Random Rants and Market Ideas by Brandonf
- Thread starter Brandonf
- Start date
I did make a note earlier in the day that a lot of the names were gapping up and I would be using the gap rules for entry. This is a fairly simple rule that if a stock gaps up on the open nad that is what causes the trigger I will wait for the first pivot high (or low in the case of a short) to be established. I then will watch the reaction back and make an assesment and if I like the action I will place an order, normally over that first pivot high but often on the pullback at support. In any case this rule kept me out of the majority of the names today. I will be covering it all in the scanning group which I will record and put the log up here. You can also attend it.
As a general statement about today I would say that I was disapointed in the action. I a small amount of money, but using the gap rule kept them from being meaningful.
Brandon
Brandon, whenever I read your posts I always get the sense that you are a bright, intelligent guy but have yet to be really tested by the markets.
Old dogs like me (even though I'm just 41) have always learned the art of patience.
The truth of the matter is that most traders are usually right about what ought to happen but almost always wrong about WHEN it does.
I like your style and we seem to have a lot of similarities and top down approach but my best advise is to try not to get too caught up in yourself.
You may understand what I mean by this statement later in your career and I'm not meaning to come off condescending as I do like you and I am only making an observation, I could be wrong but I think that another 5 years of trading and you will be where you think you are now.
Quote from Samson77:
You may understand what I mean by this statement later in your career and I'm not meaning to come off condescending as I do like you and I am only making an observation, I could be wrong but I think that another 5 years of trading and you will be where you think you are now.
I agree with that. I have been humbled a number of times in the market and I always try to keep that in mind. I come from a midwestern farming background and no one lets me think too much of myself. Whenever I think I'm too smart my Grandpa still will loudly announce that he remembers when I thought girls were gross and I wanted to have sleep overs with the boys. I guess that is not PC in the modern world, but he means well.
Brandon
To say the market is split would be a bit of an understatement. The DOW was down about 66 points on Friday while the S&P500 increased 1.79 points and closed at 1179.59. Volume decreased slightly to 2.47 billion shares. Advancers beat out decliners by about 2 to 1 but there were only 34 new highs vs 114 new lows. The A/D line is nice, but I would definatly like to see better Highs/Lows. Over in Nasdaq land things looked more favorable, the Composite closed up 14.10, at 2082.21. Volume decreased by 3% to 1.82 billion shares. This is the thing I am most disapointed in with the Nasdaq. You want to see volume increase on rallies in a healthy market. Advancers beat out decliners by about 2 to 1 on the Nasdaq as they did on the NYSE. This is a good sign.
Divergances! A divergance occurs when the major indexes do not agree with each other on direction. Right now we have a major divergance starting to unfold. The DOW looks like the south end of a north bound mule, while the Nasdaq and Midcaps are holding support well. Only 4 months ago the S&P400 Midcap index was at all time highs, so pullbacks should not be a suprise. We are now at an area of major moving average and price support in the Midcaps. Will we hold here? I don't know, I can not even tell you what I am going to have for breakfast, and that is only 7 hours away. What I do know though is that if we are going to get a bounce this would be a logical area for it to occur from. Whenever the market pulls back you should go to work finding stocks showing good relative strength. These are the markets likely future leaders, the names you want to keep an eye on.
We are in the heart of earnings season and a number of stocks have acted well on numbers. Examples would include STT, GOOG, and AAPL. Some other names that are holding up nicely that I feel are worth watching are WFMI, SBAC, KF, SKYW, MGI and CHS. On the short side we have the DOW and many DOW type names looking as though they want to head lower. Also utility stocks.
I had been watching BA and entered it as a long on Wednesday. It quickly turned and stopped me out on Thursday for a loss.
Current open trades.
Skywest Inc long from $28.08
Korea Fund long from $30.79
Invitrogen short from $70.54
Lam Research long from $34.00
RTH long from $94.34
Stocks I am interested in buying/selling on breakouts. (please note that just because the price breaks does not mean I will initiate a position. I also may wait and initiate it later after the breakout (for example LRCX was not purchased until Friday even thought it "setup" on Thursday)
SBAC buy above $16.00
GOOG buy above $343
WFMI buy above $136.55
UTH short under 108.50
Divergances! A divergance occurs when the major indexes do not agree with each other on direction. Right now we have a major divergance starting to unfold. The DOW looks like the south end of a north bound mule, while the Nasdaq and Midcaps are holding support well. Only 4 months ago the S&P400 Midcap index was at all time highs, so pullbacks should not be a suprise. We are now at an area of major moving average and price support in the Midcaps. Will we hold here? I don't know, I can not even tell you what I am going to have for breakfast, and that is only 7 hours away. What I do know though is that if we are going to get a bounce this would be a logical area for it to occur from. Whenever the market pulls back you should go to work finding stocks showing good relative strength. These are the markets likely future leaders, the names you want to keep an eye on.
We are in the heart of earnings season and a number of stocks have acted well on numbers. Examples would include STT, GOOG, and AAPL. Some other names that are holding up nicely that I feel are worth watching are WFMI, SBAC, KF, SKYW, MGI and CHS. On the short side we have the DOW and many DOW type names looking as though they want to head lower. Also utility stocks.
I had been watching BA and entered it as a long on Wednesday. It quickly turned and stopped me out on Thursday for a loss.
Current open trades.
Skywest Inc long from $28.08
Korea Fund long from $30.79
Invitrogen short from $70.54
Lam Research long from $34.00
RTH long from $94.34
Stocks I am interested in buying/selling on breakouts. (please note that just because the price breaks does not mean I will initiate a position. I also may wait and initiate it later after the breakout (for example LRCX was not purchased until Friday even thought it "setup" on Thursday)
SBAC buy above $16.00
GOOG buy above $343
WFMI buy above $136.55
UTH short under 108.50
One thing i noticed in your picks is that you tend to buy very high relative stocks that apear to be extended on the charts..
This strategy will work well in a strong bull market.. but in a sideways to down market.. you will not do well.. u will be forced to use wide stops..
I remember you will very bullish on LIFC a few weeks ago.. as it was carving its top.. the point is that you have to adjust your entries based on the markets..
Yes in a full fledge bull market like we had a few years ago.. chasing momo ala IBD cup and handle breakouts was the way to do it.. but now the market internals and characteristics are not the same..
My biggest prblem with CANSLIM and IBD.. is that it has its sweet spot when we are in a full fledge bull market it will get you into the strongets stocks that will make you the fastst money no question about it.. but the majority of time this is not the case.. most of the time ( especially) going forward the market is going to boring and chopping around where this strategy will clearly underperform... when you trade for a living, especially manage money in a sideways market.. u dont have the luxury of waiting for the perfect bull market to make money.. bceause other money managers will be using models and systems that are working in this environment.. and your investors will bail out bceause you are not performing...
--MIKE
This strategy will work well in a strong bull market.. but in a sideways to down market.. you will not do well.. u will be forced to use wide stops..
I remember you will very bullish on LIFC a few weeks ago.. as it was carving its top.. the point is that you have to adjust your entries based on the markets..
Yes in a full fledge bull market like we had a few years ago.. chasing momo ala IBD cup and handle breakouts was the way to do it.. but now the market internals and characteristics are not the same..
My biggest prblem with CANSLIM and IBD.. is that it has its sweet spot when we are in a full fledge bull market it will get you into the strongets stocks that will make you the fastst money no question about it.. but the majority of time this is not the case.. most of the time ( especially) going forward the market is going to boring and chopping around where this strategy will clearly underperform... when you trade for a living, especially manage money in a sideways market.. u dont have the luxury of waiting for the perfect bull market to make money.. bceause other money managers will be using models and systems that are working in this environment.. and your investors will bail out bceause you are not performing...
--MIKE
One of the things thats helping me trade this market is detailed sector analysis.. yes the markets are bifurcated and its extremely group and sector based right now... chip stocks like SNDK, FLSH are going through the roof where INTC, xlnx is in the dumpster.. I still dont get it why anyone follows the dow-30 or other overated indices.. to me its all abuot sector and group analysis..
The hmo's are still making new highs.. MHS, AET.. where the dow-30 is falling off a cliff... who cares? who says that AET cant go up just because CAT and PFE business is not doing well... the US is a mature economy and the business market very well can be fragmented...
You have to adjust your trading based off where the economy is right now.. and it is clear that we are in the midst of the end of the recovery cycle and things are becoming less visible and the risks are becoming more increasing.. this will increase volatility and create a more scattered type market.. where group correlations can very well be in polar extremes...
Just some food for thought..
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Quote from Trend Fader:
How do u look through the 197 industry groups.. just curious as to where you get the charts of them?
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www.dailygraphs.com
The first thing I look at is sectors. I also do this nearly every evening in a scanning group on hotcomm. You are more than welcome to attend.
I also agree about the DOW being less important than say the S&P500, for example. But, the public still see's the DOW as the market, and as long as that is the case the DOW will be important to look at.