Have the bulls finally got control ?

Well, let's see....

As always, the S&P first. The light red lines are the resistances which got taken out today. Well done  bulls! But wait, before we let the champagne start bubbling and the good times rolling, see what's coming up! Yes indeed, its the 50 day MA! And it strengthened by being a resistance region from November-December. So, the 1113 regions assumes quite a significance going into tomorrow. If its a clean break, then we can party like the summer of 09. And what about the volume?? Well, it depends on whether you see the glass half full or half empty, or in this case whether you are long and short. The longs will be pleased that the volume was greater than yesterday whereas the shorts will hang on to the fact that the volume is still quite low compared to last week when we went down.

Similar story at the NASDAQ except that the MA(50) seems a little bit further and the volume was low compared to even yesterday.

Lets also have a look a the dollar ETF today, since it looks like dollar is again pretty much deciding the course of the markets these days. Well, it turns out these are interesting times for the dollar indeed. As indicated in the chart, it is in between a tight range of support and resistance - 23.2 and 23.35. Watch out for a break on either side for what I believe will be a very good indicator of where the market will go from here. As you readers might have already noticed, the volume pattern looks extremely bullish - not a good sign for the overall markets.

Personally speaking, I didn't get time to follow the markets at all today. It was one of those days at work. Oh well! I still had a fairly decent day thanks to NEP, my only position, which was up almost 10% today. 

I will be back in a little while with some charts worth keeping an eye on for tomorrow. So, to summarize - keep an eye on the 50 day MAs and let the dollar be your guide.

Take care and good luck trading!

Are the bulls back in charge?

Hmmm....let's see for ourselves.

Let's have a look at the S&P first. Well, if you see too many red lines in the charts, its because I see resistance everywhere! As I said in yesterday's post, I was expecting a bounce soon as the markets seemed oversold. Well, we did get our bounce. It bounced right off 1070 region, an area I had marked as support early last week. I am pretty pleased with the way I have read the markets recently but of course, I havent really covered myself in glory, or cash, with the way that I have played them. But I did follow my own advice yesterday, got out of most of my longs (see post below) and I am now in around 80% cash heading into tomorrow. Anyway, getting back to the chart.

Firstly - Look at the volume today!! Yes dear readers, the volume is conspicuously marked by its absence. As has been the case throughout the last 10 trading sessions or so.

So, these are what I see as the next resistance regions - 1093, 1100, 1113

and the next regions of support - 1072, 1030

The discerning readers amongst you, and I know there are many of you out there, might have noticed the absence of 1085 - a region which I had pointed out as vital last week - from both the support and resistance lists. The reason for that is simple. I kinda consider 1085 to be damaged goods now. The bulls had it and couldn't hold on to it. The bears had it and now the bulls have it again. Too much back and forth for it to be considered important right now.

So, there you have it as far as the S&P is concerned. We did have a bounce but I for one, am not impressed with it.

Let's move on to gold now. I had pointed out on Friday that gold was at a very crucial point and one could expect a bounce due to it being at vital support point and positive MACD divergence. Well, I was right. In a better part of my trading cycle, I would have milked this move for all it was worth. Oh well....I am slowly getting there. Back to the chart - the trouble is that Gold is going to face strong resistance very soon in the form of MA(50). And again, look at the volume today and in the last 10 or so trading days? Get the hint??

Moving on to oil. Again a bounce off support and now just above MA(200).  I am sure I am beginning to sound like a broken record now but look at the volume!! See what I mean??!!

In a nutshell dear readers, whether you are long or short right now, I hope you are not on margin and sufficiently in cash. This is no time to be a hero. If you, like me, made decent gains in 2009, the time has come to protect these gains while chipping away at the market. 

Our time for famous victories will come and when it comes, we will be fighting with the market, not against it!

Ever take profits too early?? Try and analyze why

Dear readers, in my post last night, I underlined the reasons why I was expecting a bounce in the markets soon. And boy, was I spectacularly right!! Sorry for the gloating, but you being the kind and attentive readers you are, surely know the kind of weeks I have had the last couple of weeks and forgive me for it.

Did I have the day I could have had? Absolutely no!! Am I pleased though? Yes. Let me explain.

Early in the trading hours, I got out of SWC at 10.42 and AUY at 10.42. I jut realized that I got out of them at the same price! Anyway, SWC is now trading at around 11 and AUY at  10.60. So yeah, I did leave some decent sized gains on the table. There are a couple of reasons I can offer for this. Firstly, my lack of confidence following my poor trading in the last couple of weeks. Due to this lack of confidence, my first impulse became not to have any losses rather than maximize my profits. This mentality is something I have to work on. 

And secondly, this is my trading style!! I do take both my profits and losses quickly. So, you will never see me with outrageous gains or on the brighter side, account blowing losses. I don't try to catch the top while selling. This is just me and this is what I am comfortable with and that's the most important thing I think when it comes to trading - adopt a style that is you,  a style that you are comfortable with, a style that reflects you as a person. How do you come to know which style works best for you? I am afraid that is a trial and error method and when you come across it, you will just know that that is the right way for you.

So, the first reason - getting "scared" of losses when being low on confidence - is something that I will work on and hopefully improve but the second reason is my trading style and I am quite comfortable with it. It worked great for me last year and right now, I see no reason to modify it. But that doesn't mean that I am a perfect trader and don't think about money left on the table once I exit a position. Far from it! One of the disadvantages of being a PhD in a quantitative discipline is that I can do math very easily in my head - I kept on adding the money left on the table :). But I am getting better at it. Earlier, I would try and get back into the position out of frustration and very often buy right at the top. I am sure some of you readers have experienced this. At least now, I try not to let it influence my trading and chase after the stock. 

Now let me present you with a counter example of why this strategy works for me. I shorted MTG at 5.92 after selling SWC seeing the weakness in mortgage insurers and not trusting the general markets. I exited at 5.90, way before my intended stop. Its now trading at 6.33 as I type this. So, as long as my losses are on average smaller than my profits, I back myself to do decently well.

Another stock I bought today was CNLG at 3.52. I exited at 3.70 for over 5% gain in 5 minutes. Its now trading at around 4. You might think of this again as huge profits left on the table but that's where you are wrong. Let me explain why. After I sold, it dropped to below 3.50 and I would have got stopped out anyway. With highly volatile stocks like this, it is smart not to try and catch the entire move, but the meaty part of the move with multiple trades. Unfortunately, I couldnt do that due to the damn Pattern Day Trader Rule!! But that's a post for another day....

That's it from me for now. I will be back sometime tonight analyzing the action in the market today, specially the commodities. And for those of you, who like me, left money on the table today, this post will hopefully make you too sit back and analyze your trades.

Take care and Good Luck trading!