All Entries Tagged With: "Chart Reviews"
Reversal Characteristics & Candidates
August 25, 2009 at 12:30 am
Stocks can reverse suddenly or slowly. Sometimes it takes place in one big bar, and other times it’s a process that occurs over time.
Because there are differences in how downside reversals can happen, after running across a couple of reversal candidates in the charts, I wanted to share a couple here on the blog.
Uptrends will often times be followed by corrective action, which may pave the way for further upside down the road. But a reversal is often a longer-lasting change of direction, and that’s what I’d like to discuss in this post.
When looking for reversal candidates, the thing to watch for is a change of character. Something that’s different from previous dips and stands out as a potential shift in the stock. That might be a lower high, or it might be a sudden decline which proves to be much sharper and faster than previous pullbacks were.
Show & Tell
In the video below, I want to point out 2 stocks which might be undergoing reversals. That means there’s plenty more to prove before they can be considered to be in corrective mode (as opposed to merely a dip within their uptrends), but chart reading is always a work in progress. If the characteristics which we’re seeing now happen to change, then so should our expectation.
For now though, let’s take a look at what’s going on and see if these show us the necessary price moves to confirm what the charts of FUQI and RL may already be saying.
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?
Chat Archive with Charles Kirk
August 7, 2009 at 12:01 pm
Today’s live chat with Charles Kirk of The Kirk Report was a lot of fun, and I hope you were able to join us for the discussion.
For those of you who were unable to attend, I’ve embedded the chat transcript below so that you can review the conversation sometime over the weekend. Hope you find it helpful!
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?
Stop Loss Placement, Part 4
August 6, 2009 at 8:50 pm
As we complete this series on stop loss placement, we’re going to discuss trailing stops. But be sure to catch Part 1, Part 2 and Part 3 first!
In this segment, I specifically want to discuss the importance of managing our risk throughout a trade, not only to reduce losses but also to preserve profits. This is achieved by adjusting our stop, or through the use of a trailing stop.
When and Why to Adjust a Stop Loss
A rock climber knows the importance of anchoring himself to the wall along the way up, just in case he happens to slip. The anchor set early in the climb at a low altitude is every bit as important as the ones set at higher levels, but the more a climber ascends, the less useful a low anchor will become. As a result, it’s wise to keep raising it along the way.
Trading is similar in that the stop loss we initially set for a position may not be appropriate once that trade has progressed, so it’s likely to need adjusting along the way.
Setting some rules for ourselves, sticking with them consistently, and maintaining an adequate reward-to-risk structure throughout the trade can keep us in good shape.
Watch this clip and let me explain more thoroughly with some specific examples. It was also posted over at the Trading Videos site, but I’ve embedded it here for your convenience.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Update: Check out Part 1, Part 2 and Part 3 of this series!
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?
Stop Loss Placement, Part 3
August 5, 2009 at 8:44 pm
To continue the series on stop loss placement, it’s time that we build on both Part 1 and Part 2 by taking things a step further.
In this segment, I specifically want to clarify a major advantage of basing our stops on the chart. Of course we’ll know where to get out if the pattern happens to fail, but there’s one thing many traders fail to focus on in relation to that. It’s an equation, and a simple one, but it gives us our position size.
Dollar Risk Per Trade
If every stock were the same price and carried with it the same volatility, and if every pattern we traded happened to carry the same exact chart scenarios, Part 3 of this discussion wouldn’t exist.
But each stock is a little different than the next. Each setup will vary from the previous one we entered. And of course, the distance from our entry to stop isn’t going to be the exact same from one trade to the next.
So what we need to do if we want to maintain a consistent dollar risk per trade is to determine an amount we’re willing to lose on each trade in case we are wrong. Let’s face it, some trades aren’t gonna work, and we’re going to get stopped out.
Once we know how much we’ll be willing to risk (in terms of a set $ amount, or a set % of our account value), then we can combine that into a simple equation to give us our position size.
$ Risk Per Trade / Distance from Entry to Stop = Position Size
Watch this clip and let me explain more thoroughly with some specific examples. It was also posted over at the Trading Videos site, but I’ve embedded it here for your convenience.
And if you have questions pertaining to stops, add them to the comments section or contact me directly and I’ll try to work those into the next few segments.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Update: Check out Part 1, Part 2 and Part 4 of this series!
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?
Stop Loss Placement, Part 2
July 31, 2009 at 7:52 am
As we dive deeper into this series on stop loss placement, I want to be sure you caught Part 1 because it helps lay the groundwork for this ongoing discussion.
I’ll be posting segments of this series one segment at a time, both for convenience and better consumption on your part. I want you to have a thorough grasp of how this can all work. After all, it’s a topic every trader faces, regardless of risk tolerance or timeframe or style or the market we’re trading.
Let’s keep it moving…
The Importance of the Chart
Just as we discussed the value of timeframe & personality in Part 1, here in Part 2 we’re going to talk about the importance of the chart.
Given that my entries are determined by the chart, it’s logical and consistent to allow the chart to offer an exit. That might be based on an important reversal, or simply a failure of the pattern being traded if I need to stop out of the trade.
In each case, I’ll show you in the clip below exactly what I’m talking about, along with an explanation of why this works for me.
The beauty of basing entries and exits on the chart is that it’s consistent across multiple timeframes. The same principles will apply on an intraday 3-minute chart as they will on a daily chart. That means once you gain an understanding of it, you can use it for both day trades & swing trades.
Watch this clip and let me explain more thoroughly. It was also posted over at the Trading Videos site, but I’ve embedded it here for your convenience.
And if you have questions pertaining to stops, add them to the comments section or contact me directly and I’ll try to work those into the next few segments.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Update: Check out Part 1, Part 3 and Part 4 of this series!
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?
Stop Loss Placement, Part 1
July 30, 2009 at 7:27 am
It is the most common question I’m asked: “How do you determine where to place a stop loss order?”
And it’s a great question. Newer traders need to know it. Experienced traders will often study it and refine it. It’s arguably as important as any other aspect of a trade.
So here I am setting out to create this mini-series as a resource. There will be several parts, so check back often for the segments to come.
There are several aspects to stops which I feel should be addressed, so I’m going to cover them in pieces. Small, bite-sized, easy-to-digest pieces.
Hopefully they’ll be helpful to your trading approach and enable you to specify some ways to protect the downside. After all, a stop loss can be your safety net.
Timeframes & Personalities
Deciding on the placement of an initial stop loss will boil down to a few things, not the least of which are (1) your trading timeframe, and (2) the personality of the stock being traded.
I’ll elaborate on each of these in the video, but essentially they’re my starting point:
Longer timeframes necessitate wider stops, and shortened trading timeframes warrant tighter stops.
Similarly, a lively stock deserves a wider stop, while a stock which tends to move very methodically will justify a tighter stop.
Watch this clip and let me explain more thoroughly, along with some examples. It is also posted over at the Trading Videos site, but I’ve embedded it here for your convenience. And if you have questions pertaining to stops, add them to the comments section or contact me directly and I’ll try to work those into the next few segments.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Update: Check out Part 2, Part 3 and Part 4 of this series!
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?
Rip City – When Will We Rest?
July 23, 2009 at 12:44 pm
Shorts are getting torched right now. The extreme momentum we’re seeing is definitely of the emotional variety, although it’s been technically significant as well.
Today, for example, the NAZ is going for its 12th straight advance – an impressive feat which has brought about a 14% move from the low set earlier this month.
We’re very stretched right now to the upside in the short term, and yet there could still be more.
So the biggest question on everyone’s mind right now – both bulls and bears alike – is “when will we rest?”
The notion of a pullback after a move of this magnitude isn’t crazy. It’s logical to expect at least some profit-taking after such a huge surge. But we’re still looking for one.
And given that the technicals are taking a back seat to emotions right now, it makes it tougher to determine when a dip might develop into something a little more than just a 15-minute slide.
Fortunately, there’s one situation in play right now that could offer a sell signal for a quick trade.
Just a little while ago over on the trading videos site, I posted the following video. In it, I discuss this topic and offer a rare clue to watch for when it comes to expecting a little deeper pullback than just a few points.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Just remember to wait until this pattern confirms, because until that happens there’s still upside momentum that deserves the utmost respect.
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?
