Morgan Stanley (MS)

From February 18:

"MS still is trading within the Rising Wedge (pattern in blue), so the upside target of 31.25 still is IN PLAY, but I sold it at the close when it got back to Unchanged on the day because its performance was poor basis the benchmark S&P 500..."

MS fell shy of the 31.25 target that has been IN PLAY since December 22, 2011. It got only to 31.04, then after telegraphing some weakness mentioned a week ago, it gapped down on February 22, broke Trendline #2-#4 of the Rising Wedge (pattern in blue) and closed below it.

After a technical breakdown of a Rising Wedge, the initial target is the area of the low, at Blue #2, which was 28.75. MS fell to within range of that, to 26.865, and currently is rallying to retest the Rising Wedge breakdown.

Morgan (MS) & S&P 500 (SPX)

NOTE: Click on charts to enlarge, then click on it again for further enlargement. Use left back arrow to get back to the narrative.

MS still is trading within the Rising Wedge (pattern in blue), so the upside target of 31.25 still is IN PLAY, but I sold it at the close when it got back to Unchanged on the day because its performance was poor basis the benchmark S&P 500, which recovered from the morning selloff and had an upside technical breakout. Stocks don't "have to" perform in tandem with the general market, but I'm not pleased when I'm long a stock that languishes all day when the general market it rallying.



The two charts to the right are 10 Minute intraday charts of the S&P 500 (SPX) and Morgan Stanley (MS). The white arrows on both charts are the lows in each on the morning selloff. Notice that the SPX made a "higher low" at #4, then broke out of the triangle to the upside. MS made a "lower low" at #4 and barely made it back to breakeven on the session. UGH.

I also made a play yesterday in sector-related Goldman Sachs (GS), figuring that if the market was showing some juice (meaning that the S&P 500 had broken out of its triangle to upside), Goldman would at least have a decent bounce off its session low. It was no good. Goldman barely budged when the market rallied, so I sold it, too, for a small gain. Goldman was weak into the close and sold off toward its session low.

Gain on Goldman: $150. Gain on Morgan: $250 (entry posted yesterday). Gain on the session: $400.

Morgan Stanley (MS) - Channel & Rising Wedge

NOTE: Click on charts to enlarge, then click on it again for further enlargement. Use left back arrow to get back to the narrative.

The channel in black in late 2010 is an excellent illustration of the significance of trendlines and how they provide resistance and support. We can connect any two highs or any two lows and call that a trendline, but we never know if it's a significant trendline unless/until it gets tested. The top of this pattern (Trendline #1 -#3) has a total of FIVE trendline validations, two red and three green. See my comments about those on the chart.



After the Channel breakout, MS formed a Rising Wedge, the pattern in blue. Both trendlines are rising and eventually will "meet up with each other" at some point in the future. Rising Wedges are said to be bearish, but they aren't always bearish. How can we tell if it is, or not?

Bearish Case: The high at Blue #3 is 30.87, not far from the 31.25 target that is IN PLAY from the 12-22-10 upside Channel breakout. Yesterday's high was 30.84. If MS should reverse to the downside here and (1) trade below the bottom of the pattern (Trendline #2-#4), (2) trade below the first horizontal red line, at 29.83, and (3) trade below the low at Blue #4, which was 29.50, odds would be good that MS is going to have a move to the downside.

Bullish Case: (1) the 31.25 target from the December breakout still is IN PLAY, (2) the 21 RSI (Relative Strength Indicator) gave back-to-back Buy Signals on February 11 and February 15, and, (3) the top of the pattern, Blue Trendline #1-#3, will be at 31.23 today, February 17, very near the 31.25 target. It will be interesting to see if that target eventually gets MADE, or at least reasonably approximated.



I've made a couple of daytrades in MS and was able to get back in it yesterday at 30.45, after a selloff from the morning high of 30.84. 30.45 was the February 15 high, so it was resistance. Yesterday afternoon, it provided support on the selloff. MS held at 30.44, then rallied into the close.

AMZN, FSLR And TIE

NOTE: After you click on a chart and it appears, you can click on it again and it will enlarge. Use your left arrow at the top of your screen to get back to the narrative.

AMZN is a favorite of the short sellers and at various market junctures, the stock has squeezed them half to death. After reporting disappointing earnings after the closing bell in late January, AMZN traded as low as the $150's in after-hours trading, but it never traded that low during regular market hours. The low was 166.90 the morning after earnings were reported and the short sellers were immediately caught in a "Bear Trap," thinking that the stock had turned bearish and that it was headed much lower. Nope...

After an inside trading session the following day (meaning that the high and low were contained with the prior day's trading range), AMZN began its short squeeze. Often on internet web sites and message boards, we will read that someone is shorting a stock because it has been up for five consecutive days, or six days, or seven days, or eight days...which is not a good reason for shorting a stock.

AMZN has closed higher for TEN days in a row, and yesterday, it got to within twenty cents of its January high! While it might be tempting (and even reasonable, with a tight stop-loss above the highs) to short AMZN here, looking for a Double Top at 191.60 (the January 18th high) and 191.40 (yesterday's high), we don't want to fool around with shorting a stock that is in a bullish trend if those highs get taken out to the upside. Witness: FSLR, as just one of many examples of why we don't want to do that (see the next chart).

FSLR broke down out of the large Rising Wedge (the patten in blue) on October 29. That was fine to short it there, or to short the Bear Flag rally (the second red pattern) back to the broken trendline. The Rising Wedge (pattern in blue) also contained a Double Top. The breakdown put a downside target of 125.18 IN PLAY, which got MADE on November 17.

Where the Bears really got into trouble shorting, or staying short FSLR, was at the upside breakout of the Symmetrical Triangle (pattern in purple) on January 16, 2011. On January 24, FSLR rallied back to, and closed above, the October high of 153.30. Uh-oh! The Bears who didn't cover their short positions on that move to a new high got a reprieve over the next few sessions when FSLR sold off, but it came roaring back and squeezed the shorts. It made a new high yesterday of 172.30. That's 19 points higher than the October high. While that "could be" a significant high that FSLR put in yesterday, just as anything "could be"... OUCH if you're caught short a rally like that.

So, back to AMZN...shorts DON'T want to see the 191.60 and 191.40 highs get taken out to the upside!



Titanium Metals (TIE) has been a bit of a devil to play since it broke out of the large Falling Wedge (pattern in blue) to the upside on January 16th. Four upside targets went IN PLAY on the breakout (listed on the chart), but TIE has had some very sharp pullbacks since the breakout.

I've played in and out of it a couple of times, last selling it in the 18.90s (see prior posts). I bought it back significantly higher last week, at 19.58 (forgot to capture a screen shot of the buy trade), because the upside targets still were IN PLAY and because TIE kept bouncing back from the sharp selloffs. The 34/55 Fibonacci RSI's (Relative Strength Indicator) also gave another Buy Signal at 19.53 late last week.

As I always say, "Take profits, or at least 'some' profits when targets get MADE." TIE finally got to Target #1, 19.95 in the early going yesterday. I considered selling only half of my position when that was achieved, but since TIE has had so many rather sharp pullbacks since the breakout, I decided to cash all of my shares in and planned to buy it back on a pullback. No luck with that strategy, which is fine. "A gain is a gain" and I'm always grateful for them. TIE was strong all session long, and went directly to target #2, 20.55.

Oh, well...


Sold at 19.93. Gain: just under $700.

Goldman Sachs (GS) - H&S Top #2

The little H&S Top pattern in white is the one from Monday. As we discussed, it broke to the downside, but it reversed and took out the high of the Right Shoulder, then the high of the head and went on to score a new high on the session.

So often, patterns "morph," or change, into something else. As it turns out, that H&S Top pattern in white "morphed" into the Left Shoulder of the larger Head & Shoulders Top, in yellow. Once the larger pattern broke down, like on Monday, GS tried to get back above the neckline (the yellow arrow), but only succeeded marginally in do so. The retest of the neckline ultimately failed, and down she went.

Goldman Sachs (GS): A Head & Shoulders Top

Goldman (GS) broke out to the upside in December and the upside target of 174.80 from the October breakout got MADE. On the reporting of earnings in January, however, GS reversed back below the December breakout on a gap down.

Recently, GS has been rallying back to the area of the breakdown, which is the horizontal blue line, and also the January earnings gap area. When stocks are rallying back to a breakdown area, that "should be" resistance to any further upside advance and I look for shorting opportunities.



Early this morning, GS broke below a Head & Shoulders Top (pattern in white) basis this 10-Minute chart. I shorted it just below the breakdown. When that occurs, we don't want to see a stock rally back above the neckline (white horizontal line) if we're short, and we really don't want to see the stock get back above the high of the Right Shoulder (white arrow). If it does, that's showing much more strength than we want to see and it's usually wise to cover a short position, which is what I did. I covered a bit below the high of Right Shoulder for about a $550 loss.

When a trade doesn't work out, I find that one of most difficult things to do is to reverse and play the stock in the oppositie direction. We tend to fear having another loss, back-to-back, but if we have a well-founded basis for making our decisions, we can put fear aside and make the play.

After rallying back above the neckline and threatening to take out the high of the Right Shoulder, GS pulled back to the neckline area (166.78-166.84) and held pretty steady. Given the show of strength after the H&S Top breakdown, I bought GS at 166.84. My stop loss in case that trade also didn't work out was the morning low, at 166.26.

Fortunately, the second trade worked out fine. GS took out the high of the Right Shoulder (white arrow) and I "sold into strength" and turned my morning loss into an overall gain.

I took a break after I sold, so I didn't continue watching the chart, but look what GS did after I sold: It rallied to a new high on the day, then sold off and found support at the high of the Right Shoulder (yellow arrow)! That's very, very nice, technically. "Former resistance became support," just as it should, and GS went on to make another new high on the session, then cruised sideways into the close, consolidating the day's gains.



Gain on the two trades: Roughly $250.

TIE - Business Decisions

I bought TIE last week for 18.68 (see real-time execution in last post) because I liked the chart and the technicals so well. Since the breakout, however, TIE has had a couple of sharp pullbacks, and it had a third sharp pullback today.



At the rally to 18.65 (the high of the triangle in this 10-Minute chart), I had a paper gain of nearly $1,000. "It ain't a gain until you sell." Basis this 10-minute chart, we can see that a Descending Triangle formed. It has descending highs and a flat bottom. It broke down this morning (see white arrow), putting a downside target of roughly 18.55 IN PLAY, below my 18.68 entry. UGH. TIE sold off to a low of 18.60, so my $1,000 paper gain not only evaporated, I was down $80. UGH.

Sharp selloffs really test one's mettle and the strength of one's conviction. Basis the daily chart, TIE still looked fine, but I had had enough of the sharp pullbacks and decided to sell TIE on any rally back toward this morning's Descending Triangle breakdown. I sold it at 18.91 and 18.92 for a gain of a little over $200.

Needless to say, I wasn't real happy to see TIE rally back above the bottom of the Descending Triangle (19.10) and CONTINUE to rally and go positive, closing at 19.37. UGH. That's the way the game is played "in real time," though. It's easy to see at the close that I would have been fine holding the position, but that's with the advantage of hindsight. I had spent a week working on TIE and at the 18.60 low this morning, I decided to move on to something more productive.



I shorted and covered a postion in Joy Global (JOYG), for a gain of $700+ in a couple of hours. That felt more productive ;)