When Small Cues Add Up

Today I want to highlight the importance of being aware of technical cues that can play a role in anyone’s risk management process, regardless of their time-frame. Use of TA is essential if you’re an active manager or trader because it introduces risk management to your process and allows you to manage entries and exits more effectively. This does not mean that with technical analysis we suddenly have a crystal ball that allows us to top and bottom tick every exit and entry, but it does allow us to notice when conditions are changing and more importantly, when the risk/reward is no longer in our favor.

I want to use the example of LinkedIn because the stock sold off significantly on Monday and has remained relatively weak since. As the chart caption states, my stance on LinkedIn changed significantly, at least for the short term, on 9/11/14 because of a few key factors.


On September 11th, I noted that the risk/reward in LinkedIn was changing and that it was a good opportunity to clean up longs or try a short as the risk on the short side became clearly defined.

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Daily Trading Journal 9/3/14

Today the major indices saw outside day reversals with small caps and the Nasdaq 100 leading to the downside with bear engulfing candles. We remain above the 10 day SMA but a day like today in which price failed to hold above yesterday’s highs and closed near the lows of the day, signals that its time for active traders to take some risk off. This shouldn’t have been a real surprise given that we’ve just had three weeks of upside and were up roughly 6% off the August lows. At some point its clear that there are a lot less long setups that look ready to go so it’s only natural that we correct through price or time to allow things to set up again. Anyway, the bias remains higher in the intermediate term, but I expect some further weakness and volatility into next week. The VIX continues to try to build a base above $12 as the 10 day SMA is now rising below it to provide support. Resistance remains at $13.50. Bonds (TLT) put in a bull engulfing candle and closed below the 10 day SMA and gap resistance at ~$117.50. Bias remains higher in the intermediate term as long as we are above trend line support and the 30 day SMA. Global equity markets were largely higher on the day with Argentina (ARGT) up 3.18% and South Korea (EWY) leading lower down 0.24%.

Sectors leading to the upside included solar stocks (TAN), steel stocks (SLX), coal stocks (KOL), gaming stocks (BJK), utilities (XLU), healthcare (XLV), and oil services / energy (OIH, PXJ, XLE).

Sectors lagging on the day included homebuilders (XHB), small caps (IWM), IPO’s (IPO), shippers (SEA), the Nasdaq 100 (QQQ), large cap tech (XLK), transports (IYT), and regional banks (KRE).

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Daily Trading Journal 9/2/14

Today the major indices saw an uptick in volatility and closed mixed on the day after a choppy session. Small caps and the Nasdaq 100 led while the Dow and S&P 500 closed slightly down on the day. The bias remains neutral/higher as we remain above a rising 10 day SMA in all the indexes, but a a more tactical approach is likely better for short term traders given the move we’ve had in the past few weeks. Additionally, a lot of charts could use time to set back up again before moving higher. Bonds (TLT) saw their first potent down day in a while which gives reason for some caution here. Intermediate term trend remains intact as we are above a rising 30 and 150 day SMA, but we may see continued weakness in the coming days as we broke the 10 day and closed on the lows of the session. Global equity markets were mixed on the day with India (EPI), which looks great on the long side, led up 1.54% and Greece (GREK) lagging, down 2.4% on the day.

Sectors leading to the upside included the transports (IYT)< telecom (XTL), regional banks (KRE), social media stocks (SOCL), small caps (IWM), and financials (XLF).

Sectors lagging on the day included gold miners (GDX), gaming stocks (BJK), oil services and energy (OIH, PXJ, XLE), utilities (XLU), steel stocks (SLX), and semiconductors (SMH, SOXX).
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ZNGA On Watch

Zynga may be setting up for a trade over the intermediate term. We’ll look at the absolute performance and sentiment to outline why the risk/reward favors the long side at current prices. Additionally, ZNGA is non-correlated with the broader market on a rolling 10 week basis, which allows you to maintain a neutral stance on the major indices but still have exposure to individual names.

ZNGA Weekly

This weekly chart shows that ZNGA is currently basing above long term support at $2.70. RSI is currently basing at support as well, as it tries to dig in a base and move higher. The next level of resistance is at $3.80 and the top of the channel which is $4.50.

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Daily Trading Journal 8/18/14

Another gap and go to the upside for the major indices as the QQQs close at new highs and the remainder of the indices closing back above their 10/30 day SMAs. The VIX printed an inside day and the bias remains lower as long as we remain below 13.50. Bonds (TLT) closed down 1% on the day as it closed the gap lower and is pulling back into its 10/30 day SMAs. Global equity markets were largely higher on the day with Poland (EPOL) leading the winners, up 2.46% and GREK (Greece) leading lower, down 1.74%.

Sectors leading to the upside included homebuilders (XHB), steel stocks (SLX), regional banks (KRE), transports (IYT), solar stocks (TAN), retail (XRT), industrials (XLI), and small caps (IWM).

Sectors leading lower included utilities (XLU), social media stocks (SOCL), energy (XLE), telecom services (VOX), semiconductors (SMH), and coal stocks (KOL).
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