NASDAQ 100 (QQQQ) Short

I last posted about the Q's here. I think the rally following the 5-waves down is corrective and is coming to a close. I am shorting the Q's here with a stop above 50.

You can see after the 5th wave completed, a nice rally ensued. This rally, however, has been very choppy, and has formed in 3-waves, which indicates it's a correction in a larger downtrend. I think the 48 level is an ideal spot to short, as it is the 50% fibo level. I like that volume has been downtrending in this up-move, as it indicates that buying pressure has been decreasing as the ETF rallied.


EUR/USD Trade (#7) Short

I am going to take a short trade @ 1.5720, stop @ 1.5783. My target is 1.5550 and below.

The breakdown of the ending diagonal unfolded nicely, forming a 464 pip, 5-wave down move. This is a significant move, and I think it is the start of a downtrend. Retail traders have finally switched to net long, so sentiment is confirming this new trend as well.

I believe the correction to this downmove is still ongoing. It looks like it'll form as an irregular flat, which should bring the price above the Wave-a top. MACD and RSI divergence indicate a temporary bottom, as does the Monthly pivot point which lies at 1.5556. Also, price often hits the Weekly pivot point (1.5721) before resuming the main trend.

I am looking to short around 1.5720 due to overlapping resistance in this area:
  • 1.5730: 1.382*Wave-a
  • 1.5722: 38.2% fibo
  • 1.5721: Weekly pivot point
  • 1.5706: Wave4 high

My stop will be above the 50% fibo.

Closing out ABX

I last posted about ABX here. Since then, it has nearly reached my $37.50 target, so I am closing out my short position. I do believe gold may drop a bit more, but I'm happy taking my profits here.


Gold stocks update

I last posted about the possibility of shorting some gold stocks (KGC, ABX) here. Gold has had a nice swoon over the past few days. I am looking to close my short position on ABX as it nears the $37.50 mark.

The above chart shows the longer term perspective for ABX. For about a year, ABX rallied in 5-waves, and now it is correcting the move in 3-waves. My downside target is $37.50 because this is the 61.8% retracement level, and the Wave-iv of Wave3 low.


EUR/USD Trade (#6) Short Update

Update on 4/24/08, 9:59pm CDT: I have canceled my short order. I am just observing for now, but I expect to put another short order in the 1.5800-5850 zone.

Price broke through the diagonal triangle very nicely. Too bad I didn't take advantage of that run. Jaime Saettele said it best in his EUR/USD post today here: "...markets typically do not allow many people in at major turns. In other words, many will wait for a larger correction that never happens." I suppose my best strategy yesterday would have been to short on the trendline break; lesson learned. Either way, I don't think it's smart to chase this move. I can see 5-waves down on the 30m chart, so I am going to wait for a correction to the trendline bottom before attempting another short entry.

I think it's important to note that retail traders finally flipped to net long. Now 54% of traders are long. Man, they are getting in at such a cheap price now!


EUR/USD Trade (#6) Short (It's looking pretty!)

I am looking to short from 1.5900-->1.5965, stop @ 1.6025. My initial target is 1.5350.

The daily chart sets up the whole bearish theme (I last posted about the longer-term picture for EUR/USD here). Wave3 appears to have completed at 1.6018. Price has hugged the upper trendline in a typical throwover, forming a fifth-wave ending diagonal. Coupled with strong RSI and MACD divergence, the outlook for the next few weeks/months is definately bearish.

The 8hr chart shows the count from the Wave-iv of Wave3 low from the daily chart above. We are in the final wave of this bull run; the ending diagonal is clear, price has obeyed the trendlines, and price has formed marginal all-time highs on RSI and MACD divergence. Diagonal triangles portend sharp countertrend moves.

The 1hr chart shows what I have been waiting for to signal the end of the uptrend: from the 1.6018 peak, there is now a clear 5-wave decline. Since Wave2 often retraces a significant portion of Wave1, I am looking to short in the 61.8%-->78.6% fibo range. Very strong resistance lies around 1.5970: there is 1) the 78.6% fibo at 1.5777; 2) the Weekly R1 pivot point at 1.5971; and 3) the Monthly R1 pivot point at 1.5967. Thus my entry is below this resistance, and my stop is above what I believe to be a multi-week of multi-month high.

I may be asking for a bit too much out of this Wave2 retracement. If I see shallower retracing tomorrow, I may adjust my entry lower.

The cherry on top of the bearish theme is that retail traders went from 31% long to 44% long in just one day. The end is near!


BIDU looks toppy

BIDU (Baidu.com) has been a pretty sweet long play over the past month, rising nearly 75% from it's $200 low. I think it may be near a top that could lead to a new trend low, or, at best case, a decline to $280.

On the daily chart above, it looks like the drop from $429 to $237 was the first ABC down leg. Since then, an irregular flat correction unfolded. Wave-b dropped below the previous trend low, and occured in 3-waves; Wave-c rose above the Wave-a high and has occured in 5-waves.

The 5-wave pattern may make some people think that a new bullish trend has begun. However, when looked at from the perspective of the larger formation, I think that the notion of new trend lows (below $200) is not far-fetched, as this would complete a larger ABC correction from $429.

My plan is to go short around here with an initial target at $280, and a longer term target at $160, the low back in August, 2007. I might unload a few of my Puts at $280, and ride the rest.


CNEH Short Term Top Possible

I last posted about CNEH here. I think it may have put in a short term top at $3.24, and we may see some retracement to as low as 2.30 before another rally commences.

On the daily chart, I see a clear 5-wave up pattern. 5-waves up is followed by 3-waves down, so I am expecting a correction from here. There is always the possibility that an extended Wave-iii is forming, but the declining volume and lack of strength thru 3.10-3.20 tells me that this scenario is unlikely. Since Wave-v was shorter than Wave-i, a correction to the Wave-ii low is possible, around 2.20-2.30.

The 1-hr chart shows the waves more clearly. Wave5 was certainly weak and choppy, and formed MACD-divergence. The 50% retracement level coincides with the Wave-ii low, so I am looking at this areas for potential downside targets. I will consider buying some more if the decline is orderly and choppy, as I believe the fundamentals of this company are very strong.

EUR/USD Trade (#5) Long Update

Update on 4/17/08, 9:40am CDT: I was stopped out for +94 pips. I will sit on the sidelines for now and wait for a clearer setup.


Gold stocks could still drop

I last talked about KGC and gold stocks here. Since then, my stop on my KGC short position has been triggered. I still think Gold has another down-leg in store before the uptrend continues. However, I think ABX (Barrick Gold) is a better shorting candidate.

KGC's pattern isn't as clear as ABX's (below). I am still not ruling out the possiblity of a new trend low, however.

Similar to KGC, ABX formed an ending diagonal and then dropped sharply. It is now correcting this drop is a shallow flag pattern. If price can stay contained within the channel, I will look to short this stock.

EUR/USD Trade (#5) Long Update

I am moving my stop to 1.5870 to lock in +94 pips.

You can see that price broke out of the ascending triangle pretty neatly. It looks like Waveiii is underway, and since a Waveiv correction is not allowed to retrace below the Wavei high, I am moving my stop to just under Wavei.


EUR/USD Trade (#5) Long Update

My long entry was triggered today at 1.5776. I have moved my stop to 1.5745.


EUR/USD Trade (#5) Long

I am taking a long trade in the 1.5750-1.5780 range, with a stop below 1.5730 or so. My target is 1.5900 and above.

The correction from the March 16th high is forming as a picture perfect ascending triangle. Price is converging along the trendlines neatly, and WaveE has just finished. I want to go long in anticipation of a break throug the triangle top.

After finishing Wave-e with yesterday's gap down, price rallied 200 pips in a clear 5-wave advance. I believe price has yet to finish correcting this upmove, as first waves in a bullish sequence are usually retraced significantly.

I see the following support levels in the 1.5750-1.5780 range:

  • 1.5788: Weekly pivot point
  • 1.5777: 50% fib level
  • 1.5771: Wave-iv low
  • 1.5762: Monthly M3 pivot point
  • 1.5755: WaveC = WaveA
  • 1.5752: 61.8% fib level
  • 1.5751: Wave-iv of iv low

With this much support, I doubt the price will head much lower. My stop will be below this level. A nice confirmation for going long is the fact that only 35% of retail traders are now long.


EUR/USD Short Trade (#4) Update

Update on 4/10/08, 8:36am CDT: I was stopped out for -40 pips. We'll have to see how the EUR/USD unfolds from here, because the count is ambiguous at the moment.


EUR/USD Short Trade (#4)

I am taking a short trade @ 1.5740, stop @ 1.5780. My target will initially be around 1.5600.

The entire decline from 1.5901 has been corrective, as there are no distinct 5-wave moves. I think, however, that there is still some downside potential, as MACD divergence formed on the 2-hour chart.

I am labeling the two declines from 1.5798 as impulse waves (Wave1 and Wave-i) because they both unfolded in 5-waves. Wave-ii appears to be forming now, and my plan is to short around the 61.8% fib level, which is also where WaveC would equal WaveA. My stop is above Wave2.


EUR/USD Short Trade (#3) Update

Update at 4/7/08, 8:57pm CDT: I was just stopped out for a +20 pip profit. I last posted about this trade here.

This recent surge through 1.5772 was unexpected, and has muddled the wave count. I will sit on the sidelines until a clearer setup arises.


EUR/USD Short Trade (#3) Update

Update at 9:49pm CDT, 4/6/08: I am moving my stop to 1.5745 to lock in +20 pips profit.

Everything appears to be going according to plan thus far. I am moving my stop to above where I believe Waveii has ended. Waveii formed as a triangle, and since triangles often precede the last move in a trend, there is a possiblity that the decline through 1.5680 could be Wave-c, in an abc correction from 1.5772. If this is not the case, and Waveiii is starting, I will again trail my stop to just above 1.5680.


Is Gold done Correcting?

I think gold has yet to decline, and I am liking KGC (Kinross Gold) as a possible short candidate. My plan is to short around $23.80 with a stop @ $24.25. My target is around $17.00.

Following a weak ending diagonal, price has plummeted. It now appears that price is correcting in 3-waves on decreasing volume. This tells me that buyers have yet to materialize in force. My downside target is $17.00 because this is roughly where WaveC would equal WaveA.

On the 1-hr chart, there is a clear 5-wave down pattern, followed by 3-waves up. My plan is to short around the 50% fibo, which is also where Wave-c equals Wave-a. My stop will be just above this level.


EUR/USD Short Trade (#3)

I am making a short entry @ 1.5765, stop @ 1.5795. My initial target is 1.5350.

There is a nice 5-wave decline from 1.5895. It seems that now price is correcting that move with a double-three (3-3-3). WaveC will not be complete until it forms a third wave up, breaking thru the WaveA top.

I am looking at the 1.5765 range as potential resistance for several reasons:
  • 1) the Monthly M3 pivot point resides at 1.5762
  • 2) the 61.8% fibo is at 1.5767;
  • 3) if WaveC = 1.618*WaveA (a common relationship), WaveC would end at 1.5774.

My stop is above the Wave2 high.


EUR/USD Short Trade (#2) Update

I am closing out my short trade for a small profit (+10). I lasted posted about this trade here. My strategy will be to wait for a clearer Wave count.

There is both bullish and bearish evidence, which is why I closed out the trade. I am surely risking missing out on a nice decline, but the decline from the recent 1.5701 high is consolidatory. Should price break below the lower trendline, the pattern could be interpreted as 3-waves up, which is bearish. However, price rally once more and hit the upper trendline, a leading diagonal would be the more accurate interpretation. I hate having to do this, but I am going to go into wait-and-see mode until I see a higher-probability setup.

CNEH Technicals (Update)

I last posted about CNEH here. It has since rallied nicely, and appears to have broken out of the ending diagonal. I think it will retrace for another day or so, and should be supported around the $2.10 range.

This recent run-up is analagous to the rally in late August, 2007. Back then, price increased sharply but then dropped from $1.94 to $1.38 (a 28.8% drop) in 3 days, on decreased volume. Similarly, the past week saw price increase from $1.61 to $2.60 on increasing volume. We have now seen two days of correction on lower volume, so I believe there could be one more corrective day. My downside target is around $2.10, which is the 50% fibo level, as well as where WaveC would equal WaveA on the intraday chart.


EUR/USD Short Trade (#2)

I will take a short trade at 1.5683, stop @ 1.5713. My initial target is 1.5340, but I suspect price could go lower.

On the 1-hr chart, it appears that the move since the 1.5901 high has been corrective. The drop to 1.5340 occured in 7-waves, as did the the rally to 1.5895. These patterns are both indicative of a flat correction. I now suspect a 5-wave decline to at least 1.5340 will follow to finish the 3-3-5 pattern. There was clear MACD and RSI divergence at the top, which is bearish.

The 15-min chart shows a nice 5-wave bearish pattern from 1.5895. My plan is to go short on a correction. There are 3 levels of resistance around 1.5680-85: 1) the 38.2% fibo of 1.5340-->1.5895; 2) the 38.2% fibo of 1.5895-->1.5562; and 3) the Wave4 high. Therefore, I will take a short trade in that range with a stop just above.

SWC (Stillwater Mining) Update

I last posted about SWC here. It topped a day after that post, and has since dropped about 37%. It has nearly reached my $14 target, so I am closing out my short trade on this stock.

It looks like the decline has formed as a leading diagonal with 5 overlapping waves. There could be further downside, but I wouldn't be surprised to see an upward correction at this point. Volume has been somewhat declining as price is forming new trend lows, so I am happy to close my shorts here for a decent profit.