Quick Trade Update

As noted to Trade Report members this morning, I took a small position in SDS today at $77.46. My upside target is $84-85.

Trade Results for February and March 2009

Back on February 17, I told my subscribers that I would do a better job of tracking my trades. Here are the results from February 17-March 16. All trades were noted in the Trade Report, and some were also mentinoed here. Note that I do not take commission into account in these results.

Total Profit = $3464

Total Wins = $6605
Total Losses = $3141

Total Trades = 15
Total Wins = 9
Total Losses = 6

Win rate = 60%

Average Win = $733
Average Loss = -$523

The Trades

February 18

200 VLO at $22.94. Exit at $21.88. -212 (-4.6%).
200 STLD at $11.56. Exit at $10.50. -212 (-7.9%).
200 USO at 23.88. Exit at $26. +424 (+8.9%).

February 23

400 SSO at $18.55. Exit at $16.90 -660 (-8.9%).
75 GOOG at $339. Exit at $326. -975 (-3.8%).

March 4

200 SSO at $15.86. Exit at $14.90. -192 (-5.5%).
350 USD at $10.72. Exit at $12.50 and $15.25. +1035 (+27.6%).
200 SIGM at $13.20. Exit at $14.50. +260 (+9.8%).
200 MOS at 39.10. Exit at $42.10 and $39.10. +600 (+7.7%).
300 (s) AAPL at $89.20. Exit at $83.50. +1710 (+7.1%).

March 9

100 FDX at $35.50. Exit at $37.50. +200 (+5.6%).
300 X at $17.25. Exit at $19.25 and $21. +862 (+16.6%).
200 (s) AEM at $49.80. Exit at $45.80. +800 (8.7%).
300 SSO at $14.25. Exit at $16.26 and $17.02. +714 (+16.7%).

March 13

300 SRS at $61.55. Exit at $58.50. -900 (-4.8%).

Thoughts: While not analyzing the individual trades, I am not happy about the size of my average loss. I expect my wins to be at least twice as large as my loses. I don't like to rely on a high win rate. I don't mind taking a lot of small losses.

The problem here is not the amount the risk/reward per trade. My stops were tight, and the *percentage gain* of my wins outpaced losses by a large margin. The problem was with my position size.

I hope to start analyzing these trades individually in the coming days.
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Breakout Stock: CTRN

During big down days, it pays to watch for stocks holding up well. CTRN, a recent breakout stocks, is doing just that.

On Probability, Trading and Current Market

What do I mean by high probability?  In trading, I define a high probability setup as one that gives me a significant edge over an average trade.  For instance, in my back tests, when stochastics hit 90 (extremely overbought) in a bear market, coupled with a few specific trading setups, the success rate of shorting is above 75 percent.  This is a very high probability setup.  Obviously, it doesn't occur often.  When it does, I usually get very aggressive with the trade.  

Adding volume and paying attention to accumulation and distribution patterns can add or subtract to the probability of a pattern setup.  For instance, in the bottoming price pattern, strong accumulation (positive volume pattern) underlying the price pattern increases the probability that the trade will be a winner.

Currently their are no high probability setups.  However, if the market pulls back to support, or ramps higher toward resistance levels and become extremely overbought, well see high probability setups emerge.

Another Bullish Signal

With so many stocks showing bullish patterns, I spent the better part of three hours today just trying to narrow down my focus list.  This is another sign that this market has legs.  If not a reversal, we should bounce towards another resistance level in the coming days or weeks.

Game Plan for Friday

Here is the game plan for Friday, taken from today's Trade Report:

(See this post for a free seven day trial and 30 minute private chat)

Market Notes:

 

The market drifted up today on decent (but not great) volume, and is nearing the $85 resistance level.  Stochastics are very overbought right now, which leads me to believe a pullback is in order.  From a trading standpoint, I hope there is a pullback.  Entry will be easier once overbought conditions are worked off a bit. 

 

I may consider a short trade if we bounce towards $85 on average volume.  This would be a quick "against the short term trend" trade with a tight stop probably around $87. 

 

 

Increasing the odds of a pullback soon is the fact that the T2108 indicator, which measures the number of stocks above the 40 day moving average, is reaching overbought territory at 75.  I like to see the indicator hit 80+, which should happen if we get another day or two of bounce.

Trade Tracker:

I am still holding SSO and FAS.  I thought about unloading half of my SSO position today, but decided against it since my target has not yet been hit.  I am concerned that FAS has not kept pace, but ill still honor my stop.

 

 

Game Plan:

 

I continue to wait for a pullback for entries.  I also may think about shorting if we get more bounce on average volume.  Any shorts will be quick trades.

 

Focus List:

I continue to wait for pullbacks in focus list stocks.  There were a few good breakouts today (solar stocks like FSLR were on fire), which I'll post over the weekend.  There's no need to post then since it will take a multi-day pullback for entry.

See focus list stocks in Monday report:  http://docs.google.com/Doc?docid=d5z8q8w_842c2357xhj&hl=en

All focus list stocks are over-extended.

If I decide to short strength for a quick trade, I'll use one of the following inverse ETFs: SDS, QID, FAZ or SRS.

Free Trial of the Trade Report and Free Private Chat

I am offering a one week free trial to the Trade Report for those that interested in subscribing, along with a *half hour private chat* with me.

You will have to sign up to the report via paypal through the link below. If at the end of 7 days you do not want to subscribe, simply e-mail me and I will refund the subscription payment.

The free trial will also include *archives* to reports going back to January 1, 2009 and a *free half hour private chat* with me, where you can discuss anything market related.

SPY Chart

The Game Plan

Today's move was unexpected and has changed the character of the market and for the moment, it looks like the reversal is in. Take a look at my post right after the market close:

http://themarketspeculator.blogspot.com/2009/03/definate-change-in-market-character.html

It's not time to add shorts, even with the big move. However, I'd like to see a pullback before long entry. A pullback close to the 50 day moving average on SPY sets up a good long entry. Unfortunately this pullback might not happen. The reason is there are a lot of scared shorts right now, and they may continue to cover positions tomorrow.

A day or two of bounce will setup "oversold" extreme or rubber band setups in some inverse ETFs, like FAZ and SRS, possibly at 15 for FAZ ann 40 for SRS.

Look for pullbacks in the indexes and focus list stocks.

Remember, we are now in a short term uptrend, so we look to enter long pullbacks and short once we see extreme overbought conditions. This is the opposite of what we had been doing.

I was stopped out of the remainder of my short positions (inverse ETFs) at entry levels. This locked in my initial profits. I currently have no positions.

Definite Change in Market Character

Today marked a change in character for the market. SPY has now convincingly mounted the 50 day moving average, the volume pattern shows accumulation, RSI is steady above 50 and the price bar is of the "breakout" variety.

I'll be looking for a pullback to initiate longs.

Chart: ACOR

ACOR is the only new addition to the focus list:

Correction in SRS Trade, Partial Profits in SDS

I wrote the wrong entries for my SRS trade yesterday. The correct prices are 200 shares at $57 and 200 shares at $58.11.

I am taking profits on 200 shares just now at $61.90 and am moving my stop on the remaining up to $57.

I also took partial profits just now in SDS (84.03). My stop on the remaining shares has been moved to entry level.

Trade Tracker

Here are my current trades, as posted in the Trade Report:

Trade Tracker:

SDS: Still holding (400 shares at average price of $80.83, currently $83.31)

USD: I took profits in the rest of the X position at $21 (entry at $17.25) for a $562 gain (total trade $862 gain).

X: I took profits in the rest of the USD position at $15.25 (entry at $10.72) for a $679 gain (total trade $1035 gain).

I added 200 shares SRS at $53 and 200 shares at $55.11 (currently around $60)

I added 200 shares FAZ at $26.55 (currently around $30). I'll go over this trade over the weekend. I watched it gap down to $23 (should have bought on the gap down--aghhh!). I decided to buy once it closed the gap and pierced yesterday's low. The fact that the market was near the 50 day MA also helped with the entry.

Last Night's Trade Report

Here is the Trade Report I sent to subscribers last night. In it is also a link to Monday's report, which is probably more important.

http://docs.google.com/Doc?id=d5z8q8w_828pc9n57gv

Game Plan: Play the Pullback, Then Buy

My current game plan is to play the expected pullback (based on overbought conditions, volume, price candles and resistance levels) with inverse ETFs (currently in SRS and SDS). Once stocks on my bullish focus list pull back to support levels, I'll reverse and start buying.

Correcton: Overbought Market

In the previous post I said the market is oversold. Obviously I meant it is overbought. Thanks to those who commented and e-mailed me.

Trade: SDS

I entered 400 shares of SDS today when my buy limit order was hit at $88.15. I don't do this often, but I am using two different stops for this trade. Half the position has a stop just above $78, while the other half is above the 50 day moving average.

The market is very oversold, thus this inverse ETF is overbought and near support levels. I expect a market bounce early this week due to overbought conditions.

SPY at a Glance

The doji candle printed Friday, which follows a bounce on low volume with overbought stochastics, leads me to believe we'll see a pullback this week.

Trade: SRS

I took a small "probing" position in SRS (ultrashort real estate) today at $61.55. As noted in a previous post, the bottom of price support is in the $50 range, thus the small position size.

Note the extremely oversold the stochastic indicator.

SPY Chart

2 Low Risk Real Estate Short Entries

If looking to get short on the current or future bounce, SRS offers two low risk and easily managed entries.

The leveraged real estate ETF is currently right at moving average support. An entry here with a tight stop under the moving average provides low risk If the top is placed at $64 and the target is modestly placed at $75, that would give us a 5:1 reward to risk ratio.

If the market gives us a stronger bounce, the next logical entry level would be at $50, where there is strong price support.

Taking Full Profits in existing SSO Position

I took profits in the remainder of my SSO position at $17.02 (entry at $14.25). My only current positions are half positions in USD and X.

I am looking to add longs on a decent pullback and shorts on a multi-day bounce.

USD

One of my favorite bottom plays going into yesterday's bounce was USD (semiconductor ETF). While I am still holding a partial positions, it's now moved right into resistance. I may add to it on a pullback.

Quick Update

I am taking partial profits this morning. More info to come.

The Gold Short: AEM

The short gold trade I mentioned yesterday is working great so far. I entered AEM at $49.80.

Gold and Silver Stocks are Setting Up as Shorts

Many gold and silver stocks showed distribution patterns on the recent pullback. here are a few of my favorite short setups: PAAS, SLV, AEM, KGC

The AAPL Short

As posted in the Trade Report earlier this week, I went short 300 shares of AAPL at $89.20. This was done mosly as a hedge against my new long positions (MOS, USD SIGM, USO), and I was a bit nervous about the trade since it was showing good relative strength versus the market.

However, it also had broken down below the 50 day moving average and pullback back on less than stellar volume. It was one of the few stocks I could short that weren't already depleted. The trade has worked out quite nicely, and I took profits today.

Short Setups in the Even of a Bounce

If the market gives us a multi-day bounce, I would like to use it to initiate a few short positions. I am currently watching broken stocks that are bouncing towards resistance levels. ALXN is a good example. A few days of bounce would put it near the 50 day moving average and broken trendline. This would provide a low risk, easily managed short setup.

Trade: Partial Profits in MOS

I took partial profits in MOS today, selling half my shares at $43.10 (+10.2%). As noted in a Trade Alert sent to my subscribers, my entry was at $39.10. I have moved my stop up and will let the rest "ride". This is now a "free trade". I've locked in my profit with the possibility of more.

My reason for entry was quite simple. The market is oversold and the ag sector has shown strong relative strength in relation to the market.



I also took full profits in SIGM. I'll have more details on this trade later.

Volume and Bottom Formation

Notice that volume during the second leg of the "W" formation is less than that of the first leg. If a bottom formation is in the works, this is a good sign.

Trade: USD

I took a position in USD today. Price has held up well and is at a strong support level. Notice the positive divergence in OBV compared to price.

A Crappy Picture That Clarifies the Ideal Volume Pattern

This picture I created ain't pretty, but it does a good job of showing the type of volume pattern I look for during bottom formations: