Courtesy of David at All About Trends
(Reminder: David is available for questions from members in the comment section!)
Today (and Friday’s action too for that matter) are exactly why we don’t chase buses. We’ve said it here before numerous times and that is:
All of a sudden a few days come along and wipe out a month’s worth of gains. That said, take a look today at numerous names in this update. None of this should come as a surprise, except to those firmly convinced POMO and Bernanke will save us all. What’s that phrase around here? Never get lulled into a sense of complacency — we think it is.
If you have been on Super Bowl defense then you are like us stacked in cash and looking at all the opportunies that buying in the face of fear brings. In fact you’re probably thinking like a kid in a candy store.
That all said? Let’s take it slow here as we really don’t know how deep this thing is going to go. We can assure you there are going to be names we will miss when this thing turns around if even for a dead cat bounce but there will be names we won’t miss.
We will probably do some nibbling in here soon and the number one stock we want to consider will be AAPL. As you see below it tagged the 340 support/50 day level and got a lift off of it intra day. Should we see it tag near there again today, or the thin blue line or in the next day or so? Think stabilization. Sure we’d consider taking a probing long position at the least so keep that name front and center.
2-22 See that thin blue line? Watch it! It’s the top of a prior basing structure. Of course in keeping with the:
"All of a sudden a few days come along and wipe out a months worth of gains" theme we’ve warned you about for time on end, his issue in the last two days basically gave up almost 2 months worth of gains. Don’t forget while we are on that subject that keeping you OUT OF TROUBLE is also what you pay us for — it’s just not measurable for the hot money crowd.
In Summary:
For the last few weeks we’ve been going slower to go faster all based upon what we’ve been seeing and now you all know why! Heck just ask Daytona 500 winner Trevor Bayne!
It really does pay to not chase buses now doesn’t it. Heck just sit back and let it come to you folks just like Trevor Bayne did.
So here we are pulling back off the highs and we should all be jumping with glee right? We should all be buy buy buying right?
One catch, how far down are we going and how deep is this thing going to be? We don’t have the answer to that nor does anyone else for that matter.
BUT what we do know is where support levels, 50 day averages, and trend channel supports are and that has go to be good enough and is good enough as we’ve all seen it time and time again that those are levels where things tend to stabilize.
And that’s what we’ll be watching for over the next few days and yes we will probably be taking some probing long positions in this sell off too. The phrase is "Face Of Fear" around these parts.
But for right now today? WATCHING is the key word. Like we’ve been saying, no need to rush here and as you’ve seen thus far today we haven’t had really any sort of lasting bounce off the lows excpet the initial knee jerk and here we are in the indexes testing lower lows yet again.
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This Is How Everything Gets Fixed! And What A 20-Year Old Can Teach The World!
At All About Trends we are all about trends and sometimes those trends are not market related trends but can have an impact on the markets others not so much. Some of the current headline trends that we’ve been seeing recently is that of the state goverments being broke and trying to reign in the spend spend spend and trying to balance their own budgets. We see this with Wisconsin front and center and other states too not to mention our own country for that matter as well as other countries in the world at large.
Another trend we’ve recently seen hit center stage that has been brewing since time began is that of pro-democracy and right now in the mid-east it’s spreading like wild fire. Over all it’s a good thing but the unknown can create fear and yes it can wreak havoc in the market, gyrations wise.
Perhaps all who are involved in those issues and in the eye of them can take their que from this weekend’s DAYTONA 500 on how it gets fixed! After all we are all in this thing called life together you know.
It’s a great example of what can happen when two people, (or two parties for that matter) get together and actually work together for a common goal.
If you saw any of it or even the highlights then you’ll know it was all about the two-step.
If you weren’t paired up and working together you never made it to the front of the pack. The guy doing the pushing and the guy getting pushed for lack of a better word as we hate the word push around here.
The guy in the back that was pushing the guy in front always ran the risk of overheating in which case the pair of cars opted to "Do The Right Thing " and work together. The way that would happen is the guy leading would relinquish the lead (Really? Thats unheard of!) to the guy in back of him so as to allow him to not overheat (HOW COOL IS THAT!). Then they’d swap back and forth like that the whole race.
In the end a 20 year and one day old (2 and 1) kid named Trevor Bayne ends up showing the WORLD how it’s done!
The guy with no expecations and was just happy being part of the this thing called life who for the most part did most of the pushing of the car in front set the tone for the world and the theme of 2011 with his symbolism of simply two into one equals car number 21 and the rest is history.
How’s that for under the hood trend reporting. Now let’s see if the world catches on to this. Can it really be that simple? We don’t know but you might want to ask the 20 year old who drives car number 21.
As an aside in keeping with the two-step theme, runner up goes to the 2 Libyan fighters who became one and were smart enough to adopt the "Do The Right Thing" and apparantly defect vs. what they were supposedly asked to do.
Trends, patterns and themes folks — they are everywhere you just need to know where to look. Now that’s socionomic news you can use entertainment.
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WHAT EXACTLY DO I WANT TO ACCOMPLISH WITH MY OVERALL Virtual PORTFOLIO IN 2011 REGARDLESS OF WHAT THE MARKET DOES OR THROWS AT ME?
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SHORT SELL WATCH LIST
For those interested on names on the short side below are a few to CONSIDER. Remember we said "consider". We didn’t say go out and throw caution to the wind. It’s all about downside breaks of the bear channels/snapback rallies.
SLAB
Well there you have it, first thrust down, snap back rally and bombs away we might add. Come to think of it, didn’t we feature GS and RHT a few weeks back that were both sporting the same pattern? Do yourself a favor and pull a daily chart of each of those and check out the patterns. This name gets moved to the featured list as we don’t chase buses on the short side either.
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LONG SIDE WATCH LIST
If I were to put money to work here. Where do I put it?
Below are the some of the energy drink names from the weekend newsletter of 2-13-11 and then some. Make sure you read it if you haven’t.
Remember it’s all about Pullbacks Off Highs of issues in clearly defined uptrends above the 50 day that we are most interested in. From the looks of the last few days it sure seems that is exactly what’s transpiring.
Best looking names are AAPL, SINA and SPRD thus far.
AAPL
Shown above
SINA
We might just have to leave this issue alone until we can see some stabilization. Right now? it’s in falling knife land but is flirting with the 50 day average we’ll give it that.
SPRD
SOHU
The way this issue trades? Might want to leave it alone for now as this is the type that can blow thru the blue line and fill the air pocket below it to the 50 day average.
NFLX
BIDU
CMG
Back On Watch List
Let’s watch that blue line for stabilization or even a tag in the face of fear AFTER it’s already fallen for days.
FFIV
Looks like we are either going to stabilize at this 115 level OR it’s 105 here we come.
VHC
See the double top breakdown (Oct. 2010) just before this issue went into a correction? Keep an eye out for that in the markets and issues you own or are looking to own. Nothing to talk about here yet either. Perhaps we’ll put this issue on the back burner yet again and should it wake up we’ll revisit it.
LULU
Do we hear the blue line calling? It’s prior resistance which now becomes new support.
LLNW
Back On WATCH List
We like those thin blue lines.
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Featured names but not trade triggered by us
Long side featured
CLR
One of the few that’s up today.
RIG
Hmmmm, breaks into a new high, stalls and comes back into the base. Didn’t MOS and CF just do that too?
VMI
BCSI
Classic first thrust down, puts in a bear channel, snapback rally call it what you will in pink, breaks it and it’s bombs away. One catch, the bombs away was earnings related. BUT that’s the pattern we want to see on the short side with names.
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All About Options In The World According To All About Trends
NOTE: The exchanges recently started WEEKLY EXPIRATIONS of options. Going forward, make sure that you check to see which ones you are buying. Let’s stay with traditional options expirations which are the ones that expire the 3rd Saturday of every month.
Current Holdings
NONE
We want to keep an eye on AAPL, SINA, SOHU and SPRD all in the March in the money call options. As we get closer to an entry on these we will post the ones we want to consider.
Remember, Paul Masson said it best when his 1970’s TV comercials said:
"Never Buy A Wine Before It’s Time"
Same can be said for stocks and options if you ask us.
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CURRENT POSITIONS
"Let Your Stocks Tell You What To Do By The Action They Exhibit"
Long Side Positions
NONE BUT, we see names that have leadership characteristics that are 4-5 days into a pullback and that bodes well for some trades coming our way soon here.
SHORT SIDE POSITIONS
CYMI (We are SHORT 200 shares at 47.66)
SINA (We WERE SHORT 150 shares at 88.50)
We WERE short 150 shares at 88.50 and per this morning’s Locking In Gains alert, we closed out this position at 79.05. In that trade trigger alert there is a typo — it was written up before the open so as to get it qued up for the open in order to allow for a timely send off to all of you who trade in tandem with us. In that it talks about 81.50 as that’s where it was in pre- market when the trade trigger alert was written up.
SINA is a good example of sticking to your guns and feeling the fear of stocks and dealing with it from an emotional standpoint and why it pays to actually allow that fear to creep into you. Say if the sun is always brightest at its peak isn’t it always darkest just before dawn?
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To our NEW SUBSCRIBERS
What we’ve tried to do is break our watch list down into chart pattern recognition structure from a visual standpoint. Learn the patterns and the components of patterns and you’ll blow those Wall Street MBAs away. You don’t need a $3,000 software program either. All you need is a BURNING DESIRE to be the best that you can be and we’re here to help.
We have a lot of new folks here and we thank you! We want you to take it easy, get to know how the routine works around here for awhile and to feel comfortable.
We hope you all aren’t here because you are chasing performance. For us it’s more about educating and making you the best you that you can be first (that’s what we focus upon!). Like many of our long time subscribers they have all found out that they have no use for traditional Wall Street (and we don’t blame them) and it’s our hope that over time you’ll have acquired enough knowledge from us to say the same with conviction.
One of the most important things we want to stress is that of RISK MANAGEMENT via POSITION SIZING. You don’t need to stack your account with just a few big positions as we’ve seen it time and time again that those who get into trouble are the ones who take large positions and do not employ any risk management system IE shoot for the fences. Those are the people who live on the fringes of extremes and yes ultimately get burned.
As a guideline a good initial system is that of the following example.
Let’s say you have a $100,000 virtual portfolio and let’s say that as a guide you never place more than 10% ($10,000) into any one position. Now let’s say that one day a news driven event hits (over which you have no control over anyway) and one of the positions tanks 20%. On its own that position is sporting a $2,000 loss, while that may seem devastating on its own its really no big deal overall.
Why? Simple its all about risk management being properly employed. What is the impact of a $2,000 loss to the TOTAL VALUE of the virtual portfolio in this example.
Answer: A whopping 2% LOSS. Now you know why we say no big deal.
We can also tell you new people here that you will get stopped out of names and you will take hits. There is nobody on the planet living that has ever hit 18 holes in one and there never will be. We’d rather get you grounded in reality right away vs talking about pie in the sky all the time like a lot of other sites. In so doing your head is screwed on straight from the start and when those days happen (and they will) mentally it won’t mean a thing to you. To us that’s what’s most important is YOUR state of mind as it’s your most important asset. We hope you appreciate our honesty.
We have a very good retention rate here at All About Trends and a lot of great outstanding people here. We like to think that a part of that is being upfront about what can happen (in both directions). Verses those up 500%, I turned $50,000 into $3 million or some other absurd number to get you to bite. That’s not who we are.
WELCOME ABOARD!
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Lastly with regards to taking any trade:
Remember the moment you take a trade you are at the mercy of the market and have no control except when to sell. If you are not willing to take the risk and are not willing to pay that price do not take the trade. We are willing to take that risk knowing full well the end result could be a loss. That said make sure that virtual portfolio management trade size is used accordingly. With any position you may take make sure that should something go awry the amount of total impact to your account does not devastate your acct. Try to stick to a 5% position That’s the key to virtual portfolio management, not biting off more than you can chew.
Remember the mechanics of reality with regards to the stock market states a stock can only do one of three things: Up, Down, Nowhere. The moment you hit the enter button you are at the mercy of the market therefore the only control you have is when to sell/cover. You can’t manage your gains as you have none to manage initially. Knowing this in advance it allows you to stay in outcome, that being you will either:
1. Make a gain
2. Wash
3. Get stopped out at a loss
Remember the market IS the boss. IT is going to do what IT wants to do.
