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Plenty of excellent sites out there include more macro commentary in their links, namely Downtown Josh Brown and Abnormal Returns. I thought I’d share a “Traders Only” collection. Here are the traders that I have been reading today (click on links):

• “The Goat,” @gtotoy with his excellent daily read on the $SPY
• The @HCPG crew always on their game
• Joe’s rock solid morning overview
• Maribeth’s actionable daily watchlist and charts
• Position Trader’s chart of the day and other analysis
• Vic’s intraday market stats
• Vj is always giving original analysis. Check him out.

There are plenty of other key sources that I check everyday, so be sure to look on the right hand side of your screen for my “Recommended Links.”

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[youtube:http://www.youtube.com/watch?v=nbZEkFLXh9Y 550 412]

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Enough whining by traders on the Twitter stream about supposedly how manipulated this market is, which is basically just a thinly disguised veil for how wrong many have been in fighting this tape the past few months anyway.

Instead, a better approach is to tune out the noise and pay attention to this broad market range that we have been trading in since the beginning of 2011. Be on watch for a break in either direction.

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Many traders often improvise their strategy on how to navigate earnings season. So long as you develop a style of risk management that you are comfortable with, there is nothing wrong with taking a case by case approach. However, for the purposes of this post, I thought I would detail my strategy for a certain stock, of which I currently have no position.

We all know that AA (Alcoa or pocket aces) reports earnings after the bell today to kick off the season. So, let’s take a look at whether it is worth holding, buying, shorting, or leaving alone leading up to it.

On the weekly chart above, quite simply we can see the tremendous run that the stock has had off the summer double-bottom. Moreover, Alcoa is now quickly running into a well-defined area of resistance from January, 2010, just above. Thus, in the short-term (days, a few weeks), the risk/reward does not justify allocating fresh capital to the long side here, regardless of the actual earnings.

Now, as far as whether to hold an existing position into earnings, I believe that the stock is much more susceptible to a gap down than a gap higher due to the distinct possibility of aggressive profit-taking on any, and I mean any, slight disappointment in the earnings report. So, I do not think holding a sizable position through earnings is a good choice.

The next option is to position yourself for Alcoa to pullback after tonight. While this strategy makes sense for a few technical reasons, a few of which I outlined above, the fact remains that the stock is still in a very powerful and steep uptrend. Overbought can become even more so during a powerful uptrend. Although extended here, just because a stock is not a good buy does not make it a great short.

The above analysis leads me to conclude that your best bet is to fold pocket AA into tonight’s earnings report and take a pass on playing it, save perhaps a few exotic options strategies for advanced options traders. Earnings season for conservative swing traders is not a particularly fun time. We are dealing with more external variables than usual with a direct effect on price action and volume. Taking a pass on earnings plays is not a sign of trepidation. Rather, is a perfectly acceptable risk management strategy for traders who want to have staying power in this business.

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(Value Investing Legend Walter Schloss Digesting Some Tasty Applesauce)

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I don’t talk much about long-term investing, but I do manage longer-term investments (holding period of at least 12-18 months) for members of my family. I look for great, reliable firms that usually pay a handsome dividend. Regarding stop losses, I have price levels in mind where I am willing to admit my thesis is wrong, but they vary greatly and are much wider than in names I trade (a topic for another post–not within the scope of this post for discussion).

I also believe that you would be remiss not to conduct some form of technical analysis before allocating capital into any position. Shunning price action because you are a fundamentalist and/or you think “the market is stupid,” is akin to going to college to study creative writing and refusing to study and flunking your required Chemistry class because you say, “I’m not a scientist.” In other words, it is pure ignorance. A little bit of due diligence looking for a relatively healthy chart–even for a value investment–will go a long way. As an example, consider that PG went from $75 down to $43 during the 2008-2009 bear market. Thus, blindly buying and holding, even quality firms, is textbook laziness.

As a bull market matures, there will be inevitable rotations. Eventually, the large cap, “safe” stocks see inflows just as the market starts to realize that perhaps CMG won’t be overtaking XOM‘s market capitalization anytime soon. That process could take anywhere from a few months to a few years. Regardless, it will happen; Hence, the phrase “long-term investment.” Below, you will see five investing ideas of firms that are defensive in nature. I believe all five are in good shape technically, and will still be conducting business at least five decades from now. If you are looking for entry points for your long-term portfolios, I hope these ideas help.

(Disclosure: I have bought all five of these issues listed below for members of my family)

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It bewilders me to see traders not cutting losses when they know they should. I am not trying to trivialize the emotions that come with purchasing a stock that you have high hopes for, only to watch it turn into a big, fat loser. At first, you are down a quick 5%, then it becomes 12%, then 18%, then 20%…No, I can genuinely appreciate that situation. However, after a certain point, there has to be an element of professionalism that kicks in. After all, we are making a serious effort to make money in the most competitive enterprise that the world has ever seen, filled with competitors sporting breathtaking combinations of wealth and intelligence.

Beyond that, there is NO EXCUSE in this day and age for not cutting a loser. Logistically, all you have to do is click the “Sell All Shares” button and confirm your order. That is it. You can do that in the privacy of your own home, or you can do it in a coffee shop. And guess what? No one has to know. Now, let’s suppose that you tweeted out your entry to said losing trade on Stocktwits, and you are now too embarrassed to tweet that you sold for a loss. Guess what? You have it back asswards, to quote Charlie Munger. If anything, when you tweet an entry and exit for a losing trade, you will be applauded for your transparency and gain a tremendous amount of respect on the stream. If anyone acts like a jerk and tries to talk trash because you lost money, just block them and move on. For every one idiot on the stream, there are tens of decent people who are genuinely interested in reaping the benefits of social leverage in trading.

Perhaps it my background, as the ease with which traders can cut losses nowadays is laughable. Trying to cut losses in the poker world seems like a much bigger deal, especially if you are not playing online. If you are a local, you have to drive to the brick and mortar casino, wait for a seat to open up at the poker table, get your chips, sit down, enter the game, and wait to be dealt reasonably good cards to play. Some days, despite (or perhaps because of) how well you play and how poorly others do, you will be destined to lose money. When that happens, many poker players find it extremely difficult to physically stand up, walk to get a chip rack, rack up their chips in front of the whole table–who knows you are losing money–tell the dealer you are leaving the game, walk over to the cashier to cash out their remaining chips, walk out of the poker room, and drive away from the casino. Indeed, logistics and pride are sometimes interesting bedfellows.

As a trader living in this day and age, it is a significant and costly mistake to not take full advantage of the ease with which technology allows us to quickly cut our losses and move on. Excuses like, “I know the right thing to do is sell here and move on, but I don’t want to give up,” are less and less valid when you have the technology right at your fingertips to actually do the right thing.

In addition to that, who really cares that you lost money on a trade and realized it, literally and figuratively?

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