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Stainless Steel Rats

by The MoleFebruary 2, 2011

I’ve been serving up a healthy diet of Bollingers in the past few weeks and as a result we all have turned into lean and mean super stainless steel rats:

Congrats to everyone who continues to contribute and has been banking mighty coin lately. We are just getting started. Now let’s look at some charts – and yes, there are even more Bollingers – no worries, there’s enough for everyone. BTW, I have nothing against Keltner channels and there are times when a combination of both works like a charm.

Also, Scott and I are drooling over ‘cable’ these days – yes the GBP/USD currency pair – and I present a juicy setup you may want to consider:
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Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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You’ve seen this chart before and let me explain what’s going on right now. There are various things that can happen from here and key is not to guess on a direction right now. As you can see we popped above the upper standard deviation line of my 25/2.0 BB. That was a great place to take profits and it still is apparently. What happens next is anyone’s guess: We may drop back to the moving average (the center line in the BB) or we may push toward and outside the upper 100/2.0 BB. If we do that is the place where I would want to take short positions. Fortunately we are only about 15 handles away, so if we paint an inside bar (plus a doji) today then it’s probably fair to grab a few selected shorts. Don’t go crazy just yet though – we are still just playing the swings.

It’s easy for the human brain to perceive patterns where there are none (and Scott touched on that issue as well in yesterday’s post). Thus my golden rule for painting trend lines, especially long term ones, is that a minimum of three touches are required. And we the daily Zero has now satisfied that requirement on both the down and upside, which indicates that we are inside an descending expanding wedge formation. And at least on the daily Zero long term this is not good news for the longs! So be cautious and remain nimble – don’t go too crazy on the long or short side (yet). We need more clarification first – the market is talking to us right now but it may be lying.

More Bollingers – this time on my precious metals chart. Silver snapped back as I expected while gold has remained more lackluster in following it’s shiny cousin. For market direction I would recommend that you look at silver right now as gold is less clear. I expect silver to run into heavy resistance at the MA line at around 28.87, if it manages to breach above that mark with confidence we’ll push toward 31.34.

Finally ‘cable’ which refers to the GBP/USD for historic reasons:

Before the advent of radio, the only means of communication across the Atlantic Ocean was to physically connect the continents with a transatlantic telegraph cable, which was operative in 1867. The exchange rate between the United States dollar and British pound is still colloquially known as “cable” by financial marketeers on account of the fact that the rate was originally transmitted via a transatlantic cable.

There you have it – and the name still sticks to this day. No matter what you want to call it – I think we have ourselves a pretty solid short setup here. I would however recommend a 2N stop. When chatting with Scott yesterday I gave him two BPC setups:

This is the 2N stop/pyramid setup on our BPC. Please note that I shifted the comma by one digit to the right as the calculator rounds for equities. I could probably produce one for FX as well but I think this works just fine.

Of course 2N based on a 155 pips ATR means a 310 pips stop and that may be too much for you. You can do one of two things: take a smaller risky position or wait for a higher entry (like earlier today) and get positioned from there with a 1N stop:

Either way you play it I think it’s a reasonable setup and my target is around the 1.59 mark.

Cheers,

Mole

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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  • http://evilspeculator.com molecool

    First commenter gets to fight stainless steel rat in this Sunday's evil lair sponsored UFC event.

  • http://www.tradingsign.com/ T. Waffle

    Am I qualified? :p

  • chronographics

    I'll back the SS Rat unless of course it is CS, then I will back him 🙂

    Great post Mole

  • Joe_Jones

    Wow! Thanks Mole.
    I was about to make a stupid move and your timely post just prevented that.
    “Trading System: Rape The Pigs”
    LMAO!

  • http://practicalt.blogspot.com/ Gold_Gerb

    SS Robotz B!tchez.

    nice pic.

  • Joe_Jones

    Mole, how do you interpret VIX's move today? Does it look like step 3?

  • Joe_Jones

    Looks like an evil kangaroo. CS influence?

  • skynard

    New Gold member, finally did what should have done1 1/2 yrs ago. Pennies for the post. Thanks Mole

  • amokta

    Ok, a few ticks down just now – big deal

  • skynard

    Still short Bro?

  • http://www.tradingsign.com/ T. Waffle

    Yes here's my current holding.

    http://www.tradingsign.com/201

  • rg64

    Cramer: Market to Climb 15% This Year

    Hold onto your hats boys I may be getting bearish. When I read comments like this I have to start looking at other options. (Still long but could switch to join you boys at any min.)

  • raised_by_wolves
  • amokta

    what about dow 12000 hats 🙂

  • skynard

    Thanks TW

  • ricebowl

    Consolidation day. I bet on it yesterday PM. Only got a few nickels out of it, though, and wasn't worth the risk.

  • rg64

    like I said I am still long…I grow weary when I see things like what I noted above. Long is correct right now with a stop. Dow 12,000 still in style my man……it is above 12,000 by 40 points right now.

  • SW6

    repost:

    $SPX still in a Bollinger Band squeeze.* The squeeze is comparable to the one from early November last year that preceded by mere days the hard shift up and outside the bbs. That move outside was maybe the end of a wave 3 upward move from the 1040 bottom. A squeeze suggests a large move still to come.

    *Refer to bottommost indicator Bollinger Band width

    http://content.screencast.com/

  • BobbyLow

    I tried to find the latest data on Cramer Vs. Leonard the Wonder Monkey but I think that the Contest ended in 2008. It was always nip and tuck between Cramer and the Monkey with 49% to 51% over a couple of years. So I guess you could go with Cramer, Fade Cramer or just Flip a Coin. 🙂

    http://club.ino.com/trading/ji…/

  • SW6

    do you mostly use Gann analysis? (not setting you up to poke fun, genuine question!)

  • http://evilspeculator.com molecool

    Well, Cramer is more entertaining than a monkey – he's got that going for him…

  • ricebowl

    To elaborate what I wrote before: usually after a nice up day (+1.6%) you get consolidation. That's good for a few points off of the SPX. After a day or two of consolidation, the trend continues. In addition to that, we currently have the ^VIX buy signal. I picked up some Feb 130 SPY calls @ $179 right at the close. I'm guessing that the play will be good for 15-20%, but $140 of it was speculative premium vs. only $39 was IV, so I still have a lot to lose if we move sideways.

  • OldChicago

    You mean Steelers? 🙂

  • http://evilspeculator.com molecool

    Mos' def!

  • http://evilspeculator.com molecool

    Jeeezzz – it took you a long time!!! Now I need to somehow lure you into the Zero 😉

  • http://evilspeculator.com molecool

    Hehehe – you caught that? 🙂

  • http://evilspeculator.com molecool

    Agreed – Scott is a mighty beast…

  • volar

    nice.

  • http://evilspeculator.com molecool

    Tough one – best Superbowl EVER for me as both of my favorite teams made it in. I fucking can't wait for Sunday – don't expect a long forecast 😉

  • SW6

    “…a fighter of some renown.”

  • SW6

    Red mutant eyes,fleas the size of rats and rats the size of cats baby!

    http://www.youtube.com/watch?v

  • convictscott

    Nice post mate 🙂 I dont have time to do a post this morning, but I have a couple of things to add.

    The radical difference between Silver and Gold charts is bearish as fuck. Just like you see we need one more push into that moving average area and a juicy short should appear. It doesnt matter which MA you use at this point because most of them are clustered around the same little area. Gold triggered the long entry of an inside day setup (although the bearish non-confirmation rules it out), there should be bottom pickers getting long at this point, and the next short setup will trap some weak hands wrongway.

    As for $spx, the price action was EXACTLY what we said it would be, a small range day, with vwap scalping and bollinger reversion tactics being the only thing that works. I hope daytraders sat today out.

    So that being said we cant draw too much conclusion from the price action today other than, its doing exactly what it should. We have NO FOLLOW THROUGH from the trend day. Now its statistically *extremely rare* for the high of a trend day to mark an interim top. The last time it happened was 2004.

    We have a confirmed $vix buy signal.

    We are above CRITICAL GAMECHANGING RESISTANCE at 1300.

    Odds favour a little pullback, but the odds are overwhelmingly for at least one more leg up. The market has spoken rats, fucking listen! Take every buy setup from now, especially from lower down.

    That cable setup is neat-o. Ties in nicely with my patterns there is a setup building but not triggered yet.

    USDJPY is worth another look, but I'm biased at this point so I wont post it.

    AUD is a fakeout inside day sell. I'm taking it.

    Crude is a retest variation sell, triggered on break of the low. Taking it.

    NG is a retest variation buy, but its a whore of a market. Taking for a token position

  • amokta

    Thanks ricebowl we had our trend day yesterday, today was day of rest!

  • http://thefxspeculator.blogspot.com Onorio

    Hey Scott! I`ve placed a question to you in the last post, didn`t know if you looked at it but here it is.

    “Hey scott could you give me a good site about candlestick inputs? Im really enjoying your posts so i want to learn some more about it 🙂

    It might be useful to use with my inputs. Thanks. “

  • convictscott

    Onorio, most of the resources on candlestick pattern focus on calling them esoteric japanese names, without information on actually trading them.

    Hit me up on skype, scottphillipsau, and I will show you what I use. There are 13 setups that I use, of which 6 of them are 95% of it.

    Like any decent trading system, the greatest variance in results is due to money management and risk control.

  • convictscott

    I know someone who gets very good results using indicator based methods to identify a potential setup, then the candlestick patterns to show him where to place his stop and how to control risk once in a trade. Seems to work very well for him.

  • Joe_Jones

    I can't believe that I am turning bullish. The top must be in.
    😉

  • fisheggs

    Hey Scott, I may hit you on Skype tmrw regarding setups, All OK with Yasi?

  • http://thefxspeculator.blogspot.com Onorio

    I`ve been watching your recent calls but sometimes i`ve some dificult to understand the sides of the trades, if long or short and why.

    Can`t you make a post someday about that 6 setups? I believe im not the only one interested.

  • http://evilspeculator.com molecool

    BTW, I don't have the time to put up a wrap up post but Geronimo lost 13 ticks today. One stop out (12) and one trade that would have won but was entered too late and got cut off at 3:58pm EDT.

    Well, odds seem to point to more upside and that'll be good for Geronimo.

  • Joe_Jones

    A freaking Nuke would have to go off somewhere to make this thing turn bearish again.

  • convictscott

    Sure, its going to be a BIG POST , but I can do those. i'll get it together over the next few days

  • http://twitter.com/CyclicalAnalyst CyclicalAnalyst

    Very bearish topping pattern in place for Financials $Rifin. Huge drop possible near term. Chart with targets.

    http://cyclicalmarketanalysis…./

  • raised_by_wolves

    That's the range between the top and bottom the Bollinger Bands, right?

  • raised_by_wolves

    I've never listened to David Bowie. What I've heard of Diamond Dogs so far is pretty decent.

    http://www.youtube.com/watch?v

  • http://evilspeculator.com molecool

    Oh-oohhh…

    😉

  • skynard

    Actually have been studying the zero during the trial period and it has been an excellent indicator. Getting use to it and more than likely will subscribe soon.

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨
    ¨°º¤ø„¸ N E W „ø¤º°¨
    ¸„ø¤º°¨ P O S T “°º¤ø„¸
    ¨°º¤ B I T C H E S ¤º°¨
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • http://thefxspeculator.blogspot.com Onorio

    You could divide it in 6 parts 🙂

    Tks scott i believe evil lair will appreciate it.

  • SW6

    I've loved the Diamond Dogs album since I was a pup. And quite liked David when I was a kid, though found him a little confusing. David's concept of Diamond Dogs is that it's all one piece with different suites.
    For example that track you posted, “Big Brother” ends abruptly on that clip because it is supposed to run into another track called, “Chant of the Ever Circling Skeletal Family,” which is a great track. I always listen to these two tracks together, they don't sound quite right on their own.

  • OldChicago

    There are some discrepancy here and there. Energy has been gunning, not giving back an inch. But, if you look at the energy major – SLB, XOM, XLE all have some kinda doji w/ narrow bodies. DJT had the larges gain yesterday and reverse hard today. Tech is driving the cart today – the high PE, growth beta had been the leaders, e.g. BIDU, APKT, GMCR (+18% AH!!!). We could be in consolidation or topping. The tape can't go down unless USD go higher.

  • http://www.facebook.com/profile.php?id=100000661510485 Stal Nierdzewna

    magnifique 🙂

    Regarde
    http://stalnierdzewna.blogspot