Allan Trends provides trading ideas based on Technical Analysis. Allan covers about 30 stocks, indexes and ETF’s, in multiple time frames, including Hourly Models in SPX and QQQQ for shorter-term analysis.
What happened to bring the DJIA back 80 points in the final minutes of trading Friday? A rumor, apparently placed by the Fed through the Wall Street Journal (a rumor of a rumor if you will) of the likelihood of yet more Fed action. Rumor or not, just how long can you prevent the inevitable?
VXX Hourly Trade Model
Some of the very best trading signals we have had over the past two years have been Long signals in the VXX. When those trades get going, gains of 20%, 50% and 100% are not uncommon. The leveraged UVXY provides about 2X those returns and as I have recorded a personal trade here, the 100% VXX win in mid-2011 resulted in over a 500% gain in my longer-term VXX call options. These kinds of returns are a traders dream and every time VXX triggers Long there is the potential for achieving well into the double digit returns. So I get excited when VXX issues a fresh Long signal. It’s the home run pitch right down the middle of the trading plate. The cost? A lot of swings and misses. But read on.
What doesn’t get quite the same level of my enthusiasm are the VXX Short signals. The Short signal just closed out on Friday morning gained 9.67%. As tough as the past 4 months have been, they haven’t been so tough on the Short signals. Of eight hourly Short signals since March 7th, there have been five winners and three losers. The winners averaged gains of +12.56%. The losers averaged losses of (2.27%). All eight Short trades since March 7th, winners and losers, have averaged +6.7%.
Surprised? Even though there is a built-in bias for VXX to decline month over month (based upon the mechanics of the fund), that bias is not nearly as much as represented by those returns. Here’s the best part: On March 7th SPX was at 1352. On Friday, SPX closed at 1355. That’s a net 3 point gain for equities while at the same time VXX Hourly had 8 trades averaging over 6% per trade. In case you’re wondering, just taking the Short trades averaged 12.56% per trade in 5 trades.
The easiest way to short VXX is to go Long its inverse fund, XIV. If you’re nimble at options, a 6% average gain per trade should equate to 10X that return in near-term options. It’s not recommended for anyone except the most seasoned option traders. Nonetheless, the trades are there for the taking.
(Click on charts and table to enlarge)
VXX 240 Minute and Daily Trend Models
All of that said about the VXX Hourly Trend Model, it is a frustrating, nerve whacking, fist through the wall kind of trading system. It works over the long run or it wouldn’t be a part of this service, it works very well. But so do the Daily and 240 Minute Trend Models and those too have a bias to the short side. But as you can see from the status of the current results, the returns can be routinely in the double digits. There are all kinds of ways to filter these systems. For example, only take the Hourly signals that are in sync with the Daily, or the 240, or require that of the three that two be in the same direction, or, somehow use the Weekly status to guide your trading,
Finally, the VXX is not acting the way it has been the past two years. Whether its the high frequency trading or other mysterious manipulations, what used to be a pretty reliable trading vehicle is not quite as reliable as it used to be. It’s still robust and as you can see above, still provides ample returns through profitable trends in all time frames. But it bears watching and should only be a complement to other trading, not the whole enchilada.
We need to keep an eye on the Weekly indexes insofar as the April-May TOP is still in place. Note on the chart above that last week the DJIA made an eight-week high, but closed lower for the week. The beginning of a next leg down? This longer-term pattern is flashing yellow and will continue to be until one of two things happen: Either the reversal line currently at 13,167 on the DJIA is breached to the upside (on a weekly closing basis), or, the current downtrend drops below the recent low of 12,035, suggesting that a significant decline is in the making. Until either of these events, the market remains, “mixed” and cautioning to tread lightly.
Above is a Weekly Trend Model of SLV. The chart and trend signals speak for themselves and no matter what you think about global financial Armageddon, this is not a trend model that can be ignored. Taking only the Daily signals that are in the direction of the Weekly signals looks like a reliable way to make the most of these multi-year trends. That strategy leaves some interim profits on the table, but it trades less frequently and does generate a lot of high probability signals.
About the same analysis goes for GLD, although I like trading stocks (and especially their options) that are lower priced, if available:
Finally, an opportunity in the making for getting into or adding to positions in CIGX. When I bought my first box of Anatabloc, the clerk at GNC knew he had Anatabloc but didn’t know much else about it. There were two boxes on the shelf and I bought one, half of their supply. Yesterday I went back to the same GNC store. There was the same clerk and he actually remembered me (who doesn’t?). He says, “Hi there,” and asks, “More Anatabloc?” I told him I wanted two boxes this time, “If you have them.” I walked over and there were 10 boxes on the shelf and grabbed two of them. While paying I asked him how sales were going. “Fantastic,” he said, “Especially considering how pricey it is.” He tells me sales took off in the past few weeks and tells me all about the Fred Couples endorsement.
Anatabloc is going viral and its just a matter of time until the stock price follows. Note that on this 60 minute chart there is a small downtrend channel forming. A break out above the trend line (about $4.90) will suggest that the next leg up is underway.
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