Wednesday, March 31, 2010

Some stocks to watch out for

DLTR - You gotta love the pattern. A buy on a break of 60.

WEL - Liked how it bounced back after a sell off in the middle of the day. That shows character! A buy on a break of 2.50.

TIVO - Impressive consolidation after the initial breakout.

WFR - Like how it held up today after the breakout yesterday. Pre market action would be a good clue to where this is headed tomorrow.

And of course, keep an eye on the mortgage insurers.

Take care and good luck!

Mortgage insurers breakout!!

All the mortgage insurers - RDN, PMI and MTG - broke out today on massive volume!! PMI was up 30% one time today! I had blogged about these stocks earlier these week calling them potential breakouts and marking the crucial levels. I posted about them on twitter in the pre market today saying that they could breakout today. Congratulations to all you readers who made some money off them! If you got in due to my posts, buy me a beer if I am ever in your town :). Just so you know, I am partial towards stouts and IPAs!

Here are the charts. They still look good for some more profits, so I would recommend having them in your watchlist for the next few days. A break of today's highs on good volume should be a good buy  point if you are a momentum trader. If you are a swing trader, a low volume pullback would be a better entry point for you.

I will be back later tonight with some charts that I like for tomorrow.

Take care and good luck!

Tuesday, March 30, 2010

Some stocks for the watchlist

WFR - Blasted through the MA(200) at high volume today. At important levels

OCLR - Consolidating after a huge run up. A buy if 2.75 holds.

WEL - Another impressive run up. The volume just keeps on coming.

RDN - Still like this one. A break of 15 and this could fly.

Taking it to the next level

In my post earlier this week dear readers, I hinted at making important changes in my trading strategy. Well, here they are.

Firstly, the need for the changes. As the regular readers of this blog know, I trade with a small trading account. Though this account has grown over 300% since the beginning of last year, I still take a more than decent hit due to commissions. I had blogged a little while earlier on the difficulties of trading with small accounts. In fact, I decided to make these changes after going through my trading results for this quarter, trying to see where and how I could improve as a trader.

As you readers know, I am up  around 10% for this quarter. While going through my trades, I realized I would be up at least 20% if not for the commissions!! Now, that's a huge difference dear readers and totally unacceptable if something can be done about it. Why do the commissions cost me so much, literally and figuratively speaking, when my account has grown so much in the last two years? Read on.
I gave the above question some thought and here is the correct answer. When I had a much smaller account in the first half of last year, I had no choice but to go all in in all my trades. Now, as we all know that is a strategy fraught with danger. In fact, I had blogged about the  dangers of such a strategy a little while back. But as the account has grown, I have practiced position sizing and have become much better at risk management. No longer does my account have wild swings as it used to before. So, though my overall account value has increased, the size of individual positions has not changed much.

But seeing over half of my profits disappear in commissions this year, means its time to make some changes. Its time to get out of my comfort zone. So, I have decided to increase the minimum size of any position I take by ~ 50%. As I am sure you readers realize, this is a big change. The biggest challenge I face with this is getting mentally used to higher absolute value of losses. That will take time. But there are times in life, when man has got to do what a man has to do. If I continue trading the same way I have, I have no doubt I will continue being successful.

Another by product of this change in strategy is that hopefully I will be more disciplined now while getting into trades. As you readers know, my biggest problem in the last three months has been overtrading. Dealing with larger amounts will hopefully mean that I am more cautious while entering into trades.

So that is it, my dear readers. Going by the response I have received for the posts on trading with small accounts, I take it that most of you readers trade with small accounts, though small is a highly relative term. I will blog about the challenges I face with this new strategy and hopefully it will be of help to some of you readers too who are thinking of themselves taking it to the next level.

I will be back later tonight with some stocks that I like.

Wish me luck :)

Monday, March 29, 2010

Taking it to the next level

"If you can dream--and not make dreams your master,
If you can think--and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build 'em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!"'

                                                            - If by Rudyard Kipling

More on it tomorrow..... 

Sunday, March 28, 2010

Keep an eye on the mortgage insurers - MTG, RDN, PMI

The mortgage insurers saw some nice action at the end of last week thanks to some good news, first from Bank of America on Thursday and some more bailout for the homeowners from the government on Friday. All three of these stocks - MTG, RDN and PMI - are at very crucial levels and have the potential to run up huge here. I am posting both the daily and weekly charts for them below. I would recommend keeping an eye on the crucial levels next week.

MTG - Crucial level - 10. Closed right above it.

RDN - Crucial level -15.

PMI - Nice gap up last week on very high volume. Crucial level - 5.

Take care and good luck!

Let the market leaders guide you

As you know dear readers, this rally has been blessed with strong leadership with stocks like AAPL, GS, GOOG leading the way. So, I thought it would make sense to have a look at these stocks to see if we could gain any insights to where this market is headed.

AAPL - A strong negative MACD divergence developing. I see 225 in the very near future. The gap support at 215 looks very strong though and should be further strengthened by MA(50) soon.

GS - Rejected right at strong resistance at ~179 levels. A negative MACD divergence can be seen here too. A pullback to 170 can be expected, which is the next support. Again, both MA(50) and MA(200) inching up to provide more support.

GOOG - I bet a lot of people got stopped out below the MA(50) on this one. This stock has moved a lot on news lately, due to all the China business. So, it would be wrong to conclude too much about the overall markets by looking at this one, but even in this chart, strong support can be seen at ~530 levels which will soon be strengthened by MA(200).

So, what are these market leaders telling us?
  • Negative MACD divergences developing which signal a pullback in the near future
  • All these stocks have strong support not too far away, which will be further strengthened by important moving averages converging there in the near future.
To conclude, be prepared for a pullback in the near future but expect the dip buyers to jump in at or even little above the support levels.

Take care and good luck!

Saturday, March 27, 2010

Mar 22 - Mar 26 completed trades

4 profits, 3 losses- +0.04%
Average Profit - +2.07%
Average Loss - -2.75%

Total account up 10.48% YTD (after commissions)

Open Positions: NEP, MTG, FAZ, SDS (59% long, 38% short)

A couple of losses bigger in size than I usually "like" to have. No regrets as far as VXX is considered as it was a hedge position but I could certainly have played it better. But MGM was just bad stupid trading. If I have to pick a positive, it would be that I didn't let MGM, which I sold on Monday, affect the rest of my week and managed to recover from the losses. Hopefully, with MGM, I have managed to get the stupid out of my system for some time :).

I had hinted in the blog sometime earlier that I was thinking of making important changes in my trading style (see March 1-March 5 review) and I kind of started on that path this week. So, this might result in a little more than normal swings in my account in the next couple of weeks as I try to fine tune these changes. I will update you readers on the necessity for these changes and how I am dealing with getting out of my comfort zone in the near future.

I will be back tomorrow with my views on the market and some setups to watch out for next week.

Take care and enjoy the weekend!


1) The table shows only completed trades of the week. The positions that are still open will be accounted for in the week that I close them.
2) The YTD calculation includes the open positions. I just take my account value at end of Friday and calculate it. So, it also includes commissions which do matter a lot to a small account like mine.

Which other blog reports results after commissions? :)

An Inspiration to all those who trade with small accounts

A couple of weeks ago, I wrote a series of posts on difficulties of trading with small accounts but concluded that if one had the right attitude and was willing to learn, one could still be very successful. An article I was just reading seems very relevant to the above posts and I thought I would share it with you readers. The article was about Richard Dennis. 

Richard Dennis, once known as "Prince of the Pit" and of teaching the Turtles fame, started trading with just $400 and converted it into $200,000,000!! Obviously, this is an exceptional case but truly an inspirational figure for all those who trade with small accounts. To read more about him, here is the Wikipedia link: Richard Dennis.

And here is the link to the series of posts I wrote about trading with small accounts:

Enjoy the weekend.

Friday, March 26, 2010

Who won today - bulls or the bears?

And the correct answer is......that there is no wrong answer my dear readers. If you are bearish, you could be glad with the fact the markets were unable to hold on to their initial gains for second day in a row. If you are bullish, you would be pleased with the fact that even after the huge run up in the recent weeks, this market just refuses to go down. Take your pick.

Personally speaking, I had a decent day today. I got out of half my FAZ position at 13.05 early in the day. I decided to hold on to half my position as I didn't like the market action even though the market was up around 50 points at that time. So, I decided to get out of my remaining CSE position too at 5.88 for an average loss of ~1.5%. I hadn't liked the AH action in this last evening and this was another reason why I decided to sell it. I was in MTG, NEP, FAZ and SDS at this point. Having reduced both my long and short positions to comfortable levels, I decided to simply step away from my trading screen for the rest of the day. However, I did catch the market action again in the last half an hour and added to my MTG position at 10.02. I had posted about this stock a couple of days ago and it was up over 12% today! Hope some of you readers profited from this too.

I will be back this weekend with trading results from this week, my thoughts on what to expect next week and also a new watchlist.

Have a nice weekend!

Thursday, March 25, 2010

I see a pullback coming....

I will keep this short dear readers as I am hard pressed for time today. I was thinking of not doing a post at all today, but then decided to write down a few lines as today was a pretty important day, at least in my view. Today was the most disappointing day for the bulls in a long, long time. What started as another impressive up run, ended as a down day on the S&P. I wouldn't be surprised to see today as the start of a meaningful pullback.

I still hold all my longs as I didn't get the chance to look at the markets today until the last 15 minutes. Seeing the state of the markets at that time, I took positions in FAZ and SDS.

Take care and good luck tomorrow!

Wednesday, March 24, 2010

What is your profit target for the year?

I was just wondering what is a reasonable profit target for a year. I had an amazing year last year, up over 170%, and am under no illusions of ever having a return like that again. Even half that return will be amazing! Come to think of it, 1/4th of it would be great too!! I would take 1/8 too!! :) So, I am just curious what kind of targets do you readers have? What is a realistic return that you would be happy with? Please take a second and participate in the poll on the right. Thanks!

Keep an eye on the dollar

If you are bullish overall, then small down days like today really should not worry you. These small pullbacks are healthy and allow the market to regroup before making making another move up. The S&P closed right at support today. If this doesn't hold, next support -1160. What is beginning to concern me though, is the negative MACD divergence beginning to develop. Notice how the MACD is not moving higher with the market. We will see how this develops.

The big story today was the US dollar. It had a huge gap up. UUP hasn't reached these levels since July of last year. Keep an eye tomorrow on whether there are any signs of dollar trying to fill this gap. If the gap support holds, it could signal a deeper than usual pullback for the markets.

Naturally, the upside in the dollar meant that gold and oil took a hit. GLD got rejected right at the MA(50). Next support - 105.

USO shows a nice example of using negative MACD divergence to predict a pullback.

Personally speaking, as the regular readers of this blog know, I held a position in CSE going into today. This stock has been struggling to break 6 for ages now. It finally did manage to break it and I added more to my position 6.04. However, this was as high as it reached and I got stepped out of my overnight position at 5.96. I still hold today's position and it is smaller than the position I held going into today. I also took a position in MTG at 9.65. It closed at 9.50. Here is a weekly chart. As you can see, a break of 10 could really make it run. I won't get time to watch it tomorrow morning, so am thinking about how much room to give it to run and where to keep my stop.

Take care and good luck tomorrow!

Tuesday, March 23, 2010

Keep an eye on NEP

I am going to keep this post short dear readers, as I spent a decent bit of time and energy on the last one - Bull markets are the worst teachers. Check it out if you haven't done so already!

I have two stocks for you readers today - NEP and OCLR. 

Let's discuss NEP first. It made a big move up today. Not unexpected, I might add. I posted about the reversal in the stock yesterday on twitter and again today in the pre market on twitter. I hope some of you readers got in this one as it looks good to run some more. It's results are due any day now and they should be good. It is the only stock whose results I follow and know about the fundamentals and you know the reason for that if you have read my introduction. 

OCLR - Keeps going higher. I posted about this one on Sunday. There is an interesting story on how I came to know about this stock too but let's save that for another day. Basically, this is another stock from my newbie buy-and-hold days from summer of 2007. Love the volume pattern but be careful chasing it here as I see a negative momentum divergence developing.

I will just briefly update you readers about my trading activities today:

Sold WYNN at 76.40 for around 1.8%. I am not against a stock consolidating but I expected a move up at the end of the day with the rest of the market. Better safe than sorry attitude here as my account had its highest ever close today and I wanted to hold on to that.

Sold OCLR for at 2.73 for an average profit of ~ 3.8%. Sold too soon but I will take a 4% profit anyday! More important is I don't get frustrated by thinking about the money left on the table and do stupid things. I know I do that when I am not trading well.

Got in and out of CNC for ~ 2.3% gain.

Sold my hedge VXX for an average loss of ~ 3.7%. More loss than I would have liked but I would rather lose money on a hedge position than make money on it :). No regrets as this position gave me the confidence to go overly long even when I wasn't in a good place with my trading. In hindsight, I could have managed this one better. Chalk this one to inexperience in dealing with hedge positions.

Also, took a starter position in CSE at 5.99. Its been trying to cross 6 for ages. If it doesn't early tomorrow, I get out in a flash.

That's it from me for today. Take care!

Bull markets are the worst teachers

Markets continued going higher. 

That's it. That's all I have to say about the markets today as far as the general market is concerned. But that doesn't mean I don't have anything more to say today. Read on dear readers, read on.

Are you scared on how this epic low volume junk rally will end? Now, I am not saying go and short this rally. Anything but. I don't think anybody has a clue when this rally will end. But we all agree this rally will end sometime, right? Its what follows this what troubles me. Let me explain.

I don't follow too many blogs but a common theme that has started developing in the comments section of many of the blogs I do follow is a lot of new faces, and in some cases old familiar ones too, coming on board and saying that pick any stock and let it run. In some cases, I see the traders getting stopped or taking profits being mocked at by these "experts". Their rationale is the market is just gonna go higher. No doubt, these new traders have enjoyed considerable profits in the last few weeks and I congratulate them on their success and wish them well. But at the same time, I am confused whether I should laugh at these experts or feel sorry for them. Being the kind spirit that I am, I choose the latter. I feel sorry for these new traders as we all know how this story ends.

I started short term trading around one and a half years ago, right in the middle of the bear market. I started short term trading after an unsuccessful attempt at buy-and-hold "investing" when the market crossed 13000 and everybody calling for 16000. We all know how that story ended. You can read all about my early exploits in investing over here. The point is I learned my trade in the worst possible market conditions. I am still learning and nowhere close to being the trader I want to be and the trader I know I can be but I learned my basic lessons in a bear market. 

I certainly did not appreciate being a child of the bear market back then, but I certainly do now, especially when I see all these exuberant newbie traders who are children of the bull market. I learned the importance of keeping stops the hard way as I saw stocks fall to unimaginable depths all around me. Imagine not having kept a stop loss on AIG! I learned, as a short term trader, not to hold any stocks through its earnings report, no matter how confident you are about the stock. Its something that I still practice today, even in a bull market, as it becomes a natural defense mechanism when you see companies come out with horrible numbers one after another. Bear markets teach you this. I learned not to trust any company. No matter how big or reputed the company, as a short term trader my goal is just to take my profits and move on. Imagine trusting Lehman. Bear markets taught me this. I learned to take my profits, or at least partial profits, whenever the Stock Gods smile upon me. I have seen too many massive gap down days not to have learned this. All the above knowledge, courtesy of the bear markets.

I am not saying all the above was easy. Exactly the opposite in fact. Markets are the best teachers, but also the harshest ones. You get to learn a lot, but all this comes at a price. A price you see reflected in the bottom line of your trading account. But as long as one has the right attitude and is ready to learn, you DO learn. The markets are there to teach us everyday. I still make basic errors but the lessons from bear market are, and will always be, ingrained in my mind. Does learning in a bear market have any drawbacks? Sure! Take my example again. I have a hard time letting my stocks run, as I always fear the worst. Because the worst is all I have seen. 

But give me the bear markets as a teacher over the bull markets anyway. Take the newbie traders that made me muse on this topic. The bull market is lulling them into a fall sense of complacency. It is showing them the door to riches, to riches they never thought were possible. It is telling them trading is the easiest thing in the world. It is telling them just buy a stock and keep it, because even if it goes down in the immediate future, they all go up in the end. We all know how this story ends. The same way it ended in 2000 and 2007. Eventually, most of these traders will too learn. But only after the bull market has played them for a lot. Bear markets just give you the harsh lessons straight up. Following a similar line of thinking, I feel it is much better if a new trader starts with a loss rather than a gain. 

I never thought I would find myself saying this but I think I will drink to the bear markets tonight. Thank you bear markets! You sure were one hell of a bitch but you were a damn good teacher. Cheers!

Monday, March 22, 2010

Gambling on the casino stocks

MGM, WYNN and LVS, all three broke out today on nice volumes. The volume pattern looks pretty good on all of these and they look good to run some more.

I also like OCLR here. If I get the time, I will go through my scans later tonight and post any charts I like on twitter.

Take care and good luck!

You just can't keep this market down

Another day, another impressive performance by the bulls. In the morning, the futures were down 60 odd points and it made sense. Wall Street doesn't like new taxes, right?? Well, live and learn! The market pretty much started at its lows and it was all bulls from there onwards. The volatility is still such that unless you are in the right stock, you might as well buy tickets and go and see paint dry - it's more fun!

I had a busy day as I had time to follow the markets today, and for the first time in around a couple of weeks, felt comfortable with my trading and in tune with the markets. A smarter trader would have waited for a day like this and not traded in between, but I have no qualms in admitting and as you readers already know, I am a work in progress. I had moved my stop in MGM to 50 MA and it bounced right from there. I kept on moving my stop along as it moved up and finally got stopped out at 12.10 for around a 3% loss. It finished the day at 12.50 odd. Was my stop too tight? Yes! After being down a decent bit on this one (it bounced from 11.38), I admit I was pleased with whatever I got and felt lucky to get away with a smaller loss. Yes, if you stupidly ignore your stops, you are left at the mercy of luck.

I saw it acting strong after I sold it, in fact all the casino stocks were doing well - MGM, LVS and WYNN. So, I took a position in WYNN at 34.50 and added to the position at 35.90. It had a pretty nice close. I posted on twitter about these positions as I did have the time to do so today and I hope some of you readers following me there were able to take advantage of these stocks too. Why did I go for WYNN, and not MGM again? Well, I know myself and losing twice on the same stock in the same day wouldn't have been good for my confidence. In an ideal world, these things shouldn't matter but like I said before, I am a work in progress as a trader and experience the same frustrations and challenges that I am sure most of you readers do. I don't mind making mistakes as long as I keep learning from them.

Anyway, I also got out of ADBE for 34.88 for little more than breakeven. It was struggling a little too much with the 36 mark, so I got out. As I was now on margin, thanks to my now large WYNN position, I sold half my OCLR position at 2.62 for around 2% profit.

From the watchlist I posted last night, CNC was up around 11% today. I wasn't able to take advantage of this pick but I hope some of you readers got in! I will be back later tonight with a post on why the casino stocks look so impressive here.

Take care and good luck tomorrow!

Sunday, March 21, 2010

Some stocks to watch out for

GS - Looking toppy to me. Important resistance right ahead. Negative MACD divergence on the latest upmove. I like the odds of it as a short here rather than a long play.

GOOG - Watch out for 50 MA.

GLD - 108 is the important support here. A break of this and next support is 106.

OCLR - In this one. Really like the volume pattern.

CBB - Nice move up on big volume on Friday. Am going to keep an eye on it and see how it reacts to market weakness. Will take a small starting position if it holds up well.

CNC - Keeps going higher on better and better volume. Break of 22 next buy point.

SFI -  Like this as a short. Weak close on Friday could signal a possible double top formation. Negative MACD divergence makes it even more attractive as a short.

Take care and good luck!

Saturday, March 20, 2010

NOT overbought anymore!

This might come a a surprise to some of you readers out there. Though the markets have just gone higher since the McClellan Oscillator - one of the oscillators used to identify overbought and oversold market conditions - made its high two weeks ago, the oscillator has turned sharply lower.

As I had pointed back then, the oscillator was at its third most overbought condition in the last two years back then. Since then, the markets have chopped and churned higher, but the oscillator has worked off the extreme overbought conditions and is in fact, negative now. The charts below show NYSE and NSDAQ McClellan Oscillators with S&P and QQQQ in the background respectively.

I will be back tomorrow with some charts to keep an eye on tomorrow. Hope you readers are enjoying your weekend!

Mar 15 - Mar 19 completed trades

4 profits, 3 losses- +4.23%
Average Profit - +1.72%
Average Loss - -0.88%

Total account up 7.39% YTD (after commissions)

Open Positions: NEP, VXX, MGM, ADBE, OCLR

It looks like a decent week at first glance but it was anything but. As you can see, my overall account is down from last week, mainly due to MGM and NEP positions. The bottom line is I shouldn't have traded at all in the second half of the week. I was in no way emotionally stable to partake in an activity such as trading where the control of your emotions plays such an important part. Due to some news I received on Wednesday, I was angry and frustrated and I am afraid, I took it out on my trading account. Trading seemed very insignificant to what was happening in my life at this point and I did not keep my stop in MGM. At that time, I couldn't care less about it. And now its coming back to bite me. I fully deserve it. Enough said.

I will be back later this evening and tomorrow with the market review and what to expect next week and also a list of some potential breakout set ups for next week.


1) The table shows only completed trades of the week. The positions that are still open will be accounted for in the week that I close them.
2) The YTD calculation includes the open positions. I just take my account value at end of Friday and calculate it. So, it also includes commissions which do matter a lot to a small account like mine.

Which other blog reports results after commissions? :)

Friday, March 19, 2010

The Bears miss a trick

That's it??!! That's all?? So, you are telling me that's the best the bears can do after something like 8 consecutive up days on the DJI. A measly 40 points up on a day which they dominated pretty much from start to finish. Not very impressive, is it? They have no one to blame but themselves really. Late in the afternoon session, when DJI was close to 70 odd points down it looked like we were heading to a triple digit down day. Now that would have been impressive, especially in light of the low volatility we have had in the previous few days. If you are a bull, there is really no reason for you to be disappointed at all, in spite of the red day.

Personally speaking, I got out of my FAZ position at 14.09, a gain of 2.1%, and SRS at 6.05, a gain of 1.68%. As a side note, I remembering that when I last traded these ETFs, 2% used to be something you could achieve in minutes and I have to admit, I sometimes used to find the volatility in them scary, hence I try to avoid them even until today. But I had to work really hard for the above 2% gains. I got into ADBE at 34.72. It reports on Tuesday afternoon and if you have a look at the previous quarter's earnings, you will see that I am not really out there to expect a pre-earnings run up from here. I don't plan holding into the earnings. I also got into OCLR at ~2.56 and 2.60. 

I will be back tomorrow with the weekly trading results (not a nice week!). I will also post some charts and general market indicators to assess what kind of damage happened to the charts today. I feel its important to assess how the commodities and market leaders like GS, GOOG, AAPL held up today. And finally, I will also post some setups for your watchlist for next week.

Take care and have a nice weekend!

Thursday, March 18, 2010

An interesting day

An interesting day dear readers, an interesting day indeed. Though the Dow Jones Index and Nasdaq closed well in the green and the S&P only slightly in the red, I see more red than green on my screen. Do you readers see that too or is it just me? Perhaps tellingly, FAS closed in the red today despite the overall markets being up. Financials have led this rally. Could this be a sign?

Personally speaking, I decided to change my strategy. I decided to balance between long and short term holdings and hold my positions for a longer period of time. I will balance my long/short ratio as and when I see fit. Currently, I am long NEP and MGM while I am short with positions in FAZ, VZZ and SRS. On the whole, I am more short than long. Let's see how this new strategy works out.

Take care and good luck. Be careful out there!

Wednesday, March 17, 2010

It's all in the charts

Pardon me dear readers but I don't feel up to doing the usual daily market commentary tonight. I am not feeling well and on top of which I have some personal issues to deal with, though I doubt that they can be dealt with at all. What happened, you ask? Life happened!! That's what happened. Anyway, I have put up some charts to share with you readers. I have commented on the charts itself. I hope you find these charts of some use. Come to think of it, I hope you find this damn blog of some use. Take care and good luck.







Tuesday, March 16, 2010

Oil plays

Some stocks to keep eye on in case oil continues on its run up. See here for my take on oil, gold and the dollar.