Market Internals – August 30, 2017

The oversold bounce that I wrote about this past Sunday (click here) seems to be working so far … when I look at the McClellan Summation Index, however, I’m not sure if the bounce will have staying power for the next several days as I originally thought.

McClellan Summation Index – Daily Chart

The last time we were at such an extreme/extended downtrend in the Index, we saw much more conviction in the short-squeeze higher.  Month-end typically sees some sort of a markup in stock prices, so I remain unconvinced if we are going to see a 1-2 week bump/grind higher like I was originally hoping for.

McClellan Summation Index – 195 Minute Chart

The Summation Index should push higher and take out the 195-minute ATR level before the end of the week if this bounce has any real staying power.

Cheers … Leaf_West

FB Update – August 30, 2017

I updated my published outlook for FB yesterday mid-day, and the stock ended up moving higher and taking out the 30-min ATR resistance level I had an audio alert at.  I was looking to trade FB intra-day once again today, but I want to wait until price takes out the 195-min ATR resistance level before I try and take any stock overnight.

FB – 195 Minute Chart

Everything is looking good for FB bulls into month end … before I swing or positional trade FB, I want to see price break the 195-min ATR and then “accept” the break of that level.  Typically I like to see a multi-candle consolidation around that ATR level, but a controlled/shallow pullback is also fine in my books.

FB – 5 Minute Chart

You don’t have to hold a stock overnight to make money on it … all you need to do is look for a spot during the day when the odds of seeing follow through on the bigger trend is likely to work-out.  For me, I try and focus on my chart indicators and the bullish signals they make/confirm when they have a crossover … I circled the area in red where traders had better than average odds that a long trade was going to work out.

You can see what happened to the traders that were too anxious first thing … they were likely stopped out during the subsequent consolidation, after getting long on that early large bullish candle (2nd five-minute candle of the day).  Most times it pays to be patient and wait for an intraday consolidation set-up rather than buying the opening push/market orders.

FB finished the day with a bullish 15-min candle so I will be looking to trade FB intra-day once again tomorrow.

Cheers … Leaf_West

 

FB Update …

AAPL and FB have been the strongest tech stocks of late while many of the big winners of 2017 are acting weaker than the overall market.  AAPL triggered my entry level this morning and FB is testing the 30-min ATR audio alert that I have in place at $167.66.  I don’t really want to try and get long FB at these levels, as I would rather see the bigger time frame ATRs flip to the condition of support.  Overall though, FB looks like a stock that wants to head higher once the daily bull-flag pattern has run its course. Continue reading

Opening 5-Minute Candles …

Many retail traders make the mistake of trading at the opening of the markets at 9:30am thinking that they “know” what the markets are going to do for that day.  Occasionally, markets will trend from the opening tick, but that is the exception rather than the rule.  I have a screen on one of my 6 monitors that tracks the stocks I typically will day trade.

You can see that for the most part, waiting for the first 2 or 3 five-minute candles.  Back a few years ago, I wrote an educational PDF about how I try and trade the opening 5 and 15-minute time periods.  I will place it back under the Educational tab of my new blog site once again.  Here is a link to the PDF …

 

 

 

 

 

 

 

 

Cheers … Leaf_West

Potential Wedge Patterns …

I mentioned in a blog post yesterday that I was looking for the overall market to have a bit of an oversold relief bounce this week … today really just confirmed that the short-term selling is probably all exhausted, and I am still looking for a bounce into month-end.

If we are indeed going to bounce, I like looking to any of my continuation scans (bull-flags, wedges) for possible long candidates …

Here is the TC2000 logic behind my 195-min wedge scan …

The first condition has price closing for 5 consecutive candles below the 20-period linear regression of the upper channel of the stock price highs x 1.0095.  The second condition has price closing for 5 consecutive candles above the 20-period linear regression of the upper channel of the stock price highs x 0.9905.

The next two conditions set the requirements for the “wedge” style consolidation pattern … the top linear regression line has to be downward sloping and the bottom linear regression line has to be upward sloping.

The final condition looks to the bigger trend and ensures that we are looking only at stocks that are trending higher overall.

Here is the results when I apply that scan on my main scan list of about 600 names …

There are 12 names that meet my scan conditions on the 195-min time frame.  The far right column actually measures the 3-day relative strength of each stock versus the SPY ETF.  0.0x equates to the stock exactly matching the SPY 3-day return – any number greater than 0.0x is a stock showing strength that I like to look for.

AAPL is a stock interesting as it appears that investors are becoming more and more comfortable with the iPhone 8 launch actually happening on-time in mid-September.  I am expecting the stock to continue to do well into month-end and probably right up until the end of the first week in September (September 8th).

AAPL 195-Minute Chart

You can see the wedge that is drawn with white lines automatically on the price chart … price made a nice little inside candle today with the last 195-min candle, which could mean that end of day pause was a consolidation pause that precedes an expansion phase push higher starting tomorrow or Wednesday.  The Relative Strength vs the SPY Indicator in the right panel shows that AAPL looks fine here and bulls should be fine adding to or starting a multiple-day positional trade once we can break this wedge pattern.  The upper wedge pattern line is at $161.67 … set your audio alerts!!

Note the linear regression lines on the R/S chart … I use those for several scans I like to run on that indicator.  I will go over some of those as we go forward into the busier fall trading season.

If you use TC2000, drop me a request via email and I will send over to you the pre-built scan conditions so you can incorporate it into your post-market review of the markets.

Cheers … Leaf_West

Looking for a Bounce …

One of my favorite barometers for how the market is doing from an internal strength point of view is the McClellan Summation Index.  I tweeted out earlier this month (August 8th) when that Summation Index broke down out of its upward broadening pattern …

One of the things traders learn over time is that trades generally work out much better when the trades are taken in the same trend as the overall market.  They also learn that the overall market will move much further and that move will have more strength if the breadth of the overall market is also expanding/trending in the direction of your trade.

The McClellan Summation Index is a cumulative measurement of the advancers versus the decliners so it can help traders keep an eye on the strength/direction of the market.  Here is an update of the index as of the close on Friday …

While I think the index is setting up to show a burst of strength in the market sometime next week, I am cautious of how high the market will move on the next bounce higher.  Here is a snapshot of the McClellan Summation Index from back in late 2015 as we headed into the vicious down market of January 2016.

You can see that back in late-2015, the McClellan Summation Index was starting to look like it was trending lower.  Nothing heads in a straight line forever and the bounce in the Summation Index lasted about 6 green candles (Dec 22nd – Dec 30th) before it began rolling lower.

I’m not saying the market is about to give us a similar push lower like it did in early 2016, but the bounce coming this week should be viewed with caution until it can show us that it is not about to fail after about five or six-days of bouncing.

Cheers … Leaf_West

 

 

 

Hi …

The golf season is nearing its last stretch drive here in Canada, so I decided to restart my investment blog.  Much like my prior blog sites, this one will focus on trade set-ups and trade education concepts.  Take time to read the disclaimer and my bio.  If you like, drop me a line and tell me what you would like me to cover as we go forward into what could be an interesting time to be a trader.

Cheers … Leaf_West