Posted on October 3 , 2010 In Daily Updates

Financial Short Squeeze?

Tomorrow’s Plan:

The market continues to chop around in a very tight range. Just take a look through most of the sector ETFs and you will quickly see that gold and energy are really the only sectors with some kind of movement in them. The longer we consolidate here, the farther the market will eventually move when it finally does pick a direction. We have earnings coming up and there are quite a few optimistic guidance predictions, so the atmosphere is especially charged for some kind of breakout. Always be aware of the disappointment play where something that seemed so certain gets turned on its head and supplies a great 2-3 day move. I think, at least from what I have been feeling, that the key to trading well in the next few weeks will be looking for confirmation, and not jumping at the first move. There have been so many fake outs in both directions, its just prudent to wait for pull backs before jumping in. I am not sure why, but this environment has definitely punished people who “get in on the ground floor” for any move. Looking back at the last week and a half, the short side has actually been more lucrative, even though the long side has been the “right play,” given the trend. This just tells me that our current trend is very obvious, and definitely has some weak holders.

Friday’s internals were all bullish, but only moderately so. Volume has been on the rise this past week, so I think a breakout will happen sooner rather then later. VIX continues to be in a box. I have been watching the quote AMZN+AAPL+NFLX+BIDU on thinkorswim (which lets you make custom charts) as kind of a “four horsemen” indicator. I will write more on it later, but suffice to say, it is pulling back at the moment without much market participation. If it finds some support, which I have no doubt it will, it could light a fire under the market.

My Best Ideas:

•ADM LONG: has a nice looking bottoming hammer which coincides with the 200 SMA on the weekly chart. I think this has a great probability of rising here, although some of the down days in its consolidation were on pretty high volume. I am looking for this to be strong early in the day, and continue that strength to get involved.

•ORCL LONG: tried to break out of its triangle on Friday and kind of flopped. I am watching it as a long to see if it can continue this breakout.

•DAL LONG: had a very nice move on Friday. I haven’t trading this stock much, and it is low priced, but if it can stay over the 12.00 level, I like it up to the 12.50 area.

•INTU LONG: had a very bearish close on Thursday, and took all that back and more on Friday. I think it has a good chance of retesting the highs within the next few days, although the low volume is a bit concerning. I would like to see it hold its 20 SMA to keep this idea alive.

•BAC LONG: Financials have been on keystone’s short list here for awhile. Yet they have been a pretty big disappointment in follow through. With Friday’s bounce, I think a short squeeze could occur and watching the action in BAC on Friday, I think there could be some more shorts caught. A bounce to 14 would be very reasonable with an entry over Friday’s highs.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry:

Last Note

Lucas

Posted on October 1 , 2010 In Daily Updates

Two Trades

Tomorrow’s Plan:

Resumed Sunday

Today’s Trades:

Today’s Journal Entry:

Last Note

Have a Great weekend

Lucas

Posted on September 30 , 2010 In Daily Updates

Absurdity!

Tomorrow’s Plan:

Definitely not a good day if your a bull. This is the type of reversal day that can cumulate in a violent sell off sometime in the next few days. Basically it works like this: bulls get used to buying every dip until it bites a whole lot of them all at once. The action turns from violent sell offs that get bought up, to violent up moves that get sold off. It is almost like a flip flop. I expect the next few days to be like this. We will get violent up moves as bulls think its a good time to buy, but those moves will get sold off. This may happen several times until finally all the buyers disappear, we get a trend down day, and the underlying bullish trend resumes. At this point, I do not trust the bullish side unless we can take out today’s highs and negate this sell off on higher volume. Speaking of volume, the VIX made new highs today before returning to the box it has been in. TLT had a nice reversal as well. The AD line and volume stats are pretty much a wash, but considering how bullish they were this morning, that is pretty bearish. Tomorrow is the first of October, and so things can always get a little screwy on the first. Sometimes the previous day is completely forgotten, other times it sets the ton for the entire month. So be ready for anything tomorrow.

Keystone changed things up a bit, we are focusing more on sectors, and have the flexibility to change between sectors and stocks within those sectors. So my best ideas may change from seeing the same few names to being across the board. Last but not least, 1140 on the ES, and 114.50 on the SPY continue to be a level of value.

My Best Ideas:

•I like BHI if it pulls into the 41.50 area where a bid will have some strong support. It broke higher today on increased volume, and the energy sector as a whole has been doing well.

•WFC still looks like a good short below 25. It has hung out here for a few days, testing and retesting this level. If the market looks weak tomorrow, this would be a great short.

•COF looks good for a long as it broke a down trend line today on higher volume. I will be watching to see follow through tomorrow.

•BK broke out of a consolidation higher today, but came back in. If it tests today’s highs, I think there is a real buyer in there and the stock could test 27. The levels to watch are 26.5 and 26.32.

•This might seem like a wacky trade idea, but I like TXN as a test short here from the 27.44 resistance overhead. I think a weak test of today’s highs could give a great, defensible entry to ride the stock down to the 26 area. This would just be a one or two day trade.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry:

Last Note

This morning’s losses came pretty fast and furious. I was quickly down on two trades as the market came in, and a third position I tried did not work out either. I started to get those “bad” feelings. For me, those feelings are a mix of frustration and anger at not getting what I want, sadness and depression at feeling like I will never get anything that I want, and a host of other negative stuff. Then something happen, I just stopped caring. I really did not care. I look at the losses and said to myself “ahh fuck it, who cares!” I mean it was such an interesting feeling to just not give a shit. This feeling stuck with me for awhile, and when I did my breathing exercises, something else happen. I started to laugh! I couldn’t help myself!

The whole situation just seemed so ridiculous to me. Here I am, slaving away for years at this trading, trying so hard to live up to all these internals pressures and rules. What have I received for it all? I mean has being sad and depressed EVER helped anything? Has getting angry and afraid ever done anything? And most of all, has trying to avoid losses and crude stop outs (like with Macy’s this morning) ever actually succeeded in avoiding them? NO! This struggle has never worked! I have had momentary periods where I thought some how “things were different.” In reality though, I always come back to the bottom; I always come back to the losses.

This short rant here sounds angry when I read it. That really was not my goal in writing this, because I am not that angry. If anything I am bubbling with laughter at the absurdity of the whole thing. I am in disbelief really at how long I have been captive to this same mindset of try to avoid the unavoidable. It is like those people who have been through rehab ten or more times. At some point, you just have to laugh at how absurd the whole thing is. This really is getting to the absurd point. I mean am I really going to feel this way for another year or more? Am I really going to continue to trade and live on a constant roller coaster between pain and pleasure? The whole thing is just nuts! Laugh with me : )

Lucas

Posted on September 29 , 2010 In Daily Updates

Something For Nothing

Tomorrow’s Plan:

Today was the first day that I saw the put/call ratio, called the ISEE, start to get a bit frothy on the bullish side. It started making me think that this range up here is not such a bad thing for many bulls. The most nervous among them will find almost any reason to sell, but for the most part, I think this high and tight range has only increased the confidence that the bulls have in the upside. I am a bit surprised we did not have more of a rally today after yesterday’s sell off. However until we break lower with conviction, I think the bulls will find any reason to buy the market, which means we should! So what I am on the look out for is a trending down day. If we get a day where the bulls are really routed, then I will start to look at the short side more aggressively. With that in mind, the status quo of bull moves is the “scare out.” Bull moves are notorious for intra-day movements that make everyone think the reversal is FINALLY here, only to slowly chug back to the upside. These past two days have both had great sell off scares in the afternoon. The more of these we get without actually going lower, the better the upside move will be if it finally comes. These moves get rid of some of the weak longs who always accumulate in bullish moves.

Stats today were mixed. Volume fell, and the AD line was pretty much at par on the close. The amount of call buying is in the stratosphere, but overbought signals in that put/call ratio usually take awhile to start playing themselves out. VIX continues to be in a range, although it had quite an up-move in the afternoon which might lead to some selling on the open tomorrow. One last thing I have noticed: in August, I made tons of money in the first 30 minutes of the day, but in September, that stat has completely turned around with the first 30 minutes being rife with peril. I will be trading accordingly until I start to see some of the opportunities work out in the first 30 minutes.

My Best Ideas:

•WDC had a great breakout today and I think this thing has a date with the 30 figure. I will be trading this long for the rest of the week for sure.

•UAUA broke above resistance but then closed below it. I will be watching it for indications of whether it wants to stay above or not.

•WFC is still my go to short, but it is being a tough little bastard. The odd thing is when the market was weak this morning, it was strong, and when the market was strong, it was weak. From this action, I think there is some kind of short interest in it at these levels, so it may have a tough time going down until the market finally helps it out.

•JNPR and KSS are still pausing above breakout levels. These are two good longs to watch. M is also on my watch list as a long if it can stay above the 23 level which it breached today with very little fanfare.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry:

Last Note

I experienced some great lessons today. I was helped along by a friend of mine who I have been talking to over Skype for the last few days. He doesn’t trade, but he is a chronic multi-tasker. Whenever he is doing one thing, he automatically looks for something he can do at the same time. I noticed this behavior, but did not really think anything of it until I saw evidence of something similar in my trading today. I asked myself, where does the happiness or joy come from in multitasking? Why does it feel good? I thought back to when I have multi-tasked, and one example that came to mind was having to wait for something, like a doctors appointment, but being able to get some work done while I was waiting. At that time, it felt like I was getting something for free, like a twofer! I had to wait for this thing, which I deemed bad, but I was able to get something else done at the same time, which I deemed good. It was like getting something for nothing, and there is a satisfaction that goes with getting something for nothing.

I noticed today that I constantly look for opportunities to get something for nothing, and the satisfaction that comes with it, in the market. I always look for an entry that appears to offer the possibility of an ample reward, and zero downside risk: a freebie. The thing is, this searching for a freebie means you look for risk-less opportunities; those 95% trades that only reliably give you one or two ticks. I went into my body and realized that this search for a freebie was fraught with fear. Every trade automatically starts with fear as soon as it’s placed, especially if it starts to go against you. How could it be otherwise, you are expecting to get something for free without risk!

I am not saying that freebies do not exist, they most certainly do. You can pick bottoms all the time and eventually, you will get one right and have on that risk free trade. The question I have to ask myself is: what is so great about that little satisfaction I get from having a freebie that I would sacrifice consistent profitability? I have NO doubt whatsoever that this search for a freebie has cost me more money than I can count in both losses and missed profits. The nice thing about searching for the freebie is that you usually have a very close stop, and a very small tolerance for pain, so its like being paper cut to death.

I realized this after my WDC trade where I tried to exit in a way that would get me that freebie. I wanted to get out at the top, and avoid the pullback, EVEN THOUGH I expected more upside. I wanted to get that little satisfaction that comes with picking the top, and then maybe getting back in at a lower price. Yet it worked against me and I pretty much got out at the extreme of the pullback. This is so funny to me because I got into this trade and thought, this could go a point easy. Yet I saw the profit and my mind instantly starting thinking: how can I get a freebie from this, and how can I get a little more from this trade, emotionally, then what it is offering? What is so great about that little satisfaction that comes with getting something for nothing? If I can answer that question, not in my head but on an emotional level, my trading will drastically change for the better.

Lucas

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