iBankCoin
Joined Nov 11, 2007
1,458 Blog Posts

I Botched My FXP Trade

FXI Chart

The plan for FXP, which I bought on December 28th, was to sell it as FXI approached support at the rising trendline and the whole number $160. Here is the post where I outlined the trade: FXI: Basing or Bombing?

In fact, the trade went 9 points into the green for me. I watched [[FXI]] near support, and instead of selling [[FXP]], I tried to squeeze a few more points out of it. I thought (hoped?) that the FXI may breach support and really make me some jingle. Instead the stock turned at support (as I thought it would when I initiated the trade).

Now I’m down 5 points on the trade. So, what to do?

I will sell FXP if FXI overtakes the 50 day average and breaks out of the triangle. This will be a very bullish development. Volume and the indicators are confirming that a breakout is likely. In fact, should this breakout occur, I will consider going long FXI.

However, never underestimate the power of the 50 day average and a downtrending line of resistance. Tomorrow will be the day.

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Examining Market Tops: 1990 S&P 500

SPX Correction 1990

With all the talk of financials having bottomed (what about the other 80% of the S&P?), I think it is prudent to continue examining how market tops look. There has also been many mentions that this correction is like 1990, so lets examine the S&P 500’s 1990 top.

Unfortunately volume data is not provided, which makes it impossible to spot capitulation. However, the MACD did a great job of diverging from price and gave astute technicians an entry right at the bottom. Notice the Stochastics also do a great job of identifying each turn.

In this chart, observe the 50 day average. As the price re-takes this average, the bottom is in.

Comparing this top and bottom to the current SPX chart, it seems to me the average still has a good deal of unwinding to complete before bottoming. I would also like to start seeing some bullish divergences emerge. And most importantly, price needs to retake the 50 day average. However, the SPX is entering the 4th month of its correction phase. In 1990, the bottom was found in the 4th month.

Read other posts in the Examining Market Tops series here: Examining Market Tops.

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Make No Mistake, This Is Not THE Bottom

Finally, the Steer Rally is back again. Piggish shorts, eager to book a 325 point move in the Nasdaq, and Asshole Dip Buyers, sensing the extremely oversold market was ripe for a squeeze, brought forth the much-awaited bounce.

The charts, after 8 days of heavy selling, have a lot to say.

  • There are gaps to fill. I expect the gaps in the Nasdaq and the SPY to fill during this bounce.
  • Volume was relatively good on the Nasdaq and fairly unimpressive on the SPY.
  • The indexes are exiting conditions that were more short-term oversold than anytime the previous year.

  • MACD did not confirm the lower-low.

  • The Nasdaq’s 50 day average will cross under the 200 day average this month.

  • The SPY’s death cross shows no signs of coming undone.

SPY January 9, 2008

Do not make the most grave mistake of getting long here and expecting to stay long more than a week. This is not THE bottom. The bears WILL sell this rally as soon it approaches overbought. I hope that the indexes get back near moving-average resistance (indicated by the Honey Hole) before reversing, but one can never be sure.

Some crucial points to ponder:

1. As the market was deathly oversold for 3 days, it is possible that the snapback rally will be violent to the upside. This will be normal. Do not mistake it as an “all clear” signal.

2. The MACD did not confirm the lower-low, which means the Steers still have some fight left in them. This too means any rally may appear to have strong legs.

3. The RSI(2) is already in the neutral zone after today’s bounce. The market may move to overbought very quickly.

4. As the indexes are trading beneath the 200 day average, some will say this means we are officially in a bear market. If the market returns to the 200 day average and cannot overtake it, then you will have confirmation of a bear market. Let me repeat myself: If the market cannot overtake the 200 day average, you are trading in a Bear Market. As you would not be overweight short in a Bull Market, similarly, you must not be overweight long in a Bear Market. Do not fight reality, as this will be a crucial realization, necessary for survival over the coming months.

Finally, with my money, I will keep my eyes peeled on my short watchlist while playing an oversold bounce or two.

 


A history of 0 credit cards is much better than one of mortgage, or more scarily foreclosures. Often credit card consolidation leads people to pushing their mortgage limits. This often results in people borrowing more personal loans to consolidate, and eventually spending their health insurance on this too.

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My Positions and Some Thoughts

As you likely know, I had a difficult year last year. When the account went into the negative, I pretty much quit trading. I placed only a few trades in all of November, and really did not start dipping my toes back in the markets until late December. However, now that I’m focused and have regained my confidence, every trade I’ve made has been profitable.

I’ve been trading smaller position sizes to mitigate the huge market volatility but also because I don’t want to be under a lot of pressure from my positions. The idea was to take trades based on signals that I trust, and let the trade play out. Sometimes I’m early, so I don’t want to put on a position that is too big, get under pressure from it, and then blow out of it at the low (or if short, the high). Also “trading while working” was becoming unsustainable, so I’m working out strategies that rely more on opening and closing positions in the morning or just before the close, and using more limit orders.

Since I started trading again in December, I had a huge short in [[AAPL]], which I established at $198.85, and covered at $181 and change. I also rode [[GES]] down for almost 10 points, and had a nice quick short in [[RICK]].

I took the RSI(2) pick [[ECA]] and made a couple of points on the trade. I actually closed that one out today. I also took the RSI(2) pick GFA, and made almost 4 points on the trade. I was stopped out of the remaining shares of that trade yesterday.

I established a long position in [[CPHD]] last week, and added to it yesterday. I’ve got a stop set on it to get me out at breakeven. It is probably not safe to be long much right now, but CPHD was the first stock I ever bought, so I have a romantic attachment. But more importantly, Cepheid has made a great pull back to retest a breakout level. I love that pattern, so I bought it. Plus, there is some momentum in the name due to the MRSA outbreaks and due to the fact that the company is having its first profitable quarter.

I also took the [[CHD]] RSI(2) trade last week. The stock consolidated after I bought it, but was up nicely today. The rally in it today seems to be a combination of short covering and a move to defensive names. I’ll stick with it for a few more days before taking profits or getting stopped out at breakeven.

Another huge trade for me has been in [[GLD]]. I blogged about it when it broke out, and bought it the same day. Read the post here: GLD Breaks Out of Triangle. 

Other than that, I went long [[FXP]] a couple of weeks ago, as well as [[SKF]]. I’m up almost 20 points on the SKF.

Today I blew out of my [[MVIS]]. I’m glad to be done with that position. What an Albatross it has been. Also, I established a short position in [[AAPL]] at $180.25 when it couldn’t overtake the 50 day average.

In summary, I’m only 30% invested, with it split evenly between shorts and longs. Honestly, I was waiting for one up day to establish a few more short positions, but as you know, we’ve not had an up day in some time. I’m not going to chase this market down. I’ve got enough shorts so that I’ll continue making money on the downside, but not so many that I’m worried about covering before a huge snapback. I will use any decent rally to establish new shorts.

I’m up 4% for the year, and I have the distinct feeling that this year may be my best year yet.

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The Daily Breakout: A Few Good Breakouts

I don’t know about you, but I’m getting tired of looking at fucking breakdowns every evening. So, lets look at what’s working. We’ll subtitle this post “What To Consider If We Bounce.”

Important note: Patience will be rewarded. The year has just begun. Do not jump into anything with both feet, yet.

Also, I’m going to be lazy tonight and just post links to these charts. That won’t happen very often, as I like to have a purty blog.

Icici Bank Ltd. IBN

Healthways, Inc. HWAY

Investment Technology Group ITG

Also, Church and Dwight [[CHD]] has printed a very bullish candle on volume. Look at the chart HERE. I’m long the name after taking the RSI(2) signal. Read the original post: RSI(2) Oversold Play: CHD.

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The Daily Breakdown: Woodshedder’s Short-Setup Watchlist

As I have time tonight and Sunday, I’ll add to this list of charts. I hope to get a dozen or more setups posted. These setups will be stocks that are rolling over and trading beneath their 50 day moving averages. We want stocks where the selling has already begun some time ago with momentum building to the downside.

The honey hole is indicated on these charts. This is the optimum place to get short. Selling any lower than the honey hole can result in pain as you get squeezed during the obligatory oversold rally. Undoubtably some of these stocks will not rally to the optimum spot. Patience will be rewarded by granting you entries closer to resistance rather than at support.

 We’ll start with [[GOOG]]. If you have big ones, why not take down the mother of the tech rally? A retest of the 50 day will provide an excellent place to get short. A big break of 650 will move the honey hole down to that area of previous support.

GOOG Short Setup

Next up is [[DECK]]. While this stock is fresh off 52 weeks highs, I’ve included it due to the company’s exposure to the likely decline in consumer spending. Because it has not been rolling over for some time, beware that there may be some asshole dip buyers left who have just been chomping at the bit to buy any dip.

Let’s look at 2 setups from the red-hot Aerospace/Defense sector. 

[[ATK]] is offering up itself for the taking with a breakdown beneath its 50 day average and the violation of a year-long trend. Again, the honey hole is where one would short, optimally. It is possible the stock trades back up again into the triangle and well above the HH. Patience is the key here, although this one is not nearly as oversold as many others.

Short Setup: ATK

[[ESL]] is breaking down out of a 4-month triangle. With a declining 50 day average acting as resistance, this setup looks sweet. Be careful though, the 200 day average is rising and there are some bullish divergences in the indicators.

Short Setup: ESL

Everyone knows the Chemical sector, housing such leaders as [[MOS]], [[MON]], and [[AGU]] has been on fire. Here are some setups from that sector. Remember, we aren’t looking to take down the strongest from the sector. We want to be in the weakest names when the leaders start to get hit hard.

[[ALB]] has been rolling over for 2 months now. It looks like it may breakdown out of a triangle formation. As it is trading beneath both the 50 and 200 day averages, this stock makes a great candidate.

Short Setup: ALB

[[FTK]] experienced a high-volume sell-off, and has never recovered. It is now trending downward, bumping its head on the 50 day average. This is a good setup, but the stock is approaching support and the 200 day average. Watch those areas for a rally. Ideally, it will crash through support, and previous support will become resistance.

Short Setup: FTK

[[FMC]] looks good here as it is one of few stocks that is not oversold. This setup is close to resistance and a long ways from any support.

Short Setup: FMC

The next sector we’ll peruse for short setups is Manufacturing.

[[PCP]] has been trying to roll over for several months now. I’d like to see this bounce and once again fail at the 50 day before selling it.

Short Setup: PCP

[[EMR]] has just broken a strong uptrend and has made a lower high and a lower low. As you can see, the honey hole is placed right beneath the uptrend line and right at the 50 day average.

Short Setup: EMR

From the Consumer Durables, Appliances sector, we have [[SPW]]. This one has a long way to fall, and I like the breakdown from the triangle pattern. Look for more resistance at the 50 day.

Short Setup: SPW

Another one I’ve been watching is [[CLB]]. I believe it would be housed within Energy, but I’m not sure. I just like how it is setting up. It is one of few stocks that is more overbought than oversold. Accordingly, it has been popular, but the failure at the 50 day average after the high volume drop can not be ignored.

Short Setup: CLB

From the Heavy Construction sector, we have [[LAYN]]. Again, the same theme applies: 50 day as resistance, and a break through the 200 day average leads to a large fall.

Short Setup: LAYN

Finally, we have [[GHM]]. This stock is in the metals fabrication industry. Although it has a long way to fall, be careful this one as it may have some fight left in it. However, if it fails right here at the 50 day, well then you know what to do.

Short Setup: GHM

Well folks, I’m running out of time tonight. I’ll be posting more setups throughout the week ahead. Hope you can bank some coin from the setups here.

Full disclosure: I have no position in any of the stocks I’ve posted here.

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My Latest Breakout: The Finish

Wood’s Shower

Wood’s Shower Floor

Not that anyone is interested in my home repair projects. I just had to get that stupid, “My Bet, We Bounce” headline off the top.

Except for some stray grout and dust, the shower is finished. In case you are interested, here is what it used to look like: My Latest Breakout.

With my almost 4% gains this week, we are all set to go pick out a stylish shower door.

Check back later as I will be posting my watch list of short setups, starting sometime this afternoon or evening. I will add to the charts over the course of today and tomorrow. You don’t want to miss it as it is going to be one helluva coin-banking watch list.

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