RSSArchive for November, 2006

The Welcomed Return of Emotion

November 29, 2006 at 12:55 pm

Man, this market has been boring. Up a few points every day it seems! The bulls took control back in the summer and they haven’t relinquished it since. The 4-month gain has been impressive, but it’s occurred in a very dull fashion without intensity.

On longer timeframes, the climb has been incredibly steady, but new buys along the way have been harder to find if you like to buy pullbacks. After all, about the only “dips” we’ve seen these past few months have been a few days of rest before the next wave of buying begins. Finding new buys for the most part has been like jumping on board a moving train like the one pictured at the top of this page – not easy to do.

That’s why this week has been so refreshing to see. Take Monday for example. This market was due for a good shakeout, and it’s already improving the trading environment for us short-term traders. Whether it proves to be a one-day wonder or if it’s the start of a little larger correction remains to be seen, and as usual I’m making no predictions. It will either end up being just a dip within the uptrend, or it will be the start of a change of character for this market. Either one is fine by me, I’m just glad to see a return of volatility and more important, EMOTION!

This has already been my best trading week of the month, thanks to plays like VSE. I noticed this energy stock over the weekend as it recently broke a lengthy trend line and since then has been stair-stepping higher. It had formed a bullish ascending triangle which looked ripe for a pop, and I went long at $23.00. Here are two looks at this stock’s chart, first the original chart given to members at on Sunday night, and then a look at it today as it reached our Final Profit Target for a 14.78% Gain:

VSE Bullish Wedge (Click for full size.) VSE was poised for a pop as the rebuilding process was already underway. We went long at $23.00 on Monday.

Chart Courtesy of TeleChart

VSE Breakout (Click for full size.) VSE wasted no time as it blasted higher by 14.78% in just 3 days to reach our profit target. I love to “Take the Money & Run!”

Chart Courtesy of TeleChart

As you can see, there are some great setups out there for the taking, and I think the recent volatility will only serve to create more short-term trading opportunities for those of us who are day trading and swing trading.

I’m excited about the market conditions heading into the end of the year, regardless of which direction things move. Just the fact that some emotion has again entered the equation will no doubt mean more chances to exploit profitable opportunities.

Jeff White
President, The Stock Bandit, Inc.

3 Ways to Improve Your Holiday Trading

November 21, 2006 at 11:55 pm

Ahh, the holidays…..for me they evoke thoughts of family time, big meals, and lots of naps during football games on TV! The holidays mean different things to different people, but no matter which ones you celebrate, you’ll be wise to take into account the fact that holiday trading sessions may require some adjustments on your part if you want to pull some money out of the market.

(I’ll keep this short and sweet because you and I both probably have some in-laws waiting on us!)

Holiday markets can be strange. The volume is lighter and the moves are just different. There’s fewer participants (reflected by lighter volume), and that means the market will often move differently than usual.

Let’s look at 3 ways to quickly adjust your trading approach for success during the holidays:

1) Shorten your timeframes. Light-volume markets are prone to reversals, so don’t be afraid to take quick profits into an initial move……those profits might disappear before you know it!

2) Go where the action is. Lately it’s been China-related stocks. But whatever the theme du jour is, locate the high-volume movers which are showing a change of character. Momentum traders will flock to the handful of stocks which are moving well during range-bound markets, so your best bet is to find those stocks and focus on trading them.

3) Don’t trade at all! (We often forget that this is an option!) Take a break from the market and come back when everyone else does. Spend some time with family. Scratch some items off that to-do list (did someone say “rake leaves?”). Rest up and recharge so that when you do return, you’ve got a clear head. Getting away from the screens is never a bad idea, and the chances are that you’ll come back better than you were when you left.

Whatever changes you make during these times, I wish you the best! Happy holidays from!

Jeff White
President, The Stock Bandit, Inc.

The 2nd Worst Feeling in Trading

November 15, 2006 at 2:04 pm

It’s no big secret that psychology plays a massive role in how the market moves. Fear and greed are driving forces which are always at play. How fast and which direction the market is moving is simply determined by the amount of these 2 equally powerful emotions.

In recent weeks, the bulls have gotten flat-out greedy! They have been unwilling to sell, and with the market pointing sharply higher off the summer lows, it’s no big surprise that they are feeling this way. Momentum is clearly on their side. Every dip is being bought, and that only perpetuates the cycle as traders get more confident with every dip that they can put cash to work and catch a ride higher.

During the same time, the bears (and underinvested bulls) have been fearful. With every uptick there comes a concern that the market may never look back. As a result, there has been steady buying pressure with underinvested bulls throwing cash at the market while the bears run to cover their shorts every time a pullback ends and things again turn green.

So how does this all tie in with the 2nd-Worst Feeling in Trading? Well, it’s pretty simple. We’re all in agreement that the worst feeling in trading is losing. Losing is no fun and downright painful! But when it comes to the 2nd worst feeling, I’d have to say it’s missing out.

When the market blasts higher and you’re sitting on a pile of cash, it’s a frustrating feeling. You see stocks on the move which aren’t on your screen, and the continual question you ask yourself is “why am I not in that?”

The move in EFUT this past week has been a perfect example, but honestly it’s pretty difficult to buy anything after say, a 200% move in a few days! So why beat yourself up over not catching it?

Trading leaves none of us immune to these feelings of missing out, but keep 2 things in mind going forward:

1) If you’re not catching a big move, the 2nd-BEST thing is to not be losing. Basically, it could be worse if you were actually fighting this uptrend.

2) Opportunities are FAR easier to make up than losses. If you aren’t seeing what you want to see, don’t sweat it. Take a break. WAIT for the setups you love before committing capital to the market.

I’m staying pretty selective right now with new entries. I am jumping into trades as I see them emerge and booking profits on the way up in pieces. Hitting singles can definitely get you into the Hall of Fame! But when no trades really “jump” out at me from the charts, I’m sure not forcing any new entries.

If you’re interested in seeing how I’m trading this market right now, stop by today to start your free trial. Our trading community has exploded this year as more and more traders realize the value they get from a membership at, so why not come see for yourself?

After all, missing out is no fun!

Jeff White
President, The Stock Bandit, Inc.

Thank Goodness for Backups!

November 13, 2006 at 10:18 pm

Over the weekend you may have noticed a little disappearing act by for a couple of days. Thanks to resolved server issues and having made regular backups to restore this blog, all is back to normal and it’s nice to be back! Sorry for any inconvenience this may have caused and hopefully you figured it out if you pulled up the site to see something very different than normal.

I’ll have something here for you in a day or two but wanted to let you know everything is fully functional again.

Jeff White
President, The Stock Bandit, Inc.

3 Keys to Buying Dips

November 8, 2006 at 12:29 pm

The nature of the current market environment is unique in that we have an interesting dynamic at play. Like trick-or-treaters on Halloween night, the dip buyers are out in full force! We’re not seeing very many rests within this powerful uptrend, and that means there are a LOT of temporary dips out there which are being viewed as buying opportunities.

Does that mean that you can just step up and buy any lower prices on any stock you see which is heading south on the charts? No way. For one reason, we’re most of the way through earnings season but we still have plenty of companies which have yet to report. That means potential land mines, which is one reason you can’t just buy any weakness. Another reason is that some stocks have indeed topped out and their runs are over. They’re going into hibernation and may not return to the light of day until next spring (or later!).

So what is a trader to do?

Here are 3 keys to consider when buying dips right now:

1) Look for support. This could be in the form of actual price support on the chart when a stock pulls back to a prior trading range or previous low, or it might mean a pullback to a key moving average within an uptrend. If higher lows are in place or you see an area of recent support, that means the buyers are lurking and that should help to keep the stock afloat.

2) Enter and exit in pieces. Make a partial buy as a stock returns to a support zone. You don’t have to go “all in” on the dip, and in fact it is often better to initiate a ‘pilot’ position to establish a trade in order to gauge the stock’s health on the front end of the trade. If the pullback continues, it will hurt a lot less! And of course if the stock finds some buying interest, you can quickly add to your position to capture continued strength. As your trade begins to work and you find yourself with “company” in the trade (others have bought the dip and the stock bounces), take a little bit off. Sell a chunk into the strength and get out in pieces on the way back up.

3) Have a plan. There’s no substitute for having a specific trading plan for every stock you enter. Be patient as you seek out new opportunities and take the trades which will offer you several times profit what you’re planning to risk. And finally, know exactly at which point you’ll sell your shares if the dip turns into a downturn. If the time comes when that level is reached, don’t delay and exit your entire position right away.

I’m adjusting my trading right now to incorporate more dip-buying techniques, so if you’d like to learn more about how I’m trading this market right now, drop by and start your free trial today!

Jeff White
President, The Stock Bandit, Inc.