Melf's Workshop

AMZN: Earnings

2012-02-01T08:56:00.003-05:00

After successfully retesting the Falling Wedge breakout on January 13, AMZN broke out above the Ascending Triangle (in blue) to 195.94, came back and successfully retested the top of the Ascending Triangle, rallied to 196.50 and was parked just below there at the release of earnings.

As we know, the release of earnings always is a wild card. Anything can happen. In my view, the earnings don't matter; it's the REACTION to earnings that matters.

AMZN currently is called gap down, in the $174's, so it's obvious that the REACTION to the release of earnings is very poor. The $183's...$184's were Key Support since that was the Ascending Triangle breakout and the successful retest thereof. AMZN is getting whacked, well below that. The Gap Down also completes a Double Top, at 195.96 and 196.50, which puts a target of 170.46 IN PLAY, so AMZN almost will be there at the open.

Double Top:

195.94 - I use the more conservative of the two highs. Using 196.50 is fine.
183.20 - The pivot of the Double Top, or "M" Top

195.94 - 183.20 = 12.74 points of downside from the breakdown

183.20 - 12.74 = Target 170.46 IN PLAY

The $183's-$184's now are horizontal resistance again.

AKS - Morgan Downgrade

2012-01-31T07:38:00.003-05:00

Analysts' calls on stocks can be confusing and can be very right, or very wrong. Earlier in the month Credit Suisse put a price target of $12 on AKS to which Cramer gave a rather grim, ominous response, referencing Bethlehem Steel (comment on chart). Cramer could end up being very right in the end, but the market's RESPONSE to the Credit Suisse call was to break the stock out of a five month base to the upside, to 9.96 (Purple #1 of the Bull Flag), so for the time being, Cramer's remark wasn't enough to reverse the breakout.

Yesterday, Morgan Stanley downgraded AKS from overweight to equal weight, with a price target of $14. That's a bit confusing because the word "downgrade" gets the headline, but Morgan liked it on June 9, 2011 when it was trading in the $14's (it fell to $5.51 in October, 2011), and now they're "downgrading" it to equal weight, but they have a target of $14, which was that price of the stock when they liked it last summer. Bottom line: Morgan's downgrade seems much ado about nothing.

As long as AKS holds the FOUR upside breakouts, it looks fine. If AKS should CLOSE below the big Ascending Triangle trendline (Black #1-#3), which currently is at about 9.18, that would be cause for concern, and if AKS should take out the 8.76 low of the Purple Bull Flag, that would be a bigger concern. That 8.76 low was an initial 5% drop in the stock in response to the release of earnings, but AKS rebounded smartly and rallied to a new recovery high of 10.33 two sessions later. That 8.76 low "shouldn't" get taken down, at least not before the targets in the $10's get MADE, at a minimum.

KEY SUPPORT:

9.18 - The top of the Black Ascending Triangle (Black trendline #1-#3), which has a downward slope of -0.00312, so we "move the chains" downward a tad each session.

8.76 - The release of earnings low, which also was the Bull Flag (in purple) low.

As the chart stands, it still is broken out to the upside and still is intermediate-term bullish.

ARIA: Reversals And Confirmations

2012-01-30T06:39:00.003-05:00

ARIA put in a Bearish Engulfing pattern on Thursday at the top of a "possible" Bear Flag, so "possibly" a sign of some kind of top. In a situation like this, some players will go ahead and short it with a stop of either a PRINT above the high, or a CLOSE above the high. Either of those is fine for a short, if anyone wants to do it. It's a low risk entry unless the stock has a big gap up, but that risk exists when shorting ANY stock.

Some players will wait for further confirmation, like a break of the putative Bear Flag, or even a break of the Bear Flag, then a failed retest for additional confirmation that the chances are very good that some kind of top is in, an example of which we'll look at in a moment.

The December 2 candle pattern at Blue #2 in the Channel was a Bearish Engulfing pattern, similar to the one on Thursday, January 26. That one turned out to be a short-term top. The high was 12.50 and the stock sold off to 10.41.

Now look at the September 21 top, at 10.71. That one had several confirmations of a short-term top:

1. The stock had broken out of an Ascending Triangle to the upside, but September 21 was a Reversal candlestick. It made a new high for the move, then closed back inside the pattern AND closed below the prior session's low, closing at 9.97. That's nice initial confirmation. For a short trade, use a PRINT or a CLOSE (trader's choice) above the 10.71 high as the stop loss.

2. ARIA bounced off the bottom of the pattern and rallied back to the top of the Ascending Triangle and, although The Bulls managed to poke their heads through it by a tad, The Bears did their job and knocked it out of there by the close, still inside the pattern (red arrow).

3. Two sessions later, The Bears broke the bottom of the Ascending Triangle AND took out the recent 9.27 low (green arrow). More confirmations.

4. The next session, The Bears only allowed The Bulls to get to 9.30, a hair above the 9.27 horizontal resistance, then took it down. That was confirmation of a failed retest of former support, which now was resistance as it "should be."

The final low for that move off the 10.71 high was 7.72, just about half way between the last two lowa of the Ascending Triangle (8.13 and 7.55). That's about what one would expect on a broken pattern like that. Some kind of retest of the low, but a stock doesn't always go all-ll the way back.

The next session was a Bullish Key Reversal: a new low for the move, then a close higher than the prior session. That two-day reversal pattern suggested that Bears had jolly well had it as far as taking the stock down. Bears who didn't cover their shorts on that reversal got squeezed to the upside. Badly.

In March of last year, ARIA had enjoyed a big percentage gain and had put in an ominous looking Gravestone Doji Star Hangman AND a possible Double Top at 7.32... 7.30. The Bears felt that it was a reversal candle and that it was a great shorting opportunity, and sometimes they are...

...but, it wasn't. The shorts got squeezed some more, into ANOTHER Gravestone Doji Hangman. That gave The Bears hope that maybe their misery finally was over.

You know what's coming, don't you? LOL.

UGH. That wasn't a top either. The top didn't come in until the stubborn Bears nearly were squeezed half to death, and that has much to do with the nature of parabolic rallies. The shorts won't let it alone and, at least in part, margin calls force them to capitualte and "Buy To Cover" forcing the stock higher and higher until some of them are knocked out of the game entirely.

"Know when to fold 'em!"

Shorting a "possible" reversal candle, or "possible" reversal pattern (like a two-day Bearish Engulfing pattern) is perfectly alright and sometimes we get rewarded for doing it, but if the high gets taken out, as in these examples, admit as quickly as possible that our thesis for shorting is blown, take the small hit, and don't allow a trade to turn into a horrible disaster like this. DOUBLE UGH.

As is usually the case with parabolic rallies...

... they don't end well. ARIA finally topped out and had a Parabolic Return to the origin of the rally, and slightly below it, which often is what occurs. There's no base-building on the way up and the plunge often is equally dramatic on the downside. Greedy Bulls who don't take profits watch their stellar gains evaporate. We looked last week at a much more stunning example of that in AK Steel (AKS), if anyone wants to scroll back and review it. The stock had a Parabolic Return from $73 to $5.

In Friday's session, The ARIA Bulls came roaring back and took out Thursday's 15.15 high of the Bearish Engulfing pattern, but closed at 14.96, so Bears using a PRINT above Thursday's high were stopped out of their shorts. Bears using a CLOSE above Thursday's 15.15 high still are okay in their short position, but Friday's action certainly wasn't what they wanted to see.

BIDU: Heading Into Earnings

2012-01-28T08:15:00.007-05:00

BIDU's Friday morning Gap Up opening and strong move higher looked like "The Tell," suggesting that the mid-week take down of the bullish Inverse H&S pattern was a Bear Trap, as I suspected, and that BIDU finally was going to move higher off the Channel breakout that we've been looking at in the daily chart.

This Symmetrical Triangle looked lovely. Both the top and bottom had been validated as resistance and support (the white arrows) and, forming after the big move up off the opening, it "should be" a bullish continuation pattern that resolves to the upside.

Given how sloppy The BIDU Bulls have been since the Channel breakout in the daily chart, and given the fact that I've been "paying up" for BIDU most of the week, I wanted the perfomance that I was paying for, and no nonsense. I wanted to see this pattern breakout and GET GOING, dang it!

I bought 2,000 BIDU at 126.00.

UGH. She broke out...then was back in my face for "Ye Olde Knuckle-biter," back below the breakout, just like she's been doing in the daily chart since the Channel breakout. I had had enough of that nonsense.

I had "paid up" for the stock and didn't have any room to find out if it was a fakeout, or not, so I threw it in for a small gain, at 126.04. I thought that I had a good read on "The Tell," but I wasn't willing to pay to find out.

Sloppy...sloppy...sloppy.

Arrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrgh!!!

You have to have a sense of humor in this game. As good as my read of "The Tell" was, Ms. Market got me gooood on that one! I would have been fine if I hadn't fine-tuned it with the 1-Minute chart, but this stock moves very quickly and I didn't want to get caught in a quick downdraft. Oh, well...

As much as I would have liked to have had it, I'm not going to chew myself out for missing it. I've sold plenty of times on trendline violations and on "Ye Olde Knuckle-biter" and have been rewarded for doing it, so that's the breaks. I will say, though...

Curses! Curses! CURSES!!!

Here's "THE TELL:"

1. The Bullish Inverse H&S broke out to the upside, but it was a Fakeout/Breakout. Bulls who bought it were disappointed. Bears who bought to cover their shorts were disappointed. The proverbial "everyone" got busted.

2. The low of The Head got taken down at the first red arrow. That's usually bearish, but it was a Fakeout/Breakdown. Bulls who sold the breakdown and Bears who shorted the breakdown (both very reasonable plays) got busted again because the takeout low got successfully retested (second red arrow), and the stock went higher.

3. After The Bulls broke out of the Ascending Triangle at 123.50 on Wednesday and the target of 125.00 got MADE (see that chart back on Wednesday), BIDU opened down on Thursday and went through 123.50 like a knife through butter. Look where it stopped going down: 122.83 (horizontal yellow line). That was a successful retest of Wednesday morning's 122.84 Gap Up high (yellow down arrow), then BIDU raced higher, to 127.21. That looked like the "real move," enticing Bulls to buy again and Bears to buy to cover again, but it wasn't, and they both were disppointed again as BIDU moved down ... down ... down on Thursday afternoon.

When BIDU opened gapped up on Friday and raced higher, that looked like "THE TELL," that the "real move" was about to unfold, which is why I got long at 126.00 (orange arrow), but I got disappointed along with "everyone" else after I threw it in, questioning my read, then later saw what unfolded. Wow!

The "real move" was a much larger Bullish Inverse H&S breakout, packing plenty of power!

It turns out that the initial Bullish Inverse H&S (in yellow) was a "fractal" (repeating pattern) that formed what became the Left Shoulder of the much larger Inverse H&S (in white) that was to come.

Great example of how charts can "morph," or change, into something else as they unfold. It's also a great example of how Ms. Market will disappoint the greatest number of people possible with all of those fakeouts, prior to the "real move" out of the BIG Bullish Inverse H&S.

So-o, after the sloppy breakout of the Channel, back and forth above and below the breakout, BIDU powered higher into the release of earnings, which is slated for Monday, according to Yahoo Finance (check me on that). That's always a "wild card." As nice as the chart looks, the bullishness always can be trumped by a poor response to earnings.

On a pullback, The Bulls "should" defend that neckline of the BIG Bullish Inverse H&S pattern in the last chart.

Gain: a paltry $75, but I earned every penny of it trying to figger this one out! LOL.

FCX: Long-Legged Doji Star Hangman

2012-01-27T06:42:00.008-05:00

From January 1st, on FCX:

"FCX finished 2011 breaking out of a Channel, successfully retesting the top of it on December 28 and 29 and moving a tad higher into the final gong for the year...

Key Resistance:

Level 1 - 41.20 - 41.45 (the August lows, prior to the second Crash in the stock)

Level 2 - 46.06 - 46.20 (the lows of the early 2011 BIG Falling Wedge)"

FCX has had a smart rally off the validation of support that we discussed back at the end of 2011. The stock has made it to, and through, both levels of Key Resistance that we examined.

Yesterday's session is a Long-Legged Doji Star Hangman the 48.96 high of which got close to the Symmetrical Triangle target of 49.28 that went IN PLAY off the Symmetrical Triangle breakout in early January. That candlestick "can be" a sign of a reversal and some pullback in a stock, especially after such a nice rally, and especially now that FCX is into the 2011 Falling Wedge resistance. At yesterday's high, FCX was up 70% of the early October, 2011 3-Close Bullish Key Reversal. Excellent rally!

Notice the two Gaps Up in October. Those came shortly after The Smackdown from the 2011 Falling Wedge breakdown and both got filled rather quickly, in November. Lots of willing sellers on that first rally attempt into resistance.

Notice also that the December 30 and January 10 Gaps Up have not been filled. In the autumn, we discussed the facts that (1) after a big Smackdown like FCX had, it would need time for some base-building, and (2) the stock likely would have difficulty making upside progress due to year-end tax loss selling. Once the tax loss selling was over with and a decent base had formed (the Symmetrical Triangle), FCX had a much better chance of a rally, as we've witnessed in January.

Bigger picture, FCX has rallied into the thick of the 2011 Falling Wedge resistance. Interesting that it nearly ran the gamut of the narrowing top and bottom of that wedge in yesterday's trading.

Viewed in the context of that big overhang of sellers, yesterday's Doji Star candle makes a lot of sense. Bulls who have been trapped inside the Falling Wedge and who sat on fairly sizeable losses during The Smackdown were saying things like, "Omigawd, I finally have a chance to get outta this thing at a break even. SELL!!!"

Additionally,some of the Bulls who have a nice gain from the recent rally began to take profits when they saw yesterday's rally fading.

Bullish news could cause the stock to pound its way right through all of that 2011 resistance to the left of the chart, but strictly based on the technicals (the overhang of sellers), that isn't likely. After a 70% run-up into this kind of substantial resistance, a selloff or some backing and filling would be more likely, and much healthier, technically.

X, AKS And BIDU

2012-01-26T07:22:00.004-05:00

The December 19 validation of support at the bottom of the Rising Wedge earned US Steel (X) a rally back to the top of it yesterday, and in the process, the October 27 Ascending Triangle target of 30.71 got MADE, within five cents. The session high was 30.66.

From yesterday morning on AKS:

"The early selloff accomplished two things: (1) it filled most of the gap left in the chart from January 9, and (2) it estabished White Data #4 for yet another possible bullish pattern, a Bull Flag (the pattern in white), which is the pattern in purple in the next (daily) chart."

Yesterday, on the strength of the three pattern breakouts that preceded it, AKS had a FOURTH upside technical breakout to a recovery high of 10.12, so the bullishness of the nearly six month basing period and recent breakouts is being borne out.

The Bull Flag (pattern in purple) broke out yesterday crossing 9.33, so the upside targets are: a retest of the 9.96 pattern high (that got MADE yesterday), and 10.53, which is the measured move off the breakout.

9.96 - pattern high
8.76 - the release of earnings Fakeout/Bear Trap low

9.96 - 8.76 = 1.20 points on the breakout above 9.33, which is where purple trendline #1-#3 was yesterday when the stock broke out.

9.33 (breakout point) + 1.20 points = Target: 10.53 IN PLAY

That target just is what this particular pattern suggests. The pattern doesn't "know" what the chart looks like, so it must viewed in context of the entire chart. We can see that there is no nearby overhead resistance, so the stock has a bit of open field running between here and the target(s). Shareholders who held the stock during the autumn Smackdown and who didn't throw in their shares during year-end tax loss selling have a very good chance of recovering some losses and aren't as likely to sell as they were prior to the upside breakouts.

From yesterday morning on BIDU:

"What "could be" bullish in this chart, potentially, is that the takeout of the Inverse H&S pattern is a "Fakeout/Breakdown," and that The Bulls will reverse it and race back to that critical breakdown at 123.50, which coincidentally also is where the top of the Falling Wedge came in yesterday."

Yesterday's action in BIDU is exactly the type of thing that I was looking for when I bought it on Tuesday at 122.03 and ended up throwing it in for $1,000 loss.

Curses! Curses! CURSES!!!

The Bulls threw the long bomb into resistance on yesterday's opening play, but that usually doesn't work, and it didn't. The Bulls got sent back to retest the possible "Fakeout/Breakdown" low, and they held their ground. I liked that.

The successful retest set up the stampede for 123.50 resistance that I was looking for on Tuesday. The Bulls then took out the opening high and ran directly to 123.50 exactly, which proved daunting on that first attempt.

After a sizeable pullback to the Exponential Moving Averages (EMAs), which provided support, The Bulls were baaa-ack, this time to 123.49.

Another, more shallow, pullback and The Bulls were baaa-ack again, to 123.49. That's the hallmark of an Ascending Triangle: Flat top; increasingly shallow pullbacks.

Geez, I hated "paying up" for the stock at 123.40 when I basically read it right when I bought if for 122.03 on Tuesday and took $1,000 loss, but let's try NOT to whine about "coulda...shoulda...woulda." There was enough evidence here that Tuesday's breakdown was a "Fakeout/Breakdown," so I "paid up" and bought 2,000 BIDU at 123.40. The Bulls had recovered to 123.50 and were building an Ascending Triangle pattern from which to launch a rally.

Game on!

There's the Ascending Triangle breakout, which put an upside target of 125.00 IN PLAY.

123.50 - high of the pattern
122.00 - low of the pattern

123.50 - 122.00 = 1.50 points of upside on a breakout

123.50 + 1.50 = Target: 125.00 IN PLAY

Note: Look at that Bull/Bear struggle right at 123.50 (horizontal red line) at the top of the Ascending Triangle, prior to the breakout. Some serious head banging, eh?!

Given how sloppy The BIDU Bulls have been, and given the VERY nearby resistance (yellow circle), I didn't stay for the 125.00 target. I sold my 2,000 shares for 124.45.

The 125.00 target ended up getting MADE. BIDU closed right near that at 125.05 after The Bulls scored a session high of 125.52.

Gain: $2,100

AKS: Earnings; BIDU: Break Below 123.50

2012-01-25T05:37:00.006-05:00

The market's initial response to AKS's earnings was a panicky selloff of nearly 5% in the first few minutes of trading, back below the upside technical breakouts in the daily chart (below), but that didn't last long. The stock climbed off the lows and closed back above the breakouts and near the high of the session.

Unless the market changes its mind and sends AKS back below the breakouts on a closing basis, AKS has survived the release of earnings.

The early selloff accomplished two things: (1) it filled most of the gap left in the chart from January 9, and (2) it estabished White Data #4 for yet another possible bullish pattern, a Bull Flag (the pattern in white), which is the pattern in purple in the next chart.

As the daily chart stands, the upside targets still are IN PLAY as long as the stock continues to CLOSE above the breakouts.

From yesterday, on BIDU:

"The yellow line, by the way, is the Right Shoulder of the Inverse H&S pattern in the last chart. That 123.50 low "shouldn't" get taken down. The late session low was 123.50 exactly."

The BIDU Bulls have been as sloppy as this chart looks, and it has cost them.

When the low of a Right Shoulder of a Bullish Inverse H&S gets taken down (that's the top horizontal red line), that's a second "shot across the bow" from The Bears because, as i said yesterday, that "shouldn't" happen (the first shot across the bow was The Bears taking the stock back below the neckline).

The takeout of the Right Shoulder low suggests a test of next support, which was the lows of the Symmetical Triangle, in green (the middle horizontal red line), and if that breaks, a test of the low of The Head (the bottom red line). The Bears scored on all three of those support levels, taking them all out to the downside. UGH.

When there's absolutely nothing bullish to recommend a chart, I like to try to remain objective and to look for something that is bullish. What "could be" bullish in this chart, potentially, is that the takeout of the Inverse H&S pattern is a "Fakeout/Breakdown," and that The Bulls will reverse it and race back to that critical breakdown at 123.50, which coincidentally also is where the top of the Falling Wedge came in yesterday.

I wanted some evidence, though, that The Bulls at least had a chance.

Well-ll, the stock didn't tank after the takeout of The Head, and The Bulls broke out of this little Bull Flag. Hmmm-mm...

There was plenty of time still on the clock. The Bulls had a chance here if they could successfully defend the top of this Bull Flag on a pullback, then start climbing back to the 123.50 breakdown. I bought 2,000 BIDU at 122.03 on the pullback. The Bulls either had game, or they didn't, and I'd soon find out.

Curses! Curses! CURSES!!! Weak-kneed, lily-livered Bulls! LOL.

The Bull Flag breakout was an obvious failure, so I threw it in on the little bounce back to the top of the flag (white arrow), in the 121.50's.

That's a shame. The session high was 123.40, below the 123.50 low of the Right Shoulder in the intraday chart, and right at the 123.389 top of the Channel in this daily chart. UGH. The Bulls have dug themselves a bit of a hole and need to get back above there.

Loss: $1,000

BIDU: Back Above The Falling Wedge

2012-01-24T08:00:00.009-05:00

From the weekend on BIDU:

"The first order of business for The Bulls on Monday, January 23, is to: (1) get back above 123.02-123.05 resistance, (2)then the top of the Channel, which will come in at 123.808 and, (3) then knock out Friday's high of 124.54, which would trigger a repeat Buy Signal from the 13/21RSIs and the 21/34RSIs."

Bang! The Bulls came out of the gate at the opening gong and scored all three objectives in the first minute of trading.

I was wanting more of a pullback to get long, but when The Bulls took it higher, I placed an order for 2,000 shares at 124.35.

No luck with that. BIDU rallied almost to 126.00, so I cancelled the order. I accepted the disappointment with my usual dignity and aplomb.

Curses! Curses! CURSES!!!

Back to the drawing board. Sigh...

At this juncture in the session, The Bulls were looking like they wanted to make another bid for the highs. The lows here were right at the 124.54 "Buy Pivot" which had been triggered by the RSIs and, basis the 5-minute chart that we'll look at in a minute, there was an Inverse H&S forming. I bought 2,000 BIDU for 125.06.

Little upside breakout here, to the neckline of the Inverse H&S.

An attempt at a breakout, but then a pullback to retest the top of the little Ascending Triangle. That's fine, but GIT GOING. I had "paid up" for the stock and I wanted results. I wasn't much for "Ye Olde Knuckle-biter."

Oh, geez. A nice breakout with plenty of open field running available, but The Bulls buckled and allowed The Bears to take the stock back below the neckline for "Ye Olde Knuckle-biter." UGH.

Another breakout above the neckline...then ANOTHER "Ye Olde Knuckle-biter." I had a paper gain of well over $3,000 on the breakout. "Maybe" the little Falling Wedge (in white) was going to breakout to the upside, but this was so sloppy, "maybe" the danged thing was going to come back in my face. I had had enough of weak-kneed Bulls and decided to TAKE THE MONEY. Sold in the 125.60's.

Sloppy play sometimes turns out alright, but this H&S Top that The Bears put in is good example of what can happen if/when upside breakouts get sloppy. At the white arrow, The Bulls failed to get through the broken neckline, validating the H&S Top breakdown, and down she went.

The yellow line, by the way, is the Right Shoulder of the Inverse H&S pattern in the last chart. That 123.50 low "shouldn't" get taken down. The late session low was 123.50 exactly.

Despite the sloppiness from The Bulls, technically, they stuck the close slightly above the upper trendline of the Falling Wedge, but they need to do something better than that.

Gain: $1,100

AKS: Double Nested Ascending Triangle

2012-01-23T07:52:00.005-05:00

Along with US Steel (X) and other sector-related stocks, AKS has been trying to recover, not only from its 2011 Smackdown, but from a multi-year bludgeoning.

After a stock crashes, it normally needs time to build a base and to recover. Bear Market rallies can be vicious and can result in big percentage gains, but if there isn't any base-building along the way, they usually fail and get called back for some kind of retest of the crash low, which sometimes gets taken out to the downside.

AKS has done some decent base-building during the past several months. On December 15, the stock established Data Point #4 for TWO patterns: (1) the small Symmetrical Triangle (in blue) and, (2) the large Ascending Triangle (in black), at 7.30. That's now KEY SUPPORT.

The AKS Bulls got 2012 off to a nice start with a breakout of the Symmetrical Triangle on a Breakaway Gap, putting an upside target of 10.75 IN PLAY. There's a gap left in the chart from 8.23. Gaps always are bothersome because they leave us wondering if they're going to get filled, or not. "Common Gaps" tend to get filled rather quickly. "Breakaway Gaps" out of a pattern tend not to get filled as quickly. They can take weeks or months to get filled, and sometimes they don't get filled for years, if at all.

After the breakout, AKS temporized with highs in the high 8.80's and low 8.90's (horizontal green line), establishing a small Ascending Triangle, just below the top of the larger Ascending Triangle (in black). On January 10, the stock broke out above it, putting a target of 10.77 IN PLAY, very near the 10.75 target IN PLAY from the Symmetrical Triangle breakout (pattern in blue).

On January 11, AKS broke out the big Double Nested Ascending Triangle on an upgrade to $12 out of Credit Suisse. The "Double Nested" is my own terminology, meaning that there are two smaller patterns within the larget Ascending Triangle that have broken out.

Credit Suisse's price target of $12 and timeliness of the call, right after AKS broke out of TWO patterns, has me wondering if they're leaning more toward the technicals than the fundamentals because we can see that horizontal resistance is "right there," from 11.34-11.96, and the Ascending Triangle target of roughly 13.20 gives them some room. They stepped up to the plate with the call before the release of earnings, too.

Cramer didn't like the call out of Credit Suisse, which might have had something to do with the more tempered response from the market in the days following the breakout. Who knows, huh?! To date, AKS has pulled back to the a low of 8.93, just above the top of the smaller Ascending Triangle (in green), and has held up, so far. The targets are IN PLAY as long as the stock trades above the breakouts. Back below them, it's "Ye Olde Knuckle-biter" for the AKS Bulls and the targets go ON HOLD unless/until the stock gets back above the breakouts.

Bigger picture, we can see that the $12 target from Credit Suisse is a bit of a "gimme" if the AKS Bulls have anything at all. The technicals have shaped up nicely and are good to go if AKS can announce decent earnings which, according to Yahoo Finance, will be released before the market opens tomorrow, January 24. Check me on that, if you're interested.

Bigger, BIGGER picture...we've looked in the past at many examples of "Ye Olde Parabolic Rally...Ye Olde Parabolic Return," but this is one of the more stunning of them. They even took out the low of the Cup & Handle before AKS bottomed, erasing ALL of the gains for anyone who bought inside that pattern, or at any time thereafter. Have mercy!

Market Lesson: "Know when to fold 'em" (Use some kind of stop loss exit strategy, before you're bled to death).

US Steel (X) - After The Smackdown

2012-01-22T15:51:00.006-05:00

I often have been asked why I don't consider stock fundamentals and why I only look at the charts. The answer is very simple: analysts' opinions of value can be very, very wrong, and company CEO's are paid to cheerlead the stock and to keep the waters calm. I only am interested in the markets REACTION to the fundamentals.

Witness: Last April, at the release of earnings, the CEO of US Steel made positive comments about Q2 being positive. Technically, though, the chart had just broken below a sizeable H&S top. Uh-oh.

In June and July, 2011, Deutsche Bank, Morgan Stanley and S&P Equity all put out buys on US Steel, Deutsche saying that it was cheap relative to its peers. US Steel fell another 10%, the H&S Top target of 40.39 got MADE, then...

...Yeesh. US Steel fell another 50% from that point, to a low of 18.85!

"Cheap can get a lot cheaper."

The US Steel Bulls tried to stand their ground by forming a Nested Symmetrical Triangle in the late summer of 2011, but it was no good. Instead of breaking it out to the upside, The Bears busted it and the stock tanked to its 18.85 low. UGH.

In my early days of writing this blog, I said many times, "We can't expect exactitude from technical analysis, but it can be astonishing how nearly exact it can be."

Witness: The December 19, 2011 retest of the bottom of the recent Rising Wedge (Black Trendline #1-#3). The successful retest was within less than one penny, and US Steel is up over 10% from there, in one month's time. That beats CD rates by a mile, doesn't it?

We never know if a trendline is significant or not until a breakout/breakdown target gets MADE, or reasonably approximated, or until Ms. Market validates our trendline with a "hit," like she did on December 19. Always excluding a horrible gap down which can happen to any stock, particularly at earnings, buying at a validation of support is a very low-risk entry. If it gets taken out, sell for a small loss. The potential gain far outweighs the risk involved (i.e, it's a very good risk/reward).

US Steel is slated to report earnings at the end of the month. That's always a "wild card."

BIDU: Ye Olde Knuckle-biter

2012-01-21T04:19:00.004-05:00

From yesterday morning:

"If BIDU had bounced off the 123.00 low and CLOSED back above the top trendline of the Channel, it would have looked alright, but the CLOSE back inside of it presented The Bulls with the dreaded "Ye Olde Knuckle-biter" going home."

I didn't have any appetite yesterday morning for joining the BIDU Bulls in a knuckle chew on the opening Smackdown, in sympathy with GOOG's earnings miss, but I did begin to lick my chops when I saw:

1. The rally back to Unchanged
2. The successful retest of the opening low
3. The move to a new high of 124.54, which also was back above the 124.227 top trendline of the Channel in the daily chart, and
4. This breakout of a Falling Wedge

Although The Bulls still were involved in "Ye Olde Knuckle-biter," below 124.227, I liked that they were showing this kind of gumption here in the early going. I bought 2,000 BIDU at 123.24 and promptly stuck my knuckles in my mouth to show that I was sincere about aupporting The Bulls in their plight ;)

After I entered long (white arrow), The BIDU Bulls formed two Right Shoulders for a DOUBLE Bullish Inverse H&S pattern. Quite lovely. As we know, these multiple patterns/nested patterns can pack some punch on a breakout, which in this case, would put the early session high of 124.54 and a bit beyond that IN PLAY.

The Bulls broke out of the DOUBLE Inverse H&S and ran to 124.00, which was very nice.

What potentially WASN'T nice is that the two pullbacks from 124.00ish were rather deep, and a possible Bear Flag had emerged (pattern in white). Especially since The Bulls still were below the 124.227 Channel basis the daily chart, I didn't want to see any weak-kneed Bulls here, allowing The Bears to break this flag to the downside. That would suggest at least a retest of the DOUBLE Inverse H&S neckline, in which case I wasn't at all interested. I wanted to see some of those upside screamer bars showing up, like on the early rally to the the early high.

I decided to sell if the 123.60 low at White Data Point #4 got taken down.

UGH. The Bulls allowed The Bears to morph the Bear Flag into a H&S Top, then break it to the downside. No-o, thank you, and lemme outta here! I threw in my 2,000 shares at 123.58.

It's a good job of it that I did...YEESH. The Bears scored on every pattern that The Bulls tried to establish after The Bear Flag/H&S Top breakdown (white arrow), until The Bulls finally were able to break out of an Ascending Triangle (in purple), which was very sloppy. After the upside breakout, the Bears were able to move the stock back below the flat top of the pattern, willy nilly.

The horizontal red line (123.05) is the low of the Right Shoulder of the DOUBLE Inverse H&S. That support "shouldn't have" gotten taken out to the downside. It became resistance going into the final gong.

As bad as the afternoon was for The Bulls, they've still got a chance of coming out of "Ye Olde Knuckle-biter" alright.

While we never like to see a close back below a breakout (or above a breakdown, if it's bearish), it can end up being a bit of a Grande Deception that catches players off guard.

Look at the false upside breakout of the Symmetrical Triangle back on November 15. The Channel (in black) had broken down, but the Bulls formed and broke out of the Symmetrical Triangle (in blue) and it "looked like" they were headed for at least a retest of the recent high. Nope. The Bears reversed the breakout, back inside the Symmetrical Triangle, then...Whack!

In the current time-frame, although Friday's session is the second CLOSE of "Ye Olde Knuckle-biter, back below The Channel breakout, the candle is a "possible" Bullish Doji Star Hammer which also is sitting right at the bottom of Kumo (Cloud) support.

The first order of business for The Bulls on Monday, January 23, is to: (1) get back above 123.02-123.05 resistance, (2)then the top of the Channel, which will come in at 123.808 and, (3) then knock out Friday's high of 124.54, which would trigger a repeat Buy Signal from the 13/21RSIs and the 21/34RSIs.

Friday's close puts both the 13/21RSI and the 21/34RSI pairings at Bullish Synchronicity (readings that are in close proximity). I use a penny above that session high as the "buy signal" (the stock also must close higher), but this is only one indicator and always remember that indicators only "indicate." These indicators only are indicating that they're good to go, like we saw last week in AMZN when we got a repeat buy signal in the RSIs. AMZN took off to the upside after it knocked out 184.65-184.80 resistance. It's up to the analyst to have a peep at the chart and decide whether or not the chart looks good enough to take action based on any given signal.

Gain: $650

BIDU - Channel Breakout

2012-01-20T08:02:00.002-05:00

Similar to Falling Wedges, Falling Channels can be problematic on an upside breakout due to the immediate resistance inside the Channel.

BIDU broke out this Channel last week, got to the top of the Kumo (Cloud), then reversed and closed yesterday back inside the Channel.

There was a gap left in the chart at 122.97, prior to the breakout. Yesterday's low was 123.00, al-lmost filling that gap. If BIDU had bounced off the 123.00 low and CLOSED back above the top trendline of the Channel, it would have looked alright, but the CLOSE back inside of it presented The Bulls with the dreaded "Ye Olde Knuckle-biter" going home.

AMZN: Ascending Triangle Breakout

2012-01-19T06:02:00.005-05:00

From January 13:

"The AMZN Bulls need to get up there and knock out resistance in the 184's..."

Thar she blows!

Fortunately, I was watching AMZN as it was nearing the technical breakout above the 184.65-184.80 resistance that we've been discussing for the past week or so and bought it again, right at the breakout. I bought 2,000 shares at 184.85.

Notice that just prior to the breakout in the daily chart, which we'll look at below, AMZN formed and broke out of the little Symmetrical Triangle in this intraday chart, which helped to launch yesterday's breakout rally to over $190.

An hour into the trade, AMZN had formed and broken out of another Symmetrical Triangle (in white), which put a target of a little over $187 IN PLAY. I was up two dollars on the trade and "sold into strength," at 186.85, planning to buy back 1,000 shares if it pulled back a dollar. The pullback was only to 186.21, so I called it a day. My weary old eyes were ready for a rest at that point anyway ;)

As we know, Falling Wedge breakouts, like AMZN had on January 6, aren't the most bullish patterns in the world due to the technical resistance immediately inside the wedge, but as we also know, they can get a good bit stronger if a stock can hold above the top of the Falling Wedge and "morph," or change, into something like a Bullish Inverse H&S pattern or into this Ascending Triangle (pattern in blue).

The reason for the strength on a breakout like AMZN had yesterday is that the proverbial "everyone" is a buyer. Bulls buy and/or add to positions on the technical breakout, and Bears are forced to Buy To Cover when they recognize that they are caught badly out of position with the stock moving to new multi-week highs.

If The Bears get stubborn and don't Buy To Cover on the breakout, they get dragged higher. On pullbacks, Bulls want to get in at lower prices (like I did) and Bears want lower prices to Buy to Cover at a better price. As a result, pullbacks on a technical breakout like yesterday's often are shallow, and both Bulls and Bears alike are forced to "pay up" to get into the stock, or in the case of The Bears, to get out of the stock because Bears have to buy to cover their short position. Bears become "unwilling Bulls," so to speak. They're buying, which isn't what they really want to do. Thus, "buying begets buying." The rally is technically-driven and has little or nothing to do with the stock's fundamentals.

Math for the Ascending Triangle breakout target:

184.65 - the more conservative of the 184.80 and 184.65 highs of the pattern
166.97 - the low of the pattern

184.65 - 166.97 = 17.68 points of upside added to the lower high of 184.65.
184.65 + 17.68 = Target: 202.33 IN PLAY

As always, that's just what the measured move off this particular pattern breakout suggests, not a guarantee. The Ascending Triangle pattern doesn't "know," for example, that there's resistance at the December 2 high of 199.66, nor does it "know" that there's still some fairly immediate resistance inside the Falling Wedge. A lot can happen between hither and yon.

The bullishness in AMZN suggested by the second bounce higher out of Bullish Synchronicity in the 13/21RSIs, which we looked at on January 13, was borne out by yesterday's breakout, two sessions after the signal. That served as a nice leading indicator. The 21/34 RSI pairing now has thrusted higher for the first time since The Smackdown in AMZN began in October. That's "constructively bullish."

I've observed that repeat signals from these sequential Fibonacci measures of relative strength tend to be more reliable than isolated signals, like the four failures (red down arrows) in the 13/21 pairing in early-to-mid December, 2011. Those signals presaged the drop from 199 to 167.

Gain: $4,000

AMZN: Bearish Wolfe Wave

2012-01-18T07:25:00.002-05:00

Nice rally of nearly ten points in AMZN off the Cup & Handle low.

Yesterday morning was a gap up opening to a high of 180.42 (Orange #1) that got called back all the way to 178.51 in the first minute of trading, which filled the opening gap entirely. Throwing the long bomb on the first play of the game is exciting, but unless it's a Breakwaay Gap out of a pattern or above some level of resistance, those are "common gaps" and get called back more often than not.

Additionally, those big gaps up easily can turn into an ugly downside reversal if The Bulls don't hunker down and defend somewhere near Unchanged. That's what the AMZN Bulls did yesterday. They stepped up at UNCH and went into pattern formation, putting in the lovely Symmetrical Triangle, in orange, and breaking out of it. That breakout put rougly 182.00 IN PLAY. When the opening high of 180.42 got taken out to the upside, The Bulls got some help from The Bears, who were forced to Buy To Cover their shorts of the opening Gap Up. All that The Bears got on a pullback after 180.42 got taken out was 180.38, then they were squeezed higher again as the 182.00 target got MADE, and exceeded.

The Bulls managed a high of 183.30, below Key Resistance in the mid-184's basis the daily chart, then turned the ball over on a technical breakdown of a Bearish Wolfe Wave. Bearish Wolfe Waves have:

1. A strong directional Lead-In (white arrow)
2. A pattern that forms in the same direction as the Lead-In (in this case, up)
3. A Fakeout/Breakout at Wave 5 that puts the proverbial "everyone" wrong-footed.
4. A breakdown of the pattern and a move to Wave 6, which usually is relatively swift. Wave 6 is derived by connecting the high of Wave 1 and the low of Wave 4.

Al-lmost got to Wave 6.

The Wolfe Wave pattern in white also can be seen as a simple rising channel that broke down since there wasn't much of an upside Fakeout/Breakout at Wave 5. That's fine. The net effect is the same: some downside off the pattern breakdown.

ARIA: Wolfe Wave Watch Update

2012-01-17T06:50:00.003-05:00

This chart is a good illustration of why it's a good idea to follow Ms. Market, as best we can, and let her tell us what her intentions are rather than the other way round.

ARIA broke out to the upside just below 13.00. As long as the stock trades above the pattern, it's a bullish breakout and it isn't a real good idea to short it and stay short in this situation as the stock continues higher. Bears who shorted the technical breakout and who have remained short have a paper loss of over 12%. Not very pleasant for them at the moment.

AMZN: Six Bullish Pattern Breakouts

2012-01-14T07:13:00.006-05:00

AMZN got whacked coming out of the gate at yesterday's opening gong, but it staged a very impressive recovery (white arrow), going positive with the Dow and NASDAQ still down over 100 points and over 20 points, respectively.

At this juncture in trading, AMZN was forming a possible Cup & Handle, better seen in the next chart. I've been watching AMZN very closely this week. I very much liked the recovery off the morning lows and particularly liked the Cup & Handle possibility, so I went large and bought 4,000 shares of AMZN at an average cost of 176.19.

Classically, Cup & Handle patterns have rounded bottoms in the "cup" portion of the pattern. That isn't always the case. Sometimes the cup is a down...up...down...up jagged affair, like this one. Sometimes they're "V"-shaped: Straight down, then straight up, or nearly so.

The cup portion of this pattern is a Bull Flag/Falling Channel (in orange), however one wishes to view it. The important thing is that it broke out to the upside, established the second "lip" of the cup (white horizontal line) and was establishing the handle portion of the pattern which, quite often, is a pattern itself. This one is a Symmetrical Triangle (in yellow).

The Handle broke out (yellow arrow), putting rougly 178.10 IN PLAY, then the entire Cup & Handle pattern broke out (white arrow) immediately thereafter, putting roughly 179.60 IN PLAY. When patterns break out into immediate resistance, like this one did, it's preferable for it to come back and retest the breakout. If it can form another pattern, like the one in green (a Falling Channel), then break out again, all the better. Upside screamers, without any structural basis for a rally, tend to get called back.

The rally off Green #4 at the second yellow arrow is about as good as it gets, technically. It not only established the fourth data point for the Falling Channel (in green), that fourth data point was a successful retest of the top of The Handle, which was the Symmetrical Triangle pattern (in yellow).

After planting a foot there, The Bulls broke out of The Falling Channel, for a fourth bullish breakout on the session, rallied to 177.69, where they stopped to form and break out of a fifth pattern, the Symmetrical Triangle (in blue), then rallied to 178.17 where the target of roughly 178.10 got MADE at Purple #1. Lovely.

Heading into the final half hour of trading before the three day weekend, a Descending Triangle emerged (the pattern in purple). I had held my shares when the 178.10 target got MADE since The Cup & Handle target of roughly 179.50 still was IN PLAY, but time was running out on the clock and I wanted to take profits and get out by the close.

Descending Triangles "tend" to be bearish, but they aren't always. In this case, the session was wildly bullish with FIVE bullish pattern breakouts and it seemed a bit much to expect a sixth one in the final thirty minutes. I cashed in the 4,000 shares at an average of 177.70, wanting to protect profits in case the Descending Triangle broke down below its identical lows of 177.60, in which case I might be forced to sell into fast market conditions on the downside.

Curses! Curses! Curses!!!

A SIXTH bullish breakout on the session! Oh, well. At least we've got a three-day weekend to find all of the people who told us that Descending Triangles ALWAYS are bearish, and show them this chart. LOL.

The high on the session was at last horizontal resistance (horizonal red line)

Interesting action in the RSI chart. On January 12, the 13RSI came back to Bullish Syncronicity with its "shadow," the 21 RSI, then yesterday it got a bounce higher, so that looks fine. It needs to continue higher and the 21/34 RSIs, which failed on January 6 at Bearish Synchronicity (the most recent red down arrow) needs to turn positive.

Enough with the retests of the top of the Falling Channel. Git Going to the upside!

My trades were filled in annoying tiny little batches, so I have to post the executions on two pages.

Purchases.

Sales.

Gain: $6,000.

AMZN: H&S Top/Descending Triangle

2012-01-13T06:32:00.001-05:00

From yesterday morning:

"As we can see, the retest of the Right Shoulder low (horizontal red line) came mighty close to failing! It's a very good idea to have our sell orders filled out and hands on the buzzer on a retest like this because if support gets busted, the stock can go down in fast market conditions."

The 178.16...178.19...178.20 triple support (horizontal red line) got broken (white arrow) in the early going yesterday morning and AMZN went down in fast market conditions.

The pattern is a H&S Top with an extreme left translation for the "Head" of the pattern, or it can be seen as a Descending Triangle, if you will. In either case, the height of the pattern is about two and a half points, which suggested a target price in the 175's.

After a breakdown like that, of triple support, that "should" act as resistance on a retest. That's a shorting opportunity on any rally, but a move above the 178.16 ... 178.19 ... 178.20 is "Ye Olde Knuckle-biter," for the shorts because it suggests a possible false breakdown.

I shorted AMZN at 178.17, at that triple resistance (red arrow), playing it for move a down into the 175's, but I wasn't interested in sitting for "Ye Olde Knuckle-biter" if the stock went much higher than that resistance level. Unfortunately, AMZN rallied into the 178.40's, which I didn't like, so I threw it in just below 178 when the stock came back to the EMA's.

AMZN rallied again, almost to 179, but then fell to 175.75, in the target area for the broken H&S Top/Descending Triangle. I "coulda" had a nice winner, but there you have it. I wasn't up for "Ye Olde Knuckle-biter." Resistance should BE resistance, dang it! LOL.

The action is AMZN since the upside breakout of the Falling Wedge in the daily chart is turning out to be a good illustation of how they can be "iffy" due to the immediate resistance inside the wedge. Technically, AMZN still is broken out, trading above the upper trendline of the wedge, but players who bought the technical breakout of the Falling Wedge are under water on the trade, and the stock also has taken out the January 9 low of 177.00, which was a successful retest of the upper trendline. AMZN is "walking down" that upper trendline, leaving The Bulls wondering if they've got a legitimate break, or not.

The AMZN Bulls need to get up there and knock out resistance in the 184's (horizontal yellow line).

Gain on AMZN short: $300

AMZN: Bullish Inverse H&S

2012-01-12T06:45:00.004-05:00

From January 10:

"I have no idea whether AMZN will or won't move higher, so you see why I don't waste my time trying to predict anything. If I happen to be FOLLOWING it and think that I have a play, I'll go ahead with it."

Basis the intraday chart, AMZN broke out of this little bullish Inverse H&S pattern, putting an upside target of roughly 180.48 IN PLAY.

178.79 - the more conservative of the neckline highs
177.10 - the low of the Head

178.79 - 177.10 = 1.69 points of upside on a breakout above 178.79

178.79 + 1.69 points = Target: 180.48 IN PLAY

Since AMZN has had a Falling Wedge breakout in the daily chart and a successful retest thereof (see daily chart posted January 10), I bought AMZN at 179.27 on the early selloff to the EMAs and back toward the neckline breakout.

The target al-llmost got MADE, but then AMZN sold off and went back below the neckline and back toward the 178.16 low of the Right Shoulder (horizontal red line), for "Ye Olde Knuckle-biter." UGH.

After an Inverse H&S breakout, the Right Shoulder low "shouldn't" get taken out prior to the target being achieved. If it does get taken out, I throw it in. I might give it a penny or three to allow for a shakeout, but not much more than that.

As we can see, the retest of the Right Shoulder low (horizontal red line) came mighty close to failing! It's a very good idea to have our sell orders filled out and hands on the buzzer on a retest like this because if support gets busted, the stock can go down in fast market conditions.

Fortunately, in this case, support held and I was able to sell into the rally at 180.35 as the Inverse H&S target of 180.48 was getting MADE. There's a pretty big spread between the BID and ASK in AMZN so I don't play around with limit orders, insisting that I get exactly 180.48 for my shares. Take the money! LOL.

The session high of 180.77 was slightly higher than the target. AMZN sold off from there and closed down on the day, at 178.90.

Gain: $1,600

For any new readers, I occasionally post trades like this one when I have the time and when I think that they're instructive. By no means am I posting all of my trades and I do have my share of losers, just like everyone else.

My MAIN purpose when I post is to share with others things like how to look at the patterns, how to establish targets and how to manage the trade. I didn't predict that the 180.48 would get MADE. I only made a play at it based on the bullish Inverse H&S pattern breakout in this intraday chart, knowing that we also have had a bullish Falling Wedge breakout and a successful retest of that breakout in the daily chart. Based on those bullish factors, I was favored to win on the trade, but I sure don't always. That Right Shoulder low just as easily could have gotten busted, in which case I would have taken the hit and moved on to planning my next trade.

That's of paramount importance when trading: "Have a plan."

FCX: Level 1 Resistance

2012-01-11T15:47:00.006-05:00

AMZN - Falling Wedge Breakout

2012-01-10T07:33:00.003-05:00

Since we've begun a new year, I'd like to try correct the misunderstanding that many market participants have about technical analysis: that it is supposed to "call things" and "make predictions" about stocks. Perfect nonsense. Technical analysis is a tool, and a tool isn't able to make predictions. It is the technical analyst who makes predictions, if they so desire (I don't), and not all technical analysts will interpret a chart in the same manner.

My approach to technical analysis is to try to FOLLOW what a chart is telling me to do, to the best of my ability, and not get caught up in the ego-involvement of trying to "be right" about predicting anything. My focus is: Do I want to make a play at a stock, and if so, how am I going to play it?

Not all stocks chart well. Some go up and down and trade erratically, in which case I think it's best to avoid them. Some, like AMZN in 2011, have very discernible patterns that are eminently playable, as we can see from this chart. The key is to try to find good entries and to manage the trade well. I primarily play off the intraday charts, many of which I've posted, but I always look at a daily chart in order to understand the backdrop against which I am playing.

A tool that I use is one of my own design, the 13 ... 21 ... 34 ... 55 ... 89 ... 144 ... 233 Fibonacci sequential measures of relative strength. I also like to use them in combination with these Ichimoku Kinko Hyo charts. You might recall last June when I posted on AMZN being at the bottom of a Falling Wedge and retesting the neckline of a Bullish Inverse H&S Breakout (my buy order didn't get filled by ONE lousy penny...LOL). When the Falling Wedge broke out on June 21, "the work was done" and AMZN exploded to the H&S target of 215.86 and finished that rally on a Bearish Wolfe Wave Fakeout/Breakout.

The 13...21...34 Fibonacci sequential measures of relative strength are the slowest that I follow. If they're bearish, which they have been in recent months, and if the longer-term measures also are bearish (they have been in AMZN), the stock clearly is bearish.

These fastest measures are the first to turn higher, and as we can see without looking at the price chart, the 13/21 RSI pairing has thrusted higher, come back al-lmost to bullish synchronicity, then has thrusted higher again. That "could" indicate a sea change in AMZN from bearish to bullish, but technical indicators don't know what the price chart looks like. They just "indicate" and nothing else. They can't TELL US to buy or to sell.

Before we look at the price chart, it's important to note that the 21RSI rallied yesterday to Bearish Synchronicity with it's "shadow," the 34RSI, and got rejected. That's a short-term victory for The Bears. This action in the shorter-term RSIs indicates some head banging between the Bulls and the Bears: The 13/21RSI pairing is bullish, but the 21/34 RSI pairing is bearish, having been rejected yesterday.

Now let's look at the price chart to see if there's anything bullish going on since we got the early "indication" of bullishness from the 13/21 RSI pairing.

Hmm-mm...a technical breakout of a Falling Wedge, coincident with the 13/21RSI thrust higher, followed by a retest of the breakout that held up on a closing basis!

Hmm-mm...

Falling Wedge breakouts aren't particularly bullish because everything inside the wedge is IMMEDIATE resistance, as evidenced by yesterday's pullback from 184.80 - 184.65 horizontal resistance. That was "first resistance," and The Bulls got smacked.

If The Bulls can find support here at the retest of the top of the Falling Wedge, then knock out that resistance, that would indicate some kind of test of next resistance, at 199.66, as long as 184.65 - 184.80 holds up as support.

I have no idea whether AMZN will or won't move higher, so you see why I don't waste my time trying to predict anything. If I happen to be FOLLOWING it and think that I have a play, I'll go ahead with it.

ARIA: Wolfe Wave Watch

2012-01-08T10:16:00.002-05:00

ARIA has enjoyed a rally of 79% during the past three months. It's still bullish as the chart stands, but it's worth watching for a Bearish Wolfe Wave reversal. Comments are on the chart.

Also on the chart are comments from the Bearish Rising Wedge late last summer. There was a good "Body of Evidence" that ARIA would retest the bottom of that wedge.

This is an example of a Bearish Wolfe Wave in FCX last year. Strong upside directional Lead-In, then a DOUBLE Fakeout/Breakout at Wave 5, followed by...

... a close back inside the pattern...a break below the pattern...and, the Wave #6 target getting MADE and exceeded on the downside.

BXG - Cup & Handle

2012-01-05T07:53:00.002-05:00

Thanks for your comments, Kevin. I can't put enough money to work in low-priced, thinly traded stocks, but BXG is a nice looking chart. I like stocks that establish bases, like this one has.

Classically, in a Head & Shoulders pattern, the Right Shoulder is narrower in width than the Left Shoulder. I don't quibble if the pattern has the right look about it, but this one looks much more like a Cup & Handle to me, especially since the handle is a Symmetrical Triangle (pattern in blue) and a breakout of same, which often is the case with Cup & Handle patterns. The Symmetrical Triangle pattern is nice cosolidation after the move to 3.00 on big volume on November 15. I like that. So far, so good, now it needs to get going into the 3.00's.

I put some comments on the chart. Good luck if you're playing it!

FCX: 2011 Year-End

2012-01-01T10:08:00.003-05:00

From FCX comments after the October 5 close:

"In the daily chart, FCX put in a Bullish Key Reversal candle on October 4, which also was one of Erik Hadik's (sp?) 3-Close Reversal candles, meaning that the stock put in a new low for the move, then reversed and closed higher than the closes of the three prior sessions.

After something like that, we want to see signs of follow-thru that suggest that some kind of low might be in, if not THE low for the move."

Although FCX finished the year with a loss of 39%, the October 4th Bullish 3-Close Key Reversal was THE low for the move off the early 2011 Falling Wedge meltdown.

The Bullish Key Reversal came only two sessions after the Falling Wedge target of 30.61 got MADE, on September 30. Stocks don't always reverse direction when a big target like that is achieved or approximated, but quite often they do, as was the case here with FCX.

After the kind of Smackdown that FCX had into the October low, we want to take a look at where we would expect the stock to find resistance on any rally.

Key Resistance:

Level 1 - 41.20 - 41.45 (the August lows, prior to the second Crash in the stock)

Level 2 - 46.06 - 46.20 (the lows of the early 2011 BIG Falling Wedge)

From October 8, "FCX: In Crash Recovery"

"As we approach year-end, there is a huge overhang of selling pressure from the initial crash from the 56.78 high of the Bearish Wolfe Wave to 41.20, which broke the 2011 Falling Wedge, and then nearer-term, from the second crash that occurred from the 48.60 high of the weak base that The Bulls tried to establish after the Falling Wedge breakdown, to the 28.85 low of the Bullish Key Reversal on October 4.

The Bullish Key Reversal low of 28.85 could end up being significant if it holds up because it would mean that any Bears waiting for the Summer, 2010 low of 28.35 to have a better retest would be disappointed.

In my view, The Bulls would do well to spend the remainder of 2011 establishing a nice base from which to launch a rally into all of that overhead resistance, which likely will be daunting. Year-end tax loss selling won't help, either. Some players will sell FCX and take the loss to offset gains in other stocks. The Bulls need to "have game" to attack the resistance.

The Bulls have some work to do, building good bases and breaking of them. The base-building process can be slow-w-w, but again, the Bullish Key Reversal looks good if it holds up."

The FCX Bulls made a decent attempt at a recovery, rallying to 43.48, or about the middle of Level 1 and Level 2 resistance, which is about as much as could be expected after the serious breakdown from The Early 2011 Falling Wedge. Absent great news on the fundamentals, stocks generally take time to recover and need to spend some time base-building.

For easier reading, I wrote some notes at the top of this chart describing "THE TELL" that FCX was in for some selloff in early November. When we're collecting our body of evidence while following the market, that kind of information can be very helpful when we can get it.

FCX finished 2011 breaking out of a Channel, successfully reetesting the top of it on December 28 and 29 and moving a tad higher into the final gong for the year. As I've said many times, breakouts of Falling Channels/Falling Wedges are my least favorite of the bullish breakout patterns, and this current breakout is yet another example of why. Once the stock breaks out to the upside, everything inside the Channel is immediate resistance and the stock often ends up going back for a retest, as it did here, and sometimes "walks down" the top of the Channel some more, which certainly isn't particularly bullish.

That said, The Bulls did their job in fourth quarter, holding the Bullish 3-Close Key Reversal low, knocking heads with The Bears during year-end tax loss selling and trying to establish a base for another rally attempt into Key Resistance.

As readers know, I'm a trader and primarily trade FCX off the intraday charts and I don't make predictions, but I like this stock and wish long-term shareholders all the best in 2012.

Happy New Year!

AMZN: Trick Or Treat

2011-10-31T16:22:00.003-04:00

AMZN gapped down at the open with the general market, rallied above Friday's late session high, but that high was a "trick:" it was a Reversal candle.

Giving some confirmation that it was, indeed, a reversal was another "trick:" an upside Fakeout/Breakout (red arrow) out this Symmetrical Triangle, which quickly reversed back inside the pattern on an Inverted Bearish Hangman, then The Bears broke below it. That "shouldn't" have happened after the upside breakout, which gave a strong suggestion that the breakout was a fakeout.

I shorted 2,000 AMZN at 216.02 (white arrow) on the retest rally, back to the bottom of the broken pattern and to the bearishly inverted EMAs.

I covered minutes later, at 114.72, on the fast selloff back to the session low after the failure at the EMAs, for a nice Halloween treat ;)

I'm going to take some time off from posting. Been working too hard, but I'll be back. Happy Halloween, everyone!

Gain: $2,600

GS: Double H&S Top Reversal

2011-10-29T05:29:00.005-04:00

Basis the 1-Minute chart, Friday's Gap Down opening was a breakdown of a Double H&S Top. The white H&S Top forms The Head of the larger H&S Top, in yellow, and is "nested" within that larger pattern.

Frequently, we see Gap Up openings in stocks that result in a "Gap And Crap," where the stock reverses soon after the big opening higher, then goes down and fills most or all of the gap. Those are "common gaps." If the stock is bullish, it will hold somewhere near the gap, even below it, then climb higher. If it isn't, it can go well into the red and also can result in a significant downside reversal.

The same principle applies in reverse with Gap Down openings in stocks that are acting bullish, like GS has been off the early October Bullish Wolfe Wave Fakeout/Breakdown.

Friday's Gap Down in GS quickly reversed to the upside, looking for a retest of the broken neckline and some kind of fill of the two dollar gap down. We can see that the eighth bar ripped to the upside, back to the broken neckline. After a breakdown of a DOUBLE H&S Top, that neckline "should be" resistance. The Bears "should" defend it and send the stock down to a new session low. That isn't what happened.

The Bulls got back inside the broken Double H&S Top, which presented "Ye Olde Knuckle-biter" to The Bears, who managed to slap The Bulls outta there, down to Orange #2, but The Bulls came right back, up to Orange #3, back inside the broken pattern.

I bought 2,000 GS for 114.88, at Orange #4. The Bears weren't getting the job done on the downside, and The Bulls now had established a Symmetrical Triangle (pattern in orange) straddling the broken neckline, an upside breakout of which could launch a rally to the 116.18 - 116.40 gap left in the chart from Thursday's close. 116.18 was the low of the last bar; 116.40 was the close.

The gap-filling rally ensued almost immediately. I was in the trade for about two minutes and sold my 2,000 GS at 116.10 on approach to the 116.18 low of the gap. That worked out quite nicely, so I can refrain from cursing ;)

Just as they did going into Wednesday's close, The Bulls blew right through the 117.53 high of the Double H&S Top and established a new high for the move, at 118.07, where the rally ended in short-term Bear capitulation and Bull exhaustion.

The Bears broke a Descending Triangle (green pattern), then also broke validated support (orange arrow) of a Rising Channel (pattern in orange). When validated support gets broken, that "should have" some significance on the downside, but once again, The Bears didn't defend that broken trendline on a retest. The Bears allowed The Bulls back inside The Channel, willy nilly, as though it never had broken at all.

Sloppy...sloppy...sloppy on the part of The Bears, and since they weren't defending their Channel breakdown, I bought back my 2,000 GS for an average of 115.87 for a scalp. Sold them for 116.16, back inside The Channel.

Friday's rally to 118.07 took GS back to late August horizontal resistance, at 118.10. The Bulls have two closes above the Kumo (Cloud) and lots of room between here and the neckline, near 105.00, for a pullback. Roughly 124.25 is IN PLAY from the Inverse H&S breakout, as long as GS trades above the neckline.

I'm a trader and I don't make predictions. That target is just what the pattern breakout suggests. The picture could change as the chart evolves. If the target does get MADE, I would expect it to occur no later than December 5. Targets generally don't take longer to get MADE than it took for the pattern to form and, usually, they are achieved in less time than that.

Gain: $3,000

GS: Shock And Awe To The Upside

2011-10-27T09:37:00.005-04:00

From yesterday morning on GS:

"The measured move for the H&S Top went IN PLAY on the upside (add the points to the high of The Head) , as did the measured move off the Symmetrical Triangle breakout.

In addition to the Nested Symmetrical Triangle breakout in the intraday chart, The Bears also were caught short a Bullish Inverse H&S breakout in the daily, which no doubt accounted for some of the afternoon rally as they got squeezed into the $106's."

Regardless of whatever news will be given attribution as "the reason" for yesterday's upside explosion in GS, technically, The Bears were caught horribly out of position at Wednesday's close, short the Nested Symmetrical Triangle breakout in this intraday chart (yellow arrow), and short the Bullish Inverse H&S breakout in the daily chart.

Market Lesson: "Thou shalt not short, or stay short, Nested pattern breakouts and/or multiple pattern breakouts." YEEKS!!!

Breakaway Gap Up openings out of solid patterns like the ones that The Bulls had established in both the intraday and daily charts of GS that we've been following tend to be a "Gap And Go" rather than a "Gap And Crap," the latter of which reverses, then fizzles.

I didn't think that I'd get a chance at playing GS since I had no intention of chasing the opening gambit to 115.29 in fast market conditions, but there was a nice four dollar pullback to the EMAs, so I bought 2,000 shares of GS at 111.29-111.32 (white arrow).

The open was 110.33. The low was 110.00. My entry long was predicated on the thesis that on a Breakaway Gap out of the patterns that The Bulls had established in GS, The Bears weren't going to be let out of their shorts very easily, and that the session low quite likely already was in. If my thesis had been wrong, I would have stopped the trade out below the 110.00 low.

I wanted at least a dollar out of the trade. More, if I could get a quick rebound to sell into, then reposition at a better price.

About an hour into the trade, GS was noodling around the EMAs, digesting the huge opening gain. That looked fine, but I decided to take my dollar gain, and look to get back in if GS sold off into the 111's again. No luck with that. GS sold off only to 112.00, then began a steady climb to a high of 117.53, showing The Bears no mercy. UGH.

If I ever wrote a textbook on technical analysis, this last month in GS would be a thick chapter, it includes so many elements, which we've discussed these last weeks.

Among the most salient features, in my view, are:

1. The Bullish Wolfe Wave 5 Fakeout/Breakdown to 84.27 on October 4 on a Bullish Reversal candle

2. The H&S Top Fakeout/Breakdown to 100.08 at the October 25 close, which became Data Point #4 for a large Symmetrical Triangle (seen in the first chart, above). That head fake to the downside had an effect very similar to the Bullish Wolfe Wave fakeout on October 4, putting the proverbial "everyone" wrong-footed on the misdirection.

3. The move from $84 through the Kumo, to $117, occurred when poor earnings were expected and were actually much worse than anticipated. In early to mid-October, anyone who correctly predicted the big earnings miss got severely punished if they played that prediction by shorting GS, which is one of many examples of why I ignore the fundamentals, and why I always say:

"The fundamentals aren't what matter. It's the market's REACTION to the fundamentals that matters."

Gain: $2,000

GS: Inverse H&S Breakout

2011-10-27T01:31:00.005-04:00

Basis the 10-Minute chart, Tuesday's close was a break below the neckline of a H&S Top. As we've frequently discussed, anything back above the broken neckline is "Ye Olde Knuckle-biter" for The Bears. An upside takeout of the high of the Right Shoulder (white arrow at the horizontal red line) is a "shot across the bow" from The Bulls, warning The Bears that the neckline break at Tuesday's close might have been a Fakeout/Breakdown.

I liked the upside takeout of the 102.50 high of the Right Shoulder and bought 2,000 shares of GS on the pullback, at 102.09.

GS rocked steady during the morning and hadn't come even close to filling the opening gap, showing excellent relative strength vs. the general market, but unfortunately for me ...

... the benchmark S&P 500 had filled its opening gap entirely, and also had taken out its late Tuesday afternoon low to the downside. UGH. It had rallied back to the second level of horizontal resistance (top red line) in what looked to be a Bearish Rising Wedge (pattern in yellow).

Hm-mm...what to do...what to do...

Was GS going to lead the entire index higher, or was the index going to drag GS down with it, to fill its opening gap?

The latter prospect seemed more probable and I was sitting on a decent gain, so I decided to take the money and look for a lower entry back into GS, if I could get it. I sold my 2,000 GS for 102.52.

Less than five minutes after I sold, GS broke out above $103 and was gone on the upside.

CURSES!!! That danged S&P 500 threw me off my game. LOL.

What a deceptive move that neckline breakdown was at Tuesday's close, huh?! That breakdown ended up being Data Point #4 (Yellow #4) of a large Symmetrical Triangle with the H&S Top nested within it. The early session "shot across the bow" with the takeout of the Right Shoulder was followed by the Nested Symmetrical Triangle breakout and then quickly followed by a takeout of the high of the H&S Top.

Uh-oh for The Bears, caught short a Nested Symmetical Triangle breakout!

The measured move for the H&S Top went IN PLAY on the upside (add the points to the high of The Head) , as did the measured move off the Symmetrical Triangle breakout.

The top of the Symmetrical Triangle now is Key Support on any pullback (yellow arrow). Anything back below Yellow Trendline #1-3 is "Ye Olde Knuckle-biter" for The Bulls.

In addition to the Nested Symmetrical Triangle breakout in the intraday chart, The Bears also were caught short a Bullish Inverse H&S breakout in the daily, which no doubt accounted for some of the afternoon rally as they got squeezed into the $106's.

As with the top of the Symmetrical Triangle in the intraday chart, The Bulls need to defend the neckline of the Inverse H&S pattern on any pullback.

Gain: $850

GS: Selloff From Kumo Resistance

2011-10-26T06:39:00.003-04:00

Gap down in GS at the opening gong.

The stock put in a Double Bottom then made a "higher high." I bought 2,000 GS at 101.43 (white arrow) on the pullback to the prior highs that were taken out, which also coincided with the 13-21-34 EMAs, which were properly threaded. That looked like a nice setup for a run to 102.20-102.29 resistance (the two horizontal red lines).

"Former resistance provided support" where I bought it (horizontal white line) and GS rallied smartly to the target at next resistance, 102.20-102.29. I sold my 2,000 GS at 102.19.

After I sold (white arrow), GS pulled back, then broke out above the 102.20-102.29 resistance. GS came back below 102.20-102.29, for "Ye Olde Knuckle-biter," rallied again, then broke below (yellow arrow) what had become a pattern morph into a Rising Channel (pattern in yellow).

The Bulls tried to regroup and rallied it in a Bear Flag (pattern in red), but it was no good. The Bear Flag also broke to the downside, and down she went into the closing gong.

From Saturday on GS:

"At Friday's close, GS is parked right at the bottom rung of Kumo (Cloud) resistance, represented by the vertical red lines, which runs from 102.64 up to 114.765. That's daunting resistance, but if a stock is going to attack that kind of resistance, it's preferable for it to have established some kind of base from which to launch the rally, and "the bigger the base...the better the breakout."

The Kumo (Cloud) resistance was, indeed, daunting. The Bulls still have some room on the downside for a Right Shoulder pullback, or for Data Point #4 of an Ascending Triangle, without any serious damage being done the chart.

"The bigger the base, the better the breakout" so more consolidation below $105 wouldn't be at all bad, as long as The Bulls eventually can bring it and take out $105 to the upside.

Gain: $1,500

GS: Neckline Resistance

2011-10-25T06:30:00.003-04:00

GS gapped up at the open and made a run for the neckline of the Inverse H&S basis the daily chart. That's resistance. It sold off from there, to the EMAs in the 10-minute chart. I bought 2,000 GS there, at 103.14.

Near-term resistance in the 5-Minute chart was horizontal resistance, at 103.52, up to 103.58, the top of the EMAs (yellow arrow). I sold at 103.52.

In the daily chart, GS entered the Kumo (Cloud) for the first time since late July and is at the bottom rung of that resistance, just below the neckline of the putative Inverse H&S.

Gain: $750

GS: Inverse H&S Fractals Galore

2011-10-22T08:03:00.003-04:00

Basis the 5-Minute chart, Friday morning's Gap Up opening was a Breakaway Gap out of yet another Inverse H&S! Notice that The Head of the pattern (in yellow) is a self-contained Inverse H&S.

Breakaway Gaps out of patterns have a better chance of being a "Gap And Go," rather than a "Gap And Crap." Although GS has scored 20 points off the Bullish Wolfe Wave Breakdown/Fakeout low of October 4 (rallied from 84 t0 104), basis the daily chart which we'll look at in a bit, the stock still is buried deep in Bear Territory, so Gap Up openings still are highly suspect.

The first white arrow was a successful retest of the neckline, then GS rallied. That retest was nice, but the gap still was left unfilled, which was bothersome. The rally off the neckline ended in a breakdown out of a Symmetrical Triangle (in green), which gave a strong suggestion that the gap from Thursday's 100.86 close would get filled, or something close to that.

We've seen pattern morphs left and right, so there was a chance that the Symmetrical Triangle would morph into a Channel or a Falling Wedge somewhere in the area of the neckline and the gap. Since GS has been performing so well lately, ignoring the lousy earnings that came out this week, I didn't want to get shut out of it so I bought 2,000 shares at 101.05 (second white arrow), despite the fact that I was buying "Ye Olde Knuckle-biter" because GS was back below the neckline.

Hindsight always is 20/20. When GS filled the gap, I thought, "Geez, ya coulda waited for that, ya dummy!" LOL. Easy to say, though, once we have the advantage of seeing what unfolds. It also "coulda" taken off to the upside without me ;)

GS filled the 100.86 gap, bottomed at 100.59, then rallied back above the neckline. It isn't fun sitting through "Ye Olde Knuckle-biter," but when there's a reason for it (in this case, filling the opening gap), I'll occasionally sit for it.

Another Inverse H&S breakout! Lovely. The earlier neckline break in the 5-minute chart was to go down and fill the gap, now The Bulls were ready to resume the rally. After sitting for "Ye Olde Knuckle-biter," I didn't want to see anything sloppy, back below this neckline. A penny or three back below the neckline, okay, but I didn't want the thing coming back in my face.

Git going!

Curses!

Thursday afternoon, I couldn't get a pullback to support to buy GS, now it was breaking neckline support for the SECOND time in Friday's session. No, thank you. I threw it in at 101.11.

It turns out that I threw in darned near the LOW on "Ye Olde Knuckle-biter," back below the neckline.

Curses!

GS rallied back out of the Inverse H&S, went into a Rising Channel (in yellow), then had another sloppy breakdown of the Rising Channel. If I had held my position, I would have sold that breakdown (yellow arrow).

Geez, sloppy...sloppy...sloppy.

I'll give The Bulls credit, though, for holding firm on that Channel breakdown and turning it into a Symmetrical Triangle (in green), then breaking out of it. There was only about ten minutes left on the clock when it broke out, so I had to pass on the breakout.

In the Hourly chart, The Bulls still have their Inverse H&S breakout.

Falling Wedges/Falling Channels often morph into Inverse H&S patterns. Interestingly, with all of the Inverse H&S patterns that we've had in the intraday charts, The Bulls have got a chance at breaking out of one in the daily chart. The putative Right Shoulder has some room to pull back some more, prior to any breakout.

At Friday's close, GS is parked right at the bottom rung of Kumo (Cloud) resistance, represented by the vertical red lines, which runs from 102.64 up to 114.765. That's daunting resistance, but if a stock is going to attack that kind of resistance, it's preferable for it to have established some kind of base from which to launch the rally, and "the bigger the base...the better the breakout."

This possible Inverse H&S base is of one month's duration, decent enough to attack that Kumo (Cloud) resistance if The Bulls can bring it.

Gain: $100 (Grumble...Grumble...Grumble)

GS: Inverse H&S Fractal

2011-10-21T06:28:00.005-04:00

This is the hourly chart from Wednesday's close. The Bullish Inverse H&S is dominating the chart, so let's review what we were looking for in yesterday's session:

"In the Hourly Chart, despite the poor earnings, The Bulls have a chance at more upside if they can defend the neckline of this Inverse H&S pattern, the upside breakout of which helped to propel GS to the Wolfe Wave target. It currently comes in just below 100.00 and is declining a bit each hour.

Any trading below that neckline is "Ye Olde Knuckle-biter" for The Bulls, calling the bullishness of the pattern into question. Anything below the 94.52 low of the Right Shoulder would call the bullishness of the pattern into serious question. Right Shoulder lows "shouldn't" get taken down."

GS opened on a "Gap And Crap" and immediately broke below the neckline of the Inverse H&S, which was just below 100.00, handing The Bulls "Ye Olde Knuckle-biter."

A Descending Triangle formed (pattern in white), which straddled the neckline, going above and below the neckline in the Hourly chart (first chart, above). That pattern resolved to the downside, sending GS deeper below the neckline. Not good for The Bulls.

The Bulls then put in a little Double Bottom (in yellow), broke out of it to the upside, then formed a Symmetrical Triangle (in orange) in an attempt to establish a second bullish pattern breakout. They weren't successful. The Bears broke the Symmetrical Triangle to the downside AND they took out the lows of the Double Bottom (in yellow), sending GS to a new session low. The Bulls had to start all over again. UGH.

The Bulls formed a little Rectangle (in green), but the problem with that little pattern is that if it were to break out to the upside, The Bulls had to rally into IMMEDIATE resistance from the broken Symmetrical Triangle and the broken Double Bottom. I wasn't interested in getting long a rally smack into resistance if The Bulls could break it out, but continued to follow the action.

The Bulls temporized for a bit longer, within The Rectangle, then broke it out. I liked that. "The bigger the base...the better the breakout." That wasn't a large base, but it was broader than where it was in the last chart, encouraging The Bulls who were trapped in the broken Symmetrical Triange and the broken Double Bottom NOT to sell when they got whole on the rally. The Rectangle breakout put a target of 99.26 IN PLAY. If The Bulls could get there, that would be "some" evidence that the low was in and that The Bulls were ready to do something on the upside.

Math for The Rectangle target:

98.78 - Identical highs of the pattern
98.30 - The more conservative of the 99.30 and 99.28 lows

98.78 - 98.30 = 0.48 points of upside on a breakout above 98.78.

98.78 + 0.48 = Target: 99.26 IN PLAY

The Bulls rallied to 99.248, just over a penny shy of the target, then pulled back for a retest of the top of The Rectangle. I liked that. I bought 2,000 shares of GS for 98.78 on the retest, which is an example of what is meant when we hear, "Pick your spot," or, "Let the trade come to you." Buying retests of upside breakouts and shorting retests of broken patterns are nice entries into a stock. We find out very quickly if it's going to be successful, or not, and if we're going to get into "Ye Olde Knuckle-biter" (back below the breakout), or an outright failure.

WHOA! The Bulls formed a Symmetrical Triangle (in yellow) after the successful retest of the top of The Rectangle, then broke out of it. We know that nested patterns and multiple pattern breakouts can pack some punch, so I was expecting a rally, but not tha-at much of a rally so quickly. GIMME THE MONEY and a minute or three to figger that one out!! LOL.

It didn't take long for me to say, "Oh-h, geez..."

(1) The failed Double Bottom, (2) the failed Symmetrical Triangle,(3) the Rectangle, and (4) the second Symmetrical Triangle all had "morphed" (changed) into a Bullish Inverse H&S pattern, a "fractal" of the large one in the Hourly Chart (first chart above)!

"Fractal" simply means a repeating pattern, or repeating behavior. The word was invented so that we can go round cocktail parties saying it, giving everyone the impression that we've got half a brain when we know that we really haven't. Say "fractal behavior" to people with whom you particularly don't wish to have intercourse. They'll flee your side in short order, in recognition of the fact that you've trumped them in the "boring conversation" department ;)

I wanted my 2,000 shares of GS back on a retest of the neckline, but didn't get it. The pullback was shallow, then she had another leg up.

The Inverse H&S target of 100.27 got MADE, and then some.

I also wanted my 2,000 shares back, at 100.43, on a retest of the late afternoon Falling Wedge breakout. I didn't get that one either. The pullback was only to 100.46. The Falling Wedge target of 101.55 got MADE. Without me. Curses!

This is the Hourly chart again, updated to include Thursday's trading. The Bulls had to endure "Ye Olde Knuckle-biter" for a bit, but managed to close the session out back above the neckline on the strength of the Bullish Inverse H&S fractal in yesterday's intraday chart.

Gain: $1,700

GS: Bullish Wolfe Wave Target

2011-10-20T06:20:00.006-04:00

The Wolfe Wave target got MADE at 104.69 in early trading yesterday morning. That's one for the textbooks, not only for its nice execution, technically, but because the bullish target was achieved against the backdrop of a huge miss on earnings on the fundamental side. Quite lovely.

What wasn't lovely...

...was the fact that when GS was called Gap Down at the open, I entered my order three minutes before the open to buy 2,000 shares of it at 100.75, well above horizontal support at 100.50. "They" blew past my order, down to 100.34, then ripped it to the upside past my order again, and left me pipped at the post with my order NOT filled.

I called my broker on that nonsense, who said, "Security and Exchange Commission Rule 611...yap yap yap...order protection...yap yap yap...market sweep...yap yap yap..."

I said, "So, you're telling me that I got '611-ed.' Is this a polite way that you youngins have of saying, 'YOU GOT ROYALLY SCWOOOED out of an $8,000 trade, Melf?'"

The lad gave a chuckle, but gave me no shares of GS at 100.75. That's fine. I handled it with my usual dignity.

Curses! Curses!! CURSES!!!

The Wolfe Wave target of 104.69 got MADE at 10:10AM shortly after it was explained to me how I got "611-ed." No problem.

LOUSY BUZZARD FACES!!!!!!!!!!!

There wasn't much left in The Bulls after the 104.63 target got MADE. The high on the session got put in one minute later, at 104.94, then The Bears took over, breaking the neckline of a H&S Top (in white), breaking a Bear Flag (in yellow), then breaking a Double Bottom attempt at 102.00 (in orange). The session finished with a Rectangle (in green).

In the Hourly Chart, despite the poor earnings, The Bulls have a chance at more upside if they can defend the neckline of this Inverse H&S pattern, the upside breakout of which helped to propel GS to the Wolfe Wave target. It currently comes in just below 100.00 and is declining a bit each hour.

Any trading below that neckline is "Ye Olde Knuckle-biter" for The Bulls, calling the bullishness of the pattern into question. Anything below the 94.52 low of the Right Shoulder would call the bullishness of the pattern into serious question. Right Shoulder lows "shouldn't" get taken down.

GS: Bullish Wolfe Wave - Lousy Earnings

2011-10-19T06:21:00.003-04:00

Excerpt from Goldman's release of earnings:

"The investment bank said it made a loss applicable to common shareholders of $428 million or 84 cents per share in the third quarter, compared to $1.74 billion profit or $3.19 per share in the year ago quarter and $1.05 billion or $1.96 per share in the second quarter of 2011.

Goldman's results disappointed both on revenues and the bottomline. Analysts were expecting the firm to post a loss of 16 cents per share on revenues of $4.25 billion according to consensus estimates."

YEEKS. Big earnings miss, far below analysts' expectations. But, remember...

"It isn't the earnings that matter. The only thing that matters is the market's RESPONSE to the earnings."

The market's initial response was all over the board. A big gap up at the opening gong, with Bulls saying, "See-ee? That bad news already is factored in!" Then a complete retracement of the early rally and into the red with Bears saying, "See-ee? The bad news was NOT already factored in!"

Ain't we got fun? LOL.

First and foremost in my mind was the Bullish Wolfe Wave that we've been watching for the past week. We never want to "see what we wanna see" in the market. We want to FOLLOW what's going on, as best we can. If what we're seeing at any given time doesn't play out, we don't want to try to force our interpretation on the market when it simply isn't there. In this case, specifically, we don't want to get locked into the idea that the Bullish Wolfe Wave is going to play out, but we also don't want to get lathered up bearish because of the huge earnings miss.

By noontime, The Bulls had come roaring back off the early selloff, had broken out of the Channel (in white) and had formed an Ascending Triangle (in yellow) with a smaller Ascending Triangle (in orange) nested within it. Lovely. We know how nice nested patterns and multiple patterns can be on a breakout. I bought 2,000 GS at 98.90 in anticipation of a breakout. Mental stop below the 98.58 low of the little orange Ascending Triangle.

The little Ascending Triangle broke out, but "bigger picture," the entire session was a large, wide-swinging Symmetrical Triangle and GS got refused right at the top of the pattern (white arrow), validating it as resistance. Oops.

Additionally, GS was languishing as it moved into the apex of the Symmetrical Triangle. Thomas Bulkowski did research on those patterns and discovered that if stocks go beyond two-thirds of the way to the apex and don't break out, the majority of them fail and break to the downside.

Because of those two factors, I decided to throw it in at 98.88 for a small loss and wait to see what developed. I don't mind "paying up" for a stock if it looks right.

Well-ll...she broke out, just ahead of the apex! I was wanting to get long again on more of a pullback, but I also didn't want to miss a nice rally if GS was going to take off to the upside, so I "paid up" and bought back my 2,000 GS at 99.25 with the same mental stop of 98.58, the low of the little orange Ascending Triangle.

I bought at the yellow down arrow, then GS promptly came down and busted my 98.58 mental stop, by just two pennies! UGH. You're joking, Ms. Market, right??!! LOL.

That sure looked like a stop-busting "shakeout/fakeout" when it occurred, but I respected it and sold into a little bounce, at 98.70, determining that I would "pay up" again if GS got back over 99.00, which would be pretty good evidence that the break of 99.58 was, indeed, a fakeout. "If, at first, you don't succeed..."

I "paid up" again and bought back my 2,000 GS at 99.05 (orange arrow). That play finally worked. The Bulls formed the Symmetrical Triangle in orange, a "fractal" (repeating pattern) of the larger white one, then we got what we so often see with nested patterns and multiple pattern breakouts...

...KABOOM.

Despite the fact that the Bullish Wolfe Wave still was IN PLAY and that the rally "could be" much more explosive, as is the nature of Wolfe Waves, after two false starts, I sold into the upside Screamer, at 100.72. I was satisfied with that result and also was happy to give my old eyes a rest after watching the chart for five hours. I ain't as young as I useta be ;)

After a brief pullback, GS exploded to the upside again, putting in a session high of 103.79 (whew!), which...

... didn't quite make it to the Wave #6 target line, but it scored a big chunk of it.

Yesterday's market REPONSE to earnings was a case of the technicals trumping the fundamentals (much worse than expected earnings). That isn't always the case, but if we try to FOLLOW the market as best we can and focus on what is happening, we'll do alright.

My "best" certainly wasn't that swell yesterday, with the two false starts, but I came out of it alright. Trading the market is very much like playing poker. We aren't going to win every hand, but if we limit our losses and keep banging away at it, we'll do fine.

Gain: $2,200

FCX And GS

2011-10-18T05:12:00.005-04:00

From two weeks ago on FCX:

"The Bulls have some work to do, building good bases and breaking out of them. The base-building process can be slow-w-w, but again, the Bullish Key Reversal looks good if it holds up."

Since the Bullish Key Reversal on October 5, The Bulls have done alright. They broke out above horizontal resistance near 36.00 (horizontal white line) last Wednesday for a "higher high," but it was on a Gap Up, which left TWO unfilled gaps in the intraday charts. That move resulted in both gaps getting filled on Thursday.

Friday was another Gap Up above the 36.00 area. UGH. Those "common gaps" tend to get filled sooner rather than later and it did in yesterday's selloff. I bought 2,500 shares of FCX at 35.05 after the gap was filled.

The market continued down for most of the session. Although FCX put in its session low early and held up all day, it didn't do much on the upside. I sold it for 35.28 in the final fifteen minutes of trading.

GS got whacked at the open, but what I liked about it was that it reversed higher immediately and took out the late Friday high (first white arrow), pulled back to the EMAs, then took out Friday's high (second white arrow). I bought 2,000 GS for 96.70 on the next pullback to the EMAs.

What I didn't like about it was that GS pulled all-ll the way back to the opening low and I very nearly was stopped out of it. LOL. I couldn't fault the GS Bulls, though. The benchmark SPX still was tanking, but GS held the early low (red arrow).

"Doubling down" on a loser, hoping that we'll get even (or better) on a trade, generally, isn't a good idea. "Hope" isn't a strategy. If, however, "the body of evidence" suggests that we've got sound reason for doubling down, it's justifiable.

Shortly after noon time, GS was giving a very bullish non-confirmation of the lows in the SPX. It had broken out of a Channel (pattern in white) and was forming a Symmetrical Triangle (pattern in orange) at the top of the Channel. That looked very nice. I bought another 2,000 GS at 96.00 with a target of the horizontal resistance at 96.81 (red line).

I sold all 4,000 GS for 96.83.

GS put in a high of 96.89 off that Double Breakout, then went into this Double Nested Channel. It started out being a Descending Triangle (pattern in yellow), which broke down, but morphed into TWO Channels: (1) the larger one, in white; (2) the smaller one in green, nested within it.

After the Double Nested Channel broke out, I bought back 2,000 GS at 96.36 on the pullback to the top of the Channel. The breakout put a target of 97.57 IN PLAY.

96.87 - high of the pattern
95.64 - low of the pattern

96.87 - 95.64 = 1.23 points of upside on a breakout above 96.34.

96.34 + 1.23 = Target: 97.57 IN PLAY

I had my hand on the buzzer to sell at the 97.57 target, but GS rallied only to 97.53, four cents shy of the target. Curses!

I sold at the Two Minute Warning, for 97.05.

Gain on the session: $3,800

GS: Third Wolfe Wave Retest

2011-10-15T04:02:00.006-04:00

GS came out of the gate at Friday's opening gong on a Gap Up to the top of the H&S Top (in orange). It filled the opening gap, scored two successive new highs on the morning, then tank...tank...tank. Yeesh.

We knew from yesterday morning's daily chart that the top of the Wolfe Wave/Falling Wedge came in at 94.86. The low of that selloff was 94.87 (red arrow), for a near-perfect validation of support at that trendline.

The problem with that was, however, that GS had to rally off that successful retest into immediate overhead resistance at the broken neckline (horizontal orange line) and, as the rally unfolded, it was a Bear Flag (in red). That setup favored The Bears to successfully defend the neckline and send GS back for some kind of retest of the 94.87 early session low.

The Bulls didn't defend their near-perfect early retest of the Wolfe Wave. The Bears busted GS down to 94.65, but then The Bulls came back and broke out of The Channel (in white), and were back above the top of the Wolfe Wave. Hm-m-m...

I bought 1,000 GS at 95.11 on the pullback to the EMAs, but they didn't provide support. Sloppy...sloppy...sloppy, but I held with a mental stop below the 94.65 low of The Channel.

Normally, I would be drooling over this morphed Triple Nested Channel breakout, like I was on Wednesday (LOL), but I wasn't best pleased with The Bulls' repeated retests of the top of the Wolfe Wave, so I used tight stops on the rally, raising my stop as GS went higher. The Triple nested Channel breakout put 96.35 IN PLAY

95.73 - High of the Channel
94.65 - Low of the Channel

95.73 - 94,65 = 1.08 points of upside on the breakout at 95.27.

95.27 + 1.08 = Target: 96.35 IN PLAY

These two higher stops (horizontal red lines) were very close to each other. Given the Bulls' sloppy performance, I didn't want to see any "lower lows" and was concerned that I'd have to sell into fast market conditions on the downside if they both got taken down. GS was half way to the 36.35 target, so I was content to sell when the higher stop (35.75) got busted.

The lower stop (35.63) held, and the target of 96.35 got MADE about ten minutes after I sold. Curses! LOL.

From Friday morning:

"Technically, GS still is broken out on a closing basis, but it theoretically could continue to "walk down" the upper trendline...down...down...down, but still would be broken out."

You see what I meant by that. GS still is broken out, but it hasn't done anything on the upside since the breakout and still is testing the top of the Wolfe Wave/Falling Wedge. That said, The Bulls are beautifully positioned for earnings if they can hold up here and if the company comes out with anything positive.

Gain: $1,200

GOOG And GS

2011-10-14T04:17:00.005-04:00

GOOG reported earnings after the closing gong and was trading higher, in the low $590's last evening. We'll see if it holds up in regular hours. That puts GOOG up $110 off the Stifel Nicolaus downgrade low of $480 on the morning of October 4, at which time GOOG double-bottom in the intraday chart, at 480...480 (see last week's posts on GOOG).

A few observations on the daily chart, which would apply to ANY chart:

(1) When GOOG broke down below the Rising Wedge, then CLOSED back inside the wedge on September 27, that presented "Ye Olde Knuckle-biter" to The Bears. The high in that session was 547.05. The candle was a "possible" Bearish Inverted Hangman, if The Bears could knock GOOG out of the Rising Wedge and take the stock down again.

The Bears were successful, and "Ye Olde Knuckle-biter" inside the Rising Wedge turned out to be a "One Day Wonder." GOOG went down and the 490.86 target got MADE, but the 486.82 target did not. Strategy-wise, if The Bears took "at least 'some' profits when the 490,86 target got MADE," they did alright if they covered the next "Ye Olde Knuckle-biter," which was much more than a "One Day Wonder," as we can see.

(2) The October 7 close was just slightly inside the broken neckline. The Gap Up opening in the next session of ten dollars, to $525, was well inside the broken H&S Top and was a HUGE warning to The Bears. On a gap up like that, the inclination of The Bears is to "hope" for a Gap and Crap, and for a chance to cover their shorts at a lower price. The Bears got a pullback of less than two dollars, then GOOG powered higher and closed near the high of the session, at 537.17. UH-OH for The Bears.

(3) When a H&S Top gets broken to the downside, a move back above the neckline is a warning to The Bears ("Ye Olde Knuckle-biter"), a move above the Right Shoulder high is another warning, and a takeout of the high of The Head is yet another warning because, as long as the stock trades above the high of The Head, the measured move from The Head to the neckline is IN PLAY on the upside! Yeeks.

Eyeballing it, the target looks to be roughly 604.00 IN PLAY, as long as GOOG trades above the 558.52 high of The Head.

And, speaking of "Ye Olde Knuckle-biter"...

... From yesterday morning on GS:

"We knew from this chart yesterday morning that Trendline #2-#4 at the top of the Bullish Wolfe Wave (or Falling Wedge) came in at 96.34. Since it's declining, it isn't good enough for GS just to hold above it, but rather, we want to see "former resistance act as support" on any retest, then see the stock move higher.

A nominal dip below that trendline is fine, but then it should move to the upside."

After all of the nice chart work that The Bulls constructed in Wednesday's session, The Bears managed to gap GS down at the open and send the stock back for another retest of the top of the Wolfe Wave/Falling Wedge, which came in yesterday at 95.60.

I wasn't real fond of a second retest, but since The Bulls were holding steady in the 95.50's and above (horizontal white line), I went ahead and bought 1,000 GS at 95.57. The top of the Wolfe Wave/Falling Wedge didn't hold up, as support. The Bears knocked GS down below 95.00, which was more than just a nominal (in name only) break of 95.60. I was holding "Ye Olde Knuckle-biter." UGH. I threw it in on the next rally, at 95.20.

GS put in a low at 94.52, then formed and broke out of this Cup & Handle. It also was back above the 95.60 top of the Wolfe Wave/Falling Wedge, but I didn't like the fact that it had gone a dollar below it on the selloff to 94.52. The Bulls "done me wrong," so I passed on the breakout. LOL.

Sloppy...sloppy...sloppy.

After the upside breakout, The Bulls got thrown back inside The Handle, then they rallied, then they got sent back inside The Handle again. Yeesh.

The pattern in orange is a "possible" H&S Top. The Bulls managed to morph TWO of those into Falling Wedge upside breakouts on Tuesday and Wednesday, so they could do the same here, but they'd better look sharp.

As I've said many times, Falling Wedge breakouts are my least favorite of the pattern breakouts, and this is a good illustration of why. Technically, GS still is broken out on a closing basis, but it theoretically could continue to "walk down" the upper trendline...down...down...down, but still would be broken out.

Wolfe Wave breakouts are "supposed to" result in very sharp moves to the upside, toward the target line (Black #6). We got a bit of that on Wednesday's breakout to 101.13, but yesterday's perfomance from The Bulls was dismal.

An earnings beat could propel GS to the target. They're due out October 18, I believe. Check me on that.

Loss: $400

GS - The Body Of Evidence

2011-10-13T05:28:00.004-04:00

From yesterday morning on GS:

"The Bulls tried to stick the close above the 97.08 technical breakout, but failed. That presents "Ye Olde Knuckle-Biter" to The Bulls since the technical breakout didn't hold on a closing basis."

We knew from this chart yesterday morning that Trendline #2-#4 at the top of the Bullish Wolfe Wave (or Falling Wedge) came in at 96.34. Since it's declining, it isn't good enough for GS just to hold above it, but rather, we want to see "former resistance act as support" on any retest, then see the stock move higher.

A nominal dip below that trendline is fine, but then it should move to the upside. Wolfe Waves "should have" a fairly sharp move in the direction opposite the Wave #5 Fakeout Breakdown once they breakout, making it clear to everyone who was caught "wrong-footed" selling, or selling short, the technical breakdown at Wave #5 that it was a fakeout.

The "Ye Olde Knuckle-biter" close on Tuesday doesn't quite get it. If this is a Bullish Wolfe Wave, GS needs to GET GOING toward the target line, at Wave #6.

Yesterday morning, GS open on a Gap Up, came back to fill the opening gap, made a new high for the early move, then "appeared" to be tanking to the downside. That move down was a critical test of the top of the Wolfe Wave, at 96.34.

The stock gave back all of the opening gains, went into the red, but held at 96.39 (white up arrow), then powered higher, taking out the early session high (white down arrow).

The early move down was a "shakeout," similar to the Wave #5 Fakeout/Breakdown of the Bullish Wolfe Wave in the daily chart. Weak-handed Bulls, some of whom might not have been happy with the prior session's "Ye Olde Knuckle-biter" close might throw it in, and Bears accustomed to "rinse and repeat" with shorting any rally during the 2011 decline of 50% are caught "wrong-footed" on the selloff, which turned out to be a successful retest of the top of the Bullish Wolfe Wave.

Based on that pretty convincing body of evidence, I bought 1,000 GS at 97.94 on the pullback from the new session high toward the EMA's.

Similar to what we witnessed in Tuesday's session, The Bear formed and broke the neckline of a H&S Top (pattern in yellow), but The Bulls morphed it into a Falling Wedge (pattern in white), like they did in Tuesday's session, then broke out of it to the upside. More bullish evidence.

The first pullback to retest the Falling Wedge didn't quite hold, but the next two retests did (the three white arrows). More bullish evidence.

I bought another 1,000 GS at 97.82.

Oh-h, buddy!

I try not to drool when I see "nested" pattern breakouts, or multiple pattern breakouts. They don't always work out, but the majority of them not only do work out, they can really pack some punch on a breakout or a breakdown, as we've witnessed so often in the past.

The Falling Wedge (in white) was nested in the left side of a Symmetrical Triangle (in green), and there was a smaller Falling Wedge in the right side of the Symmetrical Triangle. The breakout put a target of 99.08 IN PLAY.

98.75 - High of the Symmetrical Triangle (pattern in green)
97.42 - Low of the Symmetrical Triangle

98.75 - 97.42 = 1.33 points of upside on a breakout at 97.75

97.75 + 1.33 = Target: 99.08 IN PLAY

I sold my 2,000 GS when the 99.08 target got MADE, planning to repurchase them on a pullback, if I could, but she was gone on the upside.

You see what I mean about those nested patterns "packing some punch." GS formed another "nested" Rising Channel, then took off again, scoring a high of 101.13 on the session before profit-taking set in going home.

Gain: $2,350

GS - Wolfe Wave Watch

2011-10-12T05:19:00.004-04:00

Goldman (GS) has had a rough 2011, down 50% at its low of 84.27 on October 4, when it reversed off a possible Bullish Wolfe Wave downside Fakeout/Breakdown (Black #5) and closed on a Bullish Engulfing candle.

At Monday's close, GS was poised to break out of the pattern, needing to take out the top of the pattern (Black #2-#4) at 97.08, then last Friday's high of 98.07.

GS opened yesterday Gap Down and was off two dollars, but it came right back and broke out, taking out both 97.08 and 98.07.

The stock rallied to 98.66, then broke below a little H&S Top (pattern in yellow). The Bears weren't doing much to knock it down, and after an upside breakout like GS had, H&S Tops often morph into a Falling Wedge or a Falling Channel (pattern in white). Connect the high of the Head and the high of the Right Shoulder for the upper trendline.

I bought 1,000 GS for 97.55 and sold them for 98.62-98.63, just below the session high of 98.66, to defend against a possible Double Top there.

GS went just a little bit higher (white arrow), to 98.8099, had a selloff, then traded sideways for the remainder of the session. The Bulls tried to stick the close above the 97.08 technical breakout, but failed.

That presents "Ye Olde Knuckle-Biter" to The Bulls since the technical breakout didn't hold on a closing basis. Earnings for GS are due out on October 18 according to Yahoo Finance.

Gain: $1,050

FCX: Falling Wedge

2011-10-11T03:01:00.003-04:00

This daily chart of FCX is as of Friday's close. Thursday's candle was a "possibly" Bearish Doji Star, and it was followed on Friday by a Bearish Engulfing pattern. The close was 34.01. Any Bears who shorted wouldn't want to see Friday's high of 35.72 get taken out to the upside because that would negate any short-term implications from Thursday's and Friday's candles.

Yesterday morning at the opening gong, The Bulls came out of the gate on a Gap Up, to 35.17, and at 9:40AM, FCX printed a high of 35.735, a penny and a half above Friday's high of 35.72 (horizontal white line).

That kind of nominal takeout of Friday's high isn't real convincing, but by 10:21AM, FCX had printed 36.14, which was much more convincing, clearly indicating that Thursday's and Friday's bearish-looking candlesticks wasn't any kind of top.

FCX is notorious for "Gap And Crap" openings, in which the opening gets sold, the gap is filled, and sometimes more than that. On the selloff from the new Crash Recovery high of 36.14 (White #1), The Bears were looking for the "Gap and Crap" to play out, but the upside takeout of Friday's 35.72 high suggested that it might not.

The early selloff came down in a Falling Wedge, the top of which was twice validated resistannce (the two white arrows), an upside breakout of which should have "some" significance if The Bulls could pull it off. I liked The Bulls' chances, primarily based on the upside takeout of Friday's 35.72 high, and bought 5,000 FCX at 35.35.

The Bulls broke out of the Falling Wedge and took FCX back up to the highs at White Data Point #3. I considered taking profits on half the position there, but decided instead to hold and raise my mental stop to below the lows at 35.52 and 35.525 (red arrows), locking in a winner, and giving the trade a chance to be more profitable if The Bulls could take FCX back toward the 36.14 morning high.

The selloff and failure at the EMAs (red arrow) suggested that my mental stop was going to get hit, so I threw it in at 35.53-35.55.

My stop did get hit and The Bears managed to take FCX down to 35.31 around 3:25PM, but in the final half hour of trading, with (1) the opening gap NOT filled, as they had expected, and (2) the early session Crash Recovery high of 36.14 clearly indicating that a top was NOT put in on Friday, The Bears got a little nervous and many of them covered their shorts going into the close of 36.04.

Gain: $900

FCX: In Crash Recovery

2011-10-08T06:01:00.005-04:00

Late Spring, and throughout the Summer of 2010, FCX formed a Cup & Handle base that had a Bull Flag nested within it. To the left of that solid base, there was a Bearish Rising Channel that had formed during the Winter and broke down early Spring, but it didn't represent a lot of resistance because the September 3, 2010 breakout of the nested Cup & Handle pattern occurred near the upper end of that Bearish Rising Channel. Once the 44.15 high of that Channel got taken out to the upside, everyone who had been trapped in it, holding the stock long, was made whole and was holding a winner. The lack of selling pressure contributed to FCX being able to score a gain of 116% off the July, 2010 low of 28.35.

In the current time-frame, the picture is quite different.

As we approach year-end, there is a huge overhang of selling pressure from the initial crash from the 56.78 high of the Bearish Wolfe Wave to 41.20, which broke the 2011 Falling Wedge, and then nearer-term, from the second crash that occurred from the 48.60 high of the weak base that The Bulls tried to establish after the Falling Wedge breakdown, to the 28.85 low of the Bullish Key Reversal on October 4.

The Bullish Key Reversal low of 28.85 could end up being significant if it holds up because it would mean that any Bears waiting for the Summer, 2010 low of 28.35 to have a better retest would be disappointed.

If The Bullish Key Reversal low of 28.85 does get taken down, that could spell trouble for The Bulls because it "shouldn't," and they likely would lose confidence.

In my view, The Bulls would do well to spend the remainder of 2011 establishing a nice base from which to launch a rally into all of that overhead resistance, which likely will be daunting. Year-end tax loss selling won't help, either. Some players will sell FCX and take the loss to offset gains in other stocks. The Bulls need to "have game" to attack the resistance.

For example:

Late Thursday afternoon, The Bulls established at Triple Bottom at 34.40 ...34.38 ...34.40 (red arrows at the horizontal red line). That resulted in a pop to the upside at the open on Friday, but it was a "Gap And Crap." The gap got filled and The Bulls rallied again, but the effort was no good. Off the 28.85 Key Reversal low, the Bulls had rallied 23.8% and ran out of steam. The Bears broke the 34.38-34.40 Triple Bottom, and down she went.

After taking a breather, though, The Bulls formed an Ascending Triangle (pattern in white), a breakout of which would put a target of 34.81 IN PLAY.

34.19 - The more conservative of the 34.19 and 34.20 highs
33.57 - The low

34.19 - 33.57 = 0.62 points of upside on a breakout.

34.19 + 0.62 = Target: 34.81 IN PLAY

After Data Point #4 got put in, The Bulls temporized around the EMAs (up arrow), chomping on spinach to gain some strength for the rally. I liked that and bought 5,000 shares at 33.92.

The pattern can't "know" when it breaks out that there is IMMEDIATE resistance at 34.38-34.40 from the mid-session breakdown. It's just a pattern that gives us the suggestion of a target, based on a measured move using the math above. We, as analysts, have to decide how likely it is that the target will get MADE, based on what else we're seeing that the pattern CAN'T see.

"Former support 'should be' resistance on any rally." I sold at 34.39, at the 34.38-34.40 resistance, not expecting the 34.81 target to get MADE.

It didn't. The Ascending Triangle rally high of 34.46 (red arrow) got put in seconds after I sold, then FCX tumbled back below the breakout, failed on an attempt to get back above the breakout (yellow arrow), then sold off again.

The Bulls have some work to do, building good bases and breaking of them. The base-building process can be slow-w-w, but again, the Bullish Key Reversal looks good if it holds up.

Gain: $2,350

GOOG: Rally To Neckline Resistance

2011-10-07T05:58:00.004-04:00

From the past two days on GOOG:

"Key Resistance overhead is roughly 509-515."

And, boy was it ever in yesterday's session!

I liked GOOG's chances for a rally into that resistance for a broken neckline retest, at 514.821, after the "Gap And Crap" opening above 507.77-507.80 horizontal resistance (horizontal red line).

On October 5 before the opening gong, Stifel Nicolaus downgraded GOOG, the market response to which was to send the stock back for a retest of 480, unwinding the prior afternoon's late day short squeezing Screamer to the upside. Rather than tank on the downgrade, GOOG double bottomed at 480 (the two white circles), then took out the 503.44 pivot high of Wednesday's upside Screamer. I liked that, and I liked the upside takeout of the 507.77-507.80 horizontal resistance.

I also liked the fact that on the pullback from yesterday morning's Gap and Crap opening, the EMAs just below it were properly threaded with the fastest 13 above the 21, and the faster 21 above the 34. I bought 500 shares of GOOG at 504.75 on the pullback.

After the pullback, The Bulls took GOOG higher and knocked out the Gap and Crap high, formed this Falling Wedge, then broke out of it. Lovely. I moved my mental stop up to 508.00, the low of that pattern (horizontal red line), locking in a winning trade.

The Bulls then formed a Symmetrical Triangle (pattern in white) with the Falling Wedge (in yellow) nested within it, then broke out again on a strong rally to 514.03. It looked like the neckline retest (daily chart) at 514.821 was a slam dunk.

The only thing that got slammed and dunked was Melf Elf! I wanted to give The Bulls a lot of leeway to get to the target since I was locked into a winner with my 508.00 stop, so I did NOT sell the breakdown below the Symmetrical Triangle near its apex (white arrow), and I did NOT sell the failed attempt at a Double Bottom (orange circle). I held until my 508.00 stop obviously was going to get busted and threw it in at 508.06, after having had a paper gain of about $4,600 when GOOG was at 514.03.

Arrrrrrrrrrrrrrrrrrrrrrrrgh!!!

I decided never to have truck with those wimpy GOOG Bulls again, until...

...I saw that they were forming a Bullish Inverse H&S pattern! Okay, I forgave them and bought back my 500 shares at 509.36.

The Bulls not only broke out of the Inverse H&S, they formed and broke out of a little Bull Flag (pattern in yellow), and successfully retested the top of it (yellow arrow)! How nice is tha-a-at?

I put my mental stop at 510.44 (red arrow), the low of the Bull Flag, locking in a winning trade, and got ready for LIFT OFF for the 414.89 neckline retest. Oh, boy!

WHAT?????????????????

The GOOG Bulls have to be joking. Those bums let The Bears bust my stop? Okay, I sold my shares at 510.37 and resolved never EVER to back the GOOG Bulls again.

Unless...

...I saw them take out the high of a Right Shoulder (horizontal yellow line) of a putitive Head & Shoulders Top that The Bears were trying to put in ;)

After being yanked around TWICE, though, I wasn't about to go in again with 500 shares. I bought 200 shares at 510.75. Stop below the neckline.

Oh-h, buddy!

The Bulls morphed The Bears' putative H&S Top into an Ascending Triangle (in yellow) with a little Falling Wedge (in orange) nested within it, then broke out of it to the upside. If The Bulls could hold up and not get weak-kneed like they did on the earlier breakouts, The Bears were very badly positioned short the breakout and were very vulnerable to a late day short squeeze.

After the Ascending Triangle breakout, there was a pullback for a retest of the top of the little Falling Wedge (first yellow arrow), another breakout, a pullback for a successful retest of the top of the Ascending Triangle, then...

...LIFT OFF!!!

I intended to sell near the 514.821 neckline, but The Bears were so panicked to cover their shorts and GOOG pounded higher so fast, I hung about momentarily and got an excellent fill at 515.02-515.10.

If you've read this far, you see what I meant about Key Resistance: 509-515. There was some serious head-banging, getting to the top of that resistance. Whew!

The session finished at 514.71, with The Bulls parked eleven cents below neckline resistance.

Gain on the session: $3,000

GOOG: Unwound - FCX: Key Reversal

2011-10-06T06:58:00.008-04:00

From yesterday on GOOG:

"Key Resistance overhead is roughly 509-515."

Tuesday's late afternoon short squeeze got completely unwound in the early going yesterday morning. GOOG retraced all of that rally. The Bulls dug in, though, then managed to climb back out of that hole to a session high of 507.80, just below the bottom rung of Key Resistance, at 509.00.

In FCX, the 2011 Falling Wedge target of 30.61 officially got MADE on September 30 and that target was exceeded at bit at the October 4 low of 28.85.

As often is the case, the analyst community, in general, got this one terribly wrong at the July top, giving it upgrades and booyahs and such. That's usually what occurs at the top of a Bearish Wolfe Wave, the hallmark of which is to catch the majority of players "wrong-footed" at the upside Fakeout/Breakout, and boy, did it! That Bearish Wolfe Wave was more like a Bearish Tidal Wave. FCX got sent down nearly 50% while the benchmark SPX has been down only about 20% since July. UGH.

When targets get MADE, particularly a sizeable one like this 2011 Falling Wedge target of 30.61, they can continue much lower, but they sometimes reverse somewhere near the target, or at least have some kind of rally. The rally can come from "out of nowhere," like the Tuesday afternoon short squeeze in GOOG, or they can come from something that is identifiable in the charts.

In the daily chart, FCX put in a Bullish Key Reversal candle on October 4, which also was one of Erik Hadik's (sp?) 3-Close Reversal candles, meaning that the stock put in a new low for the move, then reversed and closed higher than the closes of the three prior sessions.

After something like that, we want to see signs of follow-thru that suggest that some kind of low might be in, if not THE low for the move. We got some of that in FCX yesterday.

FCX sold off at the opening gong, but came right back and climbed steadily higher. Early afternoon, it formed and broke out of this Symmetrical Triangle, putting an upside target of 34.00 IN PLAY.

On the pullback for a retest of the breakout (white arrow), I bought 5,000 shares of it at 33.46.

After the retest, FCX then formed an Ascending Triangle (in yellow) that had a Triple Top at 33.62...33.62...33.62, which broke out to the upside, giving testimony to the fact that Triple Tops are not always bearish. That breakout put 33.87 IN PLAY, in bit below the Symmetrietcal Triangle target of 34.00.

33.62 (highs) - 33.37 (low) = 0.25 + 33.62 = Target: 33.87 IN PLAY.

I wasn't best pleased with "Ye Olde Knuckle-biter" pullback below the 33.62 highs of the Ascending Triangle (white arrow), but I liked Tuesday's Key Reversal in the daily chart and these two pattern breakouts in the intraday well enough that I sat for it, figuring it for a minor shakeout (a move against your position in an attempt to get you to throw in your hand). It was.

After the shakeout, a THIRD bullish pattern emerged and broke out, the Symmetrical Triangle (in orange). Lovely. FCX rallied out of that and I sold my 5,000 shares at the more conservative target of 33.87.

On that move off the Triple breakout, FCX got only to 33.97 (white arrow), three cents shy of the 34.00 target IN PLAY, then had a selloff. I had finished for the day, but the Bullish Inverse H&S breakout (pattern in green) was a FOURTH bullish breakout on the afternoon and was another nice entry long for the 34.36 target that went IN PLAY and got MADE near the end of the session. The high was 34.45.

Gain: $2,000.

GOOG: Short Squeeze

2011-10-05T04:57:00.006-04:00

From yesterday on GOOG:

"In the interim, downside targets of 390.86 and 368.42 are IN PLAY. The math for the H&S Top target is at the top of the chart."

The Rising Wedge target of 490.86 got MADE on the gap down opening yesterday morning. From the "Ye Olde Knuckle-biter" high of 547.05 five sessions ago, GOOG was down over 60 points at the early session low off the Smackdown from the retest failure of the broken Rising Wedge.

That isn't a reason to go knife-catching, but it's been fairly one-sided in favor of The Bears, so I was looking to see if The Bulls could come up with anything from which to launch a countertrend rally or a short squeeze.

This Ascending Triangle (in white) with a "nested" Falling Channel (in yellow) looked real decent. I liked the fact that the low of the Channel held above the ascending line. I got long 1,000 shares at 489.50.

When The Channel broke out, that put 492.82 IN PLAY.

490.36 (high of the pattern) - 486.42 (low) = 3.94 points of upside on a breakout.
488.88 (breakout) + 3.94 = Target: 492.82 IN PLAY

An Ascending Triangle breakout would put a target of 497.47 IN PLAY.

490.36 (high) - 483.25 (low) = 7.11 points of upside on a breakout.
490.36 + 7.11 = Target: 497.47 IN PLAY

"Nested" patterns and multiple patterns tend to pack some punch when they breakout, but if it's a breakout against the dominant trend, it's a good idea to reduce expectations. Targets against the dominant trend are less likely to get MADE.

Ascending Triangle breakouts in a bearish trend, or at the end of a bullish trend, often "morph," or change, into Bearish Rising Wedges/Channels. I sold the 1,000 shares in the 493.50's, between the two targets, to defend against the possible morph (pattern in red). I wasn't looking for much since I was playing against the trend.

The pattern did morph into a Rising Channel (in white), which subsequently broke down, putting a target of 479.15 IN PLAY.

494.18 (high) - 483.25 = 10.93 points of downside on a breakdown at 490.08.
490.08 - 10.93 = Target: 479.15, IN PLAY.

I wanted it short at 490.25 (white arrow), playing it for a retest failure at the bottom of the broken Rising Channel, but "they" wouldn't let me have it. When GOOG moved down to new post-breakdown low, I cancelled the order and called it a day.

The Bulls made one more rally attempt to retest the bottom of the broken Channel (white arrow), got to 492.31, then The Bears tanked it to a session low of 480.60, about a point and a half above the 479.15 target that was IN PLAY, then...

...WHOA!!!

The Bulls popped open their cans of spinach and said, "That's all we can stands...we can't stands no more!" LOL.

Good lesson on not to be rigid about targets. They're "ballpark/what we're aiming for," not anything precise or guaranteed. For that reason, we want to have a mental stop in mind so that we don't get squeezed half to death like some shorts likely did in yesterday afternoon's late day upside Screamer.

The horizontal red lines are suggestions of "logical stops" on a short trade. As GOOG tanked to the 480.25 low, shorts can ratchet down their stops to the preceding high, as the stock made each new low on the move down. That was a classic, relentless, 20 point short squeeze. Yeeks.

Market lesson for the shorts: "Know when to fold 'em."

Key Resistance overhead is roughly 509-515. That's:

1. The top of the bearishly inverted EMA's (exponential moving averages)
2. The broken neckline of the H&S Top
3. The gap from September 30th.

Anything above that is "Ye Olde Knuckle-biter" for The Bears, like we had on the September 27 "One Day Wonder" close, back above the broken Rising Wedge.

Gain: $4,000

GOOG: H&S Top Breakdown

2011-10-04T06:28:00.003-04:00

From the weekend:

"As we've witnessed in the past, Bearish Rising Wedges/Channels (pattern in blue) often morph, or change, into a Bearish Head & Shoulders Top (pattern in black). The Right Shoulder rally, which we got this week, usually is a failure to regain and hold the broken Bearish Rising Wedge or Rising Channel, then the stock comes down and breaks the neckline, which hasn't yet occurred."

Yesterday, The Bears took out the neckline of the "morphed" H&S Top on a Gap Down (red arrow), "Gap And Go" session. The Bulls tried to establish support in the mid-501's (horizontal white line), but it was no good. The Bears took out that support (white arrow) and The Bulls were shut out of it for the remainder of the session.

The downside expectation for the Rising Wedge (pattern in blue) is some kind of retest of the 490.86 low of the pattern. Rising Wedges can be tricky. Sometimes the pullback after the breakdown is more shallow than that, maybe a 50% or a 61.8% of the height of the Rising Wedge, then the stock rallies.

However, if the Rising Wedge morphs into a Head & Shoulders Top, as this one did, then there usually is more downside than that, as we witnessed in GOOG yesterday. A multiple pattern breakdown (Rising Wedge and H&S Top) tends to pack some punch.

Targets only are what a given pattern breakout or breakdown suggests, based on a measured move off the pattern. GOOG should be reporting earnings in a couple of weeks, so the fundamentals "could" trump the poor technicals. In the interim, downside targets of 390.86 and 368.42 are IN PLAY. The math for the H&S Top target is at the top of the chart.

GOOG: Down From Stacked Resistance

2011-10-01T05:21:00.007-04:00

From yesterday morning on GOOG:

"The Bears need to take out Black trendline #2-#4 and get moving on the downside, or The Bulls could turn it around. That trendline comes in today at 521.463."

The Bears did a good job of it, opening GOOG at 520.21, below trendline #2-#4, and closing the stock down for the third session in a row coming off stacked resistance after Tuesday's "Knuckle-Biter" close back inside the broken Rising Wedge.

Data Point #4 might have to be moved as the chart evolves, but the breakdown and retest failure of the Rising Wedge suggests some more downside.

For example:

As we've witnessed in the past, Bearish Rising Wedges/Channels (pattern in blue) often morph, or change, into a Bearish Head & Shoulders Top (pattern in black). The Right Shoulder rally, which we got this week, usually is a failure to regain and hold the broken Bearish Rising Wedge or Rising Channel, then the stock comes down and breaks the neckline, which hasn't yet occurred.

The high of this possible Right Shoulder is 547.05, which is a little higher than the 546.30 high of the Left Shoulder, which it "shouldn't be" if we're going to be strict about rules, which I'm not. Since the putative neckline is rising, it has the right look. The important thing is to see if: (1) the neckline breaks, (2) if the 510.50 low of the neckline gets taken down (Blue #2 in the first chart above), and (3) if the 490.86 low of the Bearish Rising Wedge at least gets tested.

The height of the putative H&S Top is about 36 points, so if the neckline breaks, that amount would be subtracted from the point of the breakdown to establish the target.

After yesterday morning's gap down to 520.21 and quick move down to 515.04, I watched for about an hour and decided to short GOOG at 520.25, near the opening price. That wasn't a great entry since there was a big gap that wasn't filled, but GOOG looked very weak, so I went ahead with the trade, planning to scalp a little.

I got squeezed to 524.00 on the rally to fill some of the opening gap. 519.50 (horizontal yellow line) was validated support. 519.50 finally got broken to the downside, but The Bulls established support just below there (horizontal white line), and were threatening to break back above 519.50. I didn't like that, so I covered my short there.

The Bulls managed only a minor breakout above 519.50, then The Bears reasserted themselves, took out minor support (the white horizontal line in the last chart) and took GOOG down.

At the high of the Symmetrical Triangle (pattern in yellow), the Bulls failed in that attempt to regain 519.50. The Bears broke the pattern to the downside and took GOOG to a new session low.

Game, Set and Match to The Bears in Friday's session. We'll have some tennis, for a change ;)

Gain: $800

GOOG And FCX

2011-09-30T06:53:00.004-04:00

This is the chart of GOOG as of Wednesday's close, prior to it being called Gap Up at yesterday's open, to 536.00, which was Gap support that The Bears broke in Wednesday's session.

"Broken support 'should be' resistance on any retest," so that opening indication at 536.00 looked marked for a Gap And Crap opening, especially since The Bears had smacked GOOG back out of the Channel in the daily chart after "Ye Olde Knuckle-biter" on Tuesday. However, two factors kept me from shorting the Gap Up opening in GOOG:

(1) In the middle of the chart, 527.87 was the pivot high of a "W"-Bottom, or Double Bottom (synonymous), the upside takeout of which took GOOG up to 547.00. At Wednesday's low of 527.70, "former resistance at 527.87 became support." The Bulls stood their ground and closed GOOG slightly above it.

(2) Not only had The Bulls stood their ground at expected support, they were breaking out of a Channel (the white arrow) at the open, so it 'could be' a Gap And Go opening.

Since the daily chart usually trumps the intraday chart, the case for The Bears looked stronger since they had smacked GOOG out of the Channel, so they had to be favored to defend 536.00, but I had some doubts.

Hmm-m-m...what to do...what to do...

I decided "when in doubt...stay out." I passed on shorting the Gap Up opening.

RESULT: It was a Gap and Crap opening (red arrow). Curses! LOL.

But, The Bulls still might not be finished. Beginning at the September 20 high of 558.52 (Blue #4), that data point also is Black #1 for a "possible" Symmetrical Triangle. The top of it comes in today, September 30, at 540.138. If The Bulls can break out of it, though, they've got to deal with the bottom of the broken Channel, which comes in today just above there, at 540.85, so an upside Symmetrical Triangle breakout wouldn't look quite believable, but we know how deceptive Ms. Market can be ;)

The Bears need to take out Black trendline #2-#4 and get moving on the downside, or The Bulls could turn it around. That trendline comes in today at 521.463.

At yesterday's 30.64 low, the 2011 Falling Wedge target of 30.61 that went IN PLAY on the August 5 breakdown below 46.00 got MADE, within three pennies.

That doesn't mean that FCX can't or won't go lower. It only tells us that the downside expectation from that particular pattern breakdown has been achieved.

Market lesson: "When analysts are calling for higher targets, but we see a chart breakdown, be ver-ry careful, despite low price earnings ratios and despite how cheap the stock looks. Cheap can get a lot cheaper."

GOOG: Bearish Pattern Breakdowns

2011-09-29T06:02:00.007-04:00

From yesterday on GOOG:

"Often, those moves back inside a broken pattern are just a "One Day Wonder" and The Bears end up knocking it outta there, but they are uncomfortable for The Bears when they occur."

The Bears got it done, but there was a little more discomfort for them in the early going, as The Bulls took GOOG higher with a Gap Up, and higher still in what turned out to be a Bearish Rising Wedge move (pattern in white) to a top at the Head of a H&S pattern (pattern in yellow).

I liked the neckline breakdown on the long red candle (horizontal arrow) and wanted to short any retest of the broken neckline, or any attempt to get through the bearishly inverted EMAs (yellow down arrows).

In the 5-Minute chart, The Bulls were holding at the gap (horizontal white line), so since a rally to the EMAs (white down arrow) seemed to be in the offing, I decided to get long 500 shares of GOOG at 536.85 for a quick rally to 539.00 - 540.00 EMA/H&S Top resistance, then reverse and go short.

The Bulls managed to break out of this Ascending Triangle and get to 539.00, but The Bears sent them back inside the triangle for "Ye Olde Knuckle-biter." I wasn't interested in a knuckle chew, especially since I was wanting to get short, so I threw it in at 537.50 for a $300 gain and planned to short any further rally, or a breakdown of 536.00 gap support (horizontal white line in the chart above).

The Bulls did have another rally in them, to 539.53 at the top of a Rising Channel and the bearishly inverted EMAs. On the heels of the broken H&S Top earlier in the session , the Rising Channel "should be" a bearish continuation pattern and resolve to the downside. I shorted 500 shares of GOOG at 538.75 on that rally (white arrow).

The Bears morphed the Bulls' Rising Channel (in white) into another H&S Top (in yellow), then broke it to the downside. Lovely. Notice the failures at the bearishly inverted EMAs (three yellow down arrows). Lovely.

What wasn't lovely at this point in trading (1:00PM) was that The Bears had allowed The Bulls back inside the broken H&S Top pattern on the broken neckline retest, for a "Ye Olde Knuckle-biter," leaving me wondering if The Bears ever were going to get it done on the downside. UGH. I lowered my mental stop to "cover an upside takeout of the high of The Right Shoulder," which at least would give me a small gain if I got taken out.

Get it done, Bears, dang it! LOL.

FINALLY!!!

The Bears rejected The Bulls' bid to get through the second H&S Top and also knocked out 536.00 Gap Support. That put the 532.93 top of the Gap from September 26 IN PLAY, where I planned to cover my short in case of 536.00 retest rally.

GOOG has a wide spread between the BID and ASK, so I covered at 533.25, allowing for some wiggle room and for the possibility that the gap wouldn't get entirely filled prior to a possible retest of 536.00. As we can see, though, the gap did get filled completely.

I took a much needed nap after I covered so I didn't get to see if the Bulls would be able to retest broken 536.00 support, but they did. The Bulls rallied to 535.88 in another rising Channel (the second one in yellow), then The Bears took over and spanked The Bulls into the close.

Advantage: The Bears

Gain on the session: $3,050

AMZN And GOOG: Gap Up Openings

2011-09-28T06:19:00.006-04:00

From yesterday on GOOG:

"Anything above the bottom trendline, at 537.28 for today, is "Ye Olde Knuckle-biter" for The Bears because the stock would be back inside the broken pattern and The Bears "shouldn't" allow that, other than for an intraday gap fill, but then they would need to smack it outta there."

This chart of AMZN is the type of thing to which I was referring yesterday morning. AMZN opened Gap Up, but it was a Gap And Crap opening, and The Bears immediately smacked it for a loss of $12.

The GOOG Bears didn't show up until late in the session, and it was a poor showing at that.

GOOG opened on a Gap Up, but it was a Gap And Go instead of the Gap And Crap that AMZN experienced. After a brief pullback, GOOG rallied to a new morning high of 542.83, well inside the broken Channel in the daily chart.

GOOG pulled back again from 542.83 and The Bulls hunkered down, formed a Bullish Falling Wedge, then broke out of it to the upside, suggesting a retest of the 542.83 high, and possibly higher.

I shorted 500 shares of GOOG in the 542.60's, playing it for a Double Top.

Nope! NOT a Double Top. Curses!

My entry short was at the first white arrow, and I got squeezed immediately. I didn't cover my short because GOOG already had rallied above the stacked resistance that we discussed on Monday morning, and it now was rallying farther into resistance. The rally didn't look sustainable, and I was willing to give the trade a chance.

My decision to hold short wasn't a horrible one, but it wasn't a good one either. I was caught out of position on the breakout into the $543's and was under water a little over $2,000 at the 547.05 session high. The trade "could have" ended with a loss like that, if GOOG hadn't finally sold off a little at the end of the session, which wouldn't have been anything dreadful, but it simply wasn't good play on my part.

In the final hour, The Bulls ran out of steam and I got a chance to cover my short with a gain (second white arrow) and I took it. I covered in 541.50's. While it looked like GOOG "could" tank into the close, I wasn't going to press my luck. It also looked like the session "could" finish with "Ye Olde Knuckle-Biter" for The Bears, with GOOG closing inside the broken Channel.

GOOG did close inside the broken Channel, presenting The Bears with "Ye Olde Knuckle-biter," leaving them wondering if the breakdown was for real, or not. Often, those moves back inside a broken pattern are just a "One Day Wonder" and The Bears end up knocking it outta there, but they are uncomfortable for The Bears when they occur (the opposite of that for The Bulls, when a stock closes back below an upside technical breakout).

The slope of the lower trendline is 1.78546, so we "move the chains" by that amount and the trendline comes in today at 539.065. Yesterday's close was 539.34, so The Bulls and The Bears will have at it "right there" at this morning's opening kickoff ;)

Gain: $550

GOOG And AMZN: Triangle Breakouts

2011-09-27T04:15:00.007-04:00

From yesterday:

"Any rally below, and up to, the 534.51 low of all of that resistance is a "gimme." Above it is Bull/Bear Combat Zone."

Rather than making an immediate bid for the "combat zone," GOOG had a Gap And Crap opening (the top of this Symmetrical Triangle, in yellow), went down and busted the stops below support in the 514's, then rallied.

Late afternoon, after the Symmetrical Triangle broke out to the upside, GOOG pulled back for a retest of the top of the pattern, which was at about 523.40. That looked like a real nice entry long the stock, but I preferred AMZN, which had a similar breakout of a Symmetrical Triangle and also was pulling back for a retest.

AMZN exhibited better relative strength during the morning Smackdown off the Gap And Crap openings. It not only didn't break to a new low, as GOOG did, it didn't challenge its recent low at all.

On the pullback to the top of the Symmetrical Triangle (pattern in yellow) after its upside breakout, the EMAs also were right there and were properly threaded with the 13 above the 21, and the 21 above the 34. Lovely. I bought 2,000 shares of it at 225.50 (yellow up arrow) with a mental stop below 224.32, the minor low just prior to the Symmetrical Triangle breakout.

AMZN put in a Symmetrical Triangle retest low at 225.43, then rallied, so I was glad that I didn't put in my order any lower than 225.50. Whew! I've been getting pipped at the post on some nice trades, by just a penny or three.

After the breakout above horizontal resistance at 227.95 (the yellow line), AMZN looked good to go for a short-squeezing late day rally to the Gap And Crap morning high of 229.79. With only about fifteen minutes remaining before the final gong, though, I decided to cash it in near $529 and sold just below that, at 528.95.

In the final few minutes, AMZN continued to rally and squeeze the shorts, putting in a new session high at 530.24, and closing at 530.00.

Market lesson: "Don't stay short an upside technical breakout AND a successful retest of that breakout."

GOOG rallied nearly $20 off its morning stop-busting low of 513.25 and also scored a new session high of 532.93 late in the session, just below the bottom rung of the stacked resistance that we discussed yesterday morning.

At the close, GOOG is parked "right there," below stacked resistance. The slope of the trendline at the bottom of the broken Channel is 1.78546, so we add that amount to yesterday's data point and it comes in today, September 27, at 537.28.

Despite yesterday's rally, it's still Advantage: The Bears since GOOG still is below the Channel breakdown. Anything above the bottom trendline, at 537.28 for today, is "Ye Olde Knuckle-biter" for The Bears because the stock would be back inside the broken pattern and The Bears "shouldn't" allow that, other than for an intraday gap fill, but then they would need to smack it outta there. The Bulls, obviously, want more than just a gap fill ;)

Gain: $6,900

GOOG: Rally Toward Stacked Resistance

2011-09-26T08:01:00.004-04:00

From the weekend, on GOOG:

"GOOG also was looking like a stock that didn't want to go down any more, at least not immediately. It had held the 514's twice on Thursday afternoon, again of Friday morning, and basis the 5-Minute chart, the EMAs were bunched together and had turned bullish."

GOOG currently is called Gap Up four dollars in pre-market, to the $529's, which is more like the kind of rally that I was looking for on Friday when the stock came off $514 support. If the current indication holds up, GOOG will be rallying toward the bottom of the of the broken Channel, the bottom of which was validated as support on September 12, then broken on a Gap Down below it on September 22.

Resistance Levels (534.51-538.86):

534.51 - The 21-Day Kijun-sen
535.496 - The bottom of the broken Channel. It rises 1.785 per/day.
536.26 - The 8-Day Tenkan-sen
537.535 - The bottom of Kumo (Cloud) resistance
538.86 - The low prior to the Gap Down below the Channel

Any rally below, and up to, the 534.51 low of all of that resistance is a "gimme." Above it is Bull/Bear Combat Zone.

GDX, FCX And GOOG

2011-09-24T04:22:00.004-04:00

Since Wednesday's technical breakdown through 64.73-64.76 double validated support, the GDX has fallen nearly ten points from there, and three of the downside targets got MADE in yesterday's session:

1. 58.57 - Horizontal support at Black Data Point #3 in The Channel
2. 57.95 - Measured Move off the broken Inverse H&S pattern
3. 55.80 - Measured Move off the completed Double Top

Unlike the GDX, after FCX gapped down at yesterday's open, it came roaring back for a gap fill. It sold off from there, but came right back and challenged Thursday afternoon's high of 32.30. Hmm-mm...that wasn't looking like a stock that wanted to tank anymore. It looked like FCX wanted to run to 33.00 horizontal resistance.

The EMA's still were properly threaded, so when FCX pulled back to test them for support, I placed an order to buy 5,000 shares at 32.00, just above the lowest of the EMA's (the 34), which was at 31.97.

"They" wouldn't let me have the shares. The lows for the next two minutes were 32.02 and 32.03, then FCX broke out above 32.30. Gr-r-r...

Ten minutes later...

Bang! 33.00! Gr-r-r-r-r-r-r-r-r...LOL.

On the next selloff, I bought 5,000 at 32.31, at what "should have been" horizontal support from the Thursday afternoon and early Friday morning highs. It wasn't support, though. Sloppy...sloppy...sloppy. UGH.

Although FCX did end up rallying again, I didn't like that so I sold into the next rally...

...at 32.53, which was the top (34) of the bearishly inverted EMAs basis the 10-Minute chart, for a gain of $1,100.

GOOG also was looking like a stock that didn't want to go down any more, at least not immediately. It had held the 514's twice on Thursday afternoon, again of Friday morning, and basis the 5-Minute chart, the EMAs were bunched together and had turned bullish. I bought 1,000 shares of it at 519.25, looking for at least a challenge of the 522.99 Thursday afternoon high, and possibly a nice breakout.

GOOG did make a breakout bid, but fell back. It still looked okay, but I had expected it to get through resistance on the rally in the NASDAQ and didn't want to give back all of my paper gain. I decided to "take the money" and sold at 521.50 for a gain of $2,250.

The minute that I sold...

...GOOG broke out and a few minutes later was three dollars higher than my exit price. Sheesh. Stocks "know" when we sell, then they rally! LOL.

Couldn't get all of the executions in one screenshot, so...

Buys:

Sells:

Gain on the session: $3,350

GDX And FCX: Gaps Down

2011-09-23T05:51:00.006-04:00

From yesterday on the GDX:

"The Bears took over from there and were able to send the GDX down through double validated support on a CLOSING basis. Oops!"

The Bulls paid the price for that "Oops!" at yesterday's Crash opening below the 61.35 low of the Head of the Inverse H&S bottom, which completed a Double Top at 66.98 and 66.90. Yesterday's high was 61.23, so The Bulls were locked out of the Double Top for the entire session.

Quite interesting how that broken Channel played out. Yesterday's move down wouldn't have been as much of a surprise if it had occurred after The Channel broke down on September 15. But, in her typical fashion, Ms. Market disappointed the greatest number of players possible by getting The Bears to cover their shorts on the move back inside The Channel and above 64.74-64.75 resistance, and by getting The Bulls to buy that breakout.

Wednesday's violation of double validated support on a CLOSING basis wasn't anything with which to be toyed. Those things usually have "some" significance, which is why I always try to type validated support and validated resistance in boldface.

That Crash Opening was so ugly, I at least wanted to consider the possibility of "some" gap fill in the GDX. As the morning progressed, the GDX was noodling around below 60.55-60.54 horizontal resistance (the horizontal white line) and the EMAs were flattening out, so I went ahead and bought 5,000 shares of it at 60.37 for a quick trade.

I got a momentary upside breakout (white arrow), to 60.63, but then the GDX fell back below 60.55-60.54...below my 60.37 entry...and, into the low 60.20's. No, thank you. I threw it in at 60.21 for an $800 loss.

FCX has been so badly bludgeoned since its breakdown from the 2011 Falling Wedge, I wanted to consider the possibility of a capitulation move down at yesterday's opening. I also wanted some evidence of that "possibility."

Early trading looked "Cup & Handle-ish." Some technicians would complain that the Cup is too "V-shaped" and that it should be more rounded, but we've seen many of those "V-shaped" Cups work out fine in the past. That didn't concern me at all. It had the right "look," with the Symmetrical Triangle "handle" (in yellow), and the EMA's were "in gear," properly threaded.

I got long 5,000 shares at 32.65. The highs of the Cup were 33.115 and 33.10, so The Bulls needed to get through there. They did, but...

...not for very long. On the pullback, 33.115-33.10 wasn't support, which I didn't like. The pattern in green looked like it "could be" a Bull Flag, so I gave that a chance to breakout. Another bullish pattern would have been nice, structurally. It dragged out for too long to be a Bull Flag, in my view, and my 32.65 entry was being threatened as the pattern progressed in desultory fashion. Given that I was long a stock that has been VERY bearish and that I was playing against the dominant trend, I wasn't inclined to give The Bulls any more time. I sold at 32.86 for a $1.050 gain.

After I exited (white arrow), FCX formed an even larger Channel (the pattern in blue), but The Bulls couldn't do anything with that one either. FCX traded sideways-to-down for the remainder of the session, as has been its wont lately.

Basis the daily chart, the 30.61 target that has been IN PLAY since the early August breakdown of the 2011 Falling Wedge came close to getting MADE yesterday. The session low was 30.97.

Anecdotally, when we talked about the Bearish Wolfe Wave breakdown in late July, which turned into a Bearish Tidal Wave, we discussed the fact that the hallmark of a Bearish Wolfe Wave is to get the proverbial "everyone" wrong-footed on the Fakeout Breakout to the upside, thinking that the stock is going much higher. That certainly was the case among the analyst community. It is said that, "They don't ring bells at a top," but an awful lot of analysts were "chiming in" with targets in the $70's, right at the top in late July ;)

Market lesson: "Play what you actually SEE a stock doing, not what you hear analysts saying that it will do."

Gain on the session: $250

GDX: Broken Support - FCX: New 2011 Low

2011-09-22T06:03:00.006-04:00

From yesterday, on the GDX:

"" The Bulls scored an upset victory in yesterday's session by taking out that resistance, and a target of 68.15 is IN PLAY
as long as the GDX trades above that 64.75 - 65.76 neckline.
The Bears are caught out of position unless/until they can crack it."

Players were well aware of that neckline in yesterday's trading. The GDX went down hard to test it, bounced off 65.73 very quickly and pounded higher. It happened so quickly, I wasn't fast enough to catch it.

That bounce off 65.73 was a double validation of support. Not only was the neckline breakout retested and validated, the bottom of the Rising Channel in the daily chart, which came in yesterday at 64.735, was validated within a half a penny!

That was a big score for The Bulls and the GDX rallied hard off it, but unfortunately for The Bulls...

...the ensuing rally got hung up at the bearishly inverted EMA's (white down arrow), and failed. The Bears took over from there and were able to send the GDX down through double validated support on a CLOSING basis. Oops!

It's been back and forth all week for control. At the gong, it was The Bulls who were caught out of position. Advantage: The Bears.

FCX continued down in the early going, off Tuesday afternoon's morphed H&S Top breakdown (see yesterday's chart). The Bulls initially attempted to form and break out of a Falling Channel/Bull Flag (in white), but it was no good and the stock went lower.

The Bulls regrouped and tried that same maneuver again, and the second time, they were successful (pattern in yellow). They broke out of it to the upside (first yellow arrow), then got sent back for a retest of the breakout. I liked the Bulls' chances on the retest and bought 5,000 shares of FCX at 36.49. The breakout put a target of 36.96 IN PLAY.

36.65 - High of the pattern
36.11 - Low of the pattern

36.65 - 36.11 = 0.54 points of upside on the breakout above 36.42

36.42 + 0.54 = Target: 36.96

While that were at it, The Bulls decided to indulge their morning penchant for channels and formed and broke out of another one (in orange). Lovely. Nested patterns and multiple patterns have a better chance of being successful when they break out, or break down. This breakout put a target of 36.89 IN PLAY, reinforcing the initial target of 36.96, just above that.

36.71 - High of the pattern
36.33 - Low of the pattern

36.71 - 36.33 = 0.38 points of upside on a breakout above 36.51.

36.51 + 0.38 = Target: 36.89 IN PLAY

When looking at these patterns from the microscopic vantage point of this 1-Minute chart, it's a good idea to check the 5-Minute chart to see if there's anything obvious that would millitate against the targets getting MADE. We already know that the longer-term time-frames in FCX are very bearish, so we want to be especially cautious being long a stock against the dominant trend.

Horizontal resistance from the last high (horizontal red line) was 37.23. The highest of the bearishly inverted EMAs, the 34 EMA, was at 37.07. Both of those were above the 36.89 and 36.96 targets that were IN PLAY, so FCX had some "head room" to rally, although it would be a foot race with those EMAs coming down. We shouldn't want to see The Bulls tarry.

The Bulls got it done and I sold my 5,000 shares when the 36.96 target got MADE.

Er-r-r...at least I thought that I did. I failed to notice until a bit later when I was recording the trade that the confirmation said BUY 5,000 shares at 36.96.

I checked the execution sheet. Yep. I was long 10,000 shares of FCX. My eye sight is worse than I thought.

Market lesson: "Don't get old." LOL.

Fortunately, Ms. Market was kind to an old man. When I caught my error, FCX was trading at the top of The Rectangle (in blue) in the next chart. I was able to sell the 10,000 shares at 36.99 and 37.00. Whew!

I will admit that I was tempted to hold some back for The Rectangle target in the 37.20's, which ultimately did get MADE, but decided not to press my luck at that point since I was darned lucky that I caught the mistake before I got into trouble.

After The Rectangle target got MADE, FCX went a little higher, to 37.41, then returned to its recent bearish behavior. It traded sideways-to-down, then formed and broke down from a wide-swinging Symmetrical Triangle (pattern in green), and closed a few pennies above a new low for 2011.

Gain on the session: $2,650

GDX: Breakout...FCX: Pfff-fff-fft

2011-09-21T04:36:00.006-04:00

From yesterday, on the GDX:

"Key Resistance levels in the GDX now are (1) the bottom of The Channel, which comes in today, September 20, at 64.395, and (2) 64.76 - 64.75, the September 13 and 19 highs, respectively. An upside takeout of both likely would give The Bears another chew at their knuckles ;)"

Wow...The Bears might have chewed off a knuckle when the GDX Double Bottomed at 63.22 and 63.21, then took out BOTH resistance levels, breaking out of this bullish Inverse H&S Bottom!

Monday's 64.76 Bull Trap high only was a short-term trap. It established the second data point for the neckline of the Inverse H&S Bottom and, yesterday, it was The Bears who were trapped if they remained short that neckline breakout above 64.75 - 64.76.

It's unusual for an Inverse H&S pattern to show up at this juncture in the chart, after The Channel breakdown that we've looked at in the daily, but The Bulls scored an upset victory in yesterday's session by taking out that resistance, and a target of 68.15 is IN PLAY as long as the GDX trades above that 64.75 - 65.76 neckline. The Bears are caught out of position unless/until they can crack it.

Math for the Inverse H&S breakout:

64.75 - the more conservative of the 64.75 and 64.76 neckline data points
61.35 - the low of the Head

64.75 - 61.35 = 3.40 points of upside added to the neckline

64.75 + 3.40 = Target: 68.15 IN PLAY

I tried to get long the GDX after the breakout, on a pullback to the neckline, but the pullback was very shallow, then it was gone on the upside. In retrospect, I should have "paid up" for the GDX in the high 64.00's since The Bears so obviously were squeezed on that neckline breakout, but I didn't move quickly enough and "he who hesitates is lost" in those powerful breakout/breakdown situations.

Instead, I bought 5,000 FCX (at 40.35), which also had had a bullish Inverse H&S breakout, had pulled back below the Right Shoulder of that pattern in the early going (which I didn't like), but was trading near its highs of the session while the GDX and stocks like GG were exploding to the upside. FCX has been bearish, but it "looked like" it would make a move higher toward its recent unfilled gap, even if that meant that it would get dragged higher in sympathy with the metals rally.

Being long FCX in that metals rally yesterday was like riding a donkey in the Kentucky Derby. Metals stocks were flashing new highs by the millisecond, but FCX was doing nothing. UGH.

When a stock can't doesn't participate in a bullish situation like we had yesterday, I view that as a BIG warning flag. I gave it a few minutes to get moving, but not long, and threw in it at 40.41.

Gain: $300

As is often the case when we sell, FCX finally began to move higher the minute that I sold. LOL. I didn't regret my decision though. I've seen plenty of stocks tank in situations like that.

The weakness in FCX manifested later in the session. It not only didn't rally to the unfilled gap (horizontal red line), The Bears morphed the bullish Inverse H&S breakout into a H&S Top!

Had I still been watching FCX, the high of the Right Shoulder at the bearishly inverted EMAs (top yellow arrow) and failed retest of the neckline of the broken H&S Top (second yellow arrow) both were excellent entries short the stock. FCX tanked after the failed retest of the neckline of the H&S Top breakdown, which had been my concern when I threw it in at 40.41.

I was watching trading in the GDX, looking for an opportunity for quick "stab and slab" on its nice rally, which came when it broke out of this Falling Wedge, then came back to test the breakout (white arrow). In a strong rally, patterns that form, generally, are bullish continuation patterns, as this one was.

I bought 5,000 shares of the GDX at 65.71 and sold them at 65.95 on the rally back toward the session high for a quick $1,200 gain.

Gain on the session: $1,500

GDX And GG

2011-09-20T05:51:00.005-04:00

From rhe weekend, on the GDX:

"The bottom of The Channel comes in on Monday, September 19, at 64.05. Friday's close was 64.11, so the GDX is "right there."

The GDX opened yesterday's session "right there," at 64.07, then ran further into The Channel, to 64.76, a penny above the September 13 high of 64.75.

That early move higher gave The Bears a bit more of "Ye Olde Knuckle-biter" with the GDX continuing its rally back inside The Channel and with it also taking out that high, but that nominal takeout of the 64.75 high by just a penny was a Bull Trap. The rally was over right there, at 9:42AM. The GDX sold off and closed back below The Channel.

Key Resistance levels in the GDX now are (1) the bottom of The Channel, which comes in today, September 20, at 64.395, and (2) 64.76 - 64.75, the September 13 and 19 highs, respectively. An upside takeout of both likely would give The Bears another chew at their knuckles ;)

I was more interested yesterday in shorting GG. It had fallen below its rising Channel and, unlike the GDX, hadn't regained it in Friday's session. The bottom of it came in yesterday at 52.239. Since it was rallying with the GDX in the early going, I decided to put in an order to short 5,000 shares of it at 52.38, just below 52.425 horizontal resistance in the Hourly chart.

I caught the session high of 52.40, within two cents.

GG put in a little Double Top and sold off quickly to the EMAs in the 1-Minute chart, so I covered the short and planned to re-short it on the next rally since it had managed to get above resistance at the 52.239 bottom of The Channel in the daily chart on the early rally.

I didn't get the rally. GG initially sold off and found support (yellow arrow) at the top of Friday's late session triangle (in white). I was wanting to short a gap-filling rally (horizontal red line), but it was no good. The Bulls didn't have it in them, and after a brief rally, GG broke below the bottom of Friday's late session triangle.

After that breakdown, The Bulls staged a failed Bearish Rising Wedge (in yellow) reflex rally back to the bearishly inverted EMAs, then they formed and broke below a Bear Flag (in orange). At the gong, The Bulls were trying to break out of an Ascending Triangle (in blue), the highs of which are 50.90 and 50.89, respectively.

The bottom of the broken Channel in GG comes in today, September 20, at 52.478.

Gain: $1,500

GDX Rally - FCX Selloff

2011-09-17T07:22:00.004-04:00

From yesterday morning:

"We know that "Retests of broken support are common, and are to be expected," so I'll try to keep that broken trendline in the GDX on the radar. It comes in today, September 16, at 63.6875."

I shorted 5,000 GDX yesterday morning, at 63.68 Channel resistance. I didn't want to stay very long, though. I covered fairly quickly, at 63.45, as the GDX moved down to find support at the EMAs. One of the reasons for my "hit and run" play was that The Bulls broke out of this triangle, which put 63.79 IN PLAY, just above my short entry. That breakout in the very short-term 1-Minute chart didn't concern me much, but...

...in the Hourly chart, The Bulls also broke out of this Falling Wedge, so that was TWO bullish breakouts in the two different time-frames. That concerned me.

Generally speaking, the longer-term daily chart will trump the Hourly and shorter-term charts, but there's no "always" in the stock market. I didn't like being short that kind of near-term strength and anything above 63.68, which was the bottom of The Channel in the daily chart, was "Ye Olde Knuckle-biter" for the shorts, and I was one of them. I took the money. More like grabbed the money ;)

It was a good job of it that I did because after I covered, the GDX formed and broke out of a Bull Flag (pattern in yellow), then moved higher and held up all session.

In the daily chart, The Bears now have "Ye Olde Knuckle-biter" with which to contend. They are left wondering about The Channel breakdown since the GDX closed back inside it on a 3-day pattern that "looks like" a Bullish Morning Star. That pattern normally shows up only at bottoms, but regardless of what we call it, Thursday and Friday were a pretty nice recovery after The Bulls got smacked out of The Channel.

The Recovery could be one of those "One Day Wonders," back inside The Channel, to test the mettle of The Bears, who obviously need to break The Channel again, then take out the 61.35 low of Thursday's Bullish Hammer.

The bottom of The Channel comes in on Monday, September 19, at 64.05. Friday's close was 64.11, so the GDX is "right there."

Another signature "Gap And Crap" opening for FCX. Have mercy!

The initial plunge in the first minute of trading didn't break 42.35-42.36 "last horizontal support" from Thursday afternoon (the top yellow horizontal line in the next chart), but after a brief rally, 42.35-42.36 support got taken down. UGH. I shorted 5,000 shares of it, at 42.56, on the next rally to the EMAs.

The Bulls staged a Bearish Rising Wedge rally (pattern in white) in an attempt to get back to the opening high, but it was no good. The pattern broke down, putting 42.15 IN PLAY.

42.90 - High of the Rising Wedge
42.30 - Low of the Rising Wedge

42.90 - 42.30 = 0.60 points of downside from the breakdown at 42.75.

42.75 - 0.60 = Target: 42.15 IN PLAY

42.24-42.25 was next horizontal support, so I covered half of my short position going into it, at 42.26.

I really, really didn't want to cover the other half when the 42.15 target got MADE since important 42.24-42.25 support just had been broken and the stock looked marked for a move toward Thursday's 41.50 low, but since Ms. Market punished me on Thursday for NOT "taking profits, or at least 'some' profits, when targets get MADE," I covered the remaining half at 42.15, even though I had covered half already, and planned to re-short the next rally.

CURSES!!! No rally. A dead drop to Thursday's 41.50 low, exactly. "Damned if you do...damned if you don't." LOL.

Oh, well...remember to be grateful for whatever Ms. Market gives you, Melf!

The trades were filled in such small batches (pain in the $#$%), I had to take two screenshots to get them all on there:

Gain on the session: $2,900

GDX And FCX

2011-09-16T06:19:00.004-04:00

I noticed before the open yesterday morning that the GDX had validated the bottom of The Channel TWICE, and that it was perilously close to breaking twice validated support.

Given that the slope of that trendline rises at about thirty-four cents a day, any opening in the GDX yesterday that wasn't a Gap Up would be a technical violation of the trendline. I was interested in shorting it, although I forget if Scottrade will allow it, and was going to enter a "tester" order, but...

... the GDX opened on a Gap Down, below The Channel. Never mind.

We know that "Retests of broken support are common, and are to be expected," so I'll try to keep that broken trendline in the GDX on the radar. It comes in today, September 16, at 63.6875.

In FCX, The Bulls tried to overcome the 42.24-42.27 resistance that we discussed yesterday by throwing the "long bomb," with a Gap Up opening to the 42.48 yard line, the short-term result of which was a signature "Gap And Crap" opening. UGH.

That play got called back to the line of scrimmage (a full retracement of the gap from the prior day's close) and then some penalty yardage tacked on to that for attempting to bully their way through resistance. LOL.

The Bulls needed to establish the running game (solid chart structure), and they did.

Coming off the morning lows, The Bulls climbed steadily higher, put in this Triangle, the LOWS of which were in the 42.24-42.27 resistance area, then broke out of it and headed for the opening high of 42.64, which went IN PLAY off the pattern's measured move.

Before going for that score, however, The Bulls did the smart thing and came back to retest the top of the Triangle, to validate it as support. Lovely. I bought 5,000 shares of FCX at 42.41.

Coming off the trendline validation of support at the top of the Triangle, The Bulls formed and broke out of another triangle (in orange), which also put a retest of the morning high of 42.64 IN PLAY. Alright ... Go Bulls!!!

Normally, I like to "take profits, or at least 'some' profits, when targets get MADE." If there had been only one pattern breakout, I would have cashed it in when the 42.64 target got MADE. I considered selling half of my position, but I liked The Bulls' game plan execution so well, I held all of the shares for a possible late day gap-filling rally toward...

... the 44.00 gap, fueled by the breakouts and some possible short-covering. I raised my stop to "anything that was back in my face," below 42.48-42.49 horizontal support.

CURSES!!! The rally rolled over and died.

The top of the orange triangle, 42.58, wasn't support (top yellow line).

42.48-42.49 horizontal support (bottom yellow line) wasn't support.

The stock was back in my face. Wimpy Bulls! I threw it in on the break of 42.48-42.49 horizontal support. UGH.

Have I mentioned, "Take profits, or at least 'some' profits, when targets get MADE?" LOL. Serves me right. I "shoulda" sold half of my position when the 42.64 target got MADE, but I got greedy. I should slap myself for that.

Slap! Slap! SLAP!!!

Ouch! Ouch! OUCH!!!!

The session finished with The Bulls finding support at the 42.35 low of the orange Triangle (the late afternoon low was 42.36).

Pitiful gain: $150

SSO And FCX

2011-09-15T04:05:00.006-04:00

The session in the SSO began with a Wolfe Wave 5 Fakeout/Breakout to the upside, followed up by an immediate plunge to the Wave 6 target line. Done!

That was followed up with an Ascending Triangle upside breakout, a successful retest of that breakout, and then another pullback to the breakout. Hmmmm-mm...that looked real decent for The Bulls.

I decided to get long 5,000 shares at 40.96 (white arrow), but as is often the case, they wouldn't let me have it. 40.96 was the exact low right there, and as it rallied again, I could see that "they" were going to make me pay up for it. I modified my order to a limit of 41.16 and got filled at 41.14.

That order modification cost me an extra $1,000, but I didn't mind paying it with the SSO looking so strong coming off the Ascending Triangle breakout validation, the target of which was 41.56.

Ascending Triangle Math:

40.90 - the more conservative of the 40.90 and 40.91 highs.
40.24 - the Ascending Triangle and completed Wolfe Wave target low

40.90 - 40.24 = 0.66 points of upside added to 40.90

40.90 + 0.66 = Target: 41.56 IN PLAY

The SSO then put in a neckline and a Right Shoulder (both in yellow) of an Inverse H&S and broke out of that to the upside, putting a target of 42.06 IN PLAY. The neckline highs were 41.17 and 41.15.

41.15 - 40.24 (low of the Head) = 0.91 points of upside.

41.15 + 0.91 = Target: 42.08 IN PLAY

I sold 2,500 shares at 40.60 when the 41.56 target got MADE. My plan was to hold the remaining 2,500 shares and see if it looked like the 42.08 target also would get MADE, but...

I talked myself out of it, based on the fact that Gap Resistance in the Hourly Chart (horizontal white line) began at 41.71. I decided to "take the money."

Curses! The two little pattern breakouts (in orange and in red) gave the chart additional strength, and the Inverse H&S target of 42.08 got MADE, and then some! The session high was nearly a dollar higher than that target, at 43.07.

If I had held, though, I would have sold at the 42.08 target.

SSO trades.

FCX has been getting kicked around, and lagged the general market all day. Late in the session, though, it was slow-w-wly making progress back toward 42.24 - 42.27 resistance, and was hugging the EMAs on the way up.

I bought 5,000 shares of it for 41.91 (white up arrow) and sold it for 42.26 (white down arrow), at the 42.24-42.27 horizontal resistance.

FCX sold off from that retest of resistance, which now is validated resistance, but The Bulls have something to work with if they can bust through it.

Gain on the session: $4,100

SSO And AMZN

2011-09-14T02:53:00.004-04:00

On the strength of Monday's strong performance and yesterday morning's opening rally, I bought 5,000 shares of SSO at 40.28 on the pullback to the EMAs in the 5-Minute chart. Initial resistance was the top of the channel (in white) and horizontal resistance (in yellow), at 40.54. I sold the shares just below there, for 40.51.

Nice consolidation and Falling Wedge breakout in AMZN. The highs at the horizontal yellow line were an identical 216.60. The low of the Falling Wedge was 215.40, so I expected a minimum rally to a target of 217.80 and bought 1,000 shares at 216.75 and another 1,000 shares at 216.50.

216.60 - Identical highs
215.40 - Low of the Falling Wedge

216.60 - 215.40 = 1.20 points of upside added to 216.60 = Target: 217.80 IN PLAY

The highs at the orange horizontal line were 216.95 and 217.00, a breakout above which would put an additional target of 218.50 IN PLAY.

216.95 - the more conservative of the two highs
215.40 - the low of the Falling Wedge

216.95 - 215.40 = 1.55 points added to 216.95 = Target: 218.50 IN PLAY

I sold all 2,000 shares going into the 217.80 target. My eyes were too tired to sell half and hold the other 1,000 shares for the 218.50 target, which would have given me a real decent chance at a better gain.

After I sold (white down arrow), AMZN formed and broke out of two Bulls Flags (white up arrowss). 218.50 got MADE and the stock scored an eventual session high of 219.95, capitalizing on the nested pattern/multiple pattern breakouts. Quite nice.

Gain on the session: $3,450

SSO - Late Day Double Breakout

2011-09-13T06:46:00.005-04:00

From yesterday morning:

"If the SSO opens as indicated, first resistance would be 39.244-39.25, which would become DOUBLE resistance. The former is where the broken bottom of The Channel comes in today; the latter was Friday's low. The Bears will want to defend that level on any reflex rally."

I shorted SLW and the SPX (via the SDS) on the reflex rally off the Gap Down opening, but The Bears didn't defend 39.244-39.25 resistance and allowed The Bulls to fill the opening gap entirely. Yeesh. I didn't like that at all, so on the next selloff, I threw in the SLW short trade and sold the shares of SDS.

As it turns out, I would have been fine holding both positions through the next selloff, which took out the opening low, but late in the session The Bulls came on strong and broke out of this Channel (in white), which contained a nested Falling Wedge (in yellow). As we know, those nested patterns can pack some punch on a breakout or breakdown, as this one did.

At the yellow arrow, The Bulls successfully retested the Falling Wedge breakout, the EMAs got properly threaded and from there, it was The Bulls, going away, into the final gong.

Gain on the session: $1,400

SPX And SSO

2011-09-12T07:08:00.003-04:00

From September 7 on the SPX Aad SSO:

" In both of these charts, the lower trendlines now are validated trendlines with yesterday's third "hit," confirming that they are support. If they get taken down, it suggests at least some kind of retest of the lows."

The SPX violated the bottom of The Channel by about a point on Friday, but closed within it by a few points, settling at the lower end of the day's trading range. This morning, the index is indicated to Gap Down, below The Channel.

The SSO held inside its Channel on Friday, but currently is indicated at BID: 38.67...ASK: 38.76, well below The Channel, and bracketing the September 6 low of 38.71, which was a trendline validation of support.

If the SSO opens as indicated, first resistance would be 39.244-39.25, which would become DOUBLE resistance. The former is where the broken bottom of The Channel comes in today; the latter was Friday's low. The Bears will want to defend that level on any reflex rally.

SLW: Broken Support At 40.74

2011-09-10T08:13:00.004-04:00

From yesterday morning:

"Why in the world would The Bulls let The Bears bring it all-ll the way back to 40.74 after TWO little upside breakouts (the red arrows)? UGH.

ANSWER: Because The Bulls had run out of spinach, and 40.74 wasn't going to hold."

This chart is as of Thursday's close, with The Bears having knocked out 40.74 support after The Bulls had TWO failed upside breakouts.

Friday's open...

...Gap Down to 39.83, then a quick rally to 40.62.

The reflex rally came so fast, I fumbled placing my order to short 2,500 shares at 40.55, just below horizontal resistance at 40.57. I typed 40.45, and that's where I got filled.

I expected at least a 50% retracement of the reflex rally off the Gap Down low, which was 40.18, and I covered the short just ahead of that, at 40.23, looking to get better positioned short if SLW rallied again.

I got short again at 40.54. The Bulls had broken out of the little triangle (pattern in white), so I covered the short going into the retest of the top of the pattern (white arrow) in case the retest was successful, and planned to short it a third time if The Bulls tried to rally it.

The retest was unsuccessful and failed to produce another bounce, so I decided to call it a day.

Too bad that I didn't hang about a little longer because there was another excellent shorting opportunity off that little triangle.

Notice how (triangle at the left of the chart):

1. The retest of the top of the triangle failed at the first down arrow
2. The bottom of the triangle broke at the up arrow
3. The retest of the bottom of the broken triangle failed at the second white arrow, validating it as resistance.

The Bears delivered the 1-2-3 Punch, and down she went.

The Bulls tried to establish something at the end of the session. They broke out of a mini Ascending Triangle (in yellow) that is nested within a Channel (in white). The clock expired with The Bulls defending the top of the Ascending Triangle, at 39.85.

The session high was 40.72, just below broken support at 40.74 in the first chart above.

Gain: $900

SLW - Falling Wedge Breakout

2011-09-09T06:22:00.004-04:00

I bought 5,000 SLW at 40.69 on the fill of the opening gap. The stock traded all morning in a triangle (in white), with a channel (in yellow) nested within it. Both trendlines at the top and the bottom of the pattern were validated as support and resistance (white arrows).

The majority of triangles that go beyond two-thirds of the way to the apex, where the trendlines converge (meet up with each other), resolve to the downside. It seems that Thomas Bulkowski did some research on that and something like two-thirds of the patterns broke to the downside.

Since SLW is acting bullish, and since this is only a one-minute chart, I decided to hold if the pattern resolved to the downside. I didn't want the problem of figuring out where to get back in, and losing my position. If the stock wasn't acting so bullish and if this chart were a longer time-frame, I would have sold a break of the lower trendline. You know how I feel about breaks of validated support ;)

The triangle did break to the downside, then it morphed (changed) into a Falling Wedge (in white) and then broke out to the upside. I bought another 5,000 at 40.62 as the stock sold off for a retest of the breakout.

I'm not one for "doubling down on a loser." That's a poor trading strategy, hoping that Ms. Market will bail us out of a loser. More often than not, she doesn't, and our losses are compounded. UGH.

This second entry was a purchase of a retest of a bullish breakout, not a purchase of a stock that is going down...down...down. If the selloff to support at the top of the Falling Wedge wasn't successful, I would have thrown in all 10,000 shares at the last low, prior to the breakout, which was 40.52, if memory serves. Actually, I would have given it another penny or three since the trendline at the top of the pattern was declining, and to defend against a little stop-buster.

The retest of the Falling Wedge breakout held ju-u-ust above the top of the pattern, then SLW rallied. Horizontal Resistance was at 40.80-40.81 (the yellow line) and 40.87 (the red line). The chart looked strong enough for at least a test of 40.87, so I planned to sell my initial 5,000 shares that I purchased for 40.69 at 40.84, just below that target, which I did when the stock rallied.

That left me with the 5,000 shares purchased at 40.62, and a guaranteed winner. My trading plan for those shares was to benefit from any rally through 40.87 resistance and to throw them in for a small gain if the stock came back into the high 40.60's. The Bulls had done their chart work, and it was time to RALLY!!!

Pitiful. SLW had two nominal breakouts (in name only) at the red arrows, but The Bulls failed to show up to buy either of those breakouts and the stock was back for a SECOND retest of 40.74. I didn't like that at all and threw in my 5,000 shares purchased for 40.62, at 40.75. Why in the world would The Bulls let The Bears bring it all-ll the way back to 40.74 after TWO little upside breakouts (the red arrows)? UGH.

ANSWER: Because The Bulls had run out of spinach, and 40.74 wasn't going to hold.

Oh.

Well-ll...the chart had the potential for a very nice gain above 40.87, and I was positioned to take advantage of it, but I forgot to throw some spinach out onto the field to The Bulls ;)

Gain: $1,400

SLW: Bear Trap

2011-09-08T06:15:00.004-04:00

SLW opened Gap Down yesterday, to 39.00, breaking the neckline of a putative H&S Top in the intraday chart, and also breaking the lower trendline of a possible Bearish Rising Wedge in the daily chart, which we'll look at later. I wanted it short near 39.74 (yellow line), at horizontal resistance and at EMA resistance basis the 10-Minute chart, but the rally stopped shy of my price, so I couldn't get short there.

SLW sold off again, toward the early lows, then rallied a bit. I shorted it at EMA resistance basis the 1-Minute chart, at 39.26 (white down arrow). That worked out fine. The stock broke the early session low, and fell to 38.72. The short trade looked golden until...

...this possibly Bullish Hammer showed up (white arrow). SLW went back above the broken neckline of the H&S Top and was hanging tough, above it. UGH. That's "Ye Olde Knuckle-Biter" that we've frequently discussed. It leaves us wondering how sincere The Bears were about the neckline breakdown when they don't defend it on a rally. The Bulls "should" get hammered at that broken neckline (horizontal white line), but they didn't.

I, generally, am not real patient with "Ye Olde Knuckle-Biter," and I wasn't yesterday. I gave The Bears a chance for a few minutes to take the stock back below the neckline, but when they didn't, I decided to "take the money," and covered my short position at 39.14-39.15.

WHOA!!!

We can see that the necline breakdown and the move down to 38.72 (yellow arrow) was a very ugly Bear Trap. The Bulls rallied strongly and took out the high of the Right Shoulder of the H&S Top (horizontal red line), then challenged the bottom of the broken Rising Channel two more times, after challenging it on Tuesday (the three white down arrows). Very impressive!

Basis the daily chart, the 39.00 opening was only a nominal takeout of the lower trendline of a possible Rising Wedge (six and a half cents), but the move down to 38.72 was a fairly significant break, which we now know in retrospect, set up The Bear Trap. Ms. Market enjoys being naughty like that ;)

Gain: $550

SSO, SPX And SLW

2011-09-07T05:14:00.004-04:00

The show was over for The Bears right at the opening gong. They opened the SSO just about smack on the lower trendline of the putative Bear Flag, which could end up as a Rising Channel, and that was the low of the session.

In the SPX, the session was a "possible" Bullish Hammer. In both of these charts, the lower trendlines now are validated trendlines with yesterday's third "hit," confirming that they are support. If they get taken down, it suggests at least some kind of retest of the lows.

SLW put in a low at 40.00 just after the opening gong, but that wasn't the session low. It rallied and put in a Symmetrical Triangle, broke it to the downside, then tanked to 39.11.

Coming off that low, SLW put in a Bullish Morning Star (circled), followed by a Bull Flag (in yellow). I liked that Bull Flag and bought 5,000 shares at 39.50. The flag broke out at 39.62, putting an upside target of 40.00 IN PLAY, which was exactly the early session low (horizontal red line).

39.81 - High of the Bull Flag
39.43 - Low of the Bull Flag

39.81 - 39.43 = 0.38 points of upside on a breakout, which was at 39.62.

39.62 + 0.38 = Target: 40.00 IN PLAY

Notice that as SLW rallied to the target, the EMAs were inverted and the 34EMA was right there, at 40.00, constituting DOUBLE RESISTANCE. I sold my 5,000 shares at 39.95 as SLW rallied into the target (it got to 39.98) because:

1. "Take profits when targets (40.00) get MADE"
2. 40.00 was horizontal resistance from the early session low
3. 40.00 was 34 EMA resistance
4. 40.00 was TRIPLE RESISTANCE from the broken Rising Channel in this 10-Minute chart...

...where the rally failed at the White Arrow. "Former support 'should be' resistance on a retest," and it was. That failure suggested a retest of the 39.11 low, for an attempt at a Double Bottom.

Coming off the failed retest of the broken Rising Channel, SLW also broke below this Rising Wedge (in white), which gave a further suggestion of at least a retest of 39.11. SLW stumbled around some at the 39.11 low, but did manage to put in a Double Bottom at 39.05, then...

...rallied back to 39.98 exactly, temporized for just a bit, then broke out to the upside. Very nice play from The Bulls, however...

...this is a rally into Channel Resistance again (the white arrow), so The Bulls need to come out onto field this morning loaded up with spinach ;)

A downside takeout of yesterday's 39.05 low and also a takeout of the last low in the Channel (the white up arrow), which was validated support, would look like a completed H&S Top, similar to the little yellow pattern to the left of the chart.

Gain: $2,200

SPX And SSO

2011-09-05T14:34:00.002-04:00

This is the 34/55/89 RSI chart of the SPX. When any two RSIs in the Fibonacci Sequence of 8...13...21...34...55...89...144...233 have readings the are ver-r-ry close, I call that "synchronicity." If the faster RSI is above the next RSI in the sequence, it's "Bullish Synchronicity." If the faster RSI is below the next RSI in the sequence, it's "Bearish Synchronicity."

In this chart, all of the cases a synchronicity are bearish. The trigger for a signal, in these bearish cases, is if the stock prints a penny below the prior day's session, and also closes lower. If it closes higher, the signal is very suspect.

I put this chart first, without benefit of seeing the SPX price chart, because indicators can't "see" the price chart either. They only do what they do best: they "indicate." They don't TELL US to do anything. We must decide if we want to act on what any particular indicator is "indicating."

We can see from this chart that, on August 31, the 34/55 RSIs went into Bearish Synchronicity, with readings that were very tight, and with the faster 34 RSI positoned below the slower 55 RSI. That meant that a print the next session of 1209.34, a penny below the August 31 session low of 1209.35, would be a sell from this particular indicator.

I stress that because indicators are just one clue as we collect our Body Of Evidence. They need to be viewed in context with what the price chart is doing, so let's look at the SPX chart.

The 34/55 RSI "Sell Signal" at 1209.34 was issued the session after a "possible" Data Point #4 of a Bear Flag, when the 34/55 RSIs were at Bearish Synchronicity. Again, that's just one clue. What we'd look for next is a break of the bottom of the putative Bear Flag, then some sort of retest of the 1101.54 low after that.

There are some additional notes on the chart. Notice, in particular, what happened after the SPX was down seven days in a row. A stock or index going up or down for any number of consecutive days in a row is not a reason to buy or sell, unless anyone is fond of Russian Roulette ;)

These Bear Flags/Rising Channels can be tricky. They can ratchet their way higher and wear one out. In the SSO, for example, we've got a gap just overhead from Friday's Gap Down opening that they might try to fill early next week.

As these price charts stand, though, it's Advantage: The Bears