Happy Holidays

Posted by downtowntrader | 12/22/2006 02:45:00 PM | 3 comments »

I would like to thank everyone who takes the time to visit my blog and hopefully I have helped or at least entertained each of you. I'm not sure how often if at all I will be posting next week as I will be taking some time off.

I wish all of you a Happy Holiday Season and a prosperous New Year.

Stay Safe.


Blog Issues

Posted by downtowntrader | 12/21/2006 06:15:00 PM | 0 comments »

I must of clicked on the wrong button last night as my post was never published. I went ahead and published it today. More of the same today as the indices tried to rally, rolled over, tried to rally, and rolled over. Not much to add today so I will call it a night.

Not sure how many readers play fantasy football, so if you're not interested in it, please stop reading here.

So, I made it to the superbowl in my keeper salary cap league and I'm pretty happy with my season. The only issue is I am facing goliath in the superbowl. This is about as good a team as I've seen in a Fantasy league where all the owners know what their are doing, except for one owner who shall remain nameless. You know who you are. Scoring is simliar to a yardage / performance league. So this is the team I am facing:

Peyton Manning
Larry Johnson
Brian Westbrook
Willie Parker
Steve Smith
Hines Ward
Robbie Gould
Pittsburgh D / Special Teams

my team is as follows

Eli Manning
Steven Jackson
Reggie Bush (over Warrick Dunn)
Marion Barber
Chad Johnson
Reggie Brown (unless Joe Horn is healthy)
Matt Stover

I think I have a pretty decent lineup but I am overmatched. Hopefully Baltimore holds his Pitt players down and I get a few lucky TD's. Good Luck to any of my readers that made it to the final game as well.


More of the same

Posted by downtowntrader | 12/20/2006 08:32:00 PM | 0 comments »

I don't have much to add today so I will keep it short. While large caps are holding up quite well, the Nasdaq and Russell are struggling to regain their 20day sma's. What I found interesting today is how the $SOX held up while the rest of techs rolled over.

Here is a chart of the $SOX. It is still in decent shape holding over the 200sma.
The reason I pay attention to the $sox is because tech tends to lead the market both to the upside and downside. The semiconductors tend to lead the tech stocks for several reasons. Now, while the $sox held up in the green today, it too is struggling to hold it's 20sma. Whichever way the $sox breaks next will likely be the way the markets move.

Thats it for tonight.

Good Luck,


Chop Fest Continues

Posted by downtowntrader | 12/19/2006 08:54:00 PM | 0 comments »

The chop fest continued today with a strong gap lower and move higher throughout the day. Oil and Gold are all over the place with strong rebounds following the sharp declines from the prior day. Tomorrow should be interesting with Oil Inventories due at 10:00am. Here is a look at the 60 minute QQQQ chart I've been following. It took out the rising trendline with a gap and fought it's way back to it by the end of the day. It pulled back off at the end of the day leaving a shooting star type candle. It will be interesting to see if Bulls can reclaim the trendline or if more weakness is in store.
Here are a few charts that may be decent buys if the markets end up turning around.

HAR is trading very narrow range candles and is oversold at this point. It is still looking quite bullish overall.
PYX has held up very well throughout December. It should be making some sort of move soon.
CROX has pulled back to support and could find support in this area.
LQDT is trading a loose bull pennant and is over the breakout area from the previous base. It could be finding traction here.

Good Luck,


Lot's of damage today

Posted by downtowntrader | 12/18/2006 08:55:00 PM | 0 comments »

While todays move lower doesn't look too bad when you look at the indices and couple it with lower volume, there was a good bit of damage done under the hood. Look at market leaders like AAPL and GOOG. AAPL looks like it is being distributed and GOOG had a pretty sharp drop today. Also, small caps were hit pretty hard. I'm not sure if a top is in or not, but there are plenty of signs pointing to a top being near.

Here is a 60 minute chart of the Q's. It paused in the area of the triangle it broke out of and on the lower bollinger band. It may find some traction here the next couple of days, but if it fails here, then tech stocks may be in for a rough ride.

The past two weeks have been hard on me and I imagine on swing traders in general. Looking at the chart above, it makes sense as the indices can't get any traction going. Commodities aren't doing any better, jerking back and forth. I had my worst day in several months today coming close to the point where I need to shut down trading for the month. The next few days should be very enlightening.

Good Luck,


Final two trading weeks

Posted by downtowntrader | 12/17/2006 09:15:00 PM | 0 comments »

There are only two trading weeks left for the year and volume should be relatively light. We may see a light volume rally as the window dressing season begins. The deceptive practice of some mutual funds, in which recently weak stocks are sold and recently strong stocks are bought just before the fund's holdings are made public, in order to give the appearance that they've been holding good stocks all along. Window dressing is where mutual funds pick up shares of the years winners so that they can report them on their year end statement. Also, although not followed as widely, there is some dumping of the years under performers as some funds don't want to show how they held on to some losers. Keep an eye on this years winners such as GOOG, AKAM, NVDA and BID for runs up and careful of this years losers such as AMD for selling off. Here are a few charts that are on my watchlist.

Immucor, Inc. (Public, NASDAQ:BLUD)
BLUD is pulling back to the breakout area and 9 ema.

salesforce.com, inc. (Public, NYSE:CRM)
CRM is trading into a small triangle here after increasing guidance. These are usually continuation patterns, so watch for a move to the upside.

Harman International Industries Inc./DE/ (Public, NYSE:HAR)
HAR has pulled back to the 50sma and lower band. It has yet to threaten the breakaway gap and may turn higher here.

NVE Corporation (Public, NASDAQ:NVEC)
NVEC has been pulling back on light volume and may find support at this trendline and the lower band.

Health Care Property Investors Inc. (Public, NYSE:HCP)
HCP may be forming a pennant here. It might be early, but it is worth watching. Keep an eye on volume.

eCollege.com (Public, NASDAQ:ECLG)
ECLG broke a downtrend and is now backing and filling into the breakout area. It might be ready for a nice move and a challenge of the 200sma.

WPT Enterprises, Inc. (Public, NASDAQ:WPTE)
WPTE looks like it may be putting in a reverse head and shoulders type bottom here. Although the left shoulder is the same depth as the head, the psychology here is the same. It already cleared the downtrend and is refusing to drop lower then halfway down the previous base.

VAALCO Energy, Inc. (Public, NYSE:EGY)
Although EGY is looking a little weak, I can't ignore how buying the 200sma has been rewarded here recently. If my pull back a few more days, but it could bounce right here after the narrow range candle.

Cogent, Inc. (Public, NASDAQ:COGT)
COGT looks like it is gonna squeeze some shorts to me. There was a climactic gap down which was reversed the next day. It has filled the gap and shorts may be getting nervous. I would be.

eFuture Information Technology Inc. (Public, NASDAQ:EFUT)
EFUT has refused to give up it's post IPO gains and is consolidating in a bull flag. This is a tough one to trade, but it can really move.

Good Luck,


Nasdaq Lagging

Posted by downtowntrader | 12/14/2006 08:58:00 PM | 0 comments »

The Indices surged today with new highs in the Dow and S&P. While the Nasdaq and Russell were strong today, it is interesting to note that they didn't make new high and are therefore lagging. Typically, these are the indices that should lead rallies, as they show investors are willing to speculate on riskier equities. When large caps lead the way, it shows rotation to more defensive stocks.

That being said, the potential for another strong leg up is high. The Nasdaq cleared the triangle it has been forming and the semiconductors had a nice day.

Here is a chart showing the four major indices and how the Big Caps are leading the way right now.

As usual, I will be taking the day off from regular trading tomorrow as it is options expiration. Good Luck,


A few more charts

Posted by downtowntrader | 12/14/2006 12:18:00 AM | 0 comments »

Today was probably the most boring day I have seen in over a year. It seemed like nothing could gain traction and moves to either direction were snuffed out pretty quickly. I have to give the bulls the benefit of the doubt due to the persistence of the previous trend. Here is an updated hourly charts of the Q's. Notice that they are starting to make higher lows and indicators are starting to come of oversold status. We could have a little bounce into expirations.

PEIX fell out of the triangle a few days ago, but is at much stronger support. I am watching for the first move higher.
CPX is even more dead then the indices. Watch for the move out of either side of the triangle.
CERN held strong today and made a higher daily high in fact. If it continues higher tomorrow then it might be ready to take a trip to the upper band.

If you haven't had a chance to check it out, the HighChartPattern team was interviewed on stocktickr.

Good Luck,


Will the dollar continue to drop?

Posted by downtowntrader | 12/12/2006 10:04:00 PM | 0 comments »

While the equity markets didn't do much today after the fed meeting minutes were released, there was an interesting move in the dollar. With the Fed acknowledging worries about housing and a slowing economy, the markets reacted by pushing bond yields down and bond prices higher. This also caused Gold and Silver to tick up as the dollar was weaker.

Here is a 60 minute chart of TLT showing the move higher after the minutes were released.

Check out how Gold as shown by the GLD etf has correlated with Bond prices as shown by the TLT etf the past few months. This shows how gold has been closely correlated to fluctuations in the dollar. With TLT possibly moving higher, Gold and silver may follow suit the next few days.

With that in mind I am looking at possible moves in a couple miners.

Silver Wheaton Corp. (USA) (Public, NYSE:SLW)
Here is a chart of SLW possibly turning at the lower band. There is probably a high chance of failure, but if it bounces here, then it could be off to the races.

Goldcorp Inc. (USA) (Public, NYSE:GG)
Goldcorp has held up better then SLW recently, drifting back to the 20sma. It could attempt to breakout soon.

I'm a little mixed on equities right now, as although some of my positions held up well today, I couldn't help notice weakness in leaders like AAPL and RIMM today. We'll see what tomorrow brings.

Good Luck,


PS. Instantbull has a new Chatter Analysis where they take a look at the news behind the 10 most searched stocks in their community each week. Just go to their home page and enter a stock and click go.

Fed Day

Posted by downtowntrader | 12/11/2006 08:47:00 PM | 2 comments »

So tomorrow is another Fed day and I won't even attempt to guess at how the markets will react. Practically everyone expects no change and it may turn into a non event, but I have been seeing a lot of people hanging their hopes of the Santa Claus rally kicking off after tomorrow. The contrarian in me thinks fading that type of reaction would work out, but the markets are still punishing shorts. That may change soon, but it hasn't happened yet. Here are a few more charts I am adding to the watchlist.

Coinstar, Inc. (Public, NASDAQ:CSTR)
CSTR has a pretty nice looking chart here pulling back to converging support. The 50sma, Bollinger Band, and two trendlines should contain this pullback.

The Andersons, Inc. (Public, NASDAQ:ANDE)
ANDE should find support in this area near the previous pivot high and the lower bollinger band.

Research In Motion Limited (USA) (Public, NASDAQ:RIMM)
RIMM has had a heck of a run and is making its first pullback to the 50sma and lower band. While it probably won't reverse on a dime here there could still be a decent trade over the next few days.

Good Luck,


Sunday Night Watchlist

Posted by downtowntrader | 12/10/2006 09:32:00 PM | 0 comments »

It seems that the indices are stuck in a near term trading range. I am watching the 44.20 level on the Q's as one of my market indicators. If it can get above it on volume, then I will be looking to get a little more aggressive on the long side. Here are a few charts I am watching this week.

Applied Digital Solutions, Inc. (Public, NASDAQ:ADSX)
ADSX is probably off a lot of traders eyes being that it is under $5 a share, however, the chart is looking pretty good here. This is a nice pennant it's basing from.

Complete Production Services, Inc. (Public, NYSE:CPX)
CPX is trading a small triangle after clearing the downtrend. If it leaves the upper side of the triangle, then a nice move should be coming.

Catuity, Inc. (Public, NASDAQ:CTTY)
CTTY is a wild trader that is starting to get some interest back. It is trading a loose pennant here and may come back to the 20 sma before moving higher.

Citrix Systems, Inc. (Public, NASDAQ:CTXS)
CTXS has been beaten down the second half of this year, but it seems pretty clear that buyers have been waiting in the 27-28 range. It looks like it is starting to turn back up and may make a decent trade.

Penn National Gaming, Inc (Public, NASDAQ:PENN)
Gaming and Casinos have been hot and PENN is looking like it may try and clear this base. It may pullback further, but Fridays narrow range candle may be showing some hesitation to push it down any lower.

Playtex Products, Inc. (Public, NYSE:PYX)
PYX has been trading a very tight range after clearing an ascending triangle. I will be watching volume closely on it.

Quality Systems, Inc. (Public, NASDAQ:QSII)
At first glance the QSII chart looks pretty ugly, but looking closer, there is obvious support in the prior breakaway gap. It has formed two doji like candles signifying some indecision in a support area after a near term downtrend. While it's only a clue, it bears watching.

Rambus Inc. (Public, NASDAQ:RMBS)
RMBS has refused to go down recently and the 20sma is catching up to price. The 200sma looms above as resistance, but RMBS could easily catch some momemtum and clear it.

SIFCO Industries, Inc. (Public, AMEX:SIF)
SIF is a very low float "cheapo", but this chart looks very interesting. Volume has come in and it is working off the breakout day very constructively. It looks like it may bounce off the 20sma here.

I still have the few short setups on my list from last week, but I am thinking that it's best to wait for the indices to be in a confirmed downtrend before looking too seriously at short setups.

Good Luck,


Distribution Day

Posted by downtowntrader | 12/07/2006 09:01:00 PM | 0 comments »

The indices were down with the Nasdaq leading the way down on increasing volume. While damage to the Dow and S&P was not substantial, the Nasdaq Composite failed to match the previous highs. It also failed to hold the 20sma and was down further after market along with semiconductors. We'll see if the jobs report brings in buyers tomorrow or if there is a follow through day to the downside. Here are a couple short ideas in case the weakness intensifies.

NewMarket Corporation (Public, NYSE:NEU)
I highlighted NEU a couple nights ago and it is still in a decent spot. If the rising wedge is valid then there is a long way to correct for NEU.

Lehman Brothers Holdings Inc. (Public, NYSE:LEH)
LEH had a shooting star (like much of the market) at resistance. If it falls out of this triangle then a trip to the mid 60's is quite possible.

Freddie Mac (Public, NYSE:FRE)
FRE had a nice bounce from the lower band to the upper band and failed pretty miserably. There is now a lower pivot low and possibly a lower pivot high confirming a trend change.

Good Luck,


Bad (manipulated) Prints

Posted by downtowntrader | 12/06/2006 11:51:00 AM | 0 comments »

I'm sure that most traders that read my blog know their way around a level II screen and know how a time and sales print works. If you are unfamiliar with it, then you can review this link to an Introduction to Level II quotes. What happens on Level II has varying degrees of importance depending on what type of trader you are, however, if you use alerts or triggers as part of your platform, then the Time and Sales prints are very important.

I'm not a floor broker, or have I ever been, so I'm not sure how or why bad prints happen. It seems to me that at some point in the transaction process, someone has to enter trades into a system. These prints are then the records of each trade. Sometimes there are obvious mistakes and the trade slips through such as entering a 42.05 trade as 41.05, or 36.63 as 36.36. While these prints will not trigger a stop order already in the market, they will cause an alert set to use trade price, to trigger. As platforms become more advanced, more and more traders are using alerts to keep their intentions hidden from all market participants. I don't have experience with automated systems, but I'm sure they also can be affected by a bad print.

Lately, I've had several instances where a bad print triggers an alert and takes me out of a position prematurely. While I'm not a conspiracy theorist, I can't help but notice that in my particular trades, the stock happened to move higher immediately after relieving me of my shares. It also seems to happen more with the specialist controlled stocks found on the NYSE or AMEX. If I was a specialist and needed to pick up some shares knowing the price would runup, it would be easy to trigger some alert based stops with a bad print. Again, I have no idea how easy it is in practice to enter a "mistake", but I'm not naive enough to think it couldn't happen.

Now there are ways to minimize the impact of bad prints such as setting an alert based on bid or ask, but in low float stocks with very wide spreads, it really isn't feasible. I'm not sure there is an easy answer other then to hold your stops mentally unless you will be gone, but I rely on alerts due to the fact that I may need to leave my trading desk and you can't watch every tick for a swing trade. I would be nice if a broker would let you set an alert based on multiple prints at a price. If anyone has any ideas or feedback on this feel free to post in the comments section.

The indices pretty much consolidated all day as called accurately by Brett this morning. If you've ever wanted to see how a pro trades, then you owe it to yourself to check out one of his morning sessions. The QQQQ etf still looks bullish to me on the 60 minute chart holding above the 44.20 number I mentioned last week. It is setting up for a good move as witnessed by the tightening of the bands, and I would imagine bulls still have the upper hand. Here are a couple charts I found interesting.

Infosys Technologies Limited (ADR) (Public, NASDAQ:INFY)
While I'm leaning to the bullish side for the next 2-3 days, INFY may be a nice short candidate, especially if the markets pullback. Looks like a classic trendline break and retest.

salesforce.com, inc. (Public, NYSE:CRM)
CRM is looking oversold to me sitting on a previous pivot low. It could bounce here, but it might only form the right side of a head and shoulders top. Too soon to tell, but it looks like a decent risk / reward setup.

On a lighter side, if you haven't checked out the Ugly Show before, do so. In my opinion, he should forget the whole Automated Trading System and start the Ugly Show Series as a spinoff from WallStrip. Not sure how to monetize it, but that's what Howard is for.

Good Luck,


Some losses are bad, and some are not

Posted by downtowntrader | 12/05/2006 02:59:00 PM | 0 comments »

I guess I cursed myself last night when I mentioned that I have been lucky to avoid a stock gapping lower against me. Even though I avoid earnings and other high profile news events, it is an inherent risk when you hold positions overnight, that a stock will release surprise news or get a ratings change. Thats why it is important to keep position size to a manageable level.
So SIRI gapped down on a downgrade this morning and I ended up taking a 3.55 R loss. While, I was obviously a little perturbed at the trade, it wasn't really a bad trade. Sometimes they just don't work out and it's better to not take it personally. The losses I try to avoid are losses where I had no business taking the trade or where I made an error in managing the trade.

There are many "Bad" losses including:

  • Pulling a stop
  • Doubling down
  • Chasing a stock
  • Straying from your core strategy
  • Mixing Timeframes
  • Overstaying your welcome in a position
I could go on and on, but the key point is that it is important to expect losses and have a plan for it. However, don't make things worse by creating extra losses by making mental mistakes.

The indices continue their trek higher and are still looking bullish on the 60 minute chart. Here are a few charts to keep an eye on.

The Andersons, Inc. (Public, NASDAQ:ANDE)
I've been waiting for ANDE to pull back to the 20 sma and it has forming an NR7 candle. It also has a little triangle forming after clearing the the recent downtrend.

Pacific Ethanol Inc (Public, NASDAQ:PEIX)
PEIX is sporting a similar chart to ANDE and looks close to a breakout. It looks like a reverse head and shoulders has been cleared and it is now in a triangle continuation pattern.

Great Wolf Resorts, Inc. (Public, NASDAQ:WOLF)
WOLF cleared this choppy base and is consolidating above the prior base. It could still pull back to 12.70, but it could just as well clear resistance with all the Casino stocks breaking out.

Best Buy Co., Inc. (Public, NYSE:BBY)
BBY continues to act weakly as it struggles with the down trendline. The 20sma is supporting it so caution remains in order, however, if the market turns sour, this will be one of the first places I turn to.

NVE Corporation (Public, NASDAQ:NVEC)
I'm getting two possible reads on NVEC here, but since this one has potential for a large move, I added it to the watchlist. It may pullback to the lower trendline, but there is still a pretty good chance that it turns here, at an internal trendline that has held recently.

NewMarket Corporation (Public, NYSE:NEU)
NEU may be in the process of breaking long term support.It broke a smaller triangle and looks like it broke out of a larger wedge and then came back up to retest resistance.

Good Luck,


November R Review

Posted by downtowntrader | 12/04/2006 05:45:00 PM | 4 comments »

I'm having all sorts of DSL problems tonight, so I'm gonna try and get this post out quickly. I haven't posted a full monthly review before, as I just started keeping a journal two and half months ago. I actually had a pretty rough summer as I jumped from strategy to strategy, straying away from my bread and butter swing setups. As my frustrations grew, I stepped back and reviewed dozens of trades. I noticed that I had some very good trades, but was throwing away money jumping on plays I had not prepared for and that didn't meet any of my "normal" criteria. I decided to truly focus on one methodology and not be tempted to jump all over the place. I also decided to start using stocktickr as my trading journal. While my methodology is still much a work in progress, I have been making consistent improvements.

Here is my R chart for November's Trades.

My major goal for November was to increase my Expectancy. I've commented before, that of the three ways to increase the bottom line, increasing expectancy is the easiest to start with. Increasing win Percentage and increasing R size are the others. I feel much happier with an expectancy of .64, but I think that I could improve on that, as I exited a ton of trades that just kept going. I had almost the same R's as in October with twenty less trades though, so I did do better. So how did I improve my expectancy?

The first thing I did was to resist the temptation to scale out a little early. I tend to take profits quickly and frequently, usually taking out some profits at 1R (and several times before that). I kept finding myself in good moves with little shares left to take advantage of the move. I think I did a much better job of waiting on my first scale out in November. Another thing I did, was to be a little more selective on my trades. I used to take setups that had pretty wide stops and I would just reduce my lot size to compensate, but I found that I would be in a lot of winners with a small R. I now wait for a setup that allows me to put on a bigger lot size with a smaller relative stop. My win percentage dropped a little as they are closer to the stops, but my winners more then compensate for it.

So here is an updated chart of my Total R performance. I was a little surprised to find myself at 74 R's so quick, but I think this market has to take some credit. I have found two things to be fairly consistent. Buying support and holding overnight is being rewarded, and shorting is getting punished. I think swing traders have an advantage in a trending environment as there are several gaps or morning moves that then consolidate all day. I have been lucky in that I have had a few gaps higher and only a couple gap down stop outs. I imagine my R performance will suffer once we enter a range bound market (We may already be there).

I have to say that I think I have been quite mediocre as a "trader" the past two months, but I am pleasantly surprised by decent performance numbers and my bottom line has shown it. My strengths by far are my chart analysis , ability to define support and resistance, and discipline in adhering to my stops. The key was designing a system that would hide my flaws and take advantage of my strengths. My goals for December are to keep my expectancy up and try and get my win percentage up over 45%, and hopefully near 50%. Another goal, is to try and sit on my hands if the trades aren't there.

Market Review
I was out most of the day and my DSL was flaky once I got home so I missed most of todays move. I noticed over the weekend that the Casinos were looking good, and boy did they move today. I see a lot of stocks on the move, so we may get some follow through the next couple days. I can't upload charts right now, but take a look at NVEC, CERN, QSII, GIGM, CAAS, CRM,and PHLY as possible long plays.

Good Luck,