Tuesday, April 14, 2015

Chart of the day: ULTA and the post breakout trading range

One of my favorite trades is playing the post earnings breakout range that develops within stocks that have had a strong earnings catalyst the previous two weeks to 2 months.

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Ulta is a good example and has formed a $148 to $155 range. Buy the bottom, sell the top. It doesn't get much easier than that. I will look to enter on a pullback as close to $148 as possible.

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Monday, April 13, 2015

Ugly Chart of the day: BABA

Baba was the talk of the Street when it IPO'd last fall and quickly zoomed up from $80 to $120 in a matter of weeks. However, after forming a classic short formation back in November, it has given back all it's gains and now sits 5 points below where it opened.

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Yes, the chart is ugly. You probably do not want to trade it right now. You see, we like pretty charts. Parabolic charts. Trending charts. Breakout charts. 

But still, every once in a while there is an ugly duckling that shows signs of turning into a swan. There are some subtle hints that BABA might have put the worst behind it and is ready to turn pretty. 

These hints lie in the volume pattern. Okay that's it. I've said to much. You can figure out the rest . . .

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Friday, April 10, 2015

Swing Trading Smart Tips: Set It and Forget It

Tick. Tick. Tick. That stock is driving you bat shit crazy!

Your co-workers gawk as you sweat and continually look up at your screen. You can't hide the fact that you are stressed-the-you-know-what-out.

Why are you stressed?

It's because that stock you entered moved 20 cents below your entry and is now forming a bearish engulfing pattern.

Sounds bad huh? I forgot to mention that you are swing trading this stock for a $10 gain, your stock has moved 20 freakin' cents and that bearish wedge . . . it's on that 2 minute chart you keep peaking at when you should be trading off the daily.

Yeah, that daily.  The one that is a 330 minute chart.

Look, I've been there. It's tough to enter a swing trade and not monitor it. It's human nature and we all do it. However, we must fight ourselves from doing this, because it inevitably leads to micro-managing positions, which is the death knell for swing traders.

That is why I constantly preach the mantra of "set it and forget it".

One of my mentorees just witnessed the power of set it and forget it first hand. I got this email from him today:


He "almost tapped out" is trader code for "gave up on the trade before hitting his stop or target." In the past, he would have. But now SB has seen the light.

Set it and forget it

A lot of hard work went into your entry, stop and target levels. Hours of experience in pattern recognition, sector analysis, trader psychology, risk analysis and support and resistance levels went into that trade you just put on. Now it is time to enjoy the fruits of your labor by "setting it and forgetting it".

If you have managed your risk right, what's the worst that can happen? You'll take a small loss and move on to the next trade.

See, trading can be as easy or hard as our minds make it out to be. Make it easy. Set it and forget it.

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Thursday, April 09, 2015

Chart of the day is EA: Keep it simple stupid!

Sometimes swing trading is easier than we make it. In the trading game it literally pays to keep it simple.

Our stock of the day, EA is a great example of the KISS method. When do you buy EA?

That's easy. When it pulls back to the 50 dma or when stochastics near oversold levels. It's a slam dunk trade that would have given us 7 profitable trades over the past year.

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For entry I will wait for a slight pullback from this level to attempt to get better value.


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Tuesday, April 07, 2015

Chart of the day: DIG

Today's swing trade stock chart of the day is DIG.  Energy is showing positive money flow and the sector has broke out over the 50 day moving average. Here we can place a stop under the moving average with a target at the recent February pivot high at $57.

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I will wait for a slight pullback from this level to attempt to get better value, though this is risky as the stock could move from here.



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Monday, April 06, 2015

Chart of the day: HD

Today's swing trade stock chart of the day is HD (Home Depot). In the Trade Report we have been watching residential real estate stocks for a few weeks now and of course, building material and home improvement stocks move in line with real estate.

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Home Depot broke out on strong volume in mid February and has now pulled back to the 50 dma. An entry here in the $112-114 range provides great reward to risk if stop is placed under the moving average with a target at the range high $118 or even a breakout to new highs.


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Thursday, April 02, 2015

21 profitable stock trading setups and the optimal conditions to trade them

Most full-time traders have a basket of "goto" setups that they trade repeatedly. Some do so mindlessly, irrespective of market conditions. You can make money this way, but you will not become wealthy.
The best traders optimize their trading by deploying the right setup for the right market. For instance, a "trading range" setup is highly profitable in choppy, rangebound markets. Just don't expect it to make you money in a parabolic momentum market.
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Here are some of my favorite setups and the best conditions to trade that setup:
  1. Trend pullback: trending markets that successfully tag key moving average support
  2. Bottoming formation: downtrending markets forming a base
  3. Rubber band short: parabolic markets nearing resistance showing signs of weakening
  4. Rubber band bounce: parabolic downtrending markets near major support levels
  5. RSI divergence shorts: market near highs but showing weakening overall breadth
  6. RSI divergence longs: markets near lows but showing strengthening overall breadth
  7. Breakouts: earnings season in an up trending market
  8. Breakout pullbacks: trending and rangebound markets, avoid downtrending markets
  9. Breakdown shorts: downtrending, rangebound and stalling trending markets
  10. Trading range bounce: rangebound and trending markets
  11. Trading range short: rangebound and downtrending markets.
  12. Breakout failure: Downtrending markets that are bouncing, or stalling at highs.
  13. Breakdown failure: momentum markets
  14. Remounts: any market
  15. Earnings Breakouts: Any market
  16. Head and shoulders short: Extending markets showing negative volume patterns
  17. Double Top short: Extended markets showing negative volume patterns
  18. Earnings Breakdowns: Downtrending markets
  19. Moving average bounce: any market for small bounces, trending markets for sustained bounces
  20. Pre (anticipatory) breakouts: Trending markets
  21. Dead cat bounce: down trending markets, rangebound markets
All of these setups will allow you to keep up with or slightly "beat the market". However, if you want to make serious money in the trading game you must deploy these setups under optimal market conditions.

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