Question: Is the the bear market ‘technically’ here? - June 26 2008

Mike,

We broke major support on all three indexes today. We’ve lost all our gains on the Dow,S&P and Nasdaq in the last four weeks and according to statistics, the Dow hasn’t seen these levels since September of 2006.

Heavy downgrades in the financial sector tore a strip in today’s trading and record high oil put the nail in the coffin by the afternoon. Not even better than expected GDP and relatively inline jobless claims could help slowdown today’ s sell off.

So the question is, even though the market is completely oversold, are we technically headed lower because of major support being broken?

Question: Waiting for volume — June 24 2008

Mike,

Quick question:

Say I’m watching intraday movement and have set CLEAR support and resistance lines. I know I want to enter just below or above these levels but naturally I’m watching for volume to follow through before I pull the trigger. The problem is, especially when playing volatile stocks, is that as I’m looking for volume on the 1 min chart once support or resistance is cracked, I miss the entry price I want by a good 15-25 cents by the time I pull the trigger. This happens because I’m nervously racing over my keyboard to get in my order as the move is happening and my profit margin ends up getting cut into by the time I get filled.

The heartache of missing easy money making opportunities has pushed me to start experimenting with executing bracket orders before resistance or support is hit. This way if there IS volume behind the move then I get filled and my exit and stp loss are in place without wrecklessly scrambling over my keyboard after the breakout or breakdown occurs. Naturally,my results have varied. There are times where I get filled and volume tends to be light or even initially strong but then the stock reverses course and my stop get’s triggered. Ofcourse, there are also times when volume just shatters through my entry point, my order gets filled and I’m laughing all the way to the bank without touching a single button during the trade.

The key is to obviously limit getting into false breakout/breakdown traps. In your opinion, how risky is it to be executing a bracket order before volume is confirmed? Generally, isn’t everyone looking at the same resistance/support levels that I am? Wouldn’t that have most traders waiting to get in at those price levels? I’m not in favor of executing orders that may or may not follow through on volume before it’s confirmed — stop losses do pile up at the end of the day. At the same time I HATE punching in lightning speed orders as the move is confirmed because i get filled at a much higher price than I want.

I know you’ve suggested creeping into an order with half a position initially and then when volume is confirmed, jump in with the remaining half. The issue I have with this practical and cautious piece of advice is that if the trade goes in my direction, I know I will end up scrambling over the keyboard to get the second lot order in and this causes my nerves to go hay wire and I usually end up missing the move…as usual.

Maybe this issue is just a matter of slow keyboard skills and a lack of knowing how to use hot keys on the IB platform?

The way I see it, is that if I wait to confirm volume on a b/o or b/d and then get into the trade, it would be INCREDIBLY easier if all I had to do is hit one button instead of punching in the entire order after the fact.

What do you suggest I do? Moreover, what do you do? I know you execute trades with the IB platform as well so maybe you could possibly suggest ways that I could speed up the order process instead of putting in risky bracket orders before volume is confirmed.

Thanks.

Cheers.

This week - Lots of things happening

This coming week will be very busy and am guaranteed to be very volatile. Let’s start off with the economic calendar. These economic data will be sure to move the markets UP or DOWN.

Tuesday: Consumer Confidence

Wednesday: Durabel Goods Orders, New Home Sales, Oil Inventory #’s and most importantly, FOMC ANNOUNCEMENT

Thursday: GDP, Jobless claims, Existing Home Sales

Friday: Consumer Sentiment

For those who havent been through the FOMC anouncement days, this is guaranteed to be one of the msot volatile trading days especially if there is a surprise on interest rates being cut, raised or kept the same.

I am unsure what the consensus is for this time but from what I hear, the Fed is trying hard to fight or manage inflation and wouldnt be surprised to see no rate cut at all eventhough the US economy is slowing down.  If anyone has anything, please feel free to write your comments here.

Happy trading this week!!! I am sure it will be volatile for us Active Traders.

What’s Ahead?? — Wednesday, June 18 2008

The word,

I’ve been combing through yearly charts for the DOW,S&P and NAS to try and figure out what the market is telling us — technically that is — and where we might be headed.

The Dow :

In the last 4 weeks we’ve seen the Dow make a steady decline from a strong resistance level of 13,000 points back down to a previous support level of 12,000. This current level of support is where the market seemed to temporarily bottom after a severe meltdown,courtesy of the financial sector,back in Jan 2008. With a combination of high oil prices and banks declaring further qtrly losses, the market sentiment is nothing short of foul and moody. Looking at the MACD and RSI it’s clear were in a downtrend and the markets oversold. Are we do for a short rally? Taking into consideration that oil prices have shot higher after a 5th straight week on lower supply reports and the financial sector continues to report horrible guidance,we may see the Dow breakdown from it’s current support level of 12,000. If a breakdown does occur,then our next stop looks like 11,740 points.

The S&P :

The story seems to be relatively the same here as well.We broke out above a crucial psychological level of 1400 points a month back but couldn’t stay above it after touching a 1425 points . Now were very close to touching previous support levels we saw back in late Jan. 1325 is a very strong level of support for the S&P and if we breakdown from support, then our next stop maybe 1300. Again, high oil prices and continuous write downs from financial’s will more than likely be the cause of the market continuing to head south.

The Nasdaq :

This yearly chart seems to be the only one telling a more hopeful story than the latter two indicie’s. Not to say that the tech sector hasn’t taken a string of hits in the past month but in comparison to the Dow and S&P, it’s quite aways from it’s late Jan support level of 2300 points. Why this index isn’t losing as much ground is not really all that clear to me — I’m sure Mike Serr will be able to answer that question. As to how the Nas will respond to further bad news is pretty obvious. Will it drop as fast as the others is left to be seen.

Whether your shorting financial’s or going long on fertilizer companies, the charts and market sentiment seem to be pointing towards a bearish atmosphere and many analysts are calling for a crash.

Whatever the out come, we active traders will take advantage either way.

Take care guys.

P.S.

However, if we did have any official declaration of a bear market, I’d give up a day of trading to have Canada’s most famous trailer park supervisor Jim Lahey sneak up on the trading floor and help conclude the final minutes of the closing bell with Bob Pasani that day,

“There’s a real sh*t storm comin’ Maria and it ain’t pretty”

( triple split screen close up of ever anchors reaction here )

For those of you who don’t know, you better ask somebody. LOL!

Interesting topic: Trading & Sports

Hey fellow traders,

I’m in toronto until June 27 and then off to Europe for some work and much needed rest. I’ve met quite a number of traders and students since I’ve been here and time and time, I often get into a conversation about trading and sports. I thought I would share with you my insights on how playing competitive sports can help you become a better trader. You may not know but lots of professional athletes go on to become very successful in business including stock trading after they have retired from their sport. Why? Let’s take a look at an example. When a person decides to pursue his dream of becoming a professional athlete, he finds a sport that he is very interested in and goes about learning as much as he/she can about the sport and how he/she can become better at the sport. He/She may hire or have a personal coach to help them improve on things that they are not good at. They have a coach to help guide them in the right direction and mentor them as they are learning the sport. Next, he/she has to continue to practice the skills that they have learned and keep doing until they are good at every aspect of their game.

Most importantly, they have to have the drive, passion and persistence to become the best athlete that they can ever be. Nobody can do this for you except yourself. There will be failures and bad times but they keep going until they achieve their goal.  Once they are ready physically and mentally, they perform at the highest competition level and achieve greatness.

I really believe that we should all learn to treat stock trading like how a professional athlete prepares him/herself for every game. If you’re in the zone and have game, you have the stock market in your hands. Good luck!!!

Updates!

Things have been pretty busy for these past few weeks and I apologize that I havent been able to post.  I am currently in Toronto to do some seminars and courses. It has been volatile in these past few weeks which is awesome for us active traders. The sentiment has been on the downside and I am not surprised to see that since we have had a major upside movement in the markets since the bottom in mid March.  As I probably mentioned to all of you, the indicators were telling us that the stocks were overbought and were due for a pullback. What I am quite surprised is the rise in crude oil price. I’m sure a lot of people were caught off guard on this and never expected oil to rise from $100 to almost $140 in such a short period of time. It looks like it may be a reality to see $100 crude oil from now on. Also, did anyone see the movement of Apple (AAPL) yesterday when they announced the 3G iPhone announcement? WOW!!! That was such easy money on the upside and downside if you look at the 5 minute chart. In the future, look for these types of events for AAPL to move up or down. There might be a pop when the 3G iPhone is officially launched. Keep an eye out for that.  Looking at the charts, it looks like we may see further downside in the markets but who knows as things can change drastically… it might not be a slow and boring summer after all… Happy Trading!!!

Quiet Victory - June 3 2008

My post has absolutely nothing to do with todays market or potential strategies for the upcoming trading week. The only reason I’m posting — at this exact moment — is to impart how most of us who blog, rarely ever touch on how trading effects us emotionally.

“EMOTIONS???? But Mike said were not suppose to…..”

Yeah,right. Ofcourse were not suppose to be emotional when we trade. Were also not suppose to pick our noses either but we do — when no one’s looking ofcourse.

Plan the trade,trade the plan right? Always follow through with your stops and exit points,right? Guess were all amazing traders then with small loses and enormous profits to print out and have Mike slap gold stars onto for the whole class to see (I like the sparkley ones).

Unfortunately, were all victims of our emotions when we trade and I’m sure you guys stand far from denying it as new traders but I almost feel as though no one ever speaks on the issue. So I thought I’d indulge you in how I spent the first 2 hrs of trading this morning piling up $1200 in losses — bringing me to a total of - $3200 for the past 3 days — and contemplating which one of my monitors would be the cheapest to replace before I stepped back and wound up for a no look, power house drop kick.

Why so passionate?? Hard to say. I’m as kool as Luke Duke when I’m up or breaking even but three days of collective losses had me channeling Van Damme for a brief moment.

I took a break for an hour and came back to my desk a lot cooler and began buying half the shares I usually do and quickly taking unrealized profits before they vanished. Suddenly, I started piling up small profits over the next 60min and was pleased to see that I was about to break even for the day. I’m not sure why I began trading so well after the morning session but I’m grateful that I was able to collect myself and finish the day with a small profit.

I guess what I’m saying is, there will be many a moment where you feel the market is out to crush you day after day but really it’s not the case. I know for certain that my emotions get the better of me when I’m down and cause me to enter into risky trades for no reason other than to avenge my indigestible losses — and each time, I’ve had my a** handed to me in a gift basket. My early morning losses truly had me feeling like giving up all together and avoiding the constant ups and downs that come with trading but I managed to muster up the courage to return with a clear mindset and less aggressive attitude. Maybe I should of walked away from my desk today and taken some time off? I don’t know? Guess I was feeling guilty for not sticking to my trade plans and letting a few bad days get under my skin.

All I know is that I feel a whole lot better and will remember these last three days as a brutal yet necessary reminder of how easy it is to let your emotions blanket your better judgement and positive mindset.

Trading emotionally is but natural. Letting it deter you from collecting yourself and starring in your own action flick is another story.

Thanks for listening and keep your spirits up guys.

Couple of Questions…

Hi Mike,

1) About full list of industry sector indices:

This is a reminder that you were going to send us all a web link to a site with a very detailed list of industry sectors indices.

2) Strange Oil Correction

So we (and apparently a number of Wall Street Traders) have been waiting for this Oil Bull to trip up. However, unlike what we’ve seen in toppy agriculture or technology stocks that drop 5-10% on a dime, the beginning of this correction only resluted in 1-3% dips in even some of the biggest oil names.

Why do you think is at-play here? Is that typical for oil stocks?

Maya

“COME ON BABY LIGHT MY FIRE” — Crude oil blazes a trail –May -21

Wow,

This morning’s oil reserve report definitely set the tone for today’s afternoon sell off. I found myself waiting for the market to react right after crude oil prices began popping in the morning but it wasn’t until the FOMC minutes report came out that truly set off what could only be called an all out “shorting extravaganza”.

I was keeping an eye on FSLR and POT all morning but was lucky enough to have one of my monitors fixed on a couple tech stocks — GOOG/APPL/RIMM — and was amazed at how fast they began dropping after the FMOC minutes report was issued. I chose to ride both APPL and GOOG down for a few points but after locking in profits couldn’t believe how much further these and many other stocks kept crashing. Crude oil prices showed no sign of slowing or remorse till the closing bell rang and even then it still continued making new highs in after hours trading.

The question now, is where does the market go from here with crude oil speculated to hit $150 a barrel by September? Mike mentioned in the weekly commentary that things would slow down for the next few months and if any of us were contemplating going long we should wait for a pullback. Hmmm….I think we just had one,no?? As a matter of fact, I’m actually wondering if the past two days of heavy losses on both the DOW & NASDAQ are going to shift market sentiment into bear mode? I guess that’s left to be seen after all the profit taking that was done today. We have had a remarkable run up in the past month so it’s only natural that we have a bit of a pullback but I’m still anxious to see how much faith investors have in fueling this summers trading season.

Although we’ve been all taught by Mike to enjoy watching the market go up or down, I have been long Google way before I met Mike and was taught how to short the market. Naturally,as an investor who got caught holding for too long,I’m anxious to see how Google and the tech sector react to record oil prices and inflation in the upcoming weeks.

Somehow,having made a tidy profit shorting GOOG today was the first time making fast money really didn’t feel all that great.

Oh, how the market seems to always have the last laugh.

Sooner than later my friends.

Picking A Brokerage Firm - May 20

Mike,

I’ve been trading with a demo account using the Think or Swim platform for the past 6 weeks and am considering using it once I begin trading with my own money. CMC Markets isn’t compatible with the Mac platform and you’ve mentioned that Interactive Broker’s software is better suited for seasoned traders so at this point the transition to Think or Swim seems natural.

What should I be using as a checklist to ask Think or Swim before opening an account with them? I believe they’re based in Chicago and being that I’m located in Vancouver, I want to feel comfortable keeping my money with this firm. What exactly should I be looking for with regards to both my financial security and trading needs.

Thanks.

P.S. Mike, if you do feel that I wouldn’t have a tough time using Interactive Brokers than I’ll definitely sign up with them. It just sounds like your not in favor of new students using IB so I haven’t even bothered playing with they’re software platform at all. Do let me know.