Trade Update

I took partial profits in DIG and AAPL. They both continued on yesterday's big gains, providing a good place to take profits. I have moved my stops up to entry.

I am still holding my full SSO position.

I made last night's trade report available free to blog readers. It explains my reasoning for my bottom thesis and going long near the lows.


http://docs.google.com/View?docid=d5z8q8w_388ccvw26fj

The Market Clues that Lead to Today's Move

I have sounded like a broken record over the past week, both here and in the Trade Report, arguing for my short term bottom thesis.

I go into my reasoning in tonight's Trade Report, which I am providing free to blog readers today:

http://docs.google.com/View?docid=d5z8q8w_388ccvw26fj

The RSI Effect

As long as the lows hold, the bottoming thesis is in effect. I have focused on more short term 3-6 month charts lately, but here is a two year chart showing the power of the oversold RSI, even in a longer term down trending "topping" market.

Holding the Lows

The lows are holding. My game plan is to hold my current positions with stops in place below the lows. As long as the lows hold, we are still within the "bottoming range" formation and just experiencing a retest.

The chart below is not annotated, but note the RSI divergence.

The Trading Range is Still Intact

Despite all the doom and gloom, we are still within the bottom trading range.

Trades

I was stopped out of all of my positions earlier today. Currently we are hitting the lows of the day and I have re-entered DIG and SSO at better prices. These are very small positions. Low risk, high reward, with the expectatino of getting stopped out.

UYG Setup and Trade

We still see a nice accumulation pattern. I took a position today within the triangle pattern. I have a tight stop in place in case the break is to the downside. Low risk, high reward.

I Own Today's Biggest Gainer

My only existing full positions, DIG, also ended up being the biggest gainer of all ETFs today. It gained a whopping 22 percent today. I still see much room to the upside, with an intermediate term target at $50.

Imtiaz and Jeremy C

Please confirm that you received an e-mail about the trade report and link to past reports. If you did not receive it, check your spam folder and contact me from a different e-mail or leave a comment after this post.

Bottom Forming

My current market thesis is that we are putting in a short to intermediate term bottom. I am not saying I think this is the final bottom and the bear market is over. However, it does look like the down trend will test major resistance levels. This would provide a decent sized uptrend within the bear market for traders to capitalize upon. It also would provide a good short entry for bear market continuation shorts.

A number of factors lead me to the bottom thesis . . . To read the rest of my analysis and game plan to start the week, become a Trade Report member.

Partial Profit Taken in SSO and DIG

I have taken a partial profit in SSO at $33.54 (entry at $27.10).

I am holding onto my position in DIG (I took partial profits at the close yesterday).

Trade Update

I added some SSO today. I've had the flu for the past couple of days, but hope to post some charts tonight or tomorrow.

I thought the opening line of this Fly post was hilarious.

Trade Update: DIG and DIG

I was stopped out of this mornings DIG trade at $29 and re-entered at the close at $26.48. The ETF moved close enough to the next buy zone to allow for a low risk entry.

As wit this mornings trade, I have a hard stop in place (under the recent low) and will strictly adhere to it. I'm willing to take small losses due to the potential of a big bounce.

Trade Update: DIG

I took a small position in DIG today at $30.45. I usually don't like to buy big gaps down, but it has entered my initial buy zone and offers a good risk ratio for easy trade management.

As noted when I took profits yesterday at resistance, a pullback and retest of lows is to be expected.

As with all my trades of late, position size is small and stop is in place. There is a risk that the pullback becomes another bear leg down. Thus, I'm not willing to take a big position.

SSO Chart

The S&P 500 has clear buy and sell zones that can be played to limit risk and provide optimal entries. I am waiting to enter as near to these zones as possible.

Trade Management

Here's a note I posted in last night's report on Trade Management and my strategy during the past two weeks:

During the past two weeks, as noted in the reports and blog, my oversold bounce trades have basically broke even. A waste of time? Not quite. I was confident the market would bounce at some point during the extreme oversold levels, and we got that today. My entries in SSO and DIG last Thursday paid off big. I am now up approximately $2000 in the DUG trade and $1800 in SSO. Thus, over two weeks of low risk trades, I have a profit of $4000 (partially taken and partially still in play).

My strategy has been to play a bounce but manage risk very closely, while always being in position for a big move to the upside. Now that the risk has increased and we are hitting resistance levels, I have exited the trade.

Note that we are still very oversold. However, I would like to wait for a breakout of current resistance or a pullback for new entries.

The T2108 is still very oversold:

Trade Update: SSO and DIG

I cleared out my entire SSO and DIG positions this morning.

Trade: SSO and DIG

In the Trade Report last night I said I would buy if SSO dipped to $28. I had a limit order in place and was filled at $26.30 (400 shares). I sold half the position minutes ago at $28.50 and will hold onto the rest. My stop for the remaining shares is below today's low ($25).

I did the same with DIG, one of my watchlist stocks, at $26.75 and just sold half the position at $30.20. I am still holding 200 shares with my stop at entry level.

I am following the strategy outlines in the report: buy weakness, sell half the position into stength (or get stopped out for a small loss), move the stop up if short term target is hit to lock in profits or at least make the position a "break even" trade by placing stop as many points below entry as the gain was above entry.

POT

I bought on the dip below $100. This is a small position size with limited risk.

I'll have a more detailed post later today.

A Positive Sign

Commodities did quite nicely today. This is a good sign.

Partial Profits

I took partial profits (110 shares) on the SSO trade at $37.55. I will use this profit to keep my stop at "break even" level and let the remaining 100 shares "ride".

Thus, I will either make money or break even on this trade.

Trade Entry: SSO

I'm taking another stab at SSO, long 200 shares at $34.81.

I noted both in the blog and the Trade Report that I would like to buy in the $35 range and my limit order was filled at the open. I have to admit I am a bit surprised that the market is not doing more with the rate cut this morning. I thought this was the news item that would finally give the market the push it needed.

Thus, while I'm not overly optimisitic about this trade, I can't ignore the historic oversold levels (T2108 at 2) and bounce potential. As with all of my trades over the past three weeks, positions size is small and the stop is tight.

Wednesday Game Plan

I currently am holding one position (K--which is still above entry). I took partial profits in X at $60, moved my stop to entry, and was stopped out.

My plan for tomorrow is to take a small position in SSO on weakness. I will likely enter if it dips down to $35. I still expect a bounce soon, but am not willing to take a big position.

The Morning After . . .

I woke up early this morning hoping to see something significant going on in early morning trading. I should have slept in. Not much is going on. At least futures are not down significantly.

It may be worth noting that Australia cut rates. Could more countries follow? The Australian ETF is EWA.

I am offering today's Trade Report free. Click here to view my game plan for today in more detail.

Update: I will likely put some cash to work shortly, via SSO and possibly a few stocks on my focus list (see Trade Report). I have a busy day so I probably will not be able to update until market close.

Game Plan for Tuesday - Free Trade Report

The bullish tails that printed today in the indexes and most stocks set up a possible entry tomorrow based on a reversal thesis.

I am providing tonight's Trade Report for blog readers for free.

http://docs.google.com/View?docid=d5z8q8w_331gdg73xjn

If interested in subscribing, click here.

Trade Safe.

SPY Prints Possible Reversal Candle

Believe it or not, although SPY was down almost 4 percent today, technically it was a good day. The index printed a bullish "long tail" candle on massive volume, while the Worden T2108 indicator at extreme oversold levels. Generally, this ia a clear reversal signal, at least short term.

The index recovered right after I was stopped out of the SPY trade (via SSO) and closed over 2 points above my entry . Looking back, it's easy to say I should have used a wider stop. However, my main concern was limiting risk.

While I am disappointed that I got stopped out of SSO, the X and K trades were gems. X closed up over 6 points from entry and both printed bullish candles.

Trade Alert: Stopped Out

Minutes ago I was stopped out of the SSO trade for a 200 loss.

Trade: SSO

200 shares of SSO at $38.64. Stop at $37.74. Initial target is $43.64. Next target is $50.

Thus, I'm risking $200 for the chance to make $1000+. Note that the T2108 is at historic oversold levels and stochastics are way oversold.

Jim Cramer Comment

Jim Cramer on Realmoney says:

"We're in a Worldwide Crash. I'm not buying, because prices are going even lower."

Hmmmm . . .could this be a contrary indicator?

Today's Trades: X and K

I just took two small long positions today at current lows.

100 shares of X at $53.46.

100 shares of K at $55.38.

These are small positions with tight stops. I am not risking more than $600 on these trades. The idea is take a small, *expected* loss, with the possibility of a big gain if the market bounces. I don't care about win rate, just the potential for a bounce off unheard of oversold conditions.

*I do not recommend taking these trades unless one has no problem taking a loss*

Kellogg: The New Momentum Play

Kellogg, Campbell Soup and Clorox--the new league of momentum stocks. When these types of stocks are the only bullish trending stocks around, you know it's not a bullish momo traders paradise (it is for bear trend traders).

Kellogg looks good on a pullback to support.

Sector Snapshot

Only 28 out of the 239 sectors Morningstar tracks were in positive territory over the past week. Out of those 28, only 7 were up over 1 percent. Here's the list:



Not many have good looking charts. Tobacco is showing nice underlying volume. Regional and Pacific banks also have decent charts. The rest are bounces off downtrends.

Got Soup?

CPB has a nice looking chart. This is one of the few traditional non-bounce related setups that has made my watchlist:

Trade Update: SSO, DUG and POT

I was stopped out of 100 shares of POT at $105.18 (short at $125.10) for a loss of $1992 (-18%)

I exited DUG at $43.85 (average entry at 36.44). I originally entered with a total of 300 shares. My exits were at $40.12, $42.05 and $43.85, 100 shares each for a $1670 gain (+15%).

Two big swings adding up for a very small loss (-322).

I added 100 shares to my SSO position at $45.96. This position is based on the divergences showing up in the chart. Due to a the House bailout vote and jobs report, I have taken a very small position. Normally when I see this type of divergence I use my normal position size, but not in this market. Note that the POT trade was showing a positive divergence before tanking.

Positon Update

Position update from the Trade Report:

I made two trades today, both involving POT. As noted yesterday, I was surprised it did not bounce, so I exited at my entry level today. When it dropped down to $125, it was too good to pass up as an oversold bounce play, so I entered. By the close, I was very happy with the trade. It closed at $128 and had reached up over $129.

Then the MOS earnings news hit and POT went down with it after hours. I believe it closed after hours trading around $118 (my entry $125.10). My original stop was going to be at $120, but I'm going to lower it. I expect there will be a big gap down at the open, then some buyers will step in and give me a better exit. I'll have my initial stop placed below the gap down.

SSO held up well and closed above $49 (entry at $46.11). We'll see how the S&P reacts to the Senate approval of the bailout plan. There still are some jitters about how the House will vote, which is why futures didn't pop after the news.

DUG is still hanging in there above $39. My stop is at my entry level around $36. This is a partial position after taking profits at $40 and $42.

After a summer and early fall of great success trading the "rubber band" oversold bounce setup, I've had two hiccups in a row (AAPL and POT). Fortunately these two trades (along with all my current trades) were taken with very small position sizes, and were balanced by successful trades like DUG, and SSO if it continues upward. This is a good example of how important trade management is to your trading.

Trade Entry: POT

I entered POT today as a bounce play at $125.10. As I have been preaching, postion size is small.

Reasons for entry:
1. Stochastics oversold
2. Extreme weakness today
3. Positive divergences in RSI and OBV (indicators are making higher lows while price is a lower low).

Risks:
1. Continuation of downtrend
2. Negative market reaction to tonights bailout plan.

X Short Setup

A few more days of bounce would cause X to seup as a nice bear flag short candidate: