Quick Summary:
Analysis of bearish close with dark cloud cover and bearish engulfing candles. Current entries $DUG and $SQQQ used to short energy and nasdaq. Earnings breakout setup $HOG. Focus list stocks put similar bearish candles to market. Game plan is to manage shorts and look for more entries.
Video Analysis:
Today's intra-day video laid out what we were looking for at the close (which ended up working to plan) and the $DUG entry, along with hitting a few focus list stocks as short setups--which some of you took.
Current Trades
There were two short trades today, both using inverse ETFs (go long the ETF to short index). I entered $DUG earlier in the day and $SQQQ near the close to short Energy and Nasdaq.
Rather than analyze the trading vehicles, let's look at the underlying ETF chart.
$SQQQ ($QQQ short)
The candle pattern at the end of the day is known as a "dark cloud cover" pattern. Knowing the names of all these different patterns is not important. Just know that there was an attempt at a breakout that failed and price closed within the previous day's candle. This pattern is effective at tops and at the resistance level of bounces. Think of it in the same vein as the inverted hammer pattern.
We are watching 3 major target levels. The first two being gapfills around $94.50 and $90.50, and the 200 dma at $92.
This morning I entered $DUG right at the 20 dma resistance level. Notice that volume was declining on the bounce and stochastics extremely overbought above 90.
Now here is the chart at the close. We already have a 5%+ gain, but have not yet hit our target. You could also enter off the close as a "bearish engulfing" pattern formed. This is like dark cloud cover, but the close is lower than the previous day, thus "englufing" that bar.
Key targets are the gap fill around $61 and lows at $55.
Tomorrow if there is slight strength off either of these two setups, an short entry is still available.
The Trade Results Journal/Spreadsheet
Key SPY Pivot Levels: Round number $200, Old high 202, 200 dma 190.76 197.54, 50 dma 196.81 recent lows 181-182
Under the Hood and Trading Game Plan:
SPY's pattern is similar to QQQ, with a dark cloud cover formation printing at the close. It's really a flip of a coin for which one to short. I chose QQQ because the 200 dma is further from entry level.
The game plan for the near future is to play another leg down with shorts. Obviously if we get stopped out here this pattern is negated. Those who did not get short today can get short on slight strength at the open or a flat open. I will continue to focus on index and sector ETFs.
The Focus List
I am back to being cautious about a stock driven focus list. However I will continue to monitor stocks that are holding up, and even possibly shorts of good stocks that are overbought.
$BITA, $PANW, $MNST, $BABA, $BIDU, $GMCR
$BIDU, $BITA and, $BABA $GMCR all printed negative patterns near bounce pivots (dark cloud and inverted hammer) and could be used as short plays if not using ETFs.
Earnings breakout setups:
$HOG is currently the only earnings setup that interests me. Notice the gap fill target that converges with the 200 dma. I am watching how the range forms.
I decided to use Telechart today for annotations due to the discrepancy in moving averages with stockcharts.com. If you have an opinion on which charts you prefer in the Report, please leave a comment here.
Please read the post 23 Laws of the Part Time Swing Trading the Market Speculator Way and How to Analyze Your Swing Trade Results It is important to know these rules if you trade off the Report.
New subscribers and trial members please leave me any feedback/comments in the comments, via email (singhjd1@aol.com) or twitter (twitter.com/PaulJSingh).
