Archive for January, 2010
Video Review of the Indexes 1-31-2010
January 31, 2010 at 6:06 pm
Following an initial pullback from the January highs, no bounce was produced last week with the dip-buyers failing to appear. The group which has been so responsible for upside follow through since the market turned higher in March of 2009 suddenly disappeared, and stocks have been declining steadily for a couple of weeks now.
Key levels from previous months have been proving to be short-term rest stops for the indexes on the way down, offering not only some orderly price action but also a reminder to us that key levels are worth keeping an eye on.
It’s hard to argue that an important change of character is underway for this market, and the depth of this initial selloff certainly raises the likelihood of a lower high being created once a bounce kicks in. At some point, a bounce will arrive, but at the moment the short-term trend is down and that deserves our respect.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 1-24-2010
January 24, 2010 at 5:49 pm
Last week we saw the market closed on Monday, making for a holiday-shortened week of trading. That certainly didn’t translate into quiet action, as traders made every day count.
Tuesday’s upside tested resistance, but without a breakout. From there, the sellers took control, raising cash more and more aggressively as the week progressed. In the end, steep selloffs made the difference with each of the indexes giving up short-term support zones with ease.
The downside reversal reminded the dip buyers who have been so persistent for 10 months that the market’s still able to move in both directions. Whether they learn their lesson this time or not remains to be seen, but it should bring continued volatility in the weeks ahead – and that’s a good thing for traders like you and me.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Prepare for Anything
January 21, 2010 at 7:00 am
On several occasions in recent years, I’ve taken a spring trip with my dad and some friends to Arizona to play golf for a few days. I love the desert, and it’s fun to spend some time with the guys and make a few birdies (let’s not talk about the bogeys!).
Around Scottsdale, and particularly to the north of town, it’s quite common to see single-engine planes buzzing around the skies. Maybe it’s the great weather and silence of being on the golf course that made me notice them, but they seem to be everywhere. They’re pilots in training, and they’re starting small before they work their way up to something larger (like perhaps, something with more than 1 engine!). I respect that approach, and we’ll touch on that shortly.
But one thing that really caught my attention is that they actually shut off their engines – on purpose – over and over. What? It’s one thing to hop in that little thing with what sounds like a lawnmower motor on it, but hey, it’s no glider. Why would they do this intentionally?
They’re creating stall conditions and learning to recover. Learning to purposely manage a malfunction in a controlled environment (well, partially) helps them avoid panic should it ever happen unannounced. Eventually, they’ll become the kind of pilot I wouldn’t mind flying with.
From One Cockpit to Another
As a trader, sometimes that malfunction happens without warning. Sometimes right after an entry is made, the position rips right against you, perhaps even before you’ve had time to place a stop. Sometimes it’s an overnight trade which has unexpected or unscheduled news hit which causes the stock to gap against you, perhaps even beyond where you had intended to exit in the event of a failed trade. It’s painful and shocking, and more often than not, it results in panic for the untrained trader.
So how do you deal?
It’s almost impossible to mimic the emotions that go along with such a situation, but here are a few simple things you and I can do in order to avoid panic.
1. Expect it to happen. That doesn’t make us negative thinkers, mind you, but rather traders who are mentally prepared for anything – including the worst-case scenario. After all, if we’re prepared to face the worst, what could possibly cause us to panic? The point here is that through logical thinking as well as visualization, unexpected events and adverse moves can be mentally rehearsed to the point that when it does happen, we’re focused on the solution rather than the problem.
2. Keep a level head. By doing #1, we’re freed up to maintain our wits. Throwing a temper tantrum or freezing up entirely is only going to make it worse. The deer in the headlights stands motionless (at least here in south Texas), which means it’s up to the car to change course if something awful is to be avoided. Don’t be the deer – you can’t base your protection on hope that the stock will change course for you. Cooler heads will always prevail, so exercise self-control when you find yourself in a sticky situation and your mind will be available to strategize.
3. Expect to survive. Trusting that you’ll be alright in the long haul will help keep things in perspective, just as they should be. What might feel like a catastrophe to the inexperienced trader might be a little unsettling to you, which is something you can absolutely recover from. At the worst, it’s one bad trade out of your next 1000 trades, so consider it a spot on the windshield to look beyond rather than something worthy of doing more damage to you than it already has.
4. Never allow one trade to be too important. This of course takes into account position sizing and position risk, because the financial hit is the one that comes first. Putting on trades which are larger than they should be is nice when they work, but when they don’t, look out. Staring at a loss which is bigger than you’ve faced before will bring instant regret. Similarly, trading within one’s limits also means that no trade is ever emotionally too important. The aftermath which follows a big loss can be more emotional than financial, so walk the line carefully when choosing position size, and you’ll avoid a tailspin.
The market will dish out surprises from time to time, no doubt about it. Train yourself to expect it, and mentally rehearse some ways you’ll respond when it happens. You’ll ultimately feel as though you’ve been there, and your second reaction (following ‘oops’) will be a remedy rather than crippling anxiety and fear.
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
ANF Looking Vulnerable
January 19, 2010 at 7:25 am
Anytime I see a stock crack support and fail to reclaim it, I pay attention. Especially when it makes no effort to rebound and merely consolidates after that key breakdown.
ANF is doing this right now. Just over a week ago, it undercut an ascending channel pattern on heavy volume, offering a decisive change of direction. Last week, not only did it fail to bounce, but it consolidated in a bear pennant pattern, indicating there may be more selling yet to come.
I’m keeping a close eye on this one, as a move down at $32 out of the short-term pennant would confirm this pattern, possibly leaving the $30 area as the next stop (given that it’s a former key level in the stock).
Here’s a closer look at the chart:
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 1-18-2010
January 18, 2010 at 1:13 pm
The bulls maintained their overall control last week, although they did allow the market to slip a little. The NAZ led the downside, but no key technical breaches occurred.
We haven’t seen a meaningful pullback in some time now, but if short-term support levels get broken, it could deliver some accelerated profit-taking. Lower highs and lower lows would have to develop before the longer-term uptrends would be disturbed, so even if we do see some downside it will be important to keep things in perspective.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
5 Years!
January 15, 2010 at 9:27 am
In the world of trading where 5 minutes can seem like an eternity, 5 years feels like a really long time. That’s the number I’m celebrating today, as it was 5 years ago today that I published my first post over at my original blog. I spent one year writing there before creating TheStockBandit.net. I’ve been writing here ever since, publishing some 480 posts during this stretch.
I continue to be thankful for those of you who are regular readers. Your comments and emails are very rewarding, and I’m very hopeful that you return not out of habit, but rather because you find something useful here each time you visit.
I’m fully aware of the many, many blogs which have popped up since I began, giving you countless choices for where to spend your time. I don’t take it lightly that you choose this site as one on which to spend some of your time.
This blog continues to serve not only as an outlet for me to teach and discuss important trading matters, but also as a reminder to myself for what I need to aim for in my own trading. The growth of readership here suggests it has been helpful to you, which is certainly rewarding to see.
I’m excited to see what the next 5 years will bring. I plan to continue bringing you chart reviews, trading psychology articles, market commentary, trading videos, and whatever else is suitable for the environment we find ourselves in. I hope you’ll never hesitate to comment when you have something to add.
Thank you for reading!
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Keys From a 6-Month Streak
January 13, 2010 at 3:18 pm
Anytime you find yourself in the midst of a streak in your trading, it’s worth paying attention to. When you’re winning, you need to find out why.
A few years ago, I was fortunate to put together a 13-month streak of consecutive net profits (profits every month for 13 months). The longer the streak continued, the more I thought about it, and the better it made me to sort of ‘observe myself’ during that run. I made note of not only my routine and the kinds of plays which were working, but I also included my thought process and the mentality I was bringing to the table. I still occasionally reflect on those notes to stay sharp.
For the past 6 consecutive months, we’ve put together net profits in each month over at TheStockBandit.com (July, August, September, October, November, December). Results can be found here.
Although I am trading confidently, I’m not telling you this in order to boast. I’ve been at this long enough to know the market will serve up a healthy dose of humility when it’s needed!
Rather, I want to share with you some of the things I’ve been focused on in recent months that have brought consistent success, hoping it can improve your own process.
Here are 5 Keys I’ve taken from the past 6 months:
* Be Patient. I have not forced trades. When setups were plentiful, I would get more aggressive. Hence the reason some months had more trades than others. When the setups were harder to come by, I was willing to wait. The year is long, and there will be an abundance of opportunities, so there’s no need to try to make something happen. Watching and waiting for the must-take setups to come along pays off.
* Picky is Good. Before committing capital, I have been requiring high-quality chart patterns and situations which carry a nice potential payout. Lowering your standards to second-rate setups will result in overtrading and a higher barrier to success, and trading is already hard enough without that. You deserve the best, so require it if you’re putting money into it.
* Take the Conservative Route. The occasional home run is nice, but they don’t always happen on purpose. In fact, swinging for the fences will send you right back to the dugout more often than it’s likely to put you on base. My approach has been to hit singles and ring the register more often, paying myself when I catch a nice move, but now wearing out my welcome. The conservative route brings with it consistency and confidence, two things I strive for.
* Have Directional Flexibility. A willingness to trade both the long and short sides has led to my booking winning trades on the short side in every month during this run, despite the fact that the market has pushed relentlessly higher. This was extremely helpful during July, September and October when we saw some brief market pullbacks as well. Looking for outlier stocks can pay off, both in terms of winning trades and the occasional hedge to long positions.
* Monitor the Behavior of Positions. Never trust a skinny chef, or any stock you hold a position in. I don’t mind giving trades some wiggle room, but I do keep a close eye on the price action and how volume corresponds with it. During this run, whenever I started to notice a discrepancy between what I expected to happen and what was actually happening, it was a clue that an adjustment may be necessary. Every stock has some personality associated with it, so if that begins to change, give it your attention and be willing to modify your trade parameters.
The next time you find yourself in the midst of a nice run, take a little time to see what you can learn from it. Take note of what’s working and what isn’t, do more of that which is working, and keep plugging along. It will help you not only perpetuate the process you’re already in, but it’ll help you return to the same mode later on.
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
