Author Archives: chessNwine
Double feature tonight, of sorts.
First, on Memorial Day you can find the season two premier of the television show “Longmire” on A&E. The first season was a hidden gem, without a doubt. Click here for more information on it. You still have time to quickly get caught up!
Next, you will see a five-minute piece about one of the most famous shots in cinematic history, from my favorite all-time film Goodfellas (1990).
Here are the results, as of Friday’s close, of a quite selective screen I created many years ago inside The PPT, titled “High Beta Short Squeeze Plays.”
Basically, these types of high beta, heavily-shorted stocks not only “work” to the upside with great momentum, but they indeed often work marvelously…until the market changes character. And then they go back to being the “you get what you pay for,” mostly lower-priced, deuce/seven off-suit rags that they generally are.
So, make sure they are showing signs of upside momentum before you enter, and are prepared to bail on nasty reversals lower.
(Please click on image for a better view)
It is hard to imagine a full retrace to the primary breakout level in the Aussie/Yen cross, down to 88 or so on the weekly chart, below.
But it is worth remembering that momentum cuts both ways, even in the world of Abenomics (I think).
More than likely, we see some consolidation at the 95/96 area before the next big move comes, in light of the heavy selling last week taking the Aussie below the 20-period weekly moving average.
Here is some great market wisdom from Bruce Kovner, legendary hedge fund billionaire, sure to add value to your long holiday weekend.
“The first rule of trading – there are probably many first rules – is don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand.”
‘You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”
“They are strong, independent, and contrary in the extreme. They are able to take positions others are unwilling to take. They are disciplined enough to take the right size positions. A greedy trader always blows out. I know some really inspired traders who never managed to keep the money they made.” -Bruce Kovner on personality traits of successful traders
“Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. For example, if the market is in the midst of a trading range, it makes no sense to put your stop within that range, since you are likely to be taken out. I always place my stop beyond some technical barrier.”
It doesn’t feel like work, except when you lose – then it feels like work.”
“For me, market analysis is like a tremendous multidimensional chess board. The pleasure of it is purely intellectual.”
Last Friday evening, we observed a long-term chart of Johnson & Johnson as a stock up twenty weeks in a row. While the broad market has not enjoyed quite that type of uptrend, it has certainly been an impressive rally in 2013. And we have been looking at a “great sugar rush market,” as I called it.
Updating the JNJ weekly chart, below, you will note that price actually pushed to make a new high Monday through Wednesday, before selling finally set in as the stock finished lower by the time the week had ended. The subsequent weekly chart candlestick raises the issue of whether we have just witnessed a meaningful reversal not just in JNJ but also the major indices, printing their own respective mid-week reversals, as we head into the unofficial start of summer.
I will delve into that issue, and much, more more, including specific trading ideas and in-depth analysis, in my Weekly Strategy Session, set to be published on Sunday.
See you there.
Have a happy and safe Memorial Day weekend.
I have been early on it, but there is now an even more interesting pattern developing on the U.S. Dollar/Japanese Yen cross, which I will discuss this weekend most likely either here or in my Strategy Session.
Can you spot it below?
(Hint: My April 2012 bearish post on DECK– Technical Voodoo Dolls Attack Ugg-Wearing Fashionistas)