Charting Beauty

Hey Gang:

Every once in awhile, a chart I set up to predict its movement goes "perfect." If it does what I anticipated it would do, which gives me some confidence to trade it. Take a look at CCJ. I initially set up my Ascending Channel by using the bottoms of 11/17/06 and 3/5/07, then moving to the top of 12/14/06 to complete the Channel, then "extend." Now technically, a line is supposed to connect three (3) points to be legitimate, but I do this method a lot to try to establish a pattern. In this case, it may have worked. Today the stock began at the Resistance line and has fallen off all day. You'll note the stock has been overbought (high STO) for awhile, and the MACD has started rolling over and heading down.

You'll also notice a Bearish Engulfing Pattern which I have circled in blue. This anticipates more downside is coming, more possible confirmation that a short/put may be a good play.

You could short this stock now with a good Reward/Risk ratio since the Stop-Loss is 1% above today's high (resistance) and your target is the bottom of the Channel. The Channel itself is over $9.00, so you could hope to capture most of that preferably before earnings. I would not play this over earnings, but get out before.

Just something to consider.

Happy Trading!

"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!

The "Bouncing Sector"

Hey Gang:

First, I'd like to thank Garvie and David Chambers for a GREAT lunch at Elizabeth's Pizza in Quaker Village last week. We had a very nice get-together to talk about a variety of investing subjects. I appreciate their confidence and curiosity in what I had to say, and I hope their lunch money was well spent. My wife, Sylvia thanks you too for her lunch. Finally, I will not be able to attend tonight's meeting because I have a more important engagement, birthing class with my wife. We are expecting our first child late May, so these classes are important. I should be able to attend the next meeting in April, and of course in the meantime, I'll continue the blog.

Y'all know I am a BIG fan of "bouncing" stocks. You know, uptrending stocks in established channels where I can buy on the bounce, and sell Covered Calls at Channel Resistance. Well, I MAY have found the motherload. Utilities.

I was looking at various components of Sector ETFs and noticed that Utility stocks have a very strong propensity to Channel and Bounce. Here are some examples:

AEP

CMS

CNP
ED
PPLThe charts are pretty self-explanatory. I have these on my watch list, so when the return to their support levels, I'll be entering a couple.

Overall, the market is pretty overbought IMHO (In My Humble Opinion), and the bad housing data (surprise!) didn't help with any Bullish sentiment. Here is th $INDU:

The MACD and STO indicate the recent run-up may be over for now, and we can expect a fall-back, probably to $12,300. If it drops below that, then it may come back to the top of the Major Ascending Channel (in Blue).

Here is the $COMPQ (NASDAQ Composite) 2-Year

Again, the market looks overbought and I expect a retracement to the targets I have highlighted in RED.

I hope y'all have a good meeting and I look forward to seeing you next time.

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!

Crossroads with the Fed

Hey Gang:

Well "Uncle Ben" Bernancke and his other Fed Chiefs will be releasing their FOMC decision on interest rates today. The consensus is there will be no rate change. This of course will not move the markets much, but it is what they say in their statement that may. Inflation is still a concern, and the dollar has been weakened of late, so there may still be talk of a rate hike. That would send the market down and in the case of our chart, keep the $12,300 level as resistance. You'll see last time we hit this level from the post 2/27 fall, it followed up with a $240 point fall. I am not saying this will happen again, just that this run-up may have been a Bull Trap, and the markets will fall off here once again and we may become rangebound here.

If the Fed decides to LOWER interest rates, the market would EXPLODE higher here and we would make a Higher-High, indicating a resumed Bullish trend. We'll just have to wait and see.

Happy Trading!

Quadruple Witch is Dead..now what?!?!

Hey Gang:

Hope y'all had a good weekend. Last week we had some more volatility with a $240 drop, then some recovery. Is this the "End of the Rainbow" for the Bears, or a "Bull Trap"? Let's take a look:

Here is a portion of the 5-Year Weekly Chart of the $INDU (Dow). You'll notice that we have begun to head down towards the top of the Major Resistance Line (support for us now) of the Major Ascending Channel (in Blue). If we bounce from here and continue up, this may signify a NEW Ascending Channel may have formed, and we could then use those support and resistance lines for analysis. But let's stay with what we DO know now. Let's take a closer look:

You'll notice that the $INDU has bounced off the aforementioned Major Ascending Channel Resistance line a couple of times already. Also, the MACD and STO are favorable towards an upward push. However, that being said we also have some other things to contend with...bad economic news, the forthcoming "Sell in May and Go Away" mantra, and more importantly, that Diagonal Resistance line I drew from the recent price action. At this time, it almost looks like a Decending Triangle since we are making Lower-Highs, and Equal-Lows. There is also talk that this "correction" is not over yet.

In Wall Street terms, a "correction" is a market drop-off of ten percent (10%). I have marked where that would fall to in a green box with "10%" in it. Once it hit there, it MAY be time to get into some positions. That would be an area where there could be some bargain hunting. Of course, I said "MAY" because if it hit there, we would be in a downtrend up to that point, so you need to be careful.

By the way, SBUX hit a bounce (like I predicted as a Triple Bottom) and took off on Friday. Full disclosure, I got taken out of this by my stop-loss on the -$240 day and did not re-enter due to Quadruple Witching Week which is always volatile. Anyway, keep an eye on it, it may come back a little bit.

Happy Trading!