I recently posted several charts from around the world that are breaking down.( China , South Korea, Hong Kong, Brazil ). When looking at the Emerging Market ETF $EEM , to my eye it sets up as a low risk / high potential reward short.
The bear case for the Emerging Markets
From a 30,000 ft view on the monthly, EEM is in a bear posture. In the top panel RSI has broken trend; The PPO momentum indicator has an emerging bearish crossover. On the main chart we find price breaking trend support. Looking back over time, you can see how powerful monthly trend changes can be both on the bull side and the bear side.
Zooming in on the weekly chart, note how price has dropped from key support into what I call an "air pocket". Air pockets are areas of low trading volume when not much price discovery has taken place. Price tends to move quickly in these type of zones.
What I like about this set up is that in addition to the bearish technicals, there is a clear line in the sand to shoot against. In this case, its $45, where the overhead resistance now lies.
Here are my annotated charts if you care to zoom in and take a look.
$EEM Monthly $EEM Weekly
Today I took a position in EEM Dec 21 44 puts . I paid $2.69. My first target is $42 but my eye is on $38. Based on prior history the monthly swing can be a lot more...we'll just have to take it week by week. My stop is $45.5 on a weekly closing basis.
As a side note, watch the US Dollar if you take the trade. If the Dollar weakens, it would likely hurt the trade. If it strengthens, that will tend to hurt EEM and be beneficial to the trade.
Good Luck; Hope it helps, and see you next time.
As US Markets forge ahead, I wanted readers to take note of developments occurring in several Key world markets.
Of particular interest is China which just lost a key support level. It seems like just yesterday but 3 years ago this August we saw the effects of a China mini devaluation of the Yuan. We opened down 1500 points down. Then we had 6 months of turmoil that culminated in the Jan / Feb 2016 flush. With the trade debates swirling, I think its smart to pay some attention to the Chinese Market.
Aside from China, several of the other larger exchanges, namely So. Korea and Hong Kong are following suit. Brazil has it's own can of worms to deal with. Much of the problem for the Latin American and other Emerging Market economies is the rising US Dollar.
Below is a chart blitz of the developments I found interesting. They are the Weekly charts of the exchanges. When looking at world markets, I like to look at the exchanges themselves vs the tradeable ETF's to negate the currency effects often present in those instruments. Here goes....
China Weekly ( $SSEC )
This market lost its 2 year uptrend in early 2018. It has subsequently lost key support at 3000. Under 2600 and "its over". Tradeable instrument is $FXI among others.
So Korea Weekly ( $KOPSI )
A significant bear flag is playing out which, more or less, targets key support around 2200. Below 2200 its looks like nothing but air for a while. Tradeable ETF is $EWY
Hong Kong / Hang Seng Weekly ( $HSI )
Chart isn't terrible but you can see price slipping beneath key support as shown. Treadable ETF is $EWH
Brazil Weekly ( $BVSP )
Brazil has been in free fall for weeks as you can see. Time will tell if it can find its footing here or if another leg lower is in the cards. Watch for an oversold bounce which could set up a massive head and shoulders top down the road. Tradeable ETF is $EWZ
Anyhow, keep an eye on Asia, especially China and Japan. Even if you aren't inclined to try and trade them, at some point they will hit the headlines, and you'll be 3 steps ahead.
Thanks for reading and hope it helps.
Short n Sweet Traders
I know it's not Netflix or the latest Software IPO, but I like Cal-Maine Foods ( $CALM ) LONG here.
It is emerging from a massive cup n Handle formation on both the Daily and weekly Charts that projects a 24% upside move. My Target is $60
I am Long via call options with a $49.75 stop on a weekly closing basis
The Apparel Retailing Sector ( $DJUSRA ) has been in zoom-zoom mode for about the last month. Rather than trying to hop on late to some of the racing apparel names, I went searching for set ups in names within the group that have been lagging. Often times strength within the group will lift these heavier boats within the rising tide.
A name and set up I came across is Nordstrom's ( $JWN)
The Technicals look Bullish
Here are the key take-aways from the charts.
I want to see price cleanly take out the last bit of resistance before I get long. That will give me a clear line to shoot against and a place to set a stop. I have an alarm set at $53.50. If reached, I plan to target the Jul 52.50 Calls which are presently priced at $2.38. My First target is $56. My second Target is the measured move from the recent consolidation which is $59-$60. JWN's Earnings have already cleared and they are not scheduled for the next ER announcement until mid August.
With the FED scheduled to come out with their proclamations this afternoon, I wont be adding this or any other positions until that risk, however small, clears.
Good Luck, Hope it Helps!
If you have a stock or other idea you'd like me to cover, please shoot me a note at firstname.lastname@example.org
Take a deep breath Traders - A Long one with lots to think about
Most experienced Traders will probably agree that trading is a tough profession. Fierce battles are constantly being waged within the mind of the trader. Intertwined among many of these battles are the conversations we have with ourselves and the perceptions we have about ourselves. Even the best traders I know sometimes have thoughts like this…
"God I’m a #*@% 'in idiot!”
“Stacy is killin' it and she’s only been trading half as long as I have. What's my Problem?”
“I’d love to make a career out of trading, but I'm a moron;
I’ll never make it”
Some Traders even vocalize these thoughts out loud or project through social media. I’m very familiar with such thoughts; I am sure you are too. Its often very difficult to quiet these voices because many times there is a kernel of truth buried deep within them. To remedy the situation, we look for ways to build our self - esteem.
Efforts to increase Self-esteem do not lead to Confidence
Many Traders link their self-esteem to their trading results and the opinions of other Traders within their circle. Basing self-esteem on your P/L or the approval and recognition of peers escorts the Trader onto a devastating roller-coaster ride of emotional turmoil. At the very least, this roller-coaster ride isn’t productive. Self-Esteem hounds shout out the successes attempting to gain the approval and admiration of other Traders. During this process, the aspiring Trader often associates a bad trade, several setbacks, or lack of measurable improvement in the P/L as personal failures. Instead, what these occurrences really demonstrate are common and necessary things on a growth path. Trees don’t grow 24/7/365. In periods of drought they conserve themselves. In periods of bad weather, they may lose a limb or be otherwise scarred. Fast growing trees that have not experienced hardship are weaker than those that have. In the end, strength comes from weathering many storms.
Self-Compassion builds Confidence and Strength
Compassion is the act of empathy expressed for another person. An acknowledgement that life is tough, messy, not fair, and often filled with hardship and pain. We as aspiring Traders need to have this same sense of warmth and positivity towards ourselves.
Dr. Kristin Neff is an associate professor at the University of Texas Austin, and the foremost researcher on self-compassion. She defines the concept this way:
“Instead of mercilessly judging and criticizing yourself for various inadequacies or shortcomings, self-compassion means you are kind and understanding when confronted with personal failings — after all, who ever said you were supposed to be perfect?”
3 main elements of Self-compassion
While self-esteem is fixated on how you feel about yourself positively or negatively, self-compassion is about having understanding for wherever you’re at right now and embracing a full range of thoughts, emotions, and reactions — without judging them as right or wrong. It’s about recognizing that your inner voice is trying to protect you, and shifting your self-talk to be benevolent, not punishing.
Why build skills for greater self-compassion? Simply put, because it works. Self-compassion gives you greater confidence, makes you more resilient, and fosters authentic growth in your abilities.
3 Ways to Build Self-Compassion
Like any skill, learning self-compassion will take time to develop. Keep at it; Keep practicing. You’ll be rewarded by becoming the strong, resilient trade you aspire to be.
Credit: Although adapted for Trading, the inspiration for this post came from an article written by Melody Wilding. Certain passages / phrases were used without significant changes being made. If you’d like to reference her work, find it HERE
Understanding Sector Rotation