Trader MD

First here's DUG as promised from last night.

I was comfortable closing out my position yesterday below the $30 level as I saw the 30.40-30.60 area being pretty decent resistance, along with the outer limit of the ~5 month long channel being in that area, and seeing how much of a move DUG has made in the last few days already.

Sure the volume has been great, maybe even fantastic, but I'd still love to see it put in a pause at this area before attempting to work its way higher. Since this was a swing trade, my entries and exits were based on the daily chart for the most part.



I also think that the market has put in at least what appears to be a short term bottom here as crude has started to crack (down >$10 in 2 days). While the $VIX is no where near the mid 30s like we'd all love to see, the fact that the safe haven known as crude is breaking down is a very positive sign for the markets and it goes beyond the price of gas at the pump.

I'll try and briefly explain. It goes along the logic of me looking for energy stocks to break down last week. The energy sector stocks were basically the next domino to fall. The materials stocks (XLB) had been breaking down and the other recent hot sectors had been falling as well (solars, then Ag, then coal). The next biggest safe haven / momentum play / sector with relative strength, after those names was the oil and natural gas energy plays.

Now taking that a step further, the only investment over the last several months that has been even stronger than the oil and natural gas names themselves is crude oil. Now that crude is no longer a "when in doubt buy crude oil" play and money is finally flowing out of crude, it can now be put to work in actual stocks.

Think about it another way: if you can simply just throw your money in crude oil and be relatively comfortable that you will make $$, then why would you bother trying to invest anywhere else?

Here's AAPL & BRCM, which I added as swings today. You'll notice that they have fairly similar charts. Both have held up relatively well with the recent downturn in the markets and both of them have potential cup and handle patterns.

If AAPL can validate the C&H, and the market / earnings / etc cooperate, AAPL has a chance of hitting its cup and handle target of $265. The same goes for BRCM and $43.

Even if that doesn't pan out I think AAPL can hit / retest resistance at $200 for a nice short trade and BRCM can reach the low to mid 30s.

Posted by Trader M.D. at 11:23 PM

Labels: AAPL, BRCM, CupnHandle, DUG, Trendline Break, Triangle