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Yesterday we said:
In the 60 minute index charts we are in an overbought zone so tread lightly here on the longside and be selective. Buying here is doing so AFTER they have already moved for the last 4-5 days.
6-29 Knowing what we have all been learning here about resistance and overbought conditions in the RSI and Full Stohcastics not to mention wave counts does anyone want to buy here?
We’ve had a lot of people who jumped all over APKT,IPGP,SODA,AAPL all in the face of fear and have some really nice gains in an extremely short period of time. Those who have not locked those gains down you may want to start scaling out of them or out of them all together as they all accomplished what they were meant to accomplish.
Couple that with the "End Of The Quarter" pump and "Into A Holiday " ? No thanks. Besides we buy fear and sell greed around here, we buy weakness and sell strength just like wall street does and who can forget buy the dips and sell the rips . Folks its no secret we’ve accomplished all of that in the markets all in a whopping 4-8 days. Especially in the nasdaq composite screamers off the 200 day average. That WAS the trade of the month, all the while the traditional IBDer’s are still waiting for a follow thru day and a slew of leadership to breakout of bases into new highs so they can be bought from the buyers who bought on weakness in the face of fear. Remember SMART MONEY gets out while the getting is good and that is on strength. And you know what? They ALWAYS sell to dumb emtional money.
This is all what we mean when we say Alternative entry points. Sure don’t get me wrong there were a few fresh breakouts but the bulk of the best action WAS in the go go names off the 200 day average.
By the weekend if not sooner we will walk away from our AAPL,SFLY,MAKO as given all of the above odds favor we can jump right back in some of them at lower prices than they are sporting today. If they dont pullback? Well then there will be others that we can look to. Don’t be suprised to see us walk away from a few after this newsletter.
What we also want to do is lay out a few short sells just to be there and in so doing at these levels selling short is the equivelent of buying in the face of fear here on the longside. Make sense? With short selling the face of fear is shorting on strength in the market. CAT and ALTR are the highest on the list currently. Don’t be surprised to see one of those take place after this newsletter.
Stand out chart of the day today is SINA and FTNT both by request.
SINA
6-29 Lets see what happens over the next few days for shorting purposes, we want to see inability to move higher and stalling at these levels, should we see that we’ll add it ti the short sell watch list.
FTNT
Above we mentioned how traditional IBDers would wait for a breakout into a new high to occur first before an entry and of course a Follow Thru Day too to occur. Well we are all about alternative entry points vs the traditional method of breakouts. Sure you got your breakout and it was good for 2 points HOWEVER look at where the low risk entry REALLY WAS. It was on the crossover of the Pink Pullback Off Highs (POH) at 23 in the face of market fear and with the full stoh’s deeply oversold. From here? You got it, we need to see a POH form to get us interested in this issue on the longside NOT here. In the coming day’s we’ll find out if the market makers pull the old slam it down more than 7-8% in order to stop out the traditional breakout buyers before they move it higher without them.
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Make sure you scroll down to the particular sections to see them. Also the red bold print in the short side coming attractions is a very strong possibility in the days ahead as to what we can expect with regards to the wave structure for those who follow elliott wave that is. The more I also look at things the more I say a 5th wave will end up trunicating (assuming we still get one) which will also show up as a double bottom. Watch for it to occur after the holiday.
The rest of you? Just pay attention to basic technical analysis, (Support, Resistance, trendlines and the like) and youll be fine.
Lastly also make sure you read the BLUE bold print at the bottom of the Short side coming Attractions section. Good education content for future reference.
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Short Side Coming Attractions
6-27-11
Note: In the short term all of the following names are in (for the most part) clearly defined downtrend channels that are pulling back off lows (POL) which are also all showing 4 waves completed out of 5 OF THE WAVE 1 TO THE DOWNSIDE.
After the 5 wave down sequence of Wave 1 completes itself its all about 3 waves up of wave 2 (which is our summer rally) then?
In the short term: 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.
Most likely we wont see that till AFTER the Holiday
But for now it’s all about a break to the downside in the pink lines shown below in the charts
CAT
NEW NAME , BACK BY POPULAR DEMAND
BIDU
6-29 Can you say a resistance level?
6-28 See that break of the pink line to the downside?Neither do I , hence nothing to talk about.
DECK
6-28 See that break of the pink line to the downside?Neither do I , hence nothing to talk about.
ALTR
6-29 this one looks pretty decent right here for those looking to short at resistance vs waiting for the break of the pink line to the downside.
6-28 See that break of the pink line to the downside?Neither do I , hence nothing to talk about.
TZOO
6-29 That 50 day average gets me interested in a starter size probing position (not a full position) on the short side.
6-28 See that break of the pink line to the downside?Neither do I , hence nothing to talk about.
6-27 With all of the above its all about a downside break of the Pink Lines or a sell short in the face of fear while the market is bouncing (friday perhaps? into the holiday on a pop at the open? if we get one that is, just a thought). Make sense?
If we buy on the longside in the face of fear while the market is dropping isnt shorting in the face of fear the same thing only flipped over on market strength? again, Welcome to the world of opposites.
6-27 BIG OBSERVATION FOR ALL OF YOU: Look at the lows on everyone of these charts above (and actually below for that matter too) Notice the lows were all of the "In The Face Of Fear" Variety? THAT WAS the most opportune time to step up to the plate.
Of course it meant buying a falling knife BUT we had 3rd wave down structure present and the Full Stoh’s indicator deeply oversold not to mention the indexes were sitting at a key support level too not to mention that a fair amount of them tagged the 200 day average. All of which told you you were "In the Zone" for a move higher in the coming days.
TPX
6-29 Just don’t like the pattern with this one here. We’ll delete this one in favor of other more sound chart patterns that we can work with, only the best patterns and forget the rest right?
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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.
PRGO
6-29 there you have it, a follow thru today but we are approaching the end of the into quarter end into a holiday window we’ve been talking about.
ARW
6-29 This issue gets moved to the featured by us but not trade triggered by us for all of you who bought this issue the last few days.
6-27 All in all I’ve got nothing bad to say about this isue here. In fact one could start to consider building some longside exposure all in the realm of "Its A Market Of Stocks" with SOME individual names tading to the beat of they’re own drum.
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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
SODA
6-29 Can you say at a retest of the highs on negative RS divergence? We’ll find out in the next few weeks if this becomes a double top too.
IPGP
APKT
6-29 Can you say at or near a resistance zone?
NFLX
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
NXPI (We are now LONG 300 shares at 24.74 as of 6-28-11)
6-28 Now one of three things are going to happen for us here as we are now at the mercy of the market. We are either going to get a gain, wash or loss. heck a 3 point pop is worth 900.00 by the way. Heres to it!
What is different about this issue vs most other names shown on these pages is that today is the first up day vs many others up 5 days in a row.
MAKO (We are LONG 300 shares at 29.52 as of 6-9-11)
6-2 Stubborn at the highs of today like a few days ago. Another day like today? Sure we have no problem locking some gains. In fact we’ll probably walk away here too before the holiday and end of quarter as the indexes are telling us we are getting borderline frothy in the sense of too far too fast.
SFLY (We are LONG 200 shares at 54.24 as of 5-25-11)
6-28 This issue too is getting overbought in the holiday, here too we’ll want to lock our gains before the weekend/end of quarter. Another day like today would be nice.
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)
6-28 Given what the indexes are saying, of which this is a big componant of we are probably going to walk away on our 50 shares before the holiday.
The high of the day is 336.70 so if this issue can’t bust thru that in the next day or so we’ll want to watch that number to walk away on on any furthr strength.
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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 to 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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