Market Analysis

Selected Trades

Commentary


5/19/19

 

ABBV Tuesday Turnaround?

 

In the 5/13/19 update, the alternate scenario of a spring set-up was identified.  That appears to be the case with ABBV.  However, there is a caveat.

 

Even though price action is moving higher (from the 5/10 lows), the character has changed.  Each day shows ease of movement lower with attempts to move and close higher.

 

Long term, ABBV is trending down, with six trend line contact points as shown.

 

If there is an up-thrust in the cards, a potential time-frame may be this coming Tuesday, 5/21; a simultaneous Fibonacci Day 34, from the 4/3/19, high and Fibonacci Day 8, from the 5/10/19, low.

 

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5/13/19

(12:31 p.m. EST)

 

ABBV price action is following the plan; posting and inside day, helping to confirm the down-trend line.

 

At this point a reversal (up-ward) is still possible.  After all, having penetrated support at the 76.00 - area, ABBV is in spring position.  Both possibilities are operating simultaneously in the market.

 

However, with each passing day as ABBV follows the script laid out weeks ago, probabilities continue to favor a significant breakout to the downside.

 

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5/11/19

 

The overall market rallied into the close on Friday and broke the down-trend line identified in the earlier (mid-morning) update.

 

Such reversals help to identify opportunities.  The chart of TSM has a lower high, lower low and a lower close for the day’s session.

 

A dramatic reversal in the S&P with TSM (thus far) not going along, helps point us to downside opportunity.

 

Best case scenario for going short TSM would be for the S&P to post an inside (upward buoyant) day on Monday and for TSM to do the same. 

 

If that happens, price action would stay within the down trend line as shown and bleed off option premium; therefore allowing for a lower cost entry towards the end of the session.

 

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5/9/19

Gold:  First Rally Fails, And Now The Second?

 

There has been one attempt at a spring in gold and one failure.  Now, we have another spring attempt as shown on the chart.

 

When a scenario does not work out as expected, something else is happening.

 

Two charts of GLD, provided here.

 

The first chart shows the analysis above.  The second chart shows another view.

 

Are we in a bullish set-up, a trading channel or both?


5/7/19

Gold Set-Up

 

Looks like gold (GLD) is set to have some kind of rally.  The character of the spring set-up is more labored than previous action so it may not be as dynamic.

 

Note how long price has remained below support; about four times as long as prior moves.


5/5/19

Silver To Single Digits?

 

Back in the old days with Middle East tensions rising, gold and silver would be trading in a brisk bull market or at panic levels.

 

We'll see what happens at the open on Monday.  If you want to check silver futures markets opening late Sunday, click here.

 

Meanwhile, here’s another potential (not a forecast) for silver.  The last update showed a breakout from a wedge that’s actually within another, larger wedge.


5/3/19

 

ABBV Wedge Pattern

 

It's mid-session on Friday.  ABBV may be setting up for a breakout to the downside.

 

The problem is (depending on how you look at it) a breakout lower or higher in the Biotech sector can happen all at once.  One day it's at one level and the next, you're up or down 50% or more.

 

Anything can happen and ABBV could move higher.  However, we’ve already had an up-thrust; Now, price action has tested and reversed. 

 

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5/1/19

Targeting Silver (SLV) to $11/oz.

 

We’ll let the chart speak for itself.

 

The attached link is a presentation on “why” silver will move higher; the arguments are all fundamental(s) with no charts on what silver is actually doing.

 

At this point SLV has broken lower out of a wedge, tested that breakout and is now moving (albeit drifting) lower.

 

It’s interesting that both the Fibonacci projection taken from the April, 2011 highs, and the measured move out of the wedge coincide.

 

Silver at $11/oz. is lower than (projected) production costs of First Majestic Silver (AG) for 2020.  What’s going to happen to its stock price if/when silver reaches that level?


4/29/19

 

Evidence of a struggle

 

After its earnings release, JNJ has struggled to move higher.  Last week JNJ closed barely above its previously weekly high (close) posted on 3/29/19.

 

Note:  Last Friday was Fibonacci Day 8, after the earnings release on Tuesday the 16th.

 

Potential sell signal is a new daily low below 139.31.

 

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4/27/19

 

CAT Reversal

 

It’s obvious CAT is in trouble.

 

Last week was an up-thrust and this week was the initial down-leg.  From an Elliott Wave standpoint (see reading list), last week may have been the top of wave 2 counter-trend.

 

If so, wave three is the main move lower.

 

CAT retraced nearly 50% of the initial down leg from the high last Thursday, the 18th.  There may be a little blip higher on Monday (to eek out that last bit to 50%) or not.

 

The attached link describes the current economic and financial situation but the best quote, is actually in the comments: 

 

3.2 GDP? .....We live in an Orwellian, command-control, centrally planned hallucination.

 

 

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4/24/19

 

Gold trade still viable?

 

The short answer is yes.  The long answer is we’re probably not going to trade the upside.

 

The weekly chart of GLD has it in spring position.  However, if there is a move higher and if that move reaches new highs, there’s a possibility a bearish MACD divergence will be created.

 

Note the previous bearish divergence on the chart.  The result was a huge move in GLD; a collapse of 18 – 24 points depending on the point of measurement.

 

During that move, GDX was shorted using a series of put options.  A detail of that trade is here.

 

If GLD moves higher, what’s more likely from my firm’s standpoint, is to monitor price action and observe the behavior if/when there is a breakout to new weekly or monthly highs.

 

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Quotable Quote:

 

“We have played out this paradigm.  There is no way it’s self sustaining.”

 

The link where this quote can be found is here.  Go to time stamp 6:40.


4/21/19:  The Shroud

 

There is conjecture the shroud was originally used as the table cloth during the last supper.  If so, it can’t get any more perfect.

 

This recent report may be the best analysis ever of what is actually imprinted on the shroud.

5/14/19

 

For ABBV to maintain its downward trajectory, it must have a lower open followed by continued downside action.

 

If there's a higher open, something else is at work and any current (short) positions may be exited.

 

At this point, 8:15 a.m. EST, the bid/ask spreads are pointing to a higher open. 

 

However, in pre-market trade not all participants are present.  I’ve seen the actual open be significantly farther away (up or down) than pre-trade activity.

 

We’ll see what happens.

 

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5/12/19

 

We’ll find out on Monday (5/13), if the trend for ABBV downward is going to continue or if we have a reversal. 

 

Once a trend line gets to -90% annualized, there’s not much room for error on the analysis

 

With ABBV trending lower for over a year, we’ve already established the up-thrust and test scenario. 

 

In addition, the wild swings from January ’18 to January ’19 are over and price action has become tight. 

 

Tight action is a coil; providing thrust for the next major move

 

As with TSM, the expectation (for a bearish set-up) is that we get some kind of inside day or a continuation lower.

 

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5/10/19

S&P Takes A Hit

 

It’s just after the open and the S&P is confirming an aggressive down trend-line.

 

Currently declining at approximately 81%, it won’t take long to get to obvious support levels.

 

If the S&P is going to make it to the 3,300 area by late August, early September, it’s got to have fuel.

 

Pushing below established support, causing the shorts to go short and the longs to bail out, may provide enough instability for a summer rally.

 

This downside action and the swiftness of it, is another reason the professionals prefer the short side.

 

We’ll probably have the obligatory picture of floor traders at the NYSE looking all pensive. 

 

What’s really in their heads may be something like this:

 

“My boss is going to kill me.  I've only made $500,000 on this down move and it should be $3,000,000 !!!” J

 

All of the financial air time and the continuous machinations over valuations are a distraction.  Price action itself, reveals the next likely direction.

 

Meanwhile, back at the ranch, ABBV is in a downside breakout.  Currently trading down -2.36%.  That’s nearly twice the loss of the S&P at this time.


5/6/19

S&P "Usual Suspects"

 

Initial stages of a retrace may be in process for the S&P.

 

If so, we’ve identified a probable support level.  That level happens to be the area identified on February 10th as a ‘danger point’.

 

A retrace at this time, puts aside the 3,300 top in the vicinity of June – July and now puts that top (potentially) around August –September … the usual suspects area for market tops.


5/4/19

 

Then and now: 

 

The two charts of ABBV side by side (click here), show the original expectation and the current action as of Friday, 5/3/19. 

 

What the chart is telling us is that so far, ABBV is following the typical pattern for an up-thrust, test, reversal and collapse.

 

Anything can happen and the trade set-up could dissipate into thin air in the coming sessions

 

However, at this point all eyes should be on this one.  The contradiction is that one must maintain an air of emotional distance.  The charts say that ABBV has the potential to drop anywhere from 15 – 20 points or more.

 

That might not sound like much but for example, let’s say we positioned with a short term put option with a strike at 72. 

 

Putting in a modest thousand dollars, albeit fiat currency J, at an estimated price of 0.25 (I’m making that up … I have not positioned at 72 with any contact).

 

That gives you 40 contracts.  Then ABBV drops to 64, during the expiration week of the option.  That’s 8-points.  Here’s the math.  8x40 (at $4,000/point) = $32,000.

 

It’s still fiat (digital, electronic dollars) but at least it can be extracted from the trading account and turned into actual wealth.

 

Of course, if it does not work out, the option goes to zero.  That's the nature of the game


5/2/19

Follow-up: 

UA Results

 

The expectation was for UA to completely collapse after the shorts had been mauled.

 

It may still happen at the next session.  However, sideways action can go on indefinitely; so the put was exited at the location shown.


5/2/19

 

Pre-market, Under Armour (UA):  Shorts in trouble.

 

 

 

If it’s a squeeze, downside action can be a violent as the upside.

 

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4/30/19

'What Could Go Wrong?'

 

The link included here provides an excellent report on the current state of hedge funds in the market.

 

Seems like these guys are at it again; Like hedge fund hotel, they are setting themselves (and us) up for the next market disaster. 

 

On a separate note, it looks like GILD has a spring underway and potentially headed for an up-thrust.


4/28/19

 

“You have spaghetti on your chart.”

 

Let’s keep that in mind as we review more data on CAT.  The link to the quote above is here (time stamp 0:44).

 

That video shows a day trader who is espousing the ancient art of Wyckoff analysis:  Price and volume … that’s it.

 

His time frame is shorter than what’s presented on this site but the markets are fractal; time-frames are relative to the individual that’s participating.

 

In the case of CAT, we have a clear up-thrust the past two weeks and now it’s at support in the 139 – 140 area.

 

The dashed line is an uptrend that goes all the way back to 2016.  If CAT moves lower from here, we’ll see how that line affects price action.

 

Obviously, we’ll be looking to go short big time if price action dictates. 

 

The previous chart shows potential downward action (from a Fibonacci projection) all the way to the 45-area.

 

This is how fortunes are made

 

'The big money is in the big move' according to Livermore and he was right.  The other part of that statement is big money is made on downside, bearish action and not the upside.

 

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Dates To Watch, Earnings Release

 

 

HSIC:  5/14

TTWO:  5/15


 

 Trading Method (Options)

 

Our market approach follows WyckoffLivermore;

 

Identify a set-up that has probability for a move lasting several days or weeks and potential for a significant gain.

 

Significant gain is anything over 1,000% 

 

That might seem extreme but when trading options (correctly) a 10-bagger gain can be made in a few hours; such as what happens on the day of expiration.

 

While those opportunities do occur, they are infrequent and one has to be seriously on their game to interpret price action in real time.

 

One 10-bagger trade example, lasting a few (market) hours was this one.

 

Other opportunities that have longer time frames provide for a more sustainable (and more reliable) move.  A good example is here.

 

Results presented on this site prove that with enough experience and focus, markets can be timed and timed effectively.  Not only that, the method is modeled after techniques and insight developed by market masters during the early 1900’s.

 

Back then, as we're doing now, there are no indicators, no algorithms, no artificial intelligence;  just real-time tape reading and discerning what the market is saying about itself.


 

Options Strategy

 

 

Successfully trading options requires advanced skill in three areas:

  • Vehicle
  • Direction
  • Time.

Our strategy is simple but not easy:

  

Trade high probability market set-ups using near expiration put (or call) options.

 

 At this point in time (post financial crisis 2008 - 2009) and in our view, this trading method is far superior to a fundamentals based or 'diversified' approach.

 

If one is 'diversified', then one has to admit they are unable to discern the technical, manipulative forces behind market moves. 

 

The above statement is harsh but true and taken as a paraphrase from Gerald M. Loeb in his book, The Battle For Investment Survival.

 

As Wyckoff stated over a century ago, the market has its own energy and objective(s).  Price action has little to do with fundamentals.

 

Wall St. has deluded the public into thinking fundamentals matter; in so doing it has been able to promulgate the deception for over 150 years.

 

Livermore stated as much during an interview with Wyckoff in 1921.  He specifically used that word to describe Wall St.:  "Deception".

 

If one is asking the wrong question (fundamentals), then one is going to get the wrong answer and be at least two levels (wrong question, wrong answer) removed from market reality. 

 

Some are so deep in the fallacy, they spend a lifetime trying to figure out what the market 'should' be doing.

 

Entire industries such as financial planning, money management, radio and television market reporting, have been (either knowingly or unknowingly) built on and in support of the Wall St. deception.

 

Of course, the trading professionals are running their own game. 

 

They use market earnings or news releases as an 'excuse' to drive prices to specific levels where they can enter or exit at low risk.  Don't think that's true?  Take a look at this.

 

At this stage (late in a fomented bull market), there is significant downside risk and very little upside commitment.

 

A market event of some type may be approaching from an unexpected source.

 

The options method detailed on this site takes into account (and intends to profit from) the possibility of another market breakdown and "no bid" that can happen at any moment.

 

The open area of this site posts the results of selected option trades and at times, other directional (ETF, futures, or equity) trades as well.


Suggested (required) Reading

 

The market approach, acumen and technical details presented on this site aren't much different than your senior or graduate level science courses in college. For you to get maximum benefit, you've got to know the material.

 

A good example of this was an experience I had years ago.  I was an upper classmen engineering student at Texas A&M.  I had made it through years of study and could just about see my way to graduation.  That was until my Automatic Control Systems class.

 

It became clear at that point, I really didn't know much at all.  There was still a long way to go.   My visions of great accomplishment were dashed.  All I had really managed to do, was survive the typical weed-out of lesser students.

 

Read more ... 



Three Ten Trading, LLC is structured as a long-short fund implementing proprietary trading strategies.  As such, we are not registered by the SEC, do not provide investment advice and do not engage in paid solicitation or advertising.  

 

This site is for purpose of demonstrating the truth of market behavior; outlined by a market master: Richard D. Wyckoff in his text, Studies In Tape Reading, published 1910. 


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