Tuesday, I shared a way to look at reversal trades using commodities and particularly, DBC, the Commodity Index ETF, as an example.
In fact, pretty much the entire commentary focused on commodities as I am fascinated by the constant opposing viewpoints and the basing action on the charts. Since I was a commodities trader for 12 years on the New York Commodity Exchange in the World Trade Center, with most of that time spent as an independent trader on the Mercantile Exchange (Crude Oil, Heating Oil and Natural Gas), I have never lost my penchant for futures nor for the excitement of trading them.
Reviewing the Commodity Index (DBC), I noted that since July 2014, it had traded under the 50 and 200 Daily Moving Averages in a sharply accelerating Bearish Phase.
A simple way to determine basing action is by watching the declining 50 DMA. If the price clears over and the slope of the 50 DMA flattens out, we can safely assume that selling has dried up. I further wrote that, “A move above the 50 DMA along with greater than average volume” and perhaps we will have a whole new pasture to play in.
The price on DBC did indeed clear the 50 DMA, but the slope continues to decline and the volume hardly merits spectacular. Therefore, we assume no more selling, some buying, but not enough slope change or volume coming in to holler “BOTTOM!” However, note that we are now in an unconfirmed phase change to Recovery.
Meanwhile, back at Sheep’s Meadow, the grazing, scattering, grazing cycle continues. Sheep are a bit nervous and with good reason; the wolves are lurking vis-à-vis the Volatility Index (VXX) fear factor, which made a new 60+ Day low, then turned around to close in the top 25% of its intraday range. That means we watch this carefully on Thursday to see if it continues higher. Investors, now is the time to unleash those sheepdogs!
S&P 500 (SPY) Uneventful really as a doji (open and closing price virtually the same) day near the highs. Subscribers: Neutral to slightly Positive Pivots in all except QQQs slightly negative
Russell 2000 (IWM) Consolidating with an inside day
Dow (DIA) New high close and consolidating-not overbought
Nasdaq (QQQ) 108 fairly pivotal spot to watch
XLF (Financials) 24.90 the January Calendar Range high to clear, taking its sweet time too
KRE (Regional Banks) Inside day with 41.06 the January Calendar Range High to clear
SMH (Semiconductors) Inside day
IYT (Transportation) 165.17 January high-cleared early on then failed-troublesome area
IBB (Biotechnology) Good to see this got a new steroid injection
XRT (Retail) Consolidating and promising for more upside
IYR (Real Estate) Warning Phase and inside day under that 50 DMA
ITB (US Home Construction) No more breakaway gap
GLD (Gold Trust) Noise unless it clears 116.90 SLV more interesting fi clears 16.05
GDX (Gold Miners) Over 21.00 gets interesting
USO (US Oil Fund) 18.65 now pivotal to hold
XLE (Energy) Watching volume patterns in this and XOP OIH-as in nothing to write home about yet
TAN (Guggenheim Solar Energy) Inside day new phase with 38.82 now area of support to hold for an add
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs cleared 130 and could see 132.00 if holds 128. Back over the 50 DMA too
UUP (Dollar Bull) Sideways for 3 weeks
EEM (Emerging Markets) Has to clear 41
EWW (Mexico) Subscribers: Over 60.00 is the place to clear
EWG (Germany) Inside day over 29.50
FXI (China Large Cap Fund) long term bullish
BAL (Cotton) Subscribers: Unconfirmed phase change to Accumulation
Longs: On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Note: Anything that is on this list is a candidate for a swing trade-(of course market condition is a factor) -use the max risk mentioned along with an opening range stop using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
SWI 50.70 max risk with a move over R1 good over today’s high better
Category 2: N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy an opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry: (Opening range reversals are good on anything above S1)
CIEN Like on an ORR
LULU Daytrade to mini as it is consolidating near the highs
MRVL Bullish engulfing pattern, over the 80 monthly moving average, positive slopes on all Mas and over the 10 DMA. Like if holds 16 and tighter, 16.25. For swing
BKD Classic on the 16 patterns I covered in today’s live. Phase change, range expansion, improvement in condition to a 1. Now, the calendar range is key 37.23 for a miniswing max
Category 4:N/A
Phase Change:
NVDA Consolidating over 22.00 and over 22.50 goes to a new multi-year high
SPWR Confirmed phase change and still interesting over 32.00
PNRA Phase change if clears 159.60 level and closes above the 200 DMA
AFL 61.60 a good day to miniswing risk with positive pivots if clears 62.20
*APOL Inside day over 28.66 with risk to under today’s low for a miniswing
PM 82.80 now support with clearance over 84.00 good
Shorts: Focus List: HCP VNO BIDU
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
GMCR White cap now with negative pivots. If cannot clear 125.55, then under S1 or around 123.33, can see move to 121 or lower
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
