Vagabond's Trading Strategies

What I think of Occupy Wall Street

2011-10-11T15:55:00.001-05:00

Basically you have a lot of unfocused (and obviously unemployed) people, bitching about their situation. It's NOT the fault of the banks, it's NOT the fault of the government, and it is NOT the fault of the rich... the fault lies squarely on their own shoulders. If you do not live beyond your means, then none of this economic crunch would really cause you any consternation.

Is it FAIR that the rich pay less on their income taxes? No.
Is it FAIR that someone can't even recoup their invested equity upon foreclosure? No

But let's face it, it wasn't the banks or the rich that ran up debt on your credit card, or caused you to be unable to pay a house payment on a loan you agreed to. It wasn't the rich who signed you up for your mobile phone plan, extended cable package, or car loan.

According to the government set poverty line, I am "poor", but I don't owe a single penny to anyone. Everything I have, I have paid for out of my own money. And the only thing that this economic crunch has caused me problems with, are the volatility of the stock markets, which in effect is both good and bad.

These people need to focus their energy on a specific issue, but do it in their spare time, after finding a job and getting their own lives in order.

Seeing these people sit around and b-tch about things, in a nation like the US, with all of the possibilities afforded to them... is like watching a child complain about the color of his Ferrari.

And what's worse? Now you have Al Sharpton joining the group. Listen, once Sharpton joins in on something, you know you have hit the bottom of the barrel.

NFLX Revisited

2011-09-22T01:53:00.000-05:00

I mentioned NFLX had the makings of a bubble October last year. 10 months later, it has finally happened. Cashing out on the short side took immense patience but it could be done; as you can see multiple attempts must be made in order to finally catch the downfall.

In hindsight, catching the $300 short would have been absolute luck and guessing. A safter approach is to short at the 20/50 day ema retest which occurred 8/31/2011, just a couple weeks ago. Resulting entry price: $230-240.

Netflix never had unique, difficult to replicate product. Business model doesn't bar entry from competitors. It was just a matter of time, like many ideas in history.

Is it too late to short? No, but wait for the next 20/50 day ema retest. The gap from $50 will be closed.

1999 vs 2011

2011-02-13T02:02:00.000-06:00

A few stocks in the cloud computing , social media, and online streaming segments have a 1999 "bubble" feel to them.

NFLX, OPEN, BIDU. The patterns are very similar to CSCO, JDSU, and a few others from 1999. Decide for yourself. Be patient and wait for the signal. That's how the big money is made.

2011 Outlook

2011-02-13T01:51:00.000-06:00

2010 ended up being a year for consolidation before taking off in September. The indices are all hitting 52 week highs and the trend is very strong to the upside. Corporate earnings have mostly beat estimates and the higher equities price are well justified as fundamentals are supporting this move. Short term, I believe the market will face consolidation into mid March before moving higher.

10/26/10 - Bubbles!

2010-10-26T22:46:00.000-05:00

NFLX:

BIDU:

10/26/2010 Market Update

2010-10-26T22:27:00.000-05:00

The market's current position could be interpreted as near the top in a double top formation, and it's about to start a down leg, or near the top, and about to start another run higher. The greatest profits are made near market turns, and this could be such an opportunity. My intuition tells me that a small leg down will start near the Nov 2nd elections with first support at 10,900 on the dow followed by 10,730. I do not see the DOW falling much more than that.

GNW - Monthly cup and handle

2010-08-28T13:59:00.000-05:00

AAPL - Short Opportunity Fizzled

2010-07-22T22:45:00.000-05:00

The recent short opportunity for Apple did not materialize as the $242 support held for two consecutive days even though the price was pierced intraday. That is tremendous strength, and the 2nd day even turned out to be a bullish engulfing candlestick pattern.

AAPL - Short Opportunity

2010-07-11T22:51:00.000-05:00

While the market lost 9.46% since the top on 4/26, Apple has managed to lose half at 4.7%, and even made a new high on 6/21. However, technicals are showing strong sell volume on down days and weak buy volume on up days, an indication that smart money is distributing and the uptrend is likely coming to an end unless earnings on 7/20 will prove to be another blowout. In addition, negative divergence is showing on both the RSI and MACD. Given that AAPL is currently the 2nd largest company behind XOM mobile in terms of market cap, both the earnings and outlook must be overwhelmingly positive for the run to continue.

Three consecutive closes below $242 would result in a 20/50 EMA crossover and signal to short.

7/9/2010 - Strong rally in downtrend - 20 EMA pierced

2010-07-09T00:50:00.000-05:00

I remain bearish on the market despite the near 400 point rally that we've had over the past 2 trading sessions. The 20 EMA was pierced on both SPX and DJI, but not on NASDAQ. The downtrend remains intact, and all the major resistance points are consolidated around the 1,090 to 1,110 area, which will prove difficult to break and will present itself as a great short entry if we do end up getting there. Do not go long until the 50 EMA is pierced on all 3 indexes.

6/1/2010 - Market Update

2010-06-01T23:24:00.000-05:00

US markets are moving in tandem with the strength of the Euro. As the currency is near oversold levels and positive divergence is taking place on the weekly chart, a short squeeze is definitely on the horizon. Yes, that's right, weekly chart. The daily chart for the Euro is completely broken by all means. $1.20 should serve as the final support before all hell breaks loose.

Noble Corp - NE (5/14/2010)

2010-05-14T23:19:00.000-05:00

Downtrend confirmed, breaking major support at 37.50. Go long at $32.50, with a stop at $32.00

5/14/2010 - Market Update

2010-05-14T23:09:00.000-05:00

The market is in trouble. First off, the Euro is in a free fall, and transferring money from the left to right pocket isn't going to fix anything. Think of the current debt problem as the soap scum on the shower door -- accumulated over several years, and will take more than a few scrubs to clear the glass.

The downtrend in the S&P 500 is confirmed, and it's now time to be bearish.

5/13/2010 - Market in Danger

2010-05-13T21:24:00.000-05:00

The past 2 trading days were great days for long exits and short entries. All the major indices are backtesting the 20EMA and failed today. If tomorrow finishes below today's close then the markets are in serious trouble. The crash last Thursday served as a warning and it definitely should not be overlooked.

5/6/2010 - The day the market broke.

2010-05-06T20:50:00.000-05:00

They're trying to rewrite history today. This was a crash. A result of the simplest and purest of market physics. A "fat finger" doesn't explain 18 full minutes of selling at the bid in the Qs and DIAs which preceded the final plunge. There were technical factors as well: the 200 day Moving Average was breached right at the time that the plunge started, triggering natural selling. That was also the moment that the demonstrations in Greece became violent. And the DXY breached 85.

We're coming off a topping process. Markets drop faster than they rise. There was evidence of a gathering liquidity crisis. Long trades and carry trades were unwinding with increasing momentum. Oil inventory and new jobless claims reports this morning came in below expectations.

In other words we had a perfect storm, a setup for a crash. Sellers simply overwhelmed bidders. And in this low volume, exhausted market at a top there simply were unanswered offers as large positions were liquidated.
What is scary is how arbitrarily and capriciously the NYSE and NASDAQ could simply nullify legitimate trades. Why didn't the safety mechanisms kick in? Where were the trading curbs, the 15 minutes of suspended trading? Would they be canceling trades if the "fat finger" made the market rise? I think we know. The playing field is full of trap doors, booby traps, land mines and leg holds. Even being right doesn't help since you can be frozen out of trades, or they can be canceled.

We are witnessing a crisis: a crisis of confidence in our markets, in capitalism as it is being practiced today and in the legal and tax system. The events in Thailand and Greece fit right in with the notion that class warfare is not only brewing, but is being fought already in the virtual trenches. But the pervasive anger and disillusionment that cuts across traditional demographics is spilling over to communities and the streets.

GS - Goldman Sachs - Support

2010-04-26T23:56:00.002-05:00

20 EMA broke down under 50, at key $150 support. Break that then it's game over.

NFLX - Netflix - Overbought

2010-04-26T23:49:00.000-05:00

Netflix - great fundamentals, growth prospects, but way overbought on daily, weekly, and monthly charts with daily RSI > 86. Chart clearly shows a parabolic move. Likely to break higher tomorrow in the AM for a quick pop on short capitulation and fall for the rest of the day.

Short entry ~$110, cover half at $100, rest at $90, stop loss at $113.

Market Update - 4/10/2010

2010-04-10T12:37:00.000-05:00

You may have noticed that this blog isn't updated regularly like some of the other trading blogs. That is actually intended. Over trading and over thinking is often a common mistake by traders, both experienced and novice alike. When the trend is intact, just sit back and relax; no need to analyze on a daily basis. I have noticed many bloggers angry and fed up with the market since the start of the run-up after the January correction. Many believe that this run up is government induced, fake, and must crash soon. Of course, these same lines of thoughts are repeated day after day, all the while the market is hitting 52 week highs. Folks, we are now in a bull market, and there will be no crash. Indexes are way above moving averages in a strong uptrend, and believe me, there will be plenty of signs if a crash were to happen.

IYR - Overbought

2010-03-17T19:34:00.000-05:00

Catching tops is never a good idea, and I don't recommend it. Certainly it isn't one of my styles. However, sometimes you wait for the trade to come to you, and some tops are so obvious that they're just begging to be shorted, like BIDU and CAGC posted last week. This week, it's the REIT index, or IYR. How overbought is this? Let me put it into perspective.

In the last 10 years, there was only one instance - just one, that shared the same run. Hint 1 : It happened in 2007. Hint 2: It happened at the all time high. Hint 3: It happened a month before Bear Stearns became a penny stock.

The reward to risk ratio by shorting the IYR through puts on DRN is extremely high at the moment. The IYR is currently at the key resistance of $50, at RSI levels that occur once every few years, at the heart of bull markets.

AA - Breakout

2010-03-17T18:53:00.001-05:00

ry nice breakout today above both 50 EMA and SMA on decisive volume. Two things to watch for here. First the obvious, wait for a retest of the 50 EMA to see if it holds. Second, this must break through the multi-year resistance at $15. I believe that AA will trade between $14 and $15 in the next 2 weeks, and the earnings will make the decisive call. If it's good, I see a breakaway gap above $15, and to $20 by the end of summer. If it's bad then I see a potential head and shoulders playing out that will take AA back to $10. Either way, keep an eye on the bottom trendline of the channel. A close below that spells trouble for AA.

GE - Breakout

2010-03-17T18:35:00.000-05:00

Late by a couple days, but nevertheless GE broke above the key $17.00 resistance and also the 360 EMA. Wait for a pullback to 20 EMA before going long. Most likely that will be between $16.50 and $17.00 over the next couple weeks. Expect to hit at least $22 sometime during the year.

BIDU - 3/10/2010

2010-03-10T18:50:00.002-06:00

I hate this stock. I hate it because it's everyone's little darling. Now it seems retail investors are piling on in the very late stages of the run, weeks or even days before the collapse. There are so many gaps in this turd that we'll have to go down to $65 just to tag them all. Do I recommend shorting darlings of the market, in uptrends as strong of a trend as this? No. But it is worth the risk to buy some OTM puts? Certainly! Believe me, the gap at $395 will be closed sooner than you think.

We are VERY close to the reversal. Take a look at the charts if you don't believe me.

3/17/2010 Update - It seems like the top put in on Monday will be the short term top, as BIDU is likely to retest anywhere between 500-525. I predict that this is not the absolute high, as BIDU will hit $6xx sometime during the summer. $700 is not out of the question. Once that occurs, I will buy leaps as this will crash to fill the gap at $55.

3/10/2010 Update

2010-03-10T18:19:00.001-06:00

Ok, listen up folks, there is a lot of money to be made very soon. The charts are learning towards the bulls, so I am long term bullish, but short term bearish for the next 2-3 trading days. Refer to the VIX comparisons below.

To me, such a similar pattern should not be ignored.

3/17/2010 Update: Boy was I wrong on this call. One powerful run we have here...

Dawn of new Bull Market?

2010-03-06T16:39:00.000-06:00

Just kidding, but we are close...just a little more confirmation is required before declaring a bull market. However, just by looking at Russell 2000's action over the past month, there is no doubt that the market wants higher prices. In hindsight, the correction on 2/5 was as deep as we're going to see, bouncing off the 200 EMA with enormous volume by BIG MONEY. If this correction was to dip twice (first being 2/5), then the SPX should not have held the 20 EMA for 3 consecutive days from 2/23 to 2/25. That was sign to GET OUT of shorts and stay cash or go back to long positions. I am optimistic that 1,150 will be broken by the end of March, followed by a period of consolidation and retest of 20 EMA at least once between now and the end of April. That retest of the 20 EMA will be the next buy point to enter 50 or 33% of position to see if it holds. If it doesn't hold, I'd expect more fakeouts below the 50 EMA to suck in more bears, in which case the 200 EMA will stand as the next logical buy point.

3/3/2010 Update

2010-03-03T21:38:00.000-06:00

The market has been showing significant strength and is now facing a key resistance line that has held as support since Aug '09. Looks very toppy to me - short term down movement is expected - will be very surprised at any kind of rally tomorrow, but hey, anything can happen.

STEC Revisited

2010-02-23T17:47:00.001-06:00

Bubbles will come and go with time as long as the stock market exists. The trick is to get out either before the bubble bursts, or soon after. STEC inc is a bubble. The bubble bursted September last year, and sell signals were literally on every technical indicator. For the longs that purchased at the high, it wasn't a mistake. There was nothing wrong with buying a stock at 52 week highs. Microsoft, Walmart, and Apple all reached where they are now by hitting 52 week highs. The mistake is not selling when the trend turned. Not every trade will be a win...some trade will be losses and it's crucial to understand when to get out. Even if you got out in the 20's, a 30-50% loss is better than selling it at a 80%+ loss after hitting <$10 in AH today. Another important point to be made here is to not average down. There's no sucker play like averaging down in a downtrend.

CAGC - SHORT @ 24.00 NEAR CLOSE

2010-02-22T17:35:00.000-06:00

Parabolic move up = impending crash.

Short @ 24, targets @ $19.50, $16.

Feb 15 - 19 Summary & Feb 22 - 26 Outlook

2010-02-20T00:52:00.000-06:00

There were two key points that I have made in previous posts that I have put heavy emphasis on:

1. Do not expect a crash this soon. The market has risen above major resistance areas since the crash in 2008.

2. Beware of headfakes with the 20/50 EMA.

3. And more recently on 2/7, I suggested that the market will rise on low volume and the 20/50 EMA offered a good chance to release longs and initiate shorts or stay cash.

Indeed, the market rallied this week and the pull back since 1/20 stopped exactly at the 200 EMA mark. Early next week will be absolutely pivotal in determining how the entire month of March may play out because it appears this move may be a headfake to trap the bears who shorted on 2/16 and 2/17 at the 20, 50 day EMA.

Could this whole move during the past month be a headfake before SPX retests the 1,150 or goes even higher? First, the market indices have been above the 50 EMA for 3 days straight. Second, the EUR is getting oversold and fast approaching crucial support. A massive reversal in the EUR/USD pair will move US equities higher. The black candlestick on UUP looks very promising that equities could break out even higher on Monday as the UUP takes a break and retraces for a couple days. UUP also hit the 38.2% fib retracement from the 3/9/09 high to the 12/1/09 low. But make no mistake about it - the dollar is nevertheless in an uptrend and bullish, and will be a burden on equities.

There are still many technical signs suggesting a continued downtrend based on the $SPX.

1. The 20 EMA is still below the 50, and this is a very easy way to flush out novice shorts or those without patience. The trend is still down. Remember Jul '09 when the masses wear bearish and though the head and shoulders would play out, only to be rejected by a massive move up. Guess what? The indices were all still in an uptrend. The exact same could happen now, except for the bearish/downtrend case.

2. CCI and DPO have not confirmed the up move. Both are still below the 0 line.

3. I drew three separate channels based on movements going as far back as Aug 2009 and Friday's close is close to the border on all three channels attempting to break to the upside. The more touches at the channel lines, the stronger the channel. In that respect, the black channel is the strongest followed by the blue.

Black channel dating back to Aug '09 - attempting to break back into this channel.
Blue channel dating back to Oct ' 09 - right at the 50% mark.
Red channel - most recent channel that the most subjective of the 3, and it looks like Friday's close could be the top of the channel.

4. Closed right under 61.8% Fibonacci retracement from the 1,150 high to the 1,040 at 1,109.

5. Closed 1 point above the 50 SMA (even though i don't look too much into the SMAs they are occasionally valid).

There you have it - more technical reasons for the downtrend to continue as opposed to a possible headfake and new highs in the market. If the market breaks out Monday, become a bull again and expect at least a double top to 1,150. If the market stays flat and trades between 1,109 and 1,115, then hold onto shorts until the signal is clear. Trading is a business of probability and statistics - and right now the probability favors a continuation of a bearish move.

2/8/2010 - A look at the Euro

2010-02-09T00:08:00.000-06:00

The Euro has been absolutely pounded because of the default fears over Greece and other European countries. This "crash" is reminiscent of the 2008 financial crisis, and as long as the Euro falls against the dollar, US equities will continue to fall. What's troubling is that the eur/usd chart has broken the 360 MA. However, I do see a temporary bottom based on the reversal candlestick pattern, and we could see a sharp rally to re-test the 50 EMA soon. This would give a chance to dump long positions.

Selling the next bounce

2010-02-07T16:24:00.001-06:00

Market decided to rally shortly after touching the 200 day EMA, giving a long tail on the candlestick formation otherwise known as the hammer. The hammer is bullish, so I am expecting a higher chance that the earlier part of next week to be up days with light volume. Any upcoming rallies will be opportunities to sell existing longs (keep a couple strong positions like AAPL, GNW, etc) and establish SMALL short positions or just STAY CASH. The SPX has crashed through major support at 1,115 and 1,085, and these will now become key resistance areas.

There's a couple reasons on why it's crucial to scale in small short positions or stay cash.

1. This a fakeout before reaching new highs. In this case cover shorts as soon as the 50 EMA does not hold.

2. Worse yet, consecutive fakeouts while the market trades within a channel. This occurred in 2004 as the US emerged from the 2000 - 2003 recession. This zig zag scenario is a very likely for 2010, but no way to be certain. Trading this kind of a market is extremely difficult, as it takes both patience and additional forms of analysis. By strictly using the 2050 EMA rule, your account would take considerable hits from the fake outs. Nevertheless, it still can be done.

The safest way to play this is to not play it at all - stay cash, or invest in stocks with great fundamentals and sell covered calls.
Use channels once the first high/low swings are formed. Sell/buy according to the top/bottom of the channels. If the shorting at the upper channel and movement pierces to the upside, cover immediately. Vice versa.
Use the 20/50 EMA rule, but enter positions strictly at the 20 or 50 EMA during the BACKTEST after a trend break. Get out immediately if the position doesn't go your way. Wouldn't recommend holding more than 2-3 days.
Out of the 3 options, I believe staying cash or selling covered calls will be the best play.

2/5/2010 - Noon Report

2010-02-05T12:49:00.001-06:00

Market selling off on HIGH volume. Big players want to get OUT. Hedge funds are SELLING. Do not think this is just another dip. The trend has already reversed.

Remember:

1. Don't catch a falling knife. Every bounce so far has been sold off.
2. Do no average down in a downtrend.
3. If you absolutely must enter a position, do it at the end of the day, minutes before the close.
4. OVERSOLD CAN BECOME EVEN MORE OVERSOLD.

You do not want to be the bag holder weeks or months from now. More updates to come after market closes.

TREND REVERSAL

2010-02-05T00:37:00.001-06:00

Thursday's action has officially put an end to the uptrend. 20/50 EMA cross over, VIX crossover, SKF and short ETFs broke out decisively from the 50 EMA.

U.S. Steel (X) - Short at $55

2010-02-01T23:13:00.000-06:00

X is a great trading vehicle, and it looks to be the high has been put in for the year, unless it can break and hold $55. X is heavily damaged from last week's high volume sell off, and I believe it has more room to go down. Wait for the gap fill at $55 to short, although entering at $54 may not be a bad idea. $43 will be key support so pay extra attention to that area. Weekly chart suggests a right shoulder may be forming. If $43 breaks, target to cover will be in the low 20's.

PALM - Short @ 13.40 - Revisited

2010-02-01T23:00:00.000-06:00

Initiated a short at $13.40, covered too early at $12.60.

SPX - Bearish

2010-02-01T21:17:00.000-06:00

Bulls were crushed last week on high volume as basic materials and tech retraced hard. The downtrend is almost confirmed - wait for the major indices to retest the 50/20 EMA and sell half of long positions and use those funds to add to short positions. The trend has been severely damaged and I do see a continued sell-off to anywhere from 970 to 1050 once the 20/50 EMA is tested. Do not be attached to any stocks. It's time to take profits since the trend confirmation from April last year.

1/21/2010 - Crucial Moment

2010-01-21T21:57:00.000-06:00

SPX index fell through 20 EMA and touched the 50 on a high volume breakdown. Even though a 2 day retrace does not mean that the top is in, the high volume today shouldn't be ignored. Commodities is the case in point, sold off hard on strong volume, which is typical of the beginning of a major trend change.

Pay close attention to how the markets react tomorrow, and all of next week. The indices must be able to rise above and hold the 20 EMA. If the 20 EMA is proving to be resistance, then I'm willing to let go half of my long positions. Given that the indices are above more support than Obama a year ago, in addition to uptrend moving averages, I don't see a sudden crash in the magnitude of 2008. Downtrend is possible, but I don't see it taking place for more than a couple months. If the trend does change, watch out for the 200 EMA.

PALM - Short @ 13.40

2010-01-20T01:10:00.000-06:00

Shorted PALM at the close.

1. Price > 50 EMA while stock still in downtrend.
2. Tweezer top candlestick formation.
3. 1/2 volume of yesterday, lack of interest in stock.

Target: $12.00

U.S. Markets - 2010 Preview

2010-01-08T00:18:00.000-06:00

Everyone has heard of the phrase history repeats itself. While this certainly is true as it pertains the notion of cyclical nature of events in relation to time, I also see this reflected in the stock market to some extent with the timing element slightly different with each repetition. 2009 was the year of the "stealth bull", as termed by Nadeem Wayalat from marketoracle.co.uk. The rally off the March 2009 lows and subsequent uptrend reversal in mid-April across broad markets was a rare opportunity for investors to make some serious cash. Of course, many people were left out of the rally, exhibiting every symptom of a drug addict in denial. Those who fight the market are dead wrong, as the market is always right. To those who and simply followed the trend and stayed with the same direction as the market, congratulations to you. Now, what will 2010 bring?

Unfortunately, there is no simple answer to this question. However, in looking back 5-6 years, we do see some striking similarities in the way the SPX rebounded 00 - 03 recession as shown in the graph below.

A, B, strong downward movements followed by rebound with lower high.
C,D,E - inverse head and shoulders followed by strong rally, and uptrend
F - this is where we are in relations to 2003, at the "200 EMA" on the weekly chart.

As previously mentioned, the timing element is always different in the market even though similar (but not the same) patterns exist. Seeing how 04-05 behaved, this could give us some insight as to how the market may perform overall in 2010. 2004-2005 was a relatively flat year. Could 2010-2011 be the same? The crash from 2007 - 2009 was more damaging than 2001-2003, so a greater snapback is expected, but just where it'll end is all guesswork. Given that investing is a game of probability, I believe 2010 has a higher probability of trading flat than seeing additional gains. Sector rotation will be key, and it will be far more difficult to profit than 2009.

GLD and Other Gold Stocks - Patience

2009-12-17T22:08:00.000-06:00

Dollar's gain means gold's loss. Breaking the 50 EMA today does not bode well. If the dollar continues to rally, we could see further deterioration or side ways movement in price of gold. Long term view is still extremely favorable - Gold is in an extremely solid long term uptrend. In the short term, a replay of Feb-March is not out of the question. Retracing to 104-105 area is very likely.

S (Sprint Nextel) - Buying Opportunity

2009-12-17T21:51:00.002-06:00

Remember, buy on weakness in an uptrend, preferably around the 50 EMA, and sell once the 50 EMA does not hold.

UUP (ProShares Double USD Index Fund) - Coming trend reversal

2009-12-17T21:48:00.000-06:00

Keep an eye on the dollar, which is picking up momentum and looks like a trend reversal may take place. The 9 month bull rally off the March lows may be put on temporary hold.

$BKX - Financials Showing Weakness

2009-12-08T01:20:00.000-06:00

Financial stocks which have led the rally off the March low have now become laggards. 20 EMA crossed under 50 a month ago on the $BKX, and it's had difficulty breaking the 50 EMA since. However, there also appears to be strong support around $43.40. The current formation shows indecision with moderate bearish bias, and the financial leaders like GS are well underway in a downtrend.

S - Buying Opportunity

2009-12-08T01:00:00.000-06:00

20 EMA for S has crossed 50 EMA, giving the signal to buy. Recent up days are characterized by heavy volume. Overhead resistance at $4.50 and $5.50 - $6.00. Possible inverse head and shoulders pattern developing in weekly chart, with 6 month target of $9 very likely.

Entry price:

Average: $4.10
Good: $4.00
Excellent: $3.85

11/26/2009 - Thanksgiving Update

2009-11-26T23:36:00.000-06:00

First off, I wish everyone a happy Thanksgiving - keep in mind to always spend time with your family and eat plenty of Turkey.

World markets took a nasty hit yesterday due to news out of Dubai, and Europe down more than 3% on indexes across the board. Dow futures are down -243 at the moment (11 PM CST), and SPX down -32 at 1,077. 1,069 will be the number to watch tomorrow on the $SPX and I am expecting a big gap down across all sectors. I don't think the US will be able to escape this global sell off, as many US companies are involved with investors from Dubai. Tomorrow morning could be ugly as many will jump for the exit.

So will this be a buy opportunity or is this a signal to sell? The market is currently still above major support levels and moving averages are showing a strong uptrend, so it'll be important to look at a couple of indicators tomorrow-

1. Volume - If greater than previous trading days even on a shortened day, extremely negative.
2. Closing price on SPX - 1,069 must hold.

Do not try to second guess where the markets will go based on what you know about Dubai, because you really know nothing. The global financial systems are more complicated than you and I can ever imagine. Follow the trend, and make decisions based on what it's telling you.

Do not automatically assume that the gap will be filled - it may, but the time variable is unknown - it could take 3 years. Your portfolio would be wiped out by then.

A couple months ago for one of my very first posts, I drew out the fibonacci retracement of ~1576 high to 666 low, and the 50% mark was right at 1121. The SPX's recent high is only about 10 points off, and if the market is going to turn, now would be the time.

US Natural Gas Fund (UNG) - Still not a buy

2009-11-09T15:44:00.000-06:00

Over a month ago when I first started this blog, I pointed out that UNG registered a sell signal way back in the 30's in July '08, and since then, it has remained in a downtrend. Even to this day, this fund is still in a downtrend. This is a perfect display of why the 20/50 EMA crossover is so pivotal in determining the trend. UNG broke the 50 EMA a few times over the last month, but it was never able to initiate the 20/50 crossover.

11/9/2009 - Market Update

2009-11-09T15:34:00.000-06:00

The 50 EMA was recently broken just like mid July, it bounced back and busted through the 20 EMA on a large white candle. The formation is nearly identical to July's bounce. I have stated on 10/28 that this may play out exactly like July. Once again, the market has defied all bearish negativity even with unemployment rising above 10%. The overall trend remains up, so continue to hold longs that are still in an uptrend.

10/29/2009 - Market Update

2009-10-29T18:52:00.000-05:00

Very strong rally today across all sectors, and it looks like a higher swing low from the dip on 10/2. However, the market is not out of the woods yet - the $SPX must break the 20 EMA at around 1069 tomorrow and close above it in order to prove to me that the uptrend will continue. If it does not by the end of the day, I am willing to dump 1/3 of the long positions that I've been holding since the uptrend started or hedge myself with some inverse ETFs. The reason being that the Russell index is still below the 50 EMA.

10/28/2009 - Market Update - Danger

2009-10-28T15:43:00.000-05:00

The market has shown its ugly face over the past week, and even though this is a great buying opportunity, there are some developments today that suggests the uptrend may be coming to an end.

1. Major indices have broken the 50 EMA. Russell 2000 was hit the hardest.

2. VIX has exploded to the upside and held above the 50 EMA on a long white candlestick.

One should stay long until the downtrend is confirmed. The moving averages are turning fast, so the market must rebound within the next couple of days in order for the uptrend to stay in tact.

RDN Radian Group (RDN)

2009-10-22T16:44:00.000-05:00

This analysis for RDN is done for a fellow blogger who shorted at 6.23.

I think shorting this is still a bit too premature, as you'd be guessing right now, since the 20/50 didn't technically cross yet. Also, the timing could have been a little bit better. Remember the rule on the side bar:

Sell into strength in downtrends, buy into weakness in uptrends.

You instead shorted into weakness in a downtrend, which isn't so bad, but you're putting yourself at a disadvantage with little breathing room. There's a couple things you could do and they're both up to you.

1. Cover asap and take your loss.
2. Wait for the 20/50 cross, and add to your short position once the price hits the 50 EMA. If the price breaks through the 50 EMA, cover everything. If the 50 holds, then you're good to go.

China Green Agriculture (CGA) - BUY

2009-10-15T00:22:00.000-05:00

Relatively new stock with little resistance showing strong uptrend on huge breakout volume. Expect this to go higher. Great buy.

Barrick Gold (ABX) - Possible Major Breakout

2009-10-15T00:07:00.002-05:00

10/13/2009 - Market Update

2009-10-13T17:05:00.000-05:00

The market continued to defy the masses and the media as it continued to rally. When grandmas and grandpas are all crying for the market to tank, then you can be rest assured that the market will continue higher. This is exactly how retail investors are left our of rallies and end up buying at the very top. Do you ever look at charts and wonder - gosh, only if I had bought at that price! Guess what, you are living through the phase when stocks are now around that price. Intel just reported their earnings with higher profits AND revenue. Futures up 75 points.

The chart below shows that the SPX is currently at resistance. If tomorrow closes higher and breaks through, the market will continue its run. Once again, stay long and do not short into this market.

Alcoa (AA) - Update

2009-10-08T17:13:00.000-05:00

I overlooked the multi year resistance at ~15.00. It may take a few tries to break this. Entry modified to 20 EMA.

10/7/2009 - Market Update and Alcoa (AA)

2009-10-07T22:27:00.000-05:00

Market closed flat today as it was waiting for Alcoa's earning announcement, although Dow did fall up to 50 points on a couple occasions out of fear, which presented itself as a bear trap. Vix also dropped below the 20 EMA. I have to say that break on the VIX did look very promising a couple days ago - but notice the 20 EMA never crossed the 50. Alcoa beat nicely, and ended up after hours at $15 even. I am going to initiate a buy on Alcoa at $15, with a short-term price target for 16.50. Not much more to say other than stay long, and do not initiate new short positions. (Unless you're shorting a short ETF).

SPDR Gold Trust (GLD) - MAJOR BREAKOUT

2009-10-06T23:29:00.001-05:00

Gold will continue to go higher as the US dollar continues to lose value. I believe this is also one of the reasons why the reason why the market is moving up. Check out that breakout over the ascending triangle - that's HUGE.

10/6/2009 - Market Update

2009-10-06T23:18:00.000-05:00

SPX broke through 20 EMA at 1044 on higher volume than yesterday with a very strong close without a selloff. 60 Min chart shows SPX breaking through the recent down channel, and then backtesting and the channel held as support - very bullish. SPX may try to move up back into the bottom trendline on the bearish rising wedge - will see what happens. Hold onto longs, initiate new longs if the stock of your choice is near the 50 or 20 EMA. Do not short and hope for the market to fall - the market is still in a very strong uptrend.

10/5/2009 - Market Update

2009-10-05T15:58:00.001-05:00

Market showed some strength today after being down 7 out of the last 8 trading days, but considering all technical points, this was a weak rally.

Sell-off volume last week was in excess of 4 billion shares traded for the S&P 500. The rally today only had $3.5B.
SPX hit higher lows since August, but the MACD reached lower lows, and is now below the 0 line.
SPX could not penetrate the 20 EMA - it didn't even touch.
The SPX has fallen out of a rising bearish wedge (don't foget).

Until the SPX can close above the 20 EMA, I still wouldn't enter in new long or short positions. I expect tomorrow to also be a light trading day as most are waiting for Alcoa's earnings announcement on Wednesday.

Technical Analysis Tools

2009-10-05T09:21:00.000-05:00

For those of you that are wondering what platform I'm using to create these charts, it's the thinkdesktop by thinkorswim. You can download the standalone trading platform here. It's absolutely free to use, and all you have to do is register (without actually opening an account). The quotes are live streams on the charts only, and if you want the live stream for individual stock quotes, futures, and everything else, then you need to open an account with a $500 balance.

For fundamental analysis I use Financial Visualizations, and stockta.com offers one of the best screeners.

10/2/2009 - Market Update

2009-10-03T22:21:00.000-05:00

The market took a nose dive on Friday morning after the unemployment numbers were released, and these numbers were bad no matter how you tried to look at them. The national unemployment now officially stands at 9.8%, although I do believe it's somewhat higher than that. Conditions have been so bad in some parts of the country that dead bodies are piling up in morgues because the family cannot dish out $695 for cremation at the very minimum, if not a full scale burial. Can you guess in which city that is happening? I'll give you a hint, it's not New York.

The market showed strong support at around SPX 1020, and prices didn't quite hit the 50 EMA. Likewise, many stocks almost hit their 50 EMA (some did), and bounced back shortly after the first 30 min of trading.

Take a look at the SPX chart below - I've drawn a channel starting mid August, and this is the 3rd time the market is hitting that bottom trendline. What happens on Monday and Tuesday will hold little importance, as the market is anticipating Alcoa's earnings release. I still would not recommend entering any new positions right now until it is clear where the market is heading. That is, in order for the market to stay bullish, the SPX must break out of the 20 EMA 1044. If the SPX bounces off the 20 EMA and cannot break, then that is extremely bearish, and you do not want to be a bag holder in long positions at that point.(Also, as a general rule, it's a bad idea to enter in new positions on a stock right before the earnings).

The market has been down 6 out of the last 7 trading days, and some stocks have already broken the 50 EMA and are now showing extreme negativity (X, BAC). Watch the 1014-1020 area extremely closely, as it has tremendous support - once it becomes broken, it'll serve again as very strong resistance. Be extra careful the next few trading days, and remember, do not become attached to any single stock, and you don't always have to be "in the market". Sometimes the best play is to stay cash (or be very well hedged).

10/1/2009 - Market Update

2009-10-01T18:06:00.000-05:00

The market moved BIG today as expected (yesterday's market review). A lot of important technicals have also occurred, so listen up very carefully.

The market has broken out of the bearish rising wedge to the downside (as one would expect), and we're resting right above support at around the 1027 - 1028 area.

If the market continues to fall tomorrow, then it is likely to test the 50 EMA at around 1014. The next support area after that is 980. If the 980 holds, then the 20 EMA should still stay above the 50, and the market would still be considered in an uptrend. However, if 980 fails to hold, then heavy shorting should be a safe play.

There are signs that the market could roll over and start a down leg -

MACD < 0
DPO at 0
ADX about to cross
VIX broke above 50 EMA again on a 10% up move.

However, the 20/50 EMAs on the SPX have not confirmed anything.

So, here are the logical decisions you should have made:

Do not initiate new long positions until it is proven that the supports mentioned above will hold.
Hold long positions if you have been riding them out for the past few months.
Exit long positions positions if recently purchased at the 20 or 50 EMA and the stock has now fallen below.
Hold all short positions.
If your stock dropped >=10% today, SELL IT. DO NOT HOLD. DO NOT CONTEMPLATE. I DON'T CARE IF YOU THINK IT'LL BOUNCE SOON.

9/30/2009 - Market Update

2009-09-30T17:45:00.000-05:00

Some strange movements have been going on in the market the last couple of days. We saw a 100+ point move on the DOW based on one of the lowest volume trading days I've seen, and then retrace just about all of that today. Seems manipulated to me, but we'll save that for a different blog.

With that said, I do expect a fairly large move to occur within the next few trading days based on a couple of reasons.

1. Symmetrical triangle on the 15 min chart.
2. Market is now trading at the very tip of the rising bearish wedge.

The market can break out either way. The coming movement will determine the direction of the next leg.

Advanced Micro Devices (AMD) - Buying Opportunity

2009-09-30T17:20:00.000-05:00

This stock has recently broken out of a multi year down trend. Enter in long positions at the 50 EMA.

Freeport Mcmoran - Buying Opportunity

2009-09-28T08:44:00.000-05:00

CVG Convergys (CVG) - Potential Short

2009-09-27T11:14:00.000-05:00

Keep an eye on this one.

Research in Motion (RIMM) - Short-term Short Opportunity

2009-09-25T17:51:00.000-05:00

Good short entry at around $70-71 if stock retraces on Monday. Cover shorts if prices break through 73.50. When a stock gaps down hard like this on extreme volume, we will generally see a continued short term downtrend. Good support at $63-$65 area - good area to cover if support holds and go long.

9/25/2009 - Market Update

2009-09-25T17:33:00.000-05:00

The market got a much needed pullback this week and has presented some very nice trading opportunities. If we take a close look at the SPY, a couple of important events occurred.

1. The SPY filled the gap left from last October at 107.
2. The SPY just about touched the 50% fibonacci retracement from the 150 high in 2007 to the 66 low in March.
3. The SPY is sitting right at the support trend line going back to late June. (60 Min chart)
4. SPY is sitting right at the 20 day EMA.

Monday will be a very important to day to watch, as many stocks are now sitting at their 20 day EMA. If we break the trend line support on Monday and close lower, a retracement back to 100 - 101 area on the SPY is definitely on the table. That would put the SPX at around 1010 - 1014.

Nevertheless, today was a great buying opportunity to see if the 20 day EMA holds. If you have been long for a few months, then the most logical play is to stay long until the sell signal is given.

Moody's (MCO) & Mcgraw Hill (MHP) - Potential Shorts

2009-09-25T00:53:00.000-05:00

Both are now in confirmed downtrends, with high volume selling going on over the past week or so. Wouldn't recommend starting a short position right now - wait for the retrace back to 20 EMA.

MHP has even broken the $25 support - there's really not much there to hold it up below that point.

MCO is $3 away from the march low - also very weak support.

Eastman Kodak (EK) - Buying Opportunity

2009-09-24T17:15:00.002-05:00

Update: The 50 EMA held on Friday despite being broken earlier. Will see on Monday if it continues to hold or break down and start another down leg.

VIX - Crucial Support

2009-09-22T22:06:00.000-05:00

The vix has been stuck in a bullish falling wedge since since late last year and broke out of it in August, and is now actually resting on the upper trendline. The 23 area is now serving as key support, and if that breaks, then the market will continue with its rally as expected. If the vix breaks out to the upside, then a pullback of moderate strength could take place as the SPX is currently 30 and 60 points above the 20 and 50 day ema, respectively.

With that said, the market has built up a very strong buffer at this point, and the SPX could very well retest the 980-982 area before I would even consider a change in trend.

Investing Psychology - Herd Mentality

2009-09-22T17:01:00.000-05:00

I have listed "trading alone" as one of the rules to follow, and here's an excerpt from psychologist Irving Janis on "Groupthink".

Irving Janis describes groupthink as, "A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action." Eight symptoms of groupthink include:

Illusion of invulnerability: Feeling that the group is above criticism.
Belief in inherent morality of group: Feeling that the group is inherently "right" and above any reproach by outsiders.
Collective rationalization: Refusing to accept contradictory data or to consider alternatives thoroughly.
Out-group stereotypes: Refusing to look realistically into other groups.
Self-censorship: Refusing to communicate personal concerns to the group as a whole.
Illusion of unanimity: Accepting consensus prematurely, without testing its completeness.
Direct pressure on dissenters: Refusing to tolerate a member who suggests the group may be wrong.
Self-appointed mind guards: Protecting the group from hearing disturbing ideas or viewpoints from outsiders.

This type of behavior is inherent not just in trading, but all aspects of life - workplace, gangs, religion, cults, drug addicts, political parties, the list goes on. It is human nature to be accepted into a group, to think and act as a group, regardless of whether or not if it's the most logical path.

In trading, a group will often feel attached to a particular view on the market or a particular stock that they feel is destined to go down or up. Generally when this is the case, this group of people will seek out bits and pieces of information / articles that only support their view, while ignoring articles and charts that state the contrary (rule 3). Even when the charts are clearly pointing down and outsiders/some group insiders are starting to think maybe we're trading in the wrong direction, the sheer power of herd mentality and groupthinking will override any opposing thoughts, no matter how correct it may be - even the contrarian thinkers will start to doubt their own beliefs. This is why people ride stocks from $100 all the way to bankruptcy. I have seen it time and time again, and it will continue to happen for as long the market trades.

The sooner one frees him/herself from a group, the sooner he or she will start making winning trades. Trade alone and you will prosper.

Danger in Shanghai ($SSEC)

2009-09-20T22:07:00.000-05:00

The Shanghai stock exchange ($SSEC) recently shed 25% since its highs on early August at 3478 to 2639 in early September, before bouncing back above the 3000 mark last week . The sell signal has been given on the SSEC, as the 20 EMA has crossed below the 50 EMA.

While it is possible for the US stock market to continue its rally in the near term despite the fall in Shanghai, the continued breakdown of the SSEC will inevitably drag down the US markets along with it. The conjoined twins of US and China have wed themselves into an economic partnership - till death do them apart. China needs US to buy its products, and US needs China to buy its debt.

Leap Wireless - LEAP

2009-09-17T11:18:00.001-05:00

Missed this excellent short opportunity yesterday when it touched the 50 EMA...may not be too late. Close position if 20 EMA holds (19.00) or breaks above 50 EMA (21.50).

STEC - Buying Opportunity

2009-09-17T10:51:00.000-05:00

Entry - $34 or lower. Exit position if stock does not close above 50 EMA by today.

Update - Closed position at $32.40. 20 minutes left and it still cannot hold 50 EMA.

Updated Chart: STEC broke key support levels on record volume - next support is at $28.45. There's really not much else below that. There also appears to be 2 unfilled gaps around the $6 and $11-$12 range - those could potentially be filled in the future.

9/17/2009 - Market Update

2009-09-17T10:21:00.000-05:00

The S&P 500 index has decisively broken out of the bearish rising wedge to the upside, and has now cleared all major resistances. There is very little reason to be short in the market to this point, and I restate my believe that the market will continue higher with minor pullbacks. Another reason why I believe it's headed higher is because certain sectors such as shipping and airlines are just starting their run.

I've seen people claiming the market is overbought and how the P3 EW is right around the corner. Folks, there's nothing wrong with making a prediction, but if you're constantly wishing for an event while the opposite is happening, it means you're not trading on the right side. Predicting the market is a dangerous game, and that's not what trading is all about. It's about being on the same side as the market (following the trend), and changing sides once the trend reverses.

ENER - A disaster of a stock

2009-09-16T07:31:00.000-05:00

ENER was a great shorting opportunity with the signal to short given back in Oct 2008. If you had shorted back then, the signal to cover is still not given. This is another example of why averaging down is a sucker's play. You don't buy a stock because you think it's oversold. You buy it because the chart says so.

Trina Solar Limited (TSL) and LDK Solar (LDK) Comparison

2009-09-15T19:03:00.001-05:00

I have been following solar stocks for about 2 years now, and the analysis below shows the difference between TSL and LDK, two solar stocks that have performed very differently. I consider TSL to be the best of the solar stocks, and LDK to be the worst (based on technicals). Among others,

Strong: YGE, CSIQ

Weak: FSLR, SOL, STP, SPWR.A,B, CSUN, JASO

Stone Energy Corporation (SGY)

2009-09-15T18:03:00.000-05:00

Manitowoc (MTW)

2009-09-15T17:44:00.000-05:00

Nice looking inverse head and shoulder breakout through 200 EMA on big volume. The stock is currently trading at 30% above the 50 EMA, so waiting for a retrace to at least 20 ema before going long would be the safest play.

9/13 Dow Futures

2009-09-13T20:24:00.000-05:00

Futures look weak at the moment - trying to hang on to support. Although it's generally a poor predictor for the market direction of the next trading day.

Bank of America (BAC) and Citigroup (C)

2009-09-13T18:46:00.000-05:00

In the past few months we have seen a disproportionate number of shares traded for both BAC and C in the S&P 500, and both have caused quite a stir among investors and the public alike. Based on technical trend analysis, there's a couple of points that can be made:

1. Both are in uptrends, and both favor long positions but BAC is in a much stronger uptrend than C.
2. BAC has cleared almost all major resistances, and the only two that remains are $18.00 and $18.50. C, on the other hand, must reach ~10.50 before clearing the final major resistance.

From a fundamental standpoint, BAC has diluted their shares from 4.5 to 8.6 billion shares in 1 year. This magnitude of dilution has essentially cut the EPS in half, and it is highly unlikley BAC will ever return to the glory day highs of mid $40 PPS. The maximum I see BAC is around low 20's unless they buy back their shares. C, on the other hand, has only faced a 10% (450mil) share dilution since last year. But the problem is they're already insolvent if it wasn't for the government backings.

Believe it or not, the initial signal given to sell these two stocks occurred back in 2007. The charts below shows the weakening process and eventual breakdown. By sticking to trends, it would've been easy to see why they were great shorts that one could have held for a sizable profit in a span of 1 & 1/2 years. The purpose of this analysis is to demonstrate the power of trends, and why one should trade with the trend regardless of external views. Being right in fundamentals doesn't always translate to profits.

US Nat. Gas Fund (UNG)

2009-09-12T18:29:00.000-05:00

UNG is one of the best examples demonstrating the power of trends and why it's a bad idea to try and catch the bottom. The sell signal was given back in late July of 2008, nearly a year ago. Since then, there has never been a buy signal on this fund. This was a great shorting opportunity, and demonstrates why you should always:

1. Always follow the trend.
2. Never average in (the greatest sucker play / mistake an investor can make)
3. Never take more than a 10% loss

Many had thought that natural gas had finally bottomed at 12 in May and this was the buy, but notice how the 20 EMA stayed well below the 50 EMA, and never even came close to touching. This was another great shorting opportunity.

Now that winter is approaching and it's typically the season for natural gas prices to rise, it is possible that 9.00 was the bottom. But it's pointless to try and predict the future - instead, the best option right now is to stay on the sidelines until the trends suggest otherwise. For UNG to be a buy, the 20 EMA must first cross the 50, and then be able to sustain it. No need to rush or try to catch the bottom (as the past few months have already proven that it was a bad idea) - sometimes the best position is to stay cash. It is better to be late and miss out on a little profit but be right than early and wrong.

The correct play was to short July '08 at around $47 once it broke 200 SMA and and 50/20 ema crossed. Another option was to short at the 20 EMA on 8/27/2008 and cover if it breaks through. This way, you would have rode it all the way down, and would still be short to this day and cover only when 20 crosses above 50 EMA again.

Genworth Financial (GNW)

2009-09-12T17:56:00.000-05:00

One interesting stock is GNW - Genworth Financial. It hit 0.78 PPS back in the March bottom, and has since rallied over 1,000%. The signal was given at $2.00, and has made a 500% return according to the 20/50 EMA crossover strategy. I believe it's still not too late to enter in a long position once it drops back to the 20 EMA.

I like this stock for a couple of technical reasons.

First, it has dropped below the 50 EMA only once since the run started, which shows that it's in a very strong uptrend.

Second, it has risen above all major EMAs shown in the chart below, and the 50 EMA has crossed the 200 EMA (my bull run confirmation).

Third, they have not diluted their shares since the start of the financial meltdown. In fact, their total common shares outstanding have actually decreased year over year. This is an important piece of information to watch out for, as companies that have diluted shares will not rise to their prior highs. Take for example, DRYS, which went through a ~600% dilution since the crisis. The EPS is greatly diminished.

9/11/2009 - SPX update

2009-09-12T12:53:00.000-05:00

The SPX made a new high yesterday at 1048, but it is still confined to the rising bearish wedge as seen in the chart below. Based on the strong uptrend of the market, it is best to stay long at this moment until the trends suggest otherwise. Notice that the SPX has risen above all EMA resistances, indicating that there is much more upside left.

Contrary to what most believe, I don't think there will be another crash coming this month or October. Not only is it just too predictable, there is also nothing in the trend that would suggest a crash of any kind that's coming. This is the prime example of why understanding fundamentals/reading the news has little to do with making money in the stock market. I am deeply concerned for the future of our country, and I understand the actions taken by the government/federal reserve will only delay the inevitable destruction of the USA. However, nobody knows when the fundamentals will actually hit the market. It could happen tomorrow, or in 2015. The point is you cannot predict the top accurately and sell all long positions and go short immediately before the crash. But you do know the trend, which is up at the moment.

By following my strategy and going long in April when the 20 EMA crossed the 50, you can see that the trend has stayed up this entire duration, and the only time it came close was during 7/8 - 7/10, when the market was about to break down on the head and shoulders formation. Most people thought that this was the beginning of the next crash. However, using the strategy, you can see that the 20 ema NEVER actually crossed the 50 ema, and this was THE best buying opportunity if you had missed the April signal. The correct way to play was to buy at that level, and sell for a small loss if the H&S did in fact break down. You would be minimizing your risk. Regardless, by sticking to the strategy you would've been in at SPX 800 and you would still be in profits regardless if the H&S broke down or not.

In terms of sectors, history suggests that financials and technology always leads markets out of recessions, and I don't see this as any exception. Some tech stocks are already reaching pre crash levels, and financials are equally strong. More conservative plays such as commodities are usually the last of the sectors to rise.

9/11/2009 - Collected thoughts on trading

2009-09-11T14:07:00.001-05:00

I have developed some simple rules to follow for successful investing/trading:

ALWAYS follow the trend - Use 20 Day and 50 Day EMA as the trend indicator.

Sell into strength in downtrends, buy into weakness in uptrends

Don't pay much attention to financial reports/news

Rather buy in higher and be right than catch bottom (buy lower) and be wrong.

Cut the dogs loose, let the horses run

Amateurs don't short

NEVER EVER take more than a 10% loss.

Don't make trading decisions intraday.

If you lose, you learn a lesson. If you get lucky, you learn to gamble.

The worst thing that can happen to a trader is to make money on a bad play.

It's better to miss a play than enter a bad one.

In an uptrend pay close attention to the 20 EMA, in downtrend mind the 50 EMA.

Don't day trade. The stress is not worth the money.

Trade alone if possible. The herd is almost always wrong.

Never reveal your trades to your friends.