School stock stalker

Keeping my eyes on school stocks…

ESI

APOL

DV

LOPE

EDU … squeeze candidate

COCO

CECO

… I’ll be watching these stocks, so check my twitter for an update.  All pulled back on Monday, after a stellar week of earnings last week.  Looking for an entry for longs.  Too many top callers here.

Also, not many other longs out there I want, so I’m on tomorrow’s tape with the intent of trading FAS on the long side.  Any dip, gap down, whatever… I want FAS to move up.  I would much rather short FAZ, but no shorts left.  If we get anything similar to Monday’s chop I suggest day traders keep their positions at 1/3 of usual trades.   As always, give me a tweet if you spot one of your carefully watched stocks finally moving in your direction.

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Ouch!  Enter the whipsaw.  I had very little read on the market today.  We were up a little over 100 on the Dow, and I was thinking we’re going higher.  I don’t know, I just felt, if the bears had an opportunity, they should have done so last Friday  (they tried, it died).  So anyway, I went long FAS almost near the TOP of the market, and that didn’t go well.  So, shorted it on the way down (held both long and shorts in FAS for about 5 minutes) and that turned out very well.  Did so again near the close and that was better…

But still, what a crazy tape.  There was no fear or greed on this tape, so I ditched the VIX before lunch and asked some chartists, like Chart Addict, for direction… but he was “scalping like a mofo.”  Okay, that’s fine- so was I, and about every other daytrader on StockTwits, but trust me you don’t want to get caught trading this way.

In the long run, you will lose.

With that said, I still have a slight bullish bias- in my swing trades I covered NFLX ahead of earnings, and added to TNA (saw that one go from +8% to 0% intraday), and began shorting some gold which will probably come out a loser since I’m aiming for near the end of the week to get full position.

Still testing the market here, but from my experience, stupid markets tend to go up so I will continue to build a long position on the dips.

Picture on the top are ATV helmets on a pineapple field.  We went quading this weekend on the North Shore in a giant dirt pineapple field.  The ride was so fast, bumpy and exciting- kind of like today’s tape!  I didn’t take any pictures of the activity because I was busy kicking up dirt on the track.  I road a 90cc Yamaha Sport Quad- Put it in 5th gear and you’re gone!

aLoHa!

-gio-

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This week I’m switching to a bullish bias.  Anything below Tuesday’s lows and I’ll enter in day trade shorts with a bazooka.  I’m not sure what stocks to buy for the bull plays:

IWOV, NTG, CLWR… calls for possible buyout, LOPE, CWT, ARII

So far concentrating on some ETFs, like TNA, and possibly shorts in SRS and/or FAZ. Looking for entry points on dips.

For other notes, I have a schedule to short gold stocks on Thursday near the close.

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I’ve wrote about this topic before- when markets get extremely volatile, the VIX becomes a more powerful tool to predict, well, maybe not predict, but at least find a good spot where the market will reverse its trend.  It’s so powerful, it even trumps that of some of the most basic technical analysis tools.  Conversely, when the market moves in trends (loss of volatility), the VIX is more difficult to use and you have to use “vix extremes” which come in the forms of spikes near the top or bottom of a channel.

Last week was a very volatile week, and I was able to spot at least 4 intraday reversals in the market (about 1 per a day) to and enter a trade.  On Friday I caught almost the top of the Dow (Dow +22) when I observed it could not take out yesterday’s support.

Anyway, now for the good stuff.  Notice whenever the VIX reversed, the probability for a powerful squeeze or a powerful selloff commenced.  Remember though, not all Vix intraday reversals lead to market reversals, but EVERY market reversal follows a Vix reversal. Here we go!…

Knowing this VERY POWERFUL correlation, I as able to trade last week’s choppiness quite effectively.  Here’s a basic review of the charts I put up last week, with the relationship of Vix~Market.  Notice, there is a pattern.  ALL market reversal followed a reversal in the VIX.

January 23, 2009:  I never posted it, but I spotted the markets high at Dow +22, then shorted FAS as the market went back down to -100.  Understand that Friday’s are very tricky on volatile weeks.

January 22, 2009:  “Using the Vix Intraday to find today’s market reversal” …in this post, I identified the breakdown in the VIX intraday to find a massive 2-hour squeeze.  The pattern was a breakdown of a H&S pattern.

January 21, 2009:  “Rare day trading day strategy applied to Wednesday’s market squeeze”  …in this post I noticed the reversal in the Vix at 54.  Then the market, DJI and SPX, crossed an important 3-day resistance point almost simulatenously with the VIX =50.  Enter the squeeze!  Got long FAS for FAStastic gains.

So, all week long I didn’t pick a side.  I went into the week knowing very well that the bulls and bears were at a deadlock and kept cash high, swing trade positions low (all shorts), and day traded the rest.  The best way to describe my feelings on the market was the use an analogy to compare the market to a giant poker game, where we can’t pick a side until more cards are shown.  Know the game, play by the rules.

Keep one thing in mind… I noted on Friday that the VIX is losing strength.  Barclays also is coming up with a Vix ETN which I do NOT like.  Making the VIX available to commercial/retail investors is stupid, and will further weaken this powerful tool.  Therefore, volatility will be dying down soon, so obviously the rules of the game are going to change again.  Be dynamic, figure out what the rules are, and trade accordingly.

It’s all about fear and greed.

Aloha!

-gio-

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If you have a strong bias, short or long, then I’m pretty sure after today’s tape you’re adding to your frustration. I mentioned last week that the market was at a pivotal point that would be followed with much misdirection and volatility. In my poker analogy, I was trying to stress how you don’t want to bet heavy either side when there’s “not enough cards on the table.” You see, right now the market is fooling you. It’s lying to you. How do I know? Look at the Vix in the past 12-days… it looks quite similar to a lie-detector, and it’s going hAyWiRe!

Charts are lying in the past 7 days…

… observing the movement in the SPX and also from a technical perspective, the market really did lie to us. If you used “breakouts” and “breakdowns” when volatility was ruling this tape, then chances are you got whipsawed…

… this proves my theory going into the week before inaguration, that “You Just Don’t Know,” and also shows via my poker analogy, that you don’t want to carry a heavy bias in either direction (even though according to the long term charts, being bearish is the winning side). The game has changed a little, but I think we will get a direction soon. The rules of this current game was to daytrade the volatility (I use the $VIX and any reversals in it) and find heavy imbalance in the market intraday.

Notice the wedge pattern developing on the big 3 indexes… its a heavy battle with the bulls and bears here, so keep swing positions light!  As I’ve said before, over and over again, wait for more cards to be shown.  No need to make big bets here… we’ll have ample time to make a move;  it’s not even February yet.   For now, I’m starting to lean on the bullish side.  It’s more of an intuition, kind of like Ragin’s post so if we get a dip, I may enter some swing longs.  However, I wouldn’t be surprised if the market were lying to me too.

ALoHa!
-gio-

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Sick of this market?  Inhale some of this stuff

Today I spotted an intraday bullish reversal, which was simultaneous with the VIX reversal.  Someone asked me before to annotate any trades that did not work, so here you go!  It took me 3 tries to spot the reversal on this trade.  There were two failed attempts to short FAZ.  Notice on chart, I took short positions in FAZ every time the VIX reversed (momentum cooled on FAZ, but that’s a more difficult topic).  Notice, however, that the VIX bounced back up slightly and the market continued to accelerate selling into -200 area, and this is essentially what stopped me out.  I did not mind getting stopped out on these shorts because I was long FAZ earlier in the morning for a buffer gain.  Finally, on the 3rd reversal of the VIX, I shorted FAZ and this time it worked.  FAZ dropped -8% from the top (“head”), but I capped my gains at about 6%.

Another development occurred that I pointed out to a fellow trader on StockTwits was the development of a Head and Shoulder pattern in the VIX.  This presented us with another great “short FAZ” or “long FAS” opportunity if the floor was taken out.  It sure did break that floor, and in came the panic buying.  (One note about panic buying/selling action intraday, you usually want to scale out or exit a winning trade during the second bar.)  Nevertheless, this breakdown in the H&S pattern on the VIX provided ample room to short FAZ (aka, “get long the market”) as FAZ fell about 12% from the breakdown point.

Actually, volatility was decreasing on today’s tape, and that’s why today’s tape wasn’t as dramatic as the ones before it.  This at least gives me some information on how the market will trade in the next few weeks.  Trade accordingly.

aLoHa

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