Sell Sell Sell!

A little late putting up the wrap-up today.

And kind of a big week last week — mainly due to continued confirmation to the downside.

Let’s just say I’m glad I’m out of this market.

I learned long ago that it’s madness to fight the direction of the general trend of the market.

Yes you can pick off some nice trades here and there — but for the most part breakout plays are going to be dead in the water before they ever get started.

Facebook ($FB) IPO or not.

And it’s a good thing I was out as the Sunday Night Watchlist trades were off -8.85%.

Wow!

Despite a few positions taking off earlier in the week, by Thursday — EVERYTHING had slid back — just in time to get really ugly on Friday.

Here are the stats:

And here are my stats for how picks have done when the S&P 500 is below it’s 50 day MA.

For awhile trading below the 50 day MA wasn’t looking so bad.

Not anymore.

Still, I’ll continue to track performance below the 50.

Here are the market charts:

HOURLY CHART

No doubt the market has been straight down for awhile now.  And trying to pick a bottom — or fight the direction — is madness.

DAILY CHART

UGLY.

I see a bounce coming in soon — but as you can guess, I never try and predict where that would be.

The best thing to do with trends like this is to let them play out.

Wait for a signal in the opposite direction — or a chart pattern.

And huge red down bars are NOT a reversal signal.

WEEKLY CHART

Might find a little support here on the 50 week MA.

Or at least a bounce.

But if that doesn’t hold — I can’t see much going on on the long side.

As always, another watchlist comes out before 7:00pm on Sunday.

Good luck out there!

Dan Zanger — world record holder for highest percent gains in a single year — did it.

3 times.

Nicholas Darvas came close to doing it.

A bunch of traders in The Market’s Wizards books did it.

I’ve done it — once.

I’m talking about blowing up your trading account.  Which means, effectively, taking it to zero.

Is it such a bad thing — really?

I guess if it was a massive account — sure.

I think Zanger got one of his early accounts up to $200,000.00 and then blew up.  Probably from margin.

Darvas mortgaged his house for a trade — and lost.

From my perspective — if you want to get big — really big — then you are going to have to take some risks.  You’re also going to have to concentrate your efforts in a few positions.  And when you do that — you run the chance of getting into trouble.

From over commitment.

From trading biases.

And without a doubt from risk or ruin — a statistical probability that says if you trade at a certain size, at some point or other you’re going to run into a losing streak that will wipe you out.

Get that?  You WILL, with 100% certainty run into a losing streak that WILL wipe you out.

But that’s the dance, isn’t it?  Outrunning the probabilities until your account is swelled with cash and you can return to statistically safe trading methods.

In the beginning, the risk is always going to be greatest.  So why not take you biggest risks there — when the account is small — and easily replaceable?

Does it make  sense to diversify an already small account into 10 positions which will move your equity nowhere?

I don’t think so.

Don’t get me wrong though.  I’m not saying go for it when you know NOTHING about trading.

Learn first.

Then go MASSIVE.  And if you blow up, you blow up.

You can always start over.

Basejumps everywhere!

Is it Sunday already?  Sheeeesh.

Time flies on the weekends.

Like I mentioned yesterday, when the market’s below the 50 day MA — I’m out.

So these picks are just to record if there’s anything really worth trading during that time.

A real life year long experiment if you will.

Here’s what I’m seeing:

Pattern: Fakeout! Looking for a push past 5. Nice base!

Pattern: Continuation. Looking for a push to .65.

Pattern: retail Reversal. Looking for more momentum up to 50 MA @ $2.50

Pattern: Fakeout/Base Jump! Looking for a push above the base to $1.60's

Pattern: Base Jump Reversal! Looking for a move to $2.20.

A lof of those are potential fakeouts and my newly coined base jumps!  LOL.  Traders love coining trades.  So why not.  And because what i love to trade are breakouts from bases at the bottom of downtrends — the name makes sense.

Anywayyyyy….

Good luck out there everyone.  And be careful with the market below the 50 MA right now.

Vacation time again!

I used to hate weeks where I was sitting out.

Because I used trading as entertainment.

And I wanted to stay excited!

I didn’t care if the market was tanking.  If it was flat.  If there were no setups.

I wanted in!

I’m pretty sure that’s the worst way to trade.  Because sometimes the conditions just aren’t favorable.

Seriously.

Now, when the market isn’t right for me — I see it as a vacation.

A chance to read, or backtest, or work on this blog.

That way, when the market comes back, or picks a direction, I’m ready to go!

This week marked another week where the indexes were trading below their 50 day MA.

And for me, going long beneath that line, is something I just don’t do.

But, I’m still putting up the types of charts I would trade because that way I can track the results for a year — and see what the P/L would have been if I was in the market during those times.

Here’s the stats for last week’s watchlist trades:

As you can see it was another flat week for the trades.

UPI stopped out early, AFFX canceled that out with a nice 11% move — and the rest were a wash.

With that said, here are the market charts I’m looking at:

HOURLY CHART

Yep — under the 50 day MA — all week.  This makes it pretty tricky to go long — and why we saw a lot of trades collapse.

We had a slight rally at the end of the day, trying to take the line — but no cigar.  We’re still underwater here.

DAILY CHART

Same with the daily — with things looking worse and worse.  Of course, that’s the time that some traders like to buy.

Not me.

Better to wait.  We’re under the 50 day MA, under the 20 day MA, about to make new 50 day lows, and look at all those huge red volume bars.

I don’t like them.

WEEKLY CHART

While the weekly is still holding above the 50 week MA, it looks like the breakout is starting to turn into a fakeout.

Not good.

And you definitely don’t want to get trapped there.

AAPL DAILY CHART

Here’s a chart that a lot of traders look to to save the market — AAPL.

AAPL longs are a pretty passionate bunch — but this chart does not look healthy to me.  Look at the huge range red bars to the downside in late April.

Look at the failed bounce on great earnings.

And the dwindling volume.

This chart screams: CAUTION.

Plus, we’re under the 20 day MA and the 50 day MA.

IN CONCLUSION

Look, the market can and will do whatever the market wants to do.  All you can do is look at the information it’s offering and try to put together several possible moves.

Ask yourself:

If the market continues lower — what would THAT look like?

Then ask yourself:

If the market reverses and goes higher — what would THAT look like?

Then ask yourself:

If the market stays flat and goes nowhere — what would THAT look like?

I’ve seen too many traders marry a direction — get locked in — and then fight like hell against the information that the market is actually presenting them with.

As if the market could ever be wrong.

Spoiler Alert: It never is!

So don’t fight it.  Make it a point to accept all possibilities, let go of your ego,  stay alert — and be smart out there!

As usual the Sunday Night Watchlist comes up tomorrow around 7:00PM Pacific.

Have a great weekend!

In the market you’re going to be wrong — a lot.

And if you can’t set (and take) stop-losses you are going to get CRUSHED.

C.R.U.S.H.E.D.

I used to be the guy who never took stops.

It’ll come back.  I have faith in my pick.  This is a long term trade.

That’s what I used to tell myself.

Well, faith’s got nothing to do with it.  And after you’ve refused to close out at a stop-loss level and watched your position plummet 50, 60, 90% you learn, it doesn’t always come back!

Take this weeks pick $MEMS.

Wow.

1 week.  -50%.

But, there was plenty of time to close out for the standard -10% stop.  And you would have thanked your lucky stars you did that.

Here’s the chart:

KeerrrrrrrSPLAT!

Stops.

Take them.

Every time.

Any questions?

Good luck out there!

I’ve been hunting for a huge run from a big breakout for a few months now.

I’m talking about 40-50% moves after already big breakouts.  Like this move here.

But I keep getting stopped out.  Because jumping on board highly volatile stocks is like trying to catch the bullet train — when it’s moving.

You know that scene in Mission Impossible — when Cruise is on top of the train?

Yeah.

Today, with $FACE we have the first possible move.

The day before entry saw a +22% move.  Today we had a +8% move.  Of course, tomorrow I’m looking for a price EXPLOSION.

If it doesn’t come, so be it.

If you know anything about me — I’m all about experimenting.

Kaboooooommmmmm

The only problem I’m seeing here (and it could be a big one!) is the lack of follow through in volume and range.

Today’s volume should have dwarfed yesterday’s — and the same should happen tomorrow.

That leads me to believe this firecracker could be a dud.

But we won’t know until we know.

Let’s see how we do!

UPDATE

Well, that did not turn out amazingly well.   No follow through.  And worse.

Sliiiiide...

The only positive here is the light volume.

Let’s see what happens tomorrow.

We’re back below the 50 MA on the daily S&P 500 chart which means I’m out of the market on the longside.

Again.

But I’m still recording my positions (if there are any setups) to see how trades perform in different market environments.

I’m also doing this to create a year long record of what does and doesn’t work for me.In the process I hope to show how other retail traders can examine what does and doesn’t work for them and how to put together a trading plan over time.

With that said, here are the charts I’m looking at this week…

Huge volume here -- looking for a push to $5.50

Need a breakout here -- looking or a bottom.

Creeping up the 50 MA here -- looking for volume expansion

Solid breakout here pushes price to $5.50.

High risk trade. I know I look at 1 of these each week. It's my experiment on huge breakouts. So far it hasn't produced results.

Remember to do your homework — and good luck with your trades next week!

Rough Trading Seas!

Famous trader Ed Sekota said:

To avoid whipsaws, stop trading!

Very funny — and true.

A whipsaw is any type of price action that gets you into a trade, then out again with a small loss.  Then in again.  Then out again.

In trend following, whipsaws happen when price is consolidating, or at tops or bottoms.

That’s what I’ve been dealing with the last couple of weeks.

We’re out, we’re in, we’re out…

These are the times that can really test your resolve.

The right thing to do is trade through it.  That’s all you can do.  The wrong thing to do is to get impatient, to trade bigger than normal, or run away.

That said, here’s what the market did this week:

HOURLY

Definitely below the 50 hour moving average — decisively.

But lately, this means nothing.  The market flip-flops every other week.

DAILY CHART

Also below the 50 day MA — and this means a little bit more to me.  Next stop $133 level.

WEEKLY CHART

Still above the 50 week MA with some support close by.  These levels we really determine if this is a longer term top or not.

When it came to the watchlist, we were down just over -3%.

Churn, churn, churn...

And with this week being the last week of the month, I’m closing out with the first losing month since starting the watchlist in January.

Here are the monthly stats so far.

Just about double the S&P 500 gains for the year so far.

8 Months to go — can’t wait to see what happens.

As always, new watchlist comes out tomorrow night — though I’m sitting out with the market below the 50 day MA.

Ka-Boooom!

When breakouts go bad — things can get hairy fast!

A bad breakout occurs whenever price breaks out of a rande and then immediately turns around and closes back under the breakout zone.

When that happens you want to watch out.  It could be a serious bull trap.  And the last thing you want is to be caught in the exit doors when the herd is charging.

While $BODY wasn’t a watchlist trade, it was in the portfolio of all time highs I’m watching.

Not good.

Here’s the chart:

Ouch!

Can I get an ouch!

That’s a 45% haircut that’s impossible to get away from because it’s a GAP DOWN.

When a gap down like that happens, it blows right through your stop and you get an exit at the first available opening price — 45% lower!

Not good at all.

The only warning sign that things weren’t going well here is the failed breakout.  But you had to act fast.  With maybe 1 day warning.  That’s not a lot.

In the watchlist, all stocks are held with a -25% trailing stop.  So this was still in the watchlist at the time of the gap.

So it’s a big loss.

Also, another lesson here — never put all of your cash into a single trade.

The all time highs watchlist contains 10 positions.  So if you lost -45% on 1/10 of your equity you have really lost only -4.5% of total equity.  Not good, but it’s not HALF of your equity.

Good luck out there.

I love seeing stocks take off.  In fact, I live for it.  When a breakout rockets off the launching pad there is simply no better feeling.

And while this weeks watchlist isn’t doing so great, $EGT is looking awesome.

Here’s the chart:

Here's the setup. Have to remember this one!

And here’s the run…

Yeahhhhhhh budy!

Now that’s what I’m talking about.

The circle represents the week we highlighted it.  We can tell right away it’s working out with the influx of volume on the breakout and lighter volume on the pullback.

Now we have even more volume coming in.

These types of charts are definitely worth studying and taking note of.  It’s all about what’s possible with low priced stocks.  And trades like these really do make the many small losses worthwhile.

Here’s to many more of them.