Friday, October 24, 2014

The 167.77 rally target we've been using is still valid, although yesterday's bend in the road has made it somewhat less enticing as a place to try shorting with a tight stop-loss. Thursday's rally was not bullishly impulsive because it merely tied the 10/10 peak, but the pattern could yield an attractive opportunity to get long nonetheless, especially since I've been featuring "illegitimate" ABCs like this one as an alternative to a standard-issue pattern that has attracted too much riff-raff, particularly the algo traders. Barring some horrific headline overnight, your bias should be bullish, using an entry signal off the pattern shown. If you want to further reduce the entry risk, drop down to a lesser chart for your entry signal. I'll be in the chat room in any case if your unsure of how to proceed. Be ready for a stall at p=167.74, since it closely coincides with the 167.77 target of the larger pattern. ______ UPDATE (October 27, 2:41 a.m. EDT): DIA peaked Friday at 167.79, two cents from our rally target, so you should be mostly out of any long positions held on the way up. If you made money and reversed the position at the target by buying out-of-the-money put options, I'd suggest stopping yourself out if they trade for 0.15-0.20 less than you paid for them.

The stall at the 1949.25 midpoint resistance (see inset) suggests the futures are consolidating for a follow-through to 1978.25. Night owls could have a chance to board ahead of the rally by bottom-fishing the Hidden Pivot support of a downtrending abc pattern. At the moment, this would imply bidding 1935.75 (15-min, a=1956.25 at 2:30 p.m. EDT) with a stop-loss of perhaps three ticks. The 1942.50 midpoint support of the pattern has already been breached, and although it would require a nasty takedown overnight to hit its 'D' sibling, that's still the most conservative place to try to get in. Otherwise, you can attempt to enter with the trend using a signal from the 1-minute chart. _______ UPDATE (1:30 a.m.):  My hunch is that the headline "Ebola Hits NYC" Thursday night caused the futures to overshoot my target. Instead, they fulfilled the somewhat lower target of this gnarly pattern within a single tick: (15-minute)  a=1956.25  (2:30 p.m.); b= 1941.50; c= 1946.75. DaBoyz have turned the dive into a swoon with a so-far 12-point rally, but they may be pushing their luck to shoot for any more.  It's not just Ebola, or even Ebola plus the hatchet-wielding jihadi psychotic in Queens -- it's just the feeling, as the week draws to a close, that the pace of disturbing events around the world is spinning out of control.

My gut feeling is that the short squeeze off last week's low is a bear rally, albeit a quite powerful one. As a practical matter, however, we've been scalping it from both the long and the short side, using targets provided in the chat room and in updates to my touts for DIA and the E-Mini S&Ps. If you want to get in on the action but don't subscribe, consider taking a free trial subscription. This will also give you access to Friday morning's "Jackpot Bet" session, for which I will provide a link in the chat room at 8:45 a.m. EDT.

Amazon's latest earnings have missed on both the top and bottom line, sending the stock into a steep dive in after-hours trading. The global retailer's shares have traded as low as $272.50, off $40 from a $313 close. Although this exceeds any downside target I could have projected using the intraday charts, the weekly bars leave room for a little more downside to 266.12., a clear Hidden Pivot support. The stock would become a screaming buy at that price, albeit with a very tight stop-loss, since the bounce could go as high as 315.49.  The operating loss for Q3 was $544 million, or about 0.95 per share; a loss of 0.74 had been expected.  The company also confirmed buzz that the "Fire" smartphone had laid an egg -- to the tune of a $170 million write-down, with $83 million of unsold units still in inventory. ______ UPDATE (October 28, 8:38 p.m.): I put out a 305.25 rally target in the chat room but see the move as corrective. As such, the 266.12 target will stand unless 364.85 is exceeded to the upside. _______ UPDATE (October 29, 9:16 p.m.): An opening bar head-fake trapped bulls, then negated the 305.25 correction target on the way down.  The short-term picture is still bullish, but not sufficiently so to warrant a play.