Friday, February 29, 2008
I was stopped out of CREE at $31.90 (entry at $33.53) for a $489 loss (-4.8%). I still like the chart but did not want to increase risk by lowering the stop.
I went short 100 shares of DECK at $118.04
I bought 300 shares of AKS at an average price of $52.89. Steel stocks, while pulling back with the market today, seem to be holding up well. I'll take any chance I can get to play this stock. I am using a pretty tight stop, so risk is minimal.
Here is the DECK. The stock (which I think will be worthless 2 years from now) tanked last night and broke it's weak reaction trend (dead cat bounce after trend breaking down move). It made it all the way down to the $111 range. I used the relief bounce for short entry. If the 200 day moving average breaks, we'll see a big drop.
Thursday, February 28, 2008
Shorts: STX, RICK, LVS, ESRX, MBT, AXLN, PSYS, DECK, BLKB, INTU, SPY
Longs: FLS, EOG, KWK, AXYS, CMED, XOP, PBR, XME, BRMN, APA, MEE
I do see a slight divergence that might be used for an extremely short term play. We measure the divergence by taking a look at the two february lows, both of which printed long tail candles. If you measure both RSI and Stochastic readings at those levels, you will see a "higher low" readings. This creates a bullish divergence.
While the divergence could be used for a short term play, the overall trend in both price and volume is still down. OBV stinks. Volume is not diverging with RSI and Stochastics. Today's nice up move was not on "bottoming" type volume.
Thus, until AAPL mounts a major resistance level and has an uptick in upside volume, I'll stay out of the divergence trade.
I decided to take a small position size here, place my stop just under $110.
I would love to get in on some more commodity related plays, but the sectors are so overbought it's tough to find an entry. I'm trying to be patient, but it's frustrating watching these stocks blow up without me. This is my first big miss of 2008. I'll have to revisit and see where I went wrong.
Wednesday, February 27, 2008
Today I bought 400 shares of TWM at $77.10. The inverse ETF is at the bottom of its trading range which gives me a nice rewards to risk. My stop will be placed around $74.50. Note the positive OBV divergence.
I also bought 300 shares of CREE at $33.53. Strong trending stock that has been a buy on pullbacks.
Tuesday, February 26, 2008
Do not get me wrong, I am still bullish on the sector and this ETF. However, it is time for a breather, and we should be able to find a good entry in the coming weeks. If we get a low volume pullback to the $39-40 range, you can bet I will be back in.
Monday, February 25, 2008
Therefore, I want to position myself both long and short. Here's how I am playing this market. I am using ultra short ETFs like SDS, QID, SKF and SRS as my bearish play, and going long individual stocks with bullish setups, like my recent WMS trade.
Friday, February 22, 2008
Take a look at the chart and note the difference between the current breakout (green arrow) and the December failed breakout (blue arrow). What is the key difference between the two breakouts?
Accumulation. You here me talk about it all the time, and this chart provides a great example of how important it is to monitor accumulation patterns. The December breakout was destined to fail, as up volume barely moved as price climbed. OBV during this period stayed within a mediocre range, further questioning the breakout.
Now look at the current breakout. Not only is price breaking out, but OBV is as well. Volume is motoring higher, and today's confirmation move was on above average volume as well. This leads me to believe we will at least retest the recent high.
Thursday, February 21, 2008
While I would not buy just yet, the stock is still technically sound. Support has not broke and volume on today's decline was within the stocks normal range. OBV still looks good. Ideally I like to see pullbacks head to support slowly and with small price bars, so I won't buy until I see more evidence that backs the idea that today's decline is nothing to be concerned about.
Another concern for this stock is the negative RSI divergence. This is a sign that momentum is waning. I don't use divergences as a primary tool, but they do go into the overall analysis and let me know that I must exercise caution.
This analysis does not cause me to discard the stock from my watchlist. As long as support holds, it's still a bull candidate. However, it does effect my entry. I enter stocks in one of two ways on pullbacks. When I am supremely confident in a stock, I will enter during the pullback, before a confirmation move like a bullish engulfing or long tail candle at support. My other method, when there are more queston marks, is to wait for confirmation.
Wednesday, February 20, 2008
Tuesday, February 19, 2008
I was short PCU as it had presented itself as a good short candidate. I was stopped out on today's breakout, and have now reversed my position, going long 50 shares.
Today's breakout over resistance makes it clear that this stock is now a long candidate. Besides the breakout, we also see recent accumulation and a positive RSI divergence. I am not sure if the stock has truly bottomed, so this is a short term long play. I may add to the position on a pullback to the breakout point.
Sunday, February 17, 2008
Friday, February 15, 2008
A number of stocks on my bullish watchlist are pulling back, which is great. However, some of them has gapped down to their buypoints, which is not so great. I may take a few low risk pilot positions, but I won't do much more today.
One of my new year resolutions is to research and ultimately trade currencies via the forex market. The main reason is I would like to put on short term day trades, but cannot in stocks since I work full-time during the day. The forex market is open 24 hours, which would allow me to carve out an hour or two on my off time to apply some short term strategies I have been working on.
I've done some research and will now start demo trading. If anybody knows of any good demo and trading platforms, please e-mail me. My e-mail is SinghJD1@aol.com
I am not sure who to believe in the Roger Clemens steroid saga. However, there is one thing I am sure of: Congress should not be involved. What a waste of time and money.
The NBA's Western Conference keeps getting stronger. I am going to stick with the defending champ Spurs as my top pick, but the Lakers sure look good with the addition of Gasol. I have no idea how the Shaq deal will effect Phoenix. Even if the trade works out, I still have not idea why Kerr did not pull the trigger on the KG deal this summer. I'd rather have Nash, Marion and KG than Nash, Amare and Shaq.
Lost keeps getting better.
Why don't more people watch Friday Night Lights? It's the second best show on television, after Lost.
Wednesday, February 13, 2008
The stock broke out in December and has traded in a consolidation range ever since. It looks a bit extended here. I'd like to buy on a pullback to the 50 day moving average.
Price action has been good, but the volume pattern does concern me. The current price breakout has not moved on tremendous volume. Many independent oil and gas stocks are showing similar patterns.
Unlike KWK, MTL's volume pattern is confirming the price move. This one's at the top of my watchlist.
I am not as bullish on the ag stocks as some. CF has one of the best charts among the grouping, but still has some concerns. Namely (surprise, surprise), the volume pattern is not confirming the up move. I'd like to see CF break out to new highs on very strong volume before entering.
Fantastic chart. Price breakout confirmed by accumulation pattern in volume. The stock is extended. I'd like to buy on pullback to support.
DECK is speculative short in the sense that I did not wait for a break of the moving average. The technicals stink, but there still may be a bounce left in this fad stock before it ultimately crashes.
I had some technical difficulties with my mic, so the promised video will be delayed until I can get a new one.
Tuesday, February 12, 2008
What I see are signs of a classic bear market, and today is a great example. We had wonderful news that Warren Buffet, our modern day Stanely Morgan, is coming to the rescue of at risk insurers. The market goes nuts. Everybody is buying. SPY trades up over $136. The Q's trade up to $44.68. The bear market is over . . . not.
We end the day with the Q's in negative terriroty and SPY making a modest gain way off the highs. My friends, this is what happens in a classic bear market. We may still get a bit more bounce, but I have a strong feeling we will come back down.
What would make me change my bear market thesis? If the S&P can breakout over the 50 day moving average (currently 1416) on strong volume, I'll change my tune.
Coal stocks are taking a hit on a strong day for the overall market, which is a bit of a surprise. Still, there are some nice looking setups out there. FCL's chart looks bullish:
Friday, February 08, 2008
Concerns aside, the stock does offer a well defined reward to risk setup. If entering at the current price ($205), a logical stop would be under the 50 day moving average with the target at the recent high of $220. That would give a 3:1 reward to risk ratio.
I covered 100 shares of FSLR (short at $187.33) at $164.67 for a $2266 (+12.1%).
I covered 200 shares of MON at $102.43 (short at $114.27) for a $2454 (+10.7%).
I covered 75 shares of GS at 188.06 (short at $202.55) for a $1086 gain (+7.7%).
I covered 400 shares of DNR at $27.01 (short at $26.01) for a $404 loss (-3.8%).
I exited 300 shares of PAAS at $34.62 (entry at $35.86) for a $372 loss (-3.6%).
I bought 300 shares of ANR at $34.05 (currently at $35.44).
I bought 400 shares of HOV at $9.32 (currently at 8.73).
I am still holding DUG (ETF short oil and gas), ANR (long), PRXL (long) and AGU (short).
February performance on completed trades:
win rate: 60%
average gain: $1935
average loss: $388
total gains: $5806
total losses: $-776
Total Profit: $5030.
Not a bad haul for 7 days of work. Now lets hope I don't lose it all in the coming week.
While I am not happy about the win rate, at least maximizing gains and minimizing losses. Over the weekend, I plan to analyze a few of the trades I made. This type of trade review will become a regular feature of the site. First up will be FSLR. Take a look at the chart and see if you can get behind my strategy
BTW, for those new to the site, all entries can be viewed by going to the trade label or just scrolling down and viewing my Febuary posts.
Thursday, February 07, 2008
My bias is still to the down side, but I don't want to give up the big gains I've already made. I am keeping a few shorts in case we go down more before we bounce.
A lot of you have e-mailed in shock over my long position in HOV (posted entry in comments section), a homebuilder. Todd S. asked a question is representative of most of the emails I received: WTF are you short a homie when you have been shorting the shit out of the sector over the past year?
Good question Todd. Fundamentally, and longer term, I still don't like the sector. I agree with most that credit and housing problems aren't going away any time soon. However, as a technician who lives and dies by trading accumulation and distribution patterns, I cannot ignore what is going on in the sector. Take a look at the HOV chart:
1. Strong breakout over downtrend line and 50 day moving average.
2. Distribution pattern shows accumulation during run up, with strong volume on up days and low volume on pullback.
3. RSI divergence (see orange dotted line on price and RSI) shows strong relative momentum.
These three factors lead me to believe we have a short term reversal in play. I expect to see a retest of the recent high. Not sure if we'll get a breakout at the high, but retesting the high alone would give us a 30 percent gain.
Some have pointed out that I may have entered early. The 50 day moving average is at 7.63, so I do understand the criticism. Maybe I could have waited for more of a pullback. Normally I would. The reason I did not is that I am expecting a bit of a market bounce in the coming days. Lately homies have been leading the market bounces, so it makes sense to enter now. I have a decent risk to reward at 2:1.
Wednesday, February 06, 2008
The latest bit of unwise conventional wisdom is the idea that one must "focus on not losing money in order to make money". Play it safe and protect your capital has been a popular mantra over the past month. What a load of crap.
You know what happens when you focus on not losing money? You lose it. Either that or you make meager gains (all hail consistency, as in consistently average!). It's akin to an athlete playing not to get injured. That is when you get hurt. The team that plays not to lose rarely wins.
In trading, playing not to lose will cause you to pass up on good trades and scare you out of trading volatile, yet lucrative markets. If you have put in the blood, sweat and tears that accompany hard work and dedication, know what you are doing, and have a sound methodology and edge, don't ever play not to lose.
Note that this doesn't mean you throw caution to the wind. On the contrary, a trader must be vigilant about managing risk, position size and ones emotions. These three factors, along with having an edge, allow one to play to win, rather than lose, and put on winning trades.
I went short 200 shares of AGU at $62.16. My analysis tells me that many of the agriculture, chemical and farming stocks look toppish right now. I am already short MON, and have added AGU as a short. We've got all the classic signails: topping price pattern, break of support and heavy volume distribution.
Note that shorting this sector is not for the faint of heart. Many still think the sector has legs, and will try to get in on dips. They will likely get burned, but we still could see some bounces. When shorting a momo sector as it looks to be topping, you must manage risk and set logical stop losses.
Tuesday, February 05, 2008
As we move towards the lows, I will likely start to lighten up on my short positions. Volume patterns don't predict a breakdown, at least not yet. While price and breadth were horrid today, volume wasn't all that heavy. Until we see more distribution, I won't go with a "breakdown of January lows" thesis.
From a technical perspective, this chart is a good example of a classic "dead cat bounce." We had a significant decline followed by a bounce that reached resistance on volume that was lower than during the distrubution phase, finalized by a sharp move down that completely wiped out the bounce gains in less than half the amount time. This is classic distribtuion phase action.
If we get early long side relief tomorrow, I will probably initiate more shorts based on the "retest January lows" thesis.
Monday, February 04, 2008
FCX, CPLA, JNPR, DRYS, DSX, NILE, CBI, MBT, FSLR, CHNR, CVD, ESRX, WFR, DBA, DNR, TOT, SU, E, CVX, ARD
ACI, MA, MCRS, CALM, RTP, ILMN, WLT, MEE, SID, CNX, CMED, PBR
Most of the shorts are broken high momentum stocks that are bouncing towards resistance levels. The longs plays are stocks that have held up well during this market, some having recently broken out.
Friday, February 01, 2008
I am long PAAS (35.86) and PRXL (54.80).