Pattern of the Year

I am finding that this is becoming the price pattern of the year - and it ought to look quite familiar to you by now. It has been more popular with the commodities but nonetheless it has become very common (ACI, POT, BTU, MOS, etc. come to mind).

It starts with a nicely trending stock (often 45 degree angle or less) that at some point begins to quickly pull too far away from its trendline...only to come crashing back down with a momentum too great for its former support line to hold.

Then one of two things have been happening: it has either been a free fall (above) or it has climbed its way back to the underside of its old trendline before making new lows.

This pattern is one that I believe can be anticipated if you see it enough times. In case you're curious, the stock shown above is US Steel (X) as of today. And while in this case, hindsight is 20/20, there are likely other similar opportunities out there.

I would look toward the transports, who have over the last several months have held up pretty well. They took it on the chin today and I think there's more downside to come in the intermediate term. Here's a head start: CSX

Taking it

A lot of stocks rolled over and broke support today...and from sectors you might not expect (ag, steel, coal, energy, etc). Hopefully none of these moves ruined your weekend plans and you'll be able to find a way to profit from them. I will likely sit tomorrow out in protest of this obnoxiously choppy market but I am seeing a lot of nice setups for next week.


Steel and Coal stocks all took in on the chin while breaking through significant levels of support
--> X, AKS, ACI, BTU


Possible longs (as always use tight stops)
--> RIG (yes, this is the whole list)


Possible shorts (same)
--> ICE, GNK, AA, POT, MON, MOS, UNP (...finally UNP)


Watchlist (these may yet require a bounce or a pullback before taking action)
--> MA, VIX, CME, NMX


Have a great July 4th weekend! With this year's undisclosed destination, I will see if I can snap another award winning photograph - just like the one I took last year: Click HERE to see it.

If I ever get tired of raping and pillaging the options market maybe I can just fall back on my photography skillz.

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OptionSpot