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Crude Oil Has 20% Upside

June 12, 2018

Crude Oil has been in a strong uptrend since late last year and is now giving us an opportunity to get involved on the long side once again after our initial price target near 4,425 was exceeded in mid-April.

Over the last two weeks, prices have experienced a swift 13% decline that has brought them back to a confluence of support near 4,425. Given that they're are still above a rising 200-day moving average and momentum remains in a bullish range, we want to be buying this pullback. Our risk is very well-defined at last week's lows of 4,305 and our next upside objective is 20% from current levels at 5,335. We know where we're wrong and the market is likely to let us know very quickly if we are, but for now the primary trend continues to favor the bulls.

Click on chart to enlarge view.

Potential Counter-Trend Trades

June 11, 2018

Typically we look to trade in the direction of the underlying trend as that increases our probability of success, however, occasionally lower-probability counter-trend trades offer reward/risk scenarios that are ridiculously skewed in our favor. Today we'll be looking at some of those setups where there are bullish momentum divergences and failed breakdowns that help us to define our risk and put probability in our favor.

A good example of this type of setup is Unichem Labs. Prices have been range-bound for most of the last three years and have been declining for most of 2018. Last week they undercut the 2017 lows and quickly reversed, confirming the potential bullish momentum divergence and failed breakdown. This suggests being long if prices are above the prior lows of 236, with a target near the middle of the range at 285.

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[Options Premium] Next Up in The Rotation

June 11, 2018

Rotation is the big word that's got us stock market bulls excited around here. It seems every couple of weeks there's a new sector that takes the baton to lead the broader indices higher. And just when one sector looks like it might be running out of steam, another one shows up to take that baton further down the track.

How long until the track runs out of runners? We don't know, but we still see a lot of contestants lacing up their shoes. Either way, after such a great relay race, if you're concerned that the next runner has a higher than normal chance of stepping on a crack, but you'd hate to be sitting on your hands if he builds on the lead, then I've got a trade that I think allows you win in both scenarios.

 

Consumer Discretionary Stocks Are Breaking Out!

June 11, 2018

It's hard for me to make a bearish case for stocks with the Consumer Discretionary sector breaking out on both an absolute and relative basis. In other words, the Consumer Discretionary sector index fund is not only coming out of a 5-month base to new all-time highs, but relative to the S&P500, Discretionaries are coming out of a 30-month base to make new all-time relative highs. This is tough to ignore.

In early May, I pointed out that the Consumer Discretionary vs Consumer Staples ratio making new all-time highs was sector rotation suggesting higher stock prices in general. Since then the S&P500 is up 5.5%, the Small-cap Russell2000 is up 7.6% and the Nasdaq100 is up 7.8%. This sort of behavior is consistent with an environment where the riskier, more speculative, much higher beta Discretionary stocks are outperforming the safer, less risky and much lower beta Staples. 

My Search For Wisdom Brought Me To India

June 9, 2018

Every morning I get to wake up and do what I want to do, not what I have to do. Life doesn't always work out that way, so I promise not a day goes by that I'm not incredibly thankful for the opportunities that I have. With a tremendous amount of luck and some hard work, I get to play in the biggest game in town, in every town. Throughout my career, most of my interactions with traders and investors came from living in New York for 15 years. Over the past 18 months, however, I've been traveling throughout Asia learning from investors who come from completely different cultures and bring brand new perspectives to my process.

It's difficult for me to write about these experiences because I truly don't even know where to begin. When I write blog posts and research about technical analysis, I can just tell you what I'm thinking. That's easy and enjoyable for me. But when it comes to really digging down into what the hell I just experienced on the other side of the planet, it's not that simple.

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[Options Premium] Fading the Faders in Tesla

June 8, 2018

It happens far too often: a game-changing company comes on the scene, has a massive run in its share price, makes a ton of people a ton of money, and becomes a media darling with constant, breathless stories about this exciting new widget maker.

But then the sideliners who sat with their hands in their pockets begin to grumble about how "the stock is overbought", "it's going to crash," "the founder is a fraud," "this company is a scam," etc. No skin in the game, just bitter about not participating. It seems in recent years, Tesla (and it's founder Elon Musk) has been the poster child for this phenomenon.

Ignore the noise, follow the price, profit.

 

 

 

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Restaurant Stocks Delivering The Gains

June 7, 2018

The broader market has resolved its range to the upside led by several groups, among them Consumer Discretionary, which is hitting all-time highs on an absolute basis and also relative to the Consumer Staples sector. Within that group, the Restaurant industry continues to deliver strong returns. An example is Texas Roadhouse up 20% YTD on top of an already massive ~ 1300% gain from its 2008 lows.

Click on chart to enlarge view.

To show how broad-based this rally's been, I want to highlight two stocks on the opposite ends of the spectrum, Denny's, the breakfast chain, and RCI Hospitality Holdings, the owner/operator of nightclubs.

Futures Radio Interview: Trade To Make Money, Not To Be Right!

June 7, 2018

This week I had the pleasure of being interviewed by Anthony Crudele, host of the Futures Radio Show. In this episode he asked me about my process, how I first got into the market, how I approach the market place today and in what ways we help our clients who are financial advisors, hedge funds, family offices, traders and individual investors. I really enjoyed this conversation and wanted to share it on the stream.

Are You Ready For A 60% Rally In Tesla?

June 6, 2018

I don't think many people are prepared for a 60% rip in shares of Tesla. I see the headlines coming through written by people who have never traded a stock in their lives. I see the pessimism and skepticism. Most importantly, I also see that a third of the float is short the stock. So forget what people are saying, look at what people are doing!

Those of you who know me or have been reading the blog for a while understand the power of the failed move, or the "whipsaw" as we like to call it. The old saying is that from failed moves, come fast moves in the opposite direction. I believe this scenario is precisely what we have on our hands today in shares of Tesla. In my opinion, the risk here is much higher and the higher probability outcome is that these shorts get squeezed very hard.

[Premium] Deep Dive Into Homebuilders

June 6, 2018

From the desk of Tom Bruni @BruniCharting

Today's mystery chart reveal post highlighted the potential opportunity in the Homebuilder ETF ($XHB) as it sits at an important inflection point within a longer-term uptrend. In the post I highlighted that although there is mixed performance among the components, the reward/risk is still skewed in favor of the bulls at current levels. As a follow-on to that, this post will be highlighting some of the best and worst stocks in the sector along with our risk management levels and targets for each.

Click on chart to enlarge view.