Pulling The Trigger

Many times we hear about buying the pullback, but when the pullback comes, it may be too intimidating to pull the trigger. Did you do any buying yesterday? Lets review the market action and also  discuss “Pulling The Trigger”.

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SPX – The Spx has turned back down at resistance and has been rejected at the 10sma too. Wednesday the markets reversed back up to the 10 sma. This time it may be able to push higher.

Let me just say that I expect a ‘bounce’, not a full recovery.  Deep down I think that it could even last long enough to encourage the BULLS to think that nothing has changed.  “FED FUNDS FOREVER!”   I’ll watch things step by step for now.  Some major changes might be taking place with commodities, as mentioned in prior reports.  Time will tell.

USD – I am still comparing it to the May run when I saw signs of weakness. We’ll see if there is any follow through for the $USD. Still looks weak to me.

WTIC – Yesterday I pointed out this pattern in the Oil chart.  Last Feb we had a 3 day run hugher, and a 1 day drop near the 20sma, followed by a reversal.

WTIC – Very similar. We then chopped around higher for a bit. I will add some Energy thoughts at the end of the report.

GOLD – This chart shows that in CYCLE timing, we could drop into a Daily Cycle low and still be fine. Gold has been dealing with the 10 SMA overhead and hasn’t closed above it.

GOLD – I wanted to point this view out too.  Look back at March,April, & May.  It shows how grueling this could be for traders if it plays out anything like golds cycle in March.  See that RED BOX of sideways movement?  What if we just did that again?  UGH 

GDX – GDX has been struggling. Today we had a reversal candle and selling was light. We’ll see if we can get that push higher above the 10sma that we need for confidence in a higher 2nd run higher.  We need a strong volume push higher.

 So before we close, the Theme of this report was  “Pulling The Trigger”.  How many times we do we see stocks just take off and run higher and we say , “I wish I owned that!”  Going one step further, we say , ” I hope we get a pullback! I will buy that pullback!”  Then when it pulls back,  we might say , ” I dont know if I should pull the trigger.  Is this the start of a sell off? How do I know that this wont roll over?”   Has that ever happened? That is why we look for a low risk entry and place our stop underneath.  The best entry is not when its running higher, it is when it falls to probable support.  Trading is about ‘probabilities’, not guarantees.  The guarantee is your stop.  It guarantees that your losses will be limited, while your gains could be impressive (based on the first run higher). 

Lets review a few Energy stocks that you may have bought Wednesday,  or that you may be able to buy Thursday if we linger at these price levels.

This was the fast moving EOX Sept 1.  I wrote that one should look for the pullback to support, the 50sma.

EOX-  A pullback & reversal happened today. It dropped right to the 50sma & reversed. That may be it or it could still move to the 10sma shown. 

LGCY – I showed this and the 10sma was at $5.57.  That would be the buy.

LGCY – The 10 sma was tagged and price reversed at $5.55, moving almost 40 cents higher.   Did anyone pull the trigger?

FCX – Remember this one posted here? Please excuse the typo.

FCX Wednesday-  This could still be bought tomorrow, and the stop goes under the 10sma  ( I recommend loosely, determine what your loss tolerance would be , based on position size). This could run to the 50sma minimum. 

REXX – Reversed on double support.

HAS OIL PUT IN THE FINAL LOWS?  We dont know for sure yet, but I wanted to show 3 charts of possibilities that this recent rally could provide. 

GDP – I pointed this out when I bought it in the $0.70’s.  It already ran up 100% off of the lows.

GDP – GDP dropped and is sitting on or bouncing off of support at the moving averages.  A stop right below $0.70 would fit my needs.  A run to $1.50 would be a double from todays lows. 

Here is where I get a little silly, but you never know.  If OIL has bottomed and regains price above $70 or $80,  could these Energy beat downs get back to former highs? Some may,  so lets draw a chart of GDP.  Lets say that we just bought 2000 shares at $0.75 today & held.   I will draw the chart projecting price 1 year from now, based on where it was 1 year ago. 2000 shares at $0.75 is $1500.  Next summer it would be $60,000.   I AM NOT SAYING THAT THIS WILL HAPPEN, but we cant dismiss the possibility that these Energy stocks could recover over time if Oil has put in its long term lows.

SO we had the expected pullback. I pointed out that OIL would likely pause and draw back at the 50sma, and Energy stocks would likely follow.  Many ran up strongly and you have to wait for the pullback to buy.  Tuesday and Wednesday they were pulling back to support. Did you pull the trigger?  You may get another chance Thursday if  Oil is still bouncing around.  As they say,  “You gotta be in it to win it”.  Just be sure that stops are in place below support.  Best wishes and happy trading!

~ALEX

P.S.  Some like nice tight stops to cut losses fast. They hate losses!  Other like looser stops below support,  they hate getting stopped out too quickly, only to see price reverse & run higher.   I think you know better than me where your stop should be, based on your risk appetite.  How much can you afford to lose without losing sleep? I like somewhat looser stops under support, since price can fluctuate.   You also may want to take position size into consideration.