Video: John vs The Machines (Carter Takes on HFT)

Apr 24, 2014: 1:05 PM CST

John Carter’s at it again with an entertaining yet educational new video about the world of High Frequency Trading (HFT) and how the trading game has changed over the last few years.

Craftily titled “High Frequency Trading – Rise of the Trading Machines,” John pulls back the curtain on what’s different and what we can do about it as small traders:

In the video, you’ll be introduced to what the machines are doing and why trading has become more difficult over the last few years.

I like John’s analogy about how we the small traders run a 5k race on foot while the machines (traders) run the same race in a car.  It’s quite the competitive advantage.

The video is a teaser to a full webinar John will deliver on Tuesday, April 29th so mark your calendar to attend.

As you know, I’m a colleague of John Carter and affiliate of his Simpler Options educational website.

Those of you who know John are aware of his engaging, often comical way of presenting important information to the trading community.

I’ll be looking forward to attending this webinar as well!

Corey

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April 24 Range Sector Breadth and Intraday Trading Update

Apr 24, 2014: 12:31 PM CST

We’re seeing a bullish but consolidating session after yesterday’s bearish range session.

Let’s update our mid-day charts, note the message from Sector Breadth, and highlight the trending stock candidates of the day.

A quick glance at our S&P 500 intraday chart shows another range day – a bullish range day but nonetheless another compression day around the 1,880 index level.

Note the up-gap and reversal with TICK and Momentum Divergences off the 1,872 level which was met by a similar reversal down against the 1,882 high with the same style of negative dual divergences.

Right now, we’re monitoring compression action around the 1,880 or 1,881 area.

A clean breakthrough above 1,883 triggers stop-losses and breakout-buy orders for a bullish bias, otherwise we remain neutral/cautious between the 1,879 and 1,882 levels.

Bearish pathways (set-ups) open under the 1,879 level.

Our sector breadth – while bullish – does indicate caution again:

While Sector Breadth is positive across the board (all Sectors except Materials are showing readings above 50%), the strength once again is concentrated in Utilities ($XLU) and Energy ($XLE) which has been a stealth caution pattern.

This time we’re seeing retail or Consumer Discretionary stocks at the same levels as Energy and Utilities but all other sectors miss the 60% mark (meaning 60% of stocks in the sector are positive on the session).

With a Range or Neutral Bias, we still have strong gapping stocks including leader Apple (AAPL):

Stocks that could continue on the bullish intraday pathway (trade retracements) include Apple (AAPL), Aetna (AET), Zimmer Holdings (ZMH), and Diamond Offshore Drilling (DO).

Because today is not a bull-dominated session (so far), we can look at bearish trend day candidates:

There are stocks gapping strongly down and those showing strong intraday bearish trends – these include hard to pronounce Xilinx (XLNX), Hersheys (HSY), Flowserve Corp (FLS), and Helmerich & Payne (HP – not to be confused with Hewlett-Packard).

Continue watching the key S&P 500 intraday levels for any breakout from the range (reference yesterday’s triangle update).

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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Short Sale Swing Candidate Lesson for Exelon EXC

Apr 23, 2014: 3:32 PM CST

For those aggressive traders who enjoy fading strength – or calling potential turning points in price – Exelon (EXC) offers a potential “inflection against resistance” opportunity.

Let’s study this aggressive set-up and note the key parameters that will make-or-break a reversal play.

Excelon EXC reversal play into resistance swing trade trend reversal fade trade

First I came across this stock from a stock screen I run which shows me the stocks with the most consecutive closes in the same direction (in this case, to the upside).

Note also that EXC had a stellar up-run at the start of 2014 with seven weeks of persistent gains ahead of a two-week pullback (retracement).

What makes this stock more compelling is that it topped the weekly scan list with six weeks in a row to the upside.  That streak is called into question today with the reversal doji candle into resistance.

Note the falling 200 week SMA just under the $37.00 per share level near the 50% or “halfway” Fibonacci level from 2011 to present.

We can’t just plan for perfection – we’ll note an alternate thesis breakout could take price through $37.00 toward the 61.8% Fibonacci Target into the prior high near $38.00 per share.

Any pro-trend movement above $38.00 opens this stock into “Open Air” for additional gains, fueled in part by a short-squeeze from the short-sellers.

Let’s drop to the daily chart for additional levels to watch (and daily reversal candles):

EXC Daily Chart Reversal Candle Doji Divergence Resistance Swing Trade

We see multiple doji/reversal candles into the $36.00 per share resistance level as volume and momentum form negative divergences (lower highs as price reaches higher highs).

If anything, these combinations (resistance, reversal candles, divergences) suggest taking profits for those long the stock (swing traders) and waiting either for price to power-break through $38.00 or else preferably retrace lower.

The last time we saw a similar situation was the end of February 2014 as price scraped against the $30.00 per share level.

A better buy-opportunity developed after a logical retracement down to the rising 50 day EMA (note similar volume/momentum divergences with reversal candles into resistance).

For an educational note, reference January 2014’s swing low under $27.00 which was undercut with a lengthy positive momentum divergence followed by an EMA breakout (and positive cross-over in February).

Exelon (EXC) is a “profit taking” and “aggressive sell-short” candidate into current levels with stops placed according to your risk-tolerance above $36.50 or $37.00.

Initial downside swing targets include the rising 20 day EMA intersecting $35.00 per share and then potentially the confluence target of $33.00 (38.2% Fibonacci Level and rising 20 day EMA).

As with any candidate, there’s no guarantee of a stall/reversal into resistance.

Study a similar example that developed in Biogen (BIIB) where price initially sliced through overhead resistance to stall at a higher target.

As always, develop a dominant/logical (expected) thesis along with an alternate/unexpected (often ‘breakout’) thesis and manage any open trades accordingly.

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Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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April 23 Sector Breadth and Intraday Trading Update

Apr 23, 2014: 12:30 PM CST

With today’s Flat Range Day in motion so far, let’s take a look at our updated S&P 500 Sector Breadth and highlight which stocks are potential trend day trading (continuation) candidates.

By reader request, I’ll start adding a flash-chart of the intraday S&P 500 to provide a sense of structure and key levels to watch throughout the remainder of the trading day.

The trend of the market also determines which direction – long or short – we’ll focus most of our trades.

Here’s the current mid-day S&P 500 structure which is “triangulating” at the moment:

Internals (TICK) failed to confirm the spike-low into the 1,875 key level (they formed higher lows and price formed lower lows) and thus the strong reaction up to the 1,880 level was logical.

We now see price squeezing between two compressing “triangle” trendlines from 1,878 to 1,877, making a breakout above 1,879 a bullish breakout buy trigger (especially above 1,880) while a breakdown under 1,877 and 1,876.50 a bearish trendline/triangle trigger to target 1,875 or lower.

Our sector breadth at the moment shows a bit of caution and defensive intraday money flow:

We go back-and-forth between “Risk-On” and “Risk-Off” money flow, and right now we’re seeing sector strength concentrated in Utilities ($XLU) and Energy ($XLE) again (which has been the pattern on prior sell-days).

The weakest sector at the moment is Technology ($XLK) followed by Health Care ($XLV) and Materials ($XLB).

Note that over 90% of Energy and Utilities Stocks (in the S&P 500) are positive on today’s flat/bearish session.

Here are our potential bullish uptrend continuation candidates during a range day:

Dr. Pepper Snapple Group (DPS),m Apache Corp (APA), Fidelity National (FIS), and Gilead Sciences (GILD).

Our downtrend potential continuation candidates include the following ‘gappers:’

International Game Technology (IGT), Seagate Technology (STX), Intuitive Surgical (ISRG), and Keurig Green Mountain (GMCR).

Take a look at my prior educational update “Gaps and Traps in Intuitive Surgical ISRG” which provides additional information.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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April 22 Breakout Trend Day Breadth Update and Stock Scan

Apr 22, 2014: 11:59 AM CST

With price breaking through resistance and defying divergences, let’s take a look at Sector Breadth (what’s strong, what’s weak) along with the top trending stocks of the day.

We’ll start as usual with Sector Breadth:

There’s a big push-pull situation where Bullish Days show strength in the Offensive/Risk-On Sectors such as Financials, Discretionary/Retail, Tech, Materials and Industrials.

We’ve also seen Energy outperform other sectors, though Bearish days show strength in Staples and Utilities (and Energy).

Today’s session – an alternate thesis bullish breakout – has resulted in one-sided buy-dominant price action as shown above with strength in the Offensive/Risk-On Sectors.

We have four of the top “trend day” stock candidates listed below from our scan:

While Netflix (NFLX) is gapping higher along with other stocks, our scan detected the following stocks, two of which had an opening gap that held strength so far (unlike Netflix):

Earnings Gappers Allergen (AGN), and Harley Davidson (HOG) join strong trenders Legg Mason (LM) and Lowe’s Corp (LOW) for our top candidates.

For those brave trading souls who want to go against money flow and a short-squeeze crushing the bears on a breakout, we have four candidates for potential intraday downtrend continuity:

Pentair (PNR), Allegheny Tech (ATI), Lockheed Martin (LMT) and Alliance Data Systems (ADS).

Be sure to incorporate today’s action into our two scenarios (clearly, the bullish scenario won the day):

Are We Really Repeating this Pattern in the S&P 500 Again?“  (probably, yes)

S&P 500 Range Reference and Market Internal Update – April 21” (overruled)

Afraid to Trade Premium Content and Membership

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Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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