Archived Blog
Posted December 13, 2009 at 2:41 AM
This is the time of year that evokes scores of emotions. That’s ok, we’re human beings. I have written frequently in my blog of removing emotion from your trading in order to make your decisions based upon objective, non - emotional criteria. However, it is our ability to feel deeply about various issues and care about others that denotes our uniqueness as humans. It seems like so many areas of our lives are encouraged to be efficient with flawless execution, devoid of emotion and subjectivity. We forget to celebrate and embrace our frailty and the frailty of those around us.
This blog is dedicated to helping the retail stock market trader to achieve consistent success in the Market. I have had some say to me, “What are you really contributing to the overall good by showing people how to make money in the Stock Market?” That question made me pause. The answer is that unless you are willing to help others who are less fortunate or struggling with your prosperity, you are failing yourself and those that you touch every day and your success becomes futile.
So, as you gather together with those that you care about this holiday season, look into their eyes and if you see pain and despair, know and realize that you can help them. If you do that, you will truly be “Home for the Holidays.” Robin
Posted December 6, 2009 at 5:35 AM
The DOW is currently trading in a sideways range or box. There is substantial resistance from trading activity in 2004 and 2005. It should be difficult to continue higher at this point. The trend is tiring and it appears that it is time for a pullback. Friday printed a Shooting Star type pattern on significant volume. I feel that the index will move back down in the range and test the lower trend line of the broadening channel.
The SPX is has also been trading in a consolidation pattern for the last three weeks and appears that the trend has weakened tremendously. The ADX supports the thesis of a diminishing trend and we also have a Bearish MACD divergence and crossover with confirmation from a Bearish Stochastics. We are more than likely headed back down in the range to test the lower trend line of the channel.
The COMPQ has been very erratic over the last three weeks with several gaps and indecisive trading. There is major resistance at 2200 and I feel that the index will trade sideways to down in the immediate term. Look for a test of the 50 days simple moving average and the lower trend line of the channel about 2135-2140.
Posted December 6, 2009 at 5:32 AM
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Posted December 6, 2009 at 5:29 AM
An indicator is a formula when placed against price will hopefully reveal the directional bias of a stock. Last week we talked about how a simple moving average is determined. The purpose of any moving average is to smooth price action and give the trader a sense of where the stock is trending.
Moving averages are lagging indicators and are many times used to confirm direction. Major moving averages like the 20, 50 and 200 day simple can be used as areas of support and resistance. Sometimes moving averages are used for buy and sell signal when a shorter term moving average crosses over a longer term moving average.
A moving average can be adjusted to react more quickly to price movement and therefore not lag quite as much as a simple moving average. The purpose of doing this is so that the moving average can act more as a buy/sell signal. An example of this is the Weighted Moving Average. This average weights recent price action more heavily. Following is the formula for the Weighted Moving Average.
If using a 5 day weighted moving average, the most recent day’s price receives the greatest importance. The weighting would be in multiples as follows: 5+4+3+2+1 =15. Today’s price would receive a weight of 5, yesterday would receive a weight of 4 and so on. In this example, the total numerical weightings add up to 15. We then divide the total prices from the five trading days by the sum of the weights (15) to arrive at the most recent plot point for the weighted moving average. Using last week’s Simple Moving Average numbers, let’s recalculate for the weighted moving average.
Day 1 - $44.60 - 5 days ago, multiply by 1
Day 2 - $88.70 - 4 days ago, multiply by 2
Day 3 - $130.98 - 3 days ago, multiply by 3
Day 4 - $173.76 - 2 days ago, multiply by 4
Day 5 - $220.70 - today's price, multiply by 5
Total = $658.74 / 15 = $43.92
This data point would be plotted. As each day closes, the new data point is plotted and the prior day receives less importance the older it becomes. Exponential Moving Averages are a bit more complex as it uses a constant or exponent that acts as a multiplier against the difference between one day’s price and the next. No need to panic, most charting packages have it all figured out for you. The important thing to know is that weighted or exponential moving averages take some of the lag out of the moving average and it becomes less of a trend following indicator and more of a leading indicator. Best, Robin
Posted December 6, 2009 at 5:26 AM
ECONOMIC REPORTS
MONDAY 12/7
Consumer Credit,
TUESDAY 12/8
None
WEDNESDAY 12/9
Wholesale Inventories, Crude Inventories
THURSDAY 12/10
Initial Claims, Continuing Claims, Trade Balance, Treasury Budget
FRIDAY 12/11
Export Prices ex- ag., Import Prices ex – oil, Retail Sales, Retail Sales ex – auto, Michigan Sentiment – Prel,
Business Inventories
EARNINGS OF NOTE
MONDAY 12/7
CASY, KKD, PBY, KR
TUESDAY 12/8
HRB, TLB, COO
WEDNESDAY 12/9
JTX, MW
THURSDAY 12/10
CIEN, COST
FRIDAY 12/11
NONE
Posted December 6, 2009 at 5:25 AM
Here are some ideas for your New Year’s trading resolutions:
- I will complete a detailed trading plan which will become my “Bible for Trading”.
- I will read one trading book a month and outline the best ideas that it presents.
- I will seek out a trading partner who will be a person with whom I can share and exchange trading ideas and hold each other accountable for disciplined trading.
- I will build a watch list which shall be comprised of fundamentally, well diversified stocks.
- I will master the art and science of technical analysis.
- I will adhere to strict money management principals.
- I will master the Collar Trade.
- I will eliminate fear and greed from my trading.
- I will learn how to use the Greeks to manage my portfolio.
- I will mentor other traders and in doing so I will help others to become successful in the Stock Market.
This list should give you a good head start on becoming more disciplined in your approach to trading. If you make a concerted effort to improve your processes, you will improve as a trader. Best, Robin
Posted November 29, 2009 at 3:59 AM
The DOW traded down 154 points on a low volume holiday shorten session on Friday. The debt restructure issue with Dubai drove the move. My feeling is that the move was an overreaction and trading this coming week should sort out the importance of the situation. The index rebounded nicely off the lows of the day. With that said, the bullish trend is running out of gas as indicated by the ADX and the low volume associated with the move. We are essentially trading in a box. The upside breakout level is the high from 11/23 at 10,496 and the key level to the downside is the swing low from 11/12 at 10,171.
The SPX analysis is similar to that of the DOW. We are also in a sideways channel on decreasing volume with a target breakout level of 1114 from the high on 11/16. The downside level to watch is the lows from 11/12 and 11/27 at 1084. The upside trend is very tired at this point. A turn to the downside is not far away.
The COMPQ staged a Counterattack type candle pattern after gapping down significantly at the open on Friday. Again, the move was fundamentally driven by the Dubai situation on low volume. It is interesting to note that the low of the day coincided with three prior gaps that acted as solid support. The bullish trend is essentially done. I see sideways to down from here. If we do manage to go higher, it will be in very small increments. There is too much overhead resistance at this point.
Posted November 29, 2009 at 3:57 AM
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Posted November 29, 2009 at 3:55 AM
What is a simple moving average and how is it computed?
The sum of all closing prices divided by the number of periods (days) being measured. The resulting and most recent data point is plotted and the oldest data point is dropped. So for example, the 5 day simple moving average comprises 5 data points and the moving average is dynamic.
- Example on the QQQQ from 11/17- 23 which included 5 trading days with a weekend between the 4th and 5th day.
- Closing prices
- Day 1 – $44.60
- Day 2 – $44.35
- Day 3 – $43.66
- Day 4 – $43.44
- Day 5 – $44.14
- Total = 220.19/5 = $44.038
- This data point would then be plotted as the most recent day in the 5 day simple moving average and what was the oldest day is dropped.
The moving average allows us to filter out “noise” and to determine the general direction or trend of the stock. Various moving averages can be employed. Some common and popular SMAs are the 5, 20, 50 and 200. Moving averages can act as levels of support and resistance and are sometimes used as buy and sell signals on crossovers. For instance when the shorter term average crosses from below to above the longer term average it could signal a bullish entry. Robin
Posted November 29, 2009 at 3:53 AM
ECONOMIC REPORTS
MONDAY 11/30
Chicago PMI
TUESDAY 12/1
Construction Spending, ISM Index, Pending Home Sales, Auto Sales, Truck Sales
WEDNESDAY 12/2
Challenger Job Cuts, ADP Employment Report, Crude Inventories, Fed Beige Book
THURSDAY 12/3
Initial Claims, Continuing Claims, Productivity-Rev., Employment Cost Index, ISM Services
FRIDAY 12/4
Nonfarm Payrolls, Unemployment Rate, Average Workweek, Hourly Earnings, Factory Orders
EARNINGS OF NOTE
MONDAY 11/30
OVTI
TUESDAY 12/1
SPLS
WEDNESDAY 12/2
ARO, SNPS
THURSDAY 12/3
DLM, MRVL, NOVL, SWHC, TOL
FRIDAY 12/4
BIG, RY
Posted November 29, 2009 at 3:51 AM
Many traders approach trading as a coin flip. Their efforts are really nothing more than gambling. However, there are those who strictly apply trading rules for entries and exits and learn to cut their losers short and let their winners run. This is a lot easier said than done. It takes a great deal of discipline. Even those adept at this style of trading find it difficult and challenging as “Emotional Capital” as well as “Trading Capital” can be depleted. Those embracing this style of trading will encounter times when they suffer through several losing trades consecutively. This is when you must remain steadfast and believe in your system. Sometimes in the midst of a winning trade, the trader ends up staying too long and watching an unrealized profit morph into a realized loss. Fear can also take hold and force a winning trade to close prematurely booking a much smaller gain than should have been.
Another way to trade is by hedging your positions and learning how to adjust to optimize a change in trend. This approach to trading has several advantages. 1) We stay with a stock that we know. This can supply a tremendous edge in that we become very familiar with how the stock reacts to the market as opposed to abandoning the stock and moving on to another unknown position. 2) When you have confidence that you can adjust a stock and move with the trend, you begin to trade without fear. The absence of fearful trading means that decisions are well thought out and not panic driven. 3) Hedging can provide the luxury of not monitoring your trades 24/7 for fear of having your positions move against you.
We at www.markettamer.com specialize in hedging and trend following. Let us show you how to trade successfully without fear and stress. Best Robin
Posted November 22, 2009 at 1:58 AM
The DOW was rejected by the upper trend line of the channel and ended the week with a Spinning Top. This could be just a short term pullback and then a move back up forming a J Hook pattern. However, we may have a little more to the downside before continuing higher. The predominate trend continues up. Watch for the breakout above 10,438. If the Spinning Top (very close to a doji) does halt the move down, we could go sideway briefly before going up. However, it is clear to me that the bullish move is still in tact.
The SPX has a similar story as the DOW. We have been trading in a box for the last two weeks. Look for a break out of the box. I feel we will test the lower trend line before resuming the trek higher.
The COMPQ has been the leader all the way up from the March lows and I see less downside potential here. I feel that we will form a J Hook chart pattern and then break above the recent high of 3525 and continue higher into the end of the year.
Posted November 22, 2009 at 1:57 AM
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Posted November 22, 2009 at 1:54 AM
-Drawing trend lines is one of the first things that a professional chartist will do. But how do we do it? There can be short term trend lines and longer term trend lines. There can be trend lines that define resistance as well as support. Do we connect the open, close, high or low? Do we need to be absolutely exact or is close good enough.
Here are the rules that I suggest when drawing trend lines. Start with finding the longer term lines and then move to shorter term trend lines. You need to have at least three definitive touches to be valid. The more touches the better and over a longer period of time. I suggest that you connect the lows of the candle for the lower trend line and the highs for the upper trend line. It is best if the lines touch exactly, but that will not always be the case.
You will begin to see obvious trend lines the more experienced you become. You will also begin to see that trend lines are a very powerful yet simple way to define support and resistance which if combined with other indicators can further enhance the strength of the support and resistance levels . Best, Robin
Posted November 22, 2009 at 1:51 AM
ECONOMIC REPORTS
MONDAY 11/23
Existing Home Sales
TUESDAY 11/24
GDP- Preliminary, GDP Deflator – Preliminary, Case Shiller 20 City Index, Consumer Confidence, FHFA Home Price Index
WEDNESDAY 11/25
Personal Income, Personal Spending, PCE Prices, PCR Prices – Core, Initial Claims, Continuing Claims, Durable Orders, Durable Orders ex Transportation, Michigan Sentiment- Rev, New Home Sales, Crude Inventories
THURSDAY 11/26
Thanksgiving, Market Closed
FRIDAY 11/27
None
EARNINGS OF NOTE
MONDAY 11/23
CPB, HPQ, LDK, TSN, VAL
TUESDAY 11/24
AEO, BMO, BKS, BGP, CWTR, CBRL, DLTR, HNZ, JCG, MDT
WEDNESDAY 11/25
DE, TIF
THURSDAY 11/26
NONE
FRIDAY 11/27
FRO
Posted November 15, 2009 at 4:56 AM
The DOW looked like it wanted to pause mid channel on its way up to the top of the broadening ascending channel, however, it continued until it ran into the upper trend line of the channel and then pulled back slightly. The index is currently forming a tight Bull Flag on decreasing volume. The key breakout level is the high of the flag at 10,342. If the DOW rolls over, it will likely come back down in the channel and retest the lower trend line.
The SPX rose to test the swing high from10/21 at 1101 putting in a top of 1105 and then pulling back. We have a Cup & Handle chart pattern and the upside target is the first lip of the cup at 1101 and then 1105. A pullback would take the index back to the bottom of the recent channel.
The COMPQ is also putting in a Cup & Handle with the first taget at 2179 and then 2190. The index broke back above the lower trend line of the recent channel and will probably retest the lower trend line before bouncing higher. The COMPQ settled right at 2168 one of the upside targets pointed out from last weeks blog.
I feel that the market will continue to edge higher through the end of the year and into January.
Posted November 15, 2009 at 4:54 AM
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Posted November 15, 2009 at 4:52 AM
-The Short combo is comprised of a higher strike Short Call and a lower strike Long Put in the same expiration month. The credit from the Short Call helps to finance the Long Put. As a result, the position can have very little if any debit. The strategy simulates very closely the risk profile of Short Stock, but for much less money. It is a bearish position. Study the risk graph and you should gain understanding of the risk and reward. Robin
Posted November 15, 2009 at 4:51 AM
ECONOMIC REPORTS
MONDAY 11/16
Retail Sales, Retail Sales ex-auto, Empire Manufacturing , Business Inventories
TUESDAY 11/17
Core PPI, PPI, Net Long Term TIC Flows, Capacity Utilization, Industrial Production
WEDNESDAY 11/18
Housing Starts, Building Permits, Crude Inventories
THURSDAY 11/19
Initial Claims & Continuing Claims, Leading Indicators, Philadelphia Fed
FRIDAY 11/20
None
EARNINGS OF NOTE
MONDAY 11/16
PSUN, SINA
TUESDAY 11/17
CSIQ, HD, LZB, JEC, SKS, CRM, TGT, TJX
WEDNESDAY 11/18
BJ, CHS, CSUN, CYBX, GYMB, HOTT, JACK, NTAP, NTES, PERY, PETM, PVH, SOLF
THURSDAY 11/19
BONT, CMRG, DKS, DBRN, FL, GME, GPS, HIBB, INTU, ROST, SHLD, BKE, PLCE, TSL, WSM
FRIDAY 11/20
CRMT, ANN, DHI, SJM, KIRK
Posted November 15, 2009 at 4:49 AM
Next week’s earnings reports include a heavy dose of Retail including HD, TGT, TJX, CHS, HOTT and ANN among several others. Reports from these retailers along with their forward guidance should foretell the real consumer sentiment as people vote on the economy with their wallets.
Unemployment numbers have been dismal at 10.2% with the real unemployment probably closer to 18% counting those who have given up looking for work and those who are underemployed. November and December should set the tone going forward into 2010 and next week should be a glimpse into what the immediate future will hold for our economy.
Top line growth has been hard to come by these days with most company’s posting decent bottom lines by instituting stringent cost cutting measures. Job cuts and inventory reduction have contributed to acceptable bottom line numbers, however, at some point these companies need to begin to grow the top line. Forward projections from these retailers should act as somewhat of a crystal ball into the 1st and 2nd quarter of 2010. Stay tuned and stay nimble. Best Robin
