The Sirius (SIRI) entry proved timely, but the trade is over. The price action has been strong, but this one looks like a trap. The company will report earnings Tuesday. I’ll steer clear for now.

A great trader I once knew always took profits too soon. He was very successful.

Tarder Art: SIRI Exit

Meanwhile, back at the Factory, I am captivated by one of the most desperate attempts at self-promotion that Wall Street has ever witnessed: the SEC suing Goldman Sachs (GS) for fraud. According to my lawyer, John Doe, the charges could possibly be the most irrelevant charges ever brought against anyone, anywhere, anytime.

The Facts

1) True, the CDO was sold by Goldman with a triple A rating. However, anyone who runs money should know well and good that a AAA offering 150 bps over swap has great potential for not being AAA after all. Right?

2) Yes, Goldman was long this deal. The issuer is almost always long some tranches of any deal–usually the most junior parts that have the toughest time being sold. This caveat is integral to selling the deal. We’re long it too!! They shout as though they hit the cash register on all the fees.

3) Gold. In reference to the gold market selling off, some circles allege that the catalyst was fear—fear that John Paulson may have to liquidate his gold holdings. I don’t buy that at all. Gold sold off because it sold off. John’s gold holdings could be sold off with little to no impact. He doesn’t run that much money. Also, he understands leverage very well. So well, that he shorted on over-leveraged real estate market and made a fortune. John is not going anywhere, nor are his gold holdings.

Now that we have our facts in clarifying order, we can move on to the markets. The market sold off broadly with the S&P lower by 19.61 points or 1.6%. The VIX gained 15% up by 2.47 points to close at 18.36. I am not convinced quite yet, but it looks very, very tempting to call a bottom in the VIX. I think it could spike more from here, but we could see even lower lows in the VIX later this year. After all, it is a bull market. There are plenty of problems out there, but we have GDP growth, and we have corporate profit expansion. We have the technicals and the fundamentals on our side.

Volatility Index Oil on Canvas

Best of all, Chief Market Technician at The Tinker Factory, the Timer, agrees with me. The market is bullish until proven otherwise. Friday was nowhere near the proof we need to call this the top and thus the beginning of a new significant move lower. Pullback, perhaps. Top, no. Don’t mess with the Timer. He is named what he is for a reason, and he is exceedingly good at what he does.

Now we have to wait and see how the crowd reacts to the reaction. Only then can we gauge if the sellers are met with buyers or more sellers. Stay tuned. I wasn’t buying on Friday because I don’t buy into selling; I buy into buying.

And the beat goes on.

Entry is taken and now the price will speak for itself.

Trade Art APWR Entry Oil on canvas

Buy into buying, don’t buy into selling.
-Trader Proverb
I buy and I sell things, but mostly I am paid to wait.
-Vincent M. Vega
The waiting is the hardest part.
-Tom Petty

In my prior post, I laid out the bullish case for APWR (A-Power Energy Generation Systems, Ltd). Two trading days have passed and I have not bought the stock because there has not been any buying. I will buy into the buying if the stock breaks out of it’s regression channel. Being patient and waiting to see demand will keep you out of many losing trades.

Stay tuned.

APWR Setup Oil on canvas

Reader query: “Any thoughts on APWR?”

Upon pulling the chart, I initially see that the stock is in a downtrend, so it is bearish. I am biased to the long side at the moment, so my first inclination is to pass–not go long or short it.

APWR

However, though the trend in APWR is down, the trend can change—it can turn up. Every new trend starts with a countertrend. The stock is going down now (the trend is down), but it won’t go down in a straight line. There will be countertrend moves within it’s overall downtrend. At some point, one of those countertrend moves will be a bottom, and the beginning of the new trend–an uptrend.

It is possible that the formation of APWR fits this countertrend criteria. So before I buy, I will wait for buying. In other words, I need to see some demand off of this bottom. I need to see buying behavior before I “buy into” the behavior. One of the greatest rules of trading is a converse conversation:

“Don’t buy into selling; buy into buying. Don’t sell into buying; sell into selling.”

Write that down.

Studying the chart in zoom, I decide I will wait for the price to move outside of the regression channel, and when it does, I will buy. I’ll always use a stop, so I will set my initial stop under the bottom pivot (red line). Stops have saved my life several times. I am sure they will again.

APWR Countertrend Oil on canvas

Every new trend starts with a countertrend. The end of one thing is the beginning of another.

And the beat goes on.