Anyway, here’s what I see now…

First, a bear flag.  No disputing this one.  Bear flag below the 13 MA, bad for business as far as I’m concerned.  The way these guys work is they usually continue in the direction they started — so this would be down.

Next, looks like we haven’t close outside the lower part of the month’s opening range.  Good thing?  Sort of.

At the bare minimum, these areas give us action points, and that’s what you want when you’re trading.  You don’t want to be sitting there looking dumb while your market sinks lower and lower.  You want to know where you’re taking action.  I have already taken action.  I’ve put a halt on new buying.  If anything I would see the 1172 zone as a last ditch get out of the freaking market zone.  Like one of those 80′s horror movies when you’re screaming “Get out of the house!”, that’s what I’ll be doing if the market moves past that level.  LOL.

Until next time…The Market Is Yours!

Here’s the current chart of the S&P 500.

So what do we do while buying is on hold?  Well, one thing we do is we look at winning trades from the past, or winning trades we may have missed and we see what we can learn from them and we can get inspired for the next market move.  Because seriously, what’s not inspiring about 1 quarter 200% moves like this one in URRE:

Until next time…The Market Is Yours!

Last week we did experience a bit of a pullback.  Nothing major but certainly enough to get us looking at the bigger picture and maturity of this current trend.  Nothing goes up forever and this trend is one of those things.

Here’s the current chart of the S&P 500.

As you can see, we’ve held the 13 MA just about the entire way up and we’re testing it once again.  For me I don’t like to go long in a market that isn’t above the 13 MA and will sometimes pause on buying decisions when price is anywhere near a decision point.  Certainly, individual positions are measured individually, but it’s important to stay focused on this bigger picture.  Let’s take a closer look:

Here’s a simple method I have of discerning exactly where we are at right NOW.  I draw two simple lines.  One from the last swing high and one from the most recent.  Once again, I’m looking for the market to tell me what to do and how to trade.  If we’re trading between those two swing highs all is good.  If we start trading below the last swing high I want to halt my buying activity and manage my current positions closely.  For my final view, I like to look at the number of stocks trading above their 200 day moving average.

As you can see, we have cracked the prior swing high on the T2108 indicator.  Ominous sign?  Maybe.  I know I certainly pay attention to this indicator and have found it a reliable way to judge market internals as they unfold…NOW.

Until next time…The Market Is Yours!

In the case of BP we definitely have a huge trend, that, if we pay attention, will teach us much about how trends develop and when and how they should be traded. With that said, here’s the current chart:

Wow, talk about a trend.  If you know what gets me all mushy and inspired on a chart then you know that this is it.  While trends only happen 30% of the time, when they do you better WATCHOUTNOW!

When I see a trend like this I like to take it back to the beginning to see if there’s anything I can spot that might have hinted that the old trend had ended and a trend reversal had begun.  Now, I’ll say right up front that I don’t like to short stocks and I don’t do it often.  Heck, even the great William O’Neil says he’s only made money shorting 2 out of the last 9 bear markets.  But I do like to protect my capital, so if you also don’t like to short, some of this will help you know when to get out of a trade.  So let’s take a look at the first warning sign that BP was in a bit of trouble…

Whenever you see something like this you should immediately think: trouble.  This is a big wide range break of support on very strong relative volume.  Relative volume for those who don’t know just means the volume is big compared to what the volume has been lately.  Another thing we have is this:

A clean trendline break.  Witnessing this confluence of events, already if you are long BP you should be thinking: WHATCHOUTNOW!  And certainly, in cases like these it pays NOT to be a hero.  Why not just get out and see if things return to normal in a couple days.  What will that cost you?  A $5-10 commission?  Here’s what happened next:

A sizeable (though not huge) GAP down on increasing volume.  At this point, if you are not going short you should definitely be out of the position.  Not worried about whether or not price is coming back, but concerned that the situation could get much worse.  Because it did.  Here’s what happened next:

A MASSIVE break to the downside on HUGE volume.  And that’s why I used the word “relative” earlier, because in the market everything is realtive to everything else, and what looks HUGE yesterday could look TINY today.  I don’t need to say you should be out of here by now.  And the sad part is that I know a lot of traders wern’t.  How do I know, because I lost half of my account when I first started trading on a trade just like this.  More of that in another post, but for now, let’s look at what happened next:

Another break to the downside via bear flag pennant downside move.  Which brings me to my next point, ORGANIC CHART READING.  In this world of going green doesn’t that name just make sense?  I think so.  And here’s what I mean…  Instead of trying to force your will onto a chart, why not let IT tell YOU what to do next?  If you are a trend trader, you are coming from the premise that you CANNOT PREDICT THE FUTURE.  If you CANNOT PREDICT THE FUTURE then you have to wait for a signal, from the chart, that a change has taken place.  You do this by watching the chart and taking note of the swing highs on the way down.  If price is ever going to reverse then one of those swing highs will have to be taken out.  And when it is, you can get in.  Here’s what I mean:

Do you see how none of these swing highs was taken out all the way down?  Waiting for them to be taken out before entering long would have kept you safe and that’s what I mean by Organic Chart Reading.  Let the chart tell you what to do next.  You’ll be a lot more relaxed.

Now, is the swing high being taken out a guarantee a new trend has started?  No way.  I have already said that trends fail 70% of the time.  But this is a great way to keep you out of stocks falling like rocks!  You just don’t want them!

Good luck.  Trade smart.

Instead of the news I use technical analysis, charts, and the stats I’ve learned doing my 1000′s of backtests.  That’s the best way to go as far as I’m concerned.  That way you know what you’re dealing with, you’re on the front line, and you are the one calling the shots.

Here’s a recent chart of the S&P 500 –

– as you can see there was a good day or so to get out of the markets or tighten your stops.  Now, it’s  anyone’s guess where we’re headed.  And we’re fine with that.  Not guessing where we’re going has kept me on the right side of many great moves.

So what can you do during sell-offs and corrections?  Well, you can trade short as 3/4 of stocks correlate with the direction of the overall market.  Or you can trade inverse EWTFs — these funds go up when the market goes down.  Or you can do nothing — stay in cash — and go chill out at the beach, read a book, go fish, run a marathon and save your cash and your nerve for the next rally.  Remember, cash is a position, and for the retail trader it’s on of the strongest positions you can take.

Good luck all!

Once the herd is in at the bottom, price reverses, often sharply, and can explode to the upside.  Here’s an example, YMI:

Nice, isn’t it?  When it comes to these trades we’re looking to get into the trade at the break of the down trend line or after price consolidates after the initial move off the bottom.  our goal is 50-100% and our stop is the prior failed low.

Good luck everyone.

Looks like we have a falling wedge setting up here on PLUG.  Be sure to wait for a confirming break of the upper channel before entry.  It would also be nice to see confirming volume of 2-3 times the 20 day average volume.  Here’s the chart.  Good luck out there.

Here’s a great trade we made in LVS when the March 09 bottom fishing trades were in full effect.  You can see by the chart that we waited a little long for our entry — that’s because (like the rest of the financial world) we wern’t too sure about the staying power of the recent rally.

In any even when we saw LVS pull back to the 20 day moving average we took out chances and bought the dip.  We were handsomely rewarded with over a 100% gain in 11 trading days.  Now THAT’S the way we like them!