Monday, October 02, 2006

Today's Trades (GG, AMLN, AAPL), Time frames and Chart Voodoo

I sold my remaining 150 share position in GG at an average price of $23.75 (entry at $21.71) for a $306 gain (+9.3%). The total gain on the position was $714.

I went short 600 shares of AMLN at an average price of $43.85. I featured this stock's chart in last night's post and it acted just as the chart predicted. I covered 300 shares at $42.75 for a $330 gain (+2.4%). I am still short 300 shares.

I went short 300 shares AAPL at $75.55, also featured in last night's post. Note the smaller position size. The fact that this stock is in the midst of an uptrend necessitated a smaller share size. I don't like to make big plays when I'm going against the trend.

I received alot of emails last night criticizing last night's analysis of AAPL. The two most frequent criticisms were:

1. The stock is in an uptrend and will do no more than pullback.

2. Charts are voodoo.

Regarding the first criticism, I agree. It is very likely that AAPL is going to resume it's uptrend. However, I am looking at the stock as a quick swing trade, possibly holding for no more than a day or two. What the stock does two weeks or two months from now is of no concern for me, although I do often trade that time frame. The point is, make sure you know what time frame you are trading when analyzing a chart and making an entry.

Now to the second point. In my opinion, anybody who says charts are voodoo either has a personal bias against technical analysis or just doesn't understand chart reading. Charts are like footprints, showing us exactly where money is flowing. An emailer accussed me of being lucky today with the downgrade. Sorry sir, but it wasn't luck. Yes, I did not know there would be a downgrade today. However, the chart did warn us that bad things were coming. Do you really think nobody outside the downgrading firm knew about the upcoming downgrade? If that's what you think, I've got a plot of land in Oklahoma I'd like to sell you, at Manhattan prices. Chart reading is "our" way of evening the playing field.


walter said...

what would you be looking for in AAPL to conclude that it might be a longer-term short...

My trendline analysis says it may have a ways to fall...


The Market Speculator said...

Hi Walter,
$72.50 is key support. If it breaks down below that level, the uptrend is likely over. Depending on volume and other factors, I may look to put on a bigger short position if it breaches that price.

walter said...

agree - sounds good...