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Monthly Archives: June 2012

“Only fear can defeat life”

I couldn’t agree more!  I read this sentence from the book, “The Life of Pi” by Yann Martel.  For those who have not heard of this book, it is a fictional story of a teenager who survived 227 days on the ocean.   I bought this book for years but finally decided it was time to read it last week since I wasn’t actively trading (due to my promise to myself to take a break while price actions was trading inside the dead zone).

The author gave a full treatment on the subject of “fear” in one short chapter (chapter 56).  While the information provided in the chapter is “nothing new” since we all have at one point in our life experience fear in its naked form; it is still quite “revealing” to read the author’s recap of the essence of fear.

I’m sure everyone who are reading this post know and understand that fear is our worst enemy when it comes to trading.  While fear can destroy us “slowly” in our normal day-to-day living if you don’t do something about it, it will “accelerate” your demise in the trading world by paralyzing your ability to trade with a plan and thereby destroy any chance you have to improve your game.

You must FACE fear.  You must ACKNOWLEDGE fear.  Only by facing and acknowledging your fear can you then embark on developing a PLAN to trade with DISCIPLINE in spite of your fear.

Yes, it means you have to WORK at it.

Nope, it doesn’t matter if you follow the most successful traders on this planet, you will still lose your shirt if you don’t INVEST your time to become a disciplined trader.  Every successful trader trades with a style that is very much their OWN UNIQUE style.   And the odd that you can be successful by taking the easy way out in following the trades of any successful trader is a big ZERO.

You know why?


Just because a trader is successful doesn’t mean he has no fear.  It only means that he FINDS his own personal way to work around this fear and still be successful.  And guess what, if you didn’t spend the time and investment to develop the discipline need to follow a trading plan that is unique to your own personality; your fear will destroy the trades you took by following Trader X.


Does the following sound familiar?

1) Trader X bought AAAA

You just took a loss from previous Trader X’s trade; now you FEAR to take another one.

2) Trader X sold BBBB as a loss

You hesitate to take the loss because you FEAR stock BBBB will take off without you.  On top of that, you now decided Trader X is wrong to take loss so soon.

3) Trader X is holding CCCC thru the volatility while sitting on profit

You FEAR of losing the profit so you closed the trade to lock in profit even though Trader X is still holding it.

4) Trader X is still holding DDDD when the loss is now approaching 5%

You FEAR that the stock is going to zero; so you cut your losses (which by incident is the right thing to do but it’s just not part of Trader X’s trading plan).

Don’t forget, Trader X is NOT PERFECT and Trader X will have his usual % of trades that are wrong; however, by second-guessing Trader X and proving to yourself that you are “right” when Trader X is “wrong”, you are only encouraging your bad habit and allowing your FEAR to dictate your market decision instead of relying on a sound trading plan.

You see, there is no short-cut to become successful in trading.  Either you work on your discipline as a mean to control your fear or you may as well be the benefactor to those who win consistently because they find their way to work around their fear.

Here is how the author Yann Martel closed his chapter on fear:

“…if your fear becomes a wordless darkness that you avoid, perhaps even manage to forget, your open yourself to further attacks of fear because you never truly fought the opponent who defeated you.”


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An explosion, gate demolished, and the Bulls stampeded the Bears!

Wow!  What a sight!  With such force of explosion, the dead zone was obliterated in a vaporized second and the Bulls run like they were in the annual San Fermin festival in Pamplona.

At this point, price action is screaming buy!  However, with such a strong head wind already expended; I will be looking to buy on retracement and on a gradual scale due to potential profit-taking activities.

Congratulation to those who took the risk hanging on to the bull side; you earned this big win off the gate.

And thanks goodness I only have a small percentage of my money in the bear trade (TZA and SKF) which I mostly like will be stopped out since I placed stop loss below the over-night intra-day low.

Good Hunting!

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The Great Escape (from the Dead Zone)

Right now, price actions from both sides, the bull and the bear, are trapped in the Dead Zone.

There is only one thing to do- escape!

While the bull’s escape plan “almost” succeeded in breaking out from the past 2 days of furious digging; it was unfortunate that the tunnel collapsed today.  The bear, meanwhile, has a better plan; it flooded the tunnel built by the bull and slide down the slippery mud with the help of gravity!

So far, the bear is in control; nevertheless, there is still a bit more to go before the bear breakout of the Dead Zone and fall off the sky.  Yes, there is nothing the bear wants more than the feeling of free fall.  And yes, that feeling can be quite addictive.

Below is the daily chart of SPY.  From the look of it, who do you think will escape the Dead Zone first?

Needless to day, I added some more SKF and TZA today.

Currently 10% long-term hold; 6% short (SKF & TZA); and 84% cash.

Good Hunting!

ps. For those not familiar with the Dead Zone; it is my own personal interpretation of the range between last Friday high and Monday low which I considered a “consolidation” area with no bias on either up or down from an intermediate to long-term perspective.

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A fistful of dollars in the bubbleland

After getting stopped out of my TZA and SKF twice this morning, I sat back and just watched the bubble floating inside the “dead zone“.  When the SP500 e-mini reached the Pivot Point- R2 level @ 1327.50 resistance and started to roll off “the hill”, I bought back starter positions on TZA and SKF with stops below intra-day lows.

Like I said in my previous post, I’m refraining from buying any long position today because the price action is trading inside the dead zone.  My “personal” thesis is that this rally (and yesterday’s) is still a head-fake.  Since I’m still 87% cash (3% being peeled off to buy TZA and SKF) and 10% long-term hold; I’m basically in a “don’t care” mindset.  Meaning I’m neither overly net short nor overly net long.  In other words, I’m giving up the opportunity to add to my YTD gain in return for protection against giving back some of my YTD gain.

Yes, I think the right word is “indifference”.  I’m indifferent to current price action due to my interpretation of the “Dead Zone”.  That is pretty much the gist of my day action.   Like I said, I don’t have any power of precognition so I can be wrong as always.

Good Hunting!

Can you see the bubbles inside the dead zone?

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Floater alert! Be careful of where you sit to eat…

I can’t believe that in the last 2 days, the SPY daily chart is showing more than a chart pattern.   My eyes must be playing trick on me; but did you see the floater in the chart below?    Yesterday a dump; today a floater!  Yuck!

While today price action took out yesterday high, the overall trend based on the last 5 days is still down.  In order for me to be convinced that the bull is back, price action has to take out the high of last Friday (June 22nd).  Meanwhile, today gallant move of the bull is nothing more than another dead cat bounce.  Yeah, just like the one last Friday.

So far, yesterday and today price actions are trading around the 50% retracement of the low of June 4th and the high of June 19th.  You can see the dashed line (50% retracement) that cut thru yesterday and today daily bars.

The big question here is, “Will this support at 50% retracement hold?”

If it doesn’t hold, then that mean price action will have to break thru the low of yesterday.

The thing about using the Fib retracement system is that you also need to be alerted to the “failure” of the Fib supports and resistances.  A failure of the Fib retracement means those supports and resistances are not there anymore.  Thus, if the 50% retracement fail to support today and yesterday price action; I will expect the market to continue the downtrend to the next support level at 130 area (see the dashed red line).

In summary, although I got bumped out (again!) of my TZA and SKF positions today, I’m still not convinced of the bull taking back the helm.  While I’m surely missing out some of the bull run in some stocks, I consider the price range b/w yesterday low and last Friday high a dead zone.  Therefore, I’m now sitting on 90% cash due to my reducing some more of my long-term holdings.

Having only 10% exposure in the market and no plan to invest more in the “bullish” side inside the dead zone; I think it is time for me to stop and smell the roses so to speak.

Good Hunting!

Almost forget, can somebody FLUSH the toilet already!

Below is the SPY daily chart which I highlighted in red rectangular box the “Dead Zone”.  My interpretation only, of course!

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Did the market just take a dump? No wonder it’s kind of smell…

Take a look at the daily and weekly SPY charts below.  It sure looks like the SPY took a dump…

Below is the daily SPY chart:

Below is the weekly SPY chart:

Just bought myself a starter position on TZA and SKF.

Unloaded some of my long-term position to lock in profit and to protect my YTD gain of 17+%.

Current cash position is 82%

Good Hunting!

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Coming into the Crossroads- the dreaded Doji bar (SPY weekly analysis)

The SPY weekly bar now shows a Doji bar.  In other words, last week price action was a [PAUSE] and the direction was NEUTRAL.

Although we have a higher high and higher low; a Doji at this point is actually not a good sign for the bull since Doji can sometimes represent a “topping” of the chart; a point suspended in mid-air before turning the corner.  Doji bar generally meant that neither the bull or the bear won the battle for the week.  However, a long-tail (from top) meant the bull gave back a lot of gain before settling back to the week open price.

From here, I’ll watch how coming price action move relative to last week closing price.  If price action starts the week trading below Friday closing price, it is considered bearish.  And if the price action takes out last week low, even more bearish.  Nevertheless, if it trades above Friday closing price with a low that does not drop below last week low, the bull may still be in charge.

Based on Friday after hour price action and current Sunday night price action, it sure looks bearish to me.


Good Hunting!

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Watch out for the falling dead cat! (with updated EOD chart)

That’s right, a falling dead cat from the dead cat bounce.

Unless there is a significant rally later on to move price beyond half-way point of yesterday down bar; it is my opinion that today is the bear catching its breath after a speedy run yesterday.    Yeah, yeah, I got bumped out of my SKF and TZA in the morning ’cause I didn’t want to see a big red numbers on my position.  I like to keep these red numbers small; so I used tight stops and they got filled.

But don’t worry; getting out of a position at a loss only mean that I’m willing to take a “hard” loss (as opposed to paper loss) while waiting for price to regain traction on the direction I’m betting on.  And if price action decides to take the opposite direction of what I like to see; fine by me because I’m already out with the hard loss.  Hell, I may even go long if that is what the price action wants to go.

But for now; I see nothing here to refute the downward bias from yesterday Big Ass down bar.  Don’t believe me?  Take a look at the daily SPY chart below:

By the close of the day, it couldn’t even close above the 38% retracement point…

Good Hunting!

Current cash position: 75%

The remaining 25% sit in the long-term portfolio

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Flowing with the river… downstream

I’ve been patiently waiting for some sort of retracement from SKF and TZA and finally got a small ones.

Bought starter position in SKF and TZA.

It’s a good thing I sold earlier this morning when the warning bomb blew up at 10:00am EST.  Sometimes, if you are thinking of getting out; it always pay to be the 1st to get out and not worry about getting out too soon.  It is to your benefit when others are still “thinking” of what to do (indecision) while you are getting out; otherwise, you will be fighting for that narrow door when everyone is running for exit.

The daily SPY bar isn’t looking good, it took out the low of the last 4 bars!  See chart below.

The weekly SPY chart now shows a red bar; not very endearing for a bullish outlook.

Good Hunting!

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“Retreat! Retreat!” Price action seems to suggest

The 10:00am melt-down was a sight to see.  Exactly at 10:00am, BOOM! Down it went!

With shell explosion everywhere, you have to retreat!

Sold all of the following for some gain, breakeven, and small losses:


Still holding AMRN plus my 25% long-term holdings

Current cash position = 70%

Will sit back and watch instead of trading to see where the market goes.  It is definitely too early to initiate any short position since this morning mini-meltdown is not enough to call into question the weekly bullish bar yet.

Good Hunting!

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