Professor’s Comments November 13, 2013

Posted by OMS  at November 13th, 2013

The Dow fell 31 points, closing at 15,751. Volume was light on the decline, coming in at only 90 percent of its 10 day average.  There were 102 new highs and 45 new lows.

It appears that the small triangle that I talked about yesterday is starting to take hold. If I’m right about the triangle, the Dow should trade down to the 15,500 level and the SPX close to 1740 before the rally resumes.  Because of this, I’m in no hurry to buy stocks.

The other reason I’m not in any hurry is because the breadth is against me.  For the past week, the A-D oscillator has been showing readings of -47, -135, -100, -85, and yestrday’s -120.   The Summation Index, Hi-Lo indicator, Up-Down oscillator and Advance Decline have also been heading down or negative.  In other words, despite what the Dow has been doing, most stocks on the NYSE are currently in down trends.

So with triangles forming and negative breadth indicators, all I’ve been doing is scalp trading, mostly from the shot side.

Yesterday was another good example of this with BIDU and BBBY.  I also took the long scalp in Marathon, MPC which was available right out of the gate. 

Several days ago, I highlighted several energy stocks that were developing strong Blades after TLB Patterns.  And yesterday. even though the Dow was down, we saw stacks like MPC, TSO, and China Pete, SNP, put in positive days. Like I always say, it’s the pattern that trumps everything at the end of the day, and currently thses energy stocks are in the process of developing very strong patterns.

BTW, if you have been following China Pete, notice how it has now quietly moved into an Uptrend with positive PT indicators?  So on a day where the Big Boys were quietly rolling out of last month’s ‘darlings’, they were looking for and rolling into energy stocks that were just starting Uptrends.

In my Classes at UNF, I talk a lot about how the institutions NEVER buy stocks in down trends, where the 50 below the 200.  But that quickly changes once the 50 starts to move above the 200.  In the next few days, you might want to pay attention to stocks like MPC and TSO and watch how by trading above their moving averages, they continually pull the 50 above the 200.  And IF this happens, you might want to watch and see how the institutions come quietly rolling in.

Also note that the P-volume on MCP turned positive yesterday. Hmmm?

But that’s not what I want to talk about today.  Today I want to hghlight the short side.  Remember, we still have that ‘relatively’ small change signal from the A-D oscillator on the board from 2-days ago.   Today is the second day of that signal.   Yesterday’s biggest intraday drop was 74 points, so there is a good chance that there could be more downside follow through today.

The stock I will be watching again today is BIDU.  Since the end of October, the stock dropped 27 points from its high of 169 to a low of 147.  In  other words, it has a “Stick’ of 27 points.  During the past 3 days, it has recovered somewhat back to yesterday’s high of 154.  In the process, it has formed a small Blade.  So If I take those 27 points and subtract them from yesterday’s high, I get a potential target of 127.  Right now the 200 is at 124, which is pretty close to that target.  Also, the interim low between the first two highs of the THT Pattern is at 132.  So IF BIDU does start to fall from it’s small HS Pattern, there is a good chance that it could trade down to the 130 level or below.

Right now, with BIDU trading at 150, all of the PT indicators are negative.  As long as the PT indicators on the Daily’s remain negative, I will be looking to short the stock on the 5s.

BTW, in case you haven’t been paying attention to what has been happening with my scalp trades for the past few days, you might want to recondider.  Yeah I know that most of you prefer longer term trades.  I understand that and because of this try to highlight things like MPC and SNP.  But when my algorithms are telling me not to expect much from the markets in terms of a trend, I can’t just sit there and wait for a trend to develop.  I need to get paid. 

Yesterday, with only a half position in MPC and BIDU, I had some pretty nice gains.  Same for the day before.  But the thing about scalping vs. longer term trading is that I’m not subjecting my money to any overnight risk.   I get in when the indicators give say so, and get out by the close.  I take what the market gives me and run.  If you are retired or have a chance to watch the markets during the day, you might want to learn how to scalp a few stocks. It pay$ the bills while you’re waiting for the next trend to develop.

Gold (the metal) recently broke the 1300 level and is currently trading near 1265.  The pattern suggest it will now trade down to 1150 or so.  If it does, that’s where I will start looking to accumulate gold stocks for the longer term.  Not now.

That’s what I’m doing.

h

I will be doing a PT Class tonight at UNF starting at 6:30.

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.