Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

SPY Gartley Pattern (by Fujisan)

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My apologies for being absent for some time.  I had some family business to take care of, and I'm glad that I'm back!

SPY Gartley Pattern

Here is my market view of SPY.  We had a reversal candle on Friday, and I'm expecting a follow through on Monday (as we all know almost every single Monday is a big UP day).

Here is one of the price patterns coming to my mind.  Of course, we don't know how high the first leg will go up, so the price projection needs to be adjusted accordingly.  This pattern may or may not be working, as it's still too early to tell, but I will be watching this pattern very closely.

2010-02-06_1020

If you missed catching a falling knife on Friday, you still have a chance to make money in both directions, so let's wait for the right entry point.

(On a side note, I'm pretty sure that people who go long at the end of Friday and short on Wed every week would have made a pretty good money on the indices, as every Monday is a big up day and every Thursday is a big down day!!).

Going Long (Bull PUT Spread)

If Monday gaps open big, it may be too late to go long – but by all means, here is one of the examples of a bull put spread – SPY 106/107 (buy 107 put and sell 106 put) credit spread.  This type of spread becomes very effective ESPECIALLY in the last 2 weeks from OPX (Option Expiration) as you could take advantage of the time decay.  If you could pick the right direction, you could double your money without a big price move AS LONG AS the underlying stock stays above/below the short strike price.

In this example, as long as SPY stays above 107, you could double your money in two weeks. 

SPY_TOS
Going Short (Bear CALL Spread)

After SPY hits the first target of 109.83 (gap from Feb 3), you could take a short entry.  I'm expecting some kind of peak on Feb 16 (Feb 15 is a holiday), which is Tuesday on OPX.  You could either short it via March put option or Feb bear call spread.  If you are taking a bear call spread, please remember that you only have 4 days to make it work, so use a very tight stop (right above the gap fill).  If you could pick the right direction, you could literally double your money in 4 days!

Here is an example of 110/111 bear call spread (buy 111 call and sell 110 call options).  My expectation is for SPY to expire right around 108 in Feb OPX.

SPY_PUT 

Combining them together (Iron Condor)

If you are sure that SPY will expire somewhere between 107 and 110 for Feb OPX, you could hold on and combine these two spreads together to maximize the profits.  Your entire risk would be $100 whereas the max profits would be $900 (you need to put them on at a different time.  The results would be different if you put them on all at once).

SPY_ic“ 

Using Pivots

I have discussed using pivot points for good entry/exit points previously, and even if you have absolutely no idea which way the market is going, Friday's support was well expected and supported by both weekly and monthly S2 pivots.

Pivots   

Another price pattern coming to my mind at this point is IH&S, which would result in a double top and potentially forming M pattern afterwards.  Either Gartley or IH&S patterns, I believe the major indices are currently going through the correction period against the major move up from March 08 low, and there will be one more leg up after this correction is over.  This is even more clear if you take a look at a monthly chart. 

SPX Monthly Chart

Here is an update of the SPX monthly chart  As you can see, monthly candle is a single leg up (no lower high candle) up until Jan 10 and this is the first (possible) lower high candle since March 09.

SPX_Monthly 

EUR/USD Thee Drives Pattern

Here is the EUR/USD update.  This pair has completed a=c pattern at 1.3654 and ready to bounce.  I see a possible three drives pattern formation on this pair.

Eur 
  
 Happy Superbowl Sunday everybody! 

Drainage Has Gas (by Drainage)

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Drainage_cartoon

This post is for swing traders and investors interested in
playing U.S. natural gas production companies. I chose to focus on producers as
they have the most trading excitement due to their exposure to the volatility
of the price of the underlying commodity, exploration risk/reward and more
recently, due to their potential as acquisition targets. 

Here are some fundamental factoids. 

Natural gas:
 + is a necessity – it is
used to generate 20% of our electricity and heats more than half of our
homes
 + is trading near long term
low prices
 + is abundant in North
America and around the world – there is oversupply given current demand
 + can be a transportation
fuel – particularly for intra-city fleets
 + production and consumption
is increasing in the US and around the world
 + burns cleaner than oil and
coal and may benefit from new environmental/climate regulations

The following charts show how U.S. natural gas production and
consumption is growing, with gas rivaling coal in terms of heat content
produced and used within the country.

US_energy_prod_by_sourceUS_energy_use_by_source

More than any other factor, the stock price of natural gas
producers is driven by the price of natural gas. Note that there has been a significant
recovery from the August-September 2009 lows of less than $3/million Btu, when
gas storage capacity was almost completely filled. But the current price of
$5.50/MMBtu is still well below the $13 peak of July, 2008.  A return to $7-8/MMBtu gas does not require
too much of an imagination.

NATGAS_weekly

Looking at stock price charts of natural gas exploration and
production companies the commodity price driver is plainly evident, but it is
also possible to discern the effects of events such as major new discoveries
and M&A activities.

MMR_weekly

As an example of price driven by drilling success, McMoran
Exploration Co. (MMR) made a major new discovery on its Davy Jones prospect and
the stock responded favorably when the news was announced in January, 2010.

XTO_weekly

XTO Energy (XTO) gained 17% the day Exxon Mobil announced
its intent to acquire the company in December, 2009. As the deal was in stock,
it has subsequently fallen along with the price of XOM.

BEXP_weekly

Brigham Exploration Co. (BEXP) is a textbook example of a
company producing both gas and oil in a hot play, in this case the Bakken of
North Dakota, with both oil and gas production. 
BEXP has almost regained its 2008 highs, in no small part due to the
recovery in oil prices.

My current favorite pick among US natural gas producers is
Sandridge Energy (SD) which has discovered an enormous gas resource base in the
West Texas Overthrust area and has become recently more oily with its
acquisition of Forest Oil producing properties in the Permian Basin to the
north.  This summer, a gas processing
plant developed in partnership with Occidental Petroleum (OXY) will be
completed. The gas plant will separate the natural gas (methane) from the CO2
that is produced along with it. The CO2 will be used for enhanced oil recovery
in mature fields in the Permian Basin. With a modest $1.5B market cap and
reserves that would be material to a major oil company, it makes an attractive
acquisition target. 

SD_weekly

But what I really like about SD is its chart and the firm
horizontal base (green line) that has been providing consistent support at a
little above $8 since April, 2009. I also like that the stock price did not
significantly weaken during the August-September 2009 gas price lows.  Some of you may interpret this as a head and
shoulders pattern, but given the limited recovery of SD since the 2008 crash,
it is hard for me to consider this a classical topping pattern.

 SD_daily

A move off this now ten month-old base could be powerful, so
I have been a buyer when it gets near this important support line.  The daily chart indicates the possibility of
a double bottom forming off this support. Next week’s action will confirm or
reject the double-bottom hypothesis. On this chart, it is easy to see how with
a positive catalyst, SD could trade over $14. Buying at $8 and selling near $10
could make a nice shorter-term swing trade.

Fibonacci Extensions

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A few days ago, a gentleman wrote me asking if ProphetCharts could have Fibonacci extensions like TOS charts. I sort of scratched my head, because we've always have Fibonacci extensions (unless I am utterly misunderstanding the request). You can customize any drawn object in ProphetCharts, and you can establish the Fibonacci levels any place that you please. So I wrote back and told him where to find this feature, and I went on with my life.

Then this morning, I saw this over on Mole's site:

0206-fibextcomment

As smart as Mole is, I figured at this point that this feature was way too buried. So here's how you do it (again, assuming I am not so blinkered as to be utterly misunderstanding what is being asked). First, you right-click on the retracement, then you choose Customize Fibonacci:

0206-fibextmenu 

Then you check the boxes for the levels you want displayed; it is auto-populated with the basics, but you can change these (although I don't see why you would).
 

0206-fibextcustomize 

   

Anyway, I hope that's helpful.