SLW - In The Channel

I wanted to buy SLW on a fill of the opening gap, or to sell short if it got to the top of the channel. It didn't do either one, so I was sidelined.

SLW: Anudder Morning Selloff

SLW sold off again in the morning, to the 13, 21 and 34 EMAs (exponential moving averages), which were properly threaded in sequence and bunched to together between 38.24-38.42. I got long at 38.28.

Given the facts that we've got the "possible" Bearish Doji Star Hangman in the weekly chart (see weekend post) and we've got a possible Bear Flag/Rising Channel in this hourly chart (pattern in white), I allowed a little wiggle room below the EMAs, but not a lot. My expectation on the trade was for SLW to use the EMAs as support, and rally, but the stock went a good bit below them, which I didn't like.




SLW continued straight down and nearly hit my 38.79 stop, which was the last low prior to the rally on Friday. Blaaaah. I adjusted my trading plan to "sell any rally to the EMAs basis this 5-minute chart" and sold at 38.40-41.



In the next hour, SLW put in a big 'ol white candle and rallied to a high on the session. Oh, well...LOL.



Gain: $600

SLW: Weekly Chart

They smacked SLW again early in Friday's session, but it came roaring back just as it did on Thursday. I liked that resilience. I bought it for 37.70 and sold it on the rally back to the 38.10 top of the Falling Wedge (white arrow). I wanted my shares back on a pullback, but there wasn't any. The stock was gone on the upside.



Basis the weekly chart, despite the wicked Smackdown off the April 11 breakdown at 44.44,following the Double Fakeout/Breakout, SLW never closed below the Kumo (Cloud), in bearish territory. The mid-June and mid-August lows both found support near the bottom of the Kumo (Cloud).

Interestingly, both the July 22 and August 26 candles are Doji Star Hangmen. I don't infer anything from one candlestick. The July 22 Hangman did result in another trip down to the bottom of the Kumo, but it's ba-a-ack. Notice the June 25, 2010 Gravestone candlestick. It was short-term bearish, but anyone who insisted that it had longer-term implications and remained stubbornly short the stock got caught in an ugly short squeeze. Volume was poor after the upside technical breakout and didn't show up until the stock already had rallied 50%. SLW scored a 100% gain off the August, 2010 Ascending Triangle breakout. As you know, I'm not a big fan of volume.

We've got a "possible" Ascending Triangle setting up in the chart. A pullback here wouldn't be bad at all, as long as the ascending line holds (Black #1 - #3) and the stock eventually breaks out. Given how badly the general market has gotten whacked recently, this chart looks pretty decent, as it stands.




Gain: $2,000

SLW: Morning Shakeout

We got two of the upside targets that were IN PLAY in SLW in mid-July (37.43 and 40.015), but the stock went into a serious tank to the downside after that.

This RSI chart has gotten back into synchronicity since the early August Smackdown in the stock, though, and was poised to kick higher if SLW could rally, but yesterday's open looked nasty.



SLW opened down hard and took out the horizontal support levels (the white arrow below the two lower horizontal white lines). UGH. But, hang about...the stock reversed to the upside and took out the late Wednesday afternoon high (yellow arrow)! Hmm-mm...

SLW then sold off to the middle horizontal line (orange arrow), then rallied to a new high on the session! Notice how the story was unfolding at this point. That looked like a classic shakeout of The Bulls, causing them to sell into the early weakness and it set up a nice short squeeze of The Bears if it could continue to rally. I bought 5,000 shares at 37.21, just above the late Wednesday high, then sold into the rally at 37.65 and watched to see how trading progressed.




I'm fond of these "nested" patterns (the little yellow Symmetrical Triangle within the channel) and am especially fond of successful retests of breakouts (the white arrow), which validates the top trendline (former resistance) as support. The breakout put a target of 38.18 IN PLAY.

37.78 - high of the pattern
37.21 - low of the pattern

37.78 - 37.21 = 0.57 points of upside on the breakout above 37.61.

37.61 + 0.57 = Target: 38.18 IN PLAY

I got long again in the channel, at 37.42, and sold at 38.16, heading into the target of 38.18. SLW did much better that, rallying to a high of 38.78 on the session before easing off for a close of 38.02






Since reversing higher off the narrowed Kumo (Cloud) on August 9 on a big white candle, SLW has remained above the Kumo, or very near the top of the Kumo (Cloud), in bullish territory. It needs to take out resistance in the low-to-mid 40.00's




I played FCX a couple of times yesterday, too.

Gain on SLW: $5,850
Gain on FCX: $1,150
Gain on the session: $7,000

FCX: Cup & Handle

I can't post much due to my poor eyesight, but I thought I'd update FCX.

A week ago, The Bulls managed three closes back inside the broken 2011 Falling Wedge, but that was all that they had. They got sent back for a retest of the 41.20 breakdown low which, thus far, has held at Monday's 41.455 low for an attempt at a Double Bottom.

The width of this possible Double Bottom is very narrow. Picture that all of the candlesticks above Black Trendline #2-#4 are players for The Bears and you'll get an idea of how daunting that resistance was on The Bulls' first bid to get through it. The Bears shorted it and The Bulls who didn't sell the technical breakdown took advantage of the reflex rally to broken support, and sold. The proverbial "everyone" was a seller.

As skimpy as this possible Double Bottom is, at least The Bulls have established short-term support at 41.20-41.445, so if the stock can move higher, The Bears are under a little bit of pressure to Buy To Cover their positions as the stock moves away from the lows. The August 17 high of 47.59 is the pivot for the Double Bottom which "should" bring in some short-covering if The Bulls can manage to take it out.

I don't try to predict what a stock "will do." I try to focus on what it "is doing" and early yesterday morning, FCX was heading south again.





To the left of the chart, the pattern in blue is a Descending Triangle. The lows were 42.70...42.69...42.68. Descending Triangles tend to be bearish, especially in stocks that are in a bearish trend, like FCX is. There were three "hits" to each of the trendlines and the pattern finally resolved to the downside, as one would expect in a downtrend.

After the selloff from the Descending Triangle breakdown, however, The Bulls were able to establish a Cup & Handle pattern, the highs of which (42.70 and 42.66) were right at the bottom of 42.70...42.69...42.68 Descending Triangle resistance. Notice the nice width of the cup portion of the pattern. As is often the case with Cup & Handles, the handle of the pattern (in yellow) was a Bull Flag that hovered near the top of the pattern.

After the upside breakout, FCX pulled back for a retest. I placed my order for 5,000 shares at 42.67 (white up arrow), just above the 42.66 high of the right lip of the cup. "They" filled me in batches over the next five minutes following my order entry and gave me only 4,999 shares. LOL. The retest lows ended up being 42.67 and 42.66, so The Bulls nailed that one!

The Cup & Handle breakout put 43.20 IN PLAY.

42.66 - the more conservative of the two highs of the cup
42.11 - the low of the cup

42.66 - 42.11 = 0.55 points added to the breakout above 42.65 (the trendline had a slight downward slope)

52.65 + 0.55 = Target: 43.20 IN PLAY

After the successful retest of the Cup & Handle breakout, The Bulls formed and broke out of another Bull Flag (pattern in orange), putting 42.96 IN PLAY

42.86 - high of the flag
42.69 - low of the flag

42.86 - 42.69 = 0.17 points of upside on a breakout above 42.79

42.79 + 0.17 = Target: 42.96 IN PLAY

Since the larger pattern (Cup & Handle) target of 43.20 was IN PLAY, I didn't sell any when the 42.96 Bull Flag target got MADE, but since FCX is in a downtrend, I did sell at the white down arrow, to defend against a possible Double Top at 43.10. The 43.20 Cup & Handle target ended up getting MADE, and The Bulls managed to take the stock to a high of 43.54 on the session.

We'll see if The Bulls can do anything with this possible Double Bottom basis the daily chart, but yesterday's bullish pattern construction after the Descending Triangle breakdown and selloff is the type of thing of which we would like to see a ot more from The Bulls in the days and weeks ahead.



Gain: $2,000

FCX: Rally To 45.88 Resistance

FCX was called higher yesterday morning from Wednesdays's close of 43.55 and opened at 44.30. On the heels of Wednesday afternoon's selloff, that was marked for a "Gap And Crap" opening, meaning that The Bulls' attempt to bully their way through that nearby price resistance wasn't likely to work and that the opening play likely would get called back for a fill of some, if not all, of the opening gap. Most of the opening gap got filled on the pullback to 43.66.

An opening gap out of a pattern has a much better chance of being a Breakaway Gap, or a "Gap and Go," rather than the "Gap and Crap" opening that we witnessed yesterday, which is known as a "common gap." The latter is tantamount to a quarterback trying to throw the "long bomb" on 3rd down and 25 into heavy traffic. Can we say I-N-T-E-R-C-E-P-T-I-O-N?

Rallies have a much better chance of being sustainable if The Bulls can establish a running game, i.e. a pattern or patterns, then then throw some long passes (breakout rally).

The Bulls settled in and formed a Bull Flag/Falling Channel (the pattern in white). The opening gap is the flag pole. The duration of the flag is a bit dragged out to be called a Bull Flag for some technicians, but I'm never one to quibble. If it walks like a duck...quacks like a duck...but, it's perfectly fine if anyone wants to insist that it's just a regular ol' channel. The only thing that matters is how it plays out.

At the white down arrow, we've got validated resistance, and we know how significant that can be if The Bulls can take out a validated trendline to the upside. That tells us that The Bears failed to do their job of smacking The Bulls down and that they've weakened a bit.

I got long at 44.05. The Bulls had established the running game (formed a pattern) and the Fibonacci 13, 21, 34 EMA's (exponential moving averages) were getting "in gear" with the 13 above the 21, and the 21 above the 34. The Bulls now were ready to throw some nice passes (break out and move higher). The Bulls broke out of the pattern at 44.20, putting an upside target of 45.18 IN PLAY.

Math for the Bull Flag:

44.64 - High of the pattern
43.66 - Low of the pattern

44.64 - 43.66 = 0.98 points of upside on a breakout above 44.40

44.20 + 0.98 = Target: 45.18 IN PLAY

After the breakout and rally to Yellow #1, the Bulls established another pattern, The Rectangle (in yellow), then broke out of that. Lovely. That breakout put a target of 45.28 IN PLAY.

Math for The Rectangle:

44.89 - the most consevative of the highs
44.50 - the most conservative of the lows

44.89 - 44.50 = 0.39 points of upside

44.89 + 0.39 = Target: 45.28 IN PLAY

What wasn't lovely was that The Bears managed to throw The Bulls for a sizeable loss, back below the pattern breakout, which put the 45.28 target ON HOLD. UGH.

The loss was more that just "Ye Olde Knuckle-biter," where we're back below a pattern breakout wondering how valid the breakout was. The Bulls got thrown for a loss well inside the pattern, and the EMAs were turning down.

I never try to predict anything. I'm just trying to follow orders as best I can and beyond the analysis, foremost in my mind when I'm in a trade, is MONEY MANAGEMENT. As the trade progresses, I'm asking myself how well I'm liking the trade and whether or not I see a possible problem.

I didn't like that pullback, well inside The Rectangle. I sold on the rally back toward the EMAs, at 44.73, and watched from the sidelines.




The Bears were able to morph The Rectangle (in yellow) into the Left Shoulder of a H&S Top, then break that pattern to the downside! Hmmm-mmm...

Morphs (pattern changes) are very common, particularly in a 1-Minute chart. Literally, one minute a pattern can look like on thing, then the next minute or three, it "morphs" into something else.

The Bears weren't making much progress with their H&S Top breakdown, and with those patterns, The Bulls always have a chance of morphing The Head and The Right Shoulder of the pattern into a Channel, then taking out the high of the Right Shoulder, then eventually, the high of The Head. Like this:



The Bulls not only morphed the H&S Top into a Channel breakout, they also threatened to put in a Double Bottom (the pattern in red). I got long again at 44.67 when I saw that possibility developing. The high of the Right Shoulder of the Bears' H&S Top is where the top red horizontal trendline begins. As we've seen in the past, when The Bulls take out the high of a Right Shoulder (that top red trendline) AND take out the high of The Head, that can spell trouble for The Bears. A Double Bottom breakout would put 45.24 IN PLAY, very near the 45.18 and 45.28 targets (the latter target would go back IN PLAY above 44.89).

Math for the Double Bottom:

44.82 - the more conservative of the highs
44.40 - the more conservative of the lows

44.82 - 44.40 = 0.42 points of upside on a breakout

44.82 + 0.42 = 45.24 IN PLAY



After THREE bullish breakouts, I didn't have any problem holding through "Ye Olde Knuckle-Biter," which went a bit below the Double Bottom breakout. The Bulls scored a fourth pattern breakout, the little white Bull Flag, then rallied to the targets. I sold at 45.27 as the last of the 45.18, 45.24 and 45.28 targets got MADE. The chart was so bullish, I was sorely tempted to hold out for a test of the bottom of 2011 Falling Wedge in the daily chart, which we knew came in at 44.883 yesterday, but I've learned to "Take profits, or at least some profits, when targets get MADE." We've all sat in winning trades, only to see our gains evaporate. I "coulda" held back half of the shares for the anticipated rally to 45.88, but with three targets getting MADE, I sealed the deal.



Lest any of us thinks that players didn't know that the bottom of the 2011 Falling Wedge came in yesterday at 45.88, look where the early afternoon rally ended, prior to a pretty decent selloff (the white down-sloping channel): 45.87.

For traders playing that last Channel breakout, either of the up trendlines coming off it would be good for stops, depending upon how loosely or tightly one would wish to play it.



Rallies back to broken support (in this case, the bottom of the 2011 Falling Wedge) are common, and are to be expected. The Bulls did a very admirable job getting there with all of those bullish breakouts in yesterday's trading, but couldn't manage a close above it.



Gain on the session: $6,350

FCX: Double Nested Ascending Triangle; Double Top

At yesterday's opening gong, FCX gapped down nearly two dollars, to 44.08, on some "bad news," to which I pay no attention. I'm only interested in the market's RESPONSE to news. As we've witnessed so often in the past, FCX has opened on a "Gap And Crap" into resistance, in which the stock gaps higher then fizzles and retraces much, or all, of the opening gap.

Yesterday morning, FCX was doing the reverse of that. It was gapping down into support from the EMA's (exponential moving averages) basis the 5-Minute and 10-Minute charts, which were properly threaded and moving higher. FCX was marked for a "Gap and Reverse higher," to fill at least part, if not all, of the opening gap.

The lowest of the EMA's that I look at, the 34, was at about 43.38-43.40 basis the intraday charts (5 & 10 Minute), so I placed a market order when FCX got there and got filled at an average cost of 43.38.

FCX went a little lower than the EMA's, but they ultimately provided the "sling shot" effect that I was expecting after FCX pulled back...back...back through the rising EMA's. I sold into the sharp gap-filling rally, at 44.48, for a gain of over a dollar in about six minutes' time. That was the easy part of my trading day. LOL.




FCX filled the opening gap entirely and took out the prior session's high. I bought my shares back at 44.12, at the 13 EMA. After a sharp rally like we had after the open, we like to see a stock settle in and do some basing, preferably with it forming a discernible pattern.

In this case, we got a DOUBLE Nested Ascending Triangle (pattern in white). There was a Symmetrical Triangle (pattern in orange) and a Channel (pattern in yellow) "nested" within the Ascending Triangle, both of which broke out to the upside, then the Ascending Triangle broke out it's Triple Top, the highs of which were an identical 44.45...44.45...44.45. The breakout put an upside target of 45.42 IN PLAY.

Math for the Ascending Triangle:

44.45 - High of the pattern
43.48 - Low of the pattern

44.45 - 43.48 = 0.97 points of upside on a breakout

44.45 + 0.97 = Target: 45.42 IN PLAY

I raised my mental stop to a takeout of 44.02 (horizontal red line), which was the "last low" prior to the breakout.




Unfortunately, "Ye Olde Knuckle-Biter" showed up (white circle), meaning that the stock went back below the 44.45 breakout, calling the validity of the breakout into question and it put the 45.42 upside target ON HOLD unless/until the stock breaks out again, above 44.45. As we know, those "Knuckle-Biters" are traders' decisions, based on how well we like the trade vis-a-vis the chart and money management considerations.

I was willing to sit through the first "Knuckle-biter," which found a low at 44.3266, but I wasn't willing to sit through a second "Knuckle-biter" if it took out that low. We saw what happened in late July in the FCX daily chart with the two "Knuckle-biters," after the 2011 Falling Wedge breakout, followed by the Bearish Wolfe Wave/Tidal Wave breakdown. UGH. No, thank you.



Well-ll, we got the second "Knuckle-biter" that took out the 44.3266 low so, as much as I am extremely fond of Double Nested Ascending Triangle breakouts, I threw that trade in and called it a day.



FCX did go lower than 44.32, where I sold, but the 44.02 stop never was taken out, the stock traded in a sideways consolidation for a bit, then the 45.42 target got MADE. Of course! If I held on the "Knuckle Biter," the danged stock woulda crashed on me. LOL.

Seriously, though, I don't regret my decision. There have been other times that I've been rewarded for throwing in a "Knuckle Biter," so that's the breaks. I made an extra $1,000 on that second trade so I can't complain.

After the 45.42 target got MADE, FCX Double Topped at 45.56 (uncanny how often that happens so close to a target), then took out the 45.00 pivot of the "M-Top" (synonymous with Double Top), which put a target of 44.44 IN PLAY.

45.56 - Identical highs of the Double Top
45.00 - The pivot

45.56 - 45.00 = 0.56 points of downside on a break of 45.00

45.00 - 0.56 = Target: 44.44 IN PLAY

After the Double Top breakdown, FCX had two failed retests (the first two red arrows), which were good shorting opportunities, then it got smacked on any attempt to sustain a rally through the inverted EMAs, which in juxtapostion to the morning selloff when they were properly threaded and pointing higher, now were providing resistance and pointing down.



Basis the daily chart, the 45.56 Double Top got put in just a bit below the 45.88 resistance at the bottom of the 2011 Falling Wedge.



Gain on the session: $6,450
Gain on the past four sessions: $22,100

I mention the latter to point out that, on the 5,000 shares that I've been playing in FCX during the past four sessions, all on the long side, that's about 4 points of upside while FCX has been down over 3 points during that same period of time and I certainly haven't played all of the trades that have been available, like yesterday's rally to the Ascending Triangle target, at 45.42, nor have I played any of the short trades that have been available, like yesterday's Double Top.

It's perfectly fine to watch and listen to the news, of course, and to what analysts have to say about stocks and the market, as long as we aren't immobilized like deer caught in the headlights, wondering what action we ought to be taking, if any, which seems to be what happens to many market participants.

Regardless of whether we're traders or investors, these same basic charting principles apply to intraday, daily and weekly charts and certainly don't require all of the work that I put into them, explaining in detail what's going on in them. If I were just doing this for myself, I'd just draw a few lines and save myself a lot of hours of work, typing all of this stuff out. LOL.

FCX: Short Squeeze

At Monday's close, the 8-Day RSI was the most oversold that it has been in at least two years. We always want to be careful about "oversold" conditions. Cheap can get a lot cheaper and crashes can occur from very oversold conditions. At the same time, we want to take advantage of a sharp reflex rally from oversold conditions if we can find reason to get long.



Gap Up openings in stocks that are bearish, like FCX is, are marked for a "Gap And Crap." That isn't how bottoms usually are made in a sharp downtrend like this one. More likely, there will be a wicked selloff in the stock, then an upside reversal.

I wasn't interested in buying into the gap, but I got interested when FCX didn't give back even 50% of the opening gap, and the exponential moving averages (EMA) started to turn bullish. I got long at 43.32, coming off White Data Point #4, for a play to the top of what looked to be a possible Bear Flag (the pattern in white) since it looked like The Bears were going to be squeezed a bit. I sold at 43.75 on approach to the early morning high.

"Expect patterns to resolve in the direction of the trend," which is bearish, and there was an unfilled gap yawning below.



FCX rallied to broken Double Bottom resistance, just above 44.00. The Bear Flag high was 44.00, then it broke to the downside. I wasn't interested in shorting, given the grossly oversold condition in the stock.



Hmmm-mm...The Bears weren't able to take the stock down after the Bear Flag breakdown. The Bulls strung it out at Horizontal Resistance (the horizontal red line) and looked like they wanted to make another bid for 44.00 resistance, and possibly higher. I got long again at 43.33.



Blah-h-h...I was looking for a much stronger rally, at least back to 44.00, not this meandering sideways-to-down in this channel, which at this point looked like it was going to break to the downside. "Expect patterns to resolve in the direction of the trend," and a fill of the opening gap still was a threat. I threw my second trade in at 43.40 and called it a day.



WHOA-A-A!!!

They saved the best for last, darn it. There's the wicked selloff and sharp upside reversal!

The Channel broke down and the opening gap got filled (and more) for a big shakeout of The Bulls, but look at that nice short squeeze of The Bears! They cleared the boards on that one.

The Ascending Triangle breakout near the end of the session put about 43.87 IN PLAY, just below 44.00 failed Double Bottom resistance, but the short squeeze was on and FCX managed to rally through that resistance for a gain of another dollar. If I had been watching and had gotten long the Ascending Triangle breakout, though, I would have sold when the 43.87 target got MADE.



Next resistance is the bottom of the broken 2011 Falling Wedge, currently at 45.884, not 44.884. I made a typo on the chart and am too lazy to go back and change it and download the chart again. LOL.



Gain on the session: $2,450

FCX - Conventional Wisdom

Coming into trading this week, following the S&P ratings downgrade after the gong on Friday, the futures were indicating a down opening and "conventional wisdom" was that the market would tank early, then stage a rebound and even close in the green on the session because the bad news already was factored in. The market already had experienced tidal wave selling, so it would be a case of "sell on the rumor of bad news...buy on the actual bad news (the actual ratings downgrade)."

That prediction sounded pretty good given that the market was so severely oversold, right?

Rather than play other peoples' predictions about what the market is going to do, though, we want to follow what the market IS DOING, as best we can.

At Friday's closing gong, what did we know from the chart?

1. Basis the daily chart, we knew that the bottom of the 2011 Falling Wedge, at 45.893, had been violated intraday, but that it held on a CLOSING basis, at 45.99.

2. Basis the weekly chart, we knew that 44.85 support at the bottom of the Kumo (Cloud) had been violated, but that FCX also recovered from that breakdown.

3. Basis the intraday chart on Friday, we knew that FCX had found a bottom at 44.03 and had broken out of a bullish Inverse H&S pattern. The target, just below 47.00, had gotten MADE.

4. Also basis the intraday chart on Friday, we knew that FCX had broken below a H&S Top and had failed a retest of the broken neckline (the white down arrow).

At yesterday's open, FCX was called Gap Down at about 44.15, so we knew at the open that:

1. The 45.893 support at the bottom of the 2011 Falling Wedge would be broken again.

2. The 44.85 support at the bottom of the weekly Kumo (Cloud) would be broken again.

3. The 44.03 low of Friday's bullish Inverse H&S Bottom would be tested right at the open, which was the only remaining nearby support level.

If "conventional wisdom" about a sharply down opening followed by a sharp rally was going to be right, 44.03 support, or there about, would need to hold for a short-term Double Bottom. Otherwise, there wasn't any support below that, so we were about to find out fairly quickly whether or not "conventional wisdom" would be right.

SHUFFLE UP AND DEAL ;)



Just before the open, I placed my order to buy FCX at 44.08, a little above Friday's low of 44.03 with a ver-ry tight stop in the high 43.80's. I was willing to give the stock a little wiggle room for a lower leg of a Double Bottom, but not much.

The early session low was 44.05, so my order at 44.08 got filled. FCX did rally sharply off the opening low, to 45.02. The "conventional wisdom" scenario was playing out fine. I was up nearly $5,000 on the trade (at White #2).

What I wanted to see from The Bulls was enough strength to fill the gap at 45.37 (the horizontal yellow line). What I did NOT want to see was anything more than a 50% or 61.8% of the early rally. Anything much more than that would suggest another retest of 44.03-44.05 Double Bottom support, which would mean a Triple Bottom. That kind of weakness would lack credibility. Triple Bottoms don't have a very good chance of holding, especially not in a stock in which there is no support whatsoever below the putative Triple Bottom.

I raised my mental stop to "anything below 44.30," which would be an unacceptable give back of the rally to 45.02 and would strongly suggest to me that:

1. The 44.03-44.05 Double Bottom was about to get broken.

2. "Conventional wisdom" about a sharp rally on the bad news about the S&P downgrade already being factored into the market would be wrong.

I threw the trade in when FCX printed 44.29. Yeesh..
After the Double Bottom broke, FCX:

1. Broke down below a Falling Wedge (pattern in white)

2. Broke down below a Symmetr4ical Triangle (pattern in orange)

3. Broke 43.08-43.10 Horizontal support (horizontal red line)

4. Failed a retest of broken horizonatal support, at 43.08 (first red down arrow)

5. Staged a weak late day rally to 43.08-43.10 resistance, which fizzled.

6. Finished the session down nearly 9%.

So much for "conventional wisdom," eh?

Market Lesson:

Follow what you SEE, not what you HEAR others predicting.

Now I will slap myself for not shorting those pattern breakdowns.

Slap! Slap! SLAP!!!(Ouch! Ouch! OUCH!!!)



First Resistance on any rally is 43.08-43.10 in the intraday chart above (horizontal red line).

Second Resistance is 44.85, the bottom of the Kumo in the weekly chart (see Sunday's post for that chart)

Third Resistance is the bottom of the 2011 Falling Wedge, which is roughly at 45.88



Gain on the session: $900. I really "shoulda" shorted all of those breaks of support, but I'm glad to have made anything being long a stock that was down nearly 9% on the session. Yeesh...

Market Lesson: "Don't get emotionally involved with stocks. Want what Ms. Market wants." I just plain didn't wanna short it. My loss ;(

FCX: Bearish Tidal Wave

As we know, when targets get MADE, that doesn't mean that a stock can't go higher or lower than the target. It just means that the target for that particular pattern has been achieved. In this particular case, after the Bearish Wolfe Wave target got MADE...



...it turned into something more akin to a Bearish Tidal Wave, destroying everything in its path. From the Bearish Wolfe Wave "Fakeout/Breakout," nine months worth of support was taken out in about two weeks' time. UGH. That's the purpose of a Wolfe Wave, though, to get the proverbial "everyone" wrong-footed, then ripping in the opposite direction of the fakeout.

When stocks get beat up this badly, they usually need time to regroup and to build a base like FCX did with the Bullish Inverse H&S in March, the Bullish Ascending Triangle in April, and the Triple Breakout Through Triple Validated Resistance in late June. After a bludgeoning like this, a "V-shaped" bottom certainly is possible, where the stock goes straight down and then straight up for awhile, but those bottoms are uncommon.

While we always want to be careful about trying to "catch a falling knife," where a stock is selling off below all nearby support, which FCX was doing on Friday, it certainly is reasonable to look for areas of possible support, for at least an oversold bounce, which is what I did on the early selloff.

As we can see in this chart, the bottom of the 2011 Falling Wedge came in on Friday at 45.893, so I made my inital purchase at that level, looking for it to provide support. FCX did manage to stick the close at 45.99 at the final gong, but it was a wild ride between hither and yon getting there, let me tell you! LOL.



The next support that I was looking at was the bottom of the Kumo (Cloud), basis the weekly chart, at 44.85.



The bottom of the 2011 Falling Wedge, at 45.893 didn't hold. FCX sold off to an early session low of 45.43 (yellow up arrow) so my trading plan was busted. I sold my shares at 46.15 into the first bounce into the inverted EMAs (yellow down arrow) for a decent gain and planned to buy my shares back if FCX tested the bottom of the weekly Kumo (Cloud), at 44.85.

Be careful what you wish for! I got back in at 44.82, but nearly was stopped out at 43.82 when FCX sank to 44.03. UGH. I sold into the next rally, at 45.37, looking for the stock to establish a neckline of an Inverse H&S bottom, or a flat top for an Ascending Triangle, with a plan to buy back the shares again near the 44.85 bottom of weekly Kumo (Cloud), if I could get them.

I got back in at 44.88. That was the money trade. The Right Shoulder of the Bullish Inverse H&S pattern was a "nested" Bull Flag (the pattern in orange), lending strength to the pattern. The H&S pattern is very unorthodox. The volume isn't right. The Right Shoulder is wider than the Left Shoulder, which it "shouldn't" be. As we've seen many times, though, those often work out fine, as this one did. If it had failed after the breakout, I would have stopped the trade out below the low of the Right Shoulder (which also was the low of the Bull Flag, in orange).

The breakout put a target of just under 47.00 IN PLAY. It was a breakout against the trend, and those are less likely to get MADE, so I sold very early, at 46.20, and played it a couple of more times afterwards, but the Bullish Inverse H&S target just below 47.00 did end up getting MADE at the afternoon high of 47.1556.



Gain on the session: $12,400

DO And DNDN: Smackdowns And Crashes

We looked at DO two weeks ago when we practiced calculating slopes. At that time, DO was coming off Data Point #4 of a Bear Flag/Rising Channel. The Rising Wedge (pattern in blue) targets had MADE, but 61.62 still was IN PLAY from the early May Rising Channel Breakdown.



The recent Bear Flag/Rising Channel resolved to the downside, like the two patterns that preceded it. Notice that the 61.57 target IN PLAY on this breakdown was within five cents of the 61.62 target already IN PLAY from the May 2 breakdown. There never are any guarantees with targets getting MADE, but when more than one pattern breakout or breakdown targets a similar price area, the chances that the target will get MADE, or reasonably approximated, are improved.

The three pattern breakdowns since the initial one, at 73.94 on May 2, provided very good opportunities to sell and/or sell short the stock to avoid losses and/or profit from the selloffs and the recent Smackdown.



This chart of DNDN is yet another example of why I ignore news on the fundamentals, including what CEOs and analysts say about a stock, and LOOK AT THE CHART.

If we're long a stock that is in a nice uptrend with no apparent problems and it gets "shot out of the sky" on bad news, there's nothing can be done about it except sell the breakdown. That's an unavoidable disaster.

The crash in DNDN was an avoidable disaster. UGH.

DNDN broke out to the upside on July 6, on good news about "reimbursement decisions." The upside Fakeout/Breakout turned into a "Knuckle-Biter" when the stock CLOSED back below the breakout, then DNDN went all-ll the way back and retested the bottom of the Symmetrical Triangle on July 18. It stuck the close at 38.22, just a hair above the trendline. Sloppy, but trendline support held and the stock went up to challenge 39.22-39.50 resistance again.

For four sessions, DNDN kept trying to get through that resistance, but without success. I played it on July 22, but threw it in after the stock failed at 39.50 and started selling off.



On July 25, DNDN fell back and CLOSED below the Symmetrical Triangle and on July 27, it CLOSED below the July 18 low. What a nice short that would have been, huh?! That was a technical breakdown, six trading sessions before disaster struck on the bad news about "reimbursement problems." UGH.

Market Lesson: Question the "good stuff" that CEOs, analysts and the media, in general, have to say about a stock when it breaks down, technically. If the news really is that good, why is the stock breaking down? Prior to stocks like DNDN crashing (the Symmetrical Triangle breadown was six days earlier), this old market saw comes in handy:

"First the (bad) chart...then the (bad) news."