"The Trend is Your Friend...

...Until it ENDS!"

Hey Gang:

As you will note by my last post, I had been somewhat bearish on the market. The trend signals were also pointing bearish, and the economic indicators were also bearish. With that in mind, and my QID and DOG charts seemingly bouncing I got in two trades. On Wednesday, I got out.

One of my trading rules is to exit any trade that falls below, and stays below support for two (2) consecutive days. That happened on Wednesday. Here are the charts:

DOG

QID
For me, it is okay to be wrong, but never okay to second guess if the market will do what you expected it to. In this case, I expected the market to go down (and UP on my Bearish ETF's), it did not, so I abandoned the positions for small losses and have moved on.

So now what? Well, we are coming into Earnings Season, always a tricky time to play stocks especially over Earnings. So if I can get into some plays that I see reaching a peak BEFORE earnings, I may play them. I have some of my favorite trades that are still overbought from when I was taken out in March (look at BHP, CLF and DVN...), so i need to be patient for a pullback before I can think about getting in. HUM which was a previous suggestion by a member is doing well. I did get into a small position on GRMN, which I saw as bouncing at the bottom of a very high Ascending Channel which made the reward/risk ratio pretty juicy:

I'll let you know if I have any other trades i am looking at playing when I come across them.

Happy Trading!

The Fed Aftermath and a FAVORITE Trade

Hey Y'all, as expected yesterday the Fed did BUPKIS to the interest rate which was to the surprise of no one. As I mentioned in yesterday's post, that was not going to move themarket, but what was in the Fed's statement that would. I was right, but I was confused as to why. The Fed's statement lamented on inflationary pressures still present in the economy, but there was something in there that put the Bulls minds' at ease, and they ran with it.

From the chart you'll see that we broke both Horizontal Resistance, as well as broke above the 30DMA. I have highlights where I believe the market will stall out before declining again near May.

I am a little upset with myself in that the big $240 point drop took me out of a lot of positions that would be really profitable today if I had got back in the next day, but since I felt the correction hadn't ceased, I played it safe. You live and you learn...and a cash position in times of volatility and uncertainty isn't a BAD thing either.

A FAVORITE Trade - CLF

Notice how I did not say "favorite STOCK?" As I mentioned at our last meeting, I DON'T LIKE STOCKS! Why? THEY DON'T LIKE ME. Heck, stocks don't even know I exist (kind of like the Head Cheerleader in High School, but that is a story for another time). I don't care about the stock, I care about the Trade. Does it fit my rules? Does it have good Reward/Risk. Am I confident in the trend?

Honestly, I don't try to follow too many stocks...too much time wasted on companies that don't present good opportunities. I like to focus on about 250 stocks and just keep waiting on them, and playing them over and over and over again. I become familiar with them, I understand their opportunities and their risks. Most importantly, I am comfortable and confident with these trades, which makes them more effective for me.

If you can find trades like CLF that you play over and over and over, and even wait on them when they go through their down cycles or play shorts/puts, then you' find a comfort zone and increased confidence...and make money along the way.

Finally, I want to mention this is OUR BLOG, not mine. I HIGHLY ENCOURAGE all of you to submit ideas. By having more eyes on the prize, we can ALL get great ideas for trades. We are not competing against one another, this is a PARTNERSHIP and I hope no one is afraid to submit an idea. We will ALL learn along the way, make some mistakes and make some winners.

Let's have fun doing it too!

Happy Trading!

Come Into My Trading Room

Hey Everyone:

Keith Volz has asked me to post the charts for the recent plays I made, and I am happy to do so. The charts should be pretty self-explanatory. I do this with ALL my charts, I set my BUY target area (or "bounce" area), as well as my "Target Price," which is one of my decision points to either take profits at resistance, or sell a Covered Call. By putting these right on the charts, it is very easy to see where I am in my trades. Reviewing them takes all of 2-5 seconds.

You'll notice that my plays usually are entered when the stock is at support and my MACD and STO are at their very bottom (or as close to them as possible). I normally DO NOT WAIT for 3 Green Arrows as I find that while it may be more "convincing," it is also less profitable. By playing earlier (when the MACD and STO begin to head up) I am buying at a lower price and therefore have less risk if I just play the 3 Green Arrows.

If I see a severe bounce, I may nibble a bit to test the waters, then wait for a pullback and buy more shares near support. The nibble gets me into the trade and if it soars from there, at least I have something. If it pulls back to support, I buy more because the Stop-Loss is the same (1% Swing, 3% Trend below recent support), but my entry price is lower, exposing me to less risk if the stock falls.

BHP
CLF
GRMN
PCL
PICO
SWK
Calling a Bottom

I also got into a small position of SBUX today. Now, from the looks of the chart, you may ask, "why would he buy a downtrending stock?" The simple reason is, "I believe it hit bottom." Here is the chart:You'll notice it hit this level twice before and bounced. It has bounced again and I got in a small position. I really don't know how high this could go over the following months. I suspect maybe those horizontal resistance levels may come into play, or even some Fibonnacci lines too if I draw them. Anyway, my reward/risk ratio seems pretty good, so we'll see how it plays out.

By the way, I bought SBUX back on 9/12/06 when it bounced making a Higher High and a Higher Low. That trade worked out very well! Needless to say, after exiting that trade (after 2 Covered Calls), I have waited patiently for it to come back to me. Maybe it has? Or maybe not?

Finally, let's revisit HUM:
The stock has definitely made a bounce here (making a Higher high) and I would consider getting in. You see a couple of Price Targets, make sure your portfolio positioning is reasonable (I never expose more than 1% of downside in any one stock), and go for it (not a recommendation to buy).

Happy Trading!

The End of the Fall?

Hey y'all:

A quick post for this morning on something I noticed yesterday. I looked at the "Big Picture" on the Dow yesterday and discovered something VERY interesting. Take a look:

This is a part of the 5 Year chart. You'll notice that the index was traveling beautifully inside an Ascending Channel until about October of '05, at which point it broke above the channel. I then have two "minor" Channels above the "major" with the most recent one being somewhat tepid, or less steep. This indicated that the trend was losing steam. Of course we all know the WALLOP the market gave most of us last week. The question on ALL of our minds was, "when will this end?"

It may have ended now.

See the way the index "bounced" of the top of the "major" channel? Pretty amazing huh? Remember gang, previous resistance becomes new support when resistance is broken. That is exactly what happened here.

What does it all mean?

Well, it may mean that the "correction" has ceased, but I can't be certain. If we see a greater move up from here we need to be careful. In order to continue the Bullish trend we need a Higher High. I am not sure we will get it here as the market may sideways trend here for a bit before deciding what it want to do. Yesterday may also have been a "Dead Cat Bounce" (I didn't make the term up for all you cat-lovers), which is a "short term spike after a tremendous downfall." Basically a DCB is a Band-Aid on a major wound giving temporary relief to the Bulls. The fall may not be over yet, be careful!

Some ideas. I "dipped my toe in" to test the market by opening small positions in the following (not a recommenbdation to buy):

BHP
CLF
GRMN
PCL
PICO
SWK

Happy Trading!

Correction, or Worse?

Good day Triad Traders. Today we are seeing what may, or may not be a correction in the markets. The Dow fell by 400 points today which was up from an intra-day low of over 546 points, the worst day since the first trading day after 9/11. This pullback has been mentioned by the talking heads for some time and the Bearish action in the Chinese markets, along with Bearish Durable Goods info was the catalyst to send the markets tumbling.

You may remember at our meeting I mentioned, "you take a stairway to the top, but you jump out the window." Basically, when a selloff like this occurs, it could be good, or it could be bad. We have to look at the charts to give us some idea what is happening. Let's look at the 5-Year Dow:

(Click on the picture to enlarge, use the browser "back" button to return to the blog.)

You'll notice that the index broke out of a pretty good Ascending Channel to create two new ones. You'll also notice that the newest channel is much shallower than the last, indicating the market may be running out of steam.

Now let's take a much closer, and shorter term look at the Dow:
WOW, that is some leap, eh?

So what does this all mean? Well, it could mean tremendous opportunities have presented themselves to us. Remember yesterday I mentioned that a stock does not necessarily reflect the strength of a company. There were a lot of good companies that got hammered today because "those boats sank with the outgoing tide." Now, I am not suggesting that this downturn is a "one and done" day. It could be the start of a correction which means more downside. It could also mean the start of a Bearish Market. As Traders, we don't care because we can make money in ANY market conditions.

The NASDAQ had quite a fall today too. Let's look at the charts, first the 5-Year:As you can see, the index was very close to the top of a major Ascending Channel and has now begun to fall. How far and how fast remains to be seen, but look at what today's action did to the previous trend:If the index drops below $2,400, we are talking a potential trend reversal. Of course, we need to see the index make a lower high and fall off to be sure, but it has the makings of a potential reversal. The $COMPQ also broke two MA's today, the 30 Day and the 100 Day. If it breaks the 200 Day, watch out!

Now, as mentioned before, there may be some GOLDEN buying opportunities coming up as some of my favorite stocks got popped today, so I may be looking for a move to their support lines, then bounces to move into some poistions. I'll give you some names, but I'll leave the charting up to you. BHP, CLF, EXP, FCX, NAVZ, TDW...(these are NOT recommendations) to name a few.

By the way, if you are looking for a way to play the Bearish side of the market but are afraid of shorting or using options, you can consider the QID, which is Bearish ETF for the NASDAQ.

Happy Trading!