A lesson in reading volume: XG massacre

Call me crazy, but I swear that sometimes its possible to see when an order is put through that is able to tip a stock in one direction or another; before it happens.

I was looking at XG today, impressed by my gold call, as it was free falling and I noticed something curious in the chart.

Yesterday, there was huge up volume, while the stock was near its highs, but the candle hardly budged.

This isn’t something that I’ve read about or learned in a book, but on my own from watching thousands of hours of trading.

For this to occur, logically what needs to happen?
A block of buy orders needs to get canceled or washed out by a block of sell orders or vice versa. Right?

I can’t be sure of what’s happening, but to me this is a smart motherf’er trying to disguise or sneak in their order before everyone else realizes what’s going on. In this case it was selling.

Now I can argue with myself, that the stock tried to break out after this and that shouldn’t of happened if the main buyer(s) left.
But there was nowhere near the previous amount of volume and the stock was promptly rejected.

This sort of stuff happens often and it doesn’t always need to be a small candle. It does need to happen at an “inflection point”.

Short term traders need to get used to reading volume because it can tell us a lot about what’s going on in a stock.

Hope this helps some of you old timerS keep up with the times.

I guess I’m not just a pretty face after all?

Good day.

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Yesterday at the close, I bought a bunch of stocks like a crack fiend.

I will likely go to cash on any bounce if the markets continue to look weak.

Am I the only one who notices the resemblance between 2000 and 2011?
I’ve been obsessed with this for a while now.

I’m not so stupid as to try and find patterns from decades ago and put all of my chips on them.
But you can’t ignore the similarities in price action and both were in the late stages of the bull.

I threw in 2007, even though its different, to show what happens when the MACD kept dropping.

Personally, I think the MACD right now is too low to just turn up and carry on. If this rally does not get hold fast, as in “like tomorrow”, do not be surprised when that MACD resets.

I think its clear that QE3 is coming.
This could lift the markets up for 1 last rally, before investors say “fuck it” to destroying the economy and just bail out.

A lower low now would shake a lot of weak hands out, only to rocket higher.

More things to think about:

1. Bonds are at levels where they are already pricing in a recession. Whatever, let them stay there. (Bearish)

2. The USD is not close to levels that will hurt the economy (Bullish)

3. The inflation trade is back, commodities from Soybean oil, to Oats, to Cocoa, to Copper, to Oil are finding support. (Bullish for now)

4. The Euro is falling and the Japanese yen is rallying. Whatever, let them trade in a range. (Bearish)

I think the USD is most important. I actually want to see the USD rally with the market, because if it breaks the lows of this year then it means this debt crisis is getting out of hand.

Like I said before, until the USD gets above 80, we can continue to rally.

You thought that last 2 years was tough? From here out, I think we can all expect to get chopped up.

If you have made it this far without blowing yourself up, congrats, give yourself a pat on the back.

Fun note: If you notice in the above charts, both 2000 and 2011 had the “right side rally” (yellow line) overtake the “left side”

In 2007, the “right side rally” was not able to make it that far.

WE DIP THEN GO HIGHER.

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Can we take a break from the markets for a second?

I am the type that doesn’t step foot inside of a doctors office or a hospital unless I need stitches.
But I can’t take it anymore. My left shoulder has some serious issues.

This is something that has bothered me for over a year now, but it keeps getting worse. I know its getting worse is because of the pain I get at the gym.

I know its a long shot to diagnose someone online, but here it goes:

1. The point of pain is when my arm is parallel to the floor, I cross my arm “across” my body and I raise upwards.

2. My doctor thought it was a rotator cuff injury

3. Both x-ray and MRI showed no problems

4. My doctor then says it must be that “the ball came out of the joint” – wouldn’t that show up in the x-ray?

5. The exercises that are most painful are; military press, pull-ups and tricep raise (behind head)

6. After a workout, my left arm feels broken, while my right arm feels “pumped”

To be honest, I don’t care about the pain.

What I do care about is that I can’t lift heavy and my whole left arm looks like a little bitch (probably like chivo) compared to my right.

I’m supposed to see a physiotherapist, but for some reason I imagine these people to be something like a yoga instructor.

I guess I have a hard time believing that swimming in a pool with a bunch of old people doing some stretches is going to fix my problem

or whatever it is they are gonna tell me to do.

I don’t know if its related but starting just last week, I could barely raise my head to get out of bed because the left side of my neck, lat, shoulder blade hurt so bad.

Any advice? I don’t want to waste another 6 months.

Thanks in advance.

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I am not seeing any edge to tell me what’s going on with the general market but I am noticing something in gold.

Yesterday even to me, gold looked like it was the place to be but today it looks crowded.

Below I have a chart showing that new relative highs usually get sold in GLD.

The indicator in blue shows GLD’s distance from its 20d MA.

Click the chart for a full size version.

From experience, for any breakout to be sustained, usually there needs to be some type of consolidation. This straight up for 2 weeks thing usually gets faded.

Another thing I noticed is the “gappy” action in a lot of PM’s today.

This could just be a few day pause before sprinting higher (especially with the USD tanking), or it might turn into more of a correction.

If you are a short term trader, booking some profits by weeks end might not be a bad idea.

You can either wait for a down day to confirm or you can take your chances and hope we consolidate.

I always feel much better selling into strength and letting the dogs fight for the scraps.

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All of you listen to me very quietly, do not ever mistake my kindness for weakness or I will remove your eyes and use the empty socket as an ashtray.

I don’t smoke but I will if I have to.

Now,

I said that I would go over some of my previous trades in the year to show how I use multiple time frames and volume for my entries and exits.

Selling volume spikes has been back tested and documented as being favourable to sell into and even short.

It takes practice to know whether a volume spike is indicative of a successful breakout, or if its an exhaustion of buyers.

My single best trade so far this year came in early June with JVA so I will use it as an example.

Below are some charts showing everything that I was looking at.

This isn’t the best example to show how I use the minute chart for entry. Usually I check the 30min chart to find buying, however in this case it was a retest.

I took a chance because there was a clear stop at the prior support.

For less than a week of work, 60% was not bad. But in hindsight I can see that I sold much too soon.

Yeah I was “chagrined” about missing 100% upside, but out of all the trades where I did exit early, most of them turned out to be right.

Sometimes that’s just the way it goes.

As fate would have it, yesterday presented an opportunity for me to get some licks back in and so I shorted at the close.

I’m still holding and I will post when I cover.

Good day.

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Wow, you people are unbelievable.

I told you I was aiming for 50% total stock gains. I never mentioned anything about total portfolio gains.

Now I will be very clear.

I limited myself to 10 positions at a time. If each position was 10% of a 100k portfolio, that’s 10k per position.

Knowing this, total portfolio returns are 6.4%. In 4 days.

Did you think I was going to go all in, every stock or what? What exactly were you thinking?

I’d really like to know.

Most bloggers out there post tons of random charts.

I post exact buy and sell orders to the penny and you come here and talk to me like I am some sort of criminal?

Just let me post every chart in the S&P next time and let you at it. Maybe you will like that.

I should of sat here like the previous KotPG’s and talked about cooking recipes.

Keep it up, I don’t care.

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