"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!

"Bear" With Me

Hey Gang:

Sorry I missed the meeting Monday, hope those who attended had a great time and shared some good ideas.

I'm feeling down (as in the Market) so "Bear" with me. I mentioned in my previous post that I felt the Market was going south. I still belive that, especially with oil prices soaring, gas prices soaring, the housing market is getting really bad, the Fed still has some inflation worries, etc. I have started entering Bearish positions in my portfolio (NOT a recommendation). I have been buying Bearish ETF's, the DOG (Dow) and the QID (NASDAQ). Here are the charts:

DOG
QIDYou can see on both charts I have my pre-set target prices where I either exit, or move my stop-loss price tighter. Technically, these were good entry days as the MACD and STO were favorable for a rise, and the "bounce" off the diagonal support seemed to give me my "go" signal. I also like this trade now because "Sell In May and Go Away" is just around the corner. If you look back on last year's chart, you'll see what happened then. That is NOT to say it will happen again, but it seems to be the pre-summer trend when the trading moguls retire to the Hamptons for the summer and let the junior traders take over. Hopefully this trend will continue.

A caveat about DOG, it isn't as heavily traded as DXD (which is probably a better ETF since it is more "liquid"), so you may want to look into DXD instead.

Chris Harding I was told is in a particluar trade I follow (and have done well with) - PCAR. Here is the chart:Again, one of those Channeling, Bouncing trades (notice I didn't say "stock") I love. Clear, defined Entry and Covered Call signals on an uptrending stock. I am out of this position now, though I have highlighted my anticipated entry area.

Some other "favorites" are: BHP, BUCY, CCJ, DVN, FCX, GRMN, PICO, TIE, to name a few.

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!