Bigger Picture

You”ll never guess where I am, right now… Livedesk is linked from the site”s left sidebar. Click on it now and join me through the top of the hour to review charts.

You”ll never guess where I am, right now… Livedesk is linked from the site”s left sidebar. Click on it now and join me through the top of the hour to review charts.

Bait and switch…
Yesterday”s market drop has extended down further overnight. Greeting Friday”s open in the midst of a sell-off like this often bounces for the morning. That happens because, not yet seeing a bounce and the weekend”s illiquidity about to begin, scared sellers rush to get out of the way of a bigger drop they think is unfolding. What they really do is push price down too far too early and its price suddenly becomes more attractive to buy.

So, you”ve probably been hearing “BTFD” a lot, as in “buy the drop.” Don”t.

That strategy”s track record is perfect, if ignoring how extended a drop can become before finally recovering. Also, like all generalizations, it doesn”t exclude simple pullbacks in an uptrend. This current environment is very different, having spent the couple of months ranging sideways.

Perhaps BTFD will work today. I”ve got my tools to help determine as early as possible, and I”ll cc: you on the memo if any of them trigger. Meanwhile, my bigger concern is that this might be a FD might be Fbig.

So, I won”t put out trading parameters with there being an overwhelming likelihood of speculative premium continuing to be crushed. You already have yesterday”s Open”s Interest blog post, last night”s video review of them, and the notes of that discussion below. Feel free to ask me in this thread for any relevant levels in stocks you”re following.

“There is nothing new under the sun.” — Ecclesiastes 

When we first met during my webinar one month ago, I noted some of the similarities between Biotech stocks and Internet stocks when they began emerging, and Marijuana stocks today. 

This past week or three is nothing new. 

Whether in a particular stock, its sector, or the broader market overall, price is all about the ongoing balancing act between supply and demand. How many shares are available, at what prices, and how much are buyers willing to pay.  

Expensive price entices sellers, and cheaper price attracts buyers. Simultaneously, rising price attracts buyers, and falling price entices sellers. Price rising steeply reflects eager buying and creates more of it. That is, until there is no more left to create, not at the suddenly higher prices where potential buyers increasingly believe they”re too late, and earlier buyers start selling so heavily that they push price back down.

And that”s when price falls hard. That”s because buyers become sellers, and price reversing down dampens interest among prospective buyers.

Nothing is perfect. This constant tugging and pulling doesn”t happen in a vacuum. Missteps, miscommunications and misappropriations that happen every single day in every single sector are magnified in such a young sector.

Of course, I speak of GrowLife (PHOT), which was halted yesterday.

Actually, “exacerbate” isn”t correct. The sector”s reaction was exactly what it should have been. It is the other mature industries where the reactions to scandal are skewed — by being muted. Imagine GM ignoring faulty brakes, or MF Global”s collapse, if either of their sectors were at the Marijuana sector”s stage. 

That”s the price this sector pays for still being in its infancy. Unfortunately, it”s the price we all pay for participating in this sector at this stage. I”m okay with that, and I own PHOT as an investment (previously disclosed). The Marijuana sector”s difference — like Biotech and Internet before it — is the attraction of new money and new investors.

Whatever comes of the SEC”s investigation into PHOT will only make the sector stronger. Possible findings range from being cleared, fined for dumb accounting mistakes, or charged as bad actors. Let”s get the truth, and let”s move on. The industry becomes more transparent, investors and prospective investors grow more comfortable that there”s a cop on the beat, and other companies behave better. 

Yes, prices are dropping during the Marijuana sector”s self-improvement phase. (The broader market sell-off doesn”t help matters.) Some companies might drop out, altogether, as they should. For the rest of them — and for those traders and investors exercising prudent risk management — that which doesn”t kill them, makes them stronger.

Livedesk session notes are below (the video is listed at the bottom of this page), watch list parameters for Friday will be available before the open…
Off the list, and why:
CBGI — price dropped back to its recent low, which could be only noise, except that volume expanded, which suggests a new downleg has begun.
EAPH — Not enough volume or price volatility to suggest anyone else is interested in it, but I still like the chart.
EDXC — Broke a big support, and on volume, so can”t buy right away without proof the break is being rejected.
ENRT — Fresh low on expanding volume, same problem as edxc.
HPCS — Holding support, but volume slipping away. I still like the pattern, and would re-focus on it if there were price strength.
STEV — Dipped even further, and the pattern is all about recovering resistance. Would reinstate on a strong day.
UTRM — Volume and price shrinking.

Still covering:
MCIG — Held a test of its maximum pullback allowed, but not of support, so this should rally into the weekend if valid.
SKTO — Low volume inside day at the lows, will give it another day to indicate that its pullback has ended.
TRTC — Big volume day and big range intraday, retested recent low and held its maximum support. Shouldn”t hesitate rallying if a new downleg is avoidable.

Probably adding to coverage:
FITX — Met my minimum target on volume and held, will look for resistance levels.
MDCN — third-day surge is already pulling back, might extend higher

Other mentions:
GWPH — weaker, on lighter volume
ATTBF — pattern seems to have another low outstanding

Livedesk video link:
http://new.livestream.com/accounts/7617211/events/2865745/videos/47682656