Wednesday, January 28, 2009

Position and Trade Update

Taken from today's trade report, here is my position update. Entries came from the Trade Report Focus List and were detailed in the report.

FAS: I exited a portion of my position today at $12 (average entry at $7.78) and moved my stop up to $10.

USO: I was stopped out of the remaing shares at $29.30. I made a profit on the intitial exit.

STR: I exited half my position today at $36 (entry at $32.75) and moved my stop up to entry level.

TTES: I exited half my position today at $$14.50 (entry at $12.10) and moved my stop up to entry level.

I am still holding SHLD and the gold short.

Earnings Breakout: NFLX

Netflix broke out yesterday on strong earnings. This is a breakout-pullback candidate. Strong volume on the breakout over a bullish flag pattern. I am now waiting for a low volume orderly pullback.

Tuesday, January 27, 2009

Trade: GLD

As noted in yesterday's Trade Report, I went short GLD @90. My stop is around $93 with an initial target in the $84-86 range.

The chart I posted Sunday night details the strategy for this trade. GLD has provided an excellent reversal trade the last 11 times stochastics have hit extreme levels.

Sunday, January 25, 2009

Monday Game Plan

Here is my game plan to being the week. This is taken from the Trade Report, sent today to subscribers:

January 26, 2009

1.  Market Notes:

While the focus of my swing trading style is daily charts, I look at a few weekly charts every Sunday.  I do not use the weekly chart for specific entry, rather to help me define major support and resistance levels.  

On the SSO chart below, we see two key support levels.  The first is the November low (around $18).  The second is the bottom of the trading range formed at $20.  The other lines on the chart are resistance lines, which can be used as targets.  

Technically, SSO is almost oversold on the weekly (note that it is not on the daily) and RSI shows a positive divergence.  I didn't market it on the chart, but notice that RSI is higher now than it was at the previous low.
 
Entry conditions:

A.  Intermediate term time frame

Traders with an intermediate term time frame (a few months) can enter here with a stop below the November low.  The initial target is the top of the trading range.  If entered at $22, with stop at $17 and an initial target at $30, the initial reward to risk is 2.67:1.  Waiting for a pullback would offer even better risk.

If the trade works, and the $30 target is hit, I would take partial profits, move my stop up and move my target to $35.  

B.  Short term time frame

Traders with a short term time frame should use the bottom of the trading range, not the November low, as the stop level.  I would look to enter on weakness, possibly around $21, with a stop under $20 and initial target of $25.  an entry at $21, with a stop at $18.90 and target at $25 would give a 2.5:1 reward to risk.  Setting the stop at $19.90 would give an even better risk ratio,.  I use a wider stop because of the increased market volatility.  

If stopped out of this trade, I would look to re-enter if the market tested the November lows for another quick, low risk trade.  If the target is hit at $25, I would take partial profits, move my stop up to entry level, and target to $30.

Trading Note:  I am focusing on risk for these trades.  Since the market is not at extreme oversold levels (T2108 and stochastics are not extreme yet), the probability of the trades working is not as high as if we tested the November lows.  This would create extreme conditions for T2108 and stochastics.  I label the SSO set above as low risk, average probability

2.  Sectors ETFs

Here are a few sectors that look promising.  You can trade individual equities within the sector, or just trade the ETF.  

FAS:  The leveraged financial ETF has been a volatile and gut wrenching trade.  So far I am one for two, with a third trade in progress.  My current trade was entered in the mid 7 range and is currently at $9.  As I learned from the loss I took on my first FAS trade, early profits are to be taken quickly, so I took partial profits at $8.90.  

The beauty of partial profits is it keeps you in a trade if there is a big move in the direction entered.  Of course it can limit gains, but I believe what is given up in gains is worth the profit it keeps in case the gains don't hold.  My favorite part of the trade is when I lock in that initial profit and the rest of the trade is "free".  

If not yet in the FAS trade, I would wait to enter on weakness, ideally as close to the bottom as possible.  An entry in the $7-8 range with an initial target between $10-12 and a stop at $6 would give us a good low risk trade.  



Aside on risk and picking bottoms or going against the trend:  

Whenever I propose a trade like this, I get e-mails (mostly from blog readers--subscribers understand my trading philosophy much better) telling me that it's tough to pick bottoms, I am gambling and stocks making lows can go lower.  I certainly am not gambling, and I know the stocks can go lower.  If anybody doesn't understand by now, my focus is on risk and probability.  If I can find a trade that risks only $1 to make $2.5-5, I am going to take it regardless of other market variables.  I don't mind taking small losses where risk is easily defined, especially if technicals are extremely oversold (creating higher probability of a short term snap-back).

USO:  I sent out a trade alert on Friday letting you guys know I was entering USO since I had not mentioned it as a setup in the report.  Amazingly, it jumped just a little while after the alert.  This is another low risk setup, or was a low risk setup.  The move on Friday has increased risk if entered at the current level.  Stochastics are also nearing overbought levels.  If looking to enter, hope for a pullback as close to support as possible.  The target is $35-36, with a stop under the support range.   

XLB:  The materials sector is showing a good accumulation pattern, as volume has been positive since the November low.  The uptrend in the OBV indicator confirms what our eyes see in the chart.  An entry close to $21, with a stop at $20 and target of $24 offers good risk.  I usually post leveraged ETFs, but did not here since price is under the 50 day moving average (lowering probability of trade).  Those wanting increased leverage, use UYM.
XLV:  Healthcare shows a strong price pattern.  Pattern buffs will notice the inverse head and shoulders pattern that is forming.  Classic entry requires a breakout of the resistance line drawn in the chart.  I prefer early entries, and find entry here with a stop below the recent price range (stop at $25), provides a low risk trade.  I again did not post the leveraged ETF since this would be considered an "early" trade.  RXL provides increased leverage.
  
GLD:  Gold has been the easiest trade imaginable for those who trade extremes.  The last 11 times price has been either extremely oversold or overbought, according to the stochastic indicator, price reversed.  Not only does price reverse, but most of the trades provided big gains for those trading the extreme.  

We have now reached extreme levels again.  I will look to short on strength (90-91) with a stop above the October highs (93) and target $84-86.  While I use GLD as my guide, I will useDZZ or DGZ.

EWZ:  A number of counties, including Brazil, show more relative strength than the U.S. market.  EWZ looks good on a pullback, with a stop under the recent trading range and target around $40.


3.  Individual Stocks Focus List:

My focus this week is on the 7 sector ETFs (and ETNs) listed.  While these 7 charts will likely be my primary trading vehicles, I am still looking at some individual stocks.  

I have already gone over all of the focus list stocks via videos last week.  The analysis still applies.

MASI (short), HOC, RIMM, SSYS, SHLD, VAL, SIGM, CSTR, NOC, SGR, SVU, SVU, ELS, TTES, SLV, STR, USD, SU, PNRA (short), CBRL (short), ACI, CBI, FSLR, X, GFA, IIVI, PKG, GNK, WGOV, PLD, MEE, HP, CGRP, KALU, SID, IDCC, SIGM

New Additions:

BRCM, GOOG and QCOM

All three stocks show similar patterns.  On the BRCM chart, we see a positive divergence in OBV and RSI.  Price is holding above the moving average and volume shows accumulation.  I like all three on pullbacks to support.
4.  Current Positions:

Long USO, FAS, SHLD, TTES, STR

Wednesday, January 21, 2009

Position Update

For those asking for updates of my current positions, here is last night's Trade Report. I did not make any trades today.

http://docs.google.com/View?docid=d5z8q8w_674fcf7x6fj

Tuesday, January 20, 2009

Morning Weakness

I am taking a small few positions, including SSO, on morning weakness. More details to come.

Monday, January 19, 2009

Trade Journal: FAZ

I don't have the time to do a comprehensive trade review at one time, so I am going to do a trade review everyday, starting with my first trade of the year on January 2. As I go, I'll compile the stats. I am only including trades I posted on the blog or the Trade Report.

FAZ Trade:

Entry: 200 shares at $35.09, additional 100 shares at $33.75. Average entry for 300 shares $34.64.

Exit: 150 shares at $38.10. 150 shares at $40.80. Average exit $39.45

Profit: $1443 (+13.9%).

Original Entry Reasoning and Chart:

While not at extreme levels, the market is starting to get a little overbought. The T2108 reading is above 70 and many individual stocks are posting stochastic readings near 70-80.

While not making any big bets yet, I took a small probing position in FAZ (entry at $35.09), which gives you 3X leverage short financials. Price is near support and stochastics are starting to get oversold. My stop is in place under the price support level.



Trade Analysis:

My reason for entry was solid. However, I am disappointed in my exit. My plan for almost every trade is to set an initial target at resistance, take partial profits once that level is hit (usually half the position), then move my stop up to entry level. This locks in a decent profit, and still keeps me in the trade if there is a big move.

I took the initial profit as I should, but for some unexplainable reason I took full profits a few points later for no good reason, completely ignoring the stop I placed. If I had traded my usual style, I would currently be sitting on a 100 percent gain. This is a good trade that should have been a great trade.

Note that this is not hindsight or back seat trading due to missing out on a big gain. I did not exit according to plan.

I get an A for the entry, C- for the exit. Overall Grade B-.

Trade Review and Video

I am working on my trade review and results and hope to have them posted some time tomorrow.

Trade Report members should expect a video tomorrow, along with the Trade Report.

Friday, January 16, 2009

Friday Game Plan

I'd like to pick up a few long positions in anticipation of an inauguration rally. The fact that we are very oversold increases the chances of a rally. I will still use tight stops with the strategy of taking a small loss with the possibility of a big gain.

Thursday, January 15, 2009

And the answer is . . .

no bullish tail for FAS. Earlier today I posted the bullish tail candle forming and wanted to see if it could hold into the close. It did not.

Bulls can hold on to the close off the lows and volume that could lead to a "capitulation" selloff.

I sold half my FAS position for a nice profit at $14.50 (entry at $12.77).

Watch for the Bullish Tail

If FAS closes as it looks right now on the chart, a bullish tail will have printed and we will be setup for a strong bounce. Keep an eye on the close . . .



The market indexes are acting similar to FAS.

New Feature: Trade Stats and Review

I plan to do a better job this year of posting stats of the trades that I post here and, more importantly, review the trades post trade. Check back tonight or tomorrow morning.

Trade: SSO, FAS and USO

I added to my small SSO position this morning and initiated an oil trade via USO. Both have tight stops beneath support.

I was stopped out of FAS at $14.40. I just entered again at $12.77.

Wednesday, January 14, 2009

Today's Trade: SSO

I took a small position in SSO today based on the "oversold bounce" or "rubber band" setup. My stop is just below the support line and I will be quick to take any available profits.

Update: I am having trouble with chart annotations and will post chart later today.

Craziest E-Mail of 2009


I receive a lot of e-mails from an outstanding group of readers and subscribers. My readers range from those who are just starting out and yearning to learn, to experience hedge fund managers. I have not only taught a lot, but have learned much from my readers.

However, every once in a while I get an e-mail that leaves me speechless. Here's one I received last night. Amazingly, he ends it by asking for my help:



Have you ever taken Viagra and been up all night. Well that is how I feel
right now only opposite. I can't take it anymore. I am horrified and
disgusted. I feel like Luke when he found out Vadar was his dad and the
Princess his sister. It can not get any worse, can it? No, but it
will get better and the yellow sun will shine. That is where I will get my
power, become king and you all will bow down to me. Well, not you, but you
will. Until then, can you help me?


I respond to all of my e-mails, but haven't responded to this one yet. Any suggestions?


Tuesday, January 13, 2009

Discussion Topic: How are You Trading This Market


I am interested in how my readers are trading the current market. What's your market bias? Are you going with longs, shorts or both? What trading vehicles? Favored setups? Leave a comment below or email me at SinghJD1@aol.com

As most of you know, over the past few months I have tried to be patient and focused on trading extremes. The idea is to catch snap back rallies or pullbacks based off overbought (short) or oversold conditions (long).

Trade Update: FAS

I added to my FAS position at $16.76. I had a buy limit order placed this morning under 17 and it opened at $16.50, so I'm a little disappointed in the price my order was filled.

My game plan for this trade was outlined in last night's Trade Report.

.

Monday, January 12, 2009

OT: Tim Raines Should Be in the Baseball Hall of Fame

The Hall of Fame voters missed the boat by not electing Tim Raines today. Even more atrocious is the fact that he got less than 25 percent of the votes. Here is a good article making the case for Raines:

http://sports.espn.go.com/mlb/hof09/columns/story?columnist=law_keith&id=3825493

.

Trade: FAS

I went long 200 shares of FAS at $17.63. This is an "oversold bounce setup. This is a low risk trade with a stop just under the support line on the chart. My target is in the $23-25 range. This provides a 3:1 reward to risk ratio.

Short and Sweet Game Plan

I am waiting for weakness in SPY, oil and financials, and will go long on *extreme* weakness.  While the market is getting oversold, it's not enough to create a high probability trade.  

Trading Vehicles:

Oil:  USO and DXO

Financials:  UYG and FAS

SPY:  SSO

Friday, January 09, 2009

Quickie Trade Update: DUG and FAZ

I exited my FAZ ($40.80) and DUG (@24) positions today for profit. My only current positions are short CSX and long HPQ.

The DUG trade did not hit my target, but did make a nice profit (entry at $21.19). I exited because a number of indivivual oil service stocks are showing up on my bullish scans.

Thursday, January 08, 2009

Best of January 2008

Over the coming weeks, I am going to archive some of my favorite posts from 2008. First up are some interesting posts from January 2008.

Anatomy of a Broken Momentum Stock

A great example of what a broken stock looks like. CPLA never did recover the breakdown level.

The Capitulation Call was a Thing of Beauty

Even I can get a little full of myself.

January 15th was a Good Day

A most excellent trading day.

The Best Indicator Is . . .

In a Q&A session, I talk about simplifying and the indicators I use. The less indicators the better.

Fibs Don't Work For Me

Another Q&A.

Short Play: DECK

The topping pattern in DECK was evident back a year ago.

Wednesday, January 07, 2009

Breakout-Pullback Setup: HPQ

The market is still overbought, so I am not looking to enter any long positions just yet. However, HPQ has formed a nice pattern and is nearing an ideal entry.

Setup: Breakout pullback. Yesterday the stock broke out over price resistance on strong volume. Today's pullback was on lower volume and help up quite well considering the overall market. A few more days of low volume pullback to the bottom of the breakout bar would provide a low risk entry.

Risk: Entry at $37.15, with a stop at $36.50 and target at $39 provides a 2.8 to 1 reward to risk.

Note: Pullback *must* be orderly and on low volume. Strong gaps down or big price bars negate setup.

Today's Trade: DUG

As noted to Trade Report subscribers earlier today, I entered DUG at $21.19.  The inverse oil services ETF is near strong price support and is very oversold (oil is overbought).  I am using this trade to short the oil sector.

Setup: Oversold bounce.  Stockchastics are way oversold.  The last 6 times they reached extreme levels, profitable trades were there for the taking. 

Risk: My stop is in the $19-20.   My initial target is $24-25.  This gives me a 2 or 3:1 reward to risk.


Tuesday, January 06, 2009

Today's Trade: CSX

I went short 200 shares CSX at $36.48.

Setup: Overbought Bounce Nearing Resistance (anybody have a better name?). Stochacastic readings have reached extreme levels. The stock is nearing price and moving average resistance.

This is a short term trade. I'll exit when either my stop or target is hit.

Risk: My stop is above the moving average, in the around $37.60-38. The target is $33, though I may take partial profits earlier. This gives me a 2:1 reward to risk ratio.

Monday, January 05, 2009

Oil Trade Exits

I exited both of my oil trades today for nice gains. Whereas my entries were based on an extremely oversold oil market, today's exits were based on overbought readings. Price is nearing resistance levels while stochastics are nearing extreme levels.

More strength would provide a good short entry.

Monday's Game Plan and Free Trade Report

I am offering today's Trade Report, which features my plan for Monday and the coming week, free to blog readers today. Enjoy!

January 5, 2008

Market Notes

The market is overbought. I'll get back to that, but first let's take a look at the overall picture. The market (via SPY-SSO) is putting in a healthy looking bottom pattern. RSI has broke out over the middle area. Price is putting in a constructive looking price pattern. Depending on how you view it, an argument can be made for a reverse head and shoulders or a bottoming cup and handle. Price has a broke out over the 50 day moving average. Last and probably most important, the volume pattern is strong, which signals underlying accumulation. Underlying accumulation is an important trait when bottoms are put in.

Note that this "bottom" is not a long or intermediate term prediction. However, it does signal a good probability we will see, at the least, a good bear market rally. I don't mean the 3 day variety we just got, but the type that could last a few months.

Short term, the market is overbought. For my trading style, it is not a good time to buy. Stochastics have reached overbought conditions (see chart), and the T2108 indicator has reached extreme levels, currently at 83.
The Trading Plan

The plan right now is to enter short term short positions to take advantage of the overbought conditions. Once overbought conditions are worked off, I will get ready to enter long in focus list stocks that pullback to support on low volume.

I will only enter shorts on strength. If we get good strength Monday or Tuesday, I'll enter positions listed in the focus list. Note that I already took a small position in FAZ on Friday (see intraday alert from Friday and the blog (www.themarketspeculator.blogspot.com).

Focus List

All longs are overbought and require pullbacks to support. Note that strong volume patterns and overbought stochastics on all stocks. Aggressive types can try taking quick shorts on some of these. This requires entry on price strength. A tight stop must be used.

JBLU, CKH, USM, USD, SUN, VMI, SGR, X, STR, DE, FSLR, ACI, TXI


Stocks from last week's focus list:

BKE, TBSI, IOC, GDX, GG, BG, DBA, CPA, ACM, MOS, SLV, SLW, PAAS, AIPC, AET, DRYS, SUN, URE, LVS, JOYG

Shorts: AXYS, CSX








Waiting for Pullback

While my focus list is full of longs, the market is too overbought to enter right now. I am waiting for pullbacks to support for most entries. In the meantime I may take a few more short positions on strength. These are quick trades meant to capture a few points off the expected pullback.

Friday, January 02, 2009

Trade Update: FAZ

I added to my FAZ position, 100 shares at $33.75.

Even with the two entries, it's still a small position. My normal position size would be 500 to 750 shares. The current position is 200 shares.

If the market gets more overbought next week, I'll start to get more aggressive.

Trade: FAZ

While not at extreme levels, the market is starting to get a little overbought. The T2108 reading is above 70 and many individual stocks are posting stochastic readings near 70-80.

While not making any big bets yet, I took a small probing position in FAZ (entry at $35.09), which gives you 3X leverage short financials. Price is near support and stochastics are starting to get oversold. My stop is in place under the price support level.



I also took partial profits in my oil trades, DXO and USO. Stops have been moved up to entry level.