In the laboratory and test kitchens here at TFP, we have been having some fun with volatility. One of our latest studies focuses on statistically prominent inflections in order flow. A favorite setup for light, sweet, and sometimes crude oil is the Sunday Night Snapout – a nice surge right as the globex session opens on Sunday evenings after squeezing shorts the preceding week.
The setup works something like this:
- Wait for a surprisingly bullish week that continually takes shorts to the cleaners (preferably capping Friday off with a bullish spasm). We had one of these in WTI oil (CL futures) last week.
- Watch for a nice order flow surge right at Sunday night’s globex open. Unfortunately, this involves weak holders still short from Friday hoping and sweating that Sunday must close lower.
- Enter shorts anywhere between the middle and highs of the offending 5-minute price candle.
- Place stops above those offending globex candle highs (5-min or even 15-min candles work best).
- Place targets at Friday’s interim swing highs BEFORE the breakout.
- Lather, rinse, repeat.
Of course, there are no guarantees, but this setup can offer some compelling risk:reward setups for those who can assess and manage risk.
PCLN: A Similar Trajectory?
We couldn’t help but notice Morgan Stanley’s price target of $1,000 for Priceline on Bloomberg today. Now, let’s be clear. It’s very possible PCLN will hit $1,000 soon and for all we know, the mavens at Morgan Stanley are geniuses and are to be congratulated. Or, maybe they’ve been long for months and now just need a good little boost to get out.
Either way, we can’t help but reminisce in a fun game of Jeopardy! QCOM, AAPL – famous $1,000 price targets for $1,000, please.
Another cool study from our test labs shows some nifty context for today’s PCLN price blast. By taking an adaptive smoothing algorithm and wrapping a pair of ATR bands around it, we form an interesting PCLN alternate price target: