AN OUTSTANDING TRADING OPPORTUNITY WILL ARISE FROM THE TOILET
I have gotten some questions about my intermediate term system of trading stocks. The next signal I get using the system I will post as a trade update. It is basically a system that triggers off of range expansions with some volume filters. There are also a couple of fundamental considerations taken into account. Not overly complicated. It works well. Most importantly, it defines my risk precisely every second I'm in the position. I am currently long this stock using the system for more than a week now: I am adding SWSH to my watchlist. They are essentially a toilet cleaning and janitorial service. If you have ever peed in a urinal at Denny's then you have probably seen their products. I believe that a tremendous long opportunity for a short-term trade is developing here as the stock has an enormous amount of trader interest (short sellers especially) that is distorting its pricing. I am waiting for the pattern to develop over the next few days. I feel that the next move, regardless of whether it is up or down, will be a fakeout. The real opportunity will come after...
THE GUN: A SUPERCHARGED ETF AND PRETTY NYSE LISTED STOCK
It has been awhile since I saw anything that look appealing enough to present as a short-term trade on "The Gun". Tonight we have a leveraged ETF to help you grow some hair on your chest. And we have a comparatively tame NYSE listed name for those who want to remain hairless. Both present their fair share of opportunity: click on chart below to...
BULLS ARE ABOUT TO STAMPEDE
Three charts is all we need tonight: click on the charts below to enlarge
COMING CLEAN: I MADE A BOO-BOO TODAY
It has been a long time since I made a trading boo-boo. A boo-boo - for clarification - is not when you lose money on a trade like I did with NFLX on Tuesday morning. That's just trading. A trading boo-boo is when you veer off of the road map for a particular trade. Case in point: VHC The trade started out wonderfully. My read on the trading pattern was spot on and my entry was a good one. The weakness was obvious from the moment I put on the trade. I didn't have an ounce of pain on this trade. Not one moment of doubt. It went my way from the very beginning and didn't stop into the close of Tuesday's trading session. In my mind, I said that once it broke 23 I would get out in anticipation of a bounce off the trend line at the bottom of its range. This morning VHC broke through 23. I didn't cover. All of traders who inhabit VHC (there are a lot of them) decided that they would begin buying/covering shorts right on the uptrend line that marks support. I still don't know why I didn't cover. I just didn't. Call it my blond moment of 2011. Even though my head is shaved and I'm a male. Today I was a blond. As the stock began rising and I was sitting there playing with my make believe blond hair, I started accessing my EDS. If you haven't read about my theory on EDS and how it influences trader/investor behavior, the link is here. I have learned over a 17 year career that started at the age of 19 trading for myself, clients and on a trading desk at a major bank that once the door to my EDS is opened I HAVE to exit the trade. I become indecisive and must move on to the next one. Start fresh. I know I have made progress since this is the first time it has happened in 2011. If you are new to the markets, it happens weekly, if not daily. Those with a few years experience should be able to keep it down to a few times a month at the most. If you have been doing this longer than 10 years and you haven't mastered your inner-trader to the point where you keep it down to once every few months, then you need to find a method that keeps the door to EDS...
THE GUN: NFLX EARNINGS TRADE
I wrote an article recently describing the 3 reasons I think NFLX will report some blowout numbers when earnings are released tomorrow. Once in a great while I will put on an earnings play. I do so when I think the odds are heavily slanted in my favor that I will be right. NFLX meets the criteria. I feel that my odds of being successful greatly outweigh my odds of anything catastrophic to the downside following their earnings report. When I am putting on an earnings play I will always do so in the last hour of trading before the report. I want to make sure I am playing the earnings and nothing else. The last thing I want is to be underwater 5 points before earnings are even announced. Of course, the flip side is that I can pay a premium for the stock going into earnings. It's the yin and yang of trading. I plan on buying the stock outright instead of buying call options. The premiums on NFLX options are insanely steep. If the stock opens up 1 or 2 points after earnings, odds are that out of the money contracts won't move much due to the premiums being built into the stock. I will get out of the position during the first half hour of trading on Tuesday no matter what the result. As the stock rises into earnings the chances of a shrug of the shoulders reaction to earnings begins to increase. This is another reason why I don't want to buy call options into the report. Even with an unchanged reaction in stock price to earnings, the option premiums following earnings will decrease in price. I'll be announcing the trade with a "trade update" during the last hour of trading...
6 CHARTS THAT TELL US WHERE THE MARKET IS HEADED IN THE WEEK AHEAD
click on charts below to enlarge
IS CHINA THE NEW HOME OF THE PHASE 4 MOMO MONSTER?
This is starting to get frightening. ALL of the Chinese stocks are rallying at once. Either China has developed weaponry that is going to facilitate their takeover of the world by summer or Chinese stocks are the new home of the dreaded phase 4 investor. If you haven't read my article on phase 4 investors and the valuable information they bring to the market, please click here to get some background on this indicator. Here are some of the charts of Chinese stocks that came up in my scans tonight of the market:...