Short Setup: FUQI

I pointed to FUQI as a short when it was around $30. I took the trade, which would have been successful had I used a wider stop. It's now broke down below the 50 day moving average and is showing distribution in the volume pattern. I will short on a pullback to the moving average, as long as strength is not on strong volume. The setup here is moving average breakdown off a topping pattern.

VPRT Showing Signs of Cracking

Notice the negative volume pattern during recent consolidation period.

Head and Shoulders Pattern is Still Intact

As long as the head and shoulders pattern holds, I remain ready to initiate shorts on a bounce.

Distribution Showing Up In Brazil ETF (EWZ)

EWZ, along with the other BRIC countries, has been on fire of late. However, the recent consolidation has the look of a short term top, with the volume pattern suggesting distribution.

Note the high volume down days during the recent consolidation.

It's Time To Short Commodities

Over the past week I have been watching for the commodity bounce to reach resistance and begin to fade. We are nearing that point in many commodity stocks. I will likely stay away from energy, as I do see more room to the upside for oil. This could boost energy stocks.

Steel, agriculture, copper, gold and silver related stocks all are close to good short entry points.

MOS is a good example of stocks in the ag industry that look ready for another run down. The topping formation is complete and we are now looking at the continuation setup. Price has pulled back to the what was once support for the topping formation. It is now resistance and provides a good entry point.

My intial target would be the recent lows. This is where I would take partial profits, move my stop up, and hold on for even more potential gain. There are two logical stop points. Either just above the 200 day MA or the resistance line.

TBSI Still Looks Like an Attractive Short

TBSI, and other dry bulk shippers, have put in topping formations and dropped enough that it's tough to enter short right now. However, there still is room for further downside. I expect to see a bounce soon and may enter short if it's of the "dead cat" variety. The March low of $26 is my downside target.

Countertrend Gold Trade

Gold is getting interesting as a short term play (bearish) that is counter to the longterm trend (bullish). If light volume continues on the up move, I will enter one of the weaker stocks.

More on DBA

Before we look at the current chart, take a look at my recent DBA posts for a refresher on finding stocks/markets that are topping and ready to rollover. There is a lot to be learned from the charts.

DBA today:

The Game Plan for Shorting Agriculture

As I previously discussed, I am no longer bullish on the ag sector. As DBA shows, the ETF is showing a distribution pattern common among tops. This weekend I analyzed the sector in search of shorts and came up with three names that head my watchlist: TRA, DE and MON.

Common among these three stocks are broken trend lines, distribution patterns and poor relative strength compared to the sector.

Take a look at the six charts below:



Compare the five stock charts (TRA, DE, MON, CF and MOS) to the ETF DBA. Notice that TRA, DE and MON have broken either a major trend lone or moving average. They all show pronounced downside volume. Most importantly, they all started making lower highs prior to DBA's recent pullback. Compare them to DE and MOS, which still look technically sound.

When shorting, I like to go with the laggards within a group. Therefore, when I decide to short the ag complex, I will likely do so with either TRA, DE or MON.

Main Page

Today's Trade: CPLA (Short) and AKS

I went short 400 shares of CPLA at $55.68. This was a textbook short play that took a nose dive shortly after I entered. I bought after the stock's failure at the 200 day moving average. This is one of my go to patterns: broken momo stock, drops below 200 day moving average with heavy distribution. Enter on illusionary strength, meaning a bounce on low volume in the midst of distribution.

I also bought 300 shares of AKS at $54.64. The stock closed at $54.32. Steel has been on fire, so I am hoping we get a quick bounce back. My stop is tight, just under the last pivot low.

Weekly Spy Chart

Analysis of the weekly SPY chart leads me to believe the market still has room for a bounce before the next downturn.

Key factors in support of bounce:
1. Bounce at major price support
2. Stochastic oversold crossover developing
3. More room to move until resistance reached.

Note that each time stochastic has reached oversold levels and crossed we've seen a decent sized bounce.

Key factors in support of continued downtrend post bounce:
1. Topping price action pattern
2. Major volume distribution
3. Major resistance

If volume stays low, I will likely unload long positions once resistance is reached and deploy some shorts.