We told you we were building some long positions last Friday.  Those are doing great, but this retracement in volatility may be short lived. 

In the image above, note the VIX inverse head & shoulders pattern.  This pattern was confirmed once down sloping neckline resistance (purple line) was broken.  The pattern measures to 30.

Last week a huge upside move in the VIX followed the neckline break confirmation, but there is still five points of potential upside until this patterns move is complete.  Today’s retracement to neckline resistance turned support at 20 (orange oval) may be the precursor to a completed measured move to 30.

We are keeping in mind that the Head & Shoulders pattern in S&P Futures completed its measured move to 1300, which is far more relevant than the technical pattern in the VIX.  That said, the VIX pattern potential should not be ignored.  We are not adding to anything yet as a result. 

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The measured move (orange oval) based on the Head & Shoulders pattern in the S&P Futures is complete.  Will this provide support for equities?  Possibly.  We are going to build some starter positions in strong names here.  Nothing huge, just 1/8 - 1/4 of intended capital in a few positions.

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Based on the current price of 23.46, the VIX has gained 71.74% since the March 16th 13.66 low.  Furthermore, it has gained 48.95% since the more recent April 26th 15.75 low.

This is quite a move and intuition would lean towards shorting volatility here.  But is that the right play?

According the Inverse Head & Shoulders pattern, it’s not.  The patten indicates a move to 30 (grey rectangle), which indicates 27.88% of upside from the current level. 

Are technical patterns dependable in the VIX? Not always, but they should never be ignored.  S&P Futures completed a head & shoulders pattern measured move with yesterday’s dip to 1300, which detracts from the validity of this VIX pattern a bit.

Bottom Line: We are moderately bullish in equities here, and will be aggressively bullish if the VIX reaches 30-33 range.

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We are seeing a lot of support based opportunities out there.  Add NTAP to the list.  33.25 seems to be a solid support level in the stock, so we see anything in the 33.00-34.00 range as a good risk reward opportunity in NTAP on the bullish side. 

Conservative target 36.  Aggressive target 38.

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With AA trading at 8.50, it is sitting at optimal point of entry for a long stock position or a bullish options strategy.  When you’re this close to a potential support level, it always makes sense to risk some capital.

If you buy the stock, a stop at say 8.20 give it plenty of breathing room below support and 30 cents of risk.  With a realistic short term target of 9.50, you’re risking 30 cents to make a dollar.  That translates to 3.3:1 reward to risk.  Solid. 

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With 30-year Treasury Bond Futures (/ZB) at 146’20 previous high resistance, a solid risk reward opportunity presents itself for a bearish strategy.  We know that /ZB sold off last time it tested these levels, so it makes logical since to assume it has a higher probability of selling off again rather than breaking through.  Of course it could break through and continue to run, but with yields at historical lows and proven previous selling interest at this level it is simply more logical to position bearish until proven wrong.

We have not put any capital to work, but will tomorrow if this resistance level has held. Something along the lines of a bearish 122/123 credit spread in TLT will likely be the route we take, but that is yet to be determined.

We shared our bearish AAPL analysis a little over a month ago which was spot on.  The question is, what’s next?

The image above references the same three up trend lines we noted in our previous article.  We find it interesting that AAPL actually broke the optimal 45 degree up trend, and since doing so is now hugging along the support turned resistance of that line.  This has resulted in a very tight trading range in AAPL this entire week.

One never knows what will happen next, but we suspect continued range bound price action until AAPL runs into the initial up trend support line.  At that point, we may start to see some upside in the stock. 

The play here may be an Iron Condor given the somewhat high levels of volatility premium priced into shares of AAPL.  We intend to explore this strategy, along with other range based options strategies.

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A confirmed bearish descending triangle break has taken place in EUR/USD.  Two consecutive closes below 1.30 support has confirmed this technical pattern.  Given the 4.75 pattern height, the move measures to 1.2525. That said, we would be looking to exit any bearish positioning in the 1.26-1.2625 range. 

Optimal bearish positioning entry? When EUR/USD is as close to a 1.30 support turned resistance retracement as possible.

p.s. - Tweet “@Ticker_Tank presents a logical bearish case for the #Euro. ow.ly/aQLed $FXE” to earn an entry credit for our Ultimate Trader’s iPad giveaway!

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A 60 day chart in NKE reveals a recent consolidation pattern in the stock.  The resistance in this pattern is inconsistent, but the support is very consistent.  There have been five support bounces off approximately 106.25, making for a strong price point of interest.

At the moment the risk reward favors a bullish position. Reason being, NKE is one point away from the 106.25 price point.  Give it a point of breathing room below 106.25 and you risk two.  The upside is 111.25 conservatively, which is four points from the current 107.25 price.  That translates to risk two to make four, a good scenario.

We like the idea of complimenting that “risk two to make four” scenario with an options strategy. The NKE Jun12 105/110 Bull Call Spread looks enticing. If there’s a break below 106.00, we would look to exit for a loss and consider shifting to a bearish strategy.  As long as it remains above 106.00, we would hold looking to exit for a 35-45% return on capital before taking profits.

p.s. - Tweet “This @Ticker_Tank article about #Nike support is good stuff. Check it out. ow.ly/aQChD $NKE” to earn an entry credit for our Ultimate Trader’s iPad giveaway!

It’s been a while since we’ve seen a Head & Shoulders formation as perfect as the one that’s currently on the BRCM 1-year chart.  The height of the pattern is approximately five points with a flat neckline at 34.00.  This translates to a measured move in the 29-30 range if this pattern comes to fruition.

BRCM will need two consecutive closes below neckline support at 34.00 before we get too excited, but it’s certainly shaping up nicely.  Today will make two consecutive closes below 200 day SMA, which may give it fuel to the downside.  Today’s break below 34.00 looked promising for bearish positioning, but it is rallying into the close which diminishes the validity of the neckline break. 

We’re keeping a close eye on BRCM and fully intend to send Premier Members a trade alert on the stock if we get the confirmation mentioned above. 

p.s. - link to this article on twitter to receive an entry credit for our Ultimate Trader’s iPad giveaway!

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Crude Oil Futures (/CL) are testing 200 day simple moving average (SMA) from a support perspective today.  This is a level of interest worth watching, as /CL has a tendency to respond to the 200 day SMA. 

Noted on the graph above are several support responses (grey ovals) and one resistance response (orange oval).  The 200 day SMA is not always relevant, but as you can see it is in /CL. 

At this point, the reward risk favors bullish positioning.  You can get long crude with a planned exit on a move below 95.  We say below 95 because it is important to give a little breathing room below potential SMA support as well as allowing /CL to test the 95 price point support level. 

On a clean break below the 200 day SMA, /CL may be in for a nice downside move. Support at 90 would be the first major test in this case.

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