I’m sure we are all getting tired of the tug-of-war between continuing market rally and a long overdue doom-and-gloom market crash that has gone on long enough.
From the monthly $SPY chart above, the tug-of-war started back in 12/31/2014 when the month closed with a doji bar. As most know, a doji bar is the Japanese candlestick bar that represents a stalemate between the bull and the bear. From my years of looking at charts, a doji at major support and resistance (or at new high and low) is a very powerful tell-tale sign that provide a better than 50/50 probability of forming a top at resistance or a bottom at support.
2015 was the year the bear fought mighty hard to kill the bull momentum that had gone on for six straight years. While the bear did not win the battle with a huge percentage drop to close the year, it did successfully halt the bull momentum to a squeaky stop.
2016 started off with a waterfall price action that surprised everyone for its speed and severity. Luckily, when thing fall too quickly, there is always a good chance for a bounce. And from my charts, we are now at a pivotal point of this bounce.
From the weekly chart above, this week strong bar brings price to the Fibonacci retracement level of 61.8% from the weekly high of 11/6/2015 to the weekly low of 02/12/2016. Notice that price closed directly in the middle of the 79 & 89 MA resistances.
Just because we are at the pivotal point of this so-called resistance and Fibonacci nonsense in the weekly chart, it doesn’t mean the bull is going to correct. There is still a good chance that this week momentum may continue on next week. However, the daily $SPY chart below is now showing signs of “tiresome” in the bull momentum that I need to take into consideration of the possible ramification of the weekly resistance and the Fibonacci 61.8% retracement.
The $SPY daily chart shows a spinning top close on Friday. And this spinning top is also directly at the Fibonacci retracement of 61.8%. To me, spinning top is as good as a doji bar representing stalemate between the bull and the bar. Notice the oscillators are also at the upper range which signify potential overbought situation.
The Nasdaq COMPQX index is also facing the same predicament.
Instead of a 61.8% Fibonacci retracement, it is at 50% retracement and the daily bar closed with an actual doji bar directly at the 79 & 89 MA resistance. The fact that the Nasdaq index could not even rise to the 61.8% retracement level meant that it is weaker than the SP500.
And as I’ve stated before in my previous blog posts, a doji bar at major resistance is not something I’ll ignore, especially when we are talking about the general market direction. Thus, I’ve taken precaution by reducing my exposure to my buy-and-hold positions just in case the bear takes back the reins next week.
$DMRC was a target of a hit article from SeekingAlpha last Thursday. Despite the obvious negative bias of the author that didn’t even bother to mention the positive developments from the 2016 NRF show, price came down anyway. Being over-weighted on Digimarc, I’ve no choice but to reduce my position last Thursday to get out of the way of a bear attack.
As much as I believe in the prospect of Digimarc, I want to raise cash so I can buy back more Digimarc at lower price if the correction does happen. Now, just because I’m exercising precaution doesn’t mean there is going to be a correction. I’m also at risk of not having all my shares in place when Digimarc bounces next week.
From the weekly $DMRC chart above, there is a support at $26.82 area and it is important that this support holds next week. The next support afterward is the recent low of $22 from last year October melt-down.
$GWPH is my new position I added Friday after raising cash from selling some $DMRC. I’ve wanted to buy GWPH for a long time but didn’t want to pay the exorbitant high price to do so.
Now, after seeing a possible long-term support at the $39.xx level where it is close to Fibonacci 78.6% retracement, I bought some for the possible bounce. I could understand why price went as high as $133.98 due to the fact that cannabis oil is not new as a healing agent. With the popular cannabis Charlotte’s Web oil that is known to curtail epilepsy, I’m betting that the Phase III trials GW Pharmaceuticals have going on will be successful. For price to come back down to this level is “my wish come truth” moment so to speak. I’ll keep a core and trade the rest to lower my average cost if price breaks support.
$ARTH is holding its ground waiting for the human trial to complete by Summer time. I’m holding this one to maintain my long-term capital gain status due to holding my shares for over 12 months.
$IBIO succumbed to selling pressure due to no news. Due to lack of liquidity, it is pointless for me to take any precaution since my action along will drop the price. So I’m holding this one for news on the fibrosis treatment.
$BIOC did good this week with a strong bounce following last week hammer bar.
There is a strong possibility of a bottom-formation here. Although I reduced my position as part of my precaution mentioned above, I’m looking to add back if there is strong momentum after next week earning release. When you think about it, if Biocept succeeds and rise above all other liquid biopsy companies, it doesn’t matter if I pay $1.4x or even $2.xx for the shares, the future price will eclipse current price by leaps and bounds.
$RBYCF closed the week slightly higher as well thanks to the persistent bullish gold price momentum. Despite this one being a “loser” right now, my thinking is that if there is a bear market in the horizon, this one here may be the shining star to hedge my portfolio due to the possibility of precious metals being used as a safe haven for investors.
What can I say, I am a buy-and-hold until the general market tells me to be careful. In other words, my internal “fail/safe” mechanism is triggered and I took action to reduce exposure despite my overall conviction on the stocks I invested in. Since I’m way over-weighted in $DMRC, it is even more important that I reduced this one for precaution.
I’ll always protect capital when I perceive a major crossroad in the making, especially when it made an impact on my thought process. Regardless of being right or wrong in my perception, what matter most is that I know my capital will survive regardless of where the market is heading next.
My 2 cents
From my camera: