By Harlan Pyan
The following is an excerpt from October 23rd’s premium update at All About Trends. Enjoy a free 15 day trial to receive daily stock picks, market analysis, & complete trading plan. Promo code: zen.
How about that market! The S&P 500 high new highs yet again and is on a tear. And YES, even the NASDAQ Comp. too!
So that’s the RA RA RA headlines all over the media HOWEVER under the hood of that shiny car on the show room floor? That eye candy car MAY not be running on all cylinders. One look at the leaders and you see there MAY be some issues that if you were to ask “Show Me The Carfax” you probably wouldn’t be buying that bright shiny car. So lets show you our version of the “Carfax”
In our original educational article shown below when talking about leadership we said or rather Bill did:
Keep in mind these names lead and that means both directions, Bill O’Neil said it best, when the market leaders roll over the rest of the market isn’t far behind. So it pays to be prepared in advance.
Have you seen what’s been happening while the circus is on town to the leaders? Did you take a look at all the leaders today? DOWN DOWN DOWN were the bulk of them.
While on the subject of “You gotta Sell Your Peanuts While The Circus Is In Town” we’ll add to that by saying markets actually distribute while they are going higher. Bold statement we know but follow along and hopefully you’ll get it like the really big money does.
Think about it, if you were long 3 million shares of a stock and wanted to get out of it how are you going to get out of it without blowing up the stock on yourself?. It would take a ready and willing crowd to be happy to buy your peanuts would it not? This all leads us to?
Our Peanut Seller Of The Week Award
Which goes to? Carl Icahn. Why? Because he’s the new master of the universe when it comes to showing you that markets actually distribute while going higher.
After the close we found out that Carl reduced his stake in NFLX to 4.5% by selling off 3 million shares. His gain is estimated to be (wait for it!) 800 MILLION DOLLARS! folks you don’t get that big by waiting for the market to roll over and die before you sell. This guy SELLS STRENGTH plain and simple, he knows how to sell peanuts! Do you all get that now?. So if you are wondering how a big fish got big now you know. When coupled with TREND CHANNEL RESISTANCE IN THE MARKET? What a winning combination!
Folks on October 17th we released a report called change in trends. Since that educational article was posted MANY if not all of the names on that list have done exactly what we talked about.
Below is that actual article so what we decided to do was revisit it in before and after form as well as add some new names to that listing.
Change in Trends Patterns
At All About Trends we focus upon the only three things you need to know to be successful in the markets. In fact this is the cornerstone upon which our whole philosophy is built.
- Uptrends – And how to trade them
- Downtrends – And how to trade them
- Change In Trends- And how to identify them
We’ve spent a lot of time on the long side recently. We talked about Pullback Off Highs (POH) chart patterns in stocks in clearly defined uptrends and uptrending channels so by now you should all be aware of that pattern. What we really haven’t touched upon lately is that of downtrends and how to trade them nor “Change In Trends” and how to identify them — they both go hand in hand.
So let’s talk about “Change In Trends” because there always comes a time when indexes and individual issues get to a point where they go into corrections. We pride ourselves on being prepared in advance around here as it’s necessary for one’s success. ALL successful traders share this trait.
When it comes to change in trend patterns, in this case from up to down for those who are long and long only it’s a what to watch out for. After all if you are long at a market top or peak you need to know when to get out right?
For those who are opportunists and are interested in making money regardless of what is going on in the market all in their quest to be all that they can be it’s a what to watch for from a when to sell short perspective.
But before we get into any of that we need to talk about trend channels. We’ve been talking a lot around here about the use of trend channels to define ones risk.But what does it look like when an overall trend is busted?
First off while uptrending issues are in up trend channels many will form change in trend patterns which is an early warning alert system pattern that tells us a change in trend MAY be near. Here is the IMPORTANT PART: WHILE STILL WITHIN THE OVERALL UPTREND CHANNEL.
This is where change in trend patterns come into play.
The most common are Double Tops, and what we call First Thrust Downs and POL Bear channels.
Keep in mind there are variations to this pattern and they can be a true double top or even a double top with what we call a shake out high. A shake out high variety is when an issue breaks into a new high and stalls only to come back down and rollover.
We call those shake and bakes.
A shake and bake is when they break into a new high they shake up the breakout buyers who get emotional and buy out of fear of missing it after they already missed it off the low risk Pullback Off Highs (POH) entry point not to mention they are mentally conditioned to buy new high breakouts. Only to have the stock roll over and? Bake them. Hence shake and bake!
In all the examples you can see the double tops showing WITHIN the overall uptrend all the while the issue is in an overall uptrend.
FIRST THRUST DOWN
Then there comes a time when an issue will sell off. That initial sell off is what we call a first thrust down. It can break the overall uptrend channel at that point or even come down to trend channel support.
After that initial first thrust down comes the IMPORTANT PART. More often than not they tend to stage what we call a snapback rally. Those who have broken the overall uptrend tend to sometimes come back to test the overall uptrend channel from underneath in what we call a KODR which stands for Kiss of Death Retracement which is just saying they are busted but they come back up for one final kiss goodbye before they roll over.
Those KODR’s can also be called Pullbacks Off Lows (POL), bear channels, Right shoulders of head and shoulder tops too.
So let’s look at a few examples of what those look like visually when viewing a chart.
HLF as of 10-16 close
As Of 10-22 Close
As you can see all WERE in clearly defined uptrend channels. Until? Until there came a time where they initially stalled and built out a few patterns namely Double Tops And First Thrust Down patterns.
This is how you spot Wall Street selling peanuts while the circus is in town, that and climax runs by the way. Think TASER and QCOM when they both went on climax runs but that’s another story for another time.