The StockTradingGuy's Online Trading Journal

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2006-09-04T17:27:00.000-05:00

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2006-08-20T03:18:00.000-05:00

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Clean Start with New Blog

2006-08-19T11:22:00.000-05:00

My posts have been two few and far between, as I've had a myriad of things come up since coming back from vacation. I've spent the past few days trying to catch up on the blog and have been overwhelmed with trying to update my trades and portfolio performance. Thus, until I have the chance to catch up, I am going to post at a new blog site, http://www.thespeculatorsdiary.blogspot.com

Please update your bookmarks and check out the new site. It's a work in progress, and I plan to slowly introduce some new ideas that I've batted around for a while. I am not sure if I will retire teh stocktradingguy blog, but I do plan to update the performance results in the coming months.

http://www.thespeculatorsdiary.blogspot.com

Clean start with new blog

2006-08-19T03:03:00.000-05:00

Trades: YHOO, IR, CMED and VLO

2006-08-04T01:26:00.000-05:00

I had to switch sites due to technical difficulties with this site. Please visit www.themarketspeculator.blogspot.com

Sorry for the lack of updates and charts. Catching up with work after a 10 day vacation has taken longer than expected.

I added a few positions this week:
Short 350 shares of HAL at $34.63.
Short 350 shares of YHOO at $27.10.
Long 300 shares IR at $37.10.
Long 250 shares CMED at $22.15

I sold 400 shares of VLO at $67.50 for $880 gain.

Chart: FRK

2006-08-02T01:23:00.000-05:00

Florida Rock (FRK) looks ripe for a short on an up move towards resistance. I would wait for the stock to move out of oversold territory and price to approach the gap area of $42-45. The stock could get this needed bounce if the Fed decides to halt interest hikes next meeting.

Charts: HAL and CVS

2006-07-30T22:35:00.000-05:00

HAL: Haliburton looks like a perfect "short the rally of a stock in a downtrend" play. I would get ready to short if the Stochastic hits 80 and the stock shows weakness at the 34-35 resistance area. HAL also looks ready to hit RSI resistance at 50-60.

CVS: CVS corp has been on fire since early June and recently broke over resistance. I would wait for a pullback to the mid-Bollinger Band for entry.

It's Good to be Home

2006-07-29T23:33:00.000-05:00

I'm back from a wonderful cross country road trip and ready to get back in the swing of things. I made a few successful trades last week which I'll detail soon. As I get caught up with work, the market and home, I may fall behind detailing my trades. However, I plan to post at least two new charts daily, starting tomorrow.

Cross Country Adventure--Back on the 24th

2006-07-14T13:33:00.000-05:00

I'm leaving for vacation tomorrow morning and, unfortunately, will not be able to post until July 24th or 25th. My wife, baby daughter and I will be driving cross country for a week and a half. Should be quite an adventure. I hope to have some pics when I get back.

Wyclef Jean's "If I Was President"

2006-07-14T00:38:00.000-05:00

Instead of spending,
billions on the war,
I can use that money,
so I can feed the poor,

If I was president,
I'd get elected on Friday
Assassinated on Saturday,
Buried on Sunday,
If I was president.
-Wyclef Jean

Does This Market Make Any Sense? What's Up With Oil Stocks?

2006-07-14T00:25:00.000-05:00

The reaction of oil related stocks to the new highs being made in crude oil has me scratching my head. USO, XLE, VLO, HAL and XOM all closed down or only slightly up today. Due to this discrepency, I'll be watching my VLO position very closely and will be ready to bail on signs of weakness. The stock should have done better than it did today.

Today's Trade and Chart: VLO, GG, TXN

2006-07-13T13:05:00.000-05:00

VLO (Valero) has been one of my favorite oil plays. I bought 400 shares at $65.02 The stock broke out of a "double bottom" pattern on strong volume and has held support. I have a stop placed at $63.90, and would likely sell into resistance in the $69-70 range.

I also sold half of my 500 shares of GG at $29.86 for a $307 gain. For the remaining 250 shares, I've moved my stop to the "break even point."

I sold all of my 500 share position in TXN at 28.95 for a $140 loss. A small bet that didn't pay off.

VLO's chart:

Trade: TXN

2006-07-12T15:09:00.000-05:00

After the move in semis yesterday, I kept a close watch on the industry today and decided to make a small bet on TXN (Texas Instruments). I bought 150 shares at $29.23. Three technical indications also piqued my interest in TXN: a positive divergence in RSI, bounce off oversold condition in stochastic, and bounce off 29, which has provided strong support over the past year. The one time 29 did not hold, the stock bounced back rather quickly.

Today's Trade: GG

2006-07-12T09:02:00.000-05:00

I went short 500 shares GG at an average cost of $31.15, with a stop at $32.60. The latest up move seems to be a minor retracement prior to another leg down. However, a break of $32.50 could signal a challenge of old highs.

It's Time to Short Gold

2006-07-10T20:55:00.000-05:00

Gold has set itself up for an excellent short play. The commodity has stalled at the 50 day MA, is overbought and looks to be on a downward descent until it becomes oversold. If conditions look good tomorrow, I'll be making some big short plays in gold stocks.

Truman Capote and Guilt After Winning Trades

2006-07-08T02:15:00.000-05:00

Today I watched Capote, easily one of the best movies I've seen in quite some time. This quote povided me with some food for thought:

More tears are shed over answered prayers than unanswered ones--Truman Capote

[spoiler alert]
By the end of the movie, it becomes painfully obvious that Capote is torchered by the fact that he had hoped his literary subjects would be denied their appeal and quickly executed, just so he could have an ending to his book. He went so far as to sabotage their appeal by not finding a lawyer to argue on their behalf. The men lose their appeal and are killed by hanging. Capote goes on to write one of the greatest non-fiction pieces of the 20th century, but his life is forever altered.

Getting back to the trading, do you ever feel guilty when you make money off of someone else's misery? It becomes easy to ignore this fact when your sitting in front of your computer watching numbers on the screen, but there is no denying the market is a zero-sum game [update: apparently there is more debate than I originally thought]. Your winning means another person has lost. And we're not just talking about lost pride after a friendly game of chess. Fortunes are won and lost in the market. One man's buying a brand spankin' new beemer after a good day in the market, while another has to sell his home. Does that make you feel guilty? Should Jesse Livermore have felt some sense of dispair after shorting the market and making a killing off the '27 crash, while many market participants could not even feed their families?

My answer is no, I don't feel guilty and I certainly won't be shedding any tears over my good fortune. We all know the rules and accept the risks. However, every time I am lucky enough to notch another win on my belt, I do wonder what's happening on the other side of the trade.

Transitional Pattern: The "Bow Ties" Strategy

2006-07-07T15:41:00.000-05:00

While their are many variations and names for this transitional setup, Dave Landry does a good job of explaining what he calls the Bow Ties strategy. The market might be headed for a short term uptrend (possibly within a longer term bear market), so this strategy could come in handy for when looking for good reversal setups.

Click here and turn your speakers on.

Today's Trade: EP

2006-07-07T10:50:00.000-05:00

I bought 500 shares of EP at $15.10. The stock is in the midst of a "coiled spring" pattern and looks poised for a breakout. Stop placement is just under the 50 day moving average, at about $14.50. With resistance looming at 16, that makes for close to a 1:2 risk/reward. If the stock does reach 16, I'll sell half my shares and let the rest ride, moving my stop on the remaining 250 shares to the purchase price.

Chart: XLE

2006-07-06T13:30:00.000-05:00

The Energy ETF XLE looks interesting. The stock has reached an extremely oversold stochastic level and it moving into PBV resistance (the grey/red bars on the left of the chart). It is very possible that the stock will take a breather here before mounting a serious challenge to break out over these highs. I might make a quick, low risk play here, going short with an extremely tight stop set at $58.30.

If the stock does not pullback, or pulls back and again challenges this level, I will become bullish once the stock clears $60.

Charts: KNOL and ATHR

2006-07-05T23:35:00.000-05:00

If you like to play bounces off of moving averages, KNOL (Knology) has a nice setup. I would enter now and place a stop 15 to 25 cents below the 50 day MA. This makes for a low risk, high reward setup.

ATHR (Atheros Communications) gapped down below both price and moving average resistance, making for a great short candidate. I would wait for a retest of the 200 day MA. If the stock can't jump over the moving average, it's time to put your plunger cap on.

Ken Lay in His Own Worlds

2006-07-05T22:06:00.000-05:00

Today is a sad day. Ken Lay will never suffer the fate he deserved (to rot away in jail). Here's the "innocent christian" in his own words (click play and turn on your speakers):

Charts: ZUMZ and HST

2006-07-05T00:08:00.000-05:00

HST and ZUMZ both have broke out over resistance levels on strong volume. I would wait for pullbacks before entering either stock.

Today's Trade: PSPT and the "Dip Trip" Entry

2006-06-30T12:35:00.000-05:00

I bought 500 shares of PSPT at an average cost of $13.35. This is currently my only position, as I am waiting to see if this bull move is a blip on the bearish radar or a true move towards new highs.

I used my own tweaked version of Alan Farley's "Dip Trip" method for this entry. Basically, it's a play on the correction of a stock that has been acting strong. Once PSPT spiked off it's resistance point I jumped in. I expect it will at least hit it's $14.50 high and may climb futher. I'll sell half my shares if it reaches the high and move my stop up to 14 for the remaining position. My current stop is just below the 13 resistance level. If the stock moves under 13, the dip trip play is invalidated, and it may even be time to reverse and go short.

Farley on Aerospace and Defense Stocks

2006-06-30T00:47:00.000-05:00

I take a keen interest in Alan Farley's trading techniques. His latest article caught my eye because I have been watching the Aerospace and Defense sectors closely over the past few months. His thoughts on the sector echo my own. Check out his take on Aerospace and defense stocks:

http://www.thestreet.com/_tscs/markets/activetraderupdate/10294469.html

SPX

2006-06-29T15:34:00.000-05:00

The S&P 500 index cleared one hurdle by crossing over the 200 day MA and is now butting up against the 50 day MA. Right now I'm hesitant to go long, but a cross of the 50 day would be a green light for me.

Yesterday's Trades: Sold and Covered Everything

2006-06-29T10:07:00.000-05:00

I decided to clear out my entire portfolio, both long and short, in anticipation of the fed meeting today.

I'm on vacation but I do have a laptop with wireless internet through Verizon. I will try to update yesterday's trades later tonight.

Long Term Bear Market

2006-06-28T13:55:00.000-05:00

Tim Knight offers an excellent argument for why we are in a long term bear market:
http://tradertim.blogspot.com/2006/06/powers-of-ten.html

Chart: GG

2006-06-27T12:32:00.000-05:00

This chart shows why I shorted Goldcorp (GG).

Today's Trades: GG, PHM and PSPT

2006-06-27T11:57:00.000-05:00

I went short 400 shares GG at $28.67.

I sent short 300 shares of PHM at an average cost of $29.10.

I bought 300 shares of PSPT at an average cost of $13.25.

Watchlist additions

2006-06-27T09:40:00.000-05:00

I've added the following stocks to my watchlist: CELG, OII, AVA, FTD and HMSY.

I am also considering shorting PHM and GG and going long PSPT.

Tuesday's Chart: DDE

2006-06-27T00:18:00.000-05:00

DDE has the makings of a good short setup. However, be careful with this stock. It has held strong in a weak market, so I would only enter upon confirmation that price is leveling off. A close inside the upper bollinger band with a stop outside the band or last price bar would minimize the risk.

Today's Trade: KNOL

2006-06-26T09:58:00.000-05:00

I sold 300 share of KNOL at an average cost of $10.01 for a $301 gain. $10 has acted as both a price and round number resistance point over the past two months. If it breaks out over this point on strong volume and to new highs, I will likely re-enter.

This Week's Watchlist

2006-06-25T23:08:00.000-05:00

Here is a list of a few stocks I am watching for good short setups:
PETM, CRM, OXPS, QQQQ, AAUK, GG, PEIX, TIE, TTWO, RBAK, AMAT, NWRE, PHM

Note that price movement and volume could change these to long setups rather quickly.

My bullish watchlist:
GYMB, AKAM, CIB, SBUX, SMSI, KNOL, OMNI, SMTS, SWB, PSPT, TSCM, MED, BMRN, BOOM

What I Have Learned in The First Six Months of 2006

2006-06-23T10:45:00.000-05:00

It's always good to take some time and reflect on your trading regimen. I usually do this at my monthly and semi annual performance reviews. I've started my 6 month review, and here's what I have noted so far:

1. Don't loosen stops!
2. Don't try to pick bottoms in a correction or bear market!
3. Even when you know you are right, wait for confirmation.
4. Dont' micro-manage your trades
5. Don't listen to pundits

Once I have completed my review, at the end of June, I will show examples of trades I made that violated these stock trading maxims.

Chart: SMTS (Somanetics)

2006-06-23T07:51:00.000-05:00

The recent gap up could start a new trend in SMTS.

Chart: QQQQ

2006-06-22T13:14:00.000-05:00

The Q's (Nasdaq 100) are at a major support area. A break of the support line would be a signal to short, while a move up off the line would be bullish. I won't try to guess this one, but once I get confirmation I may make a play in my longer term account, as I think a move in either direction could be the start or continuation of a longer trend.

Today's Trade and Chart: KNOL

2006-06-22T09:02:00.000-05:00

I took a small position in Knology (KNOL) at $8.95. I don't want to get too aggressive with any longs considering my take on the market. KNOL has pulled back to support on low volume with oversold stochastics that are trending up. Also note that the stock has been under above average accumulation since it's gap up in early May.

Chart: Dow Tests Head and Shoulders Pattern

2006-06-21T22:09:00.000-05:00

The Dow is making it's first test at the new head and shoulders resistance line. The lack of volume suggests there will not be a breakout, but I wouldn't make any major plays until we get confirmation. I'm working on a 50-50 split between my long and short watchlist, so I'll be ready whichever way the market turns.

Dead Cat Bounce

2006-06-21T14:08:00.000-05:00

It looks like I went in to early on the TIE short. I probably should have waited for a breakdown rather than trying to time the fall. At any rate, I'm using a loose stop on this trade, probably right above PBV support at $35, because I have a strong feeling that we are in the midst of a dead cat bounce that could last for a week or two. The ony thing that will change my opinion is if we start to see extremely strong volume for successive days on the upmoves.

Here is a good explanation of one of the best short setups, the dead cat bounce.

Today's Trades: GLW and TIE

2006-06-21T09:25:00.000-05:00

I went short 300 shares TIE at an average cost of $32.15.

I covered 400 shares of GLW at $21.70 for a $370 gain.

Chart: Titanuim Metals (TIE)

2006-06-21T00:44:00.000-05:00

Titanium metals (TIE) looks like an attractive stock to short.

Volume Patterns by Alan Farley

2006-06-20T15:07:00.000-05:00

While I do use indicators, I believe in the old saying "keeping it simple, stupid". Before I even look at any indicators, I eyeball price action, support and resistance, and volume. Here is a short but good article on volume patterns by Alan Farley

Today's Trades: LCAV and SWB

2006-06-20T09:36:00.000-05:00

I bought 500 shares of SWB at an average cost of $8.15. For more information on why I made this entry, see yesterday's chart.

I sold my position in LCAV at and average cost of $47.66 for a lost of $1770. The stock did not act the way I had expected, and I should have cut my losses long ago, instead of ignoring my stop.

NBA Finals 2006 Intro

2006-06-20T00:53:00.000-05:00

NBA Finals 2006 Intro

Those of you that have been following the finals have seen this clip before each game. I get chills everytime I watch it.

No Crystal Ball Today

2006-06-19T23:27:00.000-05:00

Today is one of those day's that has me scratching my head. I really don't mind that today was such an ugly trading day. I am just as comfortable going short as I am going long. Usually a day like today, where it's red as far as the eye can see, would have me chomping at the bit unleash some short plays. My short list is full of stocks that neared resistance points and sunk today. The problem is there was no strong conviction on the way down. Accompanying volume does not confirm that prices will go lower, as it was surprisingly light. So what does that mean? Is this just a low volume pullback after the end of the week rally? Or are we set for another bearish turn? Hopefully tomorrow will give us some better clues.

Chart: SWB

2006-06-19T09:48:00.000-05:00

SWB (Smith & Wesson) has broke out over resistance, reaching new highs on above average volume. An ideal entry point for this trade would be between $8.00 and 8.20.

Note: I am still having technical difficulties with the site which has moved my sidebar to the bottom of the page and lead to sporadic posts (my Friday and Saturday posts are not showing up).

Chart: GYMB

2006-06-19T00:55:00.000-05:00

Gymboree (GYMB) looks like a great breakout trade. You can't ask for much more in a stock than a breakout over resistance after a month long consolidation period, a MACD crossover, good volume and strength in a weak market.

Note: I am still having technical difficulties with the site which has moved my sidebar to the bottom of the page and lead to sporadic posts (my Friday and Saturday posts are not showing up).

Charts: KNOL, NCTY, PHM

2006-06-16T02:01:00.000-05:00

KNOL has held up well and has been trading in the $9-10 range. It would have been nice if the stock could have closed above $10 today. A close over $10 will have me buying.

PHM and NCTY both could be good short setups in a few days.

Click on images to see fullsize charts:

Quick Note: I Don't Trust This Rally

2006-06-15T15:08:00.000-05:00

I just stepped out of a meeting to see the Dow closing up around 190 points and a bunch of cheerful pundits saying the bottom has arrived. That may happen, but it's way too early to tell. Until we zoom through a resistance point on high volume I won't see this as more than a much needed bounce. Take a look at the volume today and the looming overhead resistance, and I doubt you'll be on the bull bandwagon either.

I am using the bounce to sell some of my lagging positions and get ready for some short setups.

Back to work. I hope to have some charts up this evening.

Today's Trades: NWRE and GLW

2006-06-15T10:38:00.000-05:00

I just covered by NWRE short and went short GLW as it nears it's 200 day MA.

I won't have a chance to post again until this evening.

Sitting on My Hands

2006-06-15T00:25:00.000-05:00

While I'm happy the markets are bouncing, if only to get ready for some great short setups, there aren't many low risk high reward setups right now. The market hasn't showed it's hand just yet, and probably won't for another few days. In the meantime, I'll be sitting on my hands to make sure I dont' make any impulsive trades, and spending my time going over new trading strategies and revising my watchlists. If the market continues to bounce, I'll look to dump my existing longs.

Titanium Metals (TIE) is a good example of a stock that could bounce into heavy resistance in the coming days. The more adventures types can go long on the bounce. I'll play it safe and wait for a good shorting opportunity.

Note: The sidebar, which contains links to the blog roll, about me section, and archives, has dropped to the bottom of the page for exlplorer users. I will try to get this corrected ASAP.

A Bounce Will Make For Nice Setups

2006-06-14T09:30:00.000-05:00

As predicted, it looks like we are finally getting a decent bounce this morning. It will be interesting to see if the bulls can hold it until close. If today is a positive day, volume will be the tell. If it's on weak volume there could be a lot of great short setups.

I will likely use a low volume bounce to sell some of my lagging positions and initiate shorts.

Today's Trades: NWRE and SWB

2006-06-13T19:07:00.000-05:00

I bought 300 shares of SWB at $6.90. The stock has held up well in a bad market and bounced off both price and moving average support.

I went short 200 shares of NWRE at $18.75. The stock broke down through support at 19.

Watch List

2006-06-13T10:09:00.000-05:00

The following stocks are on my watchlist for the rest of the week:

Shorts: AKAM, AMO, CIB, DCEL, FNSR, GLW, PALM, SIFY, SOHU, AAUK, ABX, ACO, AEM, GG, IPSU, NBR, PAAS, PEIX, RSAS, TIE, TTWO, RBAK, AMAT, CMVT, PENN, ZRAN.

Indicators have become extremely oversold, so I will be expecting a rally by Thursday. Any of the stocks that rally on weak volume towards resistance will be perfect short setups.

Longs: CHL, GYMB, SBUX, SMSI, ADM, ESLR, CMTL, KNOL, MED, OMNI, SWB, TSCM

Note: The sidebar, which contains links to the blog roll, about me section, and archives, has dropped to the bottom of the page for exlplorer users. I will try to get this corrected ASAP.

Chart: GLW Short

2006-06-12T22:10:00.000-05:00

Corning (GLW) crossed below the 200 day MA and has been selling off on very high volume. A bounce reaching the 200 MA on modest volume would be the ideal short setup. Make sure to keep a close eye on volume. If the bounce is on high volume, it could mark a bottom in the stock and breakout over the moving average. In that case GLW would not hit resistance until the $24-25 range.

Note: The sidebar which features the "about me" , blogroll and archives has moved to the bottom of the page. I will try to get this corrected ASAP.

John Carter on ABC News

2006-06-12T17:36:00.000-05:00

John Carter, professional trader and author of Mastering the Trade, was interviewed by ABC News. Check out video of the interview.

If you haven't read his book, I highly recommend it. It's a little more advanced than the normal trading book, which is a good thing since almost all the books go over the basics but are devoid of setups. This book is all about setups and specific trading strategies.

Shorts Watchlist

2006-06-12T09:32:00.000-05:00

Here is a list of stocks I'm watching for short setups: FNSR, AAUK, ABX, ACO, AEM, GG, IPSU, PEIX, RMIX, ADM, AMZN, DCEL, GLW, PALM

All require a bounce on low volume into resistance.

Chart: PSPT

2006-06-11T23:54:00.000-05:00

PeopleSupport (PSPT) has bucked the trend over the past month and looks strong after a pullback to price by volume support. I would wait for a break of the pullback trendline before entering.

Nasdaq Chart

2006-06-10T23:23:00.000-05:00

The Nasdaq looks setup for a nice bounce. Ideally, the bounce would head up to 2220 on average or low volume. This would be a near perfect short setup.

Great Panics in U.S. History Part 1: The Panic of 1819

2006-06-09T22:03:00.000-05:00

While the recent dip in the U.S. stock market over the past month is most likely a correction or a normal bear market, it has piked my interest in some of the great panics in U.S. history. Over the next week or so I am going to take a look at the great panics that have rocked the U.S. markets, starting with the first major panic, the Panic of 1819.

The Panic of 1819 was the first major financial crisis in the United States. It featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It marked the end of the economic expansion that had followed the War of 1812.

Government borrowed heavily to finance the War of 1812. This caused tremendous strain on the banks’ reserves of specie, and led inevitably to a suspension of specie payments in 1814. The suspension of the obligation to redeem greatly spurred the establishment of new banks and the expansion of bank note issues.

The newly issued bank notes misled investors into believing that society's time preference had decreased. In other words, it appeared as though the total supply of investment capital had increased. In response, a post-1812 boom began, fueled by rampant speculation in land, and also projects such as turnpikes and farm improvement vehicles. However, since time preferences had not really changed, these investments were not sustainable.

It soon became clear that the monetary situation was in bad shape, with a return to specie payments becoming increasingly untenable. A nationwide return to specie would not be possible without a massive contraction in credit. Faced with these threatening circumstances, the Bank of the United States was forced to call a halt to its expansion and launch a painful process of contraction. There was a wave of bankruptcies, bank failures, and bank runs. Prices dropped and wide-scale urban unemployment began.

The Panic of 1819 was caused partially in part to international reasons. European demand for American foodstuffs was reduced because the Napoleonic Wars decimated the agriculture. War and revolution in the New World destroyed the supply line of precious metals from Mexico and Peru to Europe. Without the base of the international money supply, poor European governments hoarded all the available specie. This caused American bankers and businessmen to start issuing false banknotes and expanding credit. American bankers, who had little experience with corporate charters, promissory notes, bills of exchange, or stocks and bonds, encouraged the speculated boom during the first years of the market revolution.

The nationwide depression that resulted from the Panic of 1819 was the first failure of the market economy. Small, local ups and downs had occurred in the market since the 1790s, but never to this magnitude. Businesses went bankrupt when they could not meet their debts, and hundreds of thousands of wage workers lost their jobs. Unemployment reached 75 percent in Philadelphia, and 1,800 workers were imprisoned for debt. In Baltimore, the unemployed set up a city of tents on the outskirts of the city.

--Source: Wikipedia

For a more comprehensive look at the Panic of 1819, check out this article by Murray Rothbard.

Times have changed, but there are a few interesting parallels to note. First, their was rampant speculation in real estate that could not be sustained, leading to a "real estate bubble." Second, people were borrowing hand over fist, and could not sustain their spending habits once banks curtailed credit. Finally, Government had piled on the national deficit to finance the War of 1812.

History tends to repeat itself. While it may not be likely, it would not be shocking if some of the same things that lead to the first great U.S. panic almost 200 years ago lead to economic upheaval in the 21st century.

Next up: The Panic of 1837

Lackluster Day So Far

2006-06-09T11:04:00.001-05:00

Thus far, it's been a lackluster day, certainly not the follow through that many of the pundits have been predicting. I'm going to keep a close eye on the close. A strong close could give a clue as to which way the market is heading. I'm hoping for some clear signs in the coming days. I don't care if it's up days on strong volume (which will set me up long) or up days on modest volume (which will set me up short), as long as we have some up days.

Trade and Chart: VLO

2006-06-09T11:04:00.000-05:00

I bought 200 shares of VLO at $59.

VLO (Valero) seems to have bounced off support at $58 and the stochastics have moved up from extreme levels. It might be a good buy, especially if volume picks up. If using a tight stop, I'd place it under $58, while a loose stop would be under the 200 day MA at $56.

Chart: NTRI

2006-06-09T00:43:00.000-05:00

NTRI has held up amazingly well, and managed to close the day holding it's gap point with a bullish tail. If the market bounces, this stock could soar.

Capitulation, Bottoms, Contrarians and My Favorite Chart Pattern: The High and Tight Flag

2006-06-08T22:30:00.000-05:00

If today was a capitulation day, as many are predicting, I will be on the lookout for my favorite pattern for longs, the high and tight flag pattern.

Tom Bulkowski rates the high and tight flag as the best performing pattern of the 253 that he has researched. Take a look at his analysis for some good tips on trading this pattern.

One aspect I think is very important, that Mr. Bulkowski doesn't mention, is volume on breakout. I believe the most important aspect of this pattern is the volume at the flagpole. The only stocks that will make my "flag" watchlist list are the ones that flagpole and breakout on high volume.

While I will be creating a long watchlist, I'm not so sure today was the turning point or bottom. What has me nervous is that so many pundits are calling it a bottom. Over the past month this has been a good sign to go the other way. I won be pulling out my contrarian hat, but I am going to take my time making a decision. I've learned the hard way not to enter too early. If June 8th, 2006 truly marks a bottom, there will be plenty of time to ride the new trend.

Trading Plan: 10 Questions to Ask Yourself

2006-06-08T14:01:00.000-05:00

I've used my free time today to review charts of stocks on my watchlist and tweak my trading plan. If you don't have a formal, written plan, ask yourself these 10 questions.

Thoughts on My Recent Trading

2006-06-08T09:33:00.000-05:00

I've decided to ban myself from making any new trades today. I'm a bit disappointed in the way I've been trading of late, so I'm going to take a step back and try to exert a little more discipline. What's been most frustrating is I feel that I've read the market correctly and my watchlists have pretty much done exactly as I've predicted, but my trades have not been quite as good. I chalk it up to lack of discipline and bad trading psychology. Rather than go with my setups, I've been speculating way too much (see GG trade), trying to pick bottoms. Also, I've been way too loose with my stops.

So now, rather than speculating, I will stick to my trading rules and only trade when they trigger. Generally, I am looking for bounces on weak volume for short setups , or bounces on strong volume for long setups. I'll be looking at market breadth indicators and stochastics for good entries. If the market starts to move up on good volume, I will look for moving average crossovers (e.g. 20 day MA crossing up over 50 day MA). Anything else is off the radar.

I also am considering cutting ties with all my positions except for EBAY. My stops have been too wide and it may be time to cut losses and start fresh.

I definately will have my portfolio results updated this weekend.

Today's Trade: GG

2006-06-07T09:23:00.000-05:00

I was stopped out of GG at $27.53 for a $274 loss. I do believe GG is in an area of support, but it was a speculative trade and I tend to use my stops when going against my trading rules.

Tough Day

2006-06-06T20:23:00.000-05:00

Pretty bad day for all of my positions (EBAY, GG, LCAV, NBR, GD and QCOM), but none of them have hit their stops yet. I'm getting close to using time stops on the older trades, but I'd hate to sell them pre-stop and then watch them bounce.

Only time will tell, but I still think we are near a bottom, as volume during this fall is not as strong as the last drop. Too bad I missed out on some great "dead cat bounce" shorting opportunities. Ah well, you live and learn . . .

Today's Trade: GG

2006-06-06T09:45:00.000-05:00

I bought 200 shares of GG at $28.83. This is a somewhat speculative play that goes against my rules, as it is on a short term downtrend. However, it has hit an area of support and could bounce. If it does bounce, I'll sell my position quickly and possibly go short, depending on volume.

An encouraging sign for bulls was that volume on yesterday's selloff was not as high as the previous round of selling. That could be a sign that a bottom is forming for GG.

More on the Ebay Trade

2006-06-05T18:36:00.000-05:00

I'm more confident about today's EBAY trade after the strong close today. While the Nasdaq was down over 2 percent, EBAY ended the day down only .4 percent (13 cents). Also, opposite the market, it closed higher than the price at the time of Bernanke's comments.

The chart shows a nice bullish flag formation after the breakout on big volume. The declining volume is a good sign, as is the fact that it has held the gap point at $32 and printed an NR7 (lowest volatility day in the past 7 days). Even if the stock does not breakout, money could be made playing the $32-34.50 range.

Today's Trades: EBAY, X and XLE

2006-06-05T14:21:00.000-05:00

I covered 200 shares of X at $65.20 for a $265 gain (+2.1%)

I covered 200 shares of XLE at $55.10 for a $195 gain. (+2.0%)

I bought 300 shares of EBAY at $32.20.

I still think both stocks have room to go down, but I took the smaller gains just in case today was an overreaction to Bernanke's comments.

Email Question: What's With the Longs if You are Bearish?

2006-06-05T12:52:00.000-05:00

Question: What's with the longs if you are bearish? --Jason

I am bearish because that is what the short term trend says I should be. However, I do think that we may be near a bottom, so it's a good idea to watch for good long candidates as well. I also like to play bounces against the trends for quick trades.

Stocks that have held up through stormy weather make good candidates, as do stocks in sectors where the "smart money" seems to be coming in. Sectors that I am watching closely include health, banks, retail and bio-pharma. I'm also keeping a close eye on gold stocks, which I believe will have a big run after this correction.

Monday's Gameplan

2006-06-04T22:52:00.000-05:00

I still am still bearish, especially after Friday's weak close. Commodities and tech stocks still dominate my shorts list. However, I am adding stocks on the long side, especially those that have broke out or have reacted well during the decline. I am looking for pullbacks to support on low volulme for all stocks on the long watchlist.

Long Watchlist: BOOM, MXWL, EBAY, LCAV, CELG, GYMB

VIX Says Bottom May Be Forming

2006-06-03T07:39:00.000-05:00

The VIX has moved off of extreme readings, which may be a clue that a bottom has formed.

Chart: XLE

2006-06-02T10:43:00.000-05:00

This chart will give you a good idea of why I shorted XLE this morning.

Today's Trade: XLE

2006-06-02T08:49:00.000-05:00

I went short 200 shares of XLE at $56.20. I'll be back with charts in a few hours.

Today's Trade: TIE and X

2006-06-01T10:08:00.000-05:00

I covered my TIE short at 35.50 for a $260 gain (+2.5%).

I went short 200 shares of X at $66.50. Most of the steel stocks look like attractive shorts as they have bounced on average to weak volume.

More Shorting Opportunities in Energy and Metals

2006-05-31T16:18:00.000-05:00

Most of the stocks that bounced in the energy and metals sectors did so on weak volume. This area is ripe with more shorting opportunities short term. Right now I am more focused on this sector than any other area, although it does seem that there are some great values right now in the tech area.

I still believe that there will be a bull run after this correction, and will look to strong areas of support as buying opportunities after this correction completes itself. A good example is HAL, whose chart I featured last night. It gained on weak volume today, and is on my shorts list. However, once it falls into the $68-70 range, it could enter a good buy setup as those who missed out in that range snap it up.

The point here is, in order to make solid gains in this market, you must be nimble and ready to switch from short to long in a blink of an eye. If that's not your style, you are better off sitting on cash and waiting for a new trend to emerge.

Today's Trades: GG and TIE

2006-05-31T08:47:00.000-05:00

I covered 300 shares of GG at $30.89 for a +220 gain (+2.4%). I already feel like I may have micro-managed this trade and should have stayed with it for a bigger gain.

I went short 300 shares of TIE at $36.42. Check out the annotated chart to view my strategy:

Wednesday's Chart: HAL

2006-05-30T23:32:00.000-05:00

HAL seems to be trading in between an area of strong support and resistance. I will continue to try and buy the stock in the $70-72 range and sell as it nears resistance at $76. I would place a stop under the PBV support highlighted below or just under the 200 day MA if you're willing to play loose with your stops.

Today's Trades: HAL and GG

2006-05-30T09:19:00.000-05:00

I hope you all had a great holiday weekend. The weather in Minnesota was blistering, topping out near 100 degress, so I cancelled golf and tennis plans. Instead, I spent much of it in the house catching up on DVDs, shows recorded on TIVO (the Lost finale was a major bummer) and watching basketball.

I see some nice short setups in the energy and metal sectors. Thus, the following trades:

I sold 300 shares of HAL at an average price of $74.40 for a +345 gain (+1.6%). The stock is nearing resistance at 76. I would look to re-enter if it blows past 76 on good volume.

I went short 300 shares of GG at $31.67. GG's bounce has been on light volume and it is nearing a resistance point (50 day MA $32.06). I will use a tight stop just in case the stock has hit a bottom and is resuming it's uptrend.

Watchlist (Shorts) For This Week

2006-05-30T00:02:00.000-05:00

Here is what's on my Short Watchlist for this week. All of these stocks have taken a big drop off of highs and are now bouncing on weak volume.

AAUK, ACO, BEAV, RA, BOOM, FCX, GG, GOLD, HP, PAAS, PTEN, RSAS, SLB, TIE

I will *only* short these if they hit resistance points on low volume. I'll pass if volume picks up on the way up and could even reverse and go long.

Trading Lesson: Opening Gap Reversals and Fading the Gap by Dave Landry

2006-05-29T14:15:00.000-05:00

Watch Dave Landry's webcast for a good explanation of opening gap reversals and "fading the gap", which is a good skill to brush up on considering current market conditions.

More on Overconfidence by Bret Steenbarger

2006-05-27T15:24:00.000-05:00

Here is a good article on emotional problems of traders by Brett Steenbarger.

Read Article

Today's Trades: PEIX, CVX and HAL

2006-05-26T12:34:00.000-05:00

I sold 250 shares of PEIX at $29.70 for a $301 loss (-3.6%)
I sold 125 shares of CVX at 59.65 for a $204 gain (+3.1 %)

I bought 300 shares of HAL at $73.10.

Optimum Entry Price

2006-05-25T22:32:00.000-05:00

While I like to be flexible and trade many different setups, I have set of general rules that I try to adhere to as strictly as possible. One of those rules is to trade within five percent of the optimum entry price for the setup.

Thomas Bulkowksi wrote about this, and more, in his article What I Learned Trading in 2005.

Today's Trade: PEIX

2006-05-25T10:06:00.000-05:00

I bought 250 shares of PEIX at an average price of 30.85 (borrowed cash from my long term account. After the trade, cash goes back to long term account, while profit or loss stays here). I posted an annotated chart on Wednesday. Here is an updated chart:

Indian Stocks are Way Oversold

2006-05-24T23:44:00.000-05:00

Indian stocks traded on the Nasdaq and NYSE have been crushed of late, thanks to the meltdown of the Indian stock market. Stocks traded in the U.S. market include IBN (bank), REDF (internet), TATA (auto), SIFY (internet) and IIF (India fund). The extreme oversold conditions can be played as longs or shorts on a bounce. Here are a few charts:

Answer to an Email Question About Shorting

2006-05-24T09:45:00.000-05:00

Why have your last few trades been long when you said last week that you would be looking to short a market bounce? -Rick

Good question Rick. Remember that I said I would look to short a bounce *into resistance*, especially if it was on low volume. While we have received some weak bounces the past few days, they have not been the type that would create a good risk/reward ratio.

A few individual stocks I am watching are bouncing into resistance, but the problem is they are doing so on high volume. An example is PEIX (see last night's chart). If it had bounced on average volume or less, I would have shorted it. The fact that it is moving on such strong volume has me looking to go long on any decent pullback.

Today's Trade: CVX

2006-05-24T09:34:00.000-05:00

I bought 125 shares of CVX today at $57.90. It's more of a speculative play, as it is just under it's 50 and 200 day MAs, but is in an area of good support. My hunch is gas prices will tick up with the Memorial Day weekend coming. A mental stop will be placed in the $55-57 range.

Wednesday's Chart: PEIX

2006-05-23T23:42:00.000-05:00

PEIX is at the top of my watchlist for Wednesday. A stong close over the 50 day MA along with stochastics still showing oversold conditions makes this a prime long candidate.

Brett Steenbarger on the Most Common Trading Problem

2006-05-23T20:47:00.000-05:00

After the TIE trade today, I was feeling so good about myself that I starting to feel I could do no wrong. One minute later I went over to trading psychologist Brett Steenbarger's site and came across this article that put me back in the correct frame of mind for trading:

Overconfidence is the most common trading problem

I'll be back later tonight or tomorrow morning with some charts.

Stock Picking Contest: Win "How to Make Money in Stocks" by William O'neil

2006-05-23T09:37:00.001-05:00

I'm interested in hearing more about your take on stocks and the market. Rather than ask a question, I've decided to let you guys put your *fake money* where your mouth is in a contest. This should be a great way to guage market interest.

Here are the rules:
1. You get $100,000 in paper money to invest any way you like. You can short or long as many positions as you wish.
2. The portfolio must be submitted to me by 11:59 pm on Friday, May 26th. You must include shares, ticker and whether you are long or short. Price will be determined by the price of opening the day after you make your pick.
3. You can sell your positions at any time. But no new postions. Once you sell a position, it turns to cash.
4. Contest ends Friday, June 2nd after market close.
5. Contestant with the biggest portfolio at the end of the contest wins a copy of William O'neil's How to Make Money in Stocks.

Submit your portfolio to me by either leaving it in the comments section of any post, or email me at SinghJD1@aol.com.

Let me know if you have any questions. Goodluck!

Today's Trade: Sold TIE

2006-05-23T09:37:00.000-05:00

I sold TIE at 36 for a $885 gain (+12.5%). I had a stong feeling there would be a market bounce (see previous post on oversold indications), but I had no idea TIE would make such a strong bounce right into overhead resistance. This may be a good time to short the stock, but I'd like to wait and see how strong this rally is.

Today's Trade: TIE

2006-05-23T00:59:00.000-05:00

Some of the indicators I watch are showing signs that there could be a tradable bounce (see previous post), so I bought 200 shares of TIE at $31.50 today. I will place a stop in the $28-29 range (under the 50 day MA). The stock has been a market leader and bounced off it's 50 day MA. The somewhat strong close was a good sign. PBV resistance is in the 35-37.50 range, so I'll look to that area for a profit target. However, I am expecting another market decline after a bounce, so I'll be ready to pull out quickly and go short. Take a look at the Stochastic reading. The fact that TIE dropped below 20 and has now pulled up over that mark is a bullish sign.

Sentiment and VIX Extreme Readings

2006-05-23T00:35:00.000-05:00

The VIX has hit an extreme reading, hitting 19 today and later settling down close to 18. While it's becoming fashionable to dismiss the VIX as an indicator, the Nasdaq has marked a bottom the last few times there was an extreme VIX reading. Take a look at the charts below. Notice the Nasdaq marked a bottom shortly after the VIX has extreme readings in August 04, May 05 and October 05.

Finally, a chart showing SPX stocks above their 50 day MA is nearing an extreme reading. The fact that we have not hit an extreme lends credence to the idea that a bounce will lead to a lower low.

NASDAQ Chart

2006-05-22T12:05:00.000-05:00

The Nasdaq is clearly way oversold according to stochastics, but RSI has yet to hit 30. Octobers approach of 30 lead to a big run, so keep an eye on the RSI readings.

Time to Buy?

2006-05-22T09:34:00.000-05:00

An ugly open seems to be causing some fear and panic among ivestors. Some indicators are showing oversold/negative reading not seen in many years. Is it the time to buy? It could very well be, but I'll be standing on the sidelines. I still think the best play is to be patient, wait for a bounce and test the waters with a few shorts.

I'm still holding onto my positions until the stops are hit.

Looking For Short Setups

2006-05-22T07:55:00.000-05:00

Not much new to report today. I will be watching for a bounce that leads to short setups in tech and stocks that have made parabolic moves followed by hard falls.

Why Has There Not Been a Meaningful Bounce?

2006-05-20T10:14:00.000-05:00

We've been waiting all week for a bounce that, with the exception of Friday's weak bounce, hasn't come. As Barry Ritholtz points out, it probably hasn't happened because everybody and his mother has been predicting one. In this case, it would have paid to be a contrarian.

I do think there will be a meaningful bounce next week that will make for a great short opportunity. It will probably happen at about the time everybody gives up on it.