Today's "impressive" market rally is entirely based on these two expectations:
(1) A dovish Fed statement out tomorrow afternoon signaling lower interest rates, and,
(2) The increasing likelihood of trade agreement between the US and China.
How can this end well? The bullish news is now priced in, opening the door for a "buy the rumor, sell the news" event. On the other hand the Fed could disappoint tomorrow, and/or worse yet, we are getting played by a shrewd adversary, lifting expectations for a trade deal and then pulling back at the last minute in an attempt get an even better deal.
What happens then? "Then," is the first week of July which was supposed to be one of those throw away weeks with a major market holiday in the middle of it, perfect for taking a few days off. Really?
Once again I will be taking Blue Line Trading with me on vacation (July 1-5).
]]>A respite from system trading this weekend and a return to the the bigger picture and the forces underlying the daily price movements. The first five months of 2019 carried the market up in a robust rally from the December lows. May was either a speed bump or the beginning of the traditional summer slump. We should have a pretty good idea by the end of this month as two upcoming financial events will affect the rest of the summer and maybe the rest of the year. The article link below sets out in graphic detail the range of outcomes from the two key events: The FOMC meeting mid-week and the G-20 summit June 28-29:
The S&P Could Drop 250 Points Next Week If Two Things Happen
First up is next week's FOMC meeting where they either cut, or promise to cut, or it will the be market that cuts and runs. If they do as expected (confirm rate cuts if not now, by the end of the year), probably nothing happens, or maybe a few days of a rally,
The following week is the G-20 summits in Osaka Japan and that has the makings of being the biggie. Either the U.S. makes a trade deal with China (very bullish) or they don't (very bearish). Worst case, Xi Jinping, President of China, doesn't even show up. Timber.
This is a weekly chart of the Nasdaq 100 that suggested a top of some kind in early May, followed by a new trend lower, followed by a counter-trend rally into last week. The news of the next two weeks, coupled with the look of this chart, may set the market's path for the rest of the summer. Note that the index closed near its lows of the week. Stay tuned.
Blue Line Standard
Blue Line Premium
Blue Line Pro
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It has taken just two down days in a row to generate an Intermediate Term Sell Signal in the Nasdaq 100 (QQQ). The chart below illustrates in graphic detail the pattern-recognition set-up: A new intermediate term trend (down), started on May 1st, that has turned back down after a 61.8% Fibonacci retracement.
Note: There are three additional Sell Signals listed below the chart.
Sell Signal: QQQ (currently around 182.30)
Buy to Open: QQQ July 19th $182 Put (currently 4.30-4.40)
All July 19th expirations:
Sell Signal: LVS
Buy to Open: July $57.50 Put (around 3.10)
Sell Signal: MU
Buy to Open: July $33 Put (around 2.20)
Sell Signal: NVDA
Buy to Open: July $145 (around 6.70)
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The vigorous market rally of the past week appears to be running out of steam. A day or two lower and we will start seeing some intermediate term Sells as the downtrend that started in May takes back over. For now, their is nothing to do. Note below how well the past two trades, DIS and AXP have done is such a short period of time. If you haven't taken profits yet, do so at least after the first down day.
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For every member that emails in a question there are probably 10 others that have the same question but haven't asked. The FAQs below should be helpful for everyone.
FAQ: Some options go up 35-40% so fast that by the time I can sell them they've already fallen back down. How do I get out where I want to without having to watch my options all day?
A: Once you have purchased the option in your account, take that the purchase price and multiply it by 1.35 (+35%) or 1.40 (+40%), or whatever your initial profit-taking target is, then place a GTC sell order (good-until-canceled) at that price. When the option trades there, your option will be immediately sold without any further input. Try to leave some on as your mother ticket. if you buy 4 contracts, leave 1 on for further gains, 8 contracts leave 2 on, 12 contracts, leave 3 on, etc. Keep tabs on those remaining contracts daily, with a mental stop at break-even. Once they reach triple digits move that mental stop way, way up.
FAQ: What should I do if I can't buy the option at the price in the trade alert?
A: Buy it anyway. The price in the alert is simply the price at which the option is trading as the alert gets created. I also have been known to inadvertently put down the wrong price. It is the strike and expiration described in the alert that matters, not the "around price" in parenthesis.
FAQ: Is it still advised to "take all trades?"
A: This leads us into the subject matter of the next question, but let's address it here first. It is not necessary to take every trade. Every trade that goes out has the same probability of success and any other. You can take them all, or any subset, but certainly not less than 3, preferably not less than 5.
FAQ: Doesn't taking quick profits get you out of your trades too soon, sometimes leaving few if any positions open? Even though the option tables show a lot of trades, most all of them have hit their targets.
A: There are new trades coming every week and I really am preferring quality over quantity. Right now, counting all of the June and July expiration trades, every one has reached one target or the other. If you closed out your position completely on each one you have no open positions going into Monday. Two solutions:
(1) Always leave some options open after initial profit-taking, holding for further gains. Use a break-even (on initial entry) stop and move that stop up as the option goes up.
(2) Treat "Repeat" signals as entirely new stand-alone signals, with a full monetary allocation that you would accord any new signal. The chart below is of a new addition to the PRO basket, Micron Technology (MU). It had 3 sells all within the month of May, about two weeks apart. The first two signals would have been big winners. Depending on the option expiration (we were not trading MU at the time) these signals could have overlapped. What to do? If you have extra cash to put to work take the repeat signals as new signals, or if the original option is on the verge of expiring, the new signal is an opportunity to rollover the position into the next expiration.
(3) There are two other Blue Line Services that generate more and different trades, the Premium and PRO services. If the Standard service is not active enough, try one of these more active services. The higher subscription fees for those two services is a drop in the bucket compared to what you could be making.
Look at the column labeled, "Best Return." It's unrealistic to assume you are going to get out at top tick...but how about 1/2 of top tick? The potential is there on every one of these trades and no rule-based strategy is going to make the most of what is there. The emails I am getting from PRO members support this observation. A little creatively could beat the pants of what the tables are showing.
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On hour before Thursday's close AXP ad DIS have both exceeded +35% and in just two days. There are advantages to taking these quick gains:
(1) Take a lot off and you guarantee a winning trade while leaving some on for further gains;
(2) Taking less off reduces overall risk on the trade while leaving a larger position for further gains;
(3) Taking anything off at all, large or small, frees up capital for the next trade(s).
The above guidelines are relatively loose because everyone has their own trading style. You determine the exact meaning of "take a lot off" and "take less off" to suit your style or the size of your account. As a very general rule taking 75% of a position off is a good compromise. As for remaining positions, the "lottery tickets," you can ride them through to expiration or take them off gradually as they rise. In any case, best to exit if they fall back to break-even basis the original entry price.
PS: Taking +35% off leaves very few trades at the current time, but you should have some lottery tickets still active. It's better to be selective on the trades that go out than to send out trades just for the sake of sending out trades. Quality over quantity. If you need more action, try out the PRO or Premium Services, both of which doing well. Email us for an upgrade: service@bluelinetradingsystem.com.
The first chart (Nasdaq) is a broader perspective of trading over the past few weeks, a dominant downtrend with spurts of counter-trend rallies into resistance, which is quickly approaching. The second and third charts are of the newest two intermediate positions in the Standard Service portfolio, both charts providing visual logic as to why those stocks went Long on Tuesday. We are still in a news-driven market which is temporarily back into "everything is bullish" mode, whether it is or not. Finally, now the first chart is giving one message, the second and third charts another. They cannot all be right.
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The market may have put in a short term low on Monday which opens the door for a week or two of rally before turning back down, enough to pick up 35-50% on these trades, more if the rally extends. There are six and one-half weeks left until July expiration, less the first week of July which is probably a throw-away week due to July 4th occurring on a Thursday. Expect to take that entire week off.
Buy Signal: AXP (American Express)
Option: Buy to Open July $115 call (around 4.50)
Buy Signal: DIS (Disney)
Option: Buy to Open July $135 call (around 3.30)
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Remember that current updates for all three services, Standard, Premium and PRO, can be accessed in real time under the password protected tab,"Subscriber Alerts," on the website. Each leave of service has their own entry portal. We are working hard to improve email delivery times, but they still are not as fast as the website posted updates.
We have been following this chart of the Nasdaq 100 ever since it fell below its bottom trend line of its trend regression channel on May 7th. That turned the intermediate term trend to down and it has continued lower, with only one very short-term counter trend for 3 days between May 14-16. The news keeps getting worse (tariffs, trade wars, impeachment, and of course, Golden retriever named Mueller is mayor of Southern California town), while the intermediate term trend is down and the trading system is generating a slew of new sell signals. The path of least resistance.....
GBTC hit $12.58 on Thursday before backing off to about $11 at Friday's close. The bottom of the trend channel remains about $8.75 and our stop is slightly below there at $8.50
The tables below are listed in order of performance, with the new PRO service just knocking it out of the park. From a PRO member email received on Friday:
"This is week two and I have closed out over $10,000 in profits."
...and that was before the Dow dropped 350 points on the day. We will still offer 50% off of the first month of PRO for anyone who wishes to upgrade. Email us your upgrade request and we'll take care of the adjustments to your account:
service@bluelinetradingsystem.com.
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New SELL Signal: SQ
Buy to Open: June 21st $63 Put (currently trading at 2.70)
]]>The long weekend saw bitcoin spike up by about 10% and resulted in a gap-up in GBTC this morning. We have been buying GBTC since it broke above $5 earlier in the year, and pounding the table to buy above $6.00. With it trading north of $11.50 today, let's move our stop up from $6.50 to $8.50, locking in a nice gain. With this kind of price action over the past few months, ($3.60 -$11.60) any price decline significantly below the May 17th low at $8.75 would likely coincide with the breaking of the upward sloping trend regression channel. I wouldn't want to chance that the channel fails to hold. We could always get back in.
For now, hold GBTC with a stop at $8.50.
]]>Just in case anyone is not aware, we are running a Memorial Day Weekend promotion for the new Blue Line PRO trading service. The same offer applies to all of our current subscribers as well. The offer expires Monday at midnight (PDT):
(1) Monthly rate is reduced from $249/mo to $199/mo.
(2) 50% off of first month of service.
service@bluelinetradingsystem.com
Any trading related questions should be emailed directly to Allan:
apharris@mac.com
And last, but certainly not least, the latest YouTube videos that provide real time illustrations of PRO:
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On 3-Day weekends we typically do not post a Weekend Update, but this weekend I want to at least post the trading tables, including the table from the new PRO service.
Enjoy the weekend, everyone. I'll be back upon Tuesday - A
BLUE LINE PRO TRADING SERVICE
BLUE LINE PREMIUM TRADING SERVICE
BLUE LINE STANDARD TRADING SERVICE
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Send us an email if you want to upgrade: service@bluelinetradingsystem.com
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BLUE LINE PRO: Last Week's Sell Signals
Today's decline and the generation of only one new hourly signal (MMM already +35%) is prompting me to post the sell signals that were generated last week, before we started trading hourly price bars in this new service. It was my decision not to jump into any existing signals on Monday (nor any of the repeat signals on Monday), which as you can see in the charts below, was a really bad decision. The charts also illustrate how powerful the short term signals can be.
NVDA
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Sell Signal Confirmed: CNC (Healthcare Insurance)
Option: July (19th) $55 Put - Currently at $3.00-3.20
Target: $6.00 before expiration
+35% Level: $4.20
Very Aggressive Traders: July $50 Put @ $1.20
This is an Intermediate Term Sell Signal for Blue Line Standard subscribers, however It is good for all levels of service, especially if you are looking to diversify into longer term positions.
]]>The Long TWTR Jun $37 call is one of our three trades from last week. It is creeping close to the minimum 35% profit-taking exit, so let's keep an eye on it in the days ahead. Based upon an entry at 2.35, the call is currently at 2.75, +30%. It will take a rise above 3.17 to cross the +35% threshold. Two of the last three trades (MSFT and TWLO) have exceeded +35% by a wide margin, which supports the strategy of keeping some on the table for further gains. Where to take those "further gains" is pretty much a crap shoot (harsh, but true). Note on the video below how we use the same trade management philosophy on even the shortest of time frames in the new PRO service.
The last three trades in the intermediate term (Standard Service) portfolio:
Below is a YouTube video highlighting the new hourly-based service, Blue Line PRO.
]]>This morning the financial news was all abuzz about a $10 price target placed on TSLA (trading at $200) from an analyst at Morgan Stanley, "one the most rational of analysts that are out there."
Tesla shares could drop to $10 in a worst-case scenario, Morgan Stanley says
Read a little further in the article, "However, Jonas kept his main price target for the stock at $230 and also has a bull-case forecast of $391.
So this analyst has a range on TSLA of between $10 - $391. And why "$391" - where did that extra $1 come from when $390 makes the point? Maybe that's why he is considered the most rational analyst, since a target of $390 would clearly be irrational.
This most hated stock on Wall Street got bought in my custodial accounts today, added to what I have been accumulating for the past couple of years. Why now? Because of this:
Tesla’s $218M acquisition of ultracapacitor firm opens doors to energy breakthroughs
and this:
Maxwell Could Be Worth Billions to Tesla
In summary, Tesla has taken its global lead in electric battery technologies and ratcheted it up 10X. There is no auto manufacturer even close to Tesla in this number one most important component of electric transportation. But "the most rational of analysts out there," apparently doesn't think this battery technology is of any value, or, is at best worth $10 a share.
There isn't anything bullish about this YTD chart, but check out the 5 minute directly below as it reflects the stock price immediately after the $10 news came out:
TSLA is having a real hard time staying below $200 no matter how bad the news. Against all of my trend following instincts, I am adding to my long term TSLA holdings here. Call me the most "irrational" of analysts out there.
]]>I am adding a third tier trading service to the mix, one designed for a little more action based upon hourly price bars. It should average about 1 trade per day, although some days there will be none, other days more as per system criteria. The same general parameters vis a vis profit taking can effectively be applied, although this service is designed for the more independent option trader who is willing to be flexible on exits. In other words, there will be a lot more room for decisions on the run as an alternative to the 35/75 exit strategy. I'm committing to be hands-on with this service, i.e., available (via email) during the day for any questions that may arise in trading these shorter-term signals. After a real time track record of a month or so, I suspect a lot of subscribers will opt into this new system. A full description is below this weekend's trading tables.
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The market in May has so far been mostly down, although we had two excellent Long trades on Wednesday with MSFT and TWLO. The uptrend from the December 27th lows has broken initial trend regression channels illustrated on the QQQ and SPY charts below. Next week is shaping up as an important week in determining whether the run-up is over, or this past week has been just a buying opportunity on the way to new highs.
One down day does not a buying opportunity make, especially when price has not touched even the 38.2% retracement level. Even during its massive run-up on 2017, both bitcoin and GBTC had some steep retracements. Keep stops at 6.50
INTERMEDIATE TERM - DAILY PRICE BARS
SHORT-TERM - 180 MINUTE PRICE BARS
Enough subscribers have shown an interest and in some cases and eagerness for more active trading, that I have decided it is worth the extra effort to provide such a service. The signals I have been getting on hourly (60 minute) price bars have been stellar, many preceding existing signals by enough margin to make a big difference in trade-to-trade results. It is obviously more labor intensive for me to monitor hourly price charts, but the ends justify the means.
More Trades: Less Talk
(1) Shorter-term time horizons (3-7 days) based upon signals generated from hourly price bars;
(2) Personal support during trading hours (via email) for any trade related questions;
(3) The use of weekly option expirations whenever there are at least 10 trading days to expiration. Weekly options provide powerful leverage without being held back by excessive time premium;
(4) All trade recommendations will be via email (starting out through AllanTrends Fastmail server) and soon on a new app designed for instantaneous alerts;
(5) All alerts will be simple and to the point:
Buy Signal: TWLO
Option: May 31st $130 call (@ 8.50 or less)
This is a stand-alone trading service i.e., it is independent from the current Standard and Premium level services. The cost is $249/mo, which or equivalent to about $10-15 per trades and includies timely trade support as needed.
Most of the daily as well as the 180 minute big winners have been preceded by hourly signals in the same direction. That means at least a 2-hour head start in meaningful price moves and at times an overnight head start. Some stocks are working better than others in this shorter times frame, so I've condensed the basket of trading stocks to those consistently performing well based upon the hourly signals. Adding that to weekly option expirations produces a compelling new option trading system for active traders.
AAPL AMD BABA BIDU FB FCX IBM IWM MMM MSFT MU NFLX
NVDA QQQ ROKU SPY SQ TLT TSLA TWLO TWTR VXX X
These stocks average about 1 trade per month on their hourly trading charts, some months will have 2-3 trading signals per stock, some months none. With 25 stocks, there will be enough signals so you don't have to take them all and you can easily scalp quick profits while waiting for new trades. Note also the diversification into different sectors. This is a robust, "as much action as you want," trading system.
(1) If you are a current subscriber to either the Standard or Premium service, send me an email (apharris@mac.com) and I will sign you up under your current account info. This service is separate and apart from the current Standard and Premium Services.
(2) If you are not a current subscriber to either the Standard or Premium Service, go to this link and sign up: Blue Line Pro
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A quick update on yesterday's three buy signals:
MSFT Jun $125 calls = +54%
TWLO Jun $135 calls = +85%
TWTR Jun $37 calls = +15%
Advice: Take your 35%+ profits on the first two, leaving some of the table (if you can) for futher gains. For TWTR, hold for +35%.
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Option: Jun $125 calls
TWLO
Option: Jun $135 calls
TWTR
Option: Jun $37 Calls
Everything that I have written over the past week regarding the trade war driven news headlines leading the market all over the map still holds. It is a truly nerve wracking environment in which to take new positions, either Long or Short. Nonetheless, as we have so often made the point: A signal is a signal.
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The news-driven volatility is affecting our trading system in two problematic ways: First, trends are being reversed before any identifiable price movement can follow-through with enough momentum to trigger low risk high reward trading signals. We can't enter trends with no follow through, because without follow through there is no trend. Secondly, existing trades are getting whipsawed before reaching minimal profit taking returns. We have seen this before, almost always the result of headlines that spook and panic institutional trading. The good news is that these periods eventually give way to more tradable market environments in which our pattern trading set-ups become more reliable. My best advice: Hang in there until conditions warrant taking on new trades.
GBTC touched $11.00 today and has backed off to $10 in the past two hours. The next turn back up should generate a new add-on opportunity, probably from under $10 in the next few days. It shouldn't drop below $7.00, so move the stop up to $6.50.
QQQ - Still looks lower, even if just a retracement of YTD rally
]]>The bearish backdrop that has been hanging all over this market since the Christmas lows has finally asserted itself and with a vengeance. It won't take many more days like this (DOW down 700 points as I write this) for a slew of intermediate term Sell Signals to flood the trading system. As we have learned painfully in the past, jumping on the bandwagon prematurely is not worth the risk; let the patterns unfold as they are supposed to for lower-risk high reward trades. A perfect example is GBTC, where the speculative entry was under $5, while the first system Buy was at $6.50 just two weeks ago. Today GBTC has traded as high as $10.45. That's about a 65% gain in 10 trading days and GBTC isn't even an option.
In the shorter-term oriented Premium service we bought FXI puts last week, while buying QQQ puts and VXX calls today. Those are shorter term trades, but are also often a precursor for longer term trends. We may be on the cusp of one right now, with dozens of opportunistic intermediate term trades directly ahead as a new downtrend unfolds.
It's a marathon, not a sprint. Please review the QQQ chart from the Weekend Update to see just how far down this market could go and how it's still very early in the descent. I'll be back in Arizona tomorrow (Tuesday) refreshed and refueled for summer laps around the financial markets.
]]>I'll be back in Arizona Tuesday, but will be able to access my charts in the air on Monday should there be any new trading signals.
The biggest issue arising from the week's equity losses in global markets is whether the loss is a straight forward reaction to the failure to reach a trade accord with China, or is this price action the tip of a reversal in the intermediate term trend and was just hiding under the news headlines?
The past week has done substantial damage to the charts, especially the Nasdaq:
One more thing: The wall-to-wall coverage of the UBER IPO is reminiscent of the dot.com boom and then bust of 1999. If UBER fails, as did LYFT, the market could soon forget about trade talks.
While we were trading GBTC in 2017 it went from (split-adjusted) $1.25 to $38.71. We did very well trading in and out four times during the year, but may as well have simply bought and hold in light of the explosion in the price of bitcoin. Here is a link to the December 2, 2017 post summarizing the trading: GBTC Trading
Although it is almost inconceivable that 2019 could provide a repeat performance in bitcoin/GBTC, so long as the trend is up, as it was throughout 2017, we should be Long and my job this year is to be a little more adament about GBTC than I was in 2017. I'm keeping an eye on those old charts, as well as the new ones, with the intent to not miss that "inconceivable," move up. An exponential rise mirroring that of 2017 would see GBTC run-up from its current $8.50 to $250, about a 30X increase. So just in case, own some GBTC and keep the price entry/exits timing to a bare minimum. I've been pumping it from March 20th @ $4.99, and will continue to do so, subject only to a mostly arbitrary stop at $6.00 (up from the initial stop at $3.75)
Intermediate Term
Short-Term
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China trade talks continue to dominate the market, only now to the downside. Equites are one headline or tweet away from a 1-2% move in either direction. sometimes both directions in the same session. That's no way to trade options, or anything for that matter.
By this time next week, probably sooner, the news will be less of a factor and opportunities will arise without the risk associated with news-driven mini-panics, up or down. In any case, no new system trades have been triggered.
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Trade signals that are generated concurrently with news-events are naturally suspect. But because they are suspect doesn't necessarily mean they won't work, as the rules for triggering are based upon price and trend. It's an "If the shoe fits..." kind of analysis. With that disclaimer in place we have a new sell signal today:
Sell Signal: NVS
Option: Jun $80 Put ($1.40)
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The market opened pretty much on its low of the day and prices have been rising slowly throughout the session. The talking heads on the financial shows are taking comfort in the comeback. It's hard to disagree...except for the Wall Street adage that, "If everyone knows it...it's probably is wrong.
As a reminder, I'm taking a few personal days this week, but any new signals will be posted as usual.
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As close as I am to the market day-to-day, I was taken by surprise when spotting this headline Friday:
Dow Suffers Longest Weekly Losing Streak Of Year As Fed Loses Control Of Short-End
My sense was that the market was going up every day and with the exception of earnings' spikes on individual stocks, it was doing so in a relatively orderly manner. My big picture observation is that while I thought the market was rising, according to the numbers it was falling. So take this with a grain of salt, or skepticism, or, prescience: Triple Top pattern will yield to massive breakout, or breakdown.
This weekend I want to focus on two "non-stock" stocks that are going their disparate ways, GLD and GBTC. While I understand that many of you already are positioned in these, for those who aren't or would like to add more, this is a good time based upon the charts and analysis below.
First up Gold (GLD): The Short-Term Service bought the Jun $120 puts on Wednesday and true to its "Short-term" moniker, the puts popped up over 65% on the very next day. GLD still looks weak having topped out in mid-February. Another Short-Term Sell may trigger as early as Monday. We are also standing by for an Intermediate Term Sell which could come as early as next week. If the pattern above is compelling enough and you just can't wait, the Jun $120 puts are only a buck ($1.00) which makes counting to 35% easy ($1.35) and to $2.00 even easier. Can GLD fall to $118 before Jun 21st (48 days)?
Next is the Greyscale Bitcoin Trust (GBTC): This is a 2-day chart, where each price bar (candle in this case) represents price range of 2 days. Sometimes there are clearer patterns on the 2-day than daily charts. In this case the pattern is pretty clear on both and directly opposite that of Gold. You would think they would move in tandem, as they are both a form of currency and therefore a hedge against paper money. But not this time as Gold's Intermediate trend is down, while bitcoin's trend is up. In any case, no GBTC option recommendation, because there are no options on the stock, but at $7 and change the leverage is is sufficient enough...GBTC has doubled since its early February lows.
Intermediate Term
Short-Term (Premium Service)
PS: I will be on the road for a few days next week, but will still be at the controls for new signals or special situation opportunities. - Allan
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