As I stated in the 10/12/12 volume off the high post, I had two more names in the hopper that I wanted to address. First there is is Stillwater Mining Company (ticker SWC)
SWC had appreciated considerably since early July, gaining more than 40%.
Yesterday, the company announced the offering of covert notes, and subsequently sold off 9%. Previous to the report, I had reduced the stock's weighting in the long-term value portfolio, taking the weight down to 2.5% from well over 3%. In hindsight, I could have reduced the weighting by more, but I cannot beat myself up for informational flow that is random. In any event, the strong sell-off on volume suggests to me there is further downside in the shares, possibly into the $9 range. I accordingly sold out of the position in the long-term value portfolio.
As for a more traditional volume off the high, lets look at the Powershares QQQ Trust (ticker QQQ). Yes, the NASDAQ index is showing volume off the high characteristics.
The QQQ topped out on September 19 at $70.40 and initially the volume on the downside was benign. However, the volume to downside accelerated on October 9, as 68 million shares traded hands versus an average of 30 to 40 million shares that traded daily since the fund broke out to the upside in August. In addition, the QQQ broke the 50 day moving average on this move. This breakdown was predicated on weakness in the NASDAQ index components including Apple, Microsoft, Intel, Cisco, and Oracle to name a few.
To me, this set up suggests that the QQQ has downside to, at least, the 200 day moving average. And I say at least. More ominously, the three-day sell off- which culminated in the October 9 downside volume acceleration, may be setting up a candlestick pattern called three-black crows. Three black crows signals are extremely bearish setups, and suggest significant downside. Now, the second day of the set up (Oct 8) was not as strong as I would like to conclusively say it is a three black crow, but I think all-in-all the setup here is bearish. I took a short position in the QQQ in the short trading portfolio.
SWC had appreciated considerably since early July, gaining more than 40%.
As for a more traditional volume off the high, lets look at the Powershares QQQ Trust (ticker QQQ). Yes, the NASDAQ index is showing volume off the high characteristics.
The QQQ topped out on September 19 at $70.40 and initially the volume on the downside was benign. However, the volume to downside accelerated on October 9, as 68 million shares traded hands versus an average of 30 to 40 million shares that traded daily since the fund broke out to the upside in August. In addition, the QQQ broke the 50 day moving average on this move. This breakdown was predicated on weakness in the NASDAQ index components including Apple, Microsoft, Intel, Cisco, and Oracle to name a few.
To me, this set up suggests that the QQQ has downside to, at least, the 200 day moving average. And I say at least. More ominously, the three-day sell off- which culminated in the October 9 downside volume acceleration, may be setting up a candlestick pattern called three-black crows. Three black crows signals are extremely bearish setups, and suggest significant downside. Now, the second day of the set up (Oct 8) was not as strong as I would like to conclusively say it is a three black crow, but I think all-in-all the setup here is bearish. I took a short position in the QQQ in the short trading portfolio.
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