Your Almost Daily Bit of Wall Street Wit & Wisdom

fires

h/t mexiconewsdaily.com

“Si tomas para olvidar, pague antes de tomar.”
— Sign behind the Miramar bar in San Felipe, Mexico

Translation: If you drink to forget, pay before you drink.

This week, with Santa Ana’s ill winds set to whip up infernal fires, here’s to the courageous firemen in Baja and throughout California.

Stay sharp and stay safe.

Best regards,

Steve

Gold at the Apex

Gold price chart

Chart by Steven Sarnoff h/t stockcharts.com

As you can see on our daily candlestick chart, gold shares have been consolidating for three months.

They’ve reached the apex of a large pattern that implies the likelihood, not the certainty, of a continuation higher.

The negative influence of a short-term downtrend came into play today.  The positive influence of a longer-term uptrend awaits just below.

Something’s gonna give.

We’ll see how it breaks out.

A weaker US dollar and the probability of the pattern have us thinking the Midas metal will shine.

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Best regards,

Steve

A Point About The Head and Shoulders Pattern

WPM chart

Chart by Steven Sarnoff h/t stockcharts.com

The Head and Shoulders is a well-known price pattern in markets.  Casual observers and amateur traders frequently misinterpret the pattern.  You can see how it gets its name on our chart of Wheaton Precious Metals above.

The point professional chartists understand is that it is not a pattern until the neckline support is broken.  Until then, it is only a potential Head and Shoulders.

Price projections are made from the top of the head to the neckline.  Some would call for WPM to fall to support in the low-$20s.  It may do that, if the neckline is broken.

Broken support often represents new resistance (supply).  Also, smart traders look to take advantage of false signals.  False signals are powerful indicators, but that is a topic for another article.

Support (demand) from the neckline and three consecutive positive red candles tell me WPM may be ready to take off higher and challenge its summer highs.

I see support at $25-$26.  Resistance is at $26.83-$28.50 and $30-$31.

Until proven otherwise by price action, and with the US dollar weakening, call me a Silver Bull.

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Be careful and measured in your trading.

Good luck and best regards,

Steve

 

Your Almost Daily Bit of Wall Street Wit & Wisdom

The Game Changers

The Game Changers h/t Sundance Film Festival

“Buy the strongest, sell the weakest.”
— Larry Pesavento

Note when the market is strong and an individual stock is weak (bearish for those shares) and when the market is weak and an individual stock is strong (bullish for those shares).

The character of the behavior of market price movement reveals valuable information for traders.

Netflix shares are a good example of this.  Even though shares are weak, do yourself a favor and watch The Game Changers, now on Netflix.

Subscribe to Options Hotline today to vie for fun and profit.

Best regards,

Steve

 

Mythbusters

Mythbusters

Mythbusters h/t The Discovery Channel

This past week, an article in Vanity Fair went viral.  It claimed that some futures traders made billions of dollars using inside information about Trump’s chaotic tweets.

One paragraph in particular caught my eye:

“There is no way for another trader, let alone an outsider such as me, to know who is making these trades. But regulators know or can find out. One longtime CME trader who has been watching with disgust says he’s never seen anything quite like these trades, not at least since al-Qaida cashed in before initiating the September 11 attacks. ‘There is definite hanky-panky going on, to the world’s financial markets’ detriment,’ he says. ‘This is abysmal.'”

First,  Business Insider points out there is much in the Vanity Fair article’s claim that is simply false and reveals how desperate people are for the news they want to hear.

Second, seeing a trader perpetuate the myth of terrorists profiting from the 9/11 attacks gives me pause.  You see, I’m in the 9/11 Commission Report’s “Pre-September 11, 2001 Trading Review,” because so much of the options activity in American Airlines puts at that time was based on my Options Hotline recommendation from Sunday, September 9, 2001. “In every instance where we noticed unusual trading before the attack, we were able to determine, either through speaking directly with those responsible for the trading, or by reviewing trading records, that the trading was consistent with a legitimate trading strategy.

Terrorists aren’t that smart, and Trumpians, well….it seems a mythbuster’s work is never done.

Finally, as with all news these days, think critically about what you hear.

Consider the source.

And find out for yourself.

Enjoy your weekend!

Best regards,

Steve

Your Almost Daily Bit of Wall Street Wit & Wisdom

empty restaurant

Empty restaurant h/t earlytorise.com

“Open interest is the number of players coming into the room and if they’re not coming in, it means the restaurant is out of food.”
— Larry Pesavento

Open interest is the total number of futures contracts that remain unsettled at the end of each trading day.  Changes in open interest, used in conjunction with price and volume, can provide valuable information to traders.

Currently, we’re seeing a rising stock market with falling volume and open interest.  This is akin to people leaving a restaurant because they’re out of food.

This information doesn’t guarantee stock prices will fall from here.  But it is not a bullish sign, and advises you to exercise caution.

A key reason we are able to successfully apply ancient Japanese charting techniques in today’s markets is that the information available today is what was available then: price, volume, and open interest.

Subscribe to Options Hotline today to vie for fun and profit.

Enjoy your weekend!

Best regards,

Steve

Your Almost Daily Bit of Wall Street Wit & Wisdom

Actors Shailene Woodley and Theo James in Divergent, based on the novel by Veronica Roth. h/t Jaap Buitendijk/Summit Entertainment

“Divergence is the most important aspect of oscillator analysis.”
— John Murphy

When price moves to a new low and technical indicators do not, you have a positive divergence.

When price moves to a new high and technical indicators do not, you have a negative divergence.

The development of a positive technical divergence tells us price may not be as weak as it appears.

The development of a negative technical divergence tells us price may not be as healthy as it appears.

Oscillator analysis and divergence provide valuable information for traders.

We combine the best of western technical analysis with our expertise in Japanese charting techniques to help you make great options gains from small stock moves.

Subscribe to Options Hotline today to vie for fun and profit.

Best regards,

Steve