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Next week is a pre-holiday week which MAY mean just more of the same we’ve seen this week — Sloppy And Choppy. The wild card is that it’s the end of the quarter. Typically into the end of the quarter Wall Street has a habit of popping markets in order to "get the print". Think make the quarter not as bad as it’s been. We’ll see.
Technically speaking though we see a market locked in a downtrend with 4 down waves out of 5 down waves showing.
If we were to see a retest of the recent lows in the indexes and a face of fear type of market that is when we’d want to also consider names on the long side in a major way.
In the meantime take it easy here.
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Short Side Coming Attractions
Note: In the short term all of the following are names are in (for the most part) clearly defined downtrend channels that are pulling back off lows (POL) which are also showing 4 waves out of 5. With each of them it’s all about a downside break of the pink line for those who feel the need to trade on the short side.
If it wasn’t for the pre-holiday trade and end of quarter pump potential we’d be all over these names on the short side. We still may consider taking some just for short term scalps (short term is defined as a few days tops) on the short side.
These same names upon completion of 5 waves down, which also may end up being double bottoms when all said and done, are names that we will also want to go long on AFTER a potential completion of the 5th wave. Why? Because after 5 waves down the next sequence is 3 waves up (summer rally).
This also means that should we see a 5th wave in these names, a double bottom occur over the next few days or weeks we also want to be all over them on the long side. Odds favor it will be in the face of general market fear should it occur.
But for now it’s all about a break to the downside in the pink lines shown below in the charts
BIDU
6-26 Gosh here is the not for the faint at heart kingpin that is tagging trend channel resistance. The 50 day is also only 5 points away so you may want to wait to see if it can get to that level or an attempt next week given we may get some strength if only for an end of quarter pop before rolling over.
DECK
ALTR
6-24 With regards to a short sell? We all by now ought to know what POHs are to the upside right? They are issues in clearly defined uptrends pulling back off highs. This on is the exact opposite, that being an issue in a clearly defined downtrend PULLING BACK OFF LOWS or POL for short.
NOTE: Notice with all of the above they all pretty much mimic that of the index charts?
TPX
6-26 Relative to the names above who looks better? This name/r those above it? We’d venture to say those above TPX. Why? More clear concise chart structure, after all isn’t the name of the game being "All About the Best And Forget The Rest"?
6-23 Still hanging in there after today’s bout of opening weakness, hence nothing to do as of yet.
6-22 For those who opt to buy support and sell resistance I think its safe to say this issue is at resistance for those who short sell resistance. Make sure you set say an 115 stop and adhere to the mechanics of reality in order to stay fully grounded in reality.
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LONG SIDE WATCH LIST
"Only The Best And Forget The Rest "
"We Trade What We SEE, NOT What We Think, Hear Or Fear "
Remember the name of the game is Pullback Off Highs (POH) as it’s the only pattern you’ll ever need.
NXPI
NEW NAME
6-24 We like this stock BUT not today. We’d really like it in the face of fear in the indexes IF it can hold its blue line/200 day. When we finally get a short cover rally that lasts for more than a day or our summer rally this name is a prime candidate for moving with the markets.
6-23 Say weren’t we just talking about issues stabilizing at the 200 day average?
Reminds us of APKT and BIDU examples we just touched upon.
SODA
6-24 IF IF IF we get a 5th and final wave down in the indexes into today’s close due to the day traders chart and the 60 minute chart this name could easily test the blue support line then we know what we might have to do into that fear right?
IPGP
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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
GLD
6-24 See the mini double top around 152ish? This issue goes from not exactly healthy to outright sick.
6-23 Isn’t exactly looking healthy here now is it.
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All About Options In The World According To All About Trends
Over the weekend we posted an article in this space entitled:
OPTIONS- Your best friend and worst enemy
That article is at the bottom of this newsletter for reference anytime you need it.
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 JULY call options
NONE Currently but this can change real fast and will change real fast over the next few days.
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Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
MAKO (We are LONG 300 shares at 29.52 as of 6-9-11)
6-24 Really not much to say right here except its still in backtest mode. A full blown break to the downside in the indexes though could easily send this right back to the scene of the crime retest of lows (blue line)
SFLY (We are LONG 200 shares at 54.24 as of 5-25-11)
6-24 Much like the market, sloppy and choppy.
6-21 An excellent example of feeling the fear and sweating with it vs caving in to it in the 48 range. We’ve told you for days the markets were washed out. Aren’t you glad you did not do what chicken little was doing over the last week? He got fried in the 48 range and we are now 4 points higher than where he was served up for lunch.
AAPL (We are LONG 50 shares at 338.15 as of 5-5-11)
6-24 Right up to a red resistance level and rolling back over. A retest of lows in the face of a general market sell off (Wave 5 perhaps?) and we’d be all over this name on the long side. Wait for it! There is really no good looking long side trade here and this is such a wicked index dominated name you really don’t want to short it either hence the gimme trade.
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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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OPTIONS- Your best friend and worst enemy
Let’s talk about options for a moment. First off this is a big universe with a lot of advanced strategies and terms like theta, delta , straddles, butterflies and the whole gambit. For the purposes of this conversation we’ll keep it real simple and not try to get to deep.
We’ll approach it from simple buy puts (short side) buy calls (long side). The first thing I want to mention is that options attract the fast money crowd in hopes of turning 500 into 10,000 overnight. This is also the get rich quick crowd. And more often than not these type of people get broke faster than they get rich. Please don’t be one of them as greed kills.
Time and time again we hear from people who like to trade options, and time and time again we hear the horror stories too. When we hear the horror stories nine times out of ten we can guess as to why their option went to zero. Nine times out of ten it was because they bought out of the money options or at the money options. This is the reason why 80% of those who do options lose money by the way.
Sure there are folks who use out of the monies and at the monies but those are experienced traders that know the ins outs ups and downs.
You see the trick is to NOT pay for time. You want as close to a point for point move as possible with the stock because there is nothing worse than seeing your stock move yet your option does nothing or very little, know the feeling?
So for All About Trends we only want to look at IN THE MONEY CALLS OR PUTS and we DO NOT WANT TO PAY FOR TIME, sure they cost more BUT we want to be as close as possible to being able to see a point for point move with the stock.
We hate paying for time. We want true value without the time. We’re not saying our way is any better than others, we’re just saying it’s what works for us.
Now let’s touch upon how we would build a virtual portfolio dedicated to options and how to make it a piece of your overall virtual portfolio via allocation. Keep in mind this is more geared towards beginners so you advanced people might be bored with it but then again it never hurts to revisit the basics every now and then.
At All About Trends Trends we talk a lot about never biting off more than you can chew and trade size position management. We do that for a reason, we do it so as to when Murphy’s law shows up it never devastates us or blows us up. Typically we try to stay within a 5-7% position size when we do a trade. The same thing goes for options. If we were to start a virtual portfolio of options or shall we say allocate a portion of our overall virtual portfolio to options the way we would look at it is the following:
For example, let’s say the total value of your virtual portfolio is $100,000. The most we’d consider allocating towards an options strategy is 10% of the whole virtual portfolio. In this case $10,000. So now you’d have a $10,000 option virtual portfolio to work with. Now let’s say that you are the worst trader on the planet (we doubt that!) and you lose the whole option virtual portfolio, what’s the risk to the total value of the overall virtual portfolio? 10% in which case you live to play another day. Now let’s touch upon that $10,000 you allocated toward options. Let’s reduce the risk even further (and we haven’t even talked about what stocks to trade yet). Let’s take that $10,000 and split it up into no more than 10% ($1,000) can be allocated to anyone position as a guide. (Sometimes 1000 can get you 3-4 contracts you know). Now let’s say that one of those positions goes bust (and they will! and sometimes more than one at the same time we assure you.) What is the total impact t o the overall options virtual portfolio? 10% right?
Now let’s take that a step further. What’s the total impact to the overall investment virtual portfolio of 100,000? 1% – that’s right 1 measly percent. When it comes to options you need to employ some sort of virtual portfolio risk management structure parameters as this way you can get in trouble and you don’t lose sleep – you just have a bad day that’s all.
As for getting rich overnight? Forget about it. That’s just a marketing ploy. As for taking 50,000 and turning it into millions? Ain’t happening overnight but it sure sounds good doesn’t it? And that is why people bite on those marketing ploys.
As for time? We never go out months. As a swing trader we’re in positions for only a couple of weeks best case so why pay for the time to go out further in time when you don’t have to. When the stock moves whether it’s right away or not they sure seem to suck that time out of you just as fast anyway right?
Typically we’ll look at the front month (current month) or the next month but not months. When we say front month if options expiration is a week or sometimes even two weeks away we’ll look out to the next month and not the current. While time is our enemy in most cases, in this case it’s your friend. It’s just that you don’t want to pay for it
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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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