BAS: trying to breakout from a 5-month reversal rectangle?

First, the daily chart going back to November 2013:

The next chart focuses on the possible 5-month reversal rectangle:

Of course the breakout attempt can fail and this rectangle could turn into a continuation pattern that starts another downtrend. BAS is a volatile stock tied to a volatile commodity (oil) so a trader must be cautious and stick to rigid risk controls.

CSV breaking out of a 2-year rectangle

First, let's look at the weekly chart of CSV:

Now, let's look at the daily chart and focus on the breakout:

I consider CSV a thinly-traded stock. I use extra caution when trading low-volume stocks such as CSV. Entering the trade only at a spot with a favorable reward-to-risk ratio, and even then only with a small position, is how a trader can manage risk with volatile and risky stocks such as CSV.

Chart analysis of Ford (F)

Here is a 2-year chart of Ford:

Now let's focus on the last 7 months:

Ford seems to have broken out of a textbook 5-point reversal symmetrical triangle in early February and has been trading in a tight range for 9 weeks. This range-bound action may lead to a breakout up or down. By the way, the measured move price target for the reversal symmetrical triangle is around 18, which is where long-term resistance holds.

And finally, a monthly chart going back to the 1990s:

This possibility may seem too incredible, but it is possible. Many things have to happen for this 15-year-plus H&S bottom to be realized. We should focus on possibly trading the next multi-week or multi-month pattern breakout. But it is always interesting and fun to think about what is possible in the big picture.

One reason why I keep this massive pattern possibility in mind is because it helps me fight my bearish bias for the market. The market has been on a historic run since the March 2009 bottom. Yet the market continues to go higher. Up and up. To my amazement. But I know that traders must accept and trade according to the actual price action and not what is "supposed to happen." We must always strive to stay mentally flexible and not succumb to our biases.

Chart analysis of AK Steel Holding (AKS)

First, the AKS chart going back to September 2013:

Now let's zoom in on the last 7 months or so:

Was that a trendline breakout on high volume in late March? Perhaps. Even if a breakout, I expect much back and forth and even a decline back to the trendline. Also, there is likely strong resistance at the $5 level.

AKS is a volatile and financially risky stock. If one is going to trade it, then one must use great caution. Using a small position is always a good way to limit risk. With a stock like AKS, the position size I use is the amount that, in the worst case scenario, I could lose entirely and still be a relatively minor loss for my trading account. There is nothing wrong with not trading a setup for whatever reason. Remember: there will always be more setups to trade. We must be patient.

AKS is due to release its earnings report in 3 weeks. I almost always exit my entire position before the earnings report. I think holding a stock through earnings is an unnecessary risk. There will likely be another chance to get in after the earnings announcement. And if no opportunity presents itself, then so be it. I move on.

The AKS chart shows possibly much potential as a long trade. But there is much work to be done and many hurdles to be cleared. As always, patience and strict risk control are required.

Another sign stocks are about to start another run higher: NYSE index trying to breakout

Previously, we discussed how the NYSE index has been forming a continuation H&S bottom, which, if completed, would push stocks higher to continue the current 6-year stock bull market. Here is the NYSE chart as of last Friday:

We see that the July 2014 high has rejected three attempts to break higher. Now stocks are making a fourth attempt to overcome the July 2014 high.

Do I think the NYSE index will break higher and complete the continuation H&S bottom? It is doesn't matter what I think. And I always try to remember that my main goal as a trader is to participate with the market trend rather than try to anticipate or predict the future. This mentality helps me accept the actual price action rather than get lost in my wishes and hopes.

But if were to offer my opinion (run away everyone), I would say that I am looking for stocks to go higher and the NYSE index complete this big continuation H&S bottom pattern. Why? My main reason is that small-capitalization stocks as measured by the Russell 2000 index (symbol: IWM) has in the last couple of weeks broken out of a 16-month consolidation rectangle pattern as seen here:

Of course things can change quickly. But epic bull markets, like the current one, don't die easily. Still, traders must be mentally flexible. We have to avoid following conventional wisdom and ask uncomfortable questions. So we must ask whether there is a case for potential stock weakness based on classical charting principles. The following is one chart interpretation that urges caution:

SPY, the ETF that tracks the S&P 500 index, is potentially forming a bearish ascending wedge. Remember that traders have different interpretations of the same chart. Some traders will disagree and see no ascending wedge. Personally, I think it is possible and reasonable for a trader to conclude that SPY's price action may be forming a bearish ascending wedge. Charting is about possibilities, and traders should challenge themselves to always try to see the other side of the argument.

As always, it will be interesting to see how the NYSE and SPY charts play out in the coming weeks.

Russell 2000 breaking out of 15-month consolidation

Here is the chart of IWM, the ETF that tracks the Russell 2000 index:

Is this the start of yet another uptrend in this 6-year bull market? I know many investors and traders will be in disbelief. I also have some difficulty accepting the incredible run of the stock market since the March 2009 low.

But a breakout is what the chart says.

I'll be looking at other indexes to see whether they follow the Russell 2000 and confirm the breakout.
Remember: if you don't believe in this breakout, then you don't have to trade it or invest in it. But don't go all in short because the market is doing what it is not supposed to do. Price is king, queen, and final.

Try to believe what you see, not what is supposed to happen.

Failed breakout in NYSE index

In my last post, I said that the NYSE index would have to decisively close and stay above the July 2014 high for a convincing breakout. The following chart shows that the NYSE was turned back at the old high:

This is the 4th time in less than a year that the NYSE index was turned back around the 11,100 level. Of course the market can attempt another breakout and this rejection could turn out to be a bear trap just as the breakout attempt turned out to be a bull trap.

What is clear is that, at least according to the NYSE index, the market is not ready to start yet another uptrend in this 6-year bull run.

Bears will be happy with this breakout failure. We'll have to wait to see if this rejection is the beginning of a significant market top or perhaps even a long-term top. But remember that many people have been calling, inaccurately, for a top for several years. We'll just have to wait for a resolution of this trading range.