In the stock market there are only three things you need to know:
1. Uptrends and how to trade them
2. Downtrends and how to trade them
3. Change in trends and how to identify them.
Every day at All About Trends we are constantly scanning for the strongest patterns that fall into each category.
What we do then is focus upon what are we seeing more of. Are we seeing more uptrending patterns, Downtrending patterns or change in trends? That’s how we go about our business here. If we see more of one particular pattern, that’s what we want to stay focused upon and so on.
At All About Trends one of the strongest patterns that we scan for on a daily basis is that of Pullbacks Off Highs or as we like to say POH. A good example of what those look like is shown in the chart below.
The buzzwords with this pattern is that of: In a clearly defined uptrend, above the 50 day and you guessed it pulling back off highs (pink line crossovers are the long side trigger). This pattern is the one we commonly refer to as "One Of The Only Patterns You’ll Ever Need To Know In Uptrending Markets" and it’s also the problem we currently face.
This weekend we spent a fair amount of time just looking for stocks that have formed that pattern. Care to guess how many we found? Not many. This is how the market talks to us — via chart patterns. We looked and looked and couldn’t really find any to sink our teeth into. Sure there are always going to be some but right now we’re not the kid in a candy store at this point in time. Why? It’s all because of what we’re seeing out there chart pattern wise. This should come as no surprise considering the last 12 days the market has been on a tear with the bulk of the action in the form of a gap up open then stalls.
We have a saying around here with regards to chart pattern recognition:
"If You Have To Squint It’s Not There"
Aside from the face of fear back a few weeks ago it’s been slim pickings into quarter end. Those that were in play back then at low risk entry points (where we picked off a lot of) stayed in play offering no low risk entry points since the initial entries. That’s what makes it hard out there, seeing names that keep going and going but because we are more interested in managing "Chart Pattern Risk" ala we don’t chase buses makes us sit back.
It’s easy to feel locked out of the market so to speak but we are all about managing that risk. We’ve seen it all too many times and experienced it in our distant past too many times that when one starts to jump in on stocks like that from an emotional standpoint (those who have been on a tear nowhere near and support levels or chart structure) that there comes a day when the music stops. We’ve all known what those days are like right? Not pleasant. That’s why we don’t chase buses. We’ve learned from our past so you don’t have to. We’re sure you all can look back upon your past experiences and can say the same thing. Look we’re all for going long here but the problem is we just aren’t seeing those patterns in a "Kid In A Candy Store" fashion right now. All we have to say is better take note.
What we are seeing and have been seeing is a lot of "Change In Trend" Patterns rearing their heads and developing — in this case in the from up to down variety. We put those on the watch list to be able to stalk and use as a cheat sheet if you will so as to be prepared.
On to the charts:
So what are we seeing a lot of out there? Below in our standout stocks of the week are just a few examples, mostly in the realm of what to stay away from.
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Standout stocks of the weekend
This issue ought to be interesting the next 2 weeks. Know why? Well if it sells off, it’s selling off into earnings which is just what we would want to see. A move down to support would be nice HOWEVER we are not the boss, the market is. This issue is going to do what it’s going to do and we have no control over it. That’s a key to success in the market by the way — knowing what you have control over and what you don’t.
All we are saying is what we’d like to see/need to see to get us interested in this issue on the long side again. If it happens? Great we can work with that. If it doesn’t? It’s on to the next stock.
Another name that we wanted to bring to your attention is that of XEC, yes energy. Not that it’s energy and not that it’s in play but the chart pattern alone is what we want to bring to your attention.
Or how about this one:
Would you buy this one here? Sure a NOVICE breakout of base buyer would BUT not us. Why? Simple, based upon what you know of the All About Trends Pullback Off Highs (POH) longside entry pattern, as in when to buy — this issue is extended. How can we say it’s extended when it’s a fresh breakot of a base?
Simple, below is where the lowest chart pattern risk entry was.
LASTLY
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Game Plan For The Week Of April 4th Thru 8th
Given what we are seeing above in the indexes and many individual names we are not overly excited about the long side of the market here. Given we are seeing more "Change In Trends" patterns showing we will continue to focus upon those and as they trigger we’ll pick them off one at a time. No need to try to chase performance on the long side here folks as there are a lot of buses that you have to chase and that just all ends badly.
We have some short side exposure and we have a watch list dominated with names that have bearish patterns that we can work with. That’s what we will key in on next week.
Whether we top next week or not who knows as we still have a little bit of gap upside to go on the SPX to a retest of the highs for a potential double top to be put in. We are at the least at resistance and when you couple that with what we are seeing chart patternwise and so many names extended? We are sitting right where we want to be sitting.
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SHORT SELL WATCH LIST
For weeks we’ve been highlighting numerous times the First Thrust Down pattern. Below are a few examples.
SHORT SELL WATCH LIST
Consider this section of the newsletter the "Get The Gun Loaded" and be prepared area for you forward thinkers.
VMW
Quick question for you all. What’s the overall trend on this stock. Up or down.
Quick answer — down, as in it’s in a big red downtrending channel with PINK LINE POL’s (Pullbacks Off Lows) POL’s folks are the flip side to POH’s and are used for stocks that are in clearly defined down trends.
Let’s keep an eye on it for either a test of the 50-day or a rollover to the downside of the pink line.
KLAC
Still locked in that bear channel
ARMH
Currently pulling back off the lows (POL) up to the 50 day. It’s all about a downside break of the pink line.
GEOI
Well here is that retest of the highs folks. Say if we are all about buying pullbacks off highs should we be considering buying this issue here? See any POH? Us neither, all we see is resistance.
BRY
Starting to look more like a rising bearish wedge if you ask us with a retest of the highs to boot. Intraday this issue pulled back a point off the highs and ended up only being up a whopping 22 cents.
XLE
Three days of nowhere.
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LONG SIDE WATCH LIST
If I were to put money to work here. Where do I put it?
SDS
3-31 Our notes from 3-27 pretty much sum it up. Anyone who bought it a few weeks ago getting scared here? If so? Good. Why? Its always darkest just before the dawn. Say if its always darkest just before the dawn on the short side whats that say about the longside? Hmmmm isnt the Sun is always brightest at its peak right?
3-21 So if you buy right here what is your risk? The blue support line thats what. Which is basically a little over a 1 point pop from here. Keep in mind in order for this to break support the SPX has to break into a new high. But even if the SPX were to break into a new high it doesnt mean its going to stick. See all the gaps up the SPX is creating off the recent lows? Odds favor they get filled.
This one is high on our list.
3-27 Keep in mind IF IF IF the market does the "In To Quarter End" Pump which is more strength early next week then this issue is going lower and near major support. USE THE US DOLLAR chart’s double bottom with a shake out low example as a guide for what COULD (doesnt mean it will but could) occur with it over the next week. If you own it and we get a shake out low in it don’t get scared.
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Featured But Not Trade Triggered By Us
This is where names that we have on our watch list that have triggered but for whatever reason we did not take them (can’t do them all) in our trade trigger alerts. This section is because a lot of our subscribers opt to use our information as they see fit from a do-it-yourselfer standpoint.
For those who are more apt to be investors and decided to hang on to BSFT per the raising of stop loss levels mentioned we’ll put it in the featured list for your viewing pleasure.
ALTR
3-30 Say didn’t we mention something about being on the lookout for double tops? And that is what we are on the lookout for.
4-1 recent highs definately are acting as a resistance level at the current time.
SLV
4-1 Seven days of chewing here.
3-30 New highs, and a new short term support level to watch and that is now the 33 level from a few days ago. Here is some food for thought, keep in mind this issue could ultimately end up going range bound in here the next few weeks, that said? The range would be these highs and the blue support lows. NOT saying its going to just saying something to consider and be aware of, notice we didnt say beware but be aware. Big difference.
And by popular demand below is GLD
4-1 Net nowhere for going on 5 months.
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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.
Options Watch List
ALL PUT OPTIONS All APRIL expiration
BRY
The ones to watch are the APRIL 55 puts. with the stock at 51.45 these are priced at 4.00 which means you are paying 70 cents for time.
XLE
The ones we want to look at are the APRIL 84 puts. With the stock at 80.22 these are priced at 5.30 which means you are paying 50 cents for time.
Current Holdings
CLF (We are now long 1 APRIL 110 Put Option at 12.25)
As we post they are priced at 12.00
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CURRENT POSITIONS
"Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
APKT (We are LONG 150 shares at 70.67 as of 3-28-11)
Friday’s into the close action bothers us. We MAY just save face here on any strength and cut and run vs hoping and praying. In case you didn’t know hoping and praying works in the real world but in the stock market? It already denotes you got a problem otherwise why would you be hoping right? That or your greedy after you’ve already had a nice run. In that case it’s more of a not being thankful for what you already have. Think about it.
VXX (We are now LONG 300 shares at 32.58 as of 3-23-11)
4-1 With the indexes spitting distance away from a full blown retest of the highs it stands to reason that this issue is near retesting the lows.
SHORT SIDE POSITIONS
CLF (We are now SHORT 125 shares at 98.16 as of 3-31-11)
Well here we are sitting at resistance, if the issue and the market break? We are there.
NFLX (We are now SHORT 75 shares at 220.19 as of 3-22-11)
3-30 Need you ask why it’s stalling here? Because it’s resistance and MAY be forming a double top.
BIDU (We are now SHORT 100 shares at 127.81 as of 3-23-11)
4-1 Might want to look at the chart of VMW in the short side watch list. Looks pretty similiar if you ask us.
3-24 As far as NFLX and BIDU go as you can see, its like we said- Not for the faint at heart. For us its not a big deal right here. Why? Trade size position risk management.
3-25 So here we are with a few fledgling positions on the short side. The total value of our model virtual portfolio is 169,000. The amount invested via short side exposure is 23% The amount of Cash is 77% For us all thanks to trade size position risk management it allows us to be able to have issues give us a little guff without it ever getting us into any real deep trouble (make note of that folks) . Given how close the indexes (SPX) are to a full blown retest of the recent highs of 1340 which as we post is a whopping 22 points away. So at this point instead of REACTING cause we have a few issues of ours causing a stir we’ll sit tight with then and allow ourselves to feel the fear without allowing it to emotionally get us into a tizzy. Nothing that we all havent been thru before mind you and nothing that we all wont go thru again over the span of our investing careers.
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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
We ended the month of March with a gain of $1,163.75 in our stock virtual portfolio and a gain in our options virtual portfolio of $675. You can view our complete trade by trade performance by clicking 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.
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