A Historic Day of Profits for the Speculator

I sold 200 shares of POT at $150.10 (entry at $138.14) for a $2392 gain (+8.6%).

I sold the remaining 150 shares of CF at 118.34 (entry at $92.05) for a $3943 gain (+28.5%)

I sold 150 shares of AAPL at $202.15 (entry at $179.80) for a $3352 gain (+12.2%).

I sold 100 shares of RIG at $148.74 (entry at $132) for a $1674 gain (+12.6%).

I sold 100 shares of FSLR at $281.21 (entry at $235.25) for a $4596 gain (+19.5%).

I sold 150 shares of MBT at $98.97 (entry at $93.03) for a $891 gain (+6.3%).

I am still holding a few positions, but have cleared out much of my account. Today is one of the best trading days I have ever had, and I have to say, it's a relief. I was trading on full margin. I had thought about taking partial profits on a few of these trades, but decided against it since we've had such a nice run and most reached my targets.

As you can see from my gains, don't let anybody tell you it's not wise to trade over the holiday. If you know how to pick the right momo stocks, it can be a very profitable period.

To view trade entries, click the "trade" label below.

Catching a Breakout Early: CF Trade

On Tuesday I bought 300 shares of CF at $92.05. Today the stock broke out over resistance at around $100 and closed at $107.76. I sold half my position near the close at $107.34 for a $2293 gain (+16.6%). I am holding 150 shares and will buy more on a pullback to $100, if it's orderly and on weak volume. I've moved my stop on the remaining shares to $97.

As expected, I received a number of emails today. Arthur's is representative of the bunch:

Can you tell me why you entered this trade. I have looked at all of your recent trades and I am having trouble figuring out your entry points. It amazes me that you continually pick big winners just before they break out. You are either a great trader or you are very lucky.

I am hesitant to call myself a great trader, and I certainly do not believe in luck. I firmly believe that those who are lucky put themselves in the position to receive what seems to be luck. I'm not talking "The Secret" self help bullshit here. What I mean by putting yourself in position with regards to trading is undergoing the hard work of understanding markets, your system/setup/edge and risk/reward.

Let me get specific about the CF trade. First, let's look at the overall market. Early this week, I was looking to increase my long exposure, while still maintaining a healthy dose of shorts. While I do think the market is headed down, I also thought we would get a bounce going into the holiday since the market was so oversold and we had a historical trend on our side (Christmas/end of year).

I do not like to play bounces in broken stocks, so I was looking for strong momo stocks to play. One sector full of momentum plays is Ag. I've been looking to get long and ag related for a while now. CF, MON, MOS and AGU all looked attractive, but I went with CF because I liked the volume pattern and a cup and handle seemed to be forming. My target was $90-92, which was at the bottom of the basing pattern and would give me a good risk reward (stop would be placed under the 50 day at $87).

I am not precise with entries. I don't have to have that perfect entry at $90. Early in my trading career, I missed a lot of big gains trying to be perfect. Now, as long as the reward to risk ratio is acceptable, I'll enter early on a setup that offers an edge.

Unlike many traders, gurus and technicians, I can't give you a precise stochastic reading, fib retracement or precise reason for entry. While I do rely heavily on accumulation/distribution indicators, much of it is just having an intuitive feel for the trade based on experience. For me, it boiled down to the following:

statistical edge that overall market would bounce
strong sector
strong stock within sector
nice chart, price and volume pattern
acceptable reward to risk

That's it. I placed my trade, set my target and stop, waited and "got lucky".

Note: AAPL is up 8 points from my Tuesday entry and RIG is up 4. I took partial profits in both, along with in the DRYS and EXM and housing shorts.

Today's Trades: GRMN, LEH and QID

I know I will receive alot of questions asking why I didn't stick with my short positions longer. While I do feel like the market has more room to the downside, I don't trust pre-holiday trading for sustained moves. Therefore, I feel it's best to take my profits with shorter term trades and look for the next opportunity.

I covered 500 LEH (short at $58.85) when it hit my target at $55 for a $1925 gain (7.1%).

I covered 100 GRMN (short at 102.65) at $97.80 for a $485 gain (+4.8%).

I sold 500 SDS, which is a leveraged short S&P 500 ETF (entry at $54.75), at $56.79 for a $1020 gain (+3.8%).

I am still holding GMCR, LFC and SDS.

I am currently in the midst of one of my best trading runs. Since August 6th, I have made 16 winning trades with only one loser, with $20,861 in total profits. Note that two of the three positions that I am still holding would count as losses if I exited today. I will continue to hold until my stops are hit.

This certainly was not a bad month for an account under $100,000 (I use margin when needed). However, this weekend I will analyze all of my trades, and watchlists, to see what I could have done better. I am still a little ticked about missing the BCSI and CROX moves, two stocks at the top of my primary watchlist.

So What if There is Light Volume

Many commentators around the blogosphere have pointed out that recent gains have been on light volume and should not be trusted. Rev Shark, an excellent trader, makes this point on his analysis of yesterday's charts. While I respect this analysis, I could not disagree more. It's a holiday week, people! Of course volume is going to be light. Until we see a strong move to the downside, or some major resistance point violations, I'll continue to go long without worrying too much.

I still feel we have a strong market short term, and today is a good example the market's strength. In a weak market, the Shanghai "plunge" would have had a decimated the U.S. market. Instead, we had a light selloff that the market shook off with relative ease.

Note that my bullishness short term is not a sound off to go long with reckless abandon. While I am long, I will continue to honor my stops and have short strategies ready if there is a reversal.