Friday, July 30, 2010

No post today

I am simply exhausted after an unusually busy and tiring day and since its Friday, I decided that the post for today could wait until tomorrow. I just thought I would let you readers know in case you were waiting for the post. Don't laugh, there might be someone out there who was waiting for the post! Whoever you are - Thanks! lol
I will be back with my musings on what the markets might hold for us next week and also a watchlist for next week sometime during the weekend.
Make it a great weekend!

Thursday, July 29, 2010

A hard day to trade

As I am sure most of you readers will agree, it was a hard and frustrating day to trade. On days like, it is important not to overreact and not to overtrade. It is imperative to know what the support and resistance levels are on the indices and to focus on those levels, and treat the rest of the action as noise.

Here is an updated version of the S&P chart that I posted yesterday. 

As you must have noticed, the support and resistance levels I had marked yesterday came into play today. the market got rejected right at the resistance level marked in the morning. The market ended right on the first support level.

Let's move on to the updated Nasdaq chart now.

If anything, the levels that I had marked yesterday worked even better than those on the S&P chart with the index bouncing right off the support! For all you non-believers out there, TA works!!

As always, let's end with some thoughts on tomorrow. The charts show that basically nothing much changed today and we are still in the consolidation phase. The big news tomorrow would be the GDP numbers that come out in the pre-market tomorrow. I believe a bad number is already built in into the market and the only question is how bad the number actually is. I still believe the right strategy here is trading small positions or staying in cash. Sounds boring, I know, but its a much better alternative to losing money!

Take care and good luck!

P.S.: Grabbed a little DE at 64.90 today. Its a small position, about 1/3rd my usual position size. Might consider adding if it makes new highs.

Wednesday, July 28, 2010

Few for the watchlist

Here are a few stocks that for the watchlist. As always, its earnings season and please first check on when the company is reporting if you decide to get into any of these plays.

DOLE - Cup and two handles!! I got into this today. A break of 11.15 on good volume is what is needed.

CLX - Broke out after a nice period of consolidation and low volume pullback right to the support today. A buy if the support holds.

DE - Consolidating nicely after breaking out of resistance. A buy at new highs.

NVE - Similar to CLX. A buy if the support holds.

VMED - Broke the trendline today after a low volume period of consolidation. Gotta love the bullish volume pattern of the last couple of months.

That's it from me for today. If you haven't read it yet, here is my daily review for today and the strategy for tomorrow. Also, a post on how overbought are the markets now.

Take care and good luck!

Markets not overbought anymore

A couple of days ago, in fact even yesterday, I had remarked that there were couple of ways a market could work itself off from overbought conditions like we found ourselves in after Monday - a sharp pullback or a period of consolidation preferably on low volume. Now that the latter is exactly what has happened in the last couple of days, let us check on how overbought are the markets now.

Let's start with the NYSE and NASDAQ McClellan Oscillators as usual. I have market the overbought levels and also the level where we found ourselves on Monday. 

As we can see, the markets have done a great job of working off the overbought conditions and we are not at overbought levels anymore. That doesn't mean that we go straight up from here but after the action on Monday, the odds were definitely in favor of a pullback and after the last two days, the odds are slowly increasing for the rally to continue. While trading the markets, it's very important that one thinks in terms of probabilities rather than certainties but we will save that discussion for another day. Right now, let's have a look at some other breadth indicators to see if they support our line of thinking that markets are not overbought anymore.

First up, are the Nasdaq and NYSE Advance-Decline Issues.

The above indicators, which were also at extreme levels after Monday, confirm that the markets are not overbought anymore and inf act, are getting close to levels from where we might see a bounce soon.

Now let's move on to the Nasdaq and NYSE Advance - Decline Volume.

These charts also tell the same story - the markets are not overbought anymore.

If you haven't read it yet, here is my daily review for today and the strategy for tomorrow. I will be back later tonight with some setups for the watchlist.

Take care and good luck!

Still bullish and where the support lies

Another bullish day in the markets today, in fact, if anything, even more bullish than yesterday. Why, you might ask, after all, the market was down more today compared to yesterday? Well, in my opinion, the market had plenty of reasons ranging from bad durable goods orders number to the Fed announcement to fall hard from its overbought state, but didn't. It still hung in there and finished respectably. That is bullish.

But let's see the levels from which we can expect support. Below is the S&P 30 minute chart in which I have marked the resistance and the next two support levels. 

Similarly, here is the Nasdaq hourly chart with the support and resistance levels marked. It is sitting on an area of support right now and further support should be around 2240 level. 

So, that's where we stand right now. I am not going to turn bearish until these levels are broken. The pullback is the last two days has been moderate and orderly, just what the doctored ordered for the bulls. We are still in a consolidation stage but I think the direction of the markets shall become clear before the end of the week. Until then, its better to trade small and focus on managing your risk.

I will be back with some more posts later in the evening. Take care and good luck!

Tuesday, July 27, 2010

Gold not glittering

Seeing the action today in gold, I felt compelled to do a post on gold even though I had no plans to write one. Ever since the beginning of the big move up in the latter half of 2008, gold has held steadfastly to a trendline that I have often pointed out both on the blog here and twitter. Well dear readers, today was the day this trendline broke. Have a look!

Let's zoom in a little closer. Here you can see the trendline being broken more clearly. The volume pattern has been really bearish the last couple of months. The negative slope of the MACD is another tell. All in all, things don't look good for gold here. The silver lining is the presence of MA(200) at 112 level. It will be interesting to see if this important level provides the expected support. And if there is indeed a bounce from this level, pay close attention to the accompanying volume.

This plight of gold is reflected in the gold miners index. It formed a double top late last month and then broke its own trendline earlier this month. A bounce was rejected right at the trendline. Finally, it made lower lows today accompanied by a break of MA(200).

Looking at the above charts, I wouldn't be too eager to try and call a bottom in gold here. Depending on how it deals with upcoming MA(200), I like it more as a short than a long here.

Take care and good luck!

A bullish day

As I noted in yesterday's post dear readers, the market was, and still is, at overbought levels according to the trusty McClellan Oscillator (which has nonetheless climbed down after today's action) and the ways for markets to work off overbought conditions are either a sharp pullback or a period of slow consolidation. And the latter is exactly what the markets did today. In my opinion, today's action fitted perfectly well with the best case scenario for the bulls. Since the market's hardly went anywhere today, I will not be posting the usual index charts today.

Personally speaking, I sold out of MTG at 9.11 early in the day for little over 1% gain and seeing where it closed, I am glad that I did. NR performed very well the entire day. But respecting the overall market conditions, I took profits in it, selling 1/3rd of my position at 8.30 and another 1/3rd later at 8.25. It reports later this week and I might just hold on to the remaining third position for the results. But its too early to think about that as depending on the market action, I might just sell it tomorrow.

As far as the strategy for tomorrow is concerned, another 2-3 days of such consolidation will be perfect for the bulls. I feel the best strategy here is to just sit back and watch the markets. On slow moving boring days like today, traders often find themselves trying hard to manufacture things. I certainly have been caught in that trap often. Its important to let the trade come to you, rather than trying to force the issue. My largest position is cash here and I am content with that. Remember, the markets are still at overbought levels. If you feel like starting new long positions here, I would recommend either keeping the position sizes small or making day trades. So, that's it from me for now.

Take care and good luck!

Monday, July 26, 2010

Using multiple time frame charts to find out entry/exit points

As the regular readers of this blog know, I am a short term trader. And I take it, so are most of you readers who visit this blog. As short term traders, we usually use anything from 1 min to daily charts to determine our exit strategies. But sometimes, these shorter time frame charts hide the dangers that lurk ahead. Let's take the example of NR, a stock that has been doing quite well recently. I have been holding on to it for quite sometime now (a big deal for me as patience is my trading's Achilles heel!) and adding on the way up. BTW, I have been blogging about this one for a long time and even did a full post on it over a month ago, I hope some of you readers made some money off it too! But enough of me patting myself on the back. Let's get back to the subject of this post.

Here is the daily chart of NR.

Looks beautiful, doesn't it? Firstly, a very bullish volume pattern pretty much the entire past six months. Bouncing nicely off the trendline. Consolidated very well below 7 before breaking it on good volume. Finally, it made 52 week highs today, again, on better than average volume. Empty road ahead, don't you think so dear readers.

Now lets step back a bit. Now we have the weekly chart covering a period of two years.

We see that the stock last reached these heights (pun intended!) in the last few months of 2008. It got rejected at around the 9 level back then. Well, which stock didn't at that time, we might say. After all, the stock has made a beautiful U-shaped recovery since then. Point well made.

Now let's step back a bit more. Almost 9 years to be precise (almost and precise in same sentence?!). And what do we see?? Yikes!!

The stock got rejected at these levels in 2002, 2005 and 2008. Need I say more about the  importance of the upcoming resistance level?

Now, as I am sure all you readers know, prices have a history. No, there is no magic behind this statement, just the fact that, taking NR again for example, that there have been a lot of shareholders who bought at the top around the 9 mark waiting for a long time to get out of the stock at breakeven. These are the so called long term investors who just don't how to take a loss. These people will start dumping their shares as soon as the stock reaches the previous highs. Maybe the stock will manage to overcome this resistance, maybe it won't but the point is that we would have completely missed the importance of this level if we hadn't gone back almost 10 years! I hope this post helps underscore the importance of looking at multiple time frames to find out entry/exit points. Do I follow this on every stock I trade? Hell no, I am not smart enough to follow everything I say. I do it often enough, but seeing charts such as these makes me realize that I should make it a point to always look at longer time frames at least for all my swing trades. I hope you readers found this post useful too.

Take care and good luck!

A very interesting day ahead tomorrow

You readers don't need to tell me that stocks had another great run up today with a strong finish. So, let's go straight to where we ended, so we can try and come up with a strategy for tomorrow.

First, the S&P. I have been going on emphasizing the importance of 1115 on the S&P for the last two weeks now. In fact, I recently wrote a post titled - The importance of 1115. I won't go into the importance of this level again so as not to bore the regular readers of this blog, so if the newer readers would be kind enough to just click on the above link if they wanna know why this level is so important. Well, dear readers, we ended today at 1115.01. Need I say more on how interesting and important that makes tomorrow's action.

If you think the above is interesting, and you should, check out the updated version of the NASDAQ weekly chart from what I posted yesterday. Will the dreaded 2325 level strike again?

This really sets up things for tomorrow. But I am a seller here, and not a buyer. Well, I haven't checked the numbers and shall post about them later tonight, but the markets are wayyyyy overbought here. If you are bullish, what you should be hoping for here is a period of consolidation in the form of a pullback at lower volume for the market to work their way down from these overbought conditions. The second alternative for the market to come down from these overbought conditions would be a sharp spike down, which of course, doesn't sound that appealing, does it? 

So, in a nutshell, the strategy for tomorrow should be to start taking profits if you haven't done so already and wait for a pullback. I wouldn't go shorting here until I see the volume and strength of the down move.

Take care and good luck!

Sunday, July 25, 2010

How overbought are the markets here?

And the answer according to our trusted McClellan Oscillator is, very much indeed. And with that it's time to shut up and let the charts speak for themselves. The overbought levels are marked on the charts.

I know I mention this every time the market reaches overbought or oversold levels but I feel it is my duty to do so for the benefit of any newbie traders out there - do not short the markets just because they are overbought!! An overbought market can easily become "more overbought" and an oversold market can easily become "oversold". Remember, the markets can stay irrational a lot longer than you can stay solvent.

You might ask then, what is the point of determining these overbought/oversold conditions? Well, here is a post I had written sometime back on how to play overbought markets and I hope it will prove to be of some use to you - How to play overbought markets?

Its been quite a busy weekend for me in terms of blogging and here are the posts from this weekend in case you missed any:

Take care and good luck!

Stock market sector analysis

I decided to have a look at the sector charts to find out which were the strongest and weakest looking sectors right now. It's important to figure out where the leadership in this rally is coming from. Successful trading is all about finding an edge, and if you are in a stock that belongs to the right sector, it just increases the odds of your success a little more. I have commented on all the charts itself.

Some observations:

(1) Most of the sectors are below their June highs, just like the overall markets, and will have to cross these previous highs in order for the charts to turn bullish.

(2) There is most relative strength in Consumer Staples, Materials and Utilities sector. These are the sectors one should be looking at to find long plays. Pullbacks should be taken as buying opportunities in these sectors. Utilities look good for a breakout out of multi-month resistance.

(3) Financials are lagging behind the overall markets.

(4) The Health Care sector looks particularly weak and should provide short opportunities both at MA(50) and at printing of new lows.

(5) Most of the sectors are looking short-term bullish, so that's where the bias of the market lies.

If you haven't read them already here are the links to my posts on the important levels for S&P and NASDAQ for next week and an industry to particularly watch out for next week.

Take care and good luck!

P.S.: Coming up later tonight - How overbought are the markets here and how to play them?

Saturday, July 24, 2010

Important levels for next week

Friday's action was important not only because we had a follow through day at last but also because by closing above the previous July highs, the market made higher highs - an important criterion if the chart has to start looking bullish. The momentum certainly lies with the bulls after the action last week but by no means it is game over for the bears yet. In fact, the overall chart still looks bearish and will continue to do so until we break the June highs. But before the market takes a shot at that, it still has a very important resistance level to overcome, the importance of which I had emphasized last week too.

The importance of 1115 here cannot be overstated. It represents not only the overhead resistance from November - March period, but also the MA(200) level. Making the bulls case a bit harder is the fact that the markets are already at overbought levels, but more on that in the next post.

NASDAQ also saw some significant action on Friday - bouncing off MA(50), closing above MA(200) and making higher highs. And all this on relatively high volume! But for this chart to turn bullish too, the June highs would have to be broken and that means taking on the important 2325 level. 

The importance of the 2325 level can be seen more clearly from the 2 day chart shown below the daily chart. As marked on the chart, this level has continued to hold significance from 2007-2010 and should make for some interesting action next week!

So there you are dear readers. 1115 and 2325 should be the numbers to pay close attention to on S&P and Nasdaq in the coming week. I shall be back later looking at how overbought the markets are, a few stocks for the watchlist for next week and of course, the post on "The Art of Setting Stop Loss Points".

Have a great weekend!

Friday, July 23, 2010

Watch out for mortgage insurers next week

The mortgage insurers look good to me over here and are worth having on the watchlist for next week. First, a word of caution on these stocks - PMI, MTG, RDN. All three of them are highly volatile and are prone to gap ups/downs. That said, they can pay off big time during trending markets. I usually use them as day trades to negate the risk of holding them overnight. If you would like to hold them overnight, you might consider taking in smaller positions than usual, like I did with MTG today.

PMI - Coming off a nice basing pattern. Nice move above MA(50) today with a nice close. If 4 prints, this could run to 4.50. Like how both RSI and MACD are shaping up. If only some volume would come in now.

MTG - An important close above 9 today. Reported better than expected earnings earlier this week, which is really a big deal for these mortgage insurers. First target - 9.50.

RDN - Held up the long term support at 7. Again, the RSI and MACD look encouraging. Could run up to 10 if the market cooperates.

Enjoy the weekend!

A follow through day at last

I am back from my vacation dear readers and I seem to have missed quite a rally this week. It "hurts" to see that so many stocks that were on my watchlist have broken through (look no further than PMI - up around 25% since I left it!) but I honestly believe I shall survive. I hope you readers did well this week! The one position that I hadn't sold before leaving - NR - has been up over 15% during this week, so I did benefit a bit from the rally. I also got into MTG at 9 today and added some NR at 7.98 close to the end of the day.

I will be back with posts looking at the week ahead as well as some setups that I find promising for next week. Just give me a little time to get in tune with the markets.

Have a great weekend!

P.S.: The markets are in overbought territory here ;). More on that tomorrow!

P.P.S: Also, look out for a post on "The Art of Setting Stop Loss Points" sometime this weekend. Working on it right now.

Sunday, July 18, 2010

Best of Trade to Learn

Your favorite blogger is heading out on a much needed vacation starting tomorrow. For all you smart alecs out there, yes, I am talking about myself. I will be back sharing my valuable (ha ha!) thoughts with you on Friday. Until then, I thought I would leave you readers with the very best of Trade to Learn. Its been over six months since I started this blog and all said and done, its been an enriching experience for me and hopefully, at least for some of you readers too. The blog has grown in terms of readership beyond my wildest dreams and I would like to thank you readers for your loyal readership. Without further ado, here it is....the best of Trade to Learn.


Updates till July 18 below

Dear readers, I realized this morning that the next post was going to be the 100th post of this blog. I must admit that I never expected that I would write 100 posts in less than two months. In fact, my only aim, and it did seem challenging at that time, was to document my daily trades and whatever I had learned  from them. As you regular readers know, the blog has turned out to be much more than that. And you readers are a big reason for that. I never expected the blog to have such a large readership so soon, and there certainly are days when I am too tired or not in the mood to post, but its the thought that there might be people counting on me for a daily review or stock picks that makes me post everyday. So, thanks for your support and I hope together, we will continue to grow to be the best traders we can be!

It certainly has been one wild ride since I started this blog. When I started it in early January, I was coming from over 170% gains in 2009. So, my confidence levels were indeed high up. This continued for the first two weeks but the market has a way of showing you your place as soon as you start getting complacent. That's what happened to me. One small mistake and I was in a downward spiral.

I was in a slow, painful recover phase after that where I was very quick to collect both my profits and losses. I admit, my confidence was shattered. But out of nowhere, all that changed one day. And surprisingly, what got me my confidence back  was not making a few good trades or having one great  trade, but not trading at all!

I feel it imperative to state, please don't make life all about money and don't let your market results affect the rest of your day. Sometimes, we as traders, looking at our screens hours a day and keeping track of the P/L bottomline all the time, can lose sight of this simple fact.

Here are some other posts that I particularly like and hopefully you will like them too.

The blog has certainly helped me improve as a trader so far, and I hope you readers are benefiting a little too. Trading is unique in the sense that it offers new challenges everyday. Each and every tick is different. Each day is a whole new challenge. Each day presents us with endless opportunities. That's why it is imperative that we keep on learning.....always. Trade to learn, and maybe you can even learn to trade.

March Updates

The first link here is the most viewed post of this blog. The second deals with the importance of position sizing in trading. If you don't master the art of position sizing, sooner or later you will end up blowing up your trading account. And lastly, we have a post based on my personal experiences on the problems faced with and how you can succeed with small trading accounts.

Trading with small accounts

May Updates

One of the most important things I have learned in trading. You can't be a successful short term trader without following this.

Trade what you see, not what you think

June Updates

July Updates

A post on how I called the bottom in the market when most traders were predicting gloom and doom. Though the post goes into calling this particular bottom, the general guidelines for picking any bottom remain pretty much the same.

The next support levels

Undoubtedly, after Friday's action, the momentum lies with the bears now. I thought it would be interesting to find out what the charts are saying and the next important support levels for the bulls. How the market deals with these support levels is important as a free fall through these levels would suggest  that all bets are off whereas support at these levels would imply that we are still trading in a broad range.

The S&P first. First thing that stands out is the bearish volume pattern. You can see relatively higher volume on the down days compared to the up days. We are below all the major moving averages and a bearish MACD crossover is imminent. All said and done, not much to cheer for the bulls here. The next support I see is at the 1060 level and then of course comes the big one, 1040.

Nasdaq has a similar story to tell. The next support level is 2140.

Of course, all the above analysis takes a back seat to the earnings reports coming out next week. We went down on earnings on Friday and it will pretty much be earnings that will determine the action next week too. I have added what I think is a pretty nice link for an earnings calendar on top of the page. Be sure to check the reporting date for any position you are considering to take before you get in. But as the above charts show, the momentum definitely lies with the bears now. I know I stated this in the blog a couple of times even last week but I feel compelled to state it again here - Do not trade the news but the reaction to the news! Do not blindly jump into a stock just because it beat the estimates and raised its forecasts. Instead, see how the market is reacting to this news. If the stock is getting beaten down inspite of what you think is, and might even be, great news, do not try and swim against the current. Remember, the market doesn't need a reason for what it does. It is always right. That's all.

Take care and good luck!

Friday, July 16, 2010

A horrible day

Since its Friday and I will be coming up with a detailed post later, I am going to this post short. Actually, I was wondering whether to do a post at all today as all you readers know it was a horrible day to be long and if you lost a lot of money, there is nothing I can say to make you feel better. I know how it feels. Been there, done that and most fortunately, learnt from that. I can just hope all you readers respected your stop losses. Personally speaking I got stopped out of DOLE for 2.8% loss, PMI for 2.9% loss, GMXR for 1.4% loss. I still hold NR. All small losses and it could have been much much worse.

I wrote a post sometime back on a day like this - For all those who lost a lost of money. I guess the title says it all. Give it a read if you feel like.

Well, the weekend is upon us and the charts can wait. I will be back with a more detailed analysis later. Take care and try to enjoy the weekend in the company of the people you love and cherish even if you lost more than you had planned to today. Mail me or feel free to leave comments if you are feeling down and out and if you wanna talk about it. As I said before, I have been in these situations before and know how it feels. I can't offer any cures but sometimes its just nice to talk it out with someone.

Take care dear readers!

Thursday, July 15, 2010

Staying true to your trading style

As the regular readers of the blog might have noticed, I didn't say anything about my own trading efforts today in the regular daily review.  Its not because I didn't trade today but because I am very disappointed with the way I traded today and though my actions today deserved a new post. The newer readers of the blog might be surprised by a whole post documenting and admitting to mistakes and losses but as those who have been readers of this blog from the beginning know, I have always been very forthright about my mistakes and losses. That's why you see posts like "Confessions of a recovering trader" and "Traded like a damn fool" in this blog :). If I am not forthright about my mistakes, how can I even expect to learn from them? So, here it goes....

I got into SFI at 4.48 today. It was 1/3 rd of my regular position size. The idea was that I would average up or down, as the case might be. So far, so good right? Yes, except for a couple of things. Because it was such a small position size and I went in with the mindset of averaging, I didn't have a definite stop in mind when I entered the position. The fact that it was a small position made me over-relaxed. Secondly, I am not really comfortable with the concept of averaging down. I know lot of successful traders do it but its just not my trading style. I feel averaging down is just throwing away good money after bad money but that is just my point of view. I average down sometimes but that's only in stocks that I have traded very often, stocks whose tape I have watched for hours and feel confident in predicting the action. This was a stock I hadn't even heard of until last night. Anyway, to make a long story short, I made it into a full position at 4.18, giving me an average cost of 4.28. I sold it for 4.25, thus taking a small loss. But this post is not about the actual loss. Losses I dont mind as they are a part and parcel of the game, what I do mind and what makes me disappointed is mistakes like these. I felt really uncomfortable in this trade. The moral of the story is that I should always have a definite stop loss and not get too complacent with small position trades. Also, I should stay faithful to my trading style and what works best for me as much as possible. Both these points seem like stating the obvious but one makes these stupid mistakes sometimes in the heat of the moment.

I was really angry with myself after completing this trade and decided this was it for me for the day. However, then opportunity presented itself in the form of GMXR and I felt I should not let one bad trade effect the rest of my trades. I got in at 6.99 and added more at 7.10. I did have a well defined stop as I entered it and I averaged the stock on its way up. Totally opposite to the morning play! And it felt right and I did not have to force myself. Shows the importance of staying true to your trading style. I also added some PMI in the last half an hour at 3.45.

Well, that's it. I hope I can learn from my mistakes today. Hopefully, this post would be of some use to readers out there too. Some mistakes in life one just has to make themselves but it is nice when you can learn from someone else's mistakes.

Take care and good luck!

The importance of 1115

What a day! What a crazy, crazy day even by earnings seasons standards. I guess the intraday 1 minute chart should show it best.

The 30 minute chart shown below still looks bullish. Today's overall action will count as another day of consolidation for the bulls. The resistance level which I had marked a couple of days back has now become support and held up very well today.

And finally the daily chart. Short term, the chart looks bullish with the index closing above MA(50).

Overall though, as I have been saying, the chart still looks bearish and will continue to remain so in my opinion, until we break 1115 which is an important level on so many counts -

(a) Resistance from November - December period
(b) Close to where MA(200) is right now, obviously a big resistance level
(c) The highs of June. So, we need to break it in order to make higher highs and the chart to get bullish again.

I feel we still haven't consolidated enough for a further break of 1115. All is good for the bulls till 1080 holds.

Take care and good luck!

Wednesday, July 14, 2010

A few for the watchlist

Let's start with a word of caution. These are long setups for only IF the market likes what JPM has to offer tomorrow morning and we head higher. The first two are from the financial sector and have high short interests (>20%). And as always, during earnings season I recommend you find out when these stocks are reporting before getting in.

Take care and good luck!

The ball is in Morgan's court

An interesting day on the Street dear readers more on that in the end. Firstly, today was bullish, make no mistake about that. Its been quite a rally since the beginning of last week and a few days of rest is just what the doctor has or rather, should have ordered for the tired bulls. Secondly, I am not going to post any charts today. Why, you ask. Well, JP Morgan reports in the pre market tomorrow dear readers. And to me, that's what's going to decide the action not only tomorrow, but also in the next few days. I swear by charts and technical analysis but there are times when one has to throw away the charts outside the window and I think this is one of those times. As if things weren't interesting enough tomorrow, Google reports after hours too. So, keep that in mind while carrying overnight positions tomorrow. If you have been long for a major part of this rally and are still holding long positions, I hope you have been taking partial profits along the way.

Personally speaking, I just made one trade today - PMI. I got in at 3.50 for a day trade as there was no way I was going to hold this stock overnight with JPM reporting tomorrow. This stock is permanently there on my watchlist but I almost always use it just for day trades as it has this nasty tendency of gapping up or down big time. Anyway, I entered it based on this chart below that I posted on twitter at that time.

A thing of beauty, isn't it?? I got out at 3.65 for a gain of 4.28%. Its a nice feeling when things go exactly according to plan. Only problem is that that doesn't happen often enough :).

Now coming to the interesting part of the day that I hinted at in the first line of the post. The FED came out with its announcement today afternoon. A lot of traders on twitter/blogs reacted negatively to it (nothing wrong with that) and expected the market to fall badly. But the bottomline is the market fell only 50 odd points. A 50 odd point drop after 6 consecutive days of gains! And that's bearish?? You gotta be kidding me! And that's why it is very important dear readers not to trade the news, but the reaction to the news. Always remember, that the market doesn't care a damn about our opinions. Its important to trade what one sees and not what one thinks. I learnt this the hard way in my first six months of trading but that's a story for another day. I felt it was important to make this point with it being earnings season and today being a good day to observe this philosophy in practice.

Take care and good luck!