Note to Self

Self, do not buy any longs until we get a follow-through day, no matter how tempting!

quiet here

Well, I have not been posting much for the last 2 months or so. Some have written to ask me what's up. I'm fine, but I haven't been posting because I subscribed to a service recently. This is Josh's (MauiTrader from Investors Paradise) new paid site. It wouldn't be right for me to publish his stuff here, so I have been holding back from posting as I have not been doing much new research on my own. He does pick new longs (and/or shorts) and I've been sticking with what he recommends, but I mostly joined the site for guidance on market direction and remaining disciplined. He provides a great daily commentary (and also a great free weekly commentary) that really cuts through all the BS out there.

What I found in the past was that I developed the ability to find new longs on my own and discovered a lot of winners, but selling them was not so easy. And the main thing I struggled with was dealing with what kind of market we were in. This should be easy with IBD, I know--it's either rally or correction, right? And maybe this was a lack of discipline on my part because I kept buying during corrections. But I would get out or start shorting too soon. So I felt that instead of me trying to follow so many different blogs, going to meetups and investor forums, reading different periodicals and listening to radio shows and podcasts, it would be well worth the money to pay someone who I know is an expert to help me learn to see what he sees.

I knew Josh's record from when he was on IP. He did all the stuff he does now back on that site last year for free. He made me a lot of money back then as you can see in some of my archives from 2006. And he is truly an expert who follows CANSLIM and has been doing it since before 1999, so he has seen a lot more market conditions than I have and made good money through them all.

So far, I am very happy. As this rally has started to get long-in-the-tooth, I am not panicking and wondering what might happen next and trying to figure out when to start bailing on my stocks. I am letting the market and the charts of my stocks tell me what they are doing.

I will try to post more. At least to do a monthly review, maybe weekly. This is a good place for me to collect my thoughts so I can go back and look at where I've been and how I'm progressing.

follow-through

Okay, so today I am no longer feeling so cool. We'll see what the rest
of this week brings.

wait for it...

Wow, looks like the easy recovery has ended. I feel good because I
played this one right. I pissed away a lot of money trying to bottom
fish on the way down, but finally got out before the real mess hit.

Then, everything I read said that there is usually a fake-out rally
before we attempt new lows. Plus, the bottom was too V-shaped to have
high success probability.

Now we have fallen below the 200d on the Nas, SPX, and NYSE. The day
just got uglier and uglier and ended at the lows on 25% increased
volume.

I bought QID last week and pressed my position on Thursday. I was a
little too early, but I didn't sell out after Friday's big run. In 2
days I went from being down 5% to up 1.5%. I also didn't go long
anything because we never got a confirmation day.

So, I am proud of myself... for now.

Oh, and I have small short positions in IGT and CEG now.

so maybe cramer was right?

I'm sure by now everyone has seen The Cramer Video

So after all that's happened now and how bad things are looking, I wonder if Cramer is somewhat vindicated?

All I know is I love this Cramer Mix by DJ FiniFinito from the Big Picture.

this must be the bottom

As a contrarian indicator, today may be the bottom as I lightened my
portfolio quite a bit and even opened a few small short positions. I
still have QLD and am leaving with a stop of 88.25, according to my
plan. I was 95% long last week after the follow through on Monday, but
decided to trim after IBD called the rally dead on Friday.

So, I used today's positive open to sell into strength, getting out of
many of my positions right at or around breakeven. Many were near the
high for the day, it turns out. For example, I sold ILF at 207.50 for
breakeven and it closed at 203.40

I do think this is a correction (5-10% down), rather than a bear market
(20%+ down), but I also realize that what I think the market might do is
irrelevant.

As the day went on, the market couldn't hold the strong open, even with
the liquidity boosts. I shorted a few stocks at the end of the day:

ZLC had an evening star formation.

RT Also did an evening star right on the 50d last week, a shooting star
yesterday, and today a bearish engulfing pattern.

EBAY had stalled. I used to be long this, but went short at 35.51 with
a stop of today's open of 36.20.

These will be short term swing trades with stops equal to today's
opening prices.

well, that was quick

After having a new Rally start on Monday, today it ended and we're back
in a Correction. Although apparently the S&P and Nasdaq did not
undercut their old lows, so if they have big gains on increased volume,
that could be another Rally starting. Phew. What a roller coaster.

I guess I will start paring my portfolio again.

now this is what I'd call a target rich environment

There are a lot of stocks that broke out today. Makes sense, since it
was a huge upday. 3 big gains in a row for the indices, including gap
ups on monster volume today. Very bullish.

I did buy some BHP on Tuesday. It gapped up nicely today.

I also put in orders to buy JASO and FSLR. JASO had earnings and opened
way up. I got it at 36 and it closed at 35. FSLR didn't hit my limit
order.

Many are saying we're now hitting resistance at trendlines in the
indices and will pull back over the next week or so and put in a new
(hopefully higher) bottom. I did notice many charts that today's price
spiked way up only to close much lower. Futures are down right now, so
we'll see.

If there is weakness, I want to start positions in EBAY, FXI, SLX, AAPL,
RIMM, and add to ILF.

groups on the move

After study of the stocks on the move + 2 watchlists from various place,
here's some interesting group pairings I found. I was researching each
stock individually because it broke out and kept noticing other stocks
from the same group that were also in the breakout list.

* moved at least 4% in price 50%+ in vol.

G3 *ACO, BHP [metal ores]
G5 *OYOG, *DRQ, FTK [oil & gas mach]
G6 *PCLN, NILE, EBAY [ecommerce]
G9 *DGII, *CSCO, JNPR [networks]
G13 *ROP, *CIR [machinery gen]
G25 *VMI, *BOOM [metal proc & fab]
G30 *ULTI, *CADA [software enterprise]
G32 *SIGM, *SMDI [elec semicond]

So, what does that tell us? I don't know. They're all in the top 32 of
197 groups and all breaking out at the same time. Looks like tech and
basic materials/commodities.

SIGM and ACO are cup&handle, most others are just new high/big vol.

I'll have to keep an eye on these. If this is the kind of stuff leading
this new rally, I want to be in it.

solar moving again?

FSLR and SPWR had nice updays today after hammers yesterday after a
downtrend.

JASO and TSL both bounced very nicely off the 50d.

Not great volume on any except JASO.

stops

Once again, I'm thinking about my stop strategy. I have been using a
strict system where when I place my order, I put in a sell stop to
liquidate a position on the downside and also a limit order to sell 1/2
my position at a profit target.

But the age old dilemma is how do you keep your stops from being picked
off intra-day? You can try and put it low enough so that it's out of
the average true range, but that can widen it so much that you have to
significantly decrease your position if you want to keep your risk
small.

I know the best strategy is probably just to go off closing prices.
Yes, you will get rocked every once in a while, but probably not as much
as you don't get shaken out by not having the order on the books. I was
afraid that I would not have the discipline to do it, and that's why I
was putting hard stops in.

But I think I have a new way of doing it. I made an index card that I
keep next to my monitor. On it, I'm writing all my stocks as I buy them
and exactly what price my stop will be. That is the line in the
sand--no ifs, ands, or buts. If it closes below that price, I put in a
market order to sell the next day. This will require me to look at
closing prices every day, but I'm okay with that.

JNPR

I did get into JNPR on Friday at the high of the day. I put in an order
to buy if it was higher than 32.65, which was 10c higher than Thursday's
close. It went up slightly, my order triggered and then it went down
all day, although on lower than avg vol. But it didn't close below my
stop. Today it was up 7% on big volume, and I'm up slightly on it.

BKS I didn't get filled on. It had a big downday on Friday. Today,
however, it made a textbook dragonfly doji pattern. "An extensively
long shadow on a Dragonfly Doji at the bottom of a trend is very
bullish." I will buy some Tuesday if it opens up.

I also like the chart of BHP. It had a nice hammer at the 50d and the
lower BB today on twice avg volume. It is also in IBDs group #2. Same
deal, I'll buy some if it opens up.

2 buys for tomorrow

I'm going to keep these small. Market direction is improving, but this
could be just setting us up to put in a lower low.

BKS is strictly a candlestick formation play.

JNPR has had two big volume updays, it closed at the high today, it's in
a strong group, and it has resisted pretty much all the selling of the
past 2 weeks.

missed ULTI

I saw ULTI last night as a bullish engulfing pattern. I waited til
after 9am for the morning trading to settle down and then put in an
order to buy it at 28.35. I think at the time it was around 28.50 or
60. My order never filled and it went on to close at 29.67 up 6% on the
day. Still, I think I did the right thing by not chasing it, so I
count this as a good trade (or lack of).

change of direction

Wednesday was a very interesting day. It was up/down many times. The
VIX spiked to 26, which is its highest reading since April 2003!

$SPX and $COMPQ both rose on increased volume. They also made hammer
patterns. All these things indicate a lot of churning and indecision.

This could mean we're in for some upside. Although, just like the weeks
after 2/27, we could retest the low again before we continue higher.

journaling

How do you know where you're going if you don't know where you've been?
My trading buddy doesn't keep records about his stock transactions. Not
what he traded or when or why. To me, this is a mistake, and I've heard
a couple of differnt people on podcasts saying as much lately.

One speaker said they keep track of their account balance every day.
This forces them to confront their losses and stay focused on not losing
money. I do this on weekends, so that I have a record of my account
balances.

Another speaker I heard (Toni Turner, I believe) said she keeps a
journal by keeping charts of the stocks she trades with entries & exits
marked on them. I have done something similar to this. Earlier this
summer, I went back and printed charts for all my trades and marked them
up. I need to go back and do it for trades I put on in June & July.

I currently keep a spreadsheet of all my trades. I try to put on there
why I got in and why I got out, but there are so many columns on there
that my text is cut off and it's not easy to read the full reason. I
think I may switch to keeping a notebook of chart printouts. Then I can
have more room to write on there what my reasoning is for exits/entries,
as well as draw my potential stops and profit targets. This might be
some duplicate effort, as I will still keep the spreadsheet for
statistical and tax purposes.

you hear what you wanna hear

Right now, I don't have much at risk in this market. I would like to
see it go down more to make a more powerful rally in the future. On the
other hand, I'd like to see it rebound soon and keep going up, also.

I've found that my head has been clearer the last month or two because I
haven't been reading as many different opinions. Too many just confuses
things. Plus, I've found that if I keep searching for new articles, I'm
basically looking for similar opinions to mine or confirmation of my
beliefs.

The fact is that nobody knows what the market will do. All you
need to focus on is what it's doing now. It's going one of 3 ways: up,
down, or sideways.

KYPH up 24%

So, I bought KYPH back on July 5th as it broke out from a cup and
handle. I put my stop in and forgot about it. I did notice early this
week that it was one of my few stocks that wasn't getting destroyed on
some of the first downdays and that it had huge volume on Tuesday. As
this week went on, it was the only stock I have from last week that
hadn't sold off.

I didn't even notice during the day today, but when I was reading The
Big Picture on IBD, it was one of the Stocks Up on Big Volume mentioned.
I went to look, and it's up 24%! Turns out they are being bought out.
Sweet!

The only problem is I bought it in my izone account, which is my small
one, so to only risk 1% of that account, I bought just a few shares and
was only up a few hundred bucks today on the deal. But that was 5% of
that account, so I'll take it.

anybody else buying here?

Until the next breakout sector emerges and I hopefully identify it, I'm
nibbling on QLD here, establishing a position. Bought some at 99 and
some more at 96. I will do one more buy if the market goes lower down
around 92. Then I'll use my avg share price to figure my stop based on
the amount I'm risking. For example, if my last buy is 92, that would
put my stop at 88, which is below the support levels from May and June.

This might be the wrong move, but I'm going on the theory that this is a
panic short-term move and not the beginning of a long term correction.
That is based on the VIX spiking to higher levels than 2/27 and after
today even higher than June 06 and also the % of stocks below their
50dmas being very low already. Also, QLD/QID are having record volumes
being sold/bought. But really, nothing has changed in the fundamentals.
The market knew that housing was going down the tubes--yesterday's
numbers couldn't have surprised any of the big players.

From this viewpoint, the selloff at the end today was good to see. The
recovery at the end of yesterday I think eased some minds and there
wasn't the air of panic after watching things come back a percent or two
in the last hour. The open up and then recovery mid afternoon today
also helped reassure longs. But then watching things slide right off
into the close maybe struck a little fear into a few hearts. Panic and
fear will shake the weak holders out and allow this uptrend to continue.
Might take a couple weeks, so I'm going to try to be patient.

Of course, this is all IMHO, and we could keep slipping til Labor Day.
Who knows.

what is the next sector?

Over the next few weeks, there will most likely be a bottom put in. Out
of that bottom will come the new leaders. It most likely will not be
the leaders from this past rally. We've shifted from solar to chemicals
to shippers and now it will be something new. The key will be figuring
out what that is and getting in quickly. I'm not really sure how to
figure that out at this point. For now I'm going to be following the
"stocks on the move" very closely.

This was an interesting experiment in panic. I've been messing with
tdameritrade's level 2 stuff over the last 2 days. I've never sat and
watched the orders go through before, but this morning that's pretty
much all I did. I watched FXI, AAPL, and QQQQ.

I've been watching my stocks that got stopped out. So far VDSI looks
good. HURN has put up a tough fight and if it makes a strong move off
the 50d here I'll be interested.

bought ILF, AAPL

Bought some ILF back at 212.50 at open.

Just got filled on AAPL at 146.05.

Right now the market is still falling, so these are both looking not
very smart, but we'll see how she closes.

crunching the numbers

Well, I just added up every position I closed in June & July in my accounts. At this point I'm pretty much stopped out of all but a few positions, so I've been updating my records and playing with spreadsheets.

$2702.19 gross
commissions 600
net $2,102.19

22 unique stocks traded, some with many entries, sells, reentries:

2 were breakeven

12 losers for -$3000
5 were "total losses" of 1% of the acct.

8 winners for $6400. Only 4 of those were significant
AAPL 1900
ILF 1400
MTOX 1250
BGC 950
which add up to 5500 of my 6400 profits.

It also means that in 2 months I'm up 3.3% net. I guess that's okay. If you were to extrapolate it out that would be around 20% annual. It's better than I used to do. In the past I've lost $1k on PG or TM in my IRA. Those two losses were as much as I just cleared in 2 months.

Or worse, $1k on BTJ in my $10k izone acct, or $500 on NWRE in there. Ugh.

So, what does it all mean? There's definitely something to the "you
make all your money on a few good stocks" theory. And the keep your
losses small one, as well.

June was pretty much flat for me, I think most of my gains came in July. If the kind of upward market we saw those first two weeks of July can keep going remains to be seen.

Sold 4 stocks today

• ARGN - 15% trailing stop for 7% gain on remaining half, first half sold for 20% gain
  
• TBSI - was a chandelier stop, 3 * ATR(14) from the most recent high
• ICE - sold right above my entry price. never take a loss after being up 10%. it fell way below the 50dma
• SIMO - 3 * ATR from entry price. Touched 50d and rebounded.

Yesterday I also sold my MVIS. Today they announced a deal with MOT and were up 12%.

This was a pretty big downday, but I'm not panicking. I have stops under everything. If stuff sells out, I'll have cash.

IBD did say to cut your laggards and take profits on stuff that's up slightly but didn't run quickly up to 20% after you bought it. So I'm about selling VIP, which is up less than 1% after going up 10% for me, and HURN, up 3% after 1 month.

TBSI, FTO

Wow, the shipping group is afuego lately. I've been watching DSX, but it ran away from may. Pretty much the same pattern is DRYS. Today, TBSI and SSW are breaking out. I bought TBSI at 35.13

I also bought FTO at a pullback to the 20d. I've been looking to get a refiner for a while. The two on my list were FTO and HOC.

MTOX got trounced

I never did hear what was so devastating in their announcement, but MTOX got destroyed today and closed down 18%. Obviously, I'm glad I closed my position yesterday. Yes, there's the chance that it might have rocketed up instead of down today, but I'm okay with missing something like that. I'd rather miss a good move than be part of a down one.

There is always another stock!

SPX double bottom

Looks like $SPX broke out of a double bottom and now might be forming a handle. Volume is drying up.

MTOX, totally screwed the pooch

Wow, wild ride. I bought another 1/4 of my original stake in MTOX back today as it was at 29.50. That turned out to be almost the high for the day and it reversed to down to 27. I wasn't sure what to do, should I hold to see how it closes or get out before it sank further? Surely, I would end up selling at the low of the day. Ugh. I decided that I wasn't able to be unemotional about it, so I just closed it all out. If you don't know what to do, just get out!

I lost $160 on that little experiment. I still am ahead over $1100 on MTOX as a whole, but I really let at least that much get away.

This is a case where selling 6% off the closing high might have been a good idea.

MTOX, SIMO

Wow, interesting day so far. My 20% trailing stop on MTOX hit and I got all the way out of it. Then later it recovered strong through the 50d and I bought back 1/4 of it.

I also bought some SIMO at 27.19 today. I wish it had more volume, but it has a strong rebound from the 8dma.

Double bottoms

Some very double-bottoms popped up today:

• SIMO
• TEX
• DSX

Another nice one is ATN, but not a double-bottom. 3 of those in one day is unusual for me to see. I think this is a Good Thing, even though the market overall didn't do much today.

I did sell half my BGC position on a spike for a 20% gain. I didn't even realize it had happened, just noticed more cash in the acct and realized that my stop I had put in way back when hit. Later in the day, it retraced and was down on the day.

Recent acquistions that I haven't posted about yet have been more AAPL at 125, ICE, KYPH, and VDSI.

NYX bottoming?

This thing looks like it may finally be putting in some kind of bottom
(much to Cramer's delight). You saw big volume spikes on the way down
around 6/21. Then it churned through some volatile days and put in a
couple of dojis on low volume last week. Indecision.

Then on Friday it bust out 3% with volume 5% above avg. It has great
EPS and SMR ratings in IBD, but of course the RS and Acc/Dis ratings are
pathetic. Also, it's below the 50d, and the 50d is below the 200d.

Still, this might be a low-risk entry with a stop at Friday's open
price.

Is this a rally, yet?

Wow, this may have been a low-volume holiday shortened week, but it was a good one. The Nasdaq was up 4 out of 4 days, made a new 6yr high a couple of times, and gained 2.4% on the week. Even better were the leading stocks:

For the week, the IBD 100 vaulted 5.2%. That marked its biggest weekly gain in just over a year, dating back to June 30, 2006.

Isn't this exactly what you want to see in a bull market? The Nasdaq leading the other indices and the best stocks rocketing? I feel good because my account is actually doing well. Usually after we have some big move, I'll be at a meeting and someone will ask "So who made money this fall?" and in the past I haven't. But for June my account has shaken off the spanking I got the first week and is now at all-time highs again. It's been lead by further gains in AAPL and MTOX mostly, but also good performances by ARGN, BGC, and ILF.

All through May and the first week of June I kept reading the "Sell in May and go away," mantra being repeated. June was pretty much a wash, but you know what, it kept finding support. There were a couple of times when it could have gotten ugly, but the buyers are out there. If they are there in June, that bodes well for the following months. Last year's rally started by putting in a bottom in July.

girl, I been HURN

I would call that breaking out of a 3 wks tight pattern on high volume, wouldn't you? Yeah. I think I will buy some.

BGC has done really well for me this week. Also, MTOX is showing renewed vigor. AAPL might make another run at a new high before this whole iPhone thing is said and done. I sold half my shares last week and will watch to see if they do some kind of climax run next week as the hysteria builds.

The Nasdaq had a bearish engulfing day, followed by a piercing pattern (bullish) yesterday. I hope this doesn't mean summer choppiness is upon us.

oh, it's on!

So says IBD, "Confirmed Rally" is back. Well, this was the best day the Nasdaq has seen in a long time: a breakaway gap up on 27% greater than normal volume! Oh, and it's a new multi-year high. I guess all the bond fears are now gone? Or was that just a fakeout?

Today I bought VIP, which I bought back right before close today. Got stopped out of it last week after I held it for a long time as it dropped below the 50dma on greater than avg volume.

It bounced right back through the 50d, however, and today made a new high on big volume, finally breaking out of the range it was in for the month of May (or the last 3 months, you could argue.

For some reason, I haven't worried as much during this past correction. I think a lot of it has to do with the fact that I put stops under ALL of my positions--a few trailing stops, but most based upon ATR or 7% less than the buypoint. I decided that I'm just not going to worry if they get stopped out too soon. "There is always another stock."

market candlesticks

Bullish engulfing signals on both the DOW and the S&P. And, is it me, or does the Nasdaq look like it did a kicker signal today?

the dow is crashing

The following article should be required reading by every US citizen, IMHO:

http://www.financialsense.com/fsu/editorials/2007/0416.html

A lot of people laugh at the "goldbugs", but you have to take this at least somewhat seriously. At the very least, you have to admit that the dollar has lost 20% of its value in the last few years vs just about any other currency in the world. The price of 1oz of gold was $450 as recently as Sept 2005. Now it is $670. That is a loss of 33%. What if it becomes 50% less? 75%? 96%? Don't think it could happen? $1 only buys you $0.04 worth of what it could in 1913, but the rate is accelerating.

Enough with all the scary numbers, what can we do about it? What did the population of Germany do after WWI when they literally had to pay for loaves of bread with wheelbarrows of currency? They bought stuff with it! Because if they waited until tomorrow, they would be able to buy even less. And then they bartered and exchanged "things". You see, "stuff" retains value (except as it depreciates or gets replaced by a newer, faster computer). A gallon of gas and a gallon of milk will cost relatively the same, no matter how many units of currency they are being sold for.

Anyway, so what will hold value? How bout property? As a long-term investment, real estate has pretty much always gone up in value. Wonder why that is? Mostly because of inflation (yes, in some places it's speculation or lack of land). But it's hard to trade pieces of your house for other stuff.

Here's the moral of the story: exchange some of your currency for gold and/or silver.

now Europe scares us

The European Central Bank raised interest rates and prompted downmarkets overseas. The indices here followed suit. It was a pretty big downday, but everything seemed to find support. The S&P closed right on the 20day with lower volume. The Nasdaq also had lower volume. Only the dow increased volume, which follows this rotation out of it that we seem to be seeing.

Most of my stocks were in the red, but after reviewing them, I don't see anything breaking down. All except PTNR are still above the 20day, most above the 8day. AAPL went up slightly and on higher volume, which might be a concern if that trend continues. MVIS recovered nicely to end the day up 1c. I bought more of it at open with a limit order for yesterday's close, but I should have low-balled a little bit more.

USO I am still holding and it was one of my only gainers today. It managed to close on the 50dma today, and I'm afraid it might hit off it and retrace lower. Still, since it is a commodity, I have to wonder if there's other things that affect it, like storms in the Persian Gulf and potential hurricanes. If it starts another down day tomorrow, I will probably sell it.

blog posts trend with the market?

So I've noticed that I stopped blogging after 2/27 and didn't post much through March and April. I've only started to post again recently the last week or two. This is also when I started having some positive weeks again.

This worries me because it means I was probably being emotional about trading. I'd like to say it was because I was trading less during that time period, and that's partially true. But I think it's more because I didn't like to look at how my account balance was down.

I think I managed not to lose too much, though. I lost 10% on OFI, but it was only 1R. HWCC also gapped down and I lost 10%, but it was 2.5R. There were many others, but they were smaller. On the IRA side, I lost 1.5R on TM for 11% (that was two combined losing trades on it) and 1R 11% on WFR, which gapped down after earnings. A few others, but they were all much less than 1R. So I think I've made some progress in that department.


So here's what I have right now:

izone account:
MVIS +26%
NVTL +15%
PTNR +2%
TU +2%
GTI +1%

IRA:
ILF +14%
USO -7%
VIP +4%
AAPL +35%
MTOX +22%
BGC +3%
ARGN -1%
MICC -3%
MR -2%

iphone commercials

On Sunday the first iphone commercials aired. I wonder how that will affect the stock price this week?

Re: Is anyone else feeling uneasy?

> With this market the past couple of weeks reaching new highs almost
> every other day, and most of our picks here doing remarkably well, I'm
> scared.

Here's my take, just MHO. I see a lot of people on blogs and email
lists and at meetups that are nervous and in some or all cash. They
have been afraid to get in this rally after 2/27. QID volume and puts
are still rising. This wall of worry is still out there and the market
is climbing up it. When everyone finally throws in the short towel and
goes long and euphoria hits, then it will come down.

Early May we had the nasdaq and s&p lagging the dow and diverging. Not
good. Also, the market was opening up and the fading into losses at the
close of the day. That is changing. The dips keep getting bought.
Money is being put into play. We didn't see that in March as trading
volume was down across the indices. Seems like rotation is happening
into the nasdaq and small caps.

I kept watching the IBD picture last week to see if they'd turn the
rally into a correction. 5 Naz distro days: nothing, a 6th the very
next day: didn't even sweat it. They point out that top stocks are not
breaking down. On the contrary, more stocks are breaking out, the
nasdaq and the ibd100 are starting to lead the market. This week, the
dow is up 1.2%, s&p 1.4, Naz 2.2 and IBD100 3.9% That is remarkable.
This is exactly what IBD wants to see in a strong rally.

> With the China tax hike it looked like the time had come to bail out a
> bit, and I did, only to get right back in as it rebounded forcefully.
> My holdings have have increased smartly the past few weeks. But I'm
> not shouting for joy - not usually a pessimist, yet I can feel the
> drop coming.

In my hindsight 20/20 vision, I think 2/27 was just an excuse to take
some profits. Also the yen carry trade may have been part of that.
Last week Greenspan cried wolf again and the US market rocked a little,
but a breather was needed after recent strings of updays. Thursday the
market laughed off china losing 6.5%. Sure it opened down some, but it
turned around and went higher. Again last night shanghai was down 2.5%,
but we had another upday (on lower volume). Maybe now that everyone is
watching it and expects it to come tumbling down, China dropping won't
shock everyone so much (I know, that's a big "maybe"). And their govt
is trying to leak air out of the bubble instead of popping it.

> Any recommendations on appropriate items to bail out to? Some of my
> items are hitting 52 wk highs. Scary! The drop has got to come -
> this can't go on forever.

What's the saying, the market can be irrational longer than you can
remain solvent. What's wrong with 52wk highs? Are these stocks doing
climax runs, exhaustion gaps, or other topping signals?

Having said all that bullish stuff, I hear a little voice in my head
getting scared. I've been thinking about putting in some protective or
trailing stops, but am trying to fight closing stuff out prematurely.

triggers

Here's some stocks that I see firing my triggers today:

BGC confirming it's breakout from 2 days ago. May be a little extended
from buypoint, but volume has been increasing nicely the last 5 days.

YUM is breaking out of a 65-68 channel. Would like to see more volume,
but it is a low risk opportunity with a stop at 67 (or 65 if you're more
adventurous). This stock has been very good to me over the years as a
long-term hold. I got out of it after 2/27 and should have re-entered
sooner, and might use this as an opportunity. They announced a split a
week or two back.

JCOM should have bought this one yesterday, but it might still be within
5% of a 32.5 high. Volume might be diminishing.

TEX making a new high off a "mini-cup" pattern. Needs volume.

TSO making new high breaking out of 57-62 channel. I also like the idea
of having a refiner as a longer-term play.

GTI hasn't really based long enough for my liking, but making upmove
today off a 2 week tight pattern. Volume is looking good.

MR looks like it is breaking out of a 3mo cup & handle (short handle)
pattern. Volume running above avg, decreasing volume in the handle,
looking good. I am skeptical of buying a Chinese stock right
now--especially THIS one, which I bought last on 2/26. But it's very
tempting...

MICC (best for last) already above avg volume and up 5% breaking out of
a long 81-87 channel that has been building for 7 weeks. Some big downdays
in that time but good support at the 50d and now looks to be taking off.

I am long BGC from a few days ago. Of the others, I will look to enter
MICC and probably GTI today. MR I will ponder over some more.

backfire

Okay, so my adding on to my MTOX position didn't work well today as MTOX corrected 10% after 1pm. Not sure what's up with that. Still, IBD says this stock should be held the full 8 weeks. However, IBD also says that MTOX brokeout from the $14 range, which would mean my buy was already extended and possibly I bought in the middle of that 8 week runup?

Tomorrow I am going to try to buy TU. It has formed a perfect 6mo cup and handle formation and has good fundamentals.

MTOX

I bought some more MTOX today.  I have a position that I started on 4/17 at $19.60  I decided that I would try to pyramid onto it, as it looks like the stock is basing after a breakout early last week.  This is currently my biggest winner.  I am going to hold it a full 8 weeks until mid-June and see where it is from there. 

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way of the turtle

I just got this book for my birthday. It's by Curtis Faith, one of the
original turtle traders. I've heard good things about it, so I hope it
was worth it. I also got New Market Wizards by Schwager and Confessions
of a Street Addict by Cramer. Street Addict I read through in about 3
days. Interesting story, and some lessons in it, but it's more
entertaining than informative. Never read the original, but I'm liking
some of the Wizards stories.

Vimpel earnings ride

So apparently VIP reported earnings last night (I know, I didn't do my homework).  It opened at $91, down oh, just 3 or 4 dollars from yesterday's close.  Ouch.  Hmmm, I guess this explains the selling off in heavy volume the last 2 days.  But it recovered quickly and had a strong day, finishing at the top of the trading range. 



I shorted a few shares of HOG today, based on candlesticks.  Back on 3/29 it put in a doji in an oversold condition and ran up for a couple of weeks.  Wed was a large bearish day while in oversold stochaistics, so I decided I would try to short it this morning.  I waited 30 mins after open, and it was still down at 60.90 where it had been for the past 15 mins or so.  I thought about putting in a limit order for 61.30, which is what it opened at, but decided that was being greedy, so I put one for 61.00 and it filled later.  Then it proceeded to quickly run up: 61.10, 61.20, 61.30, ... 61.60!  Great.  My stop is 62.38 which is the high from Wed.  It came back down to close at 61.48, only 18c up.  Another doji and still oversold. 



Another short I have started moving today.  My trading buddy has had SRSL for a few weeks.  As I'm reading about candlesticks and looking at the chart, I noticed that it had a bearish engulfing day on 4/5.  So the next day I sold some short at 14.11.  It went down further, but recovered and went positive, which this stock tends to do.  Today it sold off 4%, although it did recover some, so I'm not sure if the 13.50 level will be support.  If it's not, the next level looks like 12.80 and then 11.20. 

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last time I said this the market tanked

but the solar stocks are on fire again. Although they look like they may be topping. TSL, SPWR, and USU look like they may be about to reverse. FSLR just broke out, but it didn't show strength today, going up less than yesterday in a tight range on higher volume. That looks like churning, possibly. And after being one of the only stocks to recover quickly and go up significantly during the big sell-off, WFR has stalled, although it could be about to break out from its narrow range.

This is not a good sign for this rally. As IBD said in the Big Picture tonight, solar seems to be the only group making any decent breakouts since the rally. If they start to fail, what does that leave?

bought some OFI

I bought a small portion of OFI today. It broke out to a new high of a nice pattern and actually has decent fundamentals, for a cheapie stock.

I bought it with a limit order at around 11am. I've been re-evaluating my buy strategies after hearing from 2 different sources that you should wait til after the opening volatility settles down before you buy. First source says to wait til 1-1.5 hrs after open, and then not to buy if the markets are down or if the group of stocks you're looking to buy are down. Then, a book I'm reading (Rule the Freaking Markets) says to wait 1/2 hour after open and then not to buy your stock unless it is higher than whatever it opened at. And if your stock gaps up and stays up through that first 1/2 hour, that's a powerful sign, which is what OFI did today. The reason he says to wait is that frequently a stock (and the entire market) will gap at open from pent-up demand of pre-market trading and market orders that have queued up all night. MMs run the prices up or down filling these market orders at great prices for themselves. After all this fills, the market or stock fades back toward equilibrium.

I can see the point. I would prefer to do market orders the night before and let it fill. I'm looking for a bigger swing than a few cents, but still I don't want to be taken advantage of. Plus, I like the first argument that you want to wait and see what the market does before you buy. No sense getting in on a day when the whole market might be going down and your stock has to fight that much harder.

The downside of waiting is that then I'm watching stocks intraday and I start to second-guess myself and chase stuff. Although I didn't today. I had one other order that didn't fill and I let it go. I put a fluorescent green stickie on my monitor that says "There is ALWAYS another stock."

I'm starting to study candlesticks quite a bit lately, too. There are some pretty decent built-in scans at stockcharts.com and I've been following them and trying to apply what I've read.

fortune cookie

"All your hard work will soon pay off." That must mean the work I've put in learning to trade, right? I hope so because I'm ready for it. I have stayed away from this confirmed rally so far because I haven't found anything breaking out of a good base yet and I'm okay with easing back into the water.

But I gotta say this has been a frustrating time. I was thinking that we would get a good correction and reset things some. I should have not traded at all, but I got cocky and shorted a couple of indexes. I don't think it was out of boredom, but I do think it was out of fear of missing out. Reading blogs and listening to BizRadio, I was hearing about all these people making a killing in the down market and thought I should get a piece of that. I would have been better off preserving my capital. Instead, I've pissed away another 2-3%. I should know better by now, having been learning this stuff for more than a year. Of course, last summer during the correction, I traded the entire time, so I'm doing better than that now, I think.

I do like the looks of LHCG if it can make a new high, ROCM, and AB if it can retake the 50day.

bought QID

Bought a few shares of QID late this afternoon at 55.15 My stop will be a close below 54.50, which is the low point of this downtrend.

This should be an interesting week.

So now what?

Well, now we wait. Tuesday was Day 1 of the attempted rally. I'm not going long anything until we get a confirmation day--no matter how juicy things look or if one of my former stocks goes higher than what I bought it at. If I am missing any upside, which will probably be minimal, it's insurance against that stock turning around on a dime in this market. For example, I've been tempted to buy ICE the last few days with all it's upswings, but today it broke down hard.

However, I did go short a small position of SPY yesterday afternoon at 139.51 My stop is 143 because I was willing to risk 3% and that is right above the 50dma, which might now be a resistance level. I will consider shorting some more if it hits 135.

I've also been reading O'Neil's short selling book. I tried to look for a few candidates last night, but didn't see any. I think that's the hard part of his methodology.

I am also considering adding some GLD to my long-term portfolio after this pullback.

so this is what being in cash feels like

I don't hardly believe it, but I'm all cash right now. I've never been all cash. Maybe this means I'm learning, finally. After all, I pissed money away all last summer during the correction trying to stay in and find winners. Or maybe it means I panicked and sold out too soon on Tuesday. Of course, that's easy to say in retrospect. I was hoping that getting out of the market would give me some new perspective, and it has. I've come to realize the value of the saying that you need to plan for every occurrence. Before you get in a trade, you need to have the whole thing figured out. Entry, exit, and what ifs. Yesterday was a big "what if" that I hadn't considered fully. If you come upon something you don't know how to deal with, chances are good you'll do the wrong thing. I'm still not sure if my reaction was wrong, yet, but the fact that I didn't know what to do was wrong.

Tuesday's crash caught me totally off guard, like most, I suppose. I think everyone expected that a downturn or correction was coming, but I thought we'd get more warning. My plan was: as the distribution days start to show up, phase out. But before Tuesday the IBD distribution count was 1 day, the market's making new highs, the NASDAQ's leading, etc. Turns out the bears with their oversold indicators were right. I still don't like the idea that we were "due" for a correction. That just sounds too much like the gambler's fallacy to me, but I suppose it's not a fair comparison. You're not measuring a roll of the dice, you're talking about market psychology--the old saying "there's nothing new in the market." Anyway, apparently there have been a few other big sell-offs like this with no warning before. Maybe the absence of volatility has led up to this surprise.

Anyway, after it hit, I don't think there was anything I could have done. Any stop orders would have been gapped before they filled at market. The mistake was just being overextended at that point. At least I did get out of a few of my China stocks like AOB on Friday and CHINA on Monday. Of course, then I picked up MR, which got spanked at open. That was the first thing I did after I got online. I saw that pretty much everything had bounced up from the low at open, except MR, my remaining Chinese stock, so I dumped it and then sat back to assess the situation.

Now, of course, my rule #1 is Don't Buy or Sell during the day. I even thought about this, but couldn't convince myself to stick to that. I also got email alerts from a newsletter I sub to and they'd gone to cash first thing. Not knowing where this thing could go, but clearly the trend was broken, I decided to bail out of anything that was down more than 6% from its highest close price since the rally started. This was all of them, of course. But I tried to sell out with limit orders for that 6% number. Some of them filled on spikes up, and some I had to tone back later on. That left me with ICE, SYX, and AB--my 3 biggest winners in mid-afternoon. Then the slide happened and I got out of them too.

Over the next day or two, my longer-term stocks in my IRA stopped out too. First GS, then SHLD and finally TM today.

So, I'm not going to beat myself up over it, but if I had more experience with panic sells and big downdays, maybe I would have handled this differently. Blogs I've been reading seem to indicate that vets know that a panic sell is usually followed by a rebound where you can get out at a better price. But then again, Wednesday could have just as easily continued on down, and then I'd be screwed. Also, Tuesday was enough of a shock that IBD just went straight from Confirmed Rally to Market in Correction in one day. That to me indicates that the trend was broken as soon as the market opened that far down and the correct thing to do was get out.

I even thought about the saying "the problem is that people fear when they should hope, and hope when they should fear." I think this was a case where instead of hoping (that the market recovers), you should fear (that you will lose your capital).

So, now the challenge is to be disciplined enough to stay out until we get a confirmation. There will be shake-outs and false rallies and bounces, but until I get a follow-through day, I'm not buying stocks.

solar goes crazy

What is with all these solar energy IPOs going nuts lately? TSL, FSLR, SOLF, etc. I searched today to see if there was an ETF that carried these things. I read about one coming out "soon" but didn't see anything that was exclusively solar right now. Oh well, I've got WFR and that should be a solar play.

Speaking of sector rotation, it's not looking good for the financials. The XLF is down and the XBD looks even worse. Stocks like MS, MER, LEH, etc are getting hammered. I'm still long GS from 178 and AGE which I bought back in 2000 in my IRA for 35, but I may be bailing out of both of them if they fall much further.

Interesting stocks:

• MSTR brokeout to a new high
  
• RIMM new high on big vol
  
• HURN had a powerful gap up and follow-through
  
• GEF has based for a week after breaking out to a new high
  

Today I closed out my position in CHINA. It found a little bit of support, but has been lackluster for me.

I'm also looking to get back into MFW. I may have exited it too soon.

housekeeping

I'm closing out AOB, MFW, and CBG this morning.

I will be adding some MR.

candlesticks

I've been reading a little about candlesticks after hearing Stephen Bigalow of candlestickforum on the radio. I've known about some of the basic patterns for a while, but as I was going over the 12 major ones he mentions, I noticed some of them in my stocks tonight. First, SYX had a bearish engulfing pattern as bears overwhelmed the bulls at the end of the day. Second, ICE has a doji cross at the top of a long runup. These are both bearish reversal signals. I am very seriously considering getting out of both of them at open.

However, I am torn about this because this is probably the opposite of what I should be doing. These are two of my strongest stocks. SYX has run up over 30% since I bought it 3 weeks ago, which IBD says, "If a stock runs up 20% in less than 8 weeks, it should be held the full 8 weeks."

MFW also had big issues today. But it seemed to find support at the 37.00 level and my stop on this one was 10% or 36, so I'm holding tight.

So I'm sitting, waiting. If I were daytrading, I would probably follow the candlestick signals. But I'm willing to hold each of these through a pullback. Once again, I've watched my account peak and retreat this week and I think that's scaring me.

"Throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting." --Jesse Livermore

rode this week out

After options expiration day and seeing down futures this morning, I'm surprised that the market basically closed break-even today. Actually, a little better than that, as all the indices found some support and came back a little in the afternoon, though the nasdaq was on lower volume.

Some of my stocks made new highs today: ICE on slightly higher volume closed at a new high, PAY on low volume, and SHLD on avg volume. SYX was an honorable mention at 0.13 off a new high, but still up almost 3%.

I actually got up and watched the market open this morning. I don't usually do this because nothing good ever comes of it. It's too easy to get caught up in it and break your rules, and today was no exception. But I wanted to put a couple of orders in before open. I started watching and my account and the market began slipping. I was down over 1% and started to panic and looked to see which of my stocks I should liquidate to get off margin and raise cash. I looked at a couple, but they weren't technically breaking down past my sell rules. I realized (and I've never formalized this thought before) that if I let my sell rules take me out, by the time I'm 100% cash, my acct is going to be 7-8% off its highs. So, my account balance is actually just like a stock price. I've been focusing on it a lot trying to look for an indication that I'm improving. I've been getting really overjoyed when it climbed higher and bummed when it fell back down towards where I started this rally. But seeing it as just an aggregate of my stocks' actions allowed me to see that it will have fluctuations as each of my stocks do and I found that a little comforting. I've been trying to teach myself not to panic when one of my stocks has a pullback, but I've been thinking of the portfolio itself as a different animal.

I know, this seems like a very simplistic realization--obviously a portfolio reacts just as its holdings do, but it was my frame of mind that needed adjustment. This allowed me to calm down a little and realize that there was no reason to panic and, besides, my rule is not to do anything during the day, especially not first thing in the morning when I'm sleep deprived.

Oh, and my account ended up closing slightly positive on the day.

"Why, it's a bull market."

So, I'm rereading Reminisces of A Stock Market Operator. One of my favorite stories in it is about the old man who, when someone asks him why he won't take a contrary tip, only replies, "Why, it's a bull market." Livermore says this helped him understand one of the problems that he had in his early trading: cashing out too soon.

On that note, IBD today dropped a distribution day off the Nasdaq (and one earlier this week) and the S&P, giving them 1 & 2 days, respectively. There's no guarantees, but you can only see what the market has done, not what it's going to do.

AOB: don't call it a comeback

I'm not getting my hopes up yet, but AOB staged one heckuva recovery this afternoon. It was down 10% at one point and came all the way back and weathered the storm to close down only 1%. It has had 3 down days on increasing volume. If it continues to show this kind of strength, I might look to buy some more, maybe as it goes back above the 50dma.

• CSX finally broke out to a new high today on big volume.
• CROX I'm watching to see if it can hold this support it seems to have found at 52.
• VSNT is probably too extended, but it's in a strong group with good momentum. Possible overhead resistance at 25.
• TTG is a speculative play as the fundamentals are just decent. It sits at 7.45 after 3 days of big volume gains and 7.50 would make a new high (well, since 2000, anyway).

waiting

Yesterday was a big down day for my portfolio. Pretty much all my gains from last week were erased. But the most troubling thing was what to do about each of my stocks that were down? Specifically AOB, ICE, and CBG. I had a few different ideas go through my head, but the conflicting ones were "never let a winner (10% up) turn into a loser" and "don't trade scared." I was incapacitated for a while, but finally decided to sit down and look at them one by one.

AOB had two big downdays in a row and was down significantly off the high of 14.19. I'm still up 40% on my remaining shares, though, and they say you have to give your winners room. So I decided that if it fell more than 30% from the high, I'll sell it. (As of today, it's continuing to approach that, down another 6%)

CHINA I have been up 10% on, so my exit point would be break even again: 9.59

CBG had 2 big downdays almost to the 50dma, but I was still up 2%. I had been up 10% so my exit would be b/e again or 34.84. This is also very close to the 50dma, so if it violates that, I'll sell. (today it's gapped up 1% and stayed there.)

ICE was the main one I was worried about because I have a large stake in it and I bought it on margin, which is a whole nother story. It rocketed up 10% in less than 2 days, but then proceeded to give it all back Fri and Monday, which you will notice is the common theme here. I was still up 1% on it, but it has had wide moves and I was afraid of it dropping right though my entry price. But when I bought it I decided that I would give it 3% down to 138. That would violate the first tenet mentioned above, but I decided my reasons for buying the stock were still valid so I'd hold it down to my original exit point. (so far today it's up 4%.)

HRT was also in the same boat, although it seemed to find some support in the 31 area on Monday. I had originally budgeted for an 8% pullback, so I'm sticking with that: right around the 29 area. (Today it has dipped to 29.14, but recovered somewhat)

In other words, I've decided to be patient and see what happens. Try not to over-trade or get scared off. Let each of my stocks tell me when to sell. That's the whole point of establishing exit criteria before you get into a stock, so you'll have something to fall back on in times like these. I can't panic at seeing red on the screen or my account falling from its highs. The number is not important, it's making the right trades. And trying to guess which way this market's going is foolish.

exiting NYX

Well, I was hoping NYX would base and break out. It moved, but the wrong way. Exiting Monday at an 8% loss.

bought ICE

I bought some ICE intraday. This is against one of my rules, but I think I may have to rethink that one, as I had already determined that I liked the support it had and knew my entry and exit prices beforehand. As it was around 143, I put a limit order to buy at 142.20 and a trade trigger to email me if it went over 144. Sell stop would be 138, or 3% risk. I noticed after a while that my order filled, so I figured support was waning. Then, I got the email: 144, 145, all the way to 148. Volume was 60% above avg, which is good.

I know I might be late to this party after the run it made in early Jan, but it looks like there have been some shakeouts and good support the last few days in the 138 range. Also, fundamentals are really strong.

I heart HRT

I still don't see things breaking down. The market had a strong close today, which is a good sign, and my stocks reflected that too. My portfolio was up 1.4%. SYX continued to run, and CHINA finally moved out of its tight range with a 5% jump. Also, I picked up HRT today. I set a buy-stop order for 31.85 (close yesterday was 30.82) and it filled early and then was down a little, before it went on to close 3% up for me and 6% up on the day.

NYX is down a little again today, but both yesterday and today have been down on very low volume.

• DWSN big move today to make a new high out of a 6wk cup
• TIE made a 6mo high, breaking out of a 2 month double bottom with a handle (at least, that's how I interpret it. As IBD said, metals are strong, but they have lead for a while and may be rolling over.
• MIDD made a new high on big volume out of a 3 week range. Impressive fundamentals.
• Got ICE on the watchlist. It broke out Friday and has found good support the last 2 days.
  

nice day

My account was up 1% today. Big gainers included AOB and SYX, each up 4%. AOB is bouncing up off this most recent base and I'm tempted to pick up some more shares.

• PTNR new high off 1 month flate base on big volume. Strong group including VIP and CHL may be pulling it up.
• ACN new high big volume off 6wk channel.
• LDSH passed the old high from last May today.
• HOLX 9month cup no handle. Same group as OMCL and CUTR, which have both also had big moves.
• AIB big bounce through the 50dma.
• SHS new high, big vol, 7wk base.
• CRM new high, big vol, double bottom with handle.
• GFIG a blast from the past. Made a new high today on what kinda looks like an 8 mo C&H with good volume dryup the past 3 weeks.

LDSH new high

LDSH is forming the right side of an 8month cup (or could it be called a double bottom base?).  I'll be watching to see how it closes and if it starts to form a handle. 

HUBG has formed a handle and is now approaching the buypoint.

XIDE and WGA, climax tops?

January 2007 Recap

At the close of this month I am down 25.5R, which is an improvement of 1.5R since the end of December.  And it's a 2.5R improvement from my low of the month, so I'm pleased.

Closed 3 positions:
TMO +1.2R on 20% gain.  That was the peak and it has drifted lower since.
GRRF -2.4R this was a big buy (more than 1R at risk) and it went against me.  I also let it go through my 7-8% loss limit on some of the shares.  But it is still lower, so it was right to close it out.
KPN -0.4R failed to breakout.

Opened 4 longs: CBG, KPN, PAY, and SYX

Not much today. There are a lot of familiar stocks that are still doing well, including many from yesterday, but I don't see a good cup & handle. Here's some to watch though:

• LDSH volume is drying up.
• RBA building right side of 7month cup. Watch for handle or breakout.
• OKS may be forming a right side. It has found good support at the 50dma over the last month and now volume seems to be increasing.
• IMKTA wow. Too extended now, but watch for a pullback or base.

bought some SYX

I don't usually buy during the day, but I saw this one breaking out to a new high on bigger volume.  Fundamentals are pretty good, so I'm picking up a smaller lot.  Stop is a close below 19 and currently at 21.35, so that's 11%.  Sell goal will be 20% or 25.62

this is still a confirmed rally

Looks like volume in AOB might be drying up.
HRT has had a couple of downdays, but looks like it has found support at 28.50 or so. I wonder if Jeff sold his yet?
NYX is still holding on.

Interesting stocks:

• CVLT new IPO with good fundamentals and looks to be under accum.
• JLL new high on big vol off 2wk base. Not the prettiest chart, but good fundamentals.
• DLLR double bottom to set new high on big volume.
• CNH slightly above buypoint for 6mo C&H on the weekly chart.
• HMIN is still doing its thing.
• MAN strong bounce off the 50dma.
• POT broke out of a 2month channel to a new high on strong volume. Group 4 and strong fundies.
• SYK is here again with another big vol day to a new high.
• KNOT hammer on big volume. Not a great chart, but it made a new high.

I spent today in jury duty (but did not make it onto a jury). I used the opportunity to reread How to Make Money in Stocks. I tried to pay extra attention to the market tops and sell rules because I've been noticing so much bearishness. The book made me feel better. There's no point in trying to second-guess the market. As the Big Picture said, there aren't a lot of top stocks breaking down. The breakouts that I see are all in the top groups. My stocks are still performing well.

interesting week

My acct was up slightly, but less than 1%. Wednesday was such a big upday, but then Thursday gave it all back. I'm not sure I can just waive Thurs off, as IBD did, as a distro day because volume was slightly lower. If you were to count it, that would be 4 distribution days, instead of 3. But, part of being disciplined is following the rules.

I went to an IBD meetup meeting this week, and everyone there was very bearish (some said they were 100% cash). I don't know if I agree with that. We are in a confirmed rally. If you don't think that's a good time to be invested, when will you? At the beginning of the next rally? But if you're that gunshy, you might even wait it out a while after the follow-through. As a wise Mauitrader once said, listen to the market. Besides, Jeff had a good point that if everyone is that bearish, this thing might just have legs.

Anyway, I did get out of KPN this morning. It gapped down on huge volume today, but found very strong support above the 50dma. I did not follow my rule here. My rule was to sell it on a close below $14, but it wasn't even close. Basically, I got scared out of it by thinking too much about which way the market will go. I need to be careful and get out of stocks when they fail (lose 7-8%), but I'm not seeing that yet in my portfolio. OTOH, there are not a whole lot of stocks that are having runaway breakouts.

I'll have to think this weekend about where I want to be in this market. I've found quite a few nice charts today, but is this the week to be getting in? I don't know, but now earnings season is finally over.

Some things that caught my eye:

• COLM low EPS but nice high on big vol today
• VPRT saw this one a week or two ago on the movers & shakers and it's back again
• WFR formed a new high with big vol on a 7month cup w/o handle. Nice fundamentals.
• VSAT also saw this one yesterday. Nice cup&handle that started in May and just slightly above the buypoint.
• EMS breakout off 1wk flat base. Strong up/down ratio.
• SYK big vol breakout from 2 wk base.
• HMIN nice technicals and breakout. Some say the china sector has topped.

Not a bad day

My account was up 0.5%. PAY had a 2% upday--not quite a followthrough, but good action.

I found a lot of interesting stocks after close today:

• CHDX, forming a handle on big vol out of a 2 month cup and setting a new high.
• STNR, big vol new high off an 8 week flat base.
• ENR, up big on huge volume, breaking out of 3 month cup.
• PCP formed a new high on big volume off a flat base.
• USAP is looking very nice, but probably too far extended at this point.
• RIO made a new high out of a 3wk cup, but no handle and it didn't close at a highpoint.
• Big moves by the telecomms today. CHL, MBT, and MICC all made new highs breaking out of 3 week cups with nice volume, although MICC is extended. Too bad KPN couldn't catch that wave.
• COL I've been noticing recently. It's posed to make a new high if it goes up another day or two.
• LMT set a new high off a 1 week base, although it is extended.
• TAP broke out of a 1.5 year cup&handle. It's fundamentals could be a little better and that was a brutal dive into the cup.

Thinking about NYX

...for a possible bounce off the 50dma, where it looks like it has found support.  Also, AOB looks like if found good support today at the 12.50 level.

I did just buy some NYX for my IRA account.

Buying more, but smaller stakes

Recently I've been reading Tharp's Trade Your Way to Financial Freedom and thinking about position sizing again.  I had decided that I had too many stocks and was going to have fewer, bigger stakes.  That might have been okay, except that it exposes you to a larger capital risk on one stock.  

So now, I'm writing down my stock purchases with a sell rule for the up and downside.

For example yesterday morning I bought some PAY at $37.98  My loss limit would be at the 50dma of $34.46, which is about 9%.  1R of my current portfolio is $75, so 75/0.09 is $822.  (Losing 9% of 822 is $75 lost.)  Divide that by the shareprice and I bought 20 shares, just to have a round number.

This can change the amount of your position size, depending on how much risk there is in the stock.  For example, other recent buys at the end of last week were CBG and KPN.  CBG had a breakout to a new high.  I bought it with a loss limit of 8.5% (close below 50dma) and got $860 worth.  KPN had a high volume upday and I bought it at 14.76 with a sell rule of 14, or 5% and bought $1460.  If you look at both loss limits, it's for the same dollar amount, but CBG is risking a larger percent, so it's for less total stake of my portfolio.

Sold TMO

Well, my 20% sell stop kicked in today on TMO.  It bounced off its 50dma and has had 3 big updays in a row.  I sold my entire position, as it was a relatively small buy.  This move was so strong that I may regret not letting it ride more, but 20% is still a good gain for me at this point.

2006 in review

Well, my trading account, which I opened in March 2006 is down 27R. I traded
over 100 stocks in that time! Commissions were 8.7R and the remaining
18R were the following bonehead moves:

NWRE lost 5R by not adhering to a sell rule.
CTRN lost 2R by averaging down.
BTJ lost 11R by both averaging down and not adhering to sell rules.

Without those 3 trades, my acct would pretty much be even right now
(minus commissions). That's not great, but it wouldn't be bad.

The other mistake I made was trading too much and trading in a sideways
or down market. The problem there was trading for trading's sake. I
couldn't sit by and wait for conditions to improve. Instead, I kept
testing the waters and bleeding money.

Here's another common theme: the stocks I made good money on, like IFO,
FTEK, AP, AOB, I made money on quick. Generally within 2 weeks they'd
be up 20%. I might hold part of it longer, but I don't really have any
good winners that were just held for a long time and then sold.

Also, as of the start of the New Year, I'm on my own picking stocks
again. I spent a lot of time over at Investor's Paradise under Josh's
tutelage, but they have gone pay for play. I wish them luck and think
it's certainly worth the money, but I just can't spend that much on it
right now. I certainly learned a lot there and think I have grown as a
trader from being exposed to Josh and the rest of the folks I met there.

Here's a quote from Josh that is invaluable to a beginning trader:

14:03:38 [MauiTrader] it is so weird
14:03:42 [MauiTrader] how once you make rules
14:03:45 [MauiTrader] and stick to them
14:03:48 [MauiTrader] if you do lose money
14:03:54 [MauiTrader] you notice you lose a LOT less
14:04:11 [MauiTrader] and then when you get a couple of winners you
start to see drastic changes in the account number
14:04:30 [MauiTrader] i will never forget the moment I realized my
account was never going to take a huge hit again
14:04:34 [MauiTrader] it was a great feeling

I hope to know that feeling soon. Aloha to the end of one year and the beginning of another.

December recap

Well, December was up and down. After week 2 I was up 7R, but fell to
finish up only 1R. That's a little disappointing, but the market trend
was definitely down the 3rd week, which erased most of my gains.

Closed
TCHC breakeven.
MIKR 1/4 at +1.8R
MIKR 1/4 at -0.4R
AOB cashed 1/4 out at 40% gain +1.6R
UCTT -0.6R
NSTC -2R

Opened the following positions:
GRRF, AB, CHINA