All Last Week We Said:
"So the question remains as to whether we are still going to retest the highs in the indexes? Or that was it and it’s stair step down time."
"Given how close we are to a retest of the highs the last thing we want to do is get cute on the long side here because this is resistance and if resistance sticks and then the market fails at it? We’re going to want to get short."
This weekend that still stands and so does the game plan which is — On a breakdown it’s sell short time, raise some cash in the most extended issues, gain some short side exposure to offset low cost basis longs that you will never sell due to tax issues and above all trade what we see and pay attention to what we see developing.
How you choose to go about that is up to you. There are various ways to do so. One is to sell short stocks with change in trend and topping patterns developing and present, and for those who don’t short stocks or aren’t experienced enough to at the present time due to needing more knowledge in order to feel confident doing so then the other is via inverse index ETFs whether it’s one-time market risk or leveraged two-times market risk. It’s your choice.
On to the charts:
Next up is the S&P 500 in daily, 60 minute and even the zoomed in sloppy choppy action the last few weeks.
See the last few weeks of market action? Pretty wicked. These are the kind of moves we’ve shy’d away from as quite honestly it’s gyrations like these that test your mental stamina. These are the kind of moves that tear those guided by their egos (fear and greed) apart.
Friday we said:
"As you can see we are still within the potential bear channel lines on each index, this means that a retest of the highs still could occur.
A break of the bear channels pretty much coinsides with a break of the 50 day average for the most part. Watch for it but for right now we are still in that channel and could still chew around here for a bit."
And that’s what we are on the look out for here. Should we get a retest of the highs in the form of a "Manic Monday" then fine by us.
Should it retest the highs and break into a new high? Well then be careful about buying that breakout as we’ve seen it time and time again where those highs can end up being shake out highs.
What shake out highs (and lows by the way — think USD) do is shake up the novice traders in the form of see?! It’s breaking out, I gotta buy!. They buy and a short time later it rolls in the opposite direction.
Should we do a shake out high? Should we retest the highs? Honestly we’d consider a fledgling position in a few inverse etfs just for kicks and giggles and of course let’s not forget the famous "90 % of this is getting in the zone and 10% is sweating it out while in the zone" reason either.
Should we break down, then we’ll be shorting names off the short side watch list and take on some inverse ETFs
Lastly let’s bring back the Dollar chart from a few weeks back.
Since 2-27 when we last brought it up it’s still below the Pink Line. This one is going to be fun to watch because we could see a double bottom form here soon. If so? Then it’s another nail in the coffin for the rest of the market indexes and actually everything else as it’s the Dollar vs every other asset class. Typically, it’s Dollar up, markets down.
While on the subject of double bottoms and shake out lows here is one that we really want to watch the next few weeks.
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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
See below we’ve got a few names POTENTIALLY setting up
Now if over the coming weeks we sell off to the 50 day or prior supports, (2-25 Been there already did that) bounce (2-28 Now doing so) and then fail? We’ll get short in a major way. Should that occur it will set up a lot of double tops and first thrust down snapback rally chart patterns. Below are a few examples of what Double Tops and First Thrust down patterns look like.
MOTR
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.
SLAB
Well there you have it, first thrust down, snap back rally and bombs away we might add.
All of the below fall into the realm of watching for a Double Top breakdown to occur.
ARMH
Actually, the names below all look better chart patternwise than this one so you may want to hone in on those names instead with regards to deploying money on the short side.
ADTN
One could say this issue and ARMH are there. The face of fear trade on the short side is any strength as long as it doesn’t breakout. That’s what we’ll be watching for to consider taking a short sell position on strength. Or for those of you who are more "In The Zone" traders it can be taken right here but you’ll need to allow for intra day gyrations in here in the event it doesn’t break down. In that case give yourself a wide stop loss to allow for volatility.
CAT
DE
WCC
RJF
AXE
As you can see with all the names on this list that yes they are still above the 50 day average HOWEVER they are all starting to show classic All About Trends "Change In Trends" patterns from up to down.
Should our markets break to the downside here either after it stages a retest of the recent highs or breaks the pink bearish channels in the indexes to the downside these names ought to get hit right along with everything else out there. Thats what we want to be prepared for from an oportunistic standpoint in the event that it does transpire.
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LONG SIDE WATCH LIST
If I were to put money to work here. Where do I put it?
Remember it’s all about Pullbacks Off Highs of issues in clearly defined uptrends above the 50 day that we are most interested in.
AAPL
Here we are retesting the highs, thanks anyway with buying this issue here.
VMW
The blue line and 200 day average get us interested on the long side for a trade.
As for Energy?
Until we see a Pullback to the 50 day average there is nothing to talk about with regards to putting new money to work. It’s all about a grand slam to the 50-day in all of them to get us interested in the long side.
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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.
NONE currently
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CURRENT POSITIONS
"Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
NONE
SHORT SIDE POSITIONS
CY (We are now SHORT 350 shares at 20.89)
CYMI (We are SHORT 200 shares at 47.66)
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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.
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PERFORMANCE
So far in March, we have a small loss of $1,312.50 (7/10ths of 1 percent) in our stock virtual portfolio. For a trade by trade summary, click on the performance link at our subscriber only web site.
SUBSCRIBER ONLY WEB SITE
Don’t forget you can view updates in the middle and the end of each trading day complete with current charts, along with our current performance at our subscriber only web site.
