TickerTank

At TickerTank we believe in reacting to price action rather than predicting it.  That said, every once in a while we like to go out on a limb and make a bold prediction.

We predict Natural Gas Futures will print 3.25 before the end of 2011.  It seems extremely cheap here and pretty much everyone you talk to sees natty going higher from the current 3.75 price point.  The bullish argument makes plenty of sense given the fact we’re in Hurricane Season and all it takes is one storm threat to push natty back to 4.00 and above. 

That said, the head & shoulder pattern we pointed out in this article has confirmed and we see it completing the measured move to 3.40.  A move to 3.40 will put in the October 27, 2010 gap which will result in a gap fill and a print of 3.25.  Let’s face it, Natural Gas supply is massive and as of now there’s just not much demand for it.  That will change with time, but in the near term we see it going lower.

In the event this prediction comes true, we have every intention of taking a very bullish stance on natural gas via futures, UNG options plays, or a mix of both. 

About a month ago we mentioned the bearish Head & Shoulder pattern in Natural gas Futures.  At the time, they were trading around 4.19.  Now Natty is at 3.76. 

Although the downside move to 3.76 is a good start, the measured move has yet to take place with regard to the H&S pattern.  The move measures to 4.40 (yellow rectangle) which puts it in a gap from around this time last year (pink oval). 

On the flip side, there is nice support here in Natty.  The 3.75 level is an area where buyer tend to step in, which could prevent the full H&S measured move from taking place. 

At the moment, we are not holding any positions in Natural Gas Futures or UNG.  If this support level holds a little longer, we will put on a 9/10 Bull Call Spread.  If support break, we may just short some Futures.

Get your mind out of the gutter…that’s not what we mean!!  ;-) 

This is in reference to Technical Analysis. You see, Technical Analysis can be extremely complicated or fairly simple. I choose to keep it simple. 

What do you mean by “keep it simple”?

The more indicators you use to confirm a trade scenario the less trades you are likely to make.  Reason being, the chances of a technical studies disagreeing with your stance increases as you invite more studies to the party. 

Sure, it’s nice when the situation arises where a plethora of technical studies all point to the same conclusion, but that’s rare.  The only way to become a great Trader is to trade, and if you’re spending all of your time analyzing a position with a variety of technial studies, you are taking away from your actual trade activity. 

You still haven’t answered the question. How do you go about keeping things simple?

My method of keeping it simple is by slimming down the amount of items I look at when analyzing a trade.  Price action is the primary component I look at when scanning for trade ideas.  Volume and Implied Volatility play a huge roll as well. 

Aside from price action, volume, & implied volatility, there is no single technical study we have to see a confirmation in.  I may take a look at the 50 & 200 day Moving Averages, Fibonacci Retracements (if the price action permits), RSI, MACD, and the likes, but if I like the price action I place a trade regardless of what the studies are saying.

Does this result in a winning trade every time? No, but neither does spending hours mulling over technical studies.  Trust me, there have been plenty of occasions where I’ve spent hours analyzing trades that looked like sure things only to see them fail miserably. That’s why these days I keep it simple and focus on being an Active Trader rather than an “Active Analyzer.” The end result has been a dramatic increase in not only my portfolio value, but my abilities, knowledge, and confidence as a Trader.

Keep it simple!  It’s worth a try.  Worst case, you lose some money and go back to your over analytical ways. Best case, you find a new beginning and totally change your game as a Trader.  I’d say that’s a risk/reward worth pursuing, wouldn’t you?

-Nick Fenton

The market is trading in a volatile range, and has been for nearly a month now.  If you chart the VIX, you will note support at 30 and resistance at 44.  I’ve been playing this range via bearish positions when the VIX pull back near 30 support and bullish positions when the VIX pops up near 44.  Yesterday the VIX climbed near 44 once again, so I put on a bearish VXX spread (VXX is the ETN that represents the VIX). 

I make it my business not to predict, but to react.  I am reacting to the range, and will play it until the range breaks.  That could happen this time around, and if the VIX does pop through 44 range resistance I’ll bail on my positions, take the losses, and switch to bearish positioning.

@nickfenton

We are holding an absolutely awful position in NFLX.  On September 8th, we sold (to open) the Oct 195/200 Bull Put Spread @ 1.78.  We noted NFLX was reacting to the 200 psychological price level, and saw an opportunity.  There had already been one upside move off the 200 level, and with NFLX sitting on the price level once again we decided it was a good time to pull the trigger on a conservative bullish Vertical Spread.

The spread we chose gave us a little breathing room below 200 before we started to lose money.  Little did we know Reed Hastings was going to announce the negative adjustment in guidance a few days later. 

We are at max loss (-$322 per spread) on this trade, and fully expect to exit the position at max loss.  There’s no point in exiting here since there’s no more downside, but there’s pretty much no chance NFLX will bounce back to 200 before October expiration.  This trade is a great example of just how crazy financial markets can be.  Regardless of the strategy, it only takes one unexpected thing to completely throw your position off. 

Be smart, be careful, define risk, live to fight another day!

We are noting Bear Flags all over the place.  Some have broken down quite a bit, some are just breaking down, and others have yet to break down.  Let’s take a look at a few examples…

FCX broke bear flag support at 42.50 and has since tanked.  The measured move is 27.50, so there may be quite a bit more downside to come.

ACI just broke bear flag support at 18 and fell quite hard during today’s sell off in the Coal sector.  This move measures all the way down to the 9-10 range, so ACI may have some scary downside ahead of it.

AA is starting to break down after today’s push below 11.25 bear flag support. The height of this flag pole is about 4, so AA may be headed to 7.25 (at which point we would start selling Naked Puts like crazy).

Last but not least is SPY.  A bear flag is in tact, but has yet to break down.  Bear flag support resides at around 111.50, and if it breaks down on strong volume the move measures to 89.  That would translate to approximately 850 in the S&P 500, and 8,500 in the Dow 30. Scary thought, but anything is possible in this market.

This is by no means a scare tactic blog.  We are simply pointing out a few bearish technical patterns, and sharing our thoughts as to what price levels we are watching in these stocks.  If these bear flags do reach their measured moves, there will be some amazing buying opportunities in all of the names mentioned in this post.