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.