Archive for year: 2016

Markets rally, Markets drop, and markets reach turning points. We  discussed this in the premium side of the weekend report.  Lets look at a couple of the areas that we discussed Sunday March 20th.

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SPX – Whether the recent run of lower highs and lower lows started a bear market or not, I still expected a strong rally when we were at recent lows. It would draw in bulls, but what comes next after 6 weeks higher?

 

This rally has played out pretty much as expected, but I want to point out some interesting changes in character that could affect future trades / trading.

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 In the premium section of chartfreak, we’ve discussed  using Low risk entries to take a position in a stock,  but what makes them low risk? Lets take a look at a couple of examples.

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First, we have been trading sectors that looked to have bottomed recently after seriously selling off .  They give evidence of little downside and  greater upside.  As pointed out here in recent weeks, we’ve traded Miners since January, and Commodities and Oil since February.  Lets look at commodities for  example.

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CRB –  We caught commodities after the second bottom formed with divergence. The commodities chart still looks bullish after consolidating for a week heading into the Fed Meeting.  I believe that this can run higher now.

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We’ve been watching various Metals stocks pulling back or consolidating after running higher recently.  See stocks like X, CENX, AA, FCX, VALE, CLF, STLD, Etc .       Look at The sea of Green in various Commodities after the Fed Decision was released.

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Sidenote: While I believe that individual MINERS may have a little upside left, Cycle timing says that they should actually be maxing out soon. We will be prepared to buy the pullback at a low risk point. Short term traders have been given charts and instructions to trade individual Miners if they want.

 

 

 So lets look at my recent lessons on trading and then watching a stock like VALE pull back after a nice run higher.

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VALE – I bought Vale near the gap fill in the $2.50 area, after watching commodities bottom. On March 1st, a second lower risk entry point would be the break above the 50sma and trend line back test too.  Why low risk? Because you could place a stop a little  below those moving averages to limit risk if the trade goes against you.

 

I called for a run to the $4.80 – $5  area using this inverse H&S , and began to sell on the way up over $4.50.

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Then after the run fulfilled  (Topping candle), we had to look at a logical place that Vale may drop to.  These were two ideas, if vale had in fact topped at that $4.87 high & reversal.  We’d be looking at the $3.82 and $3.50 area for starters. 

 

Vale  almost hit the 50% retrace on March 10, and volume was lightening up. The 20sma was entering that $3.50 area.

March 14, selling was slowing up in that support area, and I mentioned that I started a position.  I started small, because this ‘could’ still drop to the 50sma,  but it was above support  ( Yellow) .

 

VALE –  Vale pulled right back to the $3.50 area as hoped for Tuesday and also on Fed Wednesday. It took off after the Fed Decision. I captured this chart at 3:30, but it closed even higher at $3.99.  So you can see why that  was a low risk entry.  That doesnt mean that it will go straight up from here though.

REMINDER CHART –  Notice how long the price lingered at the 50sma at the end of March?  This may or may not go right back up to the highs. It could also play out in a consolidation manner as shown,  time will tell.  The entry is low risk,  even  during possible price swings.

 

These are 2  more examples from Thursdays report showing  a lower risk area to enter a position.   A ‘stop’ is placed below a reasonable support area.

 

CLF –  I had been watching this one for re-entry too.  Look what it did during the FED MTG.

 

CENX –  That recent pull back to the 20sm offered a low risk entry with that reversal.

There were others pointed out too.

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The FED Decision seems to be favorable for a continued run in Commodity stocks and they’ve presented a low risk opportunity   (if you honor your stops).   Many Metals stocks have pulled back and consolidated going into the Fed Mtg.  Now they may be at a lower risk entry point.   OIL moved higher after the Fed Decision too.   We’ll see if some more of our Energy stocks that have been pulling back can also tack on some gains. If you didn’t buy the pullbacks in commodities yet, this may be your day.   Happy trading!

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~ALEX

 

Bonus Energy possibility  (Caution, they are higher risk due to debt and lower oil prices. Due diligence is due.

LGCY  3-16 …Yes, it is still acting correctly consolidating that blast higher.  I’d like to see a repeat of that orange box.