iBankCoin
Joined Nov 29, 2008
329 Blog Posts

Trade Reviews: COH, APD, USO / Index Reversal – High-volume Hammers

Today was pretty epic, I’d say. I shorted COH and USO and went long APD, AMTD, and the SPY. It was a no loss day. I’ll profile only COH, APD, and USO, since they were more significant than the others, which were scalped for a few pennies.

I’m not sure why, but I didn’t focus on my gut too much today. My last scale out in COH told me that I should go with my gut and not leave anything up to chance. For the USO, I covered too early and didn’t follow my usual 50%, 25%, 25% scale out. Instead I went 50%/50% and missed an entire leg down with about 2.5%. Not sure how that happened. APD simply broke above the first 1-min price bars high ($68) and I saw the momentum and acted on it.

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For the SPY, DIA, QQQQ, and IWM, the most important things here are price action, the high volume, and the hammer that was created. If this is a legit bounce, which I think it is, then we head up to the 100-day MA for a re-test. If not, we resume our adventure to the 200-day MA.

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Trade Reviews: LXK, APKT, BGP, PEIX, JCI / SPX in 50/100-day MA Range

For some reason, yesterday was a good day to trade. What I mean is that doji days are particularly unattractive days for day trading. They are best suited for swing entries. Nonetheless, it was a good day to work on execution and patience, and it all paid off.

Most breakouts require your full attention. Setting alerts is not enough as it is ‘too late’ many times. Sometimes setting buy stops is not enough because 1) the stock can gap intraday, 2) you can get a bad fill. Some days you watch a movie and other days you stare at your monitors all day long. I can usually tell if it’s going to be a good day in the first hour of the morning by looking at the 1-min intra-day price bars. If they don’t touch each other, then don’t touch it.

The SPX, as mentioned on my show, is being caught in between the 50-day MA and the 100-day MA, both very powerful moving averages main support and resistance levels. We should see an intersection of the 20-day MA with the 50-day MA in the coming days.

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I traded 5 names today (all imminent breakout plays): LXK, APKT, BGP, PEIX, and JCI.Ignore the MA’s on the 1-min/5-day charts below.

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Technical Analysis for Dummies

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There’s a car in front of you and you are trying to determine where it’s going, just like how we look at price and volume to predict future movement.

If you look at the diagram above, you’ll see an intersection. Now, only when the car reaches the intersection do we have the chance of figuring out the most likely direction the car will go (similar to when we first look at the chart of a stock).

When the car reaches the intersection, it can do several things:

1) Stop at the stop sign and wait.
2) Stop and go straight.
3) Stop and turn right.
4) Stop and turn left.
5) Not stop and speed straight through the intersection.
6) Not stop and turn right.
7) Not stop and turn left.
8 ) Make an illegal U-turn.
9) Stop and back up into you.

etc…you get my drift.

There are so many possibilities in this illustration. What if the car turns on a left- or right-turn signal, is there a guarantee that the car will turn in that direction? No, of course not. In fact, yesterday, I saw a driver turn on her left-hand signal in the left lane and then turned right, nearly causing an accident which reminded me of this illustration. The stock could go up or down, but is there a continuation?

We all probably busted illegal U-turns at intersections at one time or another. Is it easily predictable? No. I’ve also seen people accidentally shift in reverse at a red light, hitting the person behind them. Sometimes sudden reversals occur in stocks and if you aren’t careful, you could hit or get hit.

Sometimes a car will ignore all the traffic signals and go straight through an intersection, whether intentionally or unintentionally. Sometimes, stocks can make extreme movements, up and down, and we could miss them or get caught on the wrong side. These are usually deadly.

Now let’s say that you are in front of a driver that turns on his/her left-turn signal. You are reasonable sure that the next action will result in a left turn. It is the highest probable action the driver in front of you will take. Even still, it is not 100% guaranteed. When you see the car actually make the left turn, your odds significantly increase.You can predict that the driver will make the left turn before the left turn is fully complete.

These are signals that technical analysis produce on stock charts. These are your basic high-probability setups. Technical analysis itself is not enough, though. Ultimately, you are responsible for properly observing the signals you receive and to act in the best way possible according to the highest probable odds.

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Other stuff:

1) The tape reading series will resume this week.
2) The inside day yesterday was executed according to plan.
3) All four indices will be re-testing the 100-day MA. Beware as the 100-day is a strong and reliable MA.

Good night.

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Index Analysis

Looks like this morning will start out s an inside day and then honestly, I’m not sure where it’ll end. Odds favor it due to the ~20 point range it has on the SPX.

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The 100-day MA is the most important MA at the moment. The last time the moving average was it was back in March/April for the SPX, DJIA, and COMP. Prior to that, the 100-day MA was hit in mid-2008 and there was always a major market move that followed. This puts the odds for a move to the 200-day MA as the ‘most likely’ scenario. In addition, note the textbook breakdown from the rising wedge and how each correction became larger and sharper up to this point.

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Neutral Range / Flag

As mentioned on the show last night, the market is forming a flag. The 5-day chart of the SPX is shown marking the neutral intraday range. Pay attention to any breaks in the range.

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Monster Volume / Inside Day

Take a look at the selected ETFs from yesterday’s sessions, particularly the volume. It’s noteworthy, except for the fact that many individual names remained spotty. I saw many people day trading like hell on a day like today. Success probabilities significantly decrease on days like this as I mentioned many times before. I see a high probability of an inside day forming today, doji or harami.

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