In this week’s video, I point out how the dollar has broken support and may fall even further which in turn might have the market retest the recent high’s. The MTS members and I have been playing both sides of the market this past week and detailed trade setups for what we traded and what we’re looking at for next week are included in the video.
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Weekly Stock Market Wrap Video Transcription:
Hey guys! Welcome to the StockOptionAssassin.com’s weekly video for Swing Trading Options. Today is Friday, April 27th 2012. I want to start off with recapping a couple of names that we were looking at last week.
Last Week’s Review:
The first one is Silver. Basically, the trade setup I was looking at is Silver had made a drop. We’re making a large bear flag here. I have the TTM Squeeze Indicator. We can see where the red dots indicate…
that there’s some consolidation going on. You can see that as the consolidation was happening, the momentum was starting to turn down.
Our members in our trading service took some puts here, right on this candle, on this morning. And then the very next trading day, which is actually Monday (we took this on Friday), the squeeze fired short. You can see the dots turning green. That means volatility is expanding, meaning your put options are gaining in price because they are more expensive as well as you’re getting the delta from the drop.
This was a great trade. We actually took half off here for almost 40% gain. We put a breakeven stop on the rest. We ended up getting stopped out on this candle. (There’s the bell.) We ended up getting stopped out on this candle, but that’s part of the trading rules. We take profits; we let the rest ride.
What I’m actually potentially looking at for next week is Silver. We have this drop. This kind of move is climbing back up. We get a retest at the 20 day and potentially this gap fill. I might be interested in additional short and looking to retest these lows. We’ll let our members know if we’re going to take that second trade.
If you guys are interested in learning more about the Squeeze Indicator and how we use it on our service, we have a 14-day trial. You can get out Indicator Training as well as our nightly videos on how we’re using these as well. Go to the website. Take the trial and start trading with us.
Conoco Phillips (COP)
The other trade we took this week – We’re actually still in some of this. (Let me take some of these lines off here.) This was not a Squeeze, but this is more of a Fibonacci play. But basically, Conoco Phillips: earnings had already come out. (This is very important.) Earnings came out, apparently did not (too bad), sold off a little bit. But basically, what COP did was
come down, kissed this trend line and also touched the 200 day moving average.
And so when I was looking at this, I was like, “Okay, this might be a good place.” What really got me in the trade was the Fibonacci. You can see that we have this rollover. But really, the leg that came down – (Let me get the right tool in here.) This leg from here to here, we came down, pretty much found support, pulled back a little bit to the 38.2. But basically, we found support around 73.42. Once we broke this (we broke the 27), at this point, now you have a 61.8, a golden ratio extension that’s coinciding with the 200 day and the trend line. So I said, “Let’s take this trade long.” This time the market was – You’ve got to look at the technicals because anything can happen in the news. And if you’re getting too bearish and you see a long setup, you have to take long setups.
We took short in Silver, as I mentioned. We took a long in COP. We actually have another long and another short in our service right now. But basically, we took this trade that morning. We were up almost 40%. We took half off and now we have a second half. Second half is with a breakeven stop. You can see that we’re right at this 27 extension. If this thing comes back down here, that fine we get stopped out. We made 38% on the first half. And then, if this can get going though and get back up, I’m looking for a retest of the 20-day, or at least a retest of the 73.42. If that happens, we’ll probably look to take the second half off. And so this leaves me into what’s going to be the catalyst for us to get to the next little leg up.
A Look at the Dollar:
Let’s look at the dollar real quick. I’ve actually been wrong on this – I’ll have to admit. I was expecting a dollar rally. We did not get it. Bernanke came out this week and said, basically, “We’re not going to do QE3, but if we need to, we’ll do it.” So it’s there. The market is pricing in the fact that – And when I say “pricing in,” I mean the market is not tanking because the market knows that the Fed will step in if it’s needed to. You have a lot of support by the Fed. The market is being supported by the government so that people feel richer and spend money, basically.
What happened was I was looking at the Squeeze. I don’t trade the dollar, but I look at this. You can see we were in the Squeeze. I thought we were going to fire long. (Let me bring my trend line back in. Let me back out a little bit.)
We had this trend line going on. And I had been telling my members: “Right round here, we’re coming in support. It’s like the dollar is going to fire long. Bernanke is going to come out and say that we’re not doing QE3 and the dollar is going to rally.” That did not happen. The dollar actually (I think it was this candle) came down, broke below. Now the Squeeze is turning lower. Now you have a potential to fire short. And it eventually did fire short. That means I’m expecting a little more downside for the dollar. I’d probably retest these lows, which is around the 200 day moving average.
Even yesterday when they downgraded Spain a couple of notches, my instinct was telling me the dollar is probably going to rally. It didn’t. We’re down another quarter percent or whatever. This is just very interesting to me. And for those that haven’t been following this, the dollar is somewhat inversely correlated to the market. This is why Silver and Gold are getting a little boost today. The dollar is down a quarter percent. Gold is up a quarter percent. Silver is recovering from this huge drop, but Silver is up over a half percent. This is not a coincidence because the dollar continues to fall.
If we find support here and we rally, then maybe we’ll get a little selloff. But I think we have, at this point, a little more downside, potentially the 200 day moving average. You can also look at the UUP as a proxy. UUP already broke that. Now you’re looking at potential support will be here and potentially have some other support levels here at different pivots. But essentially, this dollar drop, if it continues to fall, I think on the S&P – Let’s look at the SPX real quick. The bell just rang, so we ended up with a little gain for the day.
SPX Technical Analysis:
Basically, we broke out of this trade range we’ve been in. I think there’s a good chance that we’ll retest the highs – this 1420 area. Once we get up there, if this is coinciding with a further dollar fall and the dollar finds support, I’m leading in towards a trading range so I would look to take short positions here and potentially a long here and probably more longs here, if we get that pull back. If the dollar just falls of a cliff and this thing keeps going, then so be it.
New Plays for Next Week:
Let’s look at a couple of plays for next week.
Russell 2000 Index Fund (IWM)
One is the IWM. This is the Russell 2000 Index Fund. We had a nice run these past five days. I think that Russell is going to have a little issue at this gap fill. I would potentially short that. This is at 83.24. That gap fill is from April 3rd. I would look for a small short there.
On the long side, for those that are on the bullish on the market, I’m really liking Lowe’s right now. Lowe’s has held up very well. I don’t have enough space here to see what the next earnings is, but for the last earnings, they did real well. They had been in uptrend. They had been holding the 20-day for the most part. They did break it, never confirmed, closed right back up, kept going, broke it, closed back up.
Now we’re sitting there. You have the Squeeze Indicator that’s showing volatility is decreasing. If I had my guess as to which way Lowe’s is going to break, I would say it’s going to break up. I didn’t take this trade today, but we may look to add this to the service next week, as well as a couple of others. But basically, the Squeeze – I want to see how next week opens. If we don’t have any huge headlines out of Europe over the weekend, those potentials will be popped early in the week.
But we’re consolidating here and this is still an uptrend. We haven’t made a new low. This is a higher low. We made a higher high, a higher low. And until we make a lower low below here (potentially below the 50), then you’ve got to stay bullish on Lowe’s right now.
That’s a Wrap:
That’s all I got for today. I hope you guys have a great weekend. Again, go to the website. Take the trial. Get the videos. We have the Fibonacci videos, the TTM Squeeze videos. I’ll see you guys on the inside. Take it easy.
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