http://breakpointtrades.com/controls/preview.php?nl_id=267
http://goldstockprophet.blogspot.com/2008/08/how-to-trade-stocks-without-predicting.html
http://goldstockprophet.blogspot.com/2008/07/trend-following-using-renko-charts.html
Monday, October 31, 2011
Saturday, October 29, 2011
Year 1 trading self-reflection Part I
I am going to write a series about my one year trading activity and learning curve. I think it should be very beneficial for me to reflect on my personal weakness and try to improve.
I opened my first trading account on November 2009. But I started serious trading only from October 2010, which is one year ago. During this one year period, I spent a lot of time and effort trying to learn as much trading knowledge as I could. Even though I am losing a lot in my trading account which is the tuition I pay for, I feel I gradually improve and start to form my own trading philosophy and method. With probably another five years continuing learning and trading, I should be good.
I opened my first trading account on November 2009. But I started serious trading only from October 2010, which is one year ago. During this one year period, I spent a lot of time and effort trying to learn as much trading knowledge as I could. Even though I am losing a lot in my trading account which is the tuition I pay for, I feel I gradually improve and start to form my own trading philosophy and method. With probably another five years continuing learning and trading, I should be good.
Friday, October 28, 2011
a version of QE3 from Europe
A huge up day with around 1680 stocks with 4 percent plus day. It is considered to be a big accumulation day. Thanks to the Europe to give a new version of QE3.
How the market will behave in the next few days? sideway move or test 1260-1270 for support to see if it finds buyer again.
How the market will behave in the next few days? sideway move or test 1260-1270 for support to see if it finds buyer again.
Wednesday, October 26, 2011
first vertical spread traded today
Today, I have traded my first transaction for a bull spread. I used to do long call or put and short naked put, which are more risky instrument. My biggest down trade so far is a naked spy long call. I am starting to learn the option trading strategies and put into practice. I bought 2 SPY Nov 117/127 call spread for 6.57 today.
At current stage, I do not suspect the up momentum of US market, even though SPX sell off ugly to 1221 at 11AM. When SPX retest 1225 around 1pm, I feel very frustrated and desperate, asking myself what the hell the market is doing. No dip buyer? going to test 1200? I closed my brower and my cellphone, not want to care about what the fuzzy market was going to do. Luckily market had an unbelievable afternoon bounce. I do not think TA can predict this well. It is a day trading heaven. If I have enough capital to overcome the day trading restriction, I think I will be aggresive to trade this environment.
Tomorrow, the primary indicator should turn to positive, which is the first time since July 22nd. How long it will remain positive is a question. Last time it remained positive for two weeks with gradually distribution, then market sold off hard.
My take for the market is that we are going to continue going up for the rest of the week to touch 200MA (1260 zone). Then next week the market will be in a narrow zone for distribution. After that, the market will see a sharp sell off to test 1200-1220 zone again. It will become a critical time for the market after the selloff. If the market find the buyer again, we will overcome 200MA to have a year end rally. Otherwise, I feel another phase of bear sell-off period will come again.
I really hope the market will choose the first option instead of sell off.
At current stage, I do not suspect the up momentum of US market, even though SPX sell off ugly to 1221 at 11AM. When SPX retest 1225 around 1pm, I feel very frustrated and desperate, asking myself what the hell the market is doing. No dip buyer? going to test 1200? I closed my brower and my cellphone, not want to care about what the fuzzy market was going to do. Luckily market had an unbelievable afternoon bounce. I do not think TA can predict this well. It is a day trading heaven. If I have enough capital to overcome the day trading restriction, I think I will be aggresive to trade this environment.
Tomorrow, the primary indicator should turn to positive, which is the first time since July 22nd. How long it will remain positive is a question. Last time it remained positive for two weeks with gradually distribution, then market sold off hard.
My take for the market is that we are going to continue going up for the rest of the week to touch 200MA (1260 zone). Then next week the market will be in a narrow zone for distribution. After that, the market will see a sharp sell off to test 1200-1220 zone again. It will become a critical time for the market after the selloff. If the market find the buyer again, we will overcome 200MA to have a year end rally. Otherwise, I feel another phase of bear sell-off period will come again.
I really hope the market will choose the first option instead of sell off.
Tuesday, October 25, 2011
2 percent down day
From the TA point of view, why today is a big down day?
1. the EURO $XEU closed at 200EMA yesterday as a resistance. These days $XEU and $DAX are two primary indicator for the US equity. Euro news always create dramas.
2. $COMP closed a little above 200EMA yesterday. Usually the first touch is a fail.
3. the semiconductor $SOX closed right below 200EMA yesterday as a resistance.
4. $TNX 22.64 level act as a wall, which is 65EMA resistance. Yesterday $TNX looks like it was going to break out. But eventually had a 4.74 percent plunge down.
5. 13EMA of $NYAD closed at 800 yesterday, which is way too high. Last time it was at this level was on early July. The market had a five day down trend then.
Given the accumulation in the passed 15 days rally, I believe this rally still have a more leg up or retest Monday's high at least. The timing model is still in bullish teritory from Oct 7th, there is no need to adjust until the model gives sell signal.
1. the EURO $XEU closed at 200EMA yesterday as a resistance. These days $XEU and $DAX are two primary indicator for the US equity. Euro news always create dramas.
2. $COMP closed a little above 200EMA yesterday. Usually the first touch is a fail.
3. the semiconductor $SOX closed right below 200EMA yesterday as a resistance.
4. $TNX 22.64 level act as a wall, which is 65EMA resistance. Yesterday $TNX looks like it was going to break out. But eventually had a 4.74 percent plunge down.
5. 13EMA of $NYAD closed at 800 yesterday, which is way too high. Last time it was at this level was on early July. The market had a five day down trend then.
Given the accumulation in the passed 15 days rally, I believe this rally still have a more leg up or retest Monday's high at least. The timing model is still in bullish teritory from Oct 7th, there is no need to adjust until the model gives sell signal.
Sunday, October 23, 2011
Thursday, October 13, 2011
Market Breadth Pattern Analysis from Timelysetup
http://timelysetup.wordpress.com/market-analysis/market-breadth-pattern-guide
A more detailed explannation of the market breadth pattern from Timelysetup. Really good to read.
A more detailed explannation of the market breadth pattern from Timelysetup. Really good to read.
Wednesday, October 12, 2011
Observation and reflection for today
Market is having a strong rally from the Oct 6th low. The SPX index gained another 60points for this week. Every dip is bought. As it can be seen in the below chart, every touch of the lower trend is being bought. This really indicates a strong bullish environment. Hence the next dip must be a buy. Maybe around 50MA area.
I am amazed by the signal from the timing model. It looks me that it works very well in an volatile market. On last friday, the model gives the long signal. I admit that I was quite greedy at that moment. I wish to see a little more dip on this Monday to go long. But the market did not offer hesitator an entry. The market gapped up on Monday due to the Euro news and had a 3 percent run on Columbus day. I failed to trust the timing model again other than the Sep 16th signal. I guess one needs to trust a mechanical system once he fully understands the mechanics underneath. Yesterday, the buy signal from Vbbee system is striggered. But it looks so bad to go long before close yesterday. But people who trust the sytem is a winner today to get max 7 percent profit in TNA.
As a novice trader, I guess my shortcoming is common. I failed to let my winner run and late to cut loss. I made 13 trades from September. I am still break-even right now, even though there are 10 winners and 3 losers. My two big losses wiped out my other gains quickly. As a small fish with limited capital, I cannot do much day trading and cannot allocate capital to a lot of positions. I really need to plan the trade well and have good money management. Overtrade kills. If the condition is not too favored, do not enter position.
I feel a little frustated myself today. I sold 2 naked SPY OCT 116 put on Monday, but covered early on Tuesday. I completely missed today's run. And yesterday I entered TZA before close, which is now a losing position. The two puts could gave me additional 120 profit today, while the TZA gave me 250 down. That is a huge difference.
What about tomorrow? Clearly SPX is at resistance around 1220 zone and NDX is backtesting the old broken trendline and closed in red. Given the last 15 minutes sell off, I wish we could see some follow through sell off tomorrow. JPM release ER tomorrow morning. It should be a market mover event. I will not trade any earning until I fully understand PEAD.
I wish I could come back in my TZA trades.
I am amazed by the signal from the timing model. It looks me that it works very well in an volatile market. On last friday, the model gives the long signal. I admit that I was quite greedy at that moment. I wish to see a little more dip on this Monday to go long. But the market did not offer hesitator an entry. The market gapped up on Monday due to the Euro news and had a 3 percent run on Columbus day. I failed to trust the timing model again other than the Sep 16th signal. I guess one needs to trust a mechanical system once he fully understands the mechanics underneath. Yesterday, the buy signal from Vbbee system is striggered. But it looks so bad to go long before close yesterday. But people who trust the sytem is a winner today to get max 7 percent profit in TNA.
As a novice trader, I guess my shortcoming is common. I failed to let my winner run and late to cut loss. I made 13 trades from September. I am still break-even right now, even though there are 10 winners and 3 losers. My two big losses wiped out my other gains quickly. As a small fish with limited capital, I cannot do much day trading and cannot allocate capital to a lot of positions. I really need to plan the trade well and have good money management. Overtrade kills. If the condition is not too favored, do not enter position.
I feel a little frustated myself today. I sold 2 naked SPY OCT 116 put on Monday, but covered early on Tuesday. I completely missed today's run. And yesterday I entered TZA before close, which is now a losing position. The two puts could gave me additional 120 profit today, while the TZA gave me 250 down. That is a huge difference.
What about tomorrow? Clearly SPX is at resistance around 1220 zone and NDX is backtesting the old broken trendline and closed in red. Given the last 15 minutes sell off, I wish we could see some follow through sell off tomorrow. JPM release ER tomorrow morning. It should be a market mover event. I will not trade any earning until I fully understand PEAD.
I wish I could come back in my TZA trades.
Average True Range
http://www.mercenarytrader.com/2011/10/dm-part-v-average-true-range/
As the name implies, Average True Range measures the normal range of a stock, ETF, currency pair, or other security – over a standard unit of time. The indicator takes the high and low price points of each bar on a chart (adjusted wider if there is a gap) and plots the average of this number over a period of bars.
Some very active daytraders may use ATR on a 60-minute or even 5-minute chart. Other long-term position traders may measure the “true range” on a weekly chart. For our purposes as swing traders, the 14-period ATR on a daily chart fits our trading approach well.
At its very basic level, the ATR measures the volatility of an individual security over a particular time period. This measurement helps us as traders to normalize individual positions based on the volatility of particular securities.
When we set up a potential trade, we use the ATR to determine what type of price movement should be considered “significant” compared to the daily “noise” of day-to-day trading. For a more volatile position, the higher ATR indicates that we can expect more fluctuation – and that our risk envelope should likely be wider.
A lower ATR gives us the opportunity to set up an entry with a smaller risk envelope (in terms of absolute dollar price) – which in turn can allow us to take a larger position in terms of share count.
Using ATR For Trade Entry Metrics
For most new positions, we use a stop / limit order to enter. The stop portion of the order ensures that the security is moving in our favor at the time of execution, and the limit portion protects us from receiving a poor fill.
When setting up these entry price points, we look at key technical points that the security must trade through to indicate it is trading in our favor. So for breakouts (long) we may set our buy-stop order above a previous high. For a continuation trade (short) we might set our sell-stop order just below a counter-trendline or consolidation point.
In both of these cases, we want the security to trade through a price point. ~But how far is enough? Do we put our stop 10 cents above the breakout point? More? Less??
The answer for us is based on the Average True Range of that particular security…
For major breakouts, we may require a stock to trade 0.5 ATR above the previous high to initiate a long position. This helps to ensure that the breakout is legitimate – and not simply a test of the previous high.
For volatile or high-priced securities, the breakout hurdle should be much greater in terms of actual dollar value. An active, high-priced stock like Priceline.com Inc. (PCLN) should breakout by several dollars to indicate that demand is truly pushing the stock through a resistance point.
On the other hand, a stock with more stability won’t have to move very far through a support area or trend line to indicate that a new dynamic is underway.
Using the ATR indicator allows us to objectively identify which types of trading moves are significant, and which fluctuations are more likely to be “noise.”
Using ATR for Risk Points
Before pulling the trigger on any new position, we always calculate the risk on the individual trade. Of course risk management entails a number of moving parts. (We’ll have a lot more to say about this in future installments.) But at the most basic level, we need to know how much capital is at risk with each individual position.
The ATR indicator plays an important part in determining where our initial risk points – or stop orders – will be placed.
As a general rule, we like to place our initial risk points within 1.5 to 2.5 ATR’s from our entry point. This gives our new position a little bit of wiggle room, and the amount of room is custom fit for the individual security’s volatility.
There are exceptions to this 1.5 to 2.5 ATR envelope, but for most trades, we are entering at a key inflection point and expect the trade to move quickly in our favor. If our entry point is correct, we don’t expect the price to move significantly against us – and if it does, we want to be out of the position sooner rather than later.
We also use support and resistance points on a chart to help identify key risk points. As with our entry inflection points, we want to be able to objectively determine how much of a move through a key inflection point is enough to justify exiting the position.
Once again, we use a multiple of the ATR to identify the specific price point at which we will be stopped out of at trade. A few examples include:
A risk point 0.2 ATR above a key swing point (for shorts)
A risk point 0.5 ATR below the 50 EMA (for a long trend position)
A risk point 0.5 ATR above the previous day high (for an extended short)
The ATR gives us a clear indication of what should be considered a “material price movement” as compared with more normal day-to-day fluctuations.
Many of our positions are entered with the goal of riding a major trend for many multiples of our initial risk envelope. But during certain market environments, it makes sense to take profits at pre-determined points along the way.
We’ll talk about this more in the next installment, but suffice it to say that the ATR indicator is very helpful in determining where these profit targets will be placed – and changes in the ATR level for a particular security can also help identify appropriate times to take profits off the table.
Cyclical Volatility – Enter Mild, Exit Wild
This brings up a key concept for how we use ATR in conjunction with open positions – or names that we continue to track on our watch list.
Most market academics will agree that volatility is a cyclical phenomenon. This is true on a big-picture level (just pull up a multi-decade chart of any major stock index) and is often true when looking at smaller time periods as well.
Take a look at the chart of Baidu Inc. (BIDU) below.
The ATR is the oscillating blue line at the bottom. You can see over the last few months, BIDU’s ATR has fluctuated between roughly $5.00 and $10.00 – a significant divergence during this time period.
As volatility expands and contracts, it has a material impact on how we structure our individual trades.
During wild periods, the Average True Range for most securities is significantly higher. This means that for new positions, we will usually allow a wider price envelope for our risk points.
So if we want to risk 50 basis points on a particular trade, we will be trading fewer shares to keep our absolute risk level in line.
Of course, when volatility dies down and the ATR indicator is lower, we have the ability to take much larger positions (in terms of share count) while still assuming the same amount of risk to our capital.
In mid September, we discussed the rise in market volatility – and the importance of “entering mild times” and “exiting in wild times.” Using a risk envelope based on the ATR creates a natural tendency to enter more aggressive positions during calm market periods, while scaling back on exposure during more volatile (risky) environments.
As the name implies, Average True Range measures the normal range of a stock, ETF, currency pair, or other security – over a standard unit of time. The indicator takes the high and low price points of each bar on a chart (adjusted wider if there is a gap) and plots the average of this number over a period of bars.
Some very active daytraders may use ATR on a 60-minute or even 5-minute chart. Other long-term position traders may measure the “true range” on a weekly chart. For our purposes as swing traders, the 14-period ATR on a daily chart fits our trading approach well.
At its very basic level, the ATR measures the volatility of an individual security over a particular time period. This measurement helps us as traders to normalize individual positions based on the volatility of particular securities.
When we set up a potential trade, we use the ATR to determine what type of price movement should be considered “significant” compared to the daily “noise” of day-to-day trading. For a more volatile position, the higher ATR indicates that we can expect more fluctuation – and that our risk envelope should likely be wider.
A lower ATR gives us the opportunity to set up an entry with a smaller risk envelope (in terms of absolute dollar price) – which in turn can allow us to take a larger position in terms of share count.
Using ATR For Trade Entry Metrics
For most new positions, we use a stop / limit order to enter. The stop portion of the order ensures that the security is moving in our favor at the time of execution, and the limit portion protects us from receiving a poor fill.
When setting up these entry price points, we look at key technical points that the security must trade through to indicate it is trading in our favor. So for breakouts (long) we may set our buy-stop order above a previous high. For a continuation trade (short) we might set our sell-stop order just below a counter-trendline or consolidation point.
In both of these cases, we want the security to trade through a price point. ~But how far is enough? Do we put our stop 10 cents above the breakout point? More? Less??
The answer for us is based on the Average True Range of that particular security…
For major breakouts, we may require a stock to trade 0.5 ATR above the previous high to initiate a long position. This helps to ensure that the breakout is legitimate – and not simply a test of the previous high.
For volatile or high-priced securities, the breakout hurdle should be much greater in terms of actual dollar value. An active, high-priced stock like Priceline.com Inc. (PCLN) should breakout by several dollars to indicate that demand is truly pushing the stock through a resistance point.
On the other hand, a stock with more stability won’t have to move very far through a support area or trend line to indicate that a new dynamic is underway.
Using the ATR indicator allows us to objectively identify which types of trading moves are significant, and which fluctuations are more likely to be “noise.”
Using ATR for Risk Points
Before pulling the trigger on any new position, we always calculate the risk on the individual trade. Of course risk management entails a number of moving parts. (We’ll have a lot more to say about this in future installments.) But at the most basic level, we need to know how much capital is at risk with each individual position.
The ATR indicator plays an important part in determining where our initial risk points – or stop orders – will be placed.
As a general rule, we like to place our initial risk points within 1.5 to 2.5 ATR’s from our entry point. This gives our new position a little bit of wiggle room, and the amount of room is custom fit for the individual security’s volatility.
There are exceptions to this 1.5 to 2.5 ATR envelope, but for most trades, we are entering at a key inflection point and expect the trade to move quickly in our favor. If our entry point is correct, we don’t expect the price to move significantly against us – and if it does, we want to be out of the position sooner rather than later.
We also use support and resistance points on a chart to help identify key risk points. As with our entry inflection points, we want to be able to objectively determine how much of a move through a key inflection point is enough to justify exiting the position.
Once again, we use a multiple of the ATR to identify the specific price point at which we will be stopped out of at trade. A few examples include:
A risk point 0.2 ATR above a key swing point (for shorts)
A risk point 0.5 ATR below the 50 EMA (for a long trend position)
A risk point 0.5 ATR above the previous day high (for an extended short)
The ATR gives us a clear indication of what should be considered a “material price movement” as compared with more normal day-to-day fluctuations.
Many of our positions are entered with the goal of riding a major trend for many multiples of our initial risk envelope. But during certain market environments, it makes sense to take profits at pre-determined points along the way.
We’ll talk about this more in the next installment, but suffice it to say that the ATR indicator is very helpful in determining where these profit targets will be placed – and changes in the ATR level for a particular security can also help identify appropriate times to take profits off the table.
Cyclical Volatility – Enter Mild, Exit Wild
This brings up a key concept for how we use ATR in conjunction with open positions – or names that we continue to track on our watch list.
Most market academics will agree that volatility is a cyclical phenomenon. This is true on a big-picture level (just pull up a multi-decade chart of any major stock index) and is often true when looking at smaller time periods as well.
Take a look at the chart of Baidu Inc. (BIDU) below.
The ATR is the oscillating blue line at the bottom. You can see over the last few months, BIDU’s ATR has fluctuated between roughly $5.00 and $10.00 – a significant divergence during this time period.
As volatility expands and contracts, it has a material impact on how we structure our individual trades.
During wild periods, the Average True Range for most securities is significantly higher. This means that for new positions, we will usually allow a wider price envelope for our risk points.
So if we want to risk 50 basis points on a particular trade, we will be trading fewer shares to keep our absolute risk level in line.
Of course, when volatility dies down and the ATR indicator is lower, we have the ability to take much larger positions (in terms of share count) while still assuming the same amount of risk to our capital.
In mid September, we discussed the rise in market volatility – and the importance of “entering mild times” and “exiting in wild times.” Using a risk envelope based on the ATR creates a natural tendency to enter more aggressive positions during calm market periods, while scaling back on exposure during more volatile (risky) environments.
Monday, October 10, 2011
2B Reversal (a variation of the Trader Vic 1-2-3 reversal)
http://www.trading-naked.com/2b-reversal.htm
"In an uptrend, if prices penetrate the previous high but fail to carry through and immediately drop below the previous high, the trend is apt to reverse. The converse is true for downtrends."
[Vic Sperandeo in "Trader Vic: Methods of a Wall Street Master"]
The 2B principle gets its power from the large number of stop-loss orders in the area of the X. Many traders who bought the breakout will have their stop-loss orders there, so if prices fall below the blue line those stops will be hit, driving prices back down with thrust. If you enter a short as the breakout traders are bailing out of their positions, the burst of selling can propel your trade into the green so quickly that, before you can enter your stop-loss order, prices have moved far enough in your favor to set your initial stop-loss at break even. The inverse is equally effective for 2B bottoms.
Another name for the 2B is "spring." Imagine the blue line in the graphic as a rubber band. The bigger the poke above the blue line, the stronger the reversal potential if the breakout fails. This same principle works on failed triangle breakouts and failed trendline breakouts. If you were unfortunate and bought the breakout, instead of putting just a stop loss at the X, consider making it a stop-and-reverse. This pattern occurs at the tops and bottoms of consolidations as well as at major reversals.
https://docs.google.com/viewer?url=http://www.surinotes.com/Tradestation/articles/suri2B_TJDec2007.pdf&pli=1
"In an uptrend, if prices penetrate the previous high but fail to carry through and immediately drop below the previous high, the trend is apt to reverse. The converse is true for downtrends."
[Vic Sperandeo in "Trader Vic: Methods of a Wall Street Master"]
The 2B principle gets its power from the large number of stop-loss orders in the area of the X. Many traders who bought the breakout will have their stop-loss orders there, so if prices fall below the blue line those stops will be hit, driving prices back down with thrust. If you enter a short as the breakout traders are bailing out of their positions, the burst of selling can propel your trade into the green so quickly that, before you can enter your stop-loss order, prices have moved far enough in your favor to set your initial stop-loss at break even. The inverse is equally effective for 2B bottoms.
Another name for the 2B is "spring." Imagine the blue line in the graphic as a rubber band. The bigger the poke above the blue line, the stronger the reversal potential if the breakout fails. This same principle works on failed triangle breakouts and failed trendline breakouts. If you were unfortunate and bought the breakout, instead of putting just a stop loss at the X, consider making it a stop-and-reverse. This pattern occurs at the tops and bottoms of consolidations as well as at major reversals.
https://docs.google.com/viewer?url=http://www.surinotes.com/Tradestation/articles/suri2B_TJDec2007.pdf&pli=1
Follow-Through Day concept developed by William O’Neil of Investors Business Daily
http://www.momentum-trader.com/index.php/momentum-trader-report-100911/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Momentum-tradercom+%28momentum-trader.com%29&utm_content=Google+Reader
The Follow-Through Day is a concept developed by William O’Neil of Investors Business Daily, and explained here by IBD.com:
From the beginning of any attempted rally during a definite downtrend, a ‘follow-through’ day is identified when the index closes up 1.7% or more for the day on a significant increase in volume from the day before. The first two or three days of a rally are normally disregarded as it has not yet proven it will succeed and ‘follow-through’ with power and conviction. ‘Follow-through’ days therefore generally occur the fourth through seventh day of the attempted rally. They serve as a confirmation that the market has really changed direction and is in a new uptrend
The follow-through day doesn’t always predict a new rally, it only predicts a new rally 1/3 of the time. However, no rally has ever occurred without one, which makes this method one of the best in calling a new market rally. The most recent bull market started in March of 2009 with a follow-through day, and I recall some traders questioning IBD’s labeling of the follow-through day at the time, but it proved correct.
The Follow-Through day provides a green light to start looking for and buying stocks as they break out of sound bases. New leaders should emerge first.
The Follow-Through Day is a concept developed by William O’Neil of Investors Business Daily, and explained here by IBD.com:
From the beginning of any attempted rally during a definite downtrend, a ‘follow-through’ day is identified when the index closes up 1.7% or more for the day on a significant increase in volume from the day before. The first two or three days of a rally are normally disregarded as it has not yet proven it will succeed and ‘follow-through’ with power and conviction. ‘Follow-through’ days therefore generally occur the fourth through seventh day of the attempted rally. They serve as a confirmation that the market has really changed direction and is in a new uptrend
The follow-through day doesn’t always predict a new rally, it only predicts a new rally 1/3 of the time. However, no rally has ever occurred without one, which makes this method one of the best in calling a new market rally. The most recent bull market started in March of 2009 with a follow-through day, and I recall some traders questioning IBD’s labeling of the follow-through day at the time, but it proved correct.
The Follow-Through day provides a green light to start looking for and buying stocks as they break out of sound bases. New leaders should emerge first.
Sunday, October 9, 2011
Saturday, October 8, 2011
HOW TO TRADE THE 52 WEEK FRIDAY RULE
http://club.ino.com/trading/2011/10/as-we-discussed-yesterday-has-this-market-put-in-a-bottom/
HOW TO TRADE THE 52 WEEK FRIDAY RULE:
Here are the three rules you need to trade “The 52-week new highs on Friday rule”
These are the exact rules that Bill used to make millions
Rule number 1: On a new 52-week high, when the market closes at or close to its high on a Friday, buy long and go home long for the weekend.
Rule number 2: Exit the long position on the opening the following Tuesday.
Rule number 3: If the market opens sharply lower on Monday, exit the position immediately.
There you have it. These are the only three rules you need to trade with “The 52-week new highs on a Friday rule” successfully.
“The 52-week new highs on a Friday rule” works extremely well in futures and in the Forex markets. This rule can be reversed for “The 52-week new lows on a Friday rule” if you are so inclined to trade the short side of the market. The same rules apply.
HOW TO TRADE THE 52 WEEK FRIDAY RULE:
Here are the three rules you need to trade “The 52-week new highs on Friday rule”
These are the exact rules that Bill used to make millions
Rule number 1: On a new 52-week high, when the market closes at or close to its high on a Friday, buy long and go home long for the weekend.
Rule number 2: Exit the long position on the opening the following Tuesday.
Rule number 3: If the market opens sharply lower on Monday, exit the position immediately.
There you have it. These are the only three rules you need to trade with “The 52-week new highs on a Friday rule” successfully.
“The 52-week new highs on a Friday rule” works extremely well in futures and in the Forex markets. This rule can be reversed for “The 52-week new lows on a Friday rule” if you are so inclined to trade the short side of the market. The same rules apply.
Friday, October 7, 2011
Normal pullack at resistance - wild intraday action
Today the market gapped up on nonfarm employment news. Usually on this kind of employment news out date, the market open high then close at low, or open low then close at high. Clearly it is the first case today. In the premarket today, SPY goes as high around 117.80, and TZA lowered to around 43.10. As I said yesterday, I would add TZA position on this kind of gap up. I did add some positions which turned out to be profitable.
Market failed at the resistance, but it does not mean that it will drop hard from today's high. Given the big accumulation in the past three days. I believe this kind of pullback is healthy for the market and market will continue going high. This rally must have another up leg.
Today my timing model gives the long signal. The short position from 09/16/2011 is closed, and a long position starts at today's close. If long TZA on 09/16 and sell it today, the return is 17.30 percent. If we can sell it on Monday, the profit is much better. I am happy to see that the timing model so far generates 118 percent compounding return year to date by using 3x ETF.
Trading plan for next week: buy the dip. Monday we may see a further weakness to 114 zone. I believe this is a good entry point for long. And we may close in green on Monday.
Market failed at the resistance, but it does not mean that it will drop hard from today's high. Given the big accumulation in the past three days. I believe this kind of pullback is healthy for the market and market will continue going high. This rally must have another up leg.
Today my timing model gives the long signal. The short position from 09/16/2011 is closed, and a long position starts at today's close. If long TZA on 09/16 and sell it today, the return is 17.30 percent. If we can sell it on Monday, the profit is much better. I am happy to see that the timing model so far generates 118 percent compounding return year to date by using 3x ETF.
Trading plan for next week: buy the dip. Monday we may see a further weakness to 114 zone. I believe this is a good entry point for long. And we may close in green on Monday.
Thursday, October 6, 2011
Index at resistance
Today SPX had a consective three day rally to 1164.97 with 1.88 percent gain leaded by the financial sector. It is not surprise that the rally in the passed three days. In the weekend post, I said a short term reflex bounce is very close. Unfortunately, I did not take any advantage of this rally. This is a lesson for me: When the MM says the market is really oversold, place money in 401K funds, palce money in the long ETF, even though it can gap down to a lower level, but the bounce is due and can be very very powerful.
Commodity are up today with silver up 5.19 percent. The euro FXE was up to 134 with lower volume. If FXE starting to pullback tomorrow, equity will follow also. Or FXE may go up 20MA, 135 zone?
Today most of the index are backtest their broken trendline, 20MA, 61.8 fibonacci retrace zone. I think this is a fairly strong resistance zone. As in the above overnight ES daily chart, I saw that ES broke the triangle formulation on last week and now backtesting the lower trendline.
The best case is that the index pullback a little for one to two days to 1140 zone to form a higher low, then it can go further up. The first dip must be a buy. I will long it this time. My timing model also suggests a continuing rally after a small pullback. It should give me a long signal in next week.
In my chart, I see small cap is backtesting the broken trendline at 670 zone. I am shorting RUT by TZA before the close. The market may further go up tomorrow. I will add more if we can hit 117.30. I think a pullback should come.
Jesse Livermore
http://www.jesse-livermore.com/
Time Magazine described Jesse Livermore as the most fabulous living U.S. stock trader.
His progress from office boy to Wall Street legend - his trading lessons - his triumphs and disasters - is probably the most fascinating of any of Wall Street's stories.
Even today, many stock and commodity traders owe Jesse Livermore a deep debt of gratitude for sharing his experiences in Reminiscences of a Stock Operator.
The techniques he made public have endured through many decades; his trading rules earned him millions of dollars, provided he stayed faithful to them.
Livermore also lost his entire fortune on more than one occasion, when he ignored his trading rules.
Time Magazine described Jesse Livermore as the most fabulous living U.S. stock trader.
His progress from office boy to Wall Street legend - his trading lessons - his triumphs and disasters - is probably the most fascinating of any of Wall Street's stories.
Even today, many stock and commodity traders owe Jesse Livermore a deep debt of gratitude for sharing his experiences in Reminiscences of a Stock Operator.
The techniques he made public have endured through many decades; his trading rules earned him millions of dollars, provided he stayed faithful to them.
Livermore also lost his entire fortune on more than one occasion, when he ignored his trading rules.
Wednesday, October 5, 2011
a good follow through day and Steve Jobs
SPX closed at 1140.04 up 1.79 percent today. Every dip today was bought. This action is very similar to the action in August for the bounce. Hence it is not a good entry for short. I set aside to watch all day. One thing I observed today is that small cap is lagging the big cap stocks. When SPX and COMP was up 1 percent in the morning, RUT was in red or at the same level as yesterday. In the later afternoon, RUT begin to pick up, which pushed the SPX another up wave. Is this situation similar to later September, when money following into big cap stocks which makes nasdaq to pass previous high, while small cap did not up too much? I guess this is a bearish sign to watch closely.
Today a sad news came out around 7:40pm. Steve Jobs passed away at age of 56. I feel very pity about losing such a great legend in our times. My first apple product is the iphone 4, which I bought last December. I love my iphone and am amazed by the goodness of apple product. As it is said, "Steve's brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve,"
"Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose,"
Steve Jobs' 2005 Stanford Commencement Address
http://www.youtube.com/watch?v=UF8uR6Z6KLc
Today a sad news came out around 7:40pm. Steve Jobs passed away at age of 56. I feel very pity about losing such a great legend in our times. My first apple product is the iphone 4, which I bought last December. I love my iphone and am amazed by the goodness of apple product. As it is said, "Steve's brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve,"
"Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose,"
Steve Jobs' 2005 Stanford Commencement Address
http://www.youtube.com/watch?v=UF8uR6Z6KLc
Tuesday, October 4, 2011
Last hour bounce
Today market had a big gap down in the early morning and headed lower to 1075, then have a nice bounce to 1102 area, which becomes the resistance. The resitance hold as a wall and SPX started a straight down trend to 1080. Within this period, I thought I was missing a good short. Then after 3pm, we saw a big swing up from 1080 up to 1123 in just one hour. It looked like everyone wanted to buy afraid of missing the bounce. Actually when spx break through 1102, it was a good long entry. Anyway I missed the rally.
Market did have a bounce but not in the way I wish. I entered long position one day earlier. If I did not long yesterday, I would definitely long the gap down today. Since I did not want to take the risk of averaging down, I did not add my losing position at the open. In the morning, even SPX and COMP down 2 percent, but small cap holding very well (down only 0.5 percent). That is a good sign that small cap is hitting a temporary bottom (600) and will lead the bounce. I closed my UPRO position at 12pm when SPX hitting 1100 resistance for a tiny loss. I thought I did well from 12pm to 3pm when seeing the market tanking. But obviously I did not benefit from the last hour rally.
Question for today: In this kind of the oversold extreme condidtion, is it better to long index ETF or long beaten down stocks? Look at AKAM, ENTR, ZAGG, TZOO, FMCN, etc. They started bouncing in the early morning even when the index going down. And they did not push back much during afternoon. I observed that similar situation existed when market tanking, these stocks also leaded. I guess long or short these kind of stocks have better rewards than long or short ETF. But the strategy is to pick up the right stocks.
What about tomorrow? No idea for me. Look at Aug 9th and Aug 10th, a big hammer day followed a big red drop day. I think it could happen tomorrow. I wish a small up tomorrow to confirm the new up trend by forming bullish engulfing. Or down hard to give me some long entry. But I will watch closely $RUT to back test the broken trendline around 670 area. If small cap can lead the market up, it can also lead market down hard. I think the best way to play the market now is staying in cash.
Market did have a bounce but not in the way I wish. I entered long position one day earlier. If I did not long yesterday, I would definitely long the gap down today. Since I did not want to take the risk of averaging down, I did not add my losing position at the open. In the morning, even SPX and COMP down 2 percent, but small cap holding very well (down only 0.5 percent). That is a good sign that small cap is hitting a temporary bottom (600) and will lead the bounce. I closed my UPRO position at 12pm when SPX hitting 1100 resistance for a tiny loss. I thought I did well from 12pm to 3pm when seeing the market tanking. But obviously I did not benefit from the last hour rally.
Question for today: In this kind of the oversold extreme condidtion, is it better to long index ETF or long beaten down stocks? Look at AKAM, ENTR, ZAGG, TZOO, FMCN, etc. They started bouncing in the early morning even when the index going down. And they did not push back much during afternoon. I observed that similar situation existed when market tanking, these stocks also leaded. I guess long or short these kind of stocks have better rewards than long or short ETF. But the strategy is to pick up the right stocks.
What about tomorrow? No idea for me. Look at Aug 9th and Aug 10th, a big hammer day followed a big red drop day. I think it could happen tomorrow. I wish a small up tomorrow to confirm the new up trend by forming bullish engulfing. Or down hard to give me some long entry. But I will watch closely $RUT to back test the broken trendline around 670 area. If small cap can lead the market up, it can also lead market down hard. I think the best way to play the market now is staying in cash.
Monday, October 3, 2011
Reflex bounce tomorrow?
Today the stock market get a hit. SPX closed at 1099.23, which is lower than Aug 8th low(1101.54). In the morning, there is a relatively small gap down, comparing to the wide gap in the passed several days. This gave me a positive sign. I was thinking we could start bouncing from today. At 10am, the index bounced to 1139 due to the good news for the ISM data. But it faded away very quickly. Face gave a nice call to short around 113.4 area. Since I was quite optimistic for a bounce, I did not take to short the market. Obviously, I was wrong. The market was tanking by the lead of small cap. TNA was down 15.49% percent today. What a hit! Now nearly all the major indexes are breaking the previous support, which indicates the bearish situation.
The Euro FXE reached a new low at 131.55(-1.44%). The dollar UUP had a clear break out. 10 year yield $TNX was down 7.22% at 17.85. But gold Gld was up 1.84%.
Today my timing model turned to be more negative than the passed three days. Previously I thought it would not turn to be more negative. Clearly after today's action, my prediction for the bull run in October is unlikely to happen. Today's action gives me a big question and push me to think seriously: How to develop an effective trend following system? Look at so many bull run or bear run, if one can catch most of the trend, while giving back a little in the range market, the profit can be huge. I missed the 10 percent gain for SPXU today. Too bad! My timing model gave me signal to short the market on 9/16/2011 close and the signal is still on. Clearly I did not follow it. What a big miss! If I short the COMP by SQQQ on 9/16/2011 for 21.69. It would be 32% percent gain for today (SQQQ closed at 28.77 today). My next goal is to learn to develop trend following system in the coming months.
In the bear market, the broken support can be a bear trap, while short a 2 to 3 days reflex bounce is a better risk-reward strategy. Today there are around 1600 stocks down 4 percent, only 120 stocks up 25 percent quarterly, and around 2500 stocks down 25 percent quarterly. It is more extreme than last Friday. I am expecting for a reflex bounce tomorrow. Or the market gap down tomorrow morning then bounce? I am a little impatient to buy UPRO for a bounce right before close. That is a little bit rush. With the good liquidity for UPRO, I should enter after market to get a much better price, given that the negative momentum will likely be carried from the last five minutes before market close. That is a lesson learned today. I have to keep my position small for this bounce as I am not confident. Hope things work for this kind of extreme.
The Euro FXE reached a new low at 131.55(-1.44%). The dollar UUP had a clear break out. 10 year yield $TNX was down 7.22% at 17.85. But gold Gld was up 1.84%.
Today my timing model turned to be more negative than the passed three days. Previously I thought it would not turn to be more negative. Clearly after today's action, my prediction for the bull run in October is unlikely to happen. Today's action gives me a big question and push me to think seriously: How to develop an effective trend following system? Look at so many bull run or bear run, if one can catch most of the trend, while giving back a little in the range market, the profit can be huge. I missed the 10 percent gain for SPXU today. Too bad! My timing model gave me signal to short the market on 9/16/2011 close and the signal is still on. Clearly I did not follow it. What a big miss! If I short the COMP by SQQQ on 9/16/2011 for 21.69. It would be 32% percent gain for today (SQQQ closed at 28.77 today). My next goal is to learn to develop trend following system in the coming months.
In the bear market, the broken support can be a bear trap, while short a 2 to 3 days reflex bounce is a better risk-reward strategy. Today there are around 1600 stocks down 4 percent, only 120 stocks up 25 percent quarterly, and around 2500 stocks down 25 percent quarterly. It is more extreme than last Friday. I am expecting for a reflex bounce tomorrow. Or the market gap down tomorrow morning then bounce? I am a little impatient to buy UPRO for a bounce right before close. That is a little bit rush. With the good liquidity for UPRO, I should enter after market to get a much better price, given that the negative momentum will likely be carried from the last five minutes before market close. That is a lesson learned today. I have to keep my position small for this bounce as I am not confident. Hope things work for this kind of extreme.
Sunday, October 2, 2011
Wild prediction - we are close to be bottomed
By doing the weekend research on the charts and my market timing model, I come to the conclusion that the intermediate bottom is very close. The market could act similar to the summer 2010. It could have a final retest of 1100, or go down 1100 by 7 points to 1090 area, then start a new bull move up to end of October, or even end of year. I feel it is very possible. Next week is the key. Need to see next week close in green. I am eager to see if my prediction will come true or not. I am not a short term bear any more.
I find out some people are also not so bearish about October.
Jeff Hirsch: October is a Bear Killer
I find out some people are also not so bearish about October.
Jeff Hirsch: October is a Bear Killer
Saturday, October 1, 2011
Expect a short term bounce very soon
I guess a lot of people are thinking that the market is going to drop hard next week. But I believe that it could not happen without a short term bounce. The market is quite oversold and the first day of October is historically bullish. There are only 193 stocks up 25 percent quarterly, and 2097 stocks down 25 percent quarterly, which is considered to be extreme. I feel we need to have one to three days bounce to relieve the oversold, then do further down. We could see bounce as early as Monday morning. Note that On Saturday, the Chinese PMI number is released. The number is better than expected, which indicates China is still growing. It can be an impetus for a bounce.
I have repurchased some SPXU position on Friday, which I sold on Thursday close to reduce my risk exposure. I closed all my SPXU position after market.
Actually I am not too bearish for October. If spx could retest 1100, or go down touching 1090 zone, the market can have a huge reflex bounce. Do not underestimate the power of the bull. We are seeing consistent buying when spx gets to 1120 area for a couple of times.
I will long the market if it is closed in green on Monday. Let us see.
1010 is not so easy to be reached. 2011 is not 2008.
I have repurchased some SPXU position on Friday, which I sold on Thursday close to reduce my risk exposure. I closed all my SPXU position after market.
Actually I am not too bearish for October. If spx could retest 1100, or go down touching 1090 zone, the market can have a huge reflex bounce. Do not underestimate the power of the bull. We are seeing consistent buying when spx gets to 1120 area for a couple of times.
I will long the market if it is closed in green on Monday. Let us see.
1010 is not so easy to be reached. 2011 is not 2008.
The Long T Theory 40 Year Cycle
http://ttheory.typepad.com/files/longwavecycles2010pdf-2.pdf
A very interesting reading. Are we going to expect a long recession for the next 10 years?
The nominal 40 Year Oscillator Cycle: Cyclical studies of the blue Momentum Oscillator below suggest the longest equity cycles produces major lows at approximately at 4 decade intervals as indicated by the periodic words 'Low' . T Theory expects the next low Zone in the 2010-2020 period. Midway between these Oscillator Lows are the 'High's, marking potential high zones for the Dow.
A very interesting reading. Are we going to expect a long recession for the next 10 years?
The nominal 40 Year Oscillator Cycle: Cyclical studies of the blue Momentum Oscillator below suggest the longest equity cycles produces major lows at approximately at 4 decade intervals as indicated by the periodic words 'Low' . T Theory expects the next low Zone in the 2010-2020 period. Midway between these Oscillator Lows are the 'High's, marking potential high zones for the Dow.
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