Another quick chart update for gold with my thoughts. In my most recent Tischendorf Letter Interview I expanded on why I thought it was too early to be buying into the mining stocks. The miners have pulled back since. The technical picture for gold hasn’t improved either. Here are my most recent chart annotations:

  • 03/30/14 – REDREW. THIS IS STARTING TO LOOK MORE AND MORE LIKE A DESCENDING BEARISH TRIANGLE. IF THE LOWER BOUNDARY OF THE TRIANGLE DOESN’T HOLD, THE 1000 LEVEL WILL ACT AS A PRICE MAGNET. I AM NEUTRAL / BEARISH. BETWEEN 1200 – 1400 GOLD IS TRADING IN NO MAN’S LAND. DURING CHOPPY SIDEWAYS TRADING RANGES IT IS BEST TO PROTECT CAPITAL. WHEN THE TECHNICAL PICTURE IS UNCLEAR STAYING ON THE SIDELINES IS THE BEST OPTION.

Here’s the chart. Click to enlarge:

Always up-to-date $GOLD – Gold Chart on my public list.

Granted, chart patterns morph and are constantly changing. As a trader one has to continually monitor the technical situation and adapt accordingly. That being said, the descending triangle could easily morph into a rectangle pattern. That wouldn’t change much though. This would still be a sideways trading range where explosive moves typically do not take place. Gold would have to convincingly break above 1400 on huge volume in order to alter the technical picture. Due to the fact the trend leading into the consolidation pattern was a downtrend, odds for the downtrend to resume when price moves out of the trading range are very high. Furthermore the 1000 $ level is undeniably a nice round number. These often tend to act as strong magnets attracting price.

Conclusion: I am not eager to short gold. But when in doubt one has to at least stay out. As stated in my annotations: When the technical picture is unclear standing aside is the most prudent option. After all, cash is a position.

Do not look to make any gains in bad markets. It is far better to stay out of bad markets where odds of wins are against us, rather than trying to swim against the tide. – Brad Koteshwar

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Charts:  http://stockcharts.com/public/1109839/tenpp

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Updated chart and thoughts for BWEN – Broadwind Energy after what I deem to be a beautiful earnings shakeout similar to the one with MXWL – Maxwell Technologies which I described in my latest Tischendorf Letter Interview.

I highlighted BWEN – Broadwind Energy Bullish Inverse Head And Shoulders Pattern a while back. The pattern has now developed even more bullish pattern pressure. Interestingly it is now offering additional pressure. The reason is a psychological one. As outlined in my chart annotations we have witnessed a multiple shakeout pre and post earnings. First the topping tail shook out traders. Then the earnings gap shook out another batch of traders. Then the bottoming tails took care of everybody else. This created a high volatility trading range which I drew into the chart using black lines. BWEN then proceeded to break out of that trading range and now has also taken out the blue line resistance thus printing a new 52 week high.

The weekly chart is either displaying an inverse head and shoulders pattern or an ascending triangle. Some traders also call it a ‘running consolidation’ or ‘ascending base’. How you name the pattern doesn’t matter. The important thing to keep in mind is the psychological implication. Traders are eager to buy into the stock and therefore the stock isn’t able to put in a horizontal resistance line as each time that level is hit buyers are willing to pay up. The pattern is difficult to grasp as it is constantly morphing and behaving much like a moving target. A strict and rigid set of rules won’t help you understand it either. Furthermore many traders think this is a bearish wedge pattern. I disagree as we are coming out of a long base and the overall pattern pressure is very bullish. Additionally a bearish wedge should ideally appear after a prolonged downtrend. That is not the case here.

As usual, no matter what you might think or how good you deem your analysis to be, using a stop loss makes sure a strong opinion won’t hurt you in case the technical situation turns sour. There is no doubt that increasing volume coming into the stock would help validate the set-up. So one thing to keep an eye on is big volume bars confirming rising prices.

Click on the chart to enlarge:

Always up-to-date BWEN – Broadwind Energy Chart on my public list.

The market’s sole job is to confuse us. Always look for confirming signs. Be in a hurry to sell a loss and reluctant to sell a profit. Let your stops make your decisions for you. – Brad Koteshwar

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Charts:  http://stockcharts.com/public/1109839/tenpp

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Quick chart update on SLV – Silver ETF as the technical picture hasn’t improved. As a technical trader I observe the charts and do what the markets tell me to do. In the case of SLV the technical picture couldn’t be any clearer. Price is putting in one falling top / lower high after another. This is the definition of a downtrend. Another definition of a downtrend is when price is trading below the moving average 200. That’s currently the case with SLV. The MA 200 was somewhat flatlining. It now looks like it will resume its downward slope very soon. I talked about the flatlining MA 200 and the technical implications for precious metals in more detail in my latest Tischendorf Letter Interview.

As a trader in a downtrend you have two options:

  • Cash
  • Short

Click on chart to enlarge:

Always up-to-date SLV – Silver ETF chart on my public list.

Will the downtrend end? Yes. When will it end? Nobody knows. Price will need to recapture the MA 200 for the downtrend to end. When that happens my job as a trader is to reevaluate the technical situation.

Remember: You always have a choice. You can either lose your opinion or you can lose your money. Great traders offer no excuses.

The biggest problem one faces in the market is the need to wait to confirm the trend. The most common and costly mistake is to jump at every first inkling of a rally. In the stampede to be the first to identify a trend, many get crushed. It is the patient ones who wait out the many false  starts, who will be fit as a fiddle to make the move when the true trend starts. A lot of money has been lost in trying to be the first one to identify the trend. – Brad Koteshwar

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Charts:  http://stockcharts.com/public/1109839/tenpp

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Mike Swanson who runs www.wallstreetwindow.com was so kind as to interview me again. He asked me about my thoughts on Parabolic moves, Gold, the next sector with the potential to move higher, SMH – Semiconductor Index ETF, and to describe the entry rationale of one of my recent trades MXWL – Maxwell Technologies. We also talked about the importance of being able to adapt to changing markets, something I wrote about in my Niccolò Machiavelli post.

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http://www.tischendorf.com/wp-content/uploads/2014/03/Mike-Swanson-on-2014-03-20-at-17.44.mp3

You can also listen to the interview on Mike Swanson’s website: http://www.wallstreetwindow.com/node/9753 

Here are the two quotes I bring up during our interview:

Paul Tudor Jones on Late Stage Bull Markets:

While I am a staunch advocate of higher education, there is no training, classroom or otherwise that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market.

Joe Vidich of Hedge Fund Market Wizard fame on Concept Stocks:

As an equity trader, I learned the short-selling lessons relatively early. There is no high for a concept stock. It is always better to be long before they have already moved a lot than to try to figure out where to go short.

I also go through one of my recent trades, MXWL – Maxwell Technologies, a stock that has great story stock potential. I posted the chart on Twitter when I entered. As I mention during the interview, when I started to share on Twitter I made the decision that I would provide additional content, not available on my website, as an incentive to follow me.

Opportunities multiply as they are seized. – Sun Tzu

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Charts:  http://stockcharts.com/public/1109839/tenpp

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The market environment has somewhat changed over the past few days. Former leaders are not acting as well as they used to and the jury is still out if we are headed towards a meaningful correction or if we are in the process of further constructive rotation. Further sector rotation would allow for the market to grind even higher and while doing so provide a new set of leading stocks. If you want to thrive as a trader you absolutely have to monitor changes in the market. Then you adapt and adjust your trading approach accordingly.

As I just finished reading Niccolò Machiavelli ‘The Prince’ a few  days ago I was struck by the following passage. The quote is obviously related to trading insofar as this is great insight and also a universal rule for success. You keep doing what you always did when things change – you get crushed. You adapt your approach when the environment you operate in changes – you succeed and prosper. Enjoy the quote.

This must suffice as regards opposition to fortune in general. But limiting myself more to particular cases, I would point out how one sees a certain prince today fortunate and tomorrow ruined, without seeing that he has changed in character or otherwise. I believe this arises in the first place from the causes that we have already discussed at length; that is to say, because the prince who bases himself entirely on fortune is ruined when fortune varies. I also believe that he is happy whose mode of proceeding accords with the needs of the times, and similarly he is unfortunate whose mode of proceeding is opposed to the times. For one sees that men in those things which lead them to the aim that each one has in view, namely, glory and riches, proceed in various ways; one with circumspection, another with impetuosity, one by violence, another by cunning, one with patience, another with the reverse; and each by these diverse ways may arrive at his aim. One sees also two cautious men, one of whom succeeds in his designs, and the other not, and in the same way two men succeed equally by different methods, one being cautious, the other impetuous, which arises only from the nature of the times, which does or does not conform to their method of proceeding. From this results, as I have said, that two men, acting differently, attain the same effect, and of two others acting in the same way, one arrives at his good and not the other. From this depend also the changes in fortune, for if it happens that time and circumstances are favourable to one who acts with caution and prudence he will be successful, but if time and circumstances change he will be ruined, because he does not change his mode of proceeding. No man is found able to adapt himself to this, either because he cannot deviate from that to which his nature disposes him, or else because having always prospered by walking in one path, he cannot persuade himself that it is well to leave it; and therefore the cautious man, when it is time to act suddenly, does not know how to do so and is consequently ruined; for if one could change one’s nature with time and circumstances, fortune would never change.

The one post related to this subject that comes to mind is the one where I write about trading approaches with fatal flaws. One such fatal trading flaw is the inability to react to change.

http://www.tischendorf.com/2010/05/29/worst-case-scenarios-and-fatal-trading-flaws/

Normal human tendencies are traits that cause you to do poorly. Therefore, to be successful as a trader you need to condition abnormal responses. – Mark Minervini

Twitter: https://twitter.com/Tischendorf
Stocktwits: http://stocktwits.com/Tischendorf

Charts:  http://stockcharts.com/public/1109839/tenpp

 

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Michael Platt Hedge Fund Market Wizard – How To Pick A Trader

March 10, 2014

Am currently reading Jack D. Schwager: ‘Hedge Fund Market Wizards – How Winning Traders Win’. A great book I do recommend. So far, the interview that most resonated with me was the one with Michael Platt. Here’s the passage that I liked best (page 276): Jack Schwager: You have picked a lot of traders in [...]

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GMT GATX Corp Blue Sky Potential Railcar Stock – Chart With No Overhead Resistance

February 24, 2014

Quick educational chart post highlighting GMT – GATX Corp, a stock that is offering ‘Blue Sky Potential’ as it is entering all time high territory and has no Overhead Resistance. Everybody holding the stock is in the green. From a purely psychological perspective selling pressure is greatly reduced as neither traders nor investors are experiencing any [...]

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FRO Frontline Shipping Stock – Bottoming Tails Cluster Stock Chart Pattern

February 23, 2014

Reviewing FRO – Frontline with an updated chart and my technical analysis thoughts. As outlined in a recent post I still think the Shipping Stocks Turnaround Investment Theme will play out. In the aforementioned post I analyzed the big cap stock DRYS – Dryships. At the time I stated FRO – Frontline and SBLK – Star Bulk [...]

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FTEK Fuel-Tech Bullish Weekly Hammer Candle – Technical Chart Analysis Update

February 22, 2014

Quick chart update for FTEK – Fuel-Tech a position I initiated this week. The weekly chart is now displaying an almost picture perfect bullish hammer candle pattern. As outlined in my chart annotations a picture perfect hammer candlestick would tend to have a white body on top of a long tail / wick / shadow. [...]

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Silver Potential New Bullish Uptrend With Low Risk Entry – SLV AGQ USLV

February 22, 2014

Another commodity is setting up for a low risk entry. I am talking about Silver which is displaying somewhat similar characteristics as the JO – Coffee ETN displayed recently. The thrusting move is not as strong as with JO and volume is not convincing enough as of yet. Still, the potential bear trap and the [...]

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