This blog post is more of a teaching/educational post, which is what my site "Trading with Leaf-West" is really all about. Therefore, no wise cracks for experienced traders who this post is not meant for … Cheers.
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Huge Negative TICK Readings (by Leaf_West)
I was on top of the TICK-o-Meter today (I tweeted several times about it) and that made me some good money short this morning. The extreme reading made me do some quick looking at previous negative extremes. I've looked at positive extremes before but not negative extremes.
I did a quick look back at the maximum negative TICK readings for the NYSE over the past several months … surprisingly there seems to be about 1/month.
My initial thought is that these TICKs are good exhaustion type events, and looking at the data has confirmed it. The only thing that is different here today is the consensus thinking on commodities. Today is much more bearish than during the other dates noted. That could make today's hang-over last a little bit longer and mute any near term bounce.
Cheers … Leaf_West
Now What? (by Leaf_West)
Small caps are market leaders in the bigger trends typically, so if we want to assess where we are and where we are going, let's take a look at the Russell 2000 ETF (IWM).
Shorter term view is that we bounced right off of some important GANN support levels on the 60min chart. The stochastic indicator looks like it could allow a continuation in the bounce. eSignal has a trend confirmation feature in their GET software … the trading rules are to short this confirmed downtrend when the stochastic indicator breaks above the 75 level and you get signal/trigger candles.
The daily chart believe it or not is still in a confirmed uptrend … 20EMA is above the 50EMA and price bounced exactly of the 50EMA this morning at $82.42. The Ascending Triangle for the IWM actually fits more perfectly than the one I was using on the SPY last week. If you study Ascending Triangles the "E" leg down is very scary and people get cold feet and the weak hands bail as they see a "failure" at busting higher at the end of "D".
Prepared traders actually step in at the 'E" intersection and buy. The theory is that if the pattern fails a tight stop will keep you out of real trouble and if it works out, those weaker hands will come back to the market and help boost your profits in the days to come.
If the Pattern is going to fail it will be with a "truncated" move off of the "E" intersection. Typically that truncation will happen before price gets 50% of the way back to the other/upper trendline … that level in this case is $84.615.
The trigger point for conservative traders is the close under today's low which at this writing is that $82.42 50EMA level.
Cheers … Leaf_West
One of These Things Doesn’t Look Like the Other (by Leaf_West)
AAPL Update (by Leaf_West)
One market leader that is actually holding up really well is AAPL … price is actually above the price of May 2nd when its weighting in the NDQ was slashed to 12%. Currently it looks like momentum is regenerating power to allow it to break out of the bull flag pattern ($351 is the break-out price).
I am long AAPL and am using the 50EMA as my stop … My target is for a new all-time high and hopefully either of the 61.8% or 100% pattern target of $367.35 – $380.70.
3:20pm Edit … I also added some $340 calls with this Friday's expiry to my long position as well
Cheers … Leaf_West
