SPX: Validated Resistance

We knew that the June 3 close of 1300.18 was a confirmed DOUBLE BREAKDOWN of both the Double Top (horizontal red line) and the Falling Wedge (Blue trendline #2-#4). The open (and high of the session) on June 6 was about a point below Blue trendline #2-#4, which was a validated trendline, and down she went. The trendline validation is the green up arrow on May 23.

As we know, when validated trendlines get taken out, that usually has "some" significance. In this case, the significance was the the Symmetrical Triangle target of 1291.18 (that pattern broke down on May 16)and the Double Top target of 1278.40 both got MADE.

After validated trendline #2-#4 got broken to the downside, "former support 'should' act as resistance" on any rally. We can see that the June 14 rally got to within less than one point of that trendline.

Any trading back above broken trendline #2-#4 would be a "knuckle-biter" for The Bears because that would put trading back inside the broken Falling Wedge and put the very short-term outlook at Neutral. The Bears' job after the June 14 close was: (1) to defend broken support (trendline #2-#4) and prove that "former support now is resistance," and (2) eventually to take out the 1265.64 low of the June 13 "bullish looking" Doji Star Hammer.

The Bears accomplished both tasks in yesterday's session.

The Bears clearly are in control at this point. Their next order of business is some kind of test of the March 16 low of the Rising Channel, 1249.05, which still is IN PLAY.

RIMM: Near 2009 Bear Market Low

Yesterday's general market rally was of no help to RIMM. It's down almost 50% from its February high and has given back almost all of the gains since the March, 2009 Bear Market low of 35.05. UGH.

BIDU: Patterns, Patterns, Patterns

(Click on charts to enlarge. Click on them again for further enlargement. Use left back arrow to return to narrative).

BIDU has sold off nearly 25% since its April top. Most recently, it broke down from a Bear Flag, but notice that in February/March, the resolution of that "Bear" Flag was to the upside. These patterns aren't always bearish.



BIDU had a bit of a rough start yesterday morning, but then staged a sharp rally, to White Data Point #1. At White Data Point #4, the stock had formed a Falling Wedge near the EMA's (exponential moving averages), which had turned up. That looked like a nice setup for a continuation of the countertrend rally, so I got long for a trade to the prior high of 123.60, sold there and called it a day.



The Falling Wedge (in yellow in this chart) turned out to be the Left Shoulder of a H&S Top. After that pattern broke down, BIDU retested the neckline and got slightly above it into the EMA's, which had turned down, and failed (white arrow). Both the breakdown and the failed retest were nice entries for selling short.




Quite a few patterns (and trading opportunities) formed over the entire session after the H&S Top breakdown. I should have stuck around ;)

1. Bear Flag (pattern in red) - There were two failed retests of that breakdown (red arrows).

2. Another Bear Flag (pattern in orange) - There were two validations of resistance at the top of the flag (orange arrows), prior to the breakdown.

3. Bull Flag (pattern in purple) - that was a Right Shoulder of an Inverse H&S pattern.

4. Inverse H&S (pattern in white) - both the Bull Flag and the Inverse H&S broke out to the upside, but the latter was a Fakeout Breakout (white arrow). When a H&S pattern breaks out, we don't want to see the low of the Right Shoulder (horizontal yellow line) get taken out (the opposite, if it's a top). That usually spells trouble, but not always.

In this particular case, the Right Shoulder low got taken out, then the breakdown was confirmed by a failed retest (yellow arrow). Uh-oh. Down she went.

Not only were there a lot of patterns in the intraday chart, but there were quite a few validations of resistance, and validations of the breakdowns. Those kinds of confirmations present nice trading opportunities. If we're not out gardening ;)



Gain: $1,200.

SLW - Triple Top Target

Although the June 8 and June 9 lows of 32.12 and 32.10 were "close enough," the second Triple Top target of 32.01 officially got MADE in Friday's trading.

FCX: Double Bottom And Falling Wedge Breakouts

From yesterday:

"This one is too close to call, but technically, the 48.82 close is a violation of the trendline."

I like what The Bulls did with that. On the early selloff to Wednesday's low of 48.52, they held at 48.51 for the right leg of a "W-Bottom," or Double Bottom (synonymous). The key to that pattern is the little pivot in the middle of the "W," which in this case, was 49.23. If/when 49.23 gets taken out to the upside (it obviously did), we can calculate an upside target for the pattern breakout:

49.23 - "W"-pivot
48.52 - (the more conservative of the 48.52 and 48.51 lows)

49.23 - 48.52 = 0.71 points of upside on a breakout above 49.23.

49.23 + 0.71 points = Target: 49.94 IN PLAY, which got MADE, and was exceeded.



The candle in the daily chart was a Bullish Engulfing pattern, off a successful Double Bottom breakout in the intraday chart, so that's another positive.



The early morning 48.51 low also was Data Point #4 of a Falling Wedge (the pattern in black). The top of that pattern, Trendline #1-#3 came in yesterday at 48.8475. The close was smack on it, at 48.85.

Falling Wedge breakouts aren't particularly bullish due to the price congestion immediately preceding the breakout, inside the wedge, but it's certainly "constructively bullish."

Given the sloppiness below the lower trendline #1-#3 of the larger Falling Wedge, The Bulls pulled off a nice session:

1. They completed a Double Bottom and the 49.94 target got MADE.
2. They put in a Bullish Engulfing pattern in the daily chart.
3. The broke out of a Falling Wedge in the daily chart.

The downward slope of trendline #1-#3 of the smaller Falling Wedge (in black) is a sharp -0.4075, so it will come today at 48.44. Any trading in FCX below that is a "knuckle-biter" for The Bulls, calling the breakout of the smaller Falling Wedge into question as a possible "Fakeout Breakout."

SPX, SLW, X And FCX

From June 2 (Pattern and Target Review):

"Support at the bottom of the Falling Wedge comes in today 1303.85, but if The Bears take out the May 25 session low of 1311.80, that would put in a near-term Double Top: the May high of 1346.82 and the May 31 high of 1345.20, so that might be a problem for The Bulls if that May 25 low gets taken down.

1311.80 is the intervening little pivot between the two shoulders of the "M"-Top, or Double Top (synonymous). For the downside target, I always use the more conservative of my two choices: 1346.82 and 1345.20.

1345.20 - 1311.80 = 33.40 points of downside from the 1311.80 breakdown.
1311.80 - 33.40 = Target: 1278.40 IN PLAY, as long as the SPX trades below 1311.80."

The Double Top target of 1278.40 got MADE in yesterday's session. The session low was 1277.42.



We never get FINAL confirmation of a breakout or breakdown unless/until a target gets MADE. In order for this channel (and subsequent breakdown) to be valid, we would need to see a return to the bottom of the channel, or something reasonably close to that.

SLW printed 32.43 yesterday, which was the bottom of the channel, so the channel and breakdown were valid, ipso facto.

At the 32.12 low, SLW also came with eleven cents of the Triple Top (fourth red arrow) target of 32.01 that has been IN PLAY since May 11. That's pretty close. If anyone short elected to cover some, or all, of their position, no one could blame them.



Yesterday was the fourth consecutive session in which I've shorted US Steel. The two downside targets in this daily chart still are IN PLAY.



I shorted X right after the open, at 42.75, and during the period circled, wondered what the heck was holding this stock up. Impatience is one of my many shortcomings. I finally got bored with it and covered the position for a $500 gain (white arrow). X rallied one more time, then it sold off. Served me right, for being so impatient. Curses!



Scottrade's initial indication of the close was 48.835 EXACTLY, smack on Trendline #2-#4. This one is too close to call, but technically, the 48.82 close is a violation of the trendline.



I bought 2500 shares of FCX on a market order when it got down to the 48.835 trendline. I got a real decent fill on the order, however, I didn't like the fact that it KEPT going down, below that trendline. That's bearish territory and I wanted FCX to hold at that support, or a few pennies below it, not sloppy behavior.

For that reason, I decided to sell the rally back toward the morning low of 49.15 and got out at 49.10 for a $700 gain.



FCX rallied only to 49.29 after I exited (red arrow) It went to a new low for the session and traded below 48.835 support on two more occasions (three white arrows), continuing with the sloppy behavior that I didn't like on the first test of 48.835 support.



Gain on the session: $1,200.

FCX, X, And AMZN

I like the fact that while the general market has been selling off, FCX has been holding up pretty well and showing decent relative by NOT breaking down below the bottom of the Falling Wedge and the top of the Ascending Triangle, the latter of which was a successful pattern breakout. The 52.28 target got MADE.

During the formation of the Ascending Triangle, we will remember that FCX met with QUINTUPLE resistance (5 red arrows) at the bottom of the Falling Wedge, so it wouldn't be unreasonable for the stock to go down there for a second retest of support. If it does, we would want to see that validated trendline support hold on a CLOSING basis. FCX has just under one point of "wiggle room" between yesterday's close of 49.76 and that trendline, currently at 48.825.




Not getting my order filled to re-renter short 2,500 shares of X, at 43.00, late Monday afternoon turned out to be a RARE "blessing in disguise." I was able to short it yesterday morning at a higher price (first white arrow). I covered on the first selloff and again re-shorted on the next rally (second white arrow). I covered that postion for a combined gain of $1,000 on the two trades and was ready to short it again, but decided to focus on shorting AMZN instead.



AMZN has been exhibiting interesting behavior lately. On June 1, it bounced higher off Trendline #1-#3, validating it as support, but then it broke that validated trendline in the very next session.

Very interestingly, in yesterday's session, AMZN rallied back to that trendline, got a little above it, then sold off, validating Trendline #1-#3 as resistance. Late in the session, AMZN presented this interesting shorting opportunity:



This is another of those "unorthodox" H&S Tops that we've looked at quite a few times. The Right Shoulder "shouldn't" be higher than the Left Shoulder, and the volume "shouldn't" be lowest in the Left Shoulder. Volume also "should" pick up on the breakdown. It didn't. Regardless of those "rule violations," the target got MADE.

The high of the Head was 190.21. The neckline data points were an identical 189.27 ... 189.27.

190.21 - 189.27 = 0.94 points of downside on a break of the neckline. 129.27 - 0.94 = Target: 188.33 IN PLAY.

I shorted 189.22 on a retest of the 189.27 broken neckline, allowing for AMZN's wider than usual spread between the bid and the ask. I covered my short when the 188.33 target got MADE, but got a lousy fill of 188.38-188.40. They call that "slippage." I call it "stealing my money." LOL. That's fine. Gain: $800.

Regarding this H&S Top, while we don't want to flaunt rules of technical analysis, we also don't want to be rigid about them. It ain't rocket science. "If it walks like a duck...quacks like a duck...we probably are looking at a H&S Top that walks and quacks kinda funny."

Notice, by the way, that Head of the pattern was a "nested" Symmetrical Triangle (pattern in yellow) within the overall H&S pattern. "Nested" patterns seem to give pattern targets a better chance of getting MADE, but there's no "always" in the stock market. It's a game of probabilities. If the trade hadn't worked out, I would have stopped it out above the high of the Right Shoulder for about a $600 loss.

Not a great risk:reward trade, but I was favored to win it, shorting a retest of a broken Nested H&S Top pattern.



Gain on the session: $1,800

SPX, SLW And X

The Symmetrical Triangle target of 1291.18, from the May 16 breakdown, finally got MADE in yesterday's session. The 1300.26 high of the session was about a point below the bottom of the Falling Wedge that got broken on a closing basis in Friday's session.



From the weekend, on SLW:

"The facts that (1) the trend is bearish, and (2) we still have two downside targets IN PLAY in this chart (32.01 and 29.28) have me a bit cautious about any bullish expections, but we always want to be as objective as possible and try to look in both directions."

I took a chance on a countertrend rally in SLW, and bought it for 35.21 at the open. It moved up to the highs in the 35.50's, pulled back, then moved above the 35.53... 35.58...35.57 (first white arrow) highs, to 35.65 (second white arrow). That looked fine for a move higher. I was up $1,100 on the trade at that point.

Given that new high above nearby resistance, I raised my metal stop loss to 35.25, a little above my entry. The day chart is bearish, so I didn't intend to give SLW much lattitude. When the stock began to give up the gains and to come back in my face, I threw it in at 35.27 for a small gain of $150. That WASN'T what I wanted to see!

The remainder of the session was, in a word...YUK.



I still question the recent Rising Channel/Bear Flag. It isn't very well-defined, but it "looks like" and is "acting like" a Rising Channel/Bear Flag. The two downside targets on the chart remain IN PLAY.



US Steel (X) has continued down since we looked at it a month ago. The H&S Top target of 40.39 still is IN PLAY and on Friday, X completed a little Double Top, taking out 43.86 support.



There was a failed retest of the broken Double Top on Friday (first white arrow). I shorted 2,500 shares of X at 43.40 yesterday morning, after which it rallied to retest the 43.86 breakdown again (second white arrow). I almost doubled down on that retest. While we, generally, don't want to double down on a losing position, that is the ONE exception that I will make: doubling down on a losing position at resistance.

I didn't make that play, but it would have worked out very well. The high on the
session was 43.84, just below the 43.86 Double Top breakdown. I did "double down on a winning position," at 43.20, when it was apparent that there were TWO failed retests of the Double Top breakdown.

I covered late in the session, at 42.80, for a nice gain, and placed an order to re-short 2,500 shares at 43.00.



"They" like to play games with me. "They" took X up to my 43.00 price TWICE (white arrows), but only filled 100 shares. So-o annoying. Geez, don't fill me at all, if you're only going to give me 100 shares! I covered those "annoying" 100 shares in the final minute of trading, for a $4.00 gain. LOL. This is a recurring problem that I have, playing "in size" (large orders), even in very liquid stocks (a lot of shares traded), so I just have to deal with it ;)

Downside targets of 41.43 (Double Top) and 40.39 (H&S Top), still are IN PLAY for US Steel (X). Double validated resistance is at 44.03 and 43.86.


Gain on the session: $2,650

SPX and FCX

(Click on charts to enlarge. Click again for further enlargement. Use left back arrow on your browser to return to the narrative).

From June 2:

"Support at the bottom of the Falling Wedge comes in today 1303.85, but if The Bears take out the May 25 session low of 1311.80, that would put in a near-term Double Top: the May high of 1346.82 and the May 31 high of 1345.20, so that might be a problem for The Bulls if that May 25 low gets taken down."

The fact that The Bears were able to take down 1311.80 is as much of a problem for The Bulls as The Bears closing the SPX below the Falling Wedge. That's a pattern break, as well as a break of a validated trendline (see green arrow under May 23).

1311.80 is the intervening little pivot between the two shoulders of the "M"-Top, or Double Top (synonymous). For the downside target, I always use the more conservative of my two choices: 1346.82 and 1345.20.

1345.20 - 1311.80 = 33.40 points of downside from the 1311.80 breakdown.
1311.80 - 33.40 = Target: 1278.40 IN PLAY, as long as the SPX trades below 1311.80.

Friday's close also was a close below the Kumo (Cloud). When that occurred in March, The Bulls put in a "V" bottom, and rallied like gangbusters up through the Kumo. "V" bottoms aren't the norm. It seems that John Bollinger, years ago, did research that showed that about one-third of bottoms (or less) are "V"-Bottoms, with no retest. Don't quote me on that. It was many years ago (1980's?). Suffice it to say that they aren't the norm.



FCX opened on Friday at 48.90, almost smack on Trendline #2-#4. It violated the trendline early in the session, then rallied and took out Thursday's high, closing at 49.93. Those trendline violations are fine, as long as the stock recovers and gets going in the right direction. At the first two tests of resistance during QUINTUPLE Resistance, those candles went slightly above the trendline, but didn't do the stock any good. Friday's violation didn't do the stock any harm.

Intermediate-term, FCX currently is on the bearish side of neutral. It's neutral, inside the Falling Wedge. It's bearish, below the Kumo. Friday's successful retest of the trendline and the top of the Ascending Triangle, though, is short-term bullish.



This is a chart of the triple-threaded 8-13-21 RSIs, the fastest Fibonacci RSIs that I look at. The 3 red arrows are an example of what I mean when I say that signals that fail can be just as useful as signals that work out. Those signals were looking like a "sell" while the Ascending Triangle was forming below the Falling Wedge. When FCX broke out to the upside, some would say that "technical analysis doesn't work." It worked just fine. Those signals only told us that conditions were there for a "sell," but when the Quintuple Resistance got taken out...look out for some UPSIDE. The Ascending Triangle target of 52.28 got MADE in a hurry!

Currently, FCX got a bounce higher, out of Bullish Synchronicty, which occurred on June 1. That session was a big black candle coming off 52.70 resistance at the top of the Falling Wedge. The high of that session was was 51.87, so we needed a print of 51.88 in order for the RSIs to issue a "buy." That was a tall order and we didn't get it, but again, FCX held at the bottom of the Falling Wedge and is short-term bullish.

SLW: Patterns

(I have noticed that your targets overlap sometimes with the ma's I use or the bb . .but when they don't, your "patterns" seem to be the stronger indicators. This inspires me :-).

Mary,

The Yahoo FCX Message Board wouldn't allow me post this, so I've posted it here. I think the problem was that my message contained too many "characters." Sorry about that.

After years of studying just about every technical indicator imaginable, hands down, what has helped me the most in my trading has been the patterns.

They not only are helpful when they break out or break down, they're also VERY helpful when they fail, like the four examples in FCX that I mentioned to Davenport this morning.



This Double Breakout to the upside in SLW that quickly morphed into a Bearish Rising Wedge and just as quickly broke down on April 11 at 44.44 was the single most compelling factor in helping me to understand what was going on in that stock. As I mentioned in my SLW post on Friday, it's had a total of four distinct breakdowns since the April top, seen in the next chart (red arrows).



This chart is a "redraw" of the April top pattern "morph," from the Double Breakout, into the Bearish Rising Wedge (pattern in blue). Charts continually evolve with each new candle, and we have to try to evolve with it. The fact that nothing materialized on the upside after the Double Breakout in the first chart isn't any "fault" with technical analysis. Part of technical analysis is that there are Fakeout Breakouts and Fakeout Breakdowns, or Bull Traps and Bear Traps, and we have to deal with that. This one in SLW was a Bull Trap "Double Breakout Fakeout."

As I noted on this second chart, the current Rising Channel is looking questionable. SLW hasn't been respecting the lower trendline, trading a good bit below it in the last two sessions, but I'll leave it in and see what develops. Friday's 34.43 low, by the way, was a complete gap fill of the May 23 close of 34.42, so that's done.

The Bullish Inverse H&S pattern in the first chart also is a possibility in the current time-frame. The facts that (1) the trend is bearish, and (2) we still have two downside targets IN PLAY in this chart (32.01 and 29.28) have me a bit cautious about any bullish expections, but we always want to be as objective as possible and try to look in both directions.



My favorite technical indicator is the Fibonacci sequential measures of Relative Strength: 8, 13, 21, 34, 55, 144, 233. I usually "triple thread" them so that Watson & Crick don't have anything on me with their Double Helix discovery. LOL.

The 8RSI, obviously, is the fastest RSI and will turn up (or down) first. The usefulness of this indicator in my work is when one of the RSIs in the sequence thrusts higher then pulls back to what I call "synchronicity," i.e, readings that are very close, or nearly identical. The "trigger" for the signal is if the stock can print a "higher high" than the prior session, and close positive. The opposite of all of that, for a bearish signal.

The faster signals (8/13...13/21) are less reliable than the longer-term signals (21/34...34/55...55/89...89/144...144/233). Signals seem to work better if there are repeat signals, like we'll have here with the 8/13 if SLW prints 35.59 on Monday, a penny above Friday's high, and closes higher. The 8/13 gave a buy signal on May 23, so this would be a repeat signal, if it triggers. Signals also seem to work better if a discernible pattern is involved, like a Data Point #4 of a pattern getting put in, while there's a repeat buy signal out of one of the RSI pairings.

I hope that this explanation isn't too complicated or confusing. This is a "homemade" indicator that I've played with. Just as with pattern failures, RSI signal failures can be useful, too. If the lows of repeat buy signals get taken out, it often is a good signal to sell short. The reverse, if the highs of repeat sell signals get taken out.

(I have adopted you as my mentor . .and there is nothing you can do about it :-) Teehee!)

I'm very flattered, Mary, but I still make my share of mistakes, believe me, and probably always will. I doubt that anyone really masters this game, but if our winners exceed our losers, we'll do fine ;)

Have a great weekend, Mary!

RIMM: Research Still In Commotion

It's been one month's time since we last looked at RIMM. When I looked at it this morning, the words of the reporter who was on sight in Lakehurst, New Jersey at the time of The Hindenberg disaster came to mind, "Oh-h-h...the humanity."

This chart also reminded me of my early experiences playing the stock market, when I would hold onto stocks like this one, as they went down...down...down...UGH.

As a result, I determined NEVER AGAIN to "believe" in stocks, regardless of what the analysts told me about how good the fundamentals are. We can see from some of the comments on this chart that the analysts almost were trying to outbid each other on their upside targets for RIMM, right near the top (I lost some other analyst targets when my computer crashed). We also can see that the analysts abandoned the stock in droves on April 29, more than a month after it broke down below a Head & Shoulders Top, on earnings. Shareholders went through a second crash opening in as many months. UGH.

"Where there's one cockroach, you'll usually find another."

This chart is one of many examples why I always say, "If given a choice between good fundamentals and a lousy looking chart, defer to the chart."

This chart also is an example of why technical analysts say, "First the chart...then the news," meaning that if you see a problem in the chart, like we did when the H&S Top broke down, we likely will find out later about "the bad news," which we finally did when the company lowered Q1 guidance.

"First the chart...then the news" can get into a bit of TA snobbery, which I don't care for. Charts don't ALWAYS make it as clear as this chart did, that the stock was going to tank. But, when they do, we're well-advised to pay attention.

One of the most difficult things for us to do as traders and investors is to take a loss. Even if it isn't a very big loss, it's hurtful to our "egos." None of us wants to feel like "a loser." We need to get over that. Recognize as quickly as possible that "the trade didn't work out." Not, "We're losers." Get that ego out of the equation. It's very costly to us.

Among the top reasons for BIG losses in stocks like RIMM are:

1. "The selling in RIMM on earnings is a gross over-reaction. The bad news already is priced in on today's big selloff, which is unwarranted. I'm NOT selling."

2. "This selling is stupid. Look how many analysts have targets of $80...$90...$110 for RIMM! You guys are fools for selling. You'll be sorry. See you at $110!"

3. "It isn't a loss until you sell. I believe in this company. I'm holding, no matter what!"

4. "RIMM is a bargain on this earnings selloff! I'm doubling down!"

5. "Are you kidding? All of these ANALysts are now selling RIMM? What fools! I'm doubling down again. This stock is unbelievably cheap at $49."

I read all of those comments, or some variation, on the RIMM Yahoo Message Board during this wicked smackdown in the stock.

Oh-h-h...the humanity...

SPX, FCX And SLW

(Click on charts to enlarge. Click on them again for further enlargement. Use left back arrow to return to narrative).

The Bears were able to take out the May 25 low of 1311.80, so that completed a Double Top, Or "M"-Top. The highs are 1346.82 and 1345.20, with 1311.80 being the intervening pivot of the "M." (the horizontal red line). That breakdown put a downside target of 1278.40 IN PLAY, but The Bears weren't able to close the session below the 1311.80 pivot, so the target is ON HOLD unless/until The Bears can take the index back below 1311.80 again and keep it below there.

After a wicked Bearish Reversal session on Wednesday (the Falling Wedge breakout got reversed on a long black candle), The Bulls did about the best they could yesterday. They showed up when the index got to within about two points of the bottom of the Wedge, rallied it back above the 1311.80 broken support of the Double Top and closed the session out at 1312.94 on a bullish-looking Doji Star Hammer. It isn't bullish without upside confirmation. The Bulls need, eventually, to take out the highs of the Double Top in order to do anything convincing.



In FCX, Trendline #2-#4 came in yesterday at 48.935. That trendline was QUINTUPLE resistance, prior to the upside breakout to the top of the Falling Wedge. On a pullback, "former resistance 'should be' support." It was.

FCX bottomed at 48.93 before noon, then rallied to 49.31. It pulled back for another retest of 48.93 support just after noontime, and put in a little fakeout low of 48.90, three pennies below support.



I put in my buy order at 48.93 on that second test of support, but didn't get filled. Because I play in size (large orders), I often get nicked on market orders, so I put in a limit order. It irritates me to get filled at price higher than the ASK when I submit my order, but a limit order in this situation was a BIG mistake. FCX pounded higher off that 48.90 low and I got no chance at a pullback to modify my order to a market order.

I need to get over being stubborn about limit orders in fast market conditions. It cost me $1,000 of profit on this trade. Curses!



When I saw that FCX broke out of this Double Bottom, above 49.31 (horizontal white line), I cancelled my 48.93 order and resubmitted at 49.33, just above the breakout, looking for a pullback. The forty cent differential times 2,500 shares was the $1,000 profit that I didn't get. Served me right. When a trade is as compelling as this one was, MARKET ORDER, Melf! .

The Double Bottom breakout put an upside target of 49.69 IN PLAY, and the subsequent Bull Flag breakout (pattern in yellow) put a target of 49.66 IN PLAY. I sold when those targets got MADE.



SLW has had four bearish pattern breakdowns (red arrows) since we had the morph to the Bearish Rising Wedge (pattern in blue), which broke down at 44.44 on April 11. We still have two downside targets IN PLAY. Whether or not those will get MADE remains to be seen, but when a chart is bearish, we want to look for opportunities to short it.

The recent pattern in SLW off the May 12 low is a Rising Channel/Bear Flag. Those don't always resolve to the downside. There's no "always" in the stock market. But, we know to expect patterns to resolve in the direction of the trend, so we can watch for that.





The Rising Channel/Bear Flag in this intraday chart is a "fractal" (repeating pattern) of the one we just looked at in the daily chart. The white arrow was a successful retest of the bottom of the pattern, so it was a trendline validation of support. When validated trendlines get taken out, that ususally has "some" significance.

The pattern broke down late Wednesday afternoon. Retests of broken support often are a great place to enter a stock short, so before the open yesterday, I entered an order to sell short SLW at 36.18, the bottom of the broken trendline, with the expectation of a gap fill in this chart (the horizontal red lines) and a retest of the bottom of the Rising Channel/Bear Flag in the daily chart.

The gap in this chart was 34.45 - 34.72. I covered my short just above the top of the gap, which worked out very well. The gap didn't get filled entirely. SLW put in a low on the session at 34.53, then rallied a dollar and closed at 35.25, back inside the Rising Channel/Bear Flag after the intraday violation of the bottom of the pattern.



Gain on the FCX and SLW trades: $4,500.

SPX: Falling Wedge Reversal

From yesterday:

"The Bears who are using the May 19 high of 1346.44 as their stop (red arrow), which was a trendline validation of resistance, caught a break yesterday. The session high only was 1345.20, so technically, they weren't forced to buy, to cover their positions.

Personally, I don't think that it's ever a good idea to remain short an upside technical breakout (or to remain long a technical breakdown), but that's up to the individual player."

I take my hat off to any of The Bears who remained short Monday's upside breakout. They weren't stopped out, technically, and they certainly got rewarded yesterday, if they held their short positions.

The Bulls tried to hang on to support at the top of the Falling Wedge, which came in yesterday at 1331.59, but it was no good. The Bears took it down in the afternoon, well below support, and the session ended with the prior four days' closes being reversed to the downside.

Support at the bottom of the Falling Wedge comes in today 1303.85, but if The Bears take out the May 25 session low of 1311.80, that would put in a near-term Double Top: the May high of 1346.82 and the May 31 high of 1345.20, so that might be a problem for The Bulls if that May 25 low gets taken down.

SPX: Falling Wedge Breakout

From the weekend:

"Where The Bears can get themselves into trouble is if that DOUBLE validated resistance gets taken out to the upside, and particularly if the 1346.44 high of the May 19 Doji Star Hangman gets taken out to the upside. That was the initial validated resistance and that "shouldn't" get taken out. It's a "logical stop" on a short trade for a Buy To Cover the position."

Yesterday was exactly what The Bears didn't want to see: The Bulls reversed The Bears' Double Breakdown of May 16 (The Rising Channel and the Symmetrical Triangle) on an upside technical breakout of this Falling Wedge. The Bears were under pressure to cover their short positions all session.



Mid-session, the gap from 1334.62 got filled almost to the exact penny (horizontal white line). The early afternoon low was 1334.66, within four pennies of an entire gap fill. I liked that and I liked the ensuing rally, so I got long the SSO (Two times bullish the SPX) around 2PM, figuring that The Bears would be under additional pressure to cover the technical breakout going into the closing gong, given the gap fill, the bullish technical breakout of the Falling Wedge in the daily and the fact that this intraday chart wasn't looking like it would be a "Gap And Crap" session.

Interestingly, another Cup & Handle emerged in this intraday chart! I guess we're now going to see those everywhere since we recently discussed the pattern. LOL. The problem that I had with it was that the handle seemed to be dragging out a bit more than I liked and we were about a half an hour away from the closing gong. I wanted to see a lot more pressure on The Bears than I was seeing, so I threw the trade in for a very small gain.

More's the pity. As we can see from the chart, the SPX took off to the upside not long after I sold. Arrrrrrrrrrrrrrgh ;)



Gain: $300. I blew that one. I should have stuck with my trading plan and taken the risk, based on my thesis that The Bears would be under pressure to Buy To Cover, going into the close. Impatience is one of my many weaknesses. Curses! ;)



The Bears who are using the May 19 high of 1346.44 as their stop (red arrow), which was a trendline validation of resistance, caught a break yesterday. The session high only was 1345.20, so technically, they weren't forced to buy, to cover their positions.

Personally, I don't think that it's ever a good idea to remain short an upside technical breakout (or to remain long a technical breakdown), but that's up to the individual player.

Falling Wedges are notorious for morphing (changing) into Bullish Inverse H&S patterns. I don't know with what frequency they do it, but it's always something to watch for. We had one of those in FCX, in mid-March. We got a nice rally out of FCX on the Bullish Inverse H&S breakout, but unfortunately, that rally ended April 11 with a breakdown of a Bearish Wolfe Wave.

The down and up black arrows in this chart are an example of how that "morph" scenario might play out. The neckline would be the May 19 high of 1346.44 and yesterday's high of 1345.20. Pure speculation on my part, of course.

If I were coaching The Bulls, I would have them plant a foot on the top of the Falling Wedge at the low of a putative Right Shoulder, for a successful retest of that pattern, then rally like gangbusters up through the neckline.