TRADE UPDATE – TDSC
Took a roughly 6.50 point profit on TDSC at 51.76. Took the short position on Thursday. Details here http://www.zenpenny.com/?p=1391
THE FRISKY FIVE: THE 5 CHARTS THAT EVERYBODY WILL BE WATCHING IN THE WEEK AHEAD
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BUBBLE WATCH: SILVER
This article also featured on thestreet.com Silver hit a 30-year high this week. Whenever an asset class - in this case silver - experiences a rapid increase in price coupled with the attention of a majority of investors and media, talk of a bubble begins making its way around the numerous outlets investors use to express their feelings with respect to the financial markets. Defining a bubble is a subjective exercise, at best. Asset bubbles inherently vary in the amount of appreciation they experience, the length of time they persist and the underlying reasons they exist in the first place. Some bubbles can continue for years and have very well-defined reasoning behind them. Others can last only a few months with the reasoning being without fundamental merit. The only way I have found to define a bubble and come up with any rational target for its expiration is through price action. Fundamentals will never allow you to define a bubble, as they become clouded by emotion during bubble phases. Realistic thinking and rationality is replaced by pervasive greed and unrealistic expectations. The price action during most asset bubbles is surprisingly similar if you filter out the noise by using either a weekly or monthly chart. There are 4 key elements involved: 1. A rapid increase in price that blows away anything that the asset has done in the recent and distant past. 2. Buying that is violent and disorganized. 3. Weekly or monthly price ranges that begin expanding exponentially versus previous bars. 4. A dramatic increase in trading volume. The best way to illustrate these examples is by viewing the charts of past asset bubbles and looking for the similarities. Fortunately, we have had quite a few assets bubbles over the past 10 years that we can use to formulate an opinion on silver. We're going to look at the bubble in the Nasdaq between 1999-2000. The bubble that developed in real estate, expressed through KBH. And the bubble that developed in oil between 2007 - 2008. We will look at the price action on a monthly basis to filter out a majority of the noise. You can see that the price action and participation amongst these three sectors during each of their respective bubble phases was very similar. Now let's see if there are similarities occurring in the silver market at present: 1. Do we have a notable expansion in the monthly ranges occurring relative to previous months? Yes. The average monthly range from January 2007 - August 2010 was 2.16. From September of 2010 - April 2011 it has nearly doubled to 4.02. 2. Has the price...
TOP 3 MOST POPULAR POSTS FROM THIS PAST WEEK
1. IT'S A MATTER OF RESPECT 2. COULD THIS POTENTIALLY BE THE MOST LUCRATIVE WAY TO PLAY NATURAL GAS? 3. A REVIEW OF A LONG-TERM HOLDING AND A SHORT-TERM TRADE
MAKE SURE YOU CHECK IN THIS WEEKEND!
Going to be publishing an article with some interesting comparisons of the price action occurring in Silver and how it is very similar to asset bubbles of the past. I think Silver is going to end up devouring nuts. Article needs to be read. Should be here by Sunday. Putting it together this weekend.
*VIDEO* – A REVIEW OF VOG, PSTR AND TDSC
Please enlarge video in order to be able to view...
TRADE UPDATE – VOG
Took a roughly .30 cent loss on VOG. Have given this more than a week to move. It is respecting bearish resistance points too much for my liking. I'll explain further tonight.
TRADE UPDATE – TDSC
Sold short TDSC at 58.20 - 58.30. Have one more allocation if need be. Reasoning behind the trade is here.
IT’S A MATTER OF RESPECT
Observing how much respect a particular issue, be it a stock or an index, is giving to technical levels can tell you a lot about the intentions of the stock going forward. It doesn't matter the level of importance that YOU assign a technical indicator. What matters is how important THE MARKET thinks that technical indicator is on its own personal scale. I see so many traders get caught up in their favorite indicator. The market could be ignoring it for weeks, but they cling onto it like a 5 year old to his favorite blanket. It's security for them, just as a blanket is to a 5 year old. That favorite indicator keeps your ego intact and your hopes alive. Of course you are going to have faith in it despite the market giving you solid indications that your security blanket smells of sour milk and a soggy bean burrito. As you may have noticed over the past few months, I keep my charts extremely simply and clean. I only use trendlines, support/resistance areas, price patterns and volume. I use no moving averages, oscillators, or anything else that involves squiggly lines that are derivatives of price action. All those colorful, squiggly lines that you love are made by the price of the stock and the volume that comes with it. If you understand price and volume well enough, you can eliminate those squiggly lines for good. I promise you that real men, like the guy from the Dos Equis commercial, Burt Reynolds and Hulk Hogan all use clean charts, without all the fancy stuff that ends up confusing traders more than anything else. Let's take a look at a few examples from today of the market showing respect or a lack of to an area of technical...
