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Yesterday we said:
Does Everyone Know They’re ABC’S?
On one hand we are still following the ABC Pullback Off Highs (POH) script with one more move higher potentially coming. Why? because we are still in a clearly defined uptrend and simply pulling back off highs in the indexes to trend channel support.
On the other hand we are also seeing leadership and individual names biting the dust and topping right here. Most of those are shown below in the short side coming attractions section and have already staged the first shot across the bow in first thrust down form.
So even if we are still following the script and we make one more move higher all these names will do is complete snapback rallies AND potential Right Shoulders of Head And Shoulders tops. Its those names that we’ll want to consider shorting when the time comes, in the meantime with those names its all about watching the patterns delevlop so as to be prepared in advance. The phrase that comes to mind is: "Its A Market Of Stocks"
Two such names that have the opening volley to the downside that for the most part set up 1st thrust downs are shown below. Of course those names need snap back rallies to get us interested in shorting them which means when we get a rally we want to watch those names close.
SOHU
RAX
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INDEX ACTION AND GAME PLAN FOR THE WEEK Of 5-9 through 5-13
For the last 2 weeks we said and still stands today:
"As you can see in both index charts we have a lot of structure. First off we have the current wave count of 4 waves with us in wave 4. If we are going to complete 5 waves up then we still have work to do with a pullback to boot (5-12 Which we are still in). What’s interesting is that any pullback ought to be contained to the green trend channel support and the neck line support of the head and shoulders bottom. So you see we have a floor baring any unforeseen events.
Remember this potential pullback is healthy and allows stocks to digest the recent thrust up. If we are going to continue to follow the 5 waves up script then we have one more swing higher after a buy the dips pullback. We want to be prepared for that as it’s going to set up a lot of names all in the realm of Pullbacks Off Highs (POH) with a lot of names already doing so that could go at any time."
5-12 Should we get a retest of the highs we will also be watching the action in the leadership that has bit the dust for shorting purposes so you see we got both sides covered for the most part all the while not getting too cute on either side.
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Short Side Coming Attractions — The First Thrust Down
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On Friday we talked about us highlighting first thrusts down, snapback rally and then a bombs away to the downside. We will, but given that we are still in this pullback off highs pattern we aren’t going to spend a lot of time on it but will try to keep showing that pattern all week and as we see fit so as to get you mentally prepared for it from a visual standpoint because AFTER we get a final run higher (assuming this is just a pullback to trend channel support ) it’s going to be the premiere pattern out there and yes it’s a short sell pattern. Stocks fall fast than they go up as we’ve all seen recently with energy.
One of the patterns we want to be on the lookout for from here is that of a FIRST THRUST DOWN. This is when an issue breaks a trend to the downside then stages a snapback rally and upon commencement of the snapback rally rolls over and dies. We’ve featured this pattern a lot over the years and has served us well. Two recent examples of this pattern is shown below.
Some names that we want to watch for in the coming weeks are shown below. That’s why they are called coming attractions.
MAKO
NEW NAME
SRCL
NEW NAME
PANL
NEW NAME
5-12 Should this issue rally back up to the 50 day I know what I’ll be thinking about doing as the 50 day is now resistance.
CVX
WWW
OPEN
5-12 Lets see what happens at the 50 day/100 level , assuming we get there that is.
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LONG SIDE WATCH LIST 5-8 AND WE STRESS WATCH
If I were to put money to work here. Where do I put it?
NOTE: It’s earnings season, make sure you know when that is to occur with whatever issue you are stalking.
Only The Best And Forget The Rest
AAPL
5-12 As you can see its still in the channel, for the day trading face of fear trader, the open in the 342 range was your trade. Now we see this issue having rallied right back up to resistance within the channel as shown below.
IBM
CAT
5-12 One could say its there however we are in no rush to jump into the fray here as we MAY still have a little bit more downside action per the index action section at the beginning of this newsletter.
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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.
Long side
ALLT
5-2 The blue line is definite resistance, it’s going to take this issue to catch its breath and give it another attempt if it’s going to go.
GLD
RVBD
NFLX
5-12 Both RVBD and NFLX just go to show you its a market of stocks, even with the markets pulling back these two issues opted to trade to the beat of they’re own drum.
SINA
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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 JUNE Expiration from here on out folks
CAT
See our long side watch list for more on these names.
5-12 Right now per the index action at the beginning of this update we are going to continue to watch these names. We are not going to step in here and pick any off.
Current Holdings
DANG (We are now long 3 May 21 call options to open at 3.10)
As we post they are currently at 1.30
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"Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
IRBT (We are LONG 300 shares at 32.15 as of 5-5-11)
5-11 Any break of the May lows and we stop out of this issue none the worse for wear.
INFA (We are LONG 200 shares at 51.44 as of 5-5-11)
5-12 Gosh, another day like today and we’ll consider locking down some gains on this one.
5-11 Any break of the blue line and we stop out of this issue non the worse for wear.
DANG (We are LONG 300 shares at 23.51 as of 4-28-11)
5-11 Any break below the double bottom lows and we stop out of this issue.
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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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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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