Chart of the day: ARAY

Today's chart of the day is medical devices maker ARAY. The stock has pulled back to the 50 dma after a strong uptrend and is now oversold. This setup offers great reward to risk with a target near $10, entry around $9 and a stop around $8.75.

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With a 4: reward to risk ratio, you only need a 25 percent win rate to break even.  All it takes is a 33% win rate to be profitable and if you are at 50 percent, you will kill it. This is my kind of trade.

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Chart of the day is EA: Keep it simple stupid!

Sometimes swing trading is easier than we make it. In the trading game it literally pays to keep it simple.

Our stock of the day, EA is a great example of the KISS method. When do you buy EA?

That's easy. When it pulls back to the 50 dma or when stochastics near oversold levels. It's a slam dunk trade that would have given us 7 profitable trades over the past year.

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For entry I will wait for a slight pullback from this level to attempt to get better value.

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NFLX Trade

I entered NFLX today at $186.11. Here is what I wrote to trade report members:

My watchlist is rather small right now and there aren't any good entries, so I'm going to take this opportunity to analyze a focus list stock that is not an easy sell as a long or short right now, NFLX.

NFLX has been a 2010 juggernaut momentum stock. It's been the textbook trend pullback trade. In 2010 there have been at least eight good opportunities to enter, and I, along with many of you, have traded the stock successfully. There is another pullback that normally would be a good entry, however there is a key difference in this pullback whencompared to the others---volume.

Take a look at the enclosed chart. Each arrow signifies a pullback buying opportunity that was successful. Notice that the volume pattern in each of these instances shows higher gray bars than red bars. This tells us that the stock was being accumulated. The pullbacks were natural profit taking that occurs in all uptrends.

Now take a look at the current pullback. The red bars are nearly as high as the gray bars, and there are more than one. This is a concern. There are signs of distribution. Now this does not mean the stock is definitely going to fall here. However, it needs to be noted. There is a less of an "edge" to entry here. Many times there will be one more boost higher before a big fall. So keep this in mind. If a major support area breaks, be ready for entry.

Because we focus on risk/reward ratios, it's still okay to enter long. If we take a small loss, that's fine as long as we continually take 2:1 or 3:1 trades. When I see distribution starting to settle in, I like to get closer to 3:1 because the probability of a successful trade decreases.

If entering here, around $185-186, the natural target and stops based on support and resistance would be 179 and 205. That gives us the 3:1 risk reward we need for this setup.

I just entered at $186.11. Remember, you have to be willing to embrace a small loss here. We are looking at long term gain, not the result of one trade or the short term win/loss record.

Today's Entries: NFLX and ADM

I entered NFLX and ADM today.

NFLX has pulled back to the 20 day ma, oversold, and is trending nicely. Could be a pivot level, though the risk is pullback continues to the 50 day ma.

DECK at Support

DECK is one of the few good bullish trend setups.

Trade Entry: AMZN

I entered AMZN based on 1) the oversold stochastic reading and 2) pullback to the 50 day moving average. There is not credible chart pattern, but risk is low and the two elements listed give a slight edge.

Stop is below the moving average, around $129. The intital target is $140, followed by $145.

AIG is a Great Low Risk Setup

AIG's volume pattern shows that it is under accumulation. This pullback offers a low risk setup. If entered around $37, with a stop under the 20 day moving average at $34.50 and target near the recent high at $50, we are looking at a 6:1 reward ratio.

If you find enough trades like this, you only need to be correct 1 out of every 5 trades to make decent profits!

Charts: BRE and PALM

I entered two trades today. PALM is a trend pullback setup and BRE is oversold bounce.

Trend-Pullback: VPRT

The Simple SPY Strategy

My strategy for trading SPY is about as simple as it gets right now: Short strength and buy weakness.

I will look to enter long on a pullback to the 200 day moving average. My "rubber band" short setup triggers on continued strength close to $100.

4 Stocks For Tuesday

Here are the four stocks I am looking to enter on pullback Tuesday.

Focus List Stock: AMZN

I currently only have one position (SPY at $84.03). I'm patiently waiting to add positions on a dip to support. One of my favorites is Amazon, which is consolidating after a monster run and breakout. I'm looking to enter on a pullback to the $80-81 range.

A Momentum Stock in a Sea of Bottoming Setups

NFLX is one of the few stocks that has been enfuego this year. It bottomed in December and has been on fire since. I like it on a pullback to the mid Bollinger Band level, which is also the 20 day moving average.

This is a trend pullback setup.

A Momentum Stock: EBS

Stocks that fit my trend-pullback setup have been few and far between since the summer months. That's why EBS is like a breathe of fresh air. I'd like to see it pullback a bit more before entry. Notice that RSI 50 and stochastic levels at 20 have provided good entry points.

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.

Trade Entries: KSS, ARO and LOW

Retail stocks are nearing my entry levels. However, the negative retail report could pull them down further. For this reason, I am taking small position sizes in my retail trades and using tight stops--KSS, ARO and LOW.

I bought 150 shares of KSS at $50.44


I bought 150 shares of ARO at $34.02


I bought 200 shares of LOW at $25.30

Trade Entry: CF

I bought 200 shares of CF at $152.86. This is a trend pullback setup. The stock has been a consistent buy on pullbacks. My stop is under the 50 day moving average, with a target at old highs.

While I am bearish on commodities in general and see a lot of topping patterns forming, ag related stocks have been holding up well.



Trade Report:

View samples of last week's Trade Reports. Today's entry was mentionedas a setup in last night's report. For more info, click here.

Sample Reports:

Thursday Report, Wednesday Report, Tuesday Report, Monday Report

Don't Overpay for POT

Ag related stocks are finally starting to pullback. Those of us who missed the recent run (I raise my hand in shame) are starting to get itchy trigger fingers. Rest assured, I've got my gun set on safety.

Take a look at Potash. Even with the 10 point pullback from all time highs, the stock is 15 points above the 50 day moving average and barely starting to work off overbought stochastics. With the runnup the stock has had, I would expect a more meaningful pullback to some real strong, well defined support areas.

I will buy if the following conditions are met:

1. The stock pulls back to the support zone I've drawn below, in the $220 range.

2. Downside volume stays below the line I've drawn within the volume bars. The idea is that downside volume should be less than previous upside volume. If volume increases on the pullback, that is a sign of distibution.

3. Stochastics near oversold levels, in the 20-40 range.

BEXP: Late Entry Post

I entered BEXP yesterday at the close as it showed that it would help support. This is a late post, so I won't include it if and when I get around to updating my trading results.

MTL at Support

I still like MTL here. The stock has not broke support and down volume has been lighter than previous up volume. The 50 day moving average has been a good entry point.