Technically Speaking: Advanced Charting  | Pat Mullaly, CMT | 1-24-20

Technically Speaking: Advanced Charting | Pat Mullaly, CMT | 1-24-20

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good afternoon good morning good evening
to everyone out there on this big blue planet that we’re on hopefully
everybody’s doing okay today my name is Pamela Lee and I will be with you for
the next hour so this is technically speaking advanced charting techniques
and you can follow me on at P Mullally underscore TDA
again did anybody get the number of that truck the agenda today is that we’re
gonna look backwards to go forward so we’re gonna spend a little bit of time
looking about we taught what we talked about last week and then maybe look at
some looks some other interesting things that may have given us a little bit of a
hint that perhaps there was a some other reasons out there for the market to
maybe experience what we’re seeing today we’re going to talk about that and the
what it really may mean going forward before we do any of that though options
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contract fee so there you go and so with that Delta Gamma Vega theta price
sensitivity to time and price and volatility let’s get out there and take
a look at the markets to do that we of course will go over to the big screen so
what we’re going to do today is we are going to
do what we always do very quickly but we’re going to kind of spend maybe a
little bit more time on this we’re having a pullback today a you know
or there is the the song says don’t call it a pullback well we’ll see right now
we have the market selling off we are experiencing a 1% down day a 1% down day
we can see that right here 1% to the downside how long has it been since
we’ve seen one of those all this whole this time frame up in here not not a 1%
down day in a long long time we haven’t closed down there yet so it’s not a 1%
down day yet until we close but even this area here that I have in pink right
in here that was only about six tenths of a percent almost seven tenths of a
percent down from close to close even though we had the big gap down and if we
look at the conviction indicator down in here for those that don’t know what the
conviction indicator is it’s my indication of how much strength there is
bullish or bearish strength when we compare it to price even then those days
if we go back let me move some of this stuff here if we go back to in time I’m
going to zoom in here perhaps I have a frozen screen all right well the end of
that’s the end of that let’s come back over here and we will see if we can’t
get the screen to work better over in here and there we have it so back in
time this day right here where we saw a price close a tad lower by seven tenths
of a percent almost seven tenths of percent those the
the conviction indicator actually rose those two days it actually rose those
two days so why is this why is this conviction indicator important to us
because when we do get a flush to the downside what we’re looking for is the
markets willingness to panic and we say willingness to panic when there’s a
willingness to panic we get a yellow yellow sign here and get this where it
belongs here and that yellow sign is these lines over in here where the
conviction indicator dips below 10% now that hasn’t occurred yet the conviction
indicator is just sitting here at 12 0.3 so we’re just above that red line if it
closes down below that red line that’s some that’s some heavy panic we have
going there and what we watch for then is if there is that initial need to
panic will that continue like we saw right in here will it continue to see
some weakness in the future okay so some definitely some panic there the other
thing I want to talk about and hopefully I’ve got this screen fixed again let’s
try this over here and what are the other things I want to talk about is
we’re going to go back to go forward basically we’re going to take the trip
back to where we were last Friday and we discussed this last Friday this time
frame we looked at this this happened to be the the October 2nd the week of
October 2nd 2017 all the way to the week of January 8th 28th 2018 so 2017 to 2018
we had this steep run to the upside what we talked about last week was this this
is this is this year it was October 7th through last week the 17th of of this
year 17th in so you can see those look very similar and so the question we that
I posed last week was are we this kind of a zone where we might pull
back or are we this kind of a zone and as we go forward into this week here
well there we have it this is not any indication that what we will see is
going to be what we saw what we saw the the in this time frame right here ups in
this time frame right here back in twenty twenty eighteen where we had the
sell-off at the end of January and into into February so we are excuse me
December into February we’re not necessarily saying that we’re going to
we’re going to see anything that radical but what we want to what we want to make
sure we understand is what we’re seeing in the conviction indicator down here
and that is when we’re seeing this panic is that going to lead to more downside
like what we saw over here or is that going to lead to more or is it just
going to be some consolidation we have been and that’s going to be part of the
discussion today is going to be are we are we just about ready for some
consolidation so we’re we’re going to go from here and the is going to be the
just some discussion of gotta find my here we go some discussion of what my apologies discussion of a few things that we want
to look at to make us you know to make us understand that as human beings we
get caught up in in people’s rhetoric we get caught up in the excitement we get
caught up in the fact that is that as we are in in bull markets and we’re
investing that we think you know that it can it’s never going to stop so this is
where we need to be careful so what we have here what we’re going to talk about
today is the zoom in here whoops zoomed in too far steepness of
the trend the percent above the 200-day moving average and the time above the
200-day moving average we want to talk about that as well as a few other things
so basically are we going to see the dairy are we going to see a repeat or
we’re gonna see rhyming what’s the difference between repeating and rhyming
they say markets don’t oftentimes repeat but they do rhyme so that’s what we’re
gonna talk about today and so when we when we think about what we also talked
about last week and that is that the RSI and this is a weekly a five-year weekly
chart that we’re looking actually it’s a 20-year weekly chart but a five-year or
a weekly chart we saw an RSI back here when we had this really steep push to
the upside remember steepness of trend we want to recognize you know when
things start getting parabolic what does parabolic mean it means that price goes
from a certain steepness to a little bit steeper trend to another to us even
steeper trend and how much of that is going to be sustainable so we saw an RSI
above 80 well above 80 and right now at what we saw last week was that RSI
getting above 80 this was like bordering line
right around 88 back then so that’s when people get worried now percent above the
200-day moving average time above the 200-day moving average that is important
as well and what we got going here if I can get this to pop in here so a couple
of other things we’ve got going so what other news is out there the other news
that we have out there is I can get all the way back here is a possible pandemic
who knows who knows what’s really going to happen
it has landed on our shores this coronavirus we talked a little bit about
that earlier in the week but let’s talk about a few things here’s where the SARS
the severe acute respiratory syndrome that was all the way back in 2003 and
that occurred this pink square I have in here that’s the time that it took for it
to begin and to end right and so there was about you know a few months of of
SARS epidemic but we were at the bottom of a major bear market and coming out of
that major bear market so it the effect in reality the effect happened the
beginning really was right in that zone right there so we didn’t have much of an
effect it did have a bit of a push to the downside I remember it quite well
the company that was then that is now the company it is now we were we were
heading overseas we were heading to China our to Singapore to do some to do
some education and that got called off so let’s take a look at the next
epidemic and that’s the Ebola virus this pink square or whatever color that is
that’s when it hit our shores so back in September of this year that
hit our shores and and the market sold off and then it
rallied out of that so the question becomes both of those things that we
just saw was that opportunity was that an opportunity anybody can look in
hindsight and say sure that’s an opportunity how many of us are willing
to admit that three weeks ago we said hey if the market pulls back I’m
probably going to buy some more of this or I’m probably going to enter into this
or I’ll look at my watch this and I’ll buy this or that and now how many of us
out there are if we look at this look at it this way saying that wow this has
this is really not looking good and I’m fearful and I’m bailing out of
everything I’ve got right and so preparation knowing what we’re gonna do
knowing what to expect is part of what we’re doing today right and so you know
looking back to go forward to understand where we might be is there any more
upside left who knows for sure but when we take a look at history and we see
what happens with these worries out there are around the globe of some kind
of new health risk that it will affect transportation and all different types
of things you know is there really worry out there so let’s take us back into
where we are now and that’s right here so down a little bit more down to from
where we were we know we’re not down too terribly far but this takes us to the
next question right and so we’ve got the steepness of the trend let’s take a look
at the steepness of this trend so I’m gonna zoom in where we are and this is
was our kind of the way we started this we saw this parabolic run in the markets
and we’ve certainly seen that here right we could draw a line from from the the
place we took off to the upside and then maybe we see is pulled down to that line
who knows maybe it doesn’t maybe just rallies out of here
nothing says it has to but when we look at the steepness of other runs there’s
oftentimes a bit of a bit of a pullback right so this was this was back here
July August September back in get rid of that thing
hang on get my pointer back here in 2018 if we go back a little bit further if I
can get this to attach and we look at the steepness of this run the point
being is at some point these big huge moves have to let some air out right we
can’t live if we only breathe in as human beings and this is just an analogy
we have to let some out and bring some in so in theory physics wise you have to
you the ball is going to keep rolling until something stops it so either the
friction on the ground something will slow that ball down and it will it will
have to come I have to stop or do whatever we had a quite the hard
reversal up in here well my point is the steepness of that trend versus where we
are now the steepness of this trend okay so we look at those things and those
become kind of that wall of worry that the market climbs but at some point we
know that this is getting this is getting pretty crazy and then we start
listening to sentiment out there and the sentiment is the you know newsletter
writers or bullish all different types of things out there so so when we think
about technical analysis again it’s going to be price it’s going to be
volume you know I talked about that a lot it’s going to be
sentiment it’s going to be time so which takes us to the next topic how long have
we been above the 200-day moving average and why is that important now it was
we’re going to eat nothing’s 100% we don’t have to spend a
lot of time above the 200-day moving average
but when we look at these big parabolic runs and we look at the time spent in
the past above the 200-day moving average if we look back over in here
before the parabolic run how much time were we above that 200-day moving
average this was about 400 trading days since the last time it was below the
200-day moving average so if i zoom in on that this pink spot right in here
from there to where we finally came down and actually that was to this high here
so it was actually before we actually closed but Rose the 200-day moving
average a good 460 someday something like that let’s zoom back in time and
look at this one and this was the idea bola crisis again do they do they repeat
or do they rhyme is there some semblance you know it’s it’s kind of crazy but
look at all the time we spent above the 200-day moving average in this area so
from here whoops sometimes you got to double tap
these things so from here to where it closed above or exceeding me below that
200-day moving average that was about 460 some days above that 200-day moving
average so originally I said hey we’re gonna we’re gonna look back to learn
what might happen in the future no guarantees but that’s pretty that’s
pretty interesting right pretty interesting that that turned into an
opportunity because if we back this off a little bit here we can see the market
continued to run it did top out in here rounded top what happened the Chinese
yuan story hit the hit the tape where they were devaluing their yuan and then
we had the pullback in 2016 and what that what evolved from that was another
opportunity and then that was this last time right after that we left
that 200-day moving average and never look back until after the beginning of
2018 so very long time above that 200-day moving average that does not
mean that’s what we’re going to experience right now this is very steep
very steep run so steepness of the trend time above the 200-day moving average
and then what about the percent above the 200-day moving average so when we
when we see price really get extended above these long-term moving averages
that’s where people you know when they’re looking at it they become
fearful and they you know maybe think that the the super end is near but when
we start putting all these things together steepness of trend yow maybe
it’s too steep maybe there does need to be a pullback percent of time above the
200-day moving at percent above the 200-day moving average yes we’re very
far above it time above the 200-day moving average that’s the one thing out
of out of let me move that over here that’s the one thing out of all of these
three things that we don’t have is the time above the 200-day moving average so
when we get when we see the markets really start acting fairly bullish ly
especially when we could argue that from a time perspective
remember when we think when we’re thinking technicals we’re thinking
charts price volume time and sentiment that’s been a lot of time going sideways
and then we had this sell-off last December are at December of 2018 not
last December’s timber 2018 which hit that 20% so called whoever came up with
this number who knows 20% down as a bear market but a long time spent going
sideways that consolidation going sideways might be considered a kind of a
bearish tone to the market and then the and then the capitulation and then the
strong run off of those lows strong run off of those lows and now we’re we’re
well above the 200-day moving average but we haven’t spent a ton of time above
that 200-day moving average so what may occur is no the right way on this what
may occur nothing says it will is perhaps we finally get that pause that
refreshes and we get the pullback and then you know maybe a bit of a rally and
then maybe a pullback see if I can I’m gonna try to hook these up to two
certain dates so let me erase that and start over so we get these on a weekly
bar we get these pull backs and maybe a bit of a consolidation and then a run-up
and then maybe a bit of a pullback these are terrible drawings my point being
here is that maybe we get this kind of action that is that is more of a
breathing out period more of a maybe a rheic ocean area before it decides it
wants to move higher we have hit from for a lot of technicians out there we
have hit an a spot possible speed limit and maybe pulling back here who knows
they they surely don’t know what’s gonna happen on Monday Tuesday Wednesday don’t
know what’s gonna happen over the weekend but there’s something else about
this what year is it it’s 2020 what about this year is
important besides this epidemic and besides the fact that we’re we’re
sitting ‘extra moving extremely far extremely fast it could be the fact that
we’re in that presidential year and there’s been some studies done some of
you may have seen him but when you look at all the presidential years meaning
the the the run-up to the election that’s
where we are if you put all those together since the markets been open
what has the SNP done what have the major indexes done they’ve done this
they’ve come in to January and pulled back somewhere in June we remember this
is just kind of a seasonal thing it doesn’t it may rhyme it may not repeat
perfectly it may not happen at all but over time when you put them all together
it makes this move so we sell-off in pullback I shouldn’t say sell-off we
pullback February March April rally out of rally up in March and April pull back
into May down here pull back into May and then there has been this strong
uptrend into the election nothing says that’ll happen but we’re
with today’s action seemingly on course for that to be a possibility right so
again steepness very steep time above the 200-day moving average haven’t been
above the 200-day moving average as long as we have in the past and percent above
the 200-day moving average pretty far above that 200-day moving average so and
then the presidential year election year cycle coming into play maybe we see the
little bit of see-sawing back and forth and then when we get the visibility
going into the going into the summer maybe we see that rally so great Pat
what do we do with this well that’s my question to you what do you do with this
if we continue to pull back where is the opportunity there’s different types of
opportunity and those opportunities are to take some profits those opportunities
right now are to hedge when I say take profits you could sell everything if you
wanted but you better have a rien tree plan take some profits maybe hedge weed
that’s why we talked about things we did last week
you know do are we getting overheated are we feeling are we going around
telling our friends and neighbors and everybody about our wonderful stocks
that we own and how wonderful they’re doing
and then maybe today feeling a pinch but remember here’s the thing we’re down
1.2% historically that happens all the time
I shouldn’t say all the time but it happens a fair amount it’s those three
percent days that we don’t see a lot of they are they are in there but when we
look at the overall trend directional movement of the of the market the
consolidations that we’ve had maybe it’s time for another consolidation if that’s
the case then there’s always the bullish side there’s always the bearish side the
bearish side is take some profits now think about a hedge there’s also the
realization that a lot of traders make over time that the first the first dip
is often bought doesn’t mean it will so this was a pretty hard sell off right
that was a pretty long range day-long move to the downside over the course of
several days was that an opportunity what you can see here what happened they
bought they bought that dip right they bought that dip they sold it off they
bought at the 200-day moving average and then it rallied back up until we had
that aid what we call a B top meaning this is a over here this is B over here
and then we we break back down and go go sailing to the downside strong long long
push to the upside we haven’t seen that yet so a lot of people may consider that
the fact that we have not seen this really long-term uptrend yet maybe
they’re just looking for that for that pullback so the opportunity look at the
past try to figure out what you want to do maybe look for stocks that you wanted
to buy more of maybe this is an opportunity if they pull back it’s going
to be hard to give up gains so those are the things you have to go through so I
have to worry about so maybe we see a bigger
move to the downside one of the things if you watch back in the archives and
I’ve stressed over and over and over again what do we look for we look for
that day we look for the day like we have today the long range days long
strung up move suddenly we get long range days that are out of the ordinary
we’re down one and a quarter percent right now we haven’t seen the market
down from up from close to close more than one percent in months so we look
for this if it closes down today we want you know the news is going to be
whatever the news is we’ll see what happens on on Monday alright let’s move
on to the next chart this is the financial sector and this is another
thing that we want to some of the things we might think about following what just
made what’s been making all-time highs out there not the financial sector not
the not the financial sector not the banking indexes they have not made
all-time highs what’s been weaker than the market the banks and oftentimes
you’ll see and we see things weaker than the market but the fact that they were
struggling to make all-time highs the fact that the banks and the financials
were struggling to to make it back up to the upper ranges of this channel that’s
a that’s an important thing to think to consider as we look at what’s going on
out there so banks we’re telling us hey you know we’re just with this low
interest rates we’ve been lowering rates and you know we saw JPMorgan we saw a
few issues out there doing fairly well but a lot of them not doing well and
when you look at the industry as a whole that’s something and we do all the time
we look at the industries as a whole when they’re not when they’re not
working well with the rest of the group then do you really want to if I hit this
right do we really want to be involved in there so we look at today the banking
sector the financial sector the weakest out there now everything’s down for the
day let’s put the strongest up for today what’s the strongest for the day and why
is that important it’s utilities strongest for the day
REITs second strongest for the day if you look back over the last week we’ll
take a look at this in a second it’s a real estate strong utilities strong
technology you just you know they’re still they’re still strong for the day
and that’s kind of the way things go but the the the thing we worry about is
going to be that utility sector why do we worry about that whenever we get this
really big spike in utilities that might be people moving money out of certain
areas they weren’t putting money into banks right they weren’t putting money
into banks it was going somewhere and suddenly since the beginning of the year
we’ve seen utilities really spiking quite a bit higher so when we see
utilities starting to strengthen we see utilities from a relative strength basis
outperforming the markets when we’re Chartist that’s going to tell us money
may be flowing to things obviously they’re looking for some they’re looking
for proxies for dividend they’re taking dividends as a proxy for bonds and so
they go to the go to the utilities they go to REITs something that’s going to
pay a strong dividend so that’s their proxy for bonds and we also see that xlu
is extremely out of whack in other words it’s up there on a relative RSI basis
right around 83 right now so it may be topping out and so this you might think
that hey if this starts to come down that’s good for the for the market mark
and money is rotating back not necessarily this starts to come down
that might just mean the whole markets still coming down and they’re gonna
start selling everything right they’re gonna they’re gonna start bringing in
money’s and that pushes the the markets lower let’s take a look at Treasuries
and this is why the utilities it’s important for utilities because
Treasuries it’s funny since the beginning of the year this is a weekly
chart the Treasuries have been head and lower utilities heading higher Real
Estate’s been head and higher a little bit of fear there as the market in
Treasuries start to sell-off gold we keep talking about gold gold the paused
possibly that refreshed as gold ran up pulled back into this flag now trying to
run higher and maybe there’s some little bit of fear out there geopolitical trade
news kind of out of the picture now right so buy the rumor sell the new or
excuse me no such thing as rumors buy on the anticipation of the changes in the
trade and then sell when the when that news is out all different we can we can
lump all different types of things on why the market went parabolic and why
now it might be a chance for it to pull back and why the health issues out there
right now might just be in an excuse if you will to start taking profits but
we’re certainly seeing those things early on in utilities and last but not
least I’m going to change this this is the nasdaq comp and this goes what do I
have here I’ve got this going all the way back to 75 and want to show you
something here this is a one-year chart but I’m going to this is something that
people like to scare the children with I’m going to take this price axis here
I’m going to take that off a log scale and I’ll put this on an arithmetic scale
and this remember this is a one-year chart this is some other things that
have been going around out there that was last year when we look at the big
push to the upside we look at 1999 1999 right in there 98 99 big push to the
upside and then the sell-off this is not I’m not
saying this is gonna happen by any stretch of the imagination but a big
year like we had last year you look at the S&P 500 it’s going to be the same
thing if we put these on a log chart I mean back onto the log chart which takes
which takes out that that that puts the parabolic issues back in we can see here
where are we this is since 1975 we are on the nasdaq comp which is high tech
stocks we’re at the upper end of that range this was back in 2000 we saw we
blew through the top of that range and then came back in if we can still push
through the top of that range nothing says we can’t but we are up in an area
where there may be some resistance so all of these things point to a possible
stalling of of the markets here so you see if I can do something here no and
you don’t see the same thing with the S&P so let’s go back over here and take
a look at our account all right ah you know what I get so excited with these
things hello to everyone if I can get that to click off here hello to everyone
out there you’ve got Andy is in the room Sheila grace
Alfred Terence active Andy happy Friday yes depends on how you look at it I
suppose Eric Allie Carlos Brenda Yoko Jay Don and everyone else hopefully I
didn’t miss anybody now if you’re new I’m we’re looking at the chats you can
join in the chats by subscribing and if it doesn’t let you join in so register
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meet people with like interests as you which you might live in a neighbor
where nobody cares about the markets and didn’t want to talk about him some and
he says hope J PO doesn’t bring up the virus during the Fed announcement next
week well that would be that would be interesting yeah well it’ll be
interesting people maybe just looking for a reason to your to us to sell Ali
says rhythmic epidemics and he would know all right let’s take a look at some
things so we’ve got a fairly diversified we Alan if you call diversified we got a
pretty large portfolio of stocks that’s in week that we particularly call growth
stocks from a top down that we’ve been using pretty much in this class down
$2,600 today now in reality when we look at the gains over here and so the this
is where opportunity comes in to do we have an opportunity to sell something
and get the heck out and be done with it if we get way past our our possible loss
now this is since the open we’ve got rigged here 600 shares of rig
which have done which are doing terrible down another 105 dollars a day in theory
this class should never have a loss that big because we’re we look to only risk
about a thousand dollars on any one trade so with today’s action and what’s
been going on out there with the markets you can see we’re here rigged on a one
year or a year chart just getting crushed even though it broke out and
remember the when we’re in a parabolic move a lot of breakouts are gonna fail
some of the information we had on from the oil patch this week didn’t help at
all and we saw the oil or the energy sector sell-off pretty darn hard itself
so we look at I X e for the energy sector and you can see rig looks very
similar to that so what we’re gonna do here is we’re
gonna come in here and we are going to close out that rig trade just you know
we should it’s probably in theory somebody following a strict set of rules
would have been out a long time ago which we should have done if we were
following a strict set of rules and so we just hit the confirm and send we just
went to the monitor tab right clicked said send closing trade and won’t close
out that rig the you know I talked about Boeing last year where we let Boeing get
away from us one mistake since we’re at the beginning
of the year you have a chance go back in time go back to last year if if you felt
like you could have done a lot better last year but there was one or two trays
that you just let get away from you you got to go back and look at those and see
the effect that that may have had on your total account and then make some
kind of adjustments to your guidelines if the no adjustments need to be made no
big deal right so we’ve we’ve cut out of that we’ve got some big winners in here
from the opens you notice that we’ve got some that are four thousand some that
are eight thousand three you know thirty-five you know almost nine lots of
big winners that’s why those two thousand dollar losers are going to
affect us pretty heavily and so that mistake to make back those those the
percentage lost on rigged may literally take two or three trades right and
that’s okay if you’re right you know seventy-five percent of the time you can
you can risk to or to make one right but if you’re not those things are going to
affect you pretty heavily don brings up the VIX and that was supposed to go in
my in my charts but here’s the VIX so again you look at these bar charts you
look at these candlesticks and you get scared be very careful of getting shaken
out this is a pretty long-range day when we talk about the VIX we talk about we
really talk about levels and those levels if we if you see the VIX get
above 17 that’s where we may consider close above 17 that may be where we
consider maybe some things really nasty may be happening because that’s where
and it’s not going to be all the time but that’s where we get the big pushes
to the downside so 17 ultimately 20 but then again that’s where opportunity lies
as well because if you look at the VIX going back five years to December of if
I can find it there December of 2018 is that it Yeah right in here you can see
it really is not historically high it just gives us an area where things get
wrung out perhaps we’re nowhere near that or so step up take a step back you
look at the VIX on a daily basis you look at a one and a quarter percent down
move because you’ve not seen that in months and months and months it scares
you but just take it take a step back broaden out your view look at your
account and say well you know unless you’ve got some one of these stocks in
your account is way out of whack then there’s really nothing to be done if we
looked at some of these and said well you know max are we have 498 shares of
Max are it’s down on a mark today of a dollar so yeah we’re gonna be down a
little over a dollar we’re gonna be down a pretty good chunk right so here’s the
other thing that we want to think about right now even though we’ve been all
happy with the amount of gains in our portfolio perhaps if you’ve been doing
well be very leery of that of that happiness because when we look at when
we look at the likes of Max R and we look at where it’s gone the the purchase
happened on the break back over in here for a number of reasons and it’s at a
pretty strong run we limped into this one we bought three we bought into this
three different times on the on the move to the to the upside which all happened
pretty much in this green candle right here
so we’ve held onto it now it’s coming back and so the the caution is we get
into this mode of well you know I’ve made a whole bunch of my piell’s
expanded a lot so I can I can still lose a lot more right now you can lose a lot
more and be okay no no that’s not a that’s not a guideline necessarily right
a guideline says that if if the idea is no longer valid then I want out so know
what your guidelines are try not to jiggle out with the first sign of
weakness necessarily unless that’s in your guideline but if it’s emotional
it’s it’s probably not a good idea right making decisions on emotions in theory
is not the greatest idea in the world so we can see here pretty much our pain
levels come in with Max our and with Lulu Lemon today as far as today goes
BLD which top-billed again these are areas where things have
been have been strong so there’s these our weekly chart so these are the things
we might consider do is there a reasons to sell is there a reason to say hey
after this strong run on top build perhaps what we’re seeing right now and
let me put on our studies set with the wave volume and try to make some
make some decisions based off of price and volume and momentum things like that
so we can see over the last several weeks the buying has been much stronger
than the selling we saw maybe a this last you know back at the end of the
year coming into the beginning or going into the end of December a lot of
selling going on it found some support this whole area in here might be
opportunity when I say opportunity the question becomes is this going to be
distribution or is this going to be accumulation if it’s if we deem that
it’s accumulation then what we’ll see is a continuation well we may see a
pullback but we’re going to look for this continuation of the of this uptrend
that we have here marked in this yellow dotted line for that to hold or
somewhere below that and then as it starts to move back to the upside and
maybe add into that there are some things that are going on out there right
now we talked about a few weeks back and that was that’s where Houser warehouser
company has been strong on the weekly bars they’re pulling back today they are
in that when we look at home construction we look at the REITs we
look at or we look at the real estate ETFs we look at the and not ETF sorry we
look at the real estate stocks that are out there we look at the utilities that
are out there home builders and such have been or will be a benefactor of
lower rates just like those areas are as well but when we look at Louisiana
Pacific Corp here’s another possible opportunity out there as price pulls
back when we when we start looking at the price and volume structure there’s
been a lot of supply that’s been put out on the market that’s been absorbed
meaning that we’re getting higher lows price struggling to move
lower in in these pullbacks in here even though we’re getting larger volume but
price struggling to move much lower so those are those are ideas as well so
these are things that that’s going to be should be on your docket for the weekend
right looking for stocks that might pose an opportunity once we once we get once
the smoke clears and we can see what’s going on in the overall market and so we
know utilities have been strong we know rates are probably going to may stay low
for who knows how long but who are the benefactor factors from those and start
looking around at those at those types of stocks the other things that could
come into focus and we just pull up a watch list are those stocks that have
been recently strong that may be pulling back if we look at Koopa Cooper created
the get this drawing a little bit better here the very rare diamond pattern don’t
laugh it’s a thing so the diamond pattern here which just means we get a
broadening out and then we get a symmetrical triangle that’s all that
means which means we get a coil and finally
broke out and it broke out on strong volume on a weekly basis and is now
pulling back we put Cooper in on a one-year daily chart and so the question
becomes where would you where would somebody want to be an owner of Koopa if
they felt like this whole sect section in here was just accumulation and we
look at the price and volume nodes we get that was a lot of buying a that was
a fair amount of selling it stopped it started making higher low
that’s why it turned into a symmetrical triangle but buying on the daily basis
buying just all of this is totally taking out as dwarfed if you will the
these selling nodes that have occurred in there even though we can see here
price well below its 50-day move our excuse me volume well below its 50-day
moving average we look at the volume nodes down in here then we can we can
look at this and say well it’s good that price is is drifting is low when we look
at it below the 50-day moving out on a sideways action but sometimes it’s slow
on sideways action but it’s a lot of selling volume and then it finally
breaks to the downside so these are the things that we need to need to look at
over the weekend so Koopa what about Roku these are things that
we’ve looked at previously here’s one that is an example of what I was just
talking about if we look at Roku let me back off on this just a hair if we look
at Roku it’s been coiling up right it’s been in a long sideways pattern it’s had
volume drying up as it’s drifting sideways but notice when we look at the
volume nodes as it’s drifting sideways we only have one four-day period where
volume was strong okay so if there’s an opportunity that you see with Roku to
buy puts to be on the short side where where is that fulcrum we talked about
last week let’s draw that right in here the important area on the downside
becomes that zone right where Roku is right now now it is above the 200-day
moving average which when we look at where support is ultimately on Roku that
200-day moving average well above the support here so a breakdown here not
necessarily a showing us any sign of strength it’s
really kind of showing us signs of weakness lower highs consistently lower
highs but similar lows right and so that is what we call a descending triangle so
we just looked at something that was similar in structure as far as price
goes or was with Koopa and similar in structure as far as the volume goes
underneath the 50-day moving average but when we look at the wave volume my wave
volume here the amount of actual selling volume those selling nodes has over come
the the buying volume in this sideways action so you you know you’re gonna read
books you’re gonna hear people say hey sideways action with low volume is
exactly what you want to see that’s true but what kind of low volume is it and in
this case if you just look at the you really start to stare at the 50 period
moving average very rarely do we see you know more than four days worth of worth
of buying so the buying volume in Roku might present an opportunity to the
downside let’s look at you al you al this is a similar type of idea sideways
we look at you al and this is one we put on this week where we had these tops
lower high right here and then another lower high another lower high another
lower high it was beginning to look like Boeing was several months ago and then
the health scare took him down pretty hard
this is one that we went in with a options this was done in my technical
analysis an options class and we went short on you al we can see if I can get here just
to show you what we had done so we bought one put 112 days out and you can
see here getting close to a you know just in a few days a 50% move no patting
myself on the back that just you know is just what happened what did we do to do
that we did things that were logical that followed certain guidelines and it
turned out to be okay didn’t look so good yesterday when it sold off and
rallied back up right now the whole markets selling off and when the market
sells off oftentimes they drag everything down everything down with
them so opportunities so I’m going to summarize what we talked about earlier
and that is that the markets can get ahead of themselves and the markets are
made up theoretically of people now they may program things to say when price
gets to this level I want to buy that could be lots of different things but
the steepness of the trend if it’s really steep the idea is that it’s gone
parabolic and that’s going to be hard to maintain the percent above a longer-term
moving average is important the time it’s been above that longer term moving
average and so once we start putting all these things together we may have two
things that work out to say hey this is a little stretched but we also may not
have in this case the third thing they say well we really haven’t been
stretched for very long right and so you start looking at things and then perhaps
we get something like this we just looked at a couple different patterns
one bullish one bearish that was Koopa cou P and United Airlines you al and
that showed reasons that there might be bearishness so when we look at this we
see the steepness of the trend that’s checked off percent above the moving
average yeah that’s pretty high above the moving
average but we don’t have a checkmark by time but we may get a pullback and this
is where we need to make sure we understand what we just looked at with
cou P with Koopa and Roku and UAL that if we see the markets pullback rally up
maybe make a higher high pullback rally up and start to make lower highs know
where the bottom is know where that fulcrum area is in the middle where we
can look at this and say I want if it breaks above that I’m going to put this
on a daily chart and watch last week’s web cast 117 in my discussion on the
fulcrum area if we go all the way back into last summer it doesn’t matter what
you’re looking at it’s technical analysis if I find the
zone the important zone and let me get rid of these moving averages real quick
here if I find that important zone that says if price in the middle of all this
noise if price can get above that that’s been an area that it has had a tendency
to run and if the time allotted meaning it spent a lot of time drifting
sideways if that time allows for price to move higher then this consolidation
that we went through that may happen again maybe we get another consolidation
over in here then we can consider buying things would you can you really consider
buying things if you don’t know what you’re looking for you don’t know what
you want to buy right so we look back to go forward sit back this weekend look at
your stocks that have pulled back look at the ones that pulled back the least
perhaps the strongest ones and maybe you can come up with a good
watchlist if we go through a consolidation period but again these
often times are short-lived on these pull backs and they may just drift lower
and then rally back out if you’re not ready then you’re going to be locked out
to add to positions or to buy new positions with that I’m going to bid you
adieu for the weekend actually for the all next week I’m going to be gone next
week and Connie Hill will be covering for me as well
next week so everybody have a wonderful weekend and a wonderful week next week
you’re responsible for all of your decisions in your self-directed account
so long everyone

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