Archive for September, 2009
Video Review of the Indexes 9-27-2009
September 27, 2009 at 1:10 pm
Those who have been hoping for a correction in the market finally got a small taste of one last week. It wasn’t a significant one, but it was the first 3-day dip we’ve had in a month. Does that mean the fun is over for the bulls? Let’s not jump to any big conclusions just yet.
After tagging new recovery highs (again), we saw the market reverse hard on Wednesday and show some downside follow through for the remainder of the week. We’re still above recent resistance levels (which may now serve as support), and the trend is still up. That could change, yes, but we’re to trade what we see and not what we think.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Understanding the Quiet Rally
September 23, 2009 at 8:32 am
It’s been one impressive rally…by some measures. The indexes have made an about-face from the March lows, refusing to look back as they erase so much of the carnage of the bear market. The move has been persistent and consistent…just a ton of green days.
But very few big days. Have you noticed?
I’ve been amazed at the lack of volatility, especially recently. It seems a huge day for the DJIA has become a triple-digit net change from the prior day’s closing levels. Just a few months ago, we were getting gaps that big to start the day, nevermind the several-hundred-point moves which were commonplace. Needless to say, it has indeed become a quiet rally.
In order to understand it a bit better though, I turned to an indicator to help make sense of it all, and I was surprised at what I found.
Different Directions
In the video below, I’ll walk you through my thought process that led me to doing this, and of course I’ll explain what it is that I discovered. Of equal importance, you’ll understand how and why navigating this market for as long as this rally runs its course will require a different approach than what is ‘typical’ (if there is such a thing in the market).
Here’s a video explaining it. Select the HD option and go full-screen for best quality:
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
The Power of Focus
September 21, 2009 at 9:23 am
Just last weekend, Tiger Woods collected another trophy. It was an impressive win by a wide margin, his 10th career win by 8 shots or more. And while he’s posted 6 wins this year alone, there’s one in particular I’d like to discuss today. Surprisingly, examining it offers some real value for us as traders.
On July 5th, Tiger held a 1 stroke lead heading into the 72nd hole of the tournament he hosts, the AT&T National. Needing only a par to win, he rifled a 3-wood down the fairway. Holding a 9 iron as he stepped to hit his approach shot, his focus was as intense as it had been all day. He chose a specific target, mentally rehearsed the shot, and executed it perfectly with a shot to about 12 feet. Enough for an easy 2-putt for the win.
The highlight reels didn’t mention how he played the 18th, and some would say it was downright boring and uneventful compared to other shots he hit that day. However, his focus did not waver with that all-important par at the last. He was ready for it, and he added yet another victory to his resume because of it.
So how does all this relate to trading?
Well, for each of us who have ever faced our screens with fear or trepidation, the study of a great performance by a top athlete will always offer applicable lessons. Observing someone else who’s producing great results under pressure gives us an opportunity to grow and improve, so it’s always an exercise worth doing.
Let’s learn a few things from Tiger…
Preparation = Confidence
When it’s time to get ready to play, nobody outworks Tiger. He’s willing to put in the necessary time to get the results he wants. Are you? When it comes to your trading, if you were to rate your level of effort with regards to preparation, how would you fare? The very best traders aren’t lazy. They thoroughly prepare for a variety of scenarios, and it enables them to respond in the heat of the moment with confidence. If you’re not confident, you’re probably not preparing adequately.
Confidence = Chances to Win
We’ve all heard the phrase ‘confidence breeds confidence.’ It’s true. Showing up with a winning mindset is at least half the battle, whether it’s sports or trading. It’s a positive outlook rooted in the fact that you’re ready for whatever comes your way. You’re patient yet aggressive, and you know that you won’t fall prey to hesitation or indecision. That mental sharpness elevates your performance, and it increases the chances that you’ll be at your best. As a result, winning becomes more likely.
Frequent Chances to Win = Success
Giving yourself the best chance to perform well day in and day out will repeatedly open the door for success to happen. It’s aided by good preparation and a thorough routine, and it results in better focus and even a more relaxed state when it’s all on the line. What each of us want is to have opportunities to create big performance breakthroughs regularly, because we know we’ll capitalize on some of those. Tiger wants to have a chance to win going into the back 9 on Sunday, to him that’s what it’s all about. Prepare in such a way that your odds for success naturally increase. Anticipate multiple scenarios, visualize how you’ll respond, and set fear aside as opportunities come your way. The confidence you’ll derive from that will go a very long way toward helping you convert a decent day or month into one you’re really proud of.
Whenever you have the opportunity to observe the best when they’re at work, do it. Regardless of the endeavor, you’ll see the power of focus at work and pull some qualities from that experience to apply to your trading.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 9-20-2009
September 20, 2009 at 12:59 pm
The market climbed higher once again last week, reaching its best levels since last fall with more persistent upside and relentless strength.
The bulls are flat-out refusing to rest, which has resulted in a continuous bid beneath the market. Every minor dip has been bought, which is frustrating both bulls who want to put cash to work at lower levels and bears who are itching to see a turn lower begin.
The wait continues at this point for a correction, and although the indexes badly need to pause or see some profit-taking, there’s still no technical reason here to turn bearish. The presence of short-term overbought conditions does necessitate caution on the long side though, and this week that could prove to be of particular importance.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Implementing the Time Stop
September 15, 2009 at 10:03 am
Staying patient with a position can sometimes pay off nicely. After all, not every trade works out exactly when we want it to. It might require a little more time than we originally expected before we see that P&L turn the shade of green we were looking for, and it’s sure nice when that happens.
But there is a flip side to the coin.
Sometimes you can be overly patient with a trade, giving it more and more time (dare I say too much?), just waiting for it to make its move. And I’m not referring to letting it move farther and farther against you – you know better than that!
I’m talking about the trade that simply goes nowhere.
Fortunately, there is a solution to the flatlining trade, which is to implement a time-based stop. This is essentially a countdown placed on the trade, that if nothing happens by a certain time, then either an adjustment is made to stop & target levels, or the trade is simply closed out. You know – so you can move on with your life!
After all, why tie up capital in a position which isn’t performing as expected? Kicking a stagnant trade to the curb can translate into more money to be put toward another opportunity, plus it enables us as traders to put our attention toward something more worthwhile.
Show Me the Money!
Just this week I faced this dilemma. I was swing trading SHLD on the short side due to the breakdown from a bear pennant pattern (see chart 1 below), but aside from the initial weakness, there was no follow through (see chart 2 below).
I had designated 2 targets for my exit, and of course 1 stop loss in case the stock reversed and went back above resistance, but none of those levels were reached. The stock refused to go down far enough for me to start booking profits (according to my trading plan), and yet it wasn’t bouncing enough to stop me out either.
Chart 1:
StockFinder Chart courtesy of Worden
Chart 2:
StockFinder Chart courtesy of Worden
Although SHLD was certainly underperforming the market, and I felt confident if market weakness ever arrived that SHLD would crack pretty good, that never happened. The stock simply formed a trading range, and I began to realize it was essentially a stagnant trade.
Time to Move On
Over the weekend, I decided I’d give the stock through Monday before making any moves, and so when it remained in its range, I tightened my stop heading into Tuesday, and today as the stock reached my adjusted stop I closed the position for a minor loss.
I know what some of you are thinking… Why give up on what might eventually develop into a good trade?
Don’t think of this as surrendering or giving up on a trade, because I know that can be difficult for traders who don’t mind being patient. Rather, consider it your responsibility as a trader to keep your capital working for you in the best manner possible.
That means putting it at risk when there’s a good possibility of profiting, and it means protecting it from risk when that potential isn’t present.
The longer we’re in a position as traders, the more we become exposed to company-specific, unplanned news…a surprise, if you will. Leaving a position at risk indefinitely raises the likelihood that news will eventually push the trade one way or the other. The problem with that is that a trade initiated from a technical standpoint should not evolve into a trade which is hopeful for news to make it move. We want real selling or buying to be the deciding factor, and when that turns stagnant then the basis for the trade is negated.
So as you work through your position sheets this week, consider whether some of those stocks are merely resting or if instead they’ve completely lost momentum and are now simply range-bound.
Do your best to determine if a little more patience is needed, or if instead a little less patience is warranted. Time is money, especially for a trader. It might be time to put that trade on the clock and set a deadline. A far better trade just might be waiting for you.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 9-13-2009
September 13, 2009 at 2:58 pm
Although last week was an abbreviated trading week, the bulls wasted no time in getting back to work. In the process, they propelled the indexes to new recovery highs, reaching levels not seen since last fall.
Needless to say, that keeps the uptrend very much intact, but it doesn’t mean reckless buying is warranted here. In fact, in the near term the market has become rather extended, and some rest and/or profit taking could easily develop. And actually, that wouldn’t be such a bad thing…new bases could be established after some rest which would offer a new mix of potential plays.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 9-7-2009
September 7, 2009 at 3:55 pm
Hopefully your Labor Day holiday was a good one! Mine was spent with family, relaxing and celebrating the 2nd birthday of my son – a great way to completely forget about the market in fact!
But it’s time once again to gear up for a brand new week of trading, and I’m excited about it. With Labor Day now behind us, seasonal volume should ratchet up in the weeks ahead, bringing along with it some stronger momentum – regardless of which direction this market moves.
Let’s examine some important levels in the indexes to keep an eye on in the days ahead, as that will have the greatest influence on how individual stocks are going to move.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
