Trade idea: Allstate (ALL) Short

In the event of further upside in the market next week, watch ALL for a pullback at 29.50. The stock has been in a significant downtrend since early May and is trading below its 20, 50 and 200 moving averages.

The 29.50 level corresponds to a gap fill and is very near to a pivot low and a 50% fibonacci retrace. Should this level break to the upside, there will be strong secondary resistance at the 20 moving average and the 61.8% fibonacci retrace.

I will look to short ALL on a break of 29.50 with a stop above the 20 moving average.

ALL has strong resistance at the 29.50 level

TSX60: Possible Pivot formed

The TSX 60 may have formed a pivot top, as suggested by today's move down in prices. Confirmation  of this top assumes that the index does not recover before the end of the day. A move back up would be considered a consolidation pattern and not a pivot top.

If this pivot is confirmed today, the next support level will be at the 50% retrace/20MA/previous pivot level at approximately 832. If we consolidate above these levels for any amount of time, I'll assume a move to the double bottom or lower is in order.
 

I'll be keeping an eye on this pattern throughout the day and post an update later tonight.

FM.to Short Setup

FM.to is coming into good resistance. If the market has another leg up, this short will likely trigger sometime tomorrow.

The short is based on the hit of a double-top at 147.50 after a very extended up-move. The stop should be placed above 147.50 level, using whichever method you prefer.

FTS.to

Friday June 1 Market Summary

Yesterday I posted about a possible up move in the markets despite technical resistance because of the low holiday trading volume. Today we got exactly that, but to an extent that even I didn't anticipate. The SPX rallied +19.03 to 1339.67, or almost $2 on the SPY. This is a very big move, so I'm glad I decided to wait until after the holidays to add a second round of shorts.

The trading session actually opened uneventfully and stayed in a narrow range, as you'd expect on a Friday before a long weekend. Then at 9:30ET, ISM numbers came out at above market expectations and the SPY spiked almost $1 within a single 10 minute candle. For the rest of the day, the markets floated on extremely light volume without ever pulling back.

It's hard to put much meaning onto this rally considering the volume, but the price action is all that matters at the end of the day. I'll continue to have a stop in place on all my shorts and will look to add further shorts higher up in the charts if the market continues to float. The market remains very extended and the probability of a pullback soon is still high.

If we do continue to rally next week, as we well may, I'll look to add more shorts on the market and on stocks at the the SPX 1346 and 1370 levels. I think it's unlikely we go as high as the 1370 double top, but it is possible.

Last night and this morning I posted several short setups that should play out when the market pulls back. And assuming we don't pull back before then, I'll probably enter some of these shorts mid next week.

• MCHP Short 
• LLTC Short 
• INTU Short
• FTS.to Short
• NXY.to Short
• CCO.to & FM.to

I'm currently short FTS.to and partially short the SPY and NASDAQ. I will be sure to advise of any future shorts on this blog and via twitter.

Key level: LLTC Short

Linear Tech Corp (LLTC) hit strong resistance today at $33.27 and pulled back. In the event of more upside tomorrow there will be a good opportunity for a short entry.

There are 3 resistance factors here: the 50 moving average, a gap fill and a previous pivot low. The short is valid anywhere between $33.44 and $33.61. I'll probably look to enter at around $33.50, just above the gap fill.

Key level: INTU Short

In the event of a market pullback, Intuit Inc. (INTU) will have strong resistance between 52.50 and the 50 moving average.

There are 6 factors here which could contribute to a pullback: the 50 moving average, two pivot lows, the 50% fib retrace, a gap fill and a bear wedge candle formation. This is a very similar situation to the markets overall so we'll be looking to it to help guide this trade.

I'll enter this short on a hit of the 50MA but it's valid anywhere above the gap fill at 52.48. Make sure to keep a stop as the market can rise easily during holidays.

Wednesday Market Summary

Wednesday's trading was the same float up we saw on Tuesday and pretty much exactly what I've been calling for since last week. And after three days of trading to the upside, I now have a better idea of when to expect the pullback.

The SPX looks similar to almost every other chart I've been studying lately, both US and Canadian--a sharp down move followed by a sharp up move. This is a classic bear wedge. You'll notice from the chart below that we're heading straight into 4 areas of strong resistance--a trendline, the 50 moving average, the 61.8% Fib and a pivot low. Combine this with the bear flag and you have 5 factors saying to go short. This level corresponds roughly with 132 on the $SPY.

The only wildcard left is the timing. I'll short a hit of the 50MA, but before the holidays are over next week it won't surprise if we trade even higher temporarily. In light of this I may wait until we go slightly above this level to make sure I still get a good entry in that event. In any case, I still feel confident that this area has a high probability of being a short term top.

I'll post an update on the market later today and let you know what I'm thinking on twitter throughout the day.

Update: $SPX hit my targets and I'm now short a small position. The timing of this short could be better, but the levels are still good.

Key level: FTS.to Short

Just a few days ago, I alerted via twitter that FTS.to would have strong support at 30.80. Since then the stock has risen $1.38--not bad.

Just as quickly, FTS.to is now high on my list of stocks to short. Assuming the market has 1-2 days left of upside left before pulling back, I like the 32.40 level for resistance. There are 5 factors at this level: the 50MA & 200MA, the 50% Fib and a previous pivot low all within a bear wedge.

This is a high probability short, but if for some reason the market surges I'll be more cautious about taking a position. There is also some resistance at 32.70 and 33.85. 

Update: Today FTS.to went to 32.48 early in the morning and pulled back. I shorted the retest @ 32.48 before it spiked even higher to 32.65. FTS.to then came all the way back below the resistance at 32.40, so the level is still working. We'll see what next week brings for this stock.

Key levels: NXY.to Short

NXY.to is another stock that may have already hit resistance. But in the event of more upside, I like the 21.71 level for a short swing. Just below this level is a range that includes another pivot and a 61.8% retrace--all should act as resistance when the market pulls back.