Shak Shaken

This market drubbing makes us miss the good ole days of yesteryear.  Remember when ShakeShak rallied from 40 to 90 in 3 months?  Well, last week the stock gave up that IPO level.   

Think about the other hyped 2013-2014 IPOs that have lost their IPO floors.  Twitter, Fitbit, GoPro etc.  They've been pummeled.  This isn't a handful of coincidences, it's a trend.  Use that knowledge to your advantage.

The supply-demand imbalance is epic.  This is a 15 dollar stock masquerading as a 30 something dollar stock.  Short rallies.

Disclosure: The author has no position in SHAK at the time of publication

What you 'know'

It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. - Mark Twain

They say it's bullish when advance decline lines lead markets to new highs.  Well...that's not always the case.  At least not for the S&P 500 in the most recent fall rally.

Cleaning up some chart lists I came across this chart of the S&P 500 Advance-Decline line from November.

Clearly if you would've invested off that chart alone, you have been buried in 2016.  So what are the lessons here?

1. We know less than we think about markets
2. Each data point is just a piece of evidence within the market mosaic. 
3. There are always exceptions to the rules

Amazingly, this signal is not invalid as the market hasn't broken the fall lows, but you're year would still be wrecked within two trading weeks if you confidently waited on the market to make new highs.

Thanks for reading!  Trade 'em well!

What to do when it all goes wrong?

For the past few weeks I've been pretty vocal about the panic in the energy trade.  This week, I've been proven quite wrong, at least for my trading timeframe.  Attempts at stabilization in the group completely shit the bed.  

I want to share what I do when I get a thesis like that wrong.  

Look, i'm an egotistical guy, so it takes some retrospection to clear my head.  Here's the jist of my head clearing process.

1)  Get away from the charts - Take 24 hours away.  If I have other positions on, I set stops into my trading platforms.

2)  Go over previously written notes and plan (if you don't already do that - do it).  What did I do well?  could I have done better? - Review again in 2 weeks.

3)  In that day off, get my sweat on 2-3x.  The gym, a jog, the sauna etc.  Clear it all out.  It's easy to meditate in the steam room.

4)  Watch a stupid comedy on Netflix.  After all that thinking, it's nice to flush it all out with laughter.  It's a nice reminder that life goes on and everything is ok.

5)  Get back into charts and news aggressively one or two days later.


Why do I do this?  To avoid 'revenge trades'.  It's always tempting to make a big bet after you've had a notable loss.  Compounding losses kill returns. 

Yes, you can quickly take the market and trade it the other way.  If you can do that, that's awesome.  It can pay handsomely.

Trade 'em well!

Uptrends emerging in solar

Uptrends are trying to emerge in the solar space.  Trying, being the key word.  After a sharp rally in December, most solar plays are holding their gains well, which is a positive until it's not. Keep an eye on the group moving forward.  

The leading solar stock, First Solar (FSLR) has been on the 52 week highs list and the trend is now higher on all time frames.  That said there is still plenty of work to be done as the stock remains below 2014 lows

SunPower (SPWR) has just started to clear a 2 year downtrend.  Moving Averages are coiled and one more push higher starts a fresh uptrend.  

HQCL was a massive leader in December's rally and it's moving averages are all moving higher now as price tests an old pivot.

Two plays with massive potential are JASO and JKS.  They haven't broken out yet, but moving averages are tightly coiled together and starting to move higher.  There is real potential fresh uptrends will likely emerge.

It's not like there are a ton of groups that have much promise.  This is one and money may flow here just because There Is No Alternative (TINA).

Disclosure: I have no positions in the names mentioned in this article at the time of publication.  I may establish positions in the next 72 hours.

Trade 'em well

Energy

The energy space is very intriguing as we head into 2016.  Why?  The psyche in this trade got very interesting in December.  Let's use OPEC as an example

From February:  They were absurdly optimistic long term.  Common rhetoric since oil peaked in 2014 was 'we are close to the bottom'

From late December: Their latest outlook suggests prices will decline next year

Who knows if that sentiment leads to a major long term bottom, or just the short term trading low we've seen.  That's a major change of opinion though..

Other pieces to the puzzle are there as well:

• High yield pessimism recently reached an extreme(the focus was squarely on energy)
• What countries are investors most bearish on?  You guessed it, Brazil and Russia
• This month's climax bottoms have happened on massive volume featuring the beautiful combination of fear and forced selling.
• Massive bursts on this recent rebound.  Yes, strong moves occur in bear market rallies.  However, every important low starts as a bear market rally.

Really, what else do we need?

More Psychology: what type of rhetoric do we want to hear if this trade starts working well?

A dummie thesis you want to hear:  The Fed is raising rates, the dollar strength will continue (actually that's already priced in).

Also, sharp moves off bottoms tend to create anxiety that sounds something like 'we're already up so much, how can you buy here'

If we rally and we hear things like that, it's a good sign.

On top of that, we've got people traveling, partying and dicking around in general during the holidays who are missing all these lows.  It'll be easy for them to be slow to react and apathetic to any move.

To sum up my beliefs: the conditions are in place for an intermediate term trading low in energy and energy stocks.  

It's easy to get married to an idea or position.  You can't do that when trying to time a bottom.  Let the market tell you what it wants.  Only marry your position if it treats you well.

Trade 'em well