Identifying a W bottom using Bollinger Bands $CAT

Caterpillar (CAT) made a high back in mid February and it had been coming down until it finally made a bottom in mid July.  Bollinger Bands can assist you in finding a bottom and allow you to have a higher degree of success in implementing this trade.

What we are looking for here is a W bottom (tight double-bottom).

• If we look closer at this area, you will want to see the first leg down making a low outside of the lower Bollinger Band.
• The first bounce upwards to the middle of the W should get you as close to the middle band as possible.
• The second leg down that forms the second bottom should stay "within" the lower band and you can enter the position on a long basis.  If you are more conservative and want additional confirmation, you can wait for an upward move in higher than average volume as seen down below in the thick blue arrows.

This can also be used to help identify tops with a M top pattern as well, which I can go over in a later post.

TCBI - part trois

TCBI part trois

TCBI did not break out, but we were prepared for that to happen since we didn't see a "True" 3 weeks tight pattern with a higher volume breakout day.   The market settled 2% from it's 52 week high and it looks like it is catching a breather to build up some strength to push higher...unless we get some bad macro news  like (Iran, Syria, Fed, Italy, Spain, etc. etc. etc.).   You can always find a reason to hunker down but until you get that signal it doesn't pay to play chicken little.

 We had several options after we brought up our Phesis (yeah, I know it should be thesis...) that this wasn't an ideal breakout:

A

• Sold our shares at the end of the day after you confirmed the volume was not sufficient.
• Wait until a valid base is formed and enter a position with a proper volume breakout.

B

• Sold our shares at the end of the day after you confirmed the volume was not sufficient.
• Repurchase at a predefined support level 43.30 (cool that it was definable to a degree)
• Wait and see if another base forms above the purchase price with a hard stop at $43.25

C

• Entered  a fraction of a position 
• Ensure it does not break our "Max Pain" support level which in this case is close to the $43.30  area if you chose a 3% stop.  I like to place hard stops 15 cents below a support area so you don't get taken out of a position during the day by the machines.

TCBI did not go down in high volume so it still looks interesting.  The fundamentals are doing well so it's worth to keep this on our radar.  If you wanted to make a case for a 43.89 buy point as it retraced to it's 50 day moving average back on the 23 of July it would only be extended by 1% as of today's close.

ALGO - DELL

Algo Like signature on this chart?

Rock On - AAPL

\m/

So many signs to be had  ;)

Rock On!

TCBI - Low Volume Breakout

Now that we can look at yesterday's action on TCBI  ( Texas Capital Bancshares )  We can see that the volume at the end of the day was around 611k shares which ended up being around 31% of the average daily volume when you calculated the past 50 days of volume data.  Although there was more attention being  paid to this stock on the break out day, you should want to see the volume be greater than 40% to 50% .  This shows you that institutions (Hedge Funds, Mutual Funds, and Brokerage Banks) are interested in this equity and are adding it to their coffers.

So now we have two strikes on this  stock.  The first is that the last week of the 3 weeks tight pattern did not finish under or at 1%.  The second is that on the day of the breakout from the pattern, it did not have the volume you want to see to confirm that it is still being loved by the heavy lifters of the market.  Add to this that it opened up at $44.71 on the 20th which ensures that if you did not buy this in the pre-market then you may have paid a little bit more than you wanted to.

Now this stock shouldn't be discounted yet,  We may have just started a small pull-back in the general market and it is relaxing it's relentless move upwards.  If you are an O'Neil practitioner and want to stay in this buy point, then you might want to bring in the stops from the standard -8% stop loss to something more conservative like 2%-3%.  We are finishing the summer chop session and the environment should get more stable until the election season winds down.  Let's take a look at this tomorrow and see if it warrants our continued love.

Me Gusta 666 - AAPL

Bending the rules...eh?

Texas Capital Bancshares $TCBI  is forming a pattern called a 3 weeks tight pattern which is one of the shortest bases around.   It can go one more week which should be called a 4 weeks tight but that's straying from the subject.  The primary condition for this base is that the Friday's closing price be 1% or less than the previous week.  So far this is what has transpired:


07/27/12  $43.83
08/03/12  $43.59  -0.5%
08/10/12  $43.68  0.2%
08/17/12  $44.42  1.7%


You can clearly see that the last week was way more than the ONE percent allowed by that rule.  You can start making excuses that this last Friday was an options expiration day and that the price action can be somewhat erratic, however buyer beware, once you go down this path of justifications.

TCBI has great fundamentals and it recently found support on it's 50 dma just a month ago.  If you're familiar with the O'Neil method of pricing the buy point at 10 cents over the previous 3 weeks high point of $44.60 then $44.70 would be a confirmation .  Taking into account that we are also within 0.3% of this years highs on the $SPX,  you should take a smaller position only if it goes up on high volume past the buy point and stick to your stop loss rules.

TCBI - 3 Weeks Tight

Bad news is good news for global markets

We all know that attempting to fix a debt crisis with, yet more debt, will lead to a very bad place but as the Dead have said  "I may be going to hell in a bucket, babe But at least I'm enjoying the ride" 

Noteworthy EPS for 8/3/2012

Noteworthy EPS for 8/3/2012

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Viacom	VIAB

Noteworthy EPS for 8/2/12

Noteworthy EPS for 8/2/12

Generac	GNRC
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Par Pharmaceutical	PRX
Western Refining	WNR
Scripps Networks	SNI
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Sally Beauty Holdings	SBH
Time Warner Cable	TWC
Teradata	TDC
DirecTV	DTV
Kraft Foods	KFT
Old Dominion Freight	ODFL
Cardinal Health	CAH
Kellogg	K
Zipcar	ZIP
Molycorp	MCP
General Motors	GM