ONE-TWENTY TWO - A collection of personal articles on financial markets including analysis you can use
Jul
6

T2108 Update (July 6, 2015) – A Rattling Lid Remains On the Pressure Cooker

written by Dr. Duru
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(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 27.3% (low of 23.8% which broke last week’s close and levels last seen in October, 2014)
T2107 Status: 39.8% (new 6+ month low)
VIX Status: 17.0 (faded from an open of 18.6)
General (Short-term) Trading Call: Bullish
Active T2108 periods: Day #178 over 20%, Day #2 under 30% (underperiod), Day #5 under 40%, Day #31 under 50%, Day #48 under 60%, Day #247 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

Commentary
In the immediate wake of the Greek decision to say “no” to the bailout referendum, the S&P 500 futures fell 1.5%. I had this reaction…


It touched off some interesting discussions on StockTwits and on Twitter. In the end, my “paper trade” worked with the S&P 500 (SPY) actually going into the green for a hot minute on the day. It ended down after beating out another test of its 200DMA support.


A close-up of the S&P 500 to show clearly the crowded trading around 200DMA support

A close-up of the S&P 500 to show clearly the crowded trading around 200DMA support


I decided NOT to play the S&P 500 on the day in favor of waiting for a true oversold condition. T2108 got close, bit no cigar. It closed at 27.3% after trading as low as 23.7%. I DID go after volatility and doubled down on my put options for ProShares Ultra VIX Short-Term Futures ETF (UVXY). If this trade fails at THESE levels, I will definitely get my chance to load up on call options on ProShares Ultra S&P500 (SSO) on true oversold conditions. Volatility ended up behaving just as I would have hoped. A rattling lid remains on top of the pressure cooker as the VIX at the open and at its highs did not even come close to challenging last week’s high and faded for most of the day. The VIX still hovers above the 15.35 pivot. Note that the exact vote DID matter contrary to my technical discussion from the last T2108 Update. I am also wondering whether the VIX will stay elevated until earnings seasons gets into full swing.


The volatility index fades for the majority of the trading day

The volatility index fades for the majority of the trading day


This was a day for pictures. So I will tell the rest of the story on the day with a few key charts.


For all the hand wringing in the wake of Greece's NO vote, Global X FTSE Greece 20 ETF (GREK) did not even break last week's low

For all the hand wringing in the wake of Greece’s NO vote, Global X FTSE Greece 20 ETF (GREK) did not even break last week’s low

Ditto for the euro - last week's low formed perfect support as this close-up of EUR/USD demonstrates.

Ditto for the euro – last week’s low formed perfect support as this close-up of EUR/USD demonstrates.

While Greece held support, China could not as announced government interventions failed to stem the selling. Traders are clearly quite happy to sell to the government.

While Greece held support, China could not as announced government interventions failed to stem the selling. Traders are clearly quite happy to sell to the government.

I honestly have no idea why oil fell 7.7% on the day. I have only seen attempts to back into an explanation. If there is REAL fear anywhere to be found, it is in the oil patch! The United States Oil Fund LP (USO) gapped down hard and closed down 6.3%.

I honestly have no idea why oil fell 7.7% on the day. I have only seen attempts to back into an explanation. If there is REAL fear anywhere to be found, it is in the oil patch! The United States Oil Fund LP (USO) gapped down hard and closed down 6.3%.

Oil volatility, as represented by the CBOE Crude Oil Volatility Index (OVX), closed above the pre-OPEC level and thus confirmed a bearish spike in fear on oil. I made one last buy of USO call options. From here, my strategy discussed in an earlier post is to maintain a bearish bias against oil. I will strongly prefer fading rallies.

Oil volatility, as represented by the CBOE Crude Oil Volatility Index (OVX), closed above the pre-OPEC level and thus confirmed a bearish spike in fear on oil. I made one last buy of USO call options. From here, my strategy discussed in an earlier post is to maintain a bearish bias against oil. I will strongly prefer fading rallies.



Daily T2108 vs the S&P 500

Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)


Weekly T2108
Weekly T2108
*All charts created using
freestockcharts.com unless otherwise stated
Related links:
The T2108 Resource Page
Expanded daily chart of T2108 versus the S&P 500
Expanded weekly chart of T2108

Be careful out there!

Full disclosure: net short the euro, long UVXY put options, long USO call options

Jul
6

The Australian Dollar Stabilizes In the Wake of A Copy and Paste Monetary Decision

written by Dr. Duru
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(This is an excerpt from an article I originally published on Seeking Alpha on July 7, 2015. Click here to read the entire piece.)

The Reserve Bank of Australia (RBA) left its cash rate at 2.0%, right in-line with market expectations as expressed through the Australian Stock Exchange’s RBA rate tracker. In making its policy statement for July, the RBA executed a copy and paste from the June statement and tweaked around the edges. {snip} Overall, the RBA statement is a non-event and should pave the way for some kind of relief bounce in the Australian dollar as I described earlier. The small caveat remains the RBA’s insistence that the Australian dollar should still go even lower.

{snip}

On the exchange rate, the RBA still sees further declines down the road for the Australian dollar (FXA). The related statement is a carbon copy from June. I had implicitly assumed that between 0.74 to 075 on AUD/USD might be good enough for the RBA. I am clearly wrong. This is just as well because the minute the RBA suggests it is satisfied with the level of the Australian dollar, the currency will surely soar as traders anticipate a bottom…

{snip}


The Australian dollar is breaking down against the U.S. dollar and straining even the most committed bulls on the Aussie

The Australian dollar is breaking down against the U.S. dollar and straining even the most committed bulls on the Aussie

Recent acceleration of macro-economic pressures from China and Greece are directly reflected in the technicals of trading the Australian dollar against the Japanese yen (AUD/JPY)

Recent acceleration of macro-economic pressures from China and Greece are directly reflected in the technicals of trading the Australian dollar against the Japanese yen (AUD/JPY)


Source: FreeStockCharts.com

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on July 7, 2015. Click here to read the entire piece.)

Full disclosure: net long the Australian dollar

Jul
3

T2108 Update (July 2, 2015) – A Persistent Unease

written by Dr. Duru
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(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 29.2%
T2107 Status: 41.4%
VIX Status: 16.8
General (Short-term) Trading Call: Bullish
Active T2108 periods: Day #177 over 20%, Day #1 under 30% (underperiod), Day #4 under 40%, Day #30 under 50%, Day #47 under 60%, Day #246 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

Commentary

$SPY has made "reluctant" bounce from 200DMA and "close enough" oversold. 3-day recovery good enough for swing trade. #120trade

— Duru A (@DrDuru) Jul. 2 at 06:49 AM


Sold $SSO calls but keeping bet against volatility for now. $UVXY $VXX #120trade

— Duru A (@DrDuru) Jul. 2 at 06:50 AM


With those posts, I closed out the first half of my “oversold enough” trade from the last T2108 Update (for whatever reason, StockTwits did not upload them into my twitter feed). I wanted to hold my call options on ProShares Ultra S&P500 (SSO) longer, but the bounce from the low on Monday was not quite convincing enough. I called the bounce “reluctant” because on each day, sellers were able to fade the index well off the highs. This reluctance was particularly on display on Tuesday and on Thursday. The S&P 500 ended the holiday-shortened week with a stalemate between buyers and sellers: a flat close well off both the highs and the lows of the day.


The S&P 500 makes a picture-perfect bounce off its 200DMA support on strong volume but ends the week in a stalemate.

The S&P 500 makes a picture-perfect bounce off its 200DMA support on strong volume but ends the week in a stalemate.


The SSO gains were modest. I plan to plow that money right back into call options if T2108 hits official oversold conditions (below 20%) and/or volatility spikes to a fresh high.

The fistful of put options on ProShares Ultra VIX Short-Term Futures ETF (UVXY) went through all sorts of gyrations. I felt immediate vindication when UVXY opened on Tuesday with a 10% or so gap down, but volatility rose from there. I felt double vindication on Wednesday when UVXY gapped down yet again and closed on its lows. On Friday, however, UVXY took out its revenge with a picture-perfect bounce of its 20DMA for a 12.6% gain. I took mild solace in the close just below 50DMA resistance.


After a wild week, the ProShares Ultra VIX Short-Term Futures ETF (UVXY) closed below resistance but still with a substantial gain from the previous week

After a wild week, the ProShares Ultra VIX Short-Term Futures ETF (UVXY) closed below resistance but still with a substantial gain from the previous week


While I was able to stave off some sense of regret for not locking in profits on Wednesday’s close, I could not shake the sense that I should have tried a counter-trade on UVXY or VXX. I noticed too late that the VIX had bounced cleanly off the good ol’ 15.35 pivot line. This pivot line continue to perform surprisingly well. This was one of those rare moments where it was not front and center for my trading.


The volatility index, the VIX, bounces cleanly off the 15.35 pivot line

The volatility index, the VIX, bounces cleanly off the 15.35 pivot line


The VIX’s relative resilience since Monday’s surge and UVXY’s surprising divergence in performance with a decline of just 4.2% versus the VIX’s 11% decline combined represent a persistent unease in the market. The coming Greek referendum on the bailout package from the country’s creditors leaves residual uncertainty in the air. I do not think the outcome matters at all to the larger scheme of things for trading. Greece has effectively defaulted, and it has been quite clear for some time that Greece cannot service its debts without a generous restructuring. Only the removal of uncertainty matters. If I am correct, volatility should experience a large plunge next week. At a minimum, UVXY’s out-performance versus the VIX should come to a rapid close with a decline commensurate with the VIX’s performance (it SHOULD move double). The currency markets, for example, are still not flagging any out-sized concerns after Sunday’s initial plunge in the euro (FXE).

China is likely presenting another salient concern for the market. The Shanghai Composite’s (SSEC) breakdown continues. While this index is not representative of the Chinese economy, it does hold a lot of psychological value and is a proxy for the speculative frenzy among retail investors in China. As I demonstrated earlier, the Shanghai Composite is collapsing much like the NASDAQ bubble from 15 years ago.


The Shanghai Composite Index has a confirmed breakdown with a well-defined downtrend from the recent high

The Shanghai Composite Index has a confirmed breakdown with a well-defined downtrend from the recent high


This situation will not likely resolve anytime soon with another rate cut in China failing to stem the losses this time. This trouble reminded me to look at Caterpillar (CAT). As soon as I saw that CAT had broken down below its 50DMA as well as the June low that found support at the 50DMA, I rushed to fade CAT’s meager bounce with a small number of put options. As regular readers know, CAT is my favorite hedge. I really should have been ready with puts a lot earlier – like the day of the breakdown or even the failure to break through recent highs.


A lower low confirms a 50DMA breakdown for Caterpillar, Inc. (CAT)

A lower low confirms a 50DMA breakdown for Caterpillar, Inc. (CAT)



Daily T2108 vs the S&P 500

Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)


Weekly T2108
Weekly T2108
*All charts created using
freestockcharts.com unless otherwise stated
Related links:
The T2108 Resource Page
Expanded daily chart of T2108 versus the S&P 500
Expanded weekly chart of T2108

Be careful out there!

Full disclosure: long put options on UVXY and CAT, long EUR/JPY

Jul
3

The United States Oil Fund Flirts With A Breakdown

written by Dr. Duru
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A little over two weeks ago I generated some simple trading scenarios for the United States Oil Fund LP (USO). The scenarios depended upon well-behaved volatility for oil, the CBOE Crude Oil ETF Volatility Index (OVX). OVX is now on the edge of breaking out above its 50-day moving average (DMA). The move was led by a huge surge on Monday.


Oil's volatility is breaking out above its 50DMA, but it is still well below the pre-OPEC peak

Oil’s volatility is breaking out above its 50DMA, but it is still well below the pre-OPEC peak


I am not clear why OVX surged so much on Monday and then made little progress for the rest of the week. Perhaps traders were anticipating the bearish news of a fresh U.S. inventory build (Wednesday, July 1).


U.S. stocks of crude oil ticked higher and bucked the recent trend of persistent drawdowns

U.S. stocks of crude oil ticked higher and bucked the recent trend of persistent drawdowns


Source: This Week in Petroleum, July 1, 2015, The U.S. Energy Information Association

On Thursday, July 2, we learned that the combined oil and gas rig count increased for the first time since December, 2014. The oil rig count decreased for the 29th straight week.

OVX has not yet closed above the pre-OPEC peak, so I have not yet triggered a bearish bias against USO. However, USO is on the edge of a breakdown.


United States Oil Fund LP (USO)  is on the edge of a breakdown

United States Oil Fund LP (USO) is on the edge of a breakdown


Source: FreeStockCharts.com

Sticking to my trading strategy, I doubled down on USO call options on Thursday, July 2. I am essentially betting the $19 bottom of the trading range will hold. Another lower close will confirm a breakdown below the 50DMA pivot and an end to the trading range. Even in that scenario, I will likely wait for the OVX signal before attempting a fade on USO while it is sinking. In other words, there could be a dead, “no trade” zone in the first stages of a breakdown for USO. Stay tuned..!

Be careful out there!

Full disclosure: long USO call options

Jun
29

T2108 Update (June 29, 2015) – A Greased Market Skids Toward Oversold Conditions

written by Dr. Duru
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(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 26.1% (a 38.4% plunge! 16 percentage points!)
T2107 Status: 40.2%
VIX Status: 18.9 (up 34%!)
General (Short-term) Trading Call: Bullish
Active T2108 periods: Day #174 over 20%, Day #1 under 30% and 40% (underperiods) ending 132 days above 30% and 8 days above 40%), Day #27 under 50%, Day #44 under 60%, Day #243 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

Commentary
T2108 closed at 26.2%, its lowest close since the rebound from last October’s big oversold swoon. It is very tempting to declare the market “close enough” to the oversold threshold of 20%. However, all the chop during this year has flattened moving averages which in turn means T2108 can cover a lot of ground with the right kind of trading power. The market received just such a push today. The surge in trading volume is clear on the chart of SPY: sellers drowned the sea in red with double the average! It was quite a combination of trading on the day with the S&P 500 (and SPY) barreling toward and into 200DMA support, T2108 crumbling a massive 16 percentage points (a drop of 39%), and the VIX soaring 34%.


The S&P 500 makes a beeline for 200DMA support -  test that last happened in October...and dramatically failed!

The S&P 500 makes a beeline for 200DMA support – test that last happened in October…and dramatically failed!

The chart for SPY makes the volume surge clear - almost a double from average!

The chart for SPY makes the volume surge clear – almost a double from average!

T2108 plunges 16 percentage points to its lowest point since the October swoon

T2108 plunges 16 percentage points to its lowest point since the October swoon


The trading action in currency markets motivated me to trade as if T2108 is already oversold. Even as the S&P 500 continued to slip all day and volatility expanded, the euro (FXE) – centerpoint of the Greek drama receiving the blame for the market’s troubles – remarkably gained strength. The euro not only quickly reversed its gap down, the roiling currency surged well past the gap. Either the market is looking forward to Greece’s exit from the euro, or market participants are assuming that central banks and governmental authorities will now be forced to provide a “solution” quick, fast, and in a hurry…


The euro snaps right back from the latest developments in Greece

The euro snaps right back from the latest developments in Greece


In times of panic, the opposite trade often prevails. So, I closed out my short on EUR/USD soon after the open on Sunday. I rebuilt that short into the resurgence in preparation for the next swoon from dramatic headlines. I plan to accumulate further up to previous resistance around 1.14. There is ultimately no good outcome from Greece short of the generosity of a restructuring of debt.

The euro’s resilience initially seemed to explain the immediate bounce on the S&P 500 at the open. The divergence from there was quite remarkable and surprising.


I grabbed the usual suspects for the oversold trade. I first bought put options on ProShares Ultra VIX Short-Term Futures ETF. I next bought my first tranche of call options on SSO.


For good measure, I added a few short positions on high-flyers like Tesla (TSLA) which are sure to tumble far and fast if the market sell-off really gets ugly. I also faded the rise in Ambarella (AMBA); the stock surprisingly went GREEN for a spell before fading into a -0.75% close (see the last T2108 update for a description of the setup). In other trades, I pulled the trigger on trading range/pivots the United States Oil ETF (USO) for a second to time and on Apple (AAPL).

With a holiday-shortened week in the U.S. that will include the release of the June jobs report, I am expecting the market to experience rapidfire movements, especially in currency markets. Most of my focus will be on monitoring the currency markets and trading accordingly. In the meantime, I will need a major reversal in volatility within the next 2 1/2 weeks to get good on my UVXY and SSO trades.


The volatility index breaks through resistance in dramatic form

The volatility index breaks through resistance in dramatic form

ProShares Ultra VIX Short-Term Futures ETF (UVXY) rises again...

ProShares Ultra VIX Short-Term Futures ETF (UVXY) rises again…



Daily T2108 vs the S&P 500

Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)


Weekly T2108
Weekly T2108
*All charts created using
freestockcharts.com unless otherwise stated
Related links:
The T2108 Resource Page
Expanded daily chart of T2108 versus the S&P 500
Expanded weekly chart of T2108

Be careful out there!

Full disclosure: long SSO calls, long UVXY puts, short EUR/USD

Jun
28

T2108 Update (June 26, 2015) – Shanghai Composite’s Breakdown Shakes Summer’s Slumber

written by Dr. Duru
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(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 42.6%
T2107 Status: 46.4%
VIX Status: 14.0
General (Short-term) Trading Call: Neutral
Active T2108 periods: Day #173 over 20%, Day #132 above 30%, Day #8 over 40% (overperiod), Day #26 under 50% (underperiod), Day #43 under 60%, Day #242 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

Commentary


Given that T2108 and T2107 closed essentially unchanged on Friday, the increase in breakdowns turned out to be more a function of where I happened to look on Friday, June 26, 2015.


An ominous breakdown below the 200DMA for Canadian Solar Inc. (CSIQ) confirms the earlier 50DMA breakdown

An ominous breakdown below the 200DMA for Canadian Solar Inc. (CSIQ) confirms the earlier 50DMA breakdown


However, one breakdown should now be on everyone’s radar. On Friday, the Shanghai Composite Index (SSEC-X) lost 7.4%. The selling confirmed a 50DMA breakdown and produced a fresh 6-week low. The index is now down 19% from a major multi-year high set just two weeks ago. The index is STILL up 34% year-to-date.


The Shanghai Composite Index violently pivots around its 50DMA into a confirmed (and ominous) breakdown

The Shanghai Composite Index violently pivots around its 50DMA into a confirmed (and ominous) breakdown

Anyone who has lived through the NASDAQ bubble and crash of 1999 to 2000 should see very familiar patterns

Anyone who has lived through the NASDAQ bubble and crash of 1999 to 2000 should see very familiar patterns


The Shanghai Composite Index is China’s casino stock market. We have heard stories for months now about the gold rush mentality among retail traders eager to open trading accounts to get in on the action. The tremendous rush of what has reportedly been thousands of new accounts a day has come despite a slowing growth rate in China and plunging prices of steel rebar to 2009 levels. The slump in steel is at least symbolic of a larger malaise as so much of the larger China story runs on infrastructure and construction – both heavy users of steel.

The current breakdown of the Shanghai Index represents a near inevitable end of the momentum. The similarities to the NASDAQ bubble and crash are also not surprising given these frenetic trading conditions and rapid, parabolic gains. China’s rush to cut interest rates to a record low on Saturday represents a desperate acknowledgement that conditions are potentially teetering on a bigger calamity. It is now the FOURTH rate cut since November. Along with everyone else, I will be looking to see whether this cut works to calm China’s stock traders.

Meanwhile, back on the home front, the S&P 500 (SPY) remains contently oblivious.


The S&P 500 in a familiar position - hanging out around its 50DMA

The S&P 500 in a familiar position – hanging out around its 50DMA


The VIX tried to generate some excitement but was promptly faded before it could reach the 15.35 pivot (now firm resistance).


The Federal Reserve has dutifully helped to suppress volatility

The Federal Reserve has dutifully helped to suppress volatility


The only thing preventing me from getting outright bearish on the U.S. market is that T2108 is stuck firmly in neutral territory. So, the trading call remains neutral, and I am still focused on stock-specific stories. To stick with a bearish theme, I present charts from the ugly side of the fence…

This chart on iShares MSCI Emerging Markets ETF (EEM) is “catch-up.” I should have noted it earlier. After EEM tested resistance at the 200DMA, I loaded up on put options. I closed them out on Friday. The difference between this trade and the past two is that I did not hedge with call options.


iShares MSCI Emerging Markets ETF (EEM) is firmly turned back from resistance

iShares MSCI Emerging Markets ETF (EEM) is firmly turned back from resistance


Ambarella, Inc. (AMBA) has been a momentum favorite for a while now. On Monday, June 22nd, notorious short-seller Citron brought an end to that momentum in dramatic style. Interestingly, Citron released its report on the morning of Friday, June 19th, but I guess it took the weekend for enough people to truly believe whatever the report said.


The lack of commitment to this stock showed in the subsequent rush to the exits – a classic characteristic of momentum stocks. After the dust settled, AMBA had lost 21%. The next day, it gapped up as the last bargain hunters and short-covering went to work. The momentum came to a fresh end with Friday’s bearish engulfing pattern. As ugly as the chart looks now, the stock is not technically confirmed as bearish until major support breaks, like the 50DMA.


Citron crushes the momentum in AMBA

Citron crushes the momentum in AMBA


AMBA got a lot of its fame from being a supplier to GoPro, Inc. (GPRO). AMBA has performed much better than GPRO. AMBA has made numerous all-time highs and until last week experienced near non-stop, breakneck upward momentum. GPRO had its day and is now struggling to regain former glory. That excitement returned with earnings in April. After a complete reversal of the post-earnings gap that I SHOULD have bought, the stock resumed its recovery from the March low. The momentum has wavered in June as the 200DMA has held firm as resistance. AMBA put GPRO back on my radar and I promptly faded the weak recovery from Monday’s AMBA-sympathetic drop.


GoPro, Inc. (GPRO) starts to waver at 200DMA resistance

GoPro, Inc. (GPRO) starts to waver at 200DMA resistance


Again, I am not yet bearish on the stock market overall. The constant chop, the consistent hugging of the 50DMA by the S&P 500, and the inability of volatility to make a move are all non-supportive for any fundamental bearishness. It does not even make sense to try to get “pro-actively” bearish. This is even more true if China’s rate cut succeeds in calming nerves and keeping traders in their stratospheric positions. But given the convergence and confluence of events, which now includes what could actually be the end game for Greece, I am officially on alert. Interested readers should check out my study from 2011 that demonstrated that trading in the summer can lead to gains for bulls, but when things go bad, they get VERY bad: “Summer’s Positive Gains Can Come With High Risks.” In other words, it PAYS to pay attention over the summer. Don’t sleep…


Daily T2108 vs the S&P 500

Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)


Weekly T2108
Weekly T2108
*All charts created using
freestockcharts.com unless otherwise stated
Related links:
The T2108 Resource Page
Expanded daily chart of T2108 versus the S&P 500
Expanded weekly chart of T2108

Be careful out there!

Full disclosure: short CSIQ shares, long CSIQ calls, long EEM calls,

Jun
25

T2108 Update (June 25, 2015) – Embrace the Moving Averages

written by Dr. Duru
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(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 42.6%
T2107 Status: 46.9%
VIX Status: 14.0
General (Short-term) Trading Call: Neutral
Active T2108 periods: Day #172 over 20%, Day #131 above 30%, Day #7 over 40% (overperiod), Day #25 under 50% (underperiod), Day #42 under 60%, Day #241 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

Commentary
In the last T2108 Update, I gave some examples of how “embracing the chop” has produced relatively consistent trading results. As the market chop extends further and further, the moving averages become more and more reliable friends. In particular, the 50-day moving average (DMA) has either flattened out or acquired a very steady ascent for several stock of key interest to me; they have provided convenient pivots for rangebound trading. Surprise, surprise, the S&P 500 (SPY) has spent the last two days reaching for its 50DMA yet again. The index is leading the way for 50DMA pivots.


Another 50DMA pivot for the S&P 500

Another 50DMA pivot for the S&P 500


I did not try to play the top of the channel because T2108 was not extended enough. At its highest point, T2108 hit 51.4% on Monday. It never CLOSED above 50% all week. If T2108 gets back to the mid to low 30s, I will definitely reload on call options on ProShares Ultra S&P500 (SSO).

One reason for this slight bullish bias is the controlled behavior of the volatility index. It has yet to break above its 15.35 pivot since March. Sure the VIX is up 15% over the last two days, but I am unmoved until that pivot breaks and then holds as support.


The VIX has struggled to gain ANY traction for a long time

The VIX has struggled to gain ANY traction for a long time


Before I cover two cases of tradeable chop using the 50DMA, I give this chart of KB Home (KBH) as an important contrast. Last week, the market responded well to KBH earnings and the stock broke out above a downtrend line from KBH’s peak in 2013. This move is of course bullish for homebuilders and is even more important or KBH given it was trading at 2 1/2 year lows just 5 months ago.


KB Home (KBH) breaks out

KB Home (KBH) breaks out


Of course, KBH still has a LOT to prove given the 2013 peak was at $25.14, a whole 46% away!

Next on the list is Netflix (NFLX). Buying dips continues to pay dividends. However, this week could be the last week for this trade.

Yesterday, June 24th, Carl Icahn made a splash by announcing that he had sold his remaining stake in NFLX. It is being called “the best trade ever” given the profits and massive return Icahn secured. I am even MORE impressed by Icahn’s ability to dump such a large stake and have such a non-remarkable impact on the stock. At the time Icahn made this revelation, NFLX was sitting at a fresh all-time high and had crossed the $700 threshold. At such a lofty level, Icahn’s exit of course brought out the sellers in droves. Icahn may have disturbed the entire (blissful) dynamic of NFLX.

Icahn was not pushing up the stock with buying, so his exit is not technically a withdrawal of buying volume. But *technically*, NFLX lost a major psychological force that helps traders and investors justify buying shares at this level and maintaining the momentum. So, I am ready to interpret a technical breakdown in NFLX as the end of the road or at least a signal to change strategy. I will not wait for a 50DMA breakdown for such a signal. Instead, I will be more conservative and draw a line in the sand below $623 where NFLX made its last big breakout.

The initial excitement on the day was caused by the official announcement of a 7:1 stock split. I am not sure why the acknowledgement of known plans caused such a stir. Anyway, I was kicking myself for not already having a position when I floated a Hail Mary with a limit order to buy a dip. In a case of better to be lucky than good, that dip came right after I got a price alert that NFLX had surged to a 3% gain on the day. Confused, I checked the account and, sure enough, I had purchased another tranche of call options that had already doubled in price! My initial instinct was to dump the shares and lock in my good fortune, but I decided to check the news first. I was even more confused that Icahn could cause a dip that did not last. After checking the intraday chart, I could see momentum from the bounceback was already starting to wane. That signal pushed the eject button for the position. Next, to press my luck further, I took some of my profits and placed another limit order. This one filled as well, but it will likely expire worthless tomorrow (Friday, June 26th).

NFLX dipped again today, and I bought after the stock was down over 3%. The stock eventually did bounce a little from those levels.

I tell these tales to demonstrate in real terms how I am executing on the NFLX strategy. The charts below show the action in pictures…


This 5-minute chart shows how the initial rapid recovery gave way to acceptance of the reality of Icahn's departure.

This 5-minute chart shows how the initial rapid recovery gave way to acceptance of the reality of Icahn’s departure.

Buyers are clearly trying to maintain the uptrend as NFLX conveniently bounced off its 20DMA uptrend. Quick follow-through buying would send a powerful signal that this rally may yet have legs without Icahn.

Buyers are clearly trying to maintain the uptrend as NFLX conveniently bounced off its 20DMA uptrend. Quick follow-through buying would send a powerful signal that this rally may yet have legs without Icahn.


OK, NOW onto the 50DMA charts I promised earlier. Commentary provided below the charts.


Apple (AAPL) may be forever married to its 50DMA.  The range has tightened tremendously since the WWDC. Two straight fades from a 50DMA breakout are very worrisome on a swing trading basis.

Apple (AAPL) may be forever married to its 50DMA. The range has tightened tremendously since the WWDC. Two straight fades from a 50DMA breakout are very worrisome on a swing trading basis.

The United States Oil Fund LP (USO) is keeping a tight watch on its 50DMA providing for excellent setups for rangebound trading. The Bollinger Bands are fiinally starting to tighten, so I am now looking out for a major move at some point soon...I hope I happen to be in the right position at the time!

The United States Oil Fund LP (USO) is keeping a tight watch on its 50DMA providing for excellent setups for rangebound trading. The Bollinger Bands are fiinally starting to tighten, so I am now looking out for a major move at some point soon…I hope I happen to be in the right position at the time!



Daily T2108 vs the S&P 500

Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)


Weekly T2108
Weekly T2108
*All charts created using
freestockcharts.com unless otherwise stated
Related links:
The T2108 Resource Page
Expanded daily chart of T2108 versus the S&P 500
Expanded weekly chart of T2108

Be careful out there!

Full disclosure: long AAPL, USO, and NFLX call options

Jun
25

Implications of Current Internet Valuations As Facebook Takes Over the Top Spot

written by Dr. Duru
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One big headline on Tuesday, June 23rd featured Facebook (FB) racing past Walmart (WMT) in market capitalization for the first time ever. The following day, FB gained further ground on WMT as the two stocks continued to motor in opposite directions: FB has set new all-time highs two days in a row while WMT hovers above a 2015 low which was a low not seen since October, 2013. WMT has fallen straight down for almost the entire year. At the time of writing FB is worth 249.07B and WMT worth 233.10B.


A choppy but persistent rise against Wal-Mart for Facebook

A choppy but persistent rise against Wal-Mart for Facebook


Source: StockCharts.com

Comparing FB to WMT is mainly interesting as an exercise in measuring FB’s ascendancy through the large-cap universe and demonstrating how “new world” continues to overtake “old world” stocks. Even more interesting is compaaring where FB falls in comparison to its contemporaries on the internet. It just so happens that Facebook recently took over the #1 spot in valuation among a select group of internet-related stocks that I watch. Twitter (TWTR) fell from its #1 spot mainly thanks to a major earnings miss in April that sent the stock down 18% in one day. TWTR has continued to drift lower ever since then. Along the way TWTR’s CEO resigned on June 12th and pesky M&A rumors continue to surface about the company. The chart below is a reminder that even after its steep fall, TWTR could be an expensive acquisition.

The chart is sorted from left to right by price-to-sales from lowest to highest. I have taken periodic valuation snapshots over the past three years, and I still show each of those points with different colored bars. The thick black bar represents the latest valuation measurement. This view provides visibility on which companies are on the move relative to sales. I used price-to-sales given some of the companies do not earn a profit.

Click for larger graphic…


Facebook (FB) takes over the #1 valuation spot from Twitter (TWTR)

Facebook (FB) takes over the #1 valuation spot from Twitter (TWTR)


Source for valuations: Yahoo! Finance

Facebook’s ascendance comes with a lot of momentum. Many commentators are talking about the company’s many money-making engines. However, the chart suggests that the market has topped out on how much it is willing to pay for FB’s sales. Further price appreciation will have to keep coming from sales and earnings growth and not valuation expansion.

Another key take-away from this comparison chart is that a P/S ratio of around 5 continues to serve as an important dividing line anchored by Google (GOOG). One company, comScore (SCOR), has managed to cleanly hurdle this line in the past three years. That stock has been hitting new all-time highs since last October. Pandora (P) is the most recent company to fall below that threshold. Pandora is feeling renewed pressure from competitors with Apple expansion into music streaming representing the latest intrusion. The valuation chart suggests that this kind of downward momentum in valuation will not likely recover back above the 5 threshold.

Above the 5 threshold, many of the companies have come down significantly in valuation in recent snapshots. Given these declines, Carl Icahn’s complaint about stock market valuations after he sold the rest of his stake in NFLX caught my attention. Icahn did not complain about NFLX’s valuation, so it is hard to gauge whether he would think all the stocks above NFLX are too expensive. He talked earnings not sales and complimented Netflix as being “a great company.” His main complaint about stocks is that the S&P 500 is at 17 or 18 times earnings that are suspect given many are “sort of fudged.” (For reference, NFLX is at 177 trailing and 213 forward P/Es and 7.8% of the float is sold short).

Still, within this universe of stocks, a relative compression of valuations has already occurred and produced some interesting buying/trading opportunities. One of the most interesting is Yelp, Inc. (YELP) which is currently trading sideways waiting for a suitor to buy the company. When news hit the street on May 7th that YELP could be looking to sell itself, the stock almost recovered its entire post-earnings 23% gap down. It took one more day to close that gap, but the stock has drifted downward since then. At this point, I think hedged plays on YELP make the most sense.

The valuation compression on LinkedIn (LNKD) is also interesting. The company’s earnings performance has been extremely choppy since it started a recovery from a persistent downtrend from late 2013 to early 2014. Just from the perspective of volatility, I like the odds of a lurch much higher in the next earnings or two. It should pay to be patient with LNKD because it has built a major competitive advantage in the business of recruiting and job hunting. A tightening labor market and on-going economic recovery should further solidify LNKD’s performance over time.

Comparative valuations can reveal many interesting trading and investing ideas. I am hedging my bets with what amounts to a pairs trade going short FB. Either FB’s tide will sooner or later lift other boats, or the stock is simply one of the last to feel the recent pain of swift valuation compression.

In the near future, I hope to overhaul this chart by replacing some of the laggards on the left-hand side with some of the more interesting recent IPOs in the internet space.


Facebook has caught on fire again after a lukewarm response to its last earnings report. Can it help drag other valuation leaders higher?

Facebook has caught on fire again after a lukewarm response to its last earnings report. Can it help drag other valuation leaders higher?


Source: FreeStockCharts.com

Be careful out there!

Full disclosure: long LNKD call spread, long GOOG call options, long NFLX call options, long YAHOO, long Z, long TWTR call spread, short FB

Jun
21

T2108 Update (June 19, 2015) – Embracing the Chop

written by Dr. Duru
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(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 46.3%
T2107 Status: 48.1%
VIX Status: 14.0
General (Short-term) Trading Call: Neutral
Active T2108 periods: Day #168 over 20%, Day #127 above 30%, Day #3 over 40% (overperiod), Day #21 under 50% (underperiod), Day #38 under 60%, Day #237 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

Commentary
Last week I decided to embrace the chop, and the results were pretty good. In the last T2108 Update, I reviewed the results of the previous week’s trades which took advantage of a bounce I anticipated based on T2108. I was wary about the coming Federal Reserve’s meeting and did not want to make any predictions for last week. However, when Monday (June 18th) delivered a down day, I sprung into action…

#forex market not (yet?) showing angst of stock market, so inclined to look for $SPY to bounce from short-term extended condition.

— Duru A (@DrDuru) Jun. 15 at 06:49 AM


Sure enough, the S&P 500 (SPY) bounced off its lows which happened to poke through the lower-Bollinger Band (BB). The bounce continued for three straight days until Friday’s pullback toward the 50DMA. The end result was almost typical chop action as the index closed at the highs of the previous week.


Yet more chop for the S&P 500. Note how the range has tightened since March

Yet more chop for the S&P 500. Note how the range has tightened since March


There were several keys to my belief that the good risk/reward trade was to go long even ahead of knowing what the Fed would do to calm the market’s nerves. I noted the surprisingly complacent response in the forex market to the latest round of Greek drama: the European Central Bank (ECB) even warned that it did not know whether Greek banks would have money in a week! There was also the volatility index, the VIX, which had once again bumped right into the pivot poiint…and stopped cold.


The volatility index has been unable to gain any momentum as the 15.35 pivot continues to hold as tough resistance

The volatility index has been unable to gain any momentum as the 15.35 pivot continues to hold as tough resistance


Finally, there is of course my favorite technical indicator, T2108. T2108 plunged back to the recent lows on Monday, so all I had to do was bet that it would bounce from that support. As a reminder, the neighborhood of 30% has consistently proven itself as “close enough” to oversold in this market. T2108 dropped as low as 31.2%. It got as high as 50.7% on Thursday. That is quite a range! And that range provided a lot of room for bullish trades.

As readers may recall, I have my eyes trained on Netflix (NFLX) and Amazon.com (AMZN) for swing trades. Those stocks were automatic selections on Monday for call options. I went after Apple (AAPL) which has the additional feature of pivoting around its 50DMA. I was also very aggressive in executing on my trading strategy for United States Oil Fund LP (USO). The USO trades required both call and put options as USO swung away from and back to its 50DMA. My successes in all these trades appear to validate my approaches. I also went to the well again on call options for ProShares Ultra S&P500 (SSO) and was even able to salvage most of the value of the previous week’s SSO call options. The only trade I missed that I should have made was on iShares MSCI Emerging Markets ETF (EEM). This was partially a function of already having call options left over from previous hedged trades. My last set of puts closed out successfully in the previous week. EEM did not reach a “natural” point of resistance, so I did not reload on put options.

Here are the relevant charts along with other charts of interest…


Netflix (NFLX) started the week with a gap down and bounced neatly off the first Bollinger Band. After a 1-day follow-through, NFLX churned the rest of the week. I am next looking for a (buyable) test of the 20DMA uptrend.

Netflix (NFLX) started the week with a gap down and bounced neatly off the first Bollinger Band. After a 1-day follow-through, NFLX churned the rest of the week. I am next looking for a (buyable) test of the 20DMA uptrend.

Amazon.com (AMZN) has yet to resolve its Bllinger Band squeeze. In the meantime it is bouncing reliably inside a tight trading channel. The selling to start the week took AMZN to the bottom. On Friday, a breakout from the channel was quickly faded.

Amazon.com (AMZN) has yet to resolve its Bllinger Band squeeze. In the meantime it is bouncing reliably inside a tight trading channel. The selling to start the week took AMZN to the bottom. On Friday, a breakout from the channel was quickly faded.

Apple (AAPL) bounced from Monday's selling but failed to break through the 50DMA pivot. Friday's rejection makes the 50DMA look more like solid resistance. Caution!

Apple (AAPL) bounced from Monday’s selling but failed to break through the 50DMA pivot. Friday’s rejection makes the 50DMA look more like solid resistance. Caution!

United States Oil Fund LP (USO) is caught in a 6-week trading range. The chop is tightening ever so slightly as the 50DMA rises through the middle. I am looking for it to go from simple support to pivot.

United States Oil Fund LP (USO) is caught in a 6-week trading range. The chop is tightening ever so slightly as the 50DMA rises through the middle. I am looking for it to go from simple support to pivot.

iShares MSCI Emerging Markets ETF (EEM) continues to struggle as a downtrend builds from the April high

iShares MSCI Emerging Markets ETF (EEM) continues to struggle as a downtrend builds from the April high

QE announcements are still holding as tops for the euro against the U.S. dollar. Note the steady drift upward for EUR/USD since the strong reaction to eurozone CPI.

QE announcements are still holding as tops for the euro against the U.S. dollar. Note the steady drift upward for EUR/USD since the strong reaction to eurozone CPI.

Shake Shack (SHAK) is in bigger trouble now with a lock-up expiration looming. The abandoned baby top is looking more and more like a firm top as SHAK has no broken down below its 50DMA. A feeble retest on Friday was easily rejected by sellers.

Shake Shack (SHAK) is in bigger trouble now with a lock-up expiration looming. The abandoned baby top is looking more and more like a firm top as SHAK has no broken down below its 50DMA. A feeble retest on Friday was easily rejected by sellers.

Box, Inc. (BOX) has failed to generate any momentum since its IPO. The extended trading range since then is chopping tighter and tighter. With two poor reactions to earnings, I am looking for an eventual breakdown to new lows.

Box, Inc. (BOX) has failed to generate any momentum since its IPO. The extended trading range since then is chopping tighter and tighter. With two poor reactions to earnings, I am looking for an eventual breakdown to new lows.

The chopping range for Oracle (ORCL) looks ready to breakdown. Although the initial post-earnings break of 200DMA support was reversed, the next day's selling reinforced the damage.

The chopping range for Oracle (ORCL) looks ready to breakdown. Although the initial post-earnings break of 200DMA support was reversed, the next day’s selling reinforced the damage.

The iShares Nasdaq Biotechnology ETF (IBB) has valiantly fought through several bearish signals. The new all-time high signals potential for a fresh run-up.

The iShares Nasdaq Biotechnology ETF (IBB) has valiantly fought through several bearish signals. The new all-time high signals potential for a fresh run-up.



Daily T2108 vs the S&P 500

Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)


Weekly T2108
Weekly T2108
*All charts created using
freestockcharts.com unless otherwise stated
Related links:
The T2108 Resource Page
Expanded daily chart of T2108 versus the S&P 500
Expanded weekly chart of T2108

Be careful out there!

Full disclosure: long SHAK, short the euro, short BOX, long USO calls

Jun
16

Simple Trading Scenarios for the United States Oil ETF

written by Dr. Duru
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The United States Oil ETF (USO) is down 1.0% in 2015. At its lowest point in 2015, USO was down 23.3%. At its highest point, USO was up 2.6%. This asymmetry alone seems to suggest that USO should tend higher in the short-term.

I make this assumption based on an on-going decline in volatility, measured by the CBOE Crude Oil ETF Volatility Index (OVX). The chart below shows how OPEC’s last two meetings have provided book-ends to volatility. In between, OVX has peaked and spent very little time, proportionally, actually trending higher. The choppy three-week run-up of volatility going into the last OPEC meeting was the longest uptrend since OVX ran into its March peak.


CBOE Crude Oil ETF Volatility Index (OVX) appears poised to decline further off the 2015 peak now that the last OPEC meeting is in the rear view mirror

CBOE Crude Oil ETF Volatility Index (OVX) appears poised to decline further off the 2015 peak now that the last OPEC meeting is in the rear view mirror


The decline in USO’s volatility has currently led into a very well-behaved trading range for USO. The chart below shows the dominance of the 50-day moving average (DMA) in 2015’s trading. In February and March, the 50DMA held firm as resistance. In several posts I have referenced the “bullish engulfing pattern” in March that looked like a bottom. This pattern features 1) a gap down with a low below the previous day’s low, 2) strong buying volume for the rest of the day that 3) closes the equity above the previous day’s high. When the low of the day coincides with a major low, like a 52-week low or the all-time low for USO, the odds favor a final washout of motivated sellers. True to form, this pattern has held as a firm bottom ever since.

When USO confirmed a breakout above its 50DMA with a second up day above this former line of resistance, the bottom for USO looked more solid than ever. The continued buying only slowed down when USO tested its intraday high for the year ($20.28). USO has pivoted around that line ever since and a rising 50DMA has provided picture-perfect support. Monday’s trading provided more confirmation of support as USO gapped down to the 50DMA and rallied from there.


United States Oil ETF (USO) has settled into a predictable trading range - a breakout/down could deliver the next trend

United States Oil ETF (USO) has settled into a predictable trading range – a breakout/down could deliver the next trend


Source: FreeStockCharts.com

While the uptrend in the 50DMA could carry USO to a breakout above the current range, I am looking out for a few more tests of the tops and bottoms of the presumed range between $19 and $21. My latest trades have played USO off 50DMA support and off the top of the trading range. With the range tightening between the 50DMA and the upper-bound, I shortened the duration of my last trade and sold into the day’s rebound. From here, I will just wait to buy puts near the top of the range. On the bullish side, I prefer to buy call options on a multi-day descent into support. If/once the 50DMA finally gives way, I plan to reload one more time near the presumed bottom of the range.

I consider OVX to be a linchpin to this technical strategy. As long as OVX holds steady or declines, I expect USO to continue to behave more or less predictably around the 50DMA. If OVX breaks out, say above the pre-OPEC high, my trades will take on a much more bearish bias. I will assume that a breakout above or a breakdown below the presumed trading range will precede renewed directional momentum in favor of the break.

Be careful out there!

Full disclosure: no positions

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