simple interpretation of the weekly chart is that AAPL is in a strong uptrend.  There is even an accelerated uptrend in place.  If you want to go long (or add to your long) you should try to do it after a bounce off an uptrend line or when a downtrend line breaks.

I showed you the Weekly chart of AAPL so I can show you the Daily chart. 

This chart starts at the end of the double bottom and ends at present day. 

 

 

This is a Daily chart of AAPL

• The daily chart is a little more erratic than the weekly but that is expected.  One thing to focus on though is that the Weekly and the Daily charts both show uptrends.  That is a pretty good indication that you are safe being long the stock. 

• There are many places you could have gotten into this stock after the double bottom.  The shaded green circles show you some of them.  All those shaded green circles show a downtrend line being broken.  And if you notice, they all lead to higher prices.  If UT 1 & UT 2 continue, there will be many more opportunities just like these. 

• Notice that I have drawn a red downtrend line beginning at the high on Thursday.  I drew it all the way down to UT 1 because it could take that long for the price to break the DT line if it is going to.  Based on what is happening with AAPL at the moment, I don't expect the price to even get to UT 2 before it breaks the red DT line.  But that is my expectation and it may have absolutely nothing to do with reality. 

• So how do I play this from here.  Well, first you should know that I took some profits on Friday.  The stock was following a VERY steep trend higher for 7 days.  Friday's price action fell below that steep trend so I took some profits.  The next place I will take profits is $545ish.  You can draw an UT line starting on 11/21 and touching the bottom of the next three candles.  It will be at $545ish on Monday and $547ish on Tuesday.  On Wednesday it will be at $550ish AND it will intersect the red DT line.  If apple breaks the DT line and stays above the UT line starting on 11/21, then we have a new and more accelerated UT line that has been formed.  These developments would be very positive for long investors.  If none of this happens then look for a bounce off of UT 2 or UT 1.  If it goes below UT 1 then then look for lower prices.  By the way, UT 1 is about $55 below the current share price.  That is about a 10% drop.  Do you really want to just jump in blindly and "hope" that the price doesn't go down 10% or more?  I sure hope not.

Base your investment decisions on the chart.  Trade (invest) what you see.  Not what you think, or feel, or hope, or ...    

Limit Risk & Protect Your Profits

 

Charts of KKD, PANW, & TWTR

• The first chart I want to show you is TWTR.  I wrote a blog post about this stock recently and you can find that post here :  http://trendlineinvestor.blogspot.com/2013/11/twitter-inc-twtr.html. 

Now that more time has gone by lets revisit the Daily chart of TWTR

• Changes to the chart : I moved the "H. Support" line down just a bit.  I added another horizontal line between the "Day 1 Low" and "Day 1 High" lines.  I also added the green uptrend line (UT) and the shaded box.

 

• How does all this change the outlook on TWTR?  The price broke above the downtrend line (DT) and continued higher. until Friday.  If you bought the break of the DT line you are doing fine.  Just realize that your UT line is about $3 below so protect your profits.  A drop to the UT line, from Friday's close, would be a 6% drop. 

 

• What does the shaded box represent?  I say it represents the next higher price range for TWTR.  If the UT line holds then the price will enter the shaded box.  Once it does that it should make it to the top of the box.  At least that is my near term target.  If the price drops below the UT line then it will probably test the "H. Support" line.  If it goes through there we have no history to guide us so be careful.  The UT line should be used to set stops and protect profits.  If it gets below there you should be out of your long so it doesn't matter how low it goes.

 

 

• The next chart I want to show you is PANW.  This stock has been around since late 2012.  It had a nice increase in price for about the first month.  Then something happened and it started going down.  I wrote a blog post about this stock too.  You can find that post here : http://trendlineinvestor.blogspot.com/2013/12/helping-fellow-investor.html

 

 

 

Now that more time has gone by lets revisit the Daily chart of PANW

•  You never know how long trends will last.  But the closer to the beginning you are able to get in, the longer you will get to ride it. The longer you are able to ride it the more money you will likely make.  So here is a long downtrend line that just broke.  Time to get in?  You could say that. 

 

• Lets talk about the green uptrend line (UT) that has formed recently.  It is your guide on the way up.  If you can make a little money and you have some room you may have to use some finesse on that line.  Feel free to adjust a trend line (finesse) if you are making money.  But don't alter your trading or investing plan. 

 

• If I was going to get into PANW right here I would set a stop for half my investment at 50.  I would set a stop for the other half at 48.  Another option would be to set a stop for a third at 50, a third at 48, and the remaining third at the DT line.  Today that DT line is about 46.  Your plan must be decided by how much risk you are willing to take. 

 

• Why $50 and $48?  Since the gap up on 11/26 and excluding Friday's candle, the tops of most of the candles is about 50 and the bottoms of most of the candles is about 48.  Use a cross hair pointer on a daily chart and you too will see it.  Or just use a ruler, held horizontally, against your monitor.  You can be a cave man if you want to...

 

• I have to say I like the developments over the last week.  If things continue on this course, I expect the price to make its way into the shaded rectangle.  Notice it's the day 1 range.  The day one range is key for an IPO.  Let's see what happens from here.

 

 

 

 

 

The last chart I want to show you is KKD.  I am only showing you the last 6 months of activity.  This stock is tough to understand.  It does great between earnings but horrible upon the actual announcement.  Why???  I have no idea.  All I know is that there is a lot of money to be made if KKD responds to this earnings report as it did the last one. 

 

Let's take a look at the Daily chart of KKD.

•  Let's look at the last earnings report reaction.  There was no indication, on the chart, that things were going to go badly after earnings.  But if you were long this stock you had a rough week after earnings.  Notice that UT 3 begins on the 5th day after earnings.  From then on you saw higher lows.  The first two down days after earning gave goals of price levels to achieve.  Notice that once the price broke above the lowest horizontal green resistance line, it broke above the next one the following day.  From then on it was a new uptrend line to follow.  Let's jump to this most recent earning release, look at that red candle below the uptrend line just before earnings.  That was a sign!  You had been following a trend line. Maybe you even adjusted your trend line (finesse).  But that red candle, closing below the uptrend line, was your chance to exit stage left.  Trend lines work if you respect them.  Adjusting them can be VERY dangerous to your investing account balance.

 

• Will KKD do the same thing this time?  I couldn't tell you.  Why did it react that way last time?  I couldn't tell you.  All I know it that there is a good opportunity to play KKD with very low risk and a pretty clear history.  Now, will the past predict the future?

 

• KKD closed Friday at about $20.  The horizontal green line in the most recent shaded rectangle is the "low so far" after this earnings report.  The nice thing is that the low and the close are very close to each other.  This means not a lot of risk before finding out if your thesis is wrong.  This is called a "low risk trade". 

 

• Let's say you go long here at $20.  If that was a bad decision you only have $0.40 of downside before the chart tells you so.  The price needs to stay above $19.57 if it's going to go sideways or go higher. That's only a 2% risk.   You could limit your risk even more by realizing that Wednesday's candle was inside Tuesday's candle.  Thursday's candle was inside Wednesday's candle.  And Friday's candle was inside Thursday's candle.  This is cool but it has to change at some point.  The theory is that if an inside day is broken to the upside then price should go higher.  If broken to the downside then price should go lower. 

 

• So how do you begin an investment or trade in KKD?  You could go long when the price closes above the last inside day's high or go short when the price closes below the last inside day's low.  If you go long, your stop could be $19.50ish.  If you go short your stop could be $20.50ish.  That's the top of the 2nd & 3rd days candles.  Once it closes above there it will probably go higher.

 

• I will be watching this stock pretty closely.  As I said on the chart, "I love Krispy Kreme Donuts."  And although I would love for them to succeed, I am not going to invest or trade with only my taste buds.  Trend lines make much better guides when it comes to investing.