Links that Get the Market Speculator's Seal of Approval

Trading Links
Charles Kirk does a good job of pointing out the developing double top in the S&P 500. While it's important to watch developing patterns, it's dangerous to make predictions before the pattern fully reveals itself. When everybody is looking at the same thing, patterns have a tendency to do the opposite of what is expected.

Ugly has been on fire, posting over a 100% gain over the past two months.

The Trading Radar for next week, courtesy of Minyanville. I'll be paying attention to the energy sector. I'm waiting for a pullback so I can get into a few of my favorites, like NOV, OII and CAM.

Index overview from Afraid to Trade. We've got to pullback at some point. If we keep moving higher, I'm going to have a tough time finding attractive entries.

I avoid market related shows like the plague. The worst thing that can happen as a trader is to have your trading effected by the garbage that comes from CNBC. That being said, the one show I do tune in to from time to time is Fast Money, a show that features actual traders. It's moving from 7 pm to 5 pm in a move that may be good for many traders, but not for me. I get home at 5:30! Thank goodness for DVR.

The Fly spotlights the networkers. Not too many have made my Focus List.

10 Trading Commandments. Number 10 is crucial: Don't let your bad trades turn into investments. Others will say "cut your losses early." My recent NILE trade is an example of respecting this rule. I still like the stock, but got out once my stop was hit.

Beware of the low volume breakout. Volume is what turns a breakout into a prolonged trend. I rarely trade trends without volume.

I've missed the China trade, even with many Chinese stocks in my Focus List. Is it too late to join the party?

Sports and Entertainment

I sampled a few new shows this week. I thought Bionic Woman was great, despite the negative reviews I had read. Big Bang Theory was hilarious, and Chuck was A level entertainment, featuring comedy, action and good acting.

The only returning show I've watched is Heroes. The season opener was good, but not great. The new character introduced in this episode, Maya, was intriguing. I was hoping for more about the Company and Peter's "amnesia". As usual, Hiro's antics were the best part of the show.

CNNSI's list of the 10 most clutch quarterback's of all-time. I have no idea how Troy Aikman made it on the list, and Brett Favre did not.

The idiot's guide to the Isiah Thomas trial. How does this guy still have a job as a GM? I could understand if he was as good of a GM as his former teammate, Joe Dumars. But a guy who has single handedly run a franchise into the ground does not deserve this long of a leash.

Kelly Pavlik knocked out Jermaine Taylor to become middleweight champion. This one might go down as fight of the year. Pavlik showed great heart in getting back up off the canvas after getting brutally beaten by Taylor, and then knocking Taylor out in the seventh.

Strong Accumulation Pattern in NILE

One of the most important factors I look for in selecting a stock to trade is a stong accumulation pattern. NILE is a good example of a stock under accumulation. Take note of the strong volume on up days versus the low volume down days. This is our first que that the stock is under accumulation. Next we see that all volume related indicators are sky high. Finally, price has moved as we'd expect with this type of volume pattern, up around 30 points since early July.

Strategic Flexibility is a Key to Trading Success

Your strategy has to be flexible enough to change when the environment changes. The mistake most people make is they keep the same strategy all the time. They say, “Damn, the market didn’t behave the way I thought it would.” Why should it? Life and the markets just don’twork that way.-Mark Weinstein

With the third quarter in the rear view mirror, I am keeping this quote on a post it that is stuck smack dab in the middle of my desk. What worked last quarter might now work this quarter. Keep an eye on sector action and note what new sectors are breaking out. Are extended groups like commodities and China stalling or continuing to run? What are the big whigs buying? What's being accumulated?

This past quarter, I ditched my normal breakout-pullback strategy and took a ride on some of the momentum stocks. This might not work in the fourt quarter. I'll keep my bag of trading tricks near by in case the market dictates a need for change. As I told a reader last month who was befuddled that I was ditching my pullback strategy:

I don't have *a* strategy. I have many strategies in my arsenal, and employ them as market conditions dictate. I do not have one rigid form. Rather, I strive to be like water. As Bruce Lee would say, water is formless. It adapts to it's surroundings. Be like water.

Today's Trades: AEM, FWLT, NILE and FCX

I sold 300 shares of AEM at $50.35 (entry at $46.85) for a $1050 gain (+7.4%).

I sold 200 shares of FCX at $107.50 (entry at $105.25) for a $450 gain (+2.1%).

I sold 200 shares of FWLT at $133.32 (average entry $127.88) for a $1088 gain (+4.3%).

Update (9:45am): I was stopped out of 300 shares of NILE at $94.55 (entry at $96.55) for a $600 loss (-2.0%).

I decided to close out some positions as I expect a dip that will offer better prices in the coming week. I still like all three stocks.

The Focus List Sorted by Float

Stocks with a low float (number of shares outstanding) have propensity to make explosive post breakout gains. For this reason, I like to sort my focus list by float and study these stocks very closely.

Here are the stocks from my focus list with the lowest float:

Today's Trade: NILE

I bought 300 shares of NILE at $96.55. The stock has pulled back to the old high on light volume. My stop is at $94.55 with an upside target of $103. If I get stopped out due to a deeper correction in the stock, I would probably re-enter in the $85-90 range.

Today's Trade: AEM

I bought 300 shares of AEM at $46.85. I've been waiting for a pullback to support in gold and it looks like we've finally got one. Stochastics have reached extremely oversold levels and obv has dipped to a support level on low volume.

There are a few reasons to be skeptical about this trade. It's always tough entering into a sector when the rest of the market is up and breadth levels are close to 2-1 to the upside. Also, today's price bar is long to the downside, which is not ideal. If volume had been extreme on this pullback, that would have been a dealbreaker. However, since volume is still lighter than the updays, I'm was willing to take a small feeler position.

Focus List Charts

NOV is one of my favorite energy sector plays. If the first, weaker support line breaks down in the upper $130's, the next buy point is at $125. I'd like to see the stock work off the overbought readings a bit.



CROX looked like it might be ready to end it's amazing run, but has persevered. It looks good on a pullback to support.



PCU has a pattern lots of focus list stocks are exhibiting. The overbought readings make it tough to enter until it pulls back to $115.

4 Elements Required to Trade Successfully

I received a question for Tom that many of us have stuggled at some point in our trading careers:

I think I have about 90% of the same stocks on my watchlist (and like you I
spend a TON of time on them), however, my challenge is always the entry/exit!

What tips can you give on the best way to approach this? With high beta stocks I am always nervous of a nasty reversal...we've seen a few lately.

There are 4 elements you must master:

• Idenifying support and resistance. If you are trading in the middle of the range, you will be more suseptible to what seem to be reversals, but are actually just noise in between a trading range. Do not enter if your stock has moved more than 5 percent above support or the breakout point.



• Identifying volume patterns. If you buy a dip on high volume, there's a higher probability of getting caught in the midst of a reversal. Same goes for low volume breakouts.



• Set appropriate stops, based on support, resistance and percentage of your trading portfolio. Even if you take the appropriate cautions, you can still get reversed. It shouldn't hurt when you do.



• Do not trade scared. Trust your analysis and risk parameters.

It has taken me time to master these four elements to trading, and at times I still fall into my old habits. The key is to constantly assess both the technical and mental aspects of your game.

Chart Request: CMI

In the comments of the last post, Raj asked:

What do you think of CMI? It has pulled back well to previous support levels.

CMI is pulling back towards a strong area of support after a nice breakout. Where you enter depends on your strategy. If you are a stickler for entering as close to support as possible, you may want to wait to see if the stock can pullback $125-126 in low volume. An entry now, at the current levels would still give you a good reward to risk ratio, if using the recent high as your target. This allows you to enter with adequate risk parameters and without fear of missing the next leg up. This was my strategy with today's FWLT trade.

Technically, OBV and stochastics are both rising and forming higher lows, which is the sign of a strong, trending stock. My only concern is that accumulation is not as strong as some of the other momentum players. While OBV has been rising, up days have only slightly out-measured the volume on down days. Compare CMI to the chart of FWLT in the last post, and you'll notice the difference in accumulation. That's why I prefer FWLT to CMI, although I do think gains can be had from CMI.

Today's Trade (FWLT), Market Notes and Off-Topic

I bought 100 shares of FWLT at $129.26. This is a small feeler position and I will buy more on a pullback into the $125-126 range. To the upside, I will buy more on a break of $135. Note that this is a position trade with a longer time frame than some of my recent trades.

I am glad we finally received a day of consolidation (although many stocks I follow are still on fire, ala BHP and GRMN). Hopefully we'll get a few more days like this, which will be great for trend-pullback plays.



Off-Topic:
This weekend I received more non-trading e-mails than usual. This is probably due to the links post and the new site design.

I'm still tinkering with the site design. By the end of the week it may look completely different. I welcome e-mails and feedback on the design.

I received and appreciated all of the tv show suggestions. It looks like I'm going to have to put some new shows on my Netflix list. As for new fall shows, tonight I'm going to sample Big Bang Theory and Chuck. Of course, I can't wait for the new Heroes episode.

Great weekend for NFL QBs. A ton of 300 yard games. Patriots win the Super Bowl. Anybody want to bet against me?

20 Stocks to Buy on the Dip

The following 20 stocks are at the top of this week's watchlist. I plan to remain patient and only buy on dips close to support levels.

JASO, LULU, DRYS, NILE, CF, FSLR, FCX, EXM, BHP, CMI, AGU, SINA, CTRP, PCU, EWZ, FDG, SID, LIFC, FLR AND CPHD.

Links that Get the Market Speculator's Seal of Approval

Here is a list of posts and articles that are worthy of the Market Speculator's highly sought after seal of approval.

Trading Links:
Dr. Steenbarger shows that strength begets more strength. Maybe my pullback strategy won't work . . .

The gold ETF looks golden. I'm a buyer on a pullback.

The market in a minute. Dave Landry's presentations provide quick and insightful market analysis.

Dummyspots "fade the fed trade" did not work this time, but I have used a similar approach successfully in the past.

I'm watching most of the same charts as the guys over at highchartpatterns.

Chris Perrunna highlights a book Victor Sperandeo published that I did not know about. I subscribe to the theory that the fed is a tool to manipulate the masses (and that governments are controlled by powers beyond our knowledge), so you can bet I'm going to get my hands on the book.

Nobody is better than TraderJamie at diagramming day trades. I don't do a lot of daytrading, but you can bet that when I do I'll be using the knowledge I've gained at his site.

The meaninglessness of alpha.

Babak points out that the Dow is high relative to it's moving average. That's part of the reason I'm waiting for a pullback.

The people behind Bespoke are the best market researchers on the planet.

Sports and Entertainment Links:
I agree with Bill Simmons. Friday Night Lights is one of the best shows and television, and the best sports show ever, yet sports fans aren't watching it.

Why is nobody up in arms over the racist and sexist comments made by Isiah Thomas? During his sexual harassment testimony, he says he has no problem with a black man calling a black woman a derogatory term (rhymes with witch), but has a problem with a white man doing the same thing.

I agree with Chris Collinsworth. The Texans might have made the right choice taking Mario Williams. I've always felt Reggie Bush is overrated.

You heard it here first: The Boston Celtics will win the Eastern Conference. As a die hard Timberwolves and KG fan, I'm now pulling for Boston. Anybody else thing Timberwolves GM and ex-Celtic great Kevin McHale is secretly working for Boston?

Today was a sad day for Chuck Liddell fans (for those who have no idea who I'm talking about, we're talking UFC-mixed martial arts). He lost for the second straight fight, this time to the dean of mean, Keith Jardine.

With the new fall season coming, here are my favorite shows, in no particular order: Lost, Heroes, Entourage, Curb Your Enthusiasm, Friday Night Lights, Smallville, Office, Prison Break, Monk, Psyche and 4400.

I just finished reading The Smart Money: How the World's Best Sports Bettors Beat the Bookies Out of Millions by Michael Kronik. It's a fascinating look at high stakes sports betting and the corruption that goes on at Las Vegas gambling establishments.

Revisiting Building A Better Watchlist

Ever since the "Beat the Market by Building a Better Watchlist" post, I've received a number of e-mails asking for more detail about how I build the watchlists that I post on the site.

It takes a complex, organic process that takes many factors into account to narrow a list of over 7000 stocks down to 100. Rather than address every e-mail half hazardly, I hope to have a detailed post on watchlist development ready in the coming weeks.

Today, 83 of the 100 stocks on the focus list beat the S&P 500. Even more impressive, 94 out of 100 had better weekly gains than the 2.8 percent posted by the index. Here are this week's 25 top gainers from the focus list:

Random Thoughts

I'm doing my best not to chase. The last thing I want to do is buy just before the inevitable pullback.

I thought about buying LEH when it dipped to $61.75 today. It was on my "buy the dip" list, but I was worried because it was down while the market was up, and I was afraid traders would come to their senses and realize the rate cut ain't gonna help them out that much. The stock is currently trading at $63.

It's been frustrating watching MT hit $76. I exited yesterday in the $73 range.

It has also been frustrating watching every stock on my primary watchlist make nice gains today, without me. Again, gotta fight the urge to chase.

I'm hoping some crazy stuff happens on this "quadruple witching" options day. I still hold out hope we will see a dip at some point today.

Here is a screen shot of 20 stocks on my primary watchlist:

Six Stocks to Buy on the Dip

Of the 100 stocks on my focus list, I've identified 40 that I like as buy the dip plays. Here are six of them:

Gotta Love the Dip

Today's dip was exactly the type of day a pullback trader loves. It's been tough the past few days having to chase stocks. We needed a light volume pullback, and that's exactly what we got. It's a good time to start thinking about entering some small probing positions on momentum stocks that pulled back on low volume.

In the spirit of buying on the dip, check out this article by Alan Farley.

And while your at it, here are some of my previous trend-pullback posts, and every post that has the word pullback it.

Today's Trade: MT

I sold 300 shares of MT this morning at $73.40 for a $576 gain (+2.7%). I may be this one back if it dips into the $68-70 range.

I'm looking for dips today in stocks on my primary watchlist. Oil, Industrials, Copper, steel, some techs (GRMN, NVDA, VDSI) and other momentum plays head the list.

Pickens on Oil

MT Entry

Building a better watchlist

Boone Pickens on Oil

No surprise here, oil tycoon Boone Pickens is an oil bull. According to Mr. Pickens, we are not near a top, although there could be a short term correction. I'm looking to buy on a pullback to the mid 70 range.



MT Trade

Building a Better Watchlist

MT Trade

I entered MT this morning, buying 300 shares at $71.48. Stepping back from the trade, it looks like I may have entered a bit early.

The last time MT had a similar breakout with a long price bar (early June), price action immediately pulled back to the breakout point before resuming the uptrend. The same thing could happen again.

I've set my stop under the breakout point at $68 and may purchase more shares on a pullback.



I also bought 200 shares of BCSI at $85.53.

Beat the Market by Building a Better Watchlist

I attribute my modest success as a trader to preparation and building strong watch lists. Entering and exiting trades is the easy part. Most of my time and energy is focused on narrowing thousands of stocks down to a strong, manageable list of stocks that will beat the market. This focus list, depending on market conditions, consists of 80-120 stocks that I trade from.

Today is a good example of how important it is to work off of a strong list of stocks. Yesterday the S&P 500 had the best percentage gain it has had in a number of years, posting a 2.92% gain. While that's a great gain for the average stock today, it's not so hot when compared to my focus list; 87 of the 100 stocks on the list posted a 3% gain or higher. In fact, 47 out of 100 posted gains of 5% or more.

Trading from a list that beats the market greatly increases your odds of beating the market. That's why I spend so much time scrutinizing my watchlists. You've heard me say many times that I am not a stickler for precise entries and exits. However, I am obsessive about the stocks I trade.

Here are yesterday's top 25 performers from my focus list:

Trades: TBSI, FWLT, AGU, SRS, NVDA, VDSI, PCU, BHP, GRMN, OII

I sold 200 shares of TBSI at $39.68 (entry at $37.34) for a $468 gain (+6.2%).

I sold 200 shares of FWLT at $130.10 (entry at $125.75) for a $870 gain (+3.4%).

I sold 200 shares of AGU at $50.35 (entry at $48.75) for a $320 (+3.2%).

I sold 200 shares of SRS at $94.60 (entry at $102.55) for a $1590 loss (-6.1%).

I sold 400 shares of NVDA at $34.85 (entry at $33.31) for a $616 gain (+4.65).

I sold 400 shares of VDSI at $34.05 (entry at $32.93) for a $448 gain (+3.3%).

I bought 200 shares of PCU at $110.25 and sold at the close at $114.65 for a $880 gain (+3.9%).

I bought 200 shares of BHP at $66.55.

I am still holding OII, BHP and GRMN.

Total gains today: $3608
Total loss today: $1590
Today's profit: $2018.

Update on My Emotions: Arghhhh!

Arghhhh! While I made some spendid gains today, I can't seem to forgive myself for cutting ties with UA, SII and SWHC yesterday. Instead of taking small losses, I would have have made a little over $2000.

That's what I get for not adhering to my stops. All of you loyal readers have permission to call me a royal "wuss."

The Nifty Fifty

Needless to say, I am relieved at the way the market is reacting to the Fed's "nifty fifty." I was a nervous wreck all day, considering the long positions I was holding going into the meeting. Not only did I have my current positions, I also bought BHP and PCU this morning. I took profits in a few positions and exited my real estate and financial ETF short's, ruthlessly cutting ties with them.

Tonight's research will focus on stocks to buy on a dip. All my favs are flying high, so it's tough for me to enter right now.

I'll detail my trades later today.

Market Notes, Primary Watchlist and Greenspan Rant

I've thought long and hard about how to play tomorrow's Fed announcement. After much back and forth, I've decided to just hold onto my current positions and let the trades play out according to my original analysis.

I feel protected by the fact that I have taken on smaller than normal position sizes, set stops at key levels, got rid of a few of my weaker positions today and hedged my longs by taking positions in ETFs that short real estate and financials. If I incur a few losses, so be it. That's part of the game. Unless tomorrow ends up rivaling 1987's Black Monday, my recent gains will more than offset any losses.

An irrational market dip might provide a good buying opportunity in some momentum favorites. Of course, to trade on the dip we'll have to see signs that a momentary dip is all we are seeing. The following 25 stocks are on my primary watchlist:

DRYS, LFC, MDR, FWLT, NOV, AGU, ATW, RIO, SII, NVDA, OII, MOS, BIIB, VDSI, VMI, ISRG, FCX, MON, GRMN, USO, CROX, LIFC, AAPL, JEC, SAM, POT, BIDU.

Somewhat Off Topic:
Much has been made of Alan Greenspan's recent comments. Personally, I give no weight to anything Greenspan has to say. Did he really criticize the idea of rate cuts? That's like O.J. rebuking jealous, abusive husbands. The one time Fed Chairman has become the Jose Canseco of the markets, willing to say anything to hawk a book. It seems he has taken his mentor Ayn Rand's "rational self interest" approach to heart.

Trades: LFC, SII, SWHC, UA

I sold 300 shares of LFC at $73.52 (entry at $70.68) for a $852 gain (+4.0%) gain.

I sold 300 shares of SII at $67.40 (entry at $68.40) for a $300 loss (-1.5%).

I sold 300 shares of SWHC at $18.93 (entry at $19.45) for a $156 loss (-2.6%).

I sold 400 shares of UA at $61.60 (entry at $63) for a $560 loss (-2.2%).

I will explain my thinking behind these losses, all three of which had not yet hit my stops, along with why I'm holding the stocks that are still in the portfolio.

Today's Trades:

I used today's weakness to take some small positions in stocks from my primary watchlist:

I bought 200 shares of TBSI at $37.34

I bought 200 shares of OII at $71.25

I bought 200 shares of FWLT at $125.75

I bought 200 shares of AGU at $48.75

I bought 100 shares of GRMN at $105.50.

A reader asked me where I placed my stops for UA and SWHC. UA is under the 50 day moving average ($60), while SWHC is around $18.75.

I will most likely trim some existing positions today. I am mostly long momentum stocks right now, which could be risky going into the Fed meeting.

2 Great Ways to Play the Agriculture Bull Market

Update: I inadvertently uploaded charts of FLR and FWLT, instead of AGU and MON. I'll leave the other two charts up since both stocks are on my primary watchlist. Here are the charts for AGU and MON, two of my favorite ag plays:





FWLT and FLR charts:

Sectors Posting Five Days of Gains

The following 15 sectors have posted positive gains 5 days in a row:



Sectors that have me interested include: beverages, aerospace/defense, oil & gas and ag chemcicals.

Trades: BCSI, UA, GS, GRMN, FWLT, LEH, UA, SWHC

As I posted yesterday, I exited the following positions:

I sold 500 shares of BCSI at $80.90 (entry at $76.27) for a $2315 gain (+6.0%).

I sold 500 shares of UA at $64.10 (entry at $62.50) for an $800 gain (+2.5%).

I covered 150 shares of GS at $183.40 (short at $186.04) for a $396 gain (+1.43%).

Today I made the following trades:

I sold 500 GRMN at $107.80 (entry at $106.02) for a $890 gain (+1.65).

I sold 300 FWLT at $124.58 (entry at $120.10) for a $1344 gain (+3.7%).

I covered my LEH short, 500 shares at $57.75 (entry at 55) for a $1375 loss (-4.7%).

I bought 400 shares of UA at $63. Playing the support/resistance range.

I bought 300 shares of SWHC at $19.45. This ones a trend pullback to the 50 day moving average. I'm a little concerned at the size of today's bar, but the stock has held up well at this moving average.

10 Sectors and Stocks to Watch

The following 10 sectors had a week that rivaled Tom Brady's week one breakout:



I went through the top 10 sectors and picked one or two stocks from each:

ABX & AEM (Gold)
DVA (Specialized Health Services)
LVS & WYNN (Resorts and Casinos)
XMSR (Broadcasting Radio)
CELG & ILMN (Biotech)
JEC & KBR (Technical Services)
CEO & DNR (Independent Oil)
KO & Hans (Beverages-Soft Drinks)

Nothing in the Silver and REIT-Healthcare facilities sectors interested me.

Trades: NOV, SDS, DDM, NEM, DBA, BCSI. FWLT, VDSI, GRMN, UA, NVDA

Yesterday, I sold 400 shares of NOV at $133.25 (entry at $127.23) for a $2408 gain (+4.7%).

Of course, looking back I wish I would have held on (it's currently trading at $136), but I can't complain about a $2400 one day profit.

Yesterday, I sold 300 shares of SDS at $88.37 (entry at $87.49) for a $264 gain (+1.0%).

Yesterday, I sold 300 shares of DDM at $90.26 (entry at 89.12) for a $342 gain (+1.3%).

Yesterday, I sold 200 shares of NEM at $45.17 (entry at 43.75) for a $284 gain (+3.2%).

Yesterday, I sold 200 shares of DBA at $26.98 (entry at $26.60) for a $76 gain (+1.4%). My reason for exiting the ETF with such a small gain is I felt I could make more with specific, leading ag related stocks like FLR, MDR, MON and FWLT.

Today, I sold my positons in BCSI and UA for nice gains, covered the GS short, and took positions in GRMN, FWLT, VDSI and NVDA. I am also still holding SII, LEH (short), SRS (short real estate ETF) and LFC.

I may look to short the S&P 500 if we near 1490-1500.

Quickie Trade Update

I'm in a hurry, thus the quickie trade update. I'll go into more detail in my next post.

I exited NOV for a nice gain.

I exited my index and gold plays, DDS, NEM, DBA and SSO for small to moderate gains.

I exited GMCR for a loss.

I took new positions in BCSI, SII, UA, SRS (short real estate), GS (short) and LEH (short).

I am looking to buy some momentum favorites on weakness, including AAPL, RIMM, GRMN, FLR, NOV, OII, FWLT, DRYS and CROX.

Charting National Oil Varco (NOV) and Today's Trades

Today I bought 400 shares of NOV at an average price of $127.23. As I noted in Sunday night's post of last week's top stocks, oil stocks are making a move. Therefore, I was looking to enter NOV on weakness.

As we can see in the chart, the stock broke out of a "W" formation at $125. A pullback in this vicinity makes for a good entry point, which is why I entered today on weakness. I know some of you may think I should have waited for a deeper pullback, but I like to get into a good trade before missing the move (as long as I have a good reward to risk ratio).



My other trades today:

I bought 300 shares of SRS (ultra short real estate) at $103.10. This is my "short real estate" trade. The 50 day moving average is at $99.12, which is a good area to place my stop.

I bought 200 shares of NEM at $$43.75. This one is my gold trade. In all honesty, I wish I had entered a different gold stock. This one's not all that volatile. I may exit tomorrow even if my stop or target is not hit, and enter a better acting gold play.

I was stopped out of 400 shares of TOL at $19.95 (entry at $21.11) for a $464 loss (-5.8%).

I sold 200 shares of QLD at $96.50 (entry at $95.29) for a $242 gain (+1.2%).

I am looking for good exits for my index plays, and found one for QLD. If I can get a point or two on my SSO and DDS positions, I'll do the same for them.

Quickie Trade Post

I took positions in NOV, NEM and SRS (short real estate ETF). I was also stopped out of TOL for a loss.

My schedule is full today so I'll have to detail these trades tonight.

15 Stocks to Watch and the Short Watchlist

If you are still long on the market, these 15 stocks are a good place to start your quest for trading candidates. They are among the best performing stocks last week. A cursory glance tells me energy and gold are the places to be right now.

As expected, I received a few e-mails asking about my shorts watchlist. I'm keeping it relatively simple, focusing on ETF's that short the indexes, real estate and financial sectors. If we see a true breakdown on accelerated volume, then I'll zero in on stocks to short.

A Reader Criticizes My Non-Technical Impulsive Trading

A reader seemed disappointed with Friday's "not-so-technical" trades. In that post, I said I was annoyed and pissed off by a market making non-sensical knee jerk moves. To take advantage of an emerging pattern (market is up one day and down the next), I went long the indexes on extreme weakness. I noted that I was taking emotion out of my trade decision, ditching my normal setups in favor of the short term pattern. The trade is short-term in nature with very tight stops. A reader responded:

Annoyed? Pissed off? Then you go ahead and you say you won't let the emotions get in way.

Judging by these non-technical trades, I would say you are trading on "tilt" here.

These are the worst trades I have seen you put up yet, totally against your strategy and many other sound trading principles.

While you may get lucky and these may turn out profitable for you, there is nothing more dangerous to a trader's account/career than starting to do impulsive, on-the-whim trades.

Let me address the two main points from this commentary:

1) I am letting my emotions get in the way of my trading by making impulsive trades

I don't know how to get rid of my emotions. I am a passionate person. It would be unhealthy to deny what I'm feeling. While I acknowledged my feelings, I did not let them cloud my trading decision. I based my trade on a current pattern, not emotions. I waited for the sentiment readings I watch to turn in my favor before entering. I placed a tight stop and used half the position size I normally use. This makes for a low risk trade.

2) I have ditched my strategy in favor of "on the whim" trades

I showed above that this trade, while unconventional compared to most of my trades, was not impulsive.

I don't have *a* strategy. I have many strategies in my arsenal, and employ them as market conditions dictate. I do not have one rigid form. Rather, I strive to be like water. As Bruce Lee would say, water is formless. It adapts to it's surroundings.

Be like water.

Note: The blog is experiencing an uptrend in commentary, both positive and negative. I enjoy constructive criticism and differing opinions, so don't be shy if you are in disagreement with my analysis.

A Not So Technical Trade

I know I'm not the only one annoyed by this market. It's not that we are in a trading range that's pissing me off, it's the non-sensical up and down days we are seeing.

Anyway, I'm not going to let my emotions get in the way. As we all can see, we're in an "up one day, down the next" envoroment. So today, I decided to buy the indexes on weakness.

I bought 300 shares of SSO (leveraged long S&P 500) at $87.49.

I bought 300 shares of DDM (leveraged long Dow) at $89.12.

I bought 200 shares of QLD (leveraged long Q) at $95.29.

I bought 200 shares of DBA (ag ETF) at $26.60.

These are not technical trades. In fact, the technicals don't look good for the long side. These are short term trades I expect to hold for a day or two based on the current market patterns I'm seeing. I am also using tight stops and small position sizes.

Indicators are not the be-all and end-all!

Lately I've received many e-mails and comments asking me why I made a trade when so-and-so indicator was divergent or not giving a buy or sell signal. This comment left by Rey is a good example:

"It looks like I don't see eye to eye with you sometimes regarding going long on stocks that are about to break out with divergance such as MACD, OBV or any others... all the books I have read teaches don't get in on break out if there is majar divergence...what am I missing here?

and also what is your favorit book(I was just layed off work so I got some more time to fill) and what softtware do you use to find and analyze stocks if I may ask..."

As I've stated before, I use indicators as a secondary tool. Sometimes I don't even look at them. I am a slave to price and volume patterns, along with support and resistance.

Earlier in my trading career (if you can call it that), I placed more emphasis on indicators than I do now. If there is an indicator out there that I have not studied or used, I would be surprised. As I've evolved as a trader, I've taken a more intuitive and simplistic approach. As a consequence of viewing, literally, over a million charts, I trust what my eyes tell me. I'm not going to back out of a trade I like because one or two indicators give me a negative signal. Especially when I could probably find an indicator or two that give the exact opposite signal!

That's not to say indicators have no value. I do like to use OBV, Stochastics and RSI (the only three I use regularly). However, I am not a slave to them, and will defer to my own judgment if it tells me to do the opposite of what these computations tell me to do.

That's exactly why I traded GRMN, on the $105 breakout, although there was a divergence. The stock hit $108 today. Divergence be damned!

The four five books that I recommend most are on the top right margin of the blog. It's tough to pick one, but if I had to, it would be one of Thomas Bulkowksi's chart pattern books. The Farley book is good, if you have some background and don't mind reading through dense material that at times doesn't make sense.

I use Telechart for my evening chart reviews and scans.

Today's Trades: RIMM and RS

I bought 500 shares of RIMM at $82.71. This is a short term trend-pullback play. My intitial target is the high at $85, with a stop at $81.

I covered the RS short, 500 shares at $54.05 (entry at $53.16) for a $445 loss (-1.6%).



I am still holding GMRC, SDS and LFC.

Where I Start My Research on a Negative Day

Only 10 of the 239 Hemscott Industry Groups featured on Telechart were positive today.



This is a good place to start tonight's research. One stock that piqued my interest is SOHU:

I Rushed Today's Trade: GRMN

I sold 500 shares of GRMN at $107.04 (entry at $105.25) for a $825 gain (+1.7%).

I don't feel good about this trade. It may sound hard to believe, but I am probably more conflicted about this trade than any losing trade I've this past year.

After reading comments and personal e-mails responding to the post announcing my trade yesterday, I began to question my entry. This morning I decided that I would ignore my target and take profits if the stock bounced today. When the stock hit $107, that's exactly what I did. Normally, I would wait for the stock to either reach my target or my stop.

Today, I let my emotions get the best of me and played it a little too safe. The stock broke out over resistance, picking up volume, and is up on a day where the markets are down and breadth is terrible. There is not reason for me to have exited!

I'll chalk this up to a lesson learned: Trust my own analysis and don't let outside opinions cloud my own judgement.

Note: I value all commentary, questions and analysis from my readers, even if it is contrary to my own opinions or analysis. My rant is against my own judgement, not the comments themselves. Please do not hesitate to leave feedback, via post or email.

Trend-Pullback Watchlist

The following stocks are on my "trend-pullback" watchlist:

























Four featured charts:

Today's Trade: GRMN

I bought 500 shares of GRMN at $105.25.

I placed a buy order pre-market at the breakout point, which also marks a new high for the stock. The triangle pattern appealed to me, as well as the strong stochastic and volume readings. I will likely place my stop below the breakout point, with an intial target in the $109-110 range.

August Sector Review

It's a good idea to keep tabs on what's working and what's not, so at the end of every month I do a sector review. Here are the top and bottom twenty for August.

Bottom 20 Sectors:

Top 20 Sectors:

Many of the top performing sectors are coming off down moves and may actually be good short candidates. One sector that is breaking out to new highs is internet service providers: