Oh no! Evening star at resistance point!  Run! Run! The sky is falling!

Ok, I may have exaggerated a bit on the “run, run” side of it; but seriously, you have to be cautious and on guard when you see this pattern at a key Fib resistance point.

Yesterday, I postulated that we could either have a breakout day or Fib resistance day.  Although I was leaning on the breakout day, hence my moving more cash to stock, the market showed its hand by not only confirming a resistance day but also giving us an evening star reversal pattern to boost.

Take a look at the SPY daily chart below:

 

Did you see how today price closed below the 61.8% retracement?  Now, just because we have an evening star candlestick pattern doesn’t mean we are going down for sure tomorrow; but it does mean the probability of a down day is high.

The only good thing I see in the chart that “may” stop the down slide tomorrow is the support of the blue 79 simple moving average line.  If that support line holds, we may have a failed reversal.  On the other hand, the market could easily slice through the line like hot knife to warm butter.

In summary, tomorrow is cautious day.

Today, I got busy again.  Yesterday I got busy buying up stocks for possible breakout; today I got busy unloading stocks because I couldn’t find the breakout.  I dumped NOK (why did I choose NOK over RIMM when RIMM had been so good to me in Nov?), EXK, WPRT and reduced position size on GLOG & SZYM.  I sold DDD & SSYS for profit in the morning but ended up buying back DDD by end of trading day.

I also bought my way back in RIMM during the day so I could have an open position for possible more run on it.  I traded RIMM during the day and was able squeeze into a position with a net profit to cushion tomorrow price action.  You can see my daily trading activities here @followtheprice.

For those who are keeping track, AMRN & LRAD continues to drag my portfolio down.  Since these are position play, I usually ignore them during the day so they don’t interfere with my daily trading activities.

Now, I am holding only AMRN, LRAD, RIMM, USU, SZYM, DDD, EMAN, GLOG & 33% cash.

Depending on tomorrow price action, I may continue to raise cash as I see fit.

Trade well!

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Despite the mediocre rally today;  the SPY chart is showing a possible breakout to the upside from the 61.8% retracement of the previous leg of downtrend.

Take a look at the daily SPY chart below:

 

Do you see how the momentum indicator lines at the bottom reflecting a mini-uptrend while the daily chart clocks a new high?  Although the current price is now trading below the breakout line (Nov 2nd high); the overall mini-uptrend from Nov 16th is still intact as far as I’m concerned.

All we need now is the money flow to kick start the breakout run.  However, we are not totally out of the wood yet; the 61.8% Fib retracement is right around the corner so a falling-off the cliff can happen tomorrow or Friday.

I got busy today.  I moved more cash into the market by buying more EXK, SSYS, and EMAN.  I also initiated position on WPRT and GLOG. (I’m now tweeting my daily trading activities here @followtheprice instead of at the comment area in my iBankCoin blog post; follow me if you are interested).

I’m now holding AMRN, LRAD, SSYS, SZYM, EXK, DDD, USU, NOK, EMAN GLOG, WPRT & 16% cash.

How we trade tomorrow and Friday may determine whether the 61.8% Fib retracement resistance will hold or not.

Good luck and trade well!

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Regarding NOK, I sold half of my position size in the morning to cut losses  and to reduce risk.  I wanted to see how the price action settled in during the day.

After price started to hang around the $3.65- 3.68 level, I bought most of what I sold back in the latter half of the day.  I now hold about 70% of my intended position size.

Take a look at the Daily and Weekly NOK charts below:

Did you see how the bar look almost like a hammer?  I like the fact that it leaves a long tail behind.  Potentially, the price may want to go back up.  Hence, my buying back the shares I sold this morning.  For all intent and purpose, despite today down day, I believe the short-term trend is still up.

Now, look at the weekly NOK chart below:

Today bar did not cut through 50% of last week bar; that was a good sign for me.  Just from eye-balling the chart, it does look like the uptrend is still intact.

Now, you know the reason I bought back my NOK shares.

Below is the EXK daily chart:

You see how the green up bar today formed a small V to create a pivot low from last Friday low bar?  This pivot low is higher than the pivot low created back in November 15th.  I like to see prices take out the last Monday high of $8.73 to confirm last Friday low as pivot “higher” low.  To me, this is a low risk trade because my stop level will be either last Friday low or Nov. 15th low.  Hence, I bought a medium size position on EXK today.

Meanwhile, I’m still smarting from the drawdown due to courtesy of AMRN LRAD & USU.  I’m not too worry though.  You know why?  Because I know trading BIOTECH is not only heart wrenching sometimes but it can also be heart-warming at times.  Take a look at the CLDX chart today (see below).  I traded and profited from CLDX in the past but did not trade it this time due to my commitment to AMRN.  Hey, one BIOTECH commitment is plenty here.

Did you see the spike up today?  Wow!  That is what I like to see happening in AMRN.

 

 

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Pow! AMRN threw me a sucker punch and I caught it when I wasn’t looking. I was looking at my ticker yesterday after the closing bell had rung and I saw prices printing below $10 buck. At first, I thought I was looking at another symbol that was printing $9+ on average; but when I realized I was looking at AMRN. The punch caused me to utter, “You’ve got to be kidding!” Despite my usual expression of profanity when describing an emotional outburst in my past posts, I’m actually pretty “clean” in my day-to-day expression even when I’m upset. Yes, I am merely trying to emulate YOUR emotional expression in an emotion settings in my blog posts whenever I’m expressing profanity. (grin)

I checked the news and found out AMRN decided to go solo and got a $100 million loan to do so.

Now, I do have this possible scenario factored into my risk assessment; so it is not an unexpected punch on the face like you normally get from your mistress/girlfriend/wife in that order. The way I see this scenario, AMRN is only doing what a tough negotiator is expected to do- you show your tough stance by your ability to walk away from the deal.

“You don’t wanna pay the price I think is fair. Fine, I can do it myself and probably make even more money doing so. Bye bye!”

“I know you’re bluffing” the prospective buyer countered.

“Watch me!”

Now, we are watching the action being taken by AMRN.

In a nutshell, I’m in AMRN for the success of their magic fish-oil pill. So, I’m hanging to my dear shares. And yes, I’m NOT AVERAGING down here. You see, by not averaging down ever, I know my EXACT risk at all time. I know what my maximum loss is going to be on the get go and therefore I never lose sleep on any drawdown I’m going through.

On the other hand, if I’m averaging down for every price decline, I’ll be a nervous wreck by now because my risk will have ballooned to the level that I do not expect or anticipate. Now you know why I don’t average down.

Trade well!

 

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Here is a brief summary of my trading style:

1) I do not average down
2) I DO NOT average down
3) I DO NOT AVERAGE DOWN

I know some of you do average down and all I can say is “Good Luck” to you.  Here is my past post on averaging down.

Another thing I don’t like is leverage.  I do not load up on leverage and I’ve done pretty well without using leverage.

So how do you make big buck if you don’t average down or leverage up?  Well, I tend to load up high beta stock (high risk with high reward).  Thus, in lieu of leverage, I like to pick stock that has the potential to be a 2x to 5x bagger.  But the catch is that if these stocks don’t do what it supposes to do, you can lose half of your capital you put in these stocks pretty quick.

On the other hand, I will NOT get a margin call because my pick does not work out.  Also, I always sleep easily because I do not go “ALL IN” in any one of my high beta stock.  20% of my cash portfolio is pretty much as high as I will go in any one stock.

For now, my cash portfolio has 3 high beta stocks: AMRN, USU, and LRAD and they occupy 34% of my portfolio.

Currently, all three are going through drawdown which I am prepared for.  Meanwhile, my gain on trading activities (mainly DDD & RIMM) have helped offset some of the drawdown.

I traded LRAD from the time when it was under the symbol ATCO.  I bought ATCO in 1999 at $7 and sold at $11 in early 2000. I missed the 2005 rally because I was not looking at ATCO then.  Then I bought a boat load of LRAD (ATCO changed their symbol to LRAD to represent their main product line more accurately) when it was trading at 50 cents due to the 2008 meltdown.  Because I bought a boat load, I also received plenty of bonus shares of PAMT from the spin-off.  For every 2 shares of LRAD, I received one share of PAMT.  Afterward, I added to my PAMT position until it did a reverse-split from around 80 cent into $4.  After some marketing push, PAMT rallied to $11.  However, I sold all my PAMT at $9 before it got to $11.  I’ve no problem taking profit before it reached the top because at the time, the volume was there at $9 for me to unload.

I also unloaded all my LRAD shares when it rallied to over $3 in 2011; however, I sold all my LRAD shares around $2.50 before it got to $3.  It was in 2012 that I started to buy back some LRAD shares for another rally in the future.

There were other baggers I caught in the past but the point I’m trying to make here is that you don’t need to leverage to the hilt to push your luck, you just need to find the right high beta stock to hit your homerun.  The only catch to this strategy is that you need to have patience.  Yes,  a lot of patience to wait it out is required.

Currently, I’m waiting for AMRN to give me at least a 2 baggers (knock on wood).

USU, on the other hand, can be a surprise here.  The way I see this, USU will instantly become a $2 billion dollar company if they get the Gov’t loan guarantee.  This can be a prospective 10 baggers.  I loaded up USU the way I loaded up LRAD when it was trading at 50 cents back in 2008.  The risk here is that the US Gov’t decides to let their only uranium refinery to go under.  What is the odd of that happening?  The risk/reward in this one is tremendous based on my humble opinion.

In summary, my strategy is actually quite simple.  I’ve loaded up on three potential runners; and then I spend the rest of my times finding swing trades to keep myself busy.  If you looked at my November trading journals, I did quite well on RIMM.

Trade well!

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What is the purpose of blogging anyway?

You want to share your thought, your opinion, your personal favorites, etc.

But are you sharing your superficial thoughts, stale opinions or are you sharing your experience that can resonate to others so that they can say, “Yeah, don’t I know it.  Glad to know how this guy resolves this ….”

Why am I blogging here?

I’ve come a long way to trading the way I’m trading now.  When I started, I wished I could read the blog of a seasoned trader and see how he/she traded each day and the thought that went into each trade.  I don’t want to hear someone “crying” over their bad trades or the “bad lucks” they are stuck with; and I sure don’t want to hear somebody beating their chest because they have one good trade that is based on unacceptable risk.

I wanted to read how the trader get him/herself out of a trade; good or bad.  When I discovered iBankCoin, I said to myself, “This is what I’ve been looking for!”

The Fly basically bares his soul and his trades for all to see.  If he has a bad trade, we witness the pain he is going through and his resolution to get out of his dilemma.  We may not agree to his action and resolution but you can’t dispute the fact that he opens his door for you to look into his mind.

To see The Fly’s willingness to share in his own creative way triggers my desire to do the same thing.

And that is why I’m blogging the way I am.  Basically, I time-stamp each trade I make (under the comment area) so anyone can reconstruct my trading activities and deduce whether I make money or not.  I may not time-stamp to the exact minute but I do so within a reasonable time frame so that you know my dollar is at risk.

I believe I’ve moved pass the “fear” factor that used to paralyze me at time of execution.  Do you remember the time when you’ve seen a technical signal screaming at you to execute; but you just could not act?  I’ve been there.

Now, I just take the signal and place my stop loss target.

Blogging is just my way to remind myself to stay calm, to pay attention, and to be responsible for each trade I make because someone is watching.  There is no better “outside force” than here since I know I’m not the only one exposing myself in my trades.

Trading is simple but difficult to execute.  My goal is the follow the price action and trade accordingly so that you can see that it is really not that difficult at all if you get yourself out of the way.

How do you get yourself out of the way?

Well, vote for me and I’ll demonstrate along the way…

Trade well.

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Before you say it is impossible to be perfect; hear me out first.

Let’s start with premises we already know:

1) Trading is tough because the market is volatile.

“Wow! what a big run up yesterday! The market is going up! Yeah! Wait a minute!  FUCK!  The market is dropping like a rock now!  What’s the FUCK going on here???”

2) There is no perfect trading system

“I paid %(#$)#@ for this trading system and I had FUCKING four losses in a row!  What’s the FUCK!”

3) Taking loss is inevitable; it is as certain as death and taxes

“I don’t wanna take my losses!  The price will go back up!  I’m sure of it!”

The above three items pretty much define the “imperfection of trading in the chaotic market”.

So, let’s talk about the perfection, shall we?

The only thing YOU can control during trading is your execution.  Buy, sell, hold, or neutral, you have total control to decide which action to execute.  YET, while simple in principle it is not easy to execute, failure to execute means you are GIVING UP control.  And with no control whatsoever while you are trading, you are DOOMED.

Don’t waste your time justifying that you are in control by simply making a decision to hold a losing position beyond your original stop point.  You lost control because you could not execute to close your position to take your loss.  Thus, your short-term trade now become a long-term hold (aka bagholder).

Perfection in trading is simply being perfect in executing your trade the way you plan it.  Whether you make money or not is irrelevant as a single trade; but in the long run, your being “perfect” in executing your trades will guide you to profitable trading.

Some of you who read my blog know that I usually trade the same group of stocks over and over again.  The reason is because I’m familiar with them.  While I don’t know every nuance about them; I know enough about them to execute my trades according to my plan.  This is all that matter.

While I strive to be “perfect’ in executing my trades, I may not be perfect in “timing” my trades.  Sometimes I’ve taken profit too soon or losses too quickly; but that is ok.  You know why?  It is because I don’t have a crystal ball.  Hence, without a crystal ball, I’m allowed to be “imperfect” in my timing.  As long as I can jump back in after I get out. albeit at a higher price if not at a lower price; I’m not complaining.  Isn’t this is what trading is all about?  Jumping in and out with the object of taking a piece of the pie without losing your shirt?

Perfection in your execution doesn’t have to be difficult; all it takes is that you keep this simple rule in the forefront of your head- cut your losses fast according to your plan at all times when you are trading.

Regarding my interest in becoming a tabbed blogger, I’m actually quite ambivalent about it.  If you vote for me and I’m elected, I will continue to post my 2 cents as well as my daily trades as I make them.  But it really doesn’t matter if I become a tabbed blogger or not; I will still post the way I’ve been posting.  There are a few bloggers at Blogger Network who also deserve to be a tabbed blogger; so I won’t be doing “shitting” on anyone.  My REAL goal is to make a boat load of money while posting my trades here.

IF I become a tabbed blogger, I may have to increase the creative factor in my posting so that it will be more fun than just posting my daily journal.  The way I look at it, being a tabbed blogger means that imperfection in your trades will become even more highlighted for more eyeballs to see.  Thus, in some way, being a tabbed blogger will force me to achieve perfection in the execution of my trades.

Tabbed or not, making good trades will always be my ultimate goal.

Trade well.

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“What are you waiting for?,” you asked.

Well, I’m waiting for AMRN to blast off because a pharmaceutical company materializes to buy it out.  Sub $11 buck or $18 buck, who cares?  I am looking for $25+.  So, I’m waiting…

I’m also waiting for USU to become significant.  “Significance of what?,” you asked again.

Hey,  I didn’t know you care so much.  Thanks for asking.

Do you know there are only a few countries on this earth that have the capability to refine uranium?  USU is the only established company that operates the only U.S. owned uranium enrichment facility in the United States.  Do you think our country is going to let this little child to just die even though it is being ignored right now?  I don’t think so.  One day, some of you may regret for not buying at sub $1. Hence, I’m waiting…

LRAD, what can I say about this?  I’ve traded this baby for years and it has made me boat load of money.  Directional beam sound has its usefulness and it is my belief that eventually all law enforcement and military establishments around the globe will have one of these babies.  The only problem now is that every country is in some tight budget; so this is not a top priority purchase item.  Due to its low volume and liquidity issue, I don’t trade this one actively.  I will just wait until the company starts taking big order or become a takeover target.  Waiting away I am.

Cash.

I’m sitting on a boat load of cash so I’m waiting to deploy my army.  Did I just say army?  Pardon me, I meant to say my cash.

Take a look at the weekly SPY chart below:

 

Did you see the similar pattern in November 2011?  I remember receiving comments on my November 2011 post on “catching the falling knife” implying that “the sky is falling”.  I’ve a good feeling that we are near the bottom of the correction. Did you see how this week bar touch the 61.8% retracement level? I’m deploying my army to procure some DDD and RIMM today.

Like everyone else, I’ve given back some gain but is still ahead for the year.  Perhaps, just perhaps, one of my three musketeers (AMRN, USU, or LRAD) will hit a jackpot and propels me to a stellar return for 2012.

Other than mindless conjecture on my part, I’m just waiting.

One more thing, I’ve been posting my trading activities using the comment area of my last post for the last two months and have noticed that there are some of you who read my journal.  I want to thank you for your attention.  May luck follows you as well.  Believe me, we need all the luck in this volatile market.

Trade well!

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Here we go again!  Actually, it is more like “Here I go again!”

I like to pick on AAPL ’cause it tastes the sweetest when it is the most crunchier.

We have a dark cloud hovering over the AAPL candlestick chart right now.  This is a potential bearish signal (and how many times have I said that?) which I am willing to bet that this is the last time you are going to see AAPL trading at $67X level.  Again I initiated a small starter position to short AAPL using the Sept 21st  $675 strike price put option to test my luck.

What you see in the chart below is the making of a dark cloud cover candlestick pattern which has the “potential” to signal a bearish reversal.   Tomorrow will be the confirmation day if price open below today close and continue to head lower.

“What about iPhone 5 debut on the coming Sept 12 announcement?”

Good question!  I see two ways price action will take on that day.  A very BIG UP day or a very BIG DOWN day.  For now, I’m letting the chart tells me what to do.  There are still 7 days to judgement day so I am not going to worry about it right now.

Potentially, today high may becomes the next lower pivot high next to the highest high formed on August 27th.  Thus, for the up trend to continue, today high must be taken out in the near future.  It will also be used as a basis for my stop to cut my losses in case I’m wrong, yes, again!

Click here to to see the larger font version of this post: following price action.

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So everyone is supposed to have an edge in order to win in this stock market game, right?

But what edge are we talking about here?

In general, when people talk about edge, they often refer to statistical advantage.  We will call this type of edge “technical edge”.

But to me, technical edge becomes zero edge if you don’t have the discipline to follow it.

I know I repeat this again and again but I think it is worth repeating because it is my opinion that “being discipline” is the true edge that allow you to beat the other 90% of the trader in making it.

In other words, you can be very proficient with the following:

– Chart reading that included your understanding of all popular chart patterns such as head-and-shoulder, cup and handle, double top, double bottom, flag, triangles (symmetrical, ascending, and descending), wedge, gap, triple top, triple bottom, and of course candlestick chart patterns.

– Technical analysis that included all kinds of oscillator and momentum indicators.

– Other chart & technical analysis that I did not mention above

And you still have no edge if you allow your emotion to dictate the better half of your trading decision.

But discipline doesn’t just drop on your lap without effort. You have to work at it.

To begin with, you need experience.

If you are a trader, either as a beginner or intermediate, you are already on the path to gaining experience.  However, experience alone will do nothing for you unless it is being reviewed and analyzed by yourself.  By reviewing your trades, you learn to become a witness to your own trading decision.  But to be a true witness of yourself during trading, you need to be self-aware.  Instead of living in your own fear or greed, you learn to stand back and watch yourself being in fear or greed.  If you can possess this type of self-awareness to witness your fear and greed, you will have the self-awareness to “choose” not to let it interfere with you trading plan.

Below is an example of your NOT being aware of your own emotion:

“FUCK! Why the FUCK did the stock have to go against me after I bought!  It HAS to go up.  I KNOW it!  I’m buying some more here!”

Below is an example of your being AWARE of your own emotion:

“Fuck! I may be wrong again. I HATE being wrong. Look like price action is going to hit my stop soon.  FUCK!  Oh well, moving on.  I will watch to see how this stock behave in the next couple of days.  I will take the next buy setup signal if there is one.”

When you are aware, you are not living inside your fear, anger, frustration, and greed.  That mean you still have the ability to choose to side-step your fear and greed and stay the course of your trading plan.  But to get to this level of being able to side-step your emotion, you have to climb THE mountain.  That is, the mountain of self-awareness.  And climb you will if you are commit to the path of trading well.   In time, your constant awareness of your emotional reaction and your effort to bypass these reaction will become less of a struggle and more of a habit.  And before you know it, your habit is your discipline.  And following your trading plan will become second nature.

All the effort in gaining self-awareness not only make you a better trader but a better person in life.

This is how discipline becomes you and this is how you become discipline.

You see, the true edge in being a winning trader is not the technical edge, it is your ability to commit to your risk management and trading plan because you possess self-awareness to bypass your own emotional hindrance.  We are all human; therefore, we will have our emotion.  The key to avoid living inside your emotion is your self-awareness.  And because you are self-aware, you have the power to make a choice.  With practice, your choice of following your trading plan despite your fear and greed becomes a habit.  Viola!  You now have discipline.

The road to true edge only appear to you when you are ready.  You can be reading this and agree wholeheartedly; but if you are not ready, this information will be forgotten the next day when you are staring at your loss with anger or fear.  If you are ready, you will understand what you need to do to gain this self-awareness.  In my case, I stopped buying books on trading and took up Tai Chi and meditation.

Good Hunting!

ps. Oh yeah! If you are ready, you can also do what Yogi and Boo Boo does.  Start trading small lot so you can learn to take small losses.  In time, taking small losses become a habit.  Then progress to move up the ladder by increasing your lot size in small increment to acclimate yourself.  This is the same technique in martial art training when beginners are forced to spar with partner to learn to acclimate to the punches and kicks coming at you.  You know your partner is not going to hurt you bad so you begin to put aside fear and learn to dodge and defend yourself with proper martial art techniques.  This is the same principle in trading.  You know you are not taking big loss so you learn to put aside your fear and greed and learn to apply proper risk management and following your trading plan.

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