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Confidence Ratio Going DownA great indicator to determine the confidence (ie. risk appetite) of investors/speculators is the XLY/XLP ratio. XLY is the ETF for consumer discretionary stocks whereas XLP is the ETF for constumer staples stocks. In times of confidence, XLY should perform better than XLP because there is belief that the economy is doing well and that people will spend cash on things that are not absolutely necessary. The ratio has been tracking US equities indexes fairly well over the last years, but now we see major divergence. XLY/XLP is moving down and from a technical analysis standpoint it does not look like it is about to go rise back anytime soon. Yet, at the same time, the S&P 500 has been hitting all-time highs. This performance seems like it is not supported by risk appetite - which it should! So what should you do from here? Short this ratio? Short the S&P? That is all up to you. This is just another factor from a long list that supports the thesis that equities are overextended. Good luck trading.
AMEX:XLYShort
by Fouezz
MCD Long; 150EMA Support - Risk:Reward Of 62:1This trade setup is pretty simple and doesn't require any rocket science. McDonald's, or MCD, is a component of the DOW30. MCD has been in a trading range on the weekly chart for quite some time now. We are currently at the bottom of this range, providing an excellent opportunity to get long. I'm using covered calls in this name to get long the stock at as cheap a price as possible. The RSI show at label (A) is finding support in the oversold zone we have seen it bounce from before. In addition, we have moved off the 150EMA Weekly, which if you look at the green ellipse has previously held up since about 2007-2008 (not shown in this chart). There are two long possibilities here for me: 1) Buy MCD at 93.68 and Sell the Oct. 100 Call for $0.27 making your cost basis $93.41. With our stop on a close below $93.05 we are risking about $0.36 to make a maximum of $6.59. That's a risk reward of 18:1. 2) 1) Buy MCD at 93.68 and Sell the Oct. 97.5 Call for $0.57 making your cost basis $93.11. With our stop on a close below $93.05 we are risking about $0.07 to make a maximum of $4.39. That's a risk reward of 62:1. (I traded #2) The risk reward is assuming we could close out the position on the penny. This of course is not entirely true because we do not know how far below the market can close. It give you an idea however of just how well this trade is setup. You can tailor your stops to your liking. For example from this level, my stop is on a close below $93.05 or a touch of $92.35. This is because I never risk more than 2% on a single trade. I traded play number 2 because it brought my cost basis closer to the EMA reducing risk, while limiting profit. To compensate I doubled the size of my MCD position so the profit would match that of Trade Play #1, with my total risk being less than 2% still, and appropriate stops in play as mentioned. $97.50 is the closest and more likely target, with $102.00 being the top and more extended part of the range. So by using the $97.50 calls and doubling my size, my chances are better yet that I will achieve the same profits as Trading Play #1, simply because it only requires MCD to head towards $97.50 and not $102.00. Good luck, and may the markets be ever in your favor!
NYSE:MCDLong
by TheProfitcy
US Oil Short From Bullish Flag; High Risk:Reward RatioUSO has broken it's uptrend a few weeks back, and since has been heading violently lower with no signs of stopping, at least not yet. Not in my eyes. I had a plethora of converging indications, so I've marked them in the chart A - F, and then explained my trade setup. Good luck. A) RSI has broken above the 35 level, but this is likely because it bounced a bit from being oversold. It remains below 50 which is a bearish indication and still has resistance at the 40 level. B) The cream of the crop. B marks the head of a head and shoulders pattern in USO. You can see when the neckline was broken here, while simultaneously breaking a series of important EMAs, USO began it's slide. We would expect some sort of throw back to this neckline. This will be important in our trade setup later. C) Here is our bearish flag and Andrew's Pitchfork. You can see the slight countertrend movement off the lower bollinger band, and what now looks to be a hanging man. This entire move up is hitting resistance in the pitch fork, as well as the flag formation, and has formed entirely on declining volume. That's not a positive sign for continued upward momentum. D) PSZ (Prior Support Zone) from way back when. I'm expecting a move down into this zone where it will coincide with support at the lower BB or lower median pitchfork line. We may get a bounce down here, or more consolidation. E) Volume Decline Throughout Bear Flag F) Declining & Still Negative MACD The one thing I didn't like here was the RSI, and that the weekly chart shows that we may need a throwback before extended downward momentum. This is where that neckline comes into play. We may very well see a throwback to the 66 area before we are awarded with any serious downside momentum. However the weekly RSI is also in a downtrend, reinforcing our bearish outlook. I'm short a directional diagonal on this play, to take advantage of Theta decay, and let oil slowly drift lower in my favor until we reach that prior support and I debate what the next play will be. More downside, or a retracement? Maybe a renewed uptrend? Who knows?
AMEX:USOShort
by TheProfitcy
NTAP showing relative strength above important levelNetApp holds well above broken resistance level at $38. This is very important level as it is in play since March. We had some clues before break up as buyers managed to build series of higher lows with recent bottom at $36. Below this, idea will loose its luster. As broad market entered into corrective phase, i like how this specifique stock showing us relative strength and wedging above important level. Sector of Data Storage devices also keeps its buying momentum ($WDC, $STX, $VMW). Use your trade and risk management rules to keep odds on your side and control risk the same time. I am tier 1 here, add tier 2 if market will find its footing, add tier 3 on break og wedge. If it will go through $39, it will open doors to $41.
NASDAQ:NTAPLong
by andrew.berg
LNKD showed relative strengthYeasterday US markets closed in red with QQQ -0.8%, SPY -0.9% and DIA -0.94%. But this social network reversed from lows and closed near highs. I think we are close to resolution of this wide range with upside bias because of that strength. Now we have higher low @ $143.45 and important intermidiate support @ $145 that was retested intraday. Another action point is previous high of the day @ $149.50. If it will go above and hold we can see $153.34
LLong
by andrew.berg
1
NOW get long nowStock came from $26.33 to $71.80 for one year. Then agressively sold off from high. Pretty deep pullback which we can measure with fib levels - 61,8% is support - the last chance for bulls to prove that it is not reversal. Yeasterday it went through lows but managed to get back and closed on highs. Showed us relative strength vs broad market (SPY, DIA and QQQ showed some breakout failure signals and closed around 1% down) Despite it is below all key moving averages I have thoughts that money can rotate into underperforming stocks as many sectors are extended and markets are nervous so it is difficult to buy them. Trade Plan: Enter: now @ $47.82 or wait for additional confirmation brak up through consolidation resistance @ $49 Stop: below low of the day where sellers failed to hold below $46 then we have support from $44 to $45 Target: $53 swing high where 200 MA lies then we have $55
NYSE:NOWLong
by andrew.berg