Category Archives: David Weis

Closing At Confluence: Biotech

March 12, 2021 By in Biotech, David Weis, IBB, LABD, Positions 1 Comment

On a closing basis, biotech’s hit three areas of resistance.

We’ll put all the lines up at one time (chart above) and then break it down.

First, there’s the underside of the trend break that’s already been discussed in prior updates.

Second, the resistance formed by the underside of the head and shoulders pattern identified in a prior update as well.

Last, we could have a trading channel in effect. If so, price action contacted and closed at the right side in yesterday’s session.

The following charts get a closer look at two resistance areas:

Using a ‘reverse trendline’ technique outlined by Weis in his DVD, we take contact on the left side and move it to the right.

The chart below shows the H&S resistance area (underside) contact:

Putting all lines together gets us the chart at the top of this post.

Long term MACD indicators are down; both monthly and weekly. Momentum is to the downside.

Probabilities favor a reversal

The potential downside is enormous. The markets are extended the most in history. Margin debt the most in history.

We’ve got kids running around with trading apps designed to make it look like a game. It’s no different from the Shoe Shine Boy at the steps of Wall St., giving out tips.

Positioning:

We’re short biotech via LABD (not advice, not a recommendation).

The highly leveraged inverse ETF, performs best when the direction of IBB is down in a steady and decisive move.

Otherwise as we saw near the close yesterday, IBB could be reversing to the downside while LABD is still eroding lower in value.

Inverse fund BIS does much better in this area but is not nearly as liquid. That makes pre and post market trades impossible.

We’ll be looking for IBB to post a new daily low as confirmation a reversal is underway.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Set The Stop

March 5, 2021 By in Biotech, David Weis, IBB, LABD, Positions, USO

“Set the stop and walk away”.

That was a phrase from the late David Weis, used during his training session video (link here).

That’s what we’re gong to do.

Biotech (IBB) is nearing support and it was thought the overnight would result in an obvious gap-down open, exit signal.

However, with just about a half-hour to go before the regular session, markets maintained their positions overnight keeping the door open for continued decline or counter-trend action.

All markets, the S&P, Dow, Nasdaq, (and biotech) are pivoting lower from insane valuations. We could be at the very beginning stages of a sustained deflationary move.

One example of how such moves behave, was the oil market in July of 2014. The tracking fund USO, had nine successive down months (declining over 60%), before a significant retrace.

With that in mind, we’re setting the LABD stop at the prior session low of 21.80 (not advice, not a recommendation).

With an LABD entry point at 18.08, being stopped out at 21.80, would yield a gain around 21%.

So, we’ll leave it there and move on to other opportunities.

The weekly has IBB, nearing support around 140 – 142 (dashed line). We can expect price action to hesitate as (or if) it encounters those levels.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Edge of The Lake

January 20, 2021 By in David Weis, DUG, XOP 2 Comments

The late David Weis, instructed his students during a 2007, trader’s camp sponsored by Dr. Elder, that ‘trades are found at the edge of the lake’.

Most of the training session was recorded and reproduced on DVD. That video is still available, linked here and is a wealth of knowledge.

Within the video, Weis analyzes what he calls ‘The Apache Spring’.

No, it’s not a history lesson of Chato’s raids in New Mexico Territory during the spring of 1882; it’s an analysis of Apache Oil, ticker APA.

That analysis alone, should be enough to convince any rational person, price action has absolutely nothing to do with any fundamentals.

Wyckoff repeated this assessment in his autobiography; ‘prices have an energy of their own.’

Prices are manipulated. They always have been; but it’s not important to know who’s doing the manipulating.

What’s important, is to discern (within probability) the objective of the manipulation.

Which brings us to Oil & Gas, XOP.

We’re at the edge of the lake.

Up-volume is declining and momentum (MACD) has bearishly diverged. If there’s to be a sustained reversal, this location is high probability.

Price action in XOP, is attempting to close the reversal gap. This morning’s pre-market shows it might do that in today’s session.

We’re already short the sector via DUG (not advice, not a recommendation) and watching carefully for gap closure with subsequent continuation of the nascent reversal.

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.