Thursday, August 25, 2011

Please, Save Your Stength

Good afternoon everyone, I hope everyone is having a good day. I wanted to share a thought with you, in hopes of, a) Getting it off of my chest , and 2) Hoping to receive criticism contesting my opinions and learning something from you guys. There is talk of the teevee sets, and in the daily publishings, of a double bottom put in the Standard and Poor's 500 , as well as the other major indices, and we are from here on in headed higher, and combined with the "climactic selling" we saw in early August, this has to be a major low. I would venture to humbly,yet readily dis spell this theory. Firstly, I don't care how many people say its too obvious, but we came off of a historic head and shoulders pattern on the monthly,weekly,and daily timeframes.And to confirm it,we broke the neckline with vehemence. There is nothing else to question about that occurrence. We ended distribution, and began our decline. Second step in a decline is to form a weak volume,feeble, "double bottom" get people hopeful, drift up a bit,and continue our rollover. ( Which I think we will do). Thirdly, the volume on the bounce was exactly what to expect after a vicious top reversal pattern. People are saying everywhere that " volume is an issue, but it's ok" , quickly dismissing volume,as long as the patterns are there. People, let me say this: PATTERNS ARE NOT MAGIC!!!!! Patterns are invalid. Volume and activity are extraordinarily valid. Volume and activity create these patterns, thus making them valid as a forecasting tool. But, hence, without volume, the patterns are not valid. Here, this might make it easier: PATTERNS = 0 , VOLUME= 100 , VOLUME+PATTERNS=100 PATTERNS-VOLUME= NOTHING.
The volume on the head and shoulders reversal was perfect, including the break of the neckline with huge volume. The climactic sell bottom? What climactic volume? Volume was steadily increasing for a week. Huge volume means nothing. RELATIVELY huge volume is important. And the huge volume day was not relatively huge, because the days leading up to the eighth of August had highly increasing volume as well. The double bottom claim? No. What is a double bottom, why does it mean anything? Because the bears try to break support, and lose steam once. Than, they regather their resources, recuperate, and accumulate strength. Than, they try again, stops placed below the prior low are taken out, and the bears still cannot get it done. So the fact that the bears tried once to press, couldnt, took time to re-strategize, tried again, exhausted all their selling strength in the attempt to break lows, and once they couldnt get it done again, only buyers with cheap accumulated shares were left. So the main resaon why a double bottom bears significance is because they took awhile to gather all of their strength, and still were not able to break lows with any strength. So the key factor is the time in between double bottoms. The more time spent by the bears gathering strength to retry breaking lows, the stronger the bulls appear if they still hold bids. The less time in between each bottom, that means that the bears didn't really use any major resources to break lows again, so just because that held, it does not mean anything. Gathering strength takes a lot of time, and without spending time, that means strength was not used. So yes, the bulls held for the second time. But, against what? I mean, how much force did the bears exert? Judging by the lack of volume, no undercut to take out stops and accumulate shares, and the lack of time in between bottoms, not much. The bears are obviously not worried about this "bottom" , not covering, and not wasting strength. When the Miami Heat are up by 25 in the fourth quarter. Why not? Because the Heat want to conserve him, their momentum,for when they really need it,need Lebron. Right now, up 25 in the fourth,the game is already won,so why waste their true power? Save it for when it matters. In a big game,in the playoffs, when they are facing TRUE OPPOSITION THAT MAY DEFEAT THEM each basket matters, so then, they will use every resource they have. Well, the Heat represents the market. If the game belongs to them, they will save their star for the real opposition. And apparently, it aint here yet. Lastly, when does the worst news come out, and when does the best news come out? Exactly. Bad news at bottom,great news at the top. Warren Buffet is saving Bank of America. Buffet Top, anyone?

Saturday, August 20, 2011

Double Edged Sword

Good evening all. As traders, one of our main jobs is to look where the big money is flowing, and hop along for a ride. So stock which is heavily owned by institutions could prove very very technically healthy and extremely profitable from the long side. However, I believe that in bearish and scary market conditions, finding stocks that are heavily owned by institutions can be even more profitable, as their forced liquidation, and mass exodus to avoid risk trades, could heavily heavily destroy stock prices. Hence the title of this post, seeing as a heavily institutionally owned issue could provide serious price movements, both up and even more so down. As we all know, when people are buying, they take time to calculate, plan,scale in over time. But when there is massive fear, they cannot leave fast enough, especially when a huge loss of money is possible of said institutions. So when they are forced to liquidate, by clients, margin calls,belief,strategy,fear, or all of them, prices tank faster than you can say "sell!!!). I also believe that companies with a high debt/equity ratio could face some extremely unprofitable times in rough economic times, leading the big whale/value investors, to sell out. Therefore, I developed a new thesis which incorporates a fundamental, yet nontraditional idea into my scanning for this week and the next few weeks, possibly. However, as I am primarily a devout technical analyst, my primary intentions are to find stocks that are in their late distribution/early decline on the daily timeframe, and mid to late distribution on the weekly timeframe, as I do not want to miss the meat of the move and show up late for the party. The other two conditions incorporated in my scanning formulas are : Institutional ownership of 85% or greater and debt/equity greater than 1. Here are just four of the results that came up, out of the many, ripe to short the shit out of:

Thursday, August 18, 2011

When ya know, ya know. Ya know?

There comes time in the life of a trader, where there is fear. There is confusion, fear, uncertainty, and despair in the markets. And you are proud. Because you can look past all, ignore all, except price action. You have the ability to just listen to the price, your edge, the action, and you see. Whether you achieve this through technical, fundamental, or macroeconomic research, this and only thus is your guide. And knowing this about yourself, knowing that you possess this special ability, it gives you pride. A sense of nobility, humility, eliteiscm, superiority, and purity. Thus feeling is bullshit. These feelings are bullshit. These feelings are false. Now, you may, and very legitimately ask, why they are false. This, after all, is a true achievement. One surely deserving of these feelings. What I say to you is this.

        They are false because when one really learns to let price, and price ONLY, be their guide, the end all, trump all, one does not feel it. Let me ask you something. When one strives all his life to be happy, not rich, skinny, or famous, but truly happy, and he finally achieves it, does he gloat? He can't. He does not know what if means to be gloat, for gloating is a defense mechanism used to mask sadness. He does not know what advantage he has over most other people, because one can only know the difference between happy and sad, if they experience sadness. And he doesn't. When one strives to be musically gifted, or a pilot, or a philanthropist, but not strive to have something to gloat about. He only pursues these for himself, for the sake of achieving, of purity. Does the achiever, can the acheiver, gloat? No! Once he achieved these things, he devoted all of his emotions, his true blood, into these pursuits. His life, happiness, satisfaction, comes from only these life missions, knows only these happineses. He has fulfilled his dreams. Happiness is found, and he seeks no other outlet, such as making money,showing off, or simply feeling satisfied and accomplished, to look for happiness. When does one know he is accomplished? When he never feels like he is accomplishing anything!

     This applies greatly to trading. Mastering trading is one of the hardest things one can ever hope to do. And blocking out everything besides price action is one of the hardest things to do as a trader. So by nature, achieving this is one of the hardest things that one can hope to do. But when one really can block out everything else, one has not a feeling of nobility, eliteiscm, or humility, from knowing he can do this. He cannot feel noble, because price action is more noble to him. He cannot feel humility, because price has no motives he cannot feel eliteiscm, because price action is elite. He cannot feel pride, because price action has humbled him. He cannot feel pure, because, price action is the only truth. Why are the most book smart people usually the most spacy, dishevelled, seeming semi retarded? Because all they desire is knowledge. Desiring knowledge so they can show off is not desiring knowledge. It is desiring other things. It is just using knowledge as a tool to achieve bragging rights, money, items. But to these people who just pursue pure and true knowledge get no satisfaction from dressing nice, showing off, or appearing normal. They so not need satisfaction. Their love for true knowledge is what satisfies them. Anything worth pursuing in life, one has only truly achieved when they least expect, or desire on order to gloat, gain power, or pride.
      People like @traderstewie , @gtotoy , @chessnwine, @createcapital, @alphatrends, and very few others, have achieved this. They don't feel any pride from their amazing and rare ability to listen only to price action because all of their feeling, their emotions, and desires, are invested in true price action, so there is no place left for other feelings. They are noble, elite, and superior, because they do not need to feel these things to gain satisfaction. If you know you are at this elite level, you are not there yet.
  Because after you have delved into the least accessible and purest emotions to use inhumane abilities and efforts to acheive this, you don't even care or want  to knowanymore. The only thing  you care about  is price action.  Coming to a level where you honestly believe that you let price action only be your guide, and ignore everything else, is a great and rare achievement, but there is one more battle left. You have defeated the articles,TV programs, expert's opinions, bogs, and social media. But there is one more battle , and thus is the hardest, most intense, and most brutal battle yet. Your thoughts. Thoughts can and do defeat the strongest and most seasoned wills and minds. If you can listen to your thoughts, hear them out, and bring them down, than and only than, have you reached a state of letting price action and ONLY price action guide and move you. When do you know you have acheived this task? That's the point. You don't.

Wednesday, August 17, 2011

Coming Early is Cool

As we see on this daily chart of $BEXP it began topping out in March of this year, forming a bearish descending triangle pattern, a very possible reversal signal. However, the stock is still working it's way towards the horizontal base at $24, and it is very unwise to initaite a short before a confirmed break below that level. However, inside that descending triangle is a potential head and shoulders top, so an early short is warranted if you are antsy. Neckline is at 29, a prior huge level, as well as a gap fill and the 50SMA. Also, the MM knees and toes target is at, what do you know, 24 bucks, the spot where the broader descending triangle's base is located. ( This is very very symmetrically harmonic, happens often, and provides extra bearish logic to the pattern.) So being early is sometimes a sweet sweet thing. Get two moves while executing one.
Here is my journal of my $BEXP trade short, at 10:01 AM I will post a more detailed chart of why the daily chart looked sweeeeeeeeeet. It was too sloppy, but I got lucky.

Looking to short $BEXP has a head and shoulders on the daily. Going to watch this $31 level. Yesterday volume increased on the left shoulder attempt so it may not be ripe yet. The 15 minute chart will be my guide, it is still in an uptrend on the 15 minute, looking for a failure at around 31, 31.25, which will form a head and shoulders top on the fifteen minute as well. I will short 300 shares at 31 dollars, with a price target at 28.98, 29 bucks. Shored 500 shares at 31.40 jumped the gun but gave me a good risk reward. I was wayyyyyyyyyyy too early on it, I had a short signal but I did not bother to wait for confirmation on the tape. I got scared at .82 but than I saw clear distribution so I got a bit comfortable. It seems that my judgement wads correct thus far as prices dropped quick to 31.50. My mistake was that I used the daily chart to set a a target, my"reward" , but I used the 15 min to set my stop "risk" , so my risk:reward was at an imbalance. In order to balance my risk, I would have to set my reward based on the same data. If my risk and reward come from seperate data (15 min and daily), how can they be compared against each other. I was attracted to the daily set up, but that is just my screening process. stocks move all day, every movement is recorded, and there are levels throughout the day. If i set a target on the daily, that means I am paying attention to the major levels over the past six months. That is fine, but I need to choose meaningful levels on one timeframe and compare those, because a level on a fifteen minute chart is not at all important relative to daily chart levels, so the R:R is compellingly lopsided unless they are on the same playing field. With $BEXP, the daily chart was a clear short, and I used the daily to set my target. And my 15 minute to set my stop. But that is retarded because intraday levels mean nothing on a daily timeframe. I should have used the daily price action and amplified it using the intraday timeframe to align them. They are aligning now, but my analysis was sloppy.

Tuesday, August 16, 2011

We Don't Need No $EDUcation

Head and Shoulders Knees and Toes

Following, I noticed the biotechs have mostly completed and confirmed a head and shoulders top , such as $ILMN. I am looking for others in the sector to follow suit. Notice a few things: The volume , or lack thereof on the right shoulder, the bearish wedge, low volume neckline retest, and the targets derived from a measured move forecast is usually former strong support:

I'm Back

I wanted to say how deeply I must apologize for leaving this blog for a bit. There were some complicated complications, for a dire lack of better termanalogy. For now though, everything is settled and I plan to once again give you my all here, every single day. Whether you are reading or not, it doesnt matter. I wish all traders the absolute best, and the grateful geniuses who share their ideas on stocktwits and twitter, cheers to you and my deepest thanks go out to you. To all who try their best, and no matter what,come back fighting, God bless you and trade well.

Jason (@swooon) on the stream