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,
DT
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,
DT
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
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,
DT
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,
DT
I planned on posting a review of november from my hotel room during my mini vacation, but blogger is giving me all sorts of problems. I resorted to posting this from my mobile phone. I will be back in town tomorrow and will resume blogging tomorrow night.
DT
