Archive for October, 2010
Something Special in GSM
October 29, 2010 at 11:38 am
Globe Specialty Metals has shown some special characteristics in the past 2 months (pardon the pun), and it may not be done yet.
Yahoo! Finance is showing an earnings reporting date of November 8, and that event could certainly prove meaningful – one way or the other. However, as a technical trader, I’m only interested in avoiding the stock on that date given the impact which such major fundamental news can have on a stock. This may not be a long-haul type of stock anyway, but with the price action of the past several weeks it deserves to be on the radar for a possible trade.
Watching for Movement
GSM is acting quite well from a technical standpoint. First, the stock has rallied big over the past two months, adding more than 50% to its value during that stretch. Second, and perhaps more importantly, it has put in some well-deserved and needed rest over the past two weeks, pulling back quietly and churning to digest its recent run.
That dip has allowed weak holders to dump shares while others have stepped in with bids to offer support. Shallow pullbacks and coiling price action also prevents the stock from becoming too extended to the upside. Momentum is good until it gets out of hand, at which point pullbacks tend to become all-out reversals. Healthy trends need rest, and this one is doing just that.
I’m looking at this one for a trade on the long side if it’s able to break out through the trend line at $15.50, and would expect a quick push up to new highs. I’ll of course look to be out of it ahead of the earnings report, as holding anything into such news is merely a gamble. On a technical basis, support has been found in the $14.50 area, and we could see momentum return if the trend line gets cleared.
Here’s a closer look at the chart of GSM for you:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Narrow Your Scope With Basic Stock Filters
October 27, 2010 at 11:09 am
Each night I work through literally hundreds of charts, aiming to find those setups with an edge. They’re the ones which allow me to not only clearly define my risks, but also offer potential profits which greatly outweigh those initial risks.
I’m asked quite frequently by traders how I narrow down the universe of stocks to a more manageable list. The short answer is to start with price and volume filters in order to eliminate the low-dollar stocks, as well as those with poor liquidity. That alone will give you stocks to consider which aren’t as highly-speculative as penny stocks, as well as stocks which are liquid enough that there should be a buyer when you go to sell and a seller when you go to buy.
Beyond those basic filters though, you may still wish to narrow the list. In the charting program I use, dozens and dozens of additional filters are available. Among them are things such as Beta, Trade Range, Average True Range, Expanding Trade Range, Contracting Trade Range, and a lot more.
Just that brief list is enough to help locate stocks which move faster than the broad market, or to eliminate names which simply don’t move enough.
Base Filters on Broad Market Movement
When dealing with ‘trade range’ types of filters, you can accomplish a lot. For example, you might generally use Average True Range to knock out stocks which don’t fluctuate much, helping you to eliminate the ultra-quiet stocks. When the market is starting to break out, look for Expanding Trade Range to help you locate stocks which are likely participating in the move or gaining momentum. When the market has made a big move already and is beginning to rest, use Contracting Trade Range to locate more stocks which are basing and may be starting to create patterns.
Don’t seek a one-size-fits-all filter, because it doesn’t exist. Keep an open mind, and put some thought into what it is you’re wanting to find. Stay flexible in your approach, and you’ll continually be able to avoid wasting time sifting through stocks which aren’t worth a second look.
The key to effective filtering is to learn over time how and when to vary the filter you’re using based on general market conditions. As you develop that skill, you’ll get really efficient at narrowing down the universe of stocks to a more manageable, appropriate list, depending upon whatever conditions you find yourself trading in.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Stay Sharp
October 25, 2010 at 12:52 pm
A year ago, I was in a surgeon’s waiting room. He was running late after having to do an emergency appendectomy. He hadn’t overslept or blown off his appointments for a tee time – he was operating, just as I’d expect a surgeon to.
With scheduled surgeries on the calendar, as well as the emergencies which inevitably pop up, he wakes up every day knowing he must be on his toes. He has to be prepared for whatever comes along. Routine procedures will even occasionally throw the proverbial curve ball his way, and he’s the one that must respond accordingly for the well being of his patients.
Some of you might be surgeons, but I’m confident that all of you reading this are traders. And at this point, hopefully you know exactly where I’m going with all this.
Maintain Your Edge
As a trader, it’s important that you stay active and stay sharp. You’ll of course take vacations (hopefully of the exotic type) and have times when life calls your attention elsewhere temporarily. That’s fine, and I’m certainly not suggesting putting your trading before all else – that would be unhealthy and out of balance. I’m all for maintaining perspective and priorities. However, if you truly want to get good and continually improve, you’ve got to be in the game on a regular basis to some extent.
I attended a couple of preseason NBA games this week. During the offseason, one player in particular had just signed a huge contract. Now, preseason games don’t mean anything at all. The fans love them, of course, but they’re generally treated like scrimmages and an opportunity for teams to start developing some chemistry after a few months apart.
Watching the game, it was quite clear who’s been working hard over the summer and who probably took the mindset of “it’s a long season, I’ll eventually get sharp.” The aforementioned big-contract player was of the former attitude. It was clear he worked on his (already great) game, and he was eager to get all the playing time he could – even in a preseason, so-called meaningless game.
This guy wants it, and he shows up to play every time out. In terms of dollars, he’s long since arrived and would have a hard time spending what he’s already amassed. But money is not his sole definition of success, and it’s clear in how he plays the game.
Plan & Play to Win
As you reflect on your trading, I wonder if you’re seeing some glaring problems standing in the way of your success. Some take more time to work out, such as learning to accept a loss or understanding the times when sizing up isn’t appropriate. But if it’s just more “minutes on the court” that you truly need, that’s a much easier goal to reach…and one which will pay many dividends.
The end of the year is approaching, but it isn’t here yet. You’ve still got a couple of months before you’ll need to review 2010 and look ahead to 2011 and set appropriate goals. That time will come.
For now, you still have time to make 2010 better. You still have time to gain some momentum into the end of the year, so that you can hit the ground running when January hits. But you’ve got to look at each day as an opportunity to grow.
Let me be clear though – it won’t happen from the sidelines. You’ve got to make it a habit to be in the market regularly. Modify your timeframes if you need to, and trade small when you’re struggling to get a feel for the tape, but be active, stay sharp and on your toes.
Surgeons operate, and get their hands (gloves) dirty. Athletes play and sweat and push for improvement. Traders trade and face the pressure and find ways to grow. The best simply do not allow themselves to go cold.
Earlier this year, I completed a major trader training project which required a lot of my time. It took a few months to finish it all. I could have cut that time at least in half, but I maintained a daily devotion to trading, even in the midst of a big undertaking.
I write blog posts like this one every week, and I produce a nightly stock newsletter for subscribers over at TheStockBandit.com. I’m a husband and a dad, and trading isn’t my entire world. But I’m in the market every day, moving my money into and out of opportunities as I see them. It’s the focus of my work day, and it’s what my evening preparation points to. Staying in the game is how I stay sharp.
Are you doing the same?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 10-17-2010
October 15, 2010 at 5:07 pm
The bulls posted another solid performance last week as more cash was exchanged for shares. That took the indexes to new recovery highs, but also brought some important resistance areas into play.
The big question on the minds of traders at this point is whether the pace will slow now that resistance from the spring has been reached. We’ll find out soon enough, but there’s still no signs of emerging weakness at this point.
As we head into a brand new week of trading, let’s examine some important levels 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.
Be sure to view in full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 10-10-2010
October 10, 2010 at 8:53 am
The market finished on a strong note last week, reaching new recovery highs after putting in some needed rest. This keeps the uptrends intact, and although resistance zones are quickly approaching, the bulls are showing no signs of concern at this point.
The week ahead is likely to bring a resolution to this short-term indecision, so it’s time once again to check out the big picture for clues of where momentum might return in either direction.
As we head into a brand new week of trading, let’s examine some important levels 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.
Be sure to view in full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Trading vs Investing
October 7, 2010 at 11:42 am
A recent email exchange with a new subscriber brought forth some important concepts I want to share here on the blog. Among this guy’s comments were the following:
“I’ve decided to take more control of my money and future after investing for several years with a financial advisor. I’m sitting on a lot of cash..in setting up my portfolio should I scale in and out of some core positions in a separate account? Currently I feel as though I’m under invested, and it sucks to watch undisciplined investors make so much money. I guess the real question is, should I trade my entire account or should I trade some and invest some?”
During any nonstop rally like we’ve seen from the August lows, this is a natural reaction from a trader who has exercised good discipline. Sometimes it seems like it would pay better to just be ignorant and chase extended market moves like this one! Unfortunately though, that’s not an option for anyone who understands the two-sided coin known as risk.
Taking the ‘ignorance is bliss’ mentality may be great on the way up, as every gap higher and afternoon recovery adds to the bottom line. However, when the tide shifts and the tape gets painted red, it’s a recipe for feeling helpless and stupid for not exiting when the opportunity was there.
The Best of Both Worlds
I’m all for people taking control, because many financial advisors simply want to ‘outperform’ the market rather than make money – the only reason to have money in the market to begin with.
Here’s what I personally do with my money in order to benefit from both the short-term fluctuations and the longer-term trends which occasionally emerge…
I like to diversify my timeframes. I don’t trade Bandit setups with all my money, but I do direct all my money. By that I mean nobody else manages it for me. What I do is devote a chunk of it to my short-term trading. I want enough of it available there that no buying power issues arise, and so that I’ll have plenty of cash available to put on any trades I like.
I also take a chunk of money to devote to intermediate-term ideas, so these are plays which I like for the next few months but not short-term or long-term. I’m riding these out with smaller positions, wider stops, and I’ll often exit by way of shorting options against my common.
Finally, I leave money in long-term accounts (retirement accounts) where all I do is trade ETF’s for durations of 6-18 months. Those long-term plays are simply to have market exposure when I feel a big-picture trend is present which I want to be on board for, but do not want to react to every tick. For example, earlier this summer I was buying ETF’s for a bounce, and more recently I’ve been reducing exposure there (by selling to raise cash) and getting called out of those trades after selling calls against those positions.
So for me, dividing funds into different timeframes is really helpful. Also, I maintain separate accounts for these differing timeframes. That means I don’t login to my day trading account and each time see a 6-18month ETF play I’ve been in for 9 months and get tempted to exit after a 30-minute selloff. It is a little more to keep up with, but helps me avoid feeling like I have a lot of cash going unused.
Think of day trading with a stopwatch, swing trading with a clock, and position trading with a calendar. Each can be an effective way to watch the time, and they can all be used simultaneously.
If lately you’re feeling underinvested after this market run, you certainly aren’t alone. It’s a frustrating feeling, but there will be other trends to participate in, and one of these days you’ll be very glad to have cash on hand to put to work.
Any other thoughts?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Leadership Has Left the Building
October 6, 2010 at 8:08 pm
I’m not the first one to recognize a big shift in leadership stocks of late, as it seems the momentum train has hit a southbound fork – hard – for several of them.
Stocks which had been running relentlessly higher have turned suddenly. What used to be a buy-on-any-dip mentality associated with them has is now more like sell-all-bounces.
If these truly are ‘leaders,’ then they may be leading to the downside. I’m certainly not one to call for a market peak, as I know momentum can stay present far longer than many expect. However, I will say some other leadership best emerge quickly if the indexes (which are subsequently at big resistance areas) are to continue their relentless pursuit of higher levels.
Let me suggest going full-screen for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
