Game Plan for the Week of 11-10-13 through 11-16-13

Last week I was playing Cisco (CSCO) to the upside on a pre-earnings play.  Made a nice profit and got stopped out of the position on Thursday.  I entered the trade Monday at a bid price of $1.06 and got stopped out at an ask price of $1.52.  All-in-all, a fairly good gain.

On Friday, the Non Farm Payroll report came out.  It was an outstandingly good report.  The market was expecting somewhere in the realm of 100,000 new jobs, and instead about 200,000 new jobs were created in the private sector.  Now, most pundits (myself included) expected the market to react negatively to this news because it would give the Fed extra excuse to taper.  The market did, in fact, open lower and fall lower during amateur hour.  However, the market rebounded and ended closing near all-time highs.  For once, Wall Street actually responded positively to good news, which was refreshing.

The market calendar and the years-end rule both dictate that the market should rise going into Thanksgiving, followed by a sell-off from after Thanksgiving into the end of November.  Currently, there are three very nice upside signals on JPM, C, and NVDA.

C is currently caught in a triangle pattern, between a narrow support and resistance band, which may limit it's upside.  This makes it the least attractive of the three.

JPM has a HRFP going up, and this signal is coming off of a very long-term up trend line (making it even more attractive).  The only knock on JPM is that, historically, it goes down in the month of November.  Even though the charts are showing a strong upside tendency, this goes against history, raising some caution in my mind.

NVDA is coming off an earnings beat.  It has a HRFP going up, and this signal is coming off of a very long-term up trend line (making it even more attractive).  In addition to this, historically NVDA goes up in the month of November, making it even more attractive on top of that.

The combination of strong upside signals, post earnings potential, and historical success make NVDA a very nice upside play in my mind, with JPM coming in second.  C may wind up being a good upside play if it can break through resistance and bust out of the triangle pattern it's in.

And now the charts...

Nvidia (NVDA)

JP Morgan (JPM)

Citi Bank (C)

Game Plan for the Week of 11-03-13 through 11-09-13

I still have my position to the upside open in Cisco (CSCO) and it looks like it's finally gaining traction to the upside.  It has a very strong history of trending up going into November earnings.  They report on November 13th.  I think it would be wise to pull out by this coming Thursday, though, given that Nonfarm Payrolls report Friday.  Why?  Well...

Nonfarm Payrolls report Friday, November 8th.  This will be a good indicator of the overall health of the job market, which plays a key role in the Fed's tapering plans.  If the Nonfarm payrolls are flat, a little good, or a little bad, stocks should continue upward.  If they are really good it means the job market is really good, and the Fed may speed up their tapering plans, so the market will drop.  If they are really bad this means the job market is really bad, which means the overall economy sucks, so the market will drop.

In earnings news, some good reports are coming out next week.  Disney and Whole Foods report next week.  These are two stocks that the analysts love to beat up when they report earnings.  One can almost expect there to be a post-earnings pullback on both of these stocks, followed by a rise once the pullback ends.  Wait for the drop to end, then buy on the pullback.

Recent Trading Mistake

I'm posting a recent trading mistake I made because I hope to never EVER repeat it again.  I was making a trade to the down side using put options on Tesla Motors (TSLA) and got scared out of the trade on 10/24.  Why did I get scared out?  Because instead of using my Daily charts I was watching the short-term 5 minute carts and got freaked out when they moved dramatically against me.

Luckily I exited without making a loss OR a profit (so I broke even) but had I stayed in the trade and FOLLOWED DISCIPLINE I would have made a tidy sum as of today, October 29th.

The lesson here is this: whatever time frame you use to make your trading DECISION, stay in that time frame and don't look at shorter-term charts because they WILL fluctuate and they WILL throw off your discipline.

See the chart below...

A Friendly Reminder...

Always... always... ALWAYS... stick with your decision chart once in the trade.  Big charts trump little charts.  Always.

The trend is your friend, give the trade time to work.

Possible Trades for the Coming Week

Between now and the end of October is where stocks tend to bottom out and head upward.  Assuming there's no October crash (and assuming the Fed says nothing about tapering) the markets should rock and roll sky high in November.  

If the Fed says they'll taper this week, we could probably expect a crash (and unfortunately I'm not joking here).

I've got charts posted below for four potential upcoming trades.  The only downside trade I have posted is Yahoo, and that's because it's got quite a ways to go before it hits any resistance on the charts.

Activision Blizzard (ATVI)

Goldman Sachs (GS)

Petsmart (PETM)

Yahoo! (YHOO)

Warnings Trade

Most companies that warn do so after the market is closed or prior to the opening.  On the warning we will automatically make the decision to buy Put options.  There is no decision chart for a warnings trade - the fact that a company warns IS our decision.

When the market opens the 5 minute chart will act as our action chart.

Wait for a good pullback (in this case, a rising stock) where a quality trend line can be drawn connecting at least 3 points.  Following the break in the trend line, the majority of the charting indicators must be signaling a falling price and the MACD Histogram must agree with this.  Patience is a must here, as the correct entry point may take as long as a couple of days to materialize.  Be mindful of the market calendar and any upcoming events and plan this trade accordingly.

Purchase either in-the-money puts or 1 strike price out-of-the-money puts.  If it's early in the month you can buy this month's puts, otherwise it's safer to buy next month's puts.  It is also safer to use in the money puts.

General Notes:

Warnings happen every warnings season.  Basically, a warning is a company issuing lower guidance on their upcoming earnings projections, and saying they won't beat their upcoming projections.  These projections are issued by the company... so by them saying they won't beat their own projections, that tells Wall Street one of two things: the company either sucks at what they do, or they are liars.  Either way, the stock will go down.

Be mindful of the market calendar.  If you attempt a warnings trade when the entire market is set to rise, it may not work.

"Year Ends In" Rule

The stock market is no mystery.  It does the same stuff over and over again.  There is a rule of decades that dictates that every year ending in a certain number acts like every other year ending in that same number.  For example, 2013 is behaving like 2003 and every other year that ends in "3."

Keep in mind that these are generalizations.  For example, years ending in 9 are supposed to be where the high is set for a bull market, seeing insane moves both up and down.  Well, in 2009 we saw insane up and down moves, but certainly did not hit any kind of bull market high due to the recession.  In fact we hit a bear market low in March 2009 and have been recovering since.

Year Ending in 0
Roaring bull market that may continue to hit highs.  Likely to develop a hard resistance that begins to kill the bull in the fall (around October).

Year Ending in 1
Typically a bear or bearish market.  Market will begin to slide off from the highs of the previous year and decline harder as the number of people experiencing larger losses increases.  After a small rally in the spring, the market slides as more people bail out of their stocks.  A pronounced late summer (usually August or September) slide should be expected, but is not guaranteed to happen.

Year Ending in 2
A bear market, market generally hits its lows in years ending in 2, and usually does so late in the year.  Generally flat to down with larger downside than upside moves.  Expect a sharper downside slide in the summer.  There will be a pop up after the summer low, followed by a decline.  Frequently hits its low in October or retests its summer low.  The fall low is typically the death of the bear.

Year Ending in 3
A baby bull market.  Previous year's lows will be frequently tested in the beginning of the year, generally by March/April.  The rest of the year is generally robust with an up-side bias.

Year Ending in 4
A sluggish bull market.  The market is digesting the gains seen in the last half of the previous year.  Generally a good year to the upside, but not as good as a year ending in "3."  A very good Fall/Winter move should be expected.

Year Ending in 5
A bull market.  Typically good, exceptional to the upside, especially in the Fall/Winter zone (October 25th - end of the year).  The early part of the year can have significant moves in either direction (up or down), but the Summer slide downward is less pronounced; it may only be slightly down or sideways.  The Summer time slide is seldom seen to the degree that it is in other years here.

Year Ending in 6:
A bull market.  Typically trading sideways to up as it digests the previous year's gains.  Good moves in both directions (up or down) are expected in the first half of the year.  Good moves to the upside are expected in the Fall/Winter zone (October 25th - end of the year).

Year Ending in 7:
A bull market that gets very choppy with large swings in both directions.  Expect a hard selloff, often considered a crash, or at least a severe correction.  The depth of the crash/selloff is a great place to buy stocks for the Vault, and is likely the low point for the next few years.  The decline can come at any time in the year, but is most likely to hit in September or October.

Year Ending in 8:
A bull market that simply continues the rise from last year that began after the big drop.  A year ending in 8 will have strong moves to the upside, followed by brief sideways moves to "digest" gains before continuing with more strong upside moves.  A sharp Summer decline is likely, and will usually be severe enough to scare a lot of people out of the market.  Following a September or October low, an EXTREMELY strong Fall/Winter zone (October 25th - end of the year) is typical.

Year Ending in 9:
Roaring bull market that generally sees it's high this year or next, with stocks seeing huge/crazy/insane moves in both upward and downward directions.  Basically this is a "strap on your helmet" year, because it's going to get nutty.

Stock Market Calendar

This Market Calendar works like clock-work and is your primary basis for trading decisions.  It provides the "biggest picture" of what the market is doing, and is to be followed regardless of whether we are in a Bear or Bull market.

As a note: it says late October is a "good time" to buy vault stocks, but the prime time of the year to buy Vault stocks can come as early as late July.  Late October is simply the latest in the year you should buy vault stocks, as the market almost always rises from here into January.

January to February
EARNINGS Season.  Excellent time of the year to make money in the stock market (to the up side or the down side).  A monkey can throw darts at the market and make money.  Do not confuse this with talent or ability.  Expect profit taking in mid January AND in mid February (ie: if the market was going up, expect a decline, and vice-versa).  Look for heavier profit taking at mid February through the end of February.

March
WARNINGS Season.  Look for a small pop after sell-off in February very early in the month.  Generally a tough, tired stock market.  Look for call entry points between the 15th and the end of the month, especially the last few days.

April
EARNINGS Season.  Generally good month (to the upside).  From the 1st through the 10th look for a rising market.  From the 10th to the 20th expect a sell off for tax season (the sell off can last one days or all 10 days, but it will happen during this time frame).  From the 20th through the end of the month, most stocks will be stable to up.

May
EARNINGS Season.  This is a 50/50 month.  From the 1st through the 15th, stocks trend upward as we finish up earnings.  From the 15th through the end of the month, expect heavy profit taking.

June
WARNINGS Season.  Tough, tired-acting market.  Look for call buying opportunities using charts between the 7th and 22nd of the month.  The summer months can be very choppy or just plain dead, be prepared for either.  The summer months almost always have very low volume; most traders live by the adage of "sell in May and go away."  Watch for call buying entry points the last 2 or 3 days of the month.

July
EARNINGS Season.  Can be good (to the upside) but look for profit taking mid-month.  Another summer month; generally a choppy time in the markets.  Use the profit taking in mid month to look for entry points on the charts (especially on stocks with AUG earnings or splits).

August
EARNINGS Season.  Earnings ends quickly.  Usually a choppy market with a negative bias.  Look for heavy profit taking.  Look for a sell off in the last 10 days of the month.  Watch the charts for buying entry points during the last few days for the post Labor Day bounce.

September
WARNINGS Season.  Sometime during the first 10 days look for an upward pop in the market followed by a hard sell off.  This pop is the post Labor Day bounce.  The moves will usually be dramatic (both the pop and the sell off) and will both usually be intra-day moves, rarely lasting more than one trading day.  September usually stinks after the 10th.  Look for buying opportunities (for calls OR puts) on the charts the last few days of the month.

October
EARNINGS Season.  This is a scary time in the market, as most major crashes happen in October.  Part of this is due to the fact that mutual funds must sell their losers by the 30th of October for tax purposes, causing a lot of downward pressure on the market.  Play with caution, taking profits quickly.  Look for entry points (for calls OR puts) on the charts during the last 3 to 4 days of the month.  The last few days to a week are generally a great place to purchase vault stocks (watch the daily and weekly charts for this purchase decision).

November
EARNINGS Season.  If there is no October crash, the markets will rise dramatically the first 2 to 3 weeks.  Look for HEAVY profit taking from Thanksgiving through the end of the month.

December
WARNINGS Season.  Expect HEAVY profit taking from November to continue until between the 5th and 8th of the month.  Look for buying opportunities (for calls OR puts) on the charts around the 5th to the 8th.  December can be a good month (ie: a rising market).  If it is a rising market, it is known as the Santa Clause Effect.  The market can be choppy.  Look for major buying opportunities (for calls OR puts) on the charts between the 15th to the 22nd.  The market suffers Christmas hangover from the 22nd to the end of the month.  Lookf or entry points (for calls OR puts) between the last 2 to 3 days of the month.

OEX Trading Rules

Rules for trading the OEX are as follows:

1) Only purchase this month's options - never buy time.

2) Purchase out-of-the-money options for a multi-day play, or in-the-money options if you plan on being in and out of the trade in the same day.

3) Only purchase strike prices ending in zeroes (ex: 600, 610, 620, etc.)

4) Purchase the strike price with the most volume after the open that is one to five strikes out of the money.
As an example, since we only purchase strike prices ending in zeroes: 600, 605, 610, 615, 620 would be 5 strike prices, but we would only consider 600, 610, or 620.

5) Only use the 55 minute or 34 minute charts as the decision chart, and the 8 or 5 minute chart as your action chart.

6) Due to the charts we are using we expect to be in these plays for a matter of minutes, up to a MAXIMUM of 4 days.

There are usually two very opportune areas in each month to play the OEX:

1) The 7 trading days that include the last 4 days of one month and the first 3 trading days of the next month.

2) The 8 trading days leading into expiration Friday.  Though a play could be started on Wednesday (first day of the 8) it is generally preferred to begin plays on Monday (5 days before expiration).

General Notes:

• All plays should be closed by 1:00 PM on Expiration Friday AT THE LATEST.  After 1:00 PM noone cares about options that will expire in 3 hours.

• OEX options move in either direction very quickly - be prepared!

• There can be no "deer in the headlights" in the OEX.  If you become a deer in the headlights, you will be run over by the OEX.

September 26th, 2013

The markets have been down all week until today, posting very small yet still positive gains today.  After the Fed's surprise "no taper" announcement last week, the markets irrationally skyrocketed for a day or two.  They have been nose diving since, as fear that congress may allow the US to default on it's debts sets in.

Congress is in another debt ceiling debate, where the debate whether to raise the debt ceiling so the US can pay it's bills and honor it's financial obligations.  Currently the US will run out of money by early to mid October if the ceiling is not raised, and this would result in the US defaulting on it's loan payments.  This would prove catastrophic.

Everything points to congress reaching a decision about this on Monday, September 30th.  Considering tomorrow is Friday, I think we'll hang in there on some down-side plays and then pull out by the end of Friday, then wait and see what the markets do on Monday.

In other news, it was revealed today that in the month of September so far, companies have issued a record amount of bonds as rates have been so low that it becomes very financially "advantageous" to do so.  A big part of this too could very well be fueled by the Fed's own bond buying program.

September 18th

Making this a quickie as I am really REALLY angry with myself right now.

I went AGAINST my own advice... And traded today...and lost my ass at 2:00 when the fed shocked the world by announcing they would not taper!  I was in a put option play on the QQQ and when 2:00 hit, my position got cut in half.  I am so angry I cannot put into words how angry I am!

Lessons learned: when the Fed is expected to make a huge announcement, EXIT YOUR POSITIONS THE DAY BEFORE.  There is too much potential for a massive loss!

Lesson two: I stayed in the trade as long as I did because I was already down on the trade.  YOUR FIRST LOSS IS YOUR BEST LOSS.  IF THE TRADE IS NOT WORKING, CUT YOUR LOSSES AND GET OUT.  If it's not working NOW, WHEN IT'S SUPPOSED TO, the why will it work later? Don't give a losing trade "time to work"... Cut and run!

I'm off to lick my wounds and hopefully not lose my mind.  I am a very faithful man and I can say with full confidence yes I was stupid today and yes I need Jesus right now.

September 15th, 2013 QQQ Analysis

Chart is below, and as you can see there was a MAJOR gap up in the QQQ followed by a sell off that lasted pretty much the whole session.

The gap up was supposedly caused by Lawrence Summers withdrawing his name from candidacy to become the next Federal Reserve Chairman after Bernanke steps down in January.  The hard sell off is a mystery in itself, but it was due for a short term dip anyway, so that's most likely the cause.  The gap up probably just gave it extra room (and an extra excuse) to fall.

The futures are down as I type this at 8:25 PM EST.  Perhaps this is the "pop" followed by the "hard sell off" I've been waiting for...

21 Minute Chart

It certainly did a good job smashing downward through a key support level (the bold pink line).  The StochRSI is currently oversold and the MACD histogram is showing some signs of recovery.  Having said that, it's too early to tell if the QQQ will rebound or continue falling.

Check the NASDAQ futures Tuesday morning and use them as your trend chart when making trading decisions for the QQQ.  

Oh, and I WILL NOT be trading on Wednesday as that is when the Fed will announce their tapering plans following the FOMC meeting.  There's too much potential for a trade to go against me during Wednesday's session, so I won't be participating.  I will, however, be actively watching to see how the market responds, and I will be eagerly waiting for an opportunity to take advantage of this!

QQQ Analysis, September 14th 2013

Wanted to take a moment to look at the QQQ seeing as it's probably my most frequently traded security.

I'll be posting the 21 minute, Daily, and Weekly charts.  When trading the QQQ I typically use the Nasdaq 55 minute futures as my trend chart, however I'm doing a more in-depth analysis of the Q's so I'm doing longer term charts.

21-Minute Chart

The 21 minute chart (aka my "Decision" chart)  shows that yesterday there was a huge dip in the morning, but the QQQ recovered as the day went on, and pretty much got back to even.  Most of the good trades have been to the upside on the Q's lately, and you'll see why when you look at the Daily and Weekly charts.

Daily Chart

 The QQQ has had a few dips the last couple of months, but for the last week or two it has been going up strong.  As you can see, the last few days it seems to have stalled out.  A lot of this is indecision over the upcoming Fed meeting, which we'll know more about the Fed's bond-buying tapering plans this coming Wednesday.

The MACD histogram is shrinking, and the stochRSI is topped out in the "overbought" region, so I would suspect some sort of dip coming up here soon.  Plus the ADX is showing weakening in the current uptrend.  The historical timing of this would coincide with the after-Sept-10th dip that I've been expecting.

The large pink line on the Daily is a trend line drawn off the weekly chart, which is coming up next...

Weekly Chart

Up, up, and away!  The weekly has been going up strongly since about a year ago, and has been holding a steady trend shown by the bold pink line I drew.  The weekly MACD histogram is showing some weakness.  The stochRSI still has some room to run, and the candles have yet to hit the top bollinger band on the weekly.  The weekly shows that, long term, the QQQ still has some room to run to the upside.

In Summary

In summary, there is a lot of indecision headed into the results of the Fed meeting next week.  We'll know the results on Wednesday, September 18th.  The 21 minute chart is showing choppiness, having sharp/quick downside moves that are brief and more sustained intra-day upside moves.  The daily is showing signs of topping out, and may have a brief downside move soon.  The weekly is showing that it still has some room to run to the upside.

I would say we're going to experience a dip going into the Fed meeting as investors ponder just what the Fed will do.  Then, depending on the results of the Fed meeting, we'll either see the QQQ rocket up or sell-off sharply.  There's so much hinging on the Fed meeting that I honestly cannot predict what will happen, only that (from a purely charting standpoint, ignoring the Fed entirely) there should be a short term dip on the daily soon.

September 14th, 2013

Today is a Saturday, but I figured I'd post some thoughts I have on the market as of late.

I keep expecting the market to make a down move just because A) September is historically the worst month on the stock market and B) According to the "market calendar" I follow, September is supposed to be a down month after the 10th with some buying opportunities presenting themselves toward the end of the month.

So far things have been up, up, and up some more.  The Fed is expected to announce their tapering plans for their bond buying program at the conclusion of a 2 day meeting on Wednesday, September 18th.  Given how the markets reacted to even slight whispers of Fed plans back in the summer, I'm sure the markets will have some sort of reaction.  Whether this reaction is up or down, though, depends on what the Fed announces and how they announce it.

I think it's good long term, because they've been pumping so much "heroin" into the market with this bond buying that the market has become high and addicted to it.

Additionally, the US has come to an agreement with Russia for a peaceful resolution to the disarmament of Syria's chemical weapons cache, at the behest of Vladimir Putin.  One week ago we were beating the drums of war, and now we've reached a peaceful resolution.  This will certainly bode well for the market, seeing as it was showing some weakness at the mention of war a few weeks ago.

On the whole not a whole lot else going on.  There are some signs of economic weakness popping up such as weakening consumer sentiment, and also weakening in job creation.  We continue to create low paying "hamburger flipper" jobs, while good paying jobs seem to be getting more and more scarce.  This is quickly turning into a nation of kings and paupers.

September 3rd, 2013

Alright, we're moved into the new house and settled.  My office is set up, and most of the "to do" stuff that needs to be done when one moves into a new house (painting, caulking, spackling, etc etc etc) is done.  This means I can finally get back to updating this blog on a regular basis.

I know the month of August was a huge down month in the market, and there was a lot of talk about the Hindenburg Omen.  Additionally, there's still a lot of anxiety about the situation with Syria.  I'm guessing that if we do go to war with Syria it may negatively impact the markets.

On the whole, though, the market hasn't been that volatile the last week or so.  Today was the first trading day after Labor Day, though, and that means we're watching for the post-Labor-Day "pop" which will be followed by a hard sell-off.

The markets in general, though, have definitely turned over.  I think a lot of what we're seeing is stock prices being over-inflated by the Fed's "heroine effect" of pumping money into the system with their bond-buying initiatives.  Don't get me wrong, I say ride the wave as long as they keep feeding it, but don't expect to ride this tidal wave of cheap federal money for ever.  When this does end (and it will), just be ready and make money to the downside.

Actually, be ready to make money to the downside anyway, because that's where the market's headed for at least the next month or so.  There is still the very real possibility of a crash by October.  Especially since there's possible war with Syria looming, possible fed tapering, and mutual funds have to dump their losers by the end of October for tax purposes.

Today the biggest news came from the tech giants.

It was revealed that Apple's share of the smartphone market rose 7.8% compared to this time last year, and Apple now controls 43.4% of the total global smartphone market.  Apple shares surged early morning on the news, but slowly declined as the day wore on.

Microsoft bought out Nokia in a $7.2 Billion deal.  Shares of Microsoft sank over 6% while shares of Nokia surged over 25%.  Microsoft struck the deal hoping this would give them a larger foothold in the mobile devices market, currently dominated by Apple.

Amazon.com announced a program today called Matchbook.  Matchbook basically lets you get an e-book copy of any real, physical book you purchased through Amazon.com for $2.99 or less (in many cases, for free).  Shares of Amazon.com surged on the news.

Since it's a new month, I'm going to look back at the monthly charts for the Dow, S&P, and Nasdaq.

Dow Jones Monthly

Nasdaq Composite Monthly

S&P 500 Monthly

August 21, 2013

It's been a couple of weeks since my last post.  My apologies!  I have been trading and keeping up with the markets, however I have also been starting a business and getting a house ready to move in to.  So between everything going on finding time for the blog has been hard.

Recently, however, market news has come to light and I think we're on the precipice of witnessing a "once in a decade" event on the markets.  All year the market has been riding high on cheap an easy money pouring in via the Fed's bond-buying program, and the stock market has reached all time heights by riding this wave.  Recently some Fed executives have been whispering about the Fed tapering it's bond buying which, in turn, would taper off the some 86-billion-dollar per month bond buying the Fed has been feeding the market with, which in turn would lead to an overall market decline.  Today we were supposed to get some sort of hint from the FOMC meeting minutes as to what they may be planning.  That hint never came, and the markets seem paranoid at the prospects of even a possible tapering.

Add to this the fact that the markets have been declining the past couple of weeks, and add to it that there have been occurences of the so-called "Hindenburg Omen" this summer, and it all spells a downturn in the markets (at best) and a crash (at the worst) in the coming months.  Seeing as mutual funds must sell their losers by the end of October for tax purposes, I say if a crash does happen it happens between now and the end of October.

See more on the recent re-emergence of the Hindenburg Omen on Yahoo Finance and also on Business Insider.  Long story short, the Hindenburg Omen is a mixture of several different technical indicators that, if they all occur on the same day, it is a bad omen.  If they all occur on the same day, and we have at least two of those such days in the same 30 day time span, it spells possible disaster.  If we have several of these such days in a short time span, it spells an almost certain market crash.

There have been 5 Hindenburg Omen's triggered in the last 8 trading days.  The last two times they occurred with this level of concentration and frequency were before the crash of 2000 and before the crash of 2007.

What do I think?  I think a lot of this hinges on the Fed and how much paranoia Wall Street exudes surrounding the Fed.  Sure, things are certainly going to go down for the next month or two.  That's to be expected, what with fall approaching.  What will vary is by how much things go down and if we actually experience a crash.  If the fed begins tapering it's bond buying, I would say we're almost certainly looking at a crash.  If the Fed pledges to not taper till the beginning of 2014, I think we'll see a market decline/correction and possibly a crash.

As long as Wall Street continues to get it's "heroine" from the Fed, it'll keep flying high.  However, as with any substance dependency, once the "stuff" is cut off, there's a hard crash that follows...

Multiple Day QQQ's Play

Rules for trading the QQQ's using a multi-day time frame.

1) When the Daily Nasdaq Futures charts and the Daily QQQ chart indicate a trade, use this as your decision.

2) If using an action chart, use the 21 minute as your action chart.

3) Purchase options either 1 strike price in the money or 1 strike price out of the money.  Only buy out of the money if it's within like 10 or 20 cents of being out of the money.  In the money is ALWAYS the safer bet.

4) Purchase plenty of time, you want enough time to capture a multiple day move.

5) Enter the trade when the bid/ask spread is no more than 5 cents apart.

6) If the Daily QQQ chart is coming off the bottom bollinger band headed up, or the top bollinger band headed down, you can typically expect a large move that can be as much as $4 per share.

August 5th, 2013

Laying down in bed on the iPad so no pics of charts to post today!

Mostly a quiet Monday anyway.  Today saw the least trading volume all year so far, and the markets experienced a modest down day.  Honestly I think they're due for a correction given the incredible up moves that have been taking place lately.  Not a whole lot of bad news rearing its ugly head, and gas prices have remained fairly stable so there's not been any undue stress put on consumers either.

We are winding down some majorly positive earnings reports too so I think that as earnings season closes, we may see a pullback simply because supply and demand requires it.

Of course the talking heads on tv will come up with a reason for the coming correction but hey... If they were any good at this they'd be retired instead of on tv.

Steps to a Great Trade

These are the steps to a great trade based on my own individual trading rules.  I'm posting this here for personal reference.  If you read this and don't get it, it's probably because you didn't take the same classes I took :-P lol

The weekly is to ALWAYS be your trend chart UNLESS a quality trend line can't be drawn with it.  THEN AND ONLY THEN will you use the daily as your trend.  THIS INCLUDES THE SUMMER ZONE!!!!  In Summer, the daily will FREQUENTLY be our trend chart but NOT ALWAYS

 

The 233 chart is only a decision chart and can be used as one throughout the year.  The 55 is only a decision chart.  45 is occasionally a decision chart during summer.  21 is action when daily is decision (also used for intra day Q's trade).  8 minute is action chart when decision is 55 or 233.  5 and 3 minute are used for 5 minute technique, slingshot, and warning trade.  In 5-minute technique and slingshot, the 5 is both the decision & action chart.

 

Big charts = big money (duh!), peaceful trading experience, very few losses (following all the rules all the time), less opportunity but less risk for loss

 

Little charts = little money (duh!), high anxiety trading experience, dramatically increased number of losing trades, more opportunity but more risk for loss

 

Weekly, daily, and 233 are "big" and the rest are "small"

 

Daily charts for decision = the trades will usually last 3 days, sometimes going into weeks.  Fall/winter will usually be weeks, transitional will shorten up as it gets closer to summer, and summer will usually last only a day, rarely 3, and almost never a week.  It depends on what trading zone you're in.

 

233 for decision = trade lasts anywhere from half a day (tho usually at least a day and a half) and possibly turning into 10 days.  10 days is the absolute max.

 

55 for decision = trade lasts a matter of hours (anywhere from 1 to up to 24 market hours).  24 market hours is about 4 business days.  This is the MAXIMUM that they ever go, they rarely reach this

 

34 for decision = trade lasts for a few hours, less than one market day.

 

Number of candles after a cross will RARELY go more than 20.  FEW trades go the maximum length.  If you're in a trade for 20 candles or more, GET OUT!!!!

 

Steps for a great trade!

 

1) Check the trend line

 

2) Go to decision chart.  Only trade the FP or HRFP.  HRFP doesn't indicate the size of the gain, but it indicates the size of the confidence in the trade.  HRFP just works more often than FP, but they're both incredibly reliable.

 

3) When following the decision chart candle closing, switch to the action chart.  EXCEPTION: 233 chart closes 2 candles a day, one at 1:23 and one at 4:00, but we'll consider it closed at 3:50.  This is the only exception to waiting for a candle close.

 

4) The action chart will look like the move has been going on for some time, to the point where it'll look like you've missed the move.  You haven't, it's cool.  There will be approximately 3 of the 21 minute candles in an hour if the 21 is your action chart.  Your action chart may be at the top of the bollinger bands, about to turn over, etc... but it's cool!  Wait for it to back up then turn up, this is when you get into the trade.  Wait for a pullback on the action chart before trading.  A pullback is when a quality trend line can be drawn connecting at least 3 points, then having it broken, then having the majority signaling the trade (a FP or a HRFP, but on the Cd he says "Christmas cross" or "macd").

 

5) After entering a trade, you switch to the decision chart & then wait for exit criteria.  RIGHT NOW!

 

EXIT CRITERIA:

 

1) If you're in a trade and hit a 20th candle in whatever time frame you're using for your decisions, GET OUT.  You are playing with fire and WILL get burned.

2)  New Students: up a buck & out.  You have to be right with real money at least 25 consecutive times in a row before you go beyond up a buck & out.  Beyond this, you will be "happy in Seattle."  You're never going to be Bill Gates on a single trade.  You will build a fortune off being "happy in seattle" over time.

 

3) Up 100% = GET OUT!

 

If you work 8 to 5 and cannot see the stock market at all, you do not use an action chart.  You ONLY have a decision chart & an action chart.

 

If you can not see the market during the day while it's open, you can ONLY use the weekly for trend and daily for decision.  If you can only see the market maybe twice a day for 20 minutes total, then the 233 is your best bet.

 

If the 55 is your decision chart, the FIRST candle of the day closes at 10:25, so the first candle of the day closing is your decision chart.  Ignoring the fact that this is amateur hour (for this example), you'd go to your action chart & wait for the action chart to signal a trade.  Sometimes, you will see the decision at 10:25, but the action chart won't signal a trade till like 3:30.

 

Amateur hour is the first hour of the day.  This is where ignorant people have invested purely off stock "news."  Anyone who trades during the first hour will get KILLED!  At lunch time, the market sags a little if it had been rising, or it rises a little if it had been falling.  This is the market going to lunch, so to speak. The beauty of the 233 is that it balances out these 2 portions of the day - the first 233 candle of the day captures both amateur hour and the lunch time sag (or rise).  The second candle captures the rest of the day.  So the 233 candle gives you a good idea of how the stock did despite amateur hour & lunch time.

 

If you miss a stock going up, cheer it on.  Because after up comes down, and you can always watch the up and then make money on the down.  So when a sector is hot, look for it to go down, and ride the down trend for a good play.  If they're talking about a sector being hot early, get on.  If they've been talking for a while, prepare for a drop.

 

Have a basket of 10 to 12 stocks that you trade.  Included in this basket are your expert stocks.  Over time you will gravitate toward 18 to 20 stocks you trade, including your expert stocks. 

 

About the MACD

 

The MACD has a histogram on it that looks like a comb with vertical black lines.  The histogram ALWAYS is a road sign telling us a turn is possibly coming.  The histogram will ALWAYS turn before every trade, but just because it turns does NOT mean it's a trade.  Do NOT turn on that sign, wait for your indicators!  It means a trade may be coming!

 

Remember it's a sign!  The stocks will keep going in the direction they've been going for a little while.  It's like a road sign, you don't turn AT the sign, but the sign tells you the turn may be coming up.  But not every sign tells you to trade, it tells you there's a possible trade coming up.  NEVER get in on the histogram, but know a possible turn is coming.

 

If there's no FP or HRFP, can it be a trade?

 

Yes, it absolutely can.  If you research how a stock behaves over several years of its history, and can identify repeatable patterns through specific dates or events, you can trade without the HRFP or FP.

 

If your charts matches your history & research, you trade boldly there.  If the charts do not match the history & research, you either trade the chart with caution or you don't trade at all.  Just because history dictates something, it does not mean you should trade.  A stock may have a history of doing something the past 10 years, but this year may be different!

 

Studying stock history

 

Different stocks hold at the different average lines in different ways... and they hold in different ways at different times of the year.  That's why you research!

 

Explaining the trading zones

 

In the summer time there's no volume.  This is because everyone's on vacation (ie: less trading).  As a result the market is generally flat in the summer time.  When do people come back from vacation?  After labor day.  After labor day is when the market generally starts rising again.

August 2nd, 2013 QQQ 21 Minute Intra-Day

And now for the QQQ 21 minute intra-day chart.

The QQQ started with a slight dip in the morning, and pretty much took off from there with no looking back.  It is continuing to follow the strong multi-day up trend, and even closed the day at a historical all-time high.

And now for the chart...

August 2nd, 2013

The major news item today had to do with the latest jobs report.  The US economy added about 162,000 jobs, however this fell short of expectations of 200,000.  Additionally, average hourly earnings fell 0.1% in July, which is the first decline since October 2012.  Finally, US job numbers for May and June were revised downward, painting an overall negative picture of the employment scenario.

Furthermore, 69% of the jobs created in April, May, and June were in the 3 lowest paying sectors in the economy - Retail, Food Service, and Administrative/Janitorial.  Unemployment did fall to 7.4%, however Unemployment does not include every person actually out of work, it only includes those who are actively filing for and receiving unemployment benefits.  Considering the massive influx of workers into low paying jobs, and it's no wonder GDP hasn't been growing at the rate it "should" be.  Add in the fact that we didn't add as many jobs as expected, and one has to wonder where we're going next.  Has this truly become a nation of kings and paupers?

The markets, despite the negative jobs news, were up today on strong earnings from a variety of companies.  Today winds down the end of earnings season though, so expect reality to "set in" beginning next week when the negative jobs numbers finally make their way into Wall Street.

And finally, the 5 minute chart of the DOW...

The market opened up and had a HUGE drop to start the day.  Beginning around 9:50, the market staged a small come back until 10:30, then dipped again going into 11:00.  From about 11:00 AM through the rest of the day, the market steadily rose and actually closed at an all-time historical high at the end of the trading day.

August 1st, 2013

Lots of positive news on Wall Street today boosted the Dow and S&P to record highs, while the Nasdaq hit a 13 year high.  Jobless claims were less than expected, and the ISM index for factory activity rose to its highest level since June of 2011, which bodes well for American manufacturing production.

In other news, the SEC won a lawsuit against Fabrice Tourre, an ex-Goldman Sachs VP responsible for the creation of "Abacus" - a multi-billion dollar mortgage backed security that was designed to fail from the beginning, but was marketed to potential clients as a "sure thing" and is considered one of the catalysts that lead to the economic collapse in 2008.  Mr. Tourre was found guilty of securities fraud in excess of $1 Billion.  Goldman Sachs already plea-bargained to the tune of $400 million previously, and the company was not involved directly in today's ruling.  However, there is now speculation that individual investors may use this as a basis for future civil suits against Goldman Sachs.  Only time will tell.

Finally, automotive sales have increased yet again.  Pickup sales are leading the pack as commercial customer seek to replace trucks in their aging fleets.  Commercial customers need replacement trucks because, as the economy picks up and work is required, so to will trucks be needed to do the job.

And I end with a 5 minute snap shot of the DOW

Note the HUGE gain at the beginning of the trading day, followed by the narrow range that the index traded in for the rest of the day.

August 1st, 2013 QQQ 21 Minute Intra-Day

The QQQ gapped up very hard at the open today.  This was mostly due to positive news coming in on the economic front coupled with the Fed declaring it will continue to pump money into it's multi-billion dollar bond buying QE program for the foreseeable future.  After the gap up, it remained flat most of the day, then advanced even further beginning around 2:00 PM today.

I peeked at the daily, weekly, and monthly charts for the QQQ and this advancement will be short lived.  The weekly chart and monthly chart show that it's recent movements upward are following VERY steep trend lines that will be broken soon.  On the weekly it actually recently broke a steep upward trend, pulled back, and is now following a NEW steep upward trend.  Well, it was new as of like a month or two ago lol.

See that note that says -70 LMT?  I recklessly entered a PUT play on the QQQ anticipating a drop today, but I didn't use a trend/decision/action progression or anything of the sort.  I just bought the PUT options because I felt it "couldn't go any higher" which is probably the biggest rookie mistake I've made in a long time.

I'm airing that out here to remind myself that, even after 6 years, I can still make rookie mistakes.  I'll re-evaluate the position in the morning now that my head is clear.

Just for kicks here's the daily of the QQQ...

And also the weekly of the QQQ...

It doesn't have to fall far to get me out of the trade at the spot where I put in my GTC sell order for the options, but it needs to fall quickly, something I'm not so sure of.  Again, this was a very UNDISCIPLINED and ROOKIE trade, and I'll be damn lucky to hit my GTC sell order.

July 31st QQQ 21 Minute Intraday Chart

Posting a 21 minute intra day chart of the Powershares Q's.  As you can see by the bold pink line, the 21 minute chart is following a nice little uptrend there.  Let's see if it continues...

End of July Trends

I decided to try something new.  Since it's the end of July, I took a look at all my trend charts (aka - weekly charts) and did a review of them.  I'll be posting the ones here where I noticed an actual trend, or where I noticed support/resistance levels that are set to be broken.

The thick pink lines on each chart denote either a trend, a support, or a resistance.

Apple (AAPL)

AMD (AMD)
AMD looks like they broke below resistance on the weekly

Citigroup (C)

Goldman Sachs (GS)

Nvidia (NVDA)

Sandisk (SNDK)

Does not have a trend, but DOES have a fat pitch going down on the weekly

Yahoo (YHOO)

July 31st, 2013

Today was a fairly eventful day as far as news items go.  This story on Yahoo Finance does a nice job summarizing them all

The Fed finished up a two day meeting, and the market was waiting with bated breath to hear what Bernanke had to say at the end of it.  Bernanke announced that while the economy is growing, it is not growing at the pace they would "like to see" so the Fed will continue pumping money into the system via it's bond buying program to keep inflation and interest rates in check.

GDP for the 2nd quarter grew at 1.7%.  Originally, 1st quarter GDP was reported at 1.8%, however it was revised down to 1.0% today.  SO.... after revising the 1st quarter number down, 2nd quarter GDP grew at a faster rate.  Seems rather convenient to me, but I'll take it.

Personal savings rates are up to 4.5%, which is good for the economy's long term health.

Unemployment is currently at 7.6%, and is expected to report in at 7.5% on Friday.  So keep a close eye on those Friday unemployment numbers to see if there are any surprises.

The markets themselves remained relatively flat today.  There was a massive up-swing to start the day (lasted all of amateur hour from 9:30 to a little after 10:30), followed by a massive sell-off into the Fed's 2:00 meeting, followed by a massive up-swing after the announcement that lasted till 3:00, followed by a massive sell-off in the final hour of trading between 3:00 and 4:00.  Institutional investors usually play in the last hour of trading each day, so I'd say this sell off is a good indication that institutions are going to unload their wares.

And here's a 5 minute chart of the DOW today...

July 29th, 2013

Been a few days since my last post.  Back was killing me Thursday, July 25th and I spent Friday, July 27th trading.  My results Friday were good.  I successfully executed a put option play on the QQQ ETF with an original position size of $3,000 at 10:27 AM and exited the trade with a profit of $1,000 at 10:50 AM.

Today's results were not as spectacular, however I did manage a $100 profit on a sniper call play on GS.  Toward the end of the trading session I did enter a multi-day put play on GS as their stock is coming off a 52 week high, the market is turning over, and it has a lot of room to close the gap between the trend line.  Plus the entire financial sector is facing pressure with rising interest rates, and the Federal Government accusing JP Morgan (JPM) of manipulating energy prices out west.

Aside from rising interest rates and the JPM fiasco, the biggest news of the week will be Wednesday when Ben Bernanke announces the Fed's position on ending stimulus.  How the market reacts will be interesting, to say the least.

July 24th, 2013

Sorry no posts in a while, I've been dedicating my evenings to earnings research and truthfully haven't thought to take a break to make a post.  Today's post comes from my iPad because my back is killing me, so no pictures of charts or anything like that.

Earnings reports are coming full force.  Apple (AAPL) reported last night, and while revenue and profits are down compared to this time last year, Apple still beat because Wall Street was expecting a terrible quarter.  Apple is suffering from a slowdown of iPhone sales in China, but is being buoyed by an increase of iPad and iPhone sales here in the US.  They're practically the only Nasdaq stock that's advanced in the last 24 hours.

AMD reported two days ago as well.  Their earnings missed, and the stock has sunk since the announcement.  Despite the recent dive in their stock price, I am anticipating AMD is horribly undervalued long term.  They are making the GPU for all 3 of the major next gen video game consoles, and they are making the CPU for the biggest two (Playstation 4 and Xbox One).  Add to this the fact that it's July, and retailers have already received so many pre orders that they're worried about having enough supply (of Xbox One and PS3).  Add to this the fact that the life cycle of a console is 5 to 10 years, and you realize this is a minimum of 5 years of massive revenue for AMD.  If I were a private investor, I'd put every ounce of cash I had into AMD.

Other notable earnings beats included Facebook (FB), Baidu (BIDU), and Visa (V).  

On the whole the market has been making VERY small gains this week, going up maybe 10 or 20 points a day.  Today is the first real pullback the major indexes have seen.  Here recently, a lot of stocks and the broader market are acting like they're setting up for a correction to the downside.

And a lot of my charts are showing it should be soon...

Intraday NASDAQ Futures Charts (July 18th, 2013 - CLOSE)

I was looking over the Futures charts just now on a 21-minute intra day basis, and came across something odd on the NASDAQ futures charts.  Toward the end of the day, from about 2:30 till the end of the day, the NASDAQ futures fell off a cliff.  See what I mean on the 21 minute charts...

See this story on Bloomberg's website.

Basically, the futures fell following the release of Google's (GOOG) and Microsoft's (MSFT) earnings results.  Both companies posted strong disappointments.  No wonder, every company under the sun (Google included) are trying to figure out how to wring more money out of advertising on tablet devices.

Microsoft seems to have no end of bad news these days.  Windows 8 is a MAJOR disappointment on both tablets and desktops.  So they effectively failed at cracking the ever-growing tablet market, AND managed to alienate long time desktop users.  The announcement of the Xbox One alienated over 10 years of gamers who dedicated themselves to the Xbox brand.  About the only thing Microsoft has going for them is Office which, let's be honest, not everyone is tied to like they were in the late 90's and early 2000's.  There's Internet Explorer... which every internet geek worth their salt knows is junk.  Sorry Microsoft, you need to innovate before you go under.

QQQ 21-Minute Update

Just wanted to post the 21 minute chart as of the close of today, July 18th 2013.  The top pink line represents an existing level of resistance, and the diagonal pink line represents what WAS a support line, but which has now turned into a resistance line, as you can see.

From the chart below, it looks like QQQ broke below the supporting trend line to the down side, tried to recover, hit it's head on the trend line (confirming it has now become resistance), and is now set to head back down.

And the chart...

July 18th, 2013

Most of the indexes posted very small, although positive gains today.

On the whole not much news came out.  Google (GOOG) missed on earnings by a pretty wide margin.  This was mainly due to a decline in revenue from their ad service.

Financial stocks continued to pour it on strong this earnings season, with Morgan Stanley (MS) reporting a very strong beat on their earnings.  So far this earnings season, 75% of financial stocks have actually BEATEN their estimates, making a good case that the financial sector is coming on strong.

Bernanke made more comments today, who stated that the Fed's plans for winding down the stimulus were "not set in stone."  Basically this is a re-iteration of what he said before, that the Fed plans on ending Quantitative Easing, but will do so with discretion so as to not cause a panic in the markets.

Finally, the city of Detroit officially declared Chapter 9 Bankruptcy today.  This makes Detroit the largest city in history to ever declare bankruptcy.  I mean come on, who didn't see this coming like 5 years ago?  I pretty much knew this would happen, I just didn't think it would take this long to happen.

Oh, and for the BMY chart ;) lol

July 17th, 2013

So I didn't post yesterday because I started a new medicine for my back and it basically knocked me out stone cold lol.  However today's post won't mention yesterday because yesterday was pretty much a flat day.  Of course today was pretty flat too, although there were a couple of note-able news items.

SanDisk reported a large jump in earnings.  IBM reported a small jump after taking into account cost cutting measures, however they did state that growth was non existent in their "growth markets", indicating a slow down there.

Intel announced today that we should expect "little to no growth" for the rest of the year out of them.  This is symptomatic of the boom in the tablet market.  A lot more people are ditching traditional PC's for tablets.  I personally like having a PC and a Tablet, a PC makes a better work horse.  Having said that, a tablet can do about 90% of the things I need to do on a computer, so it's a nice substitute in most cases.

If Intel REALLY wants to compete they should start making tablet chips lol.

June housing starts fell 9.9%, which was much sharper than what anyone expected.  It looks like just when the housing market was gaining some steam, it's been hit below the belt.  Some blame Bernanke's comments for stalling the housing market, some blame the economy in general.

Bernanke announced today that the Fed WILL taper it's quantitative easing by the end of the year. He did say, however, that the Fed will do so within reason and won't do anything to jeopardize an economic recovery.  Bernanke's sent the markets on a roller coaster ride with his comments about QE.  First he says we'll do it, then we won't do it, now we will do it but "within reason."  Someone get the market some head medicine, I think it's turning schizophrenic lol.

Finally, the moment you've all been waiting for, a daily chart of BMY to see if I'm right...

Looks like a Fat Pitch going down, coming off the middle bollinger band and coming off a down trend line.  Prime time to buy some PUT options.