Author Archive for Jeff White

Market View Video 8-24-2008

August 24, 2008 at 2:37 pm

Very poor volume has plagued the market lately with many traders taking a late-summer opportunity to go on vacation and get away from their screens. We might be in for another week of that, but perhaps it will improve after Labor Day as is typically the case.

On a technical basis, the major averages do have a little something going for them in a positive light, which I discuss in more detail during this week’s video.

So don’t go pushing buttons this week until you’ve checked out this week’s Market View video over at the main site for a closer look at the averages and some things to consider if you’re trading.

Trade well this week!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

Identify Failing Bounces for Short Selling

August 20, 2008 at 7:45 am

Traditional Wall Street tells you that the market goes up over time, which has proven to be true. That’s nice if you’re a “long-term investor” who socks money away in mutual funds and doesn’t care about working your capital a little harder.

But for the self-directed trader, it’s important to remember a couple of things. First, the market (and stocks and sectors) will undergo corrections from time to time. Even if a longer-term trend persists, short-term hiccups and even the occasional gasp for air will occur. Second, those corrective phases (or downtrends) offer the best opportunities for short selling if you know what you’re doing.

Flip the Chart if You’re a Bull

You might be predisposed to trading the long side, in which case you’ll certainly relate to this analogy. Within uptrends, buying dips can be an excellent strategy to participate in the move. Doing so allows you to effectively buy on a short-term discount a stock which is in the midst of a longer-term advance. On the flip side, one of the best ways to participate in a profitable way within downtrends is to correctly identify failing bounces.

It’s the mirror-image of buying dips.

Shorting failing bounces can be a great way to trade the dark side, but it does require some finesse and an added dose of patience. These aren’t like breakout plays where you should expect an almost immediate pop and follow through. Rather, they are sometimes more like watching a cruise ship turn around… it might take a couple of days before the direction really changes! With that being the case, these kinds of plays are usually best for swing trading.

The Look

So with the concept laid out before you, let’s talk about what to look for and then I’ll show you an example. What we want to find is a stock which is in fact trending lower. That means lower highs and lower lows are in place, so that support levels have been broken in recent weeks or days with some high-volume selling. Since then, the stock has attempted to bounce back up but has been unable to attain previous relative highs on the chart.

Furthermore, as price goes up in the near term, volume is going down. That creates a negative divergence which shows us that the move is more of a dead-cat bounce as opposed to true accumulation taking place. Often times this establishes a bear flag or rising wedge pattern. As these patterns are confirmed, you’ve got a trade candidate on your hands.

Here’s what good shortable failed bounces look like on the chart, and be sure to notice the lack of solid volume on each bounce attempt:

Chart Courtesy of Blocks

As you find these types of setups, be sure to take notice of the duration of each bounce since stocks will often stick with a certain rhythm in how they move. Also seek to find some sympathy weakness occurring either in the same sector or in the overall market. That way when the time is right, you’ll be putting the odds of success in your favor as you profit from the next decline rather than just endure it.

Trade well out there!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

Broken Trades

August 18, 2008 at 7:15 am

A memorable Far Side cartoon is called Horse Hospitals. In the picture, a pair of racehorses lie flat on gurneys with broken legs hoisted. A veterinarian rounds the corner staring at a clipboard in one arm while holding a rifle in the other. The adjacent room shows another gun-wielding vet with a large caption reading “BLAM” while eyes widen on the injured racehorses, suspecting their time is drawing near.

Those poor racehorses! If they only knew that a broken limb would seal their fate, they’d undoubtedly run with much more caution!

Now I’m no advocate of cruelty to animals, but my stocks are a completely different story. I have no love for them if they do not work, and I certainly know when something is broken (remember, my P&L tells me!).

If you think of your trades as horses in the race and one of them pulls up lame, it’s time to turn out the lights for that trade. If that trade was your employee and not doing its job, wouldn’t that be grounds for dismissal?

Let it go if it isn’t going to work for you. Staying in beyond your planned stop level exposes you to unnecessary risk with far-diminished odds of a reward, leaving your capital tied up in an underperforming trade.

Good trading requires a cold approach. Building and implementing a game plan is followed by reviewing results so that any adjustments can be made. If you want to trade successfully, make a commitment to operate in such a manner. It might not be an overnight process, but it’s one which will be well worth it to you in the long haul.

Btw, even the vet in the cartoon doesn’t bring his feelings into play…he’s staring at his ‘chart‘ before making a decision. 😉

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

Market View Video 8-17-2008

August 17, 2008 at 12:23 pm

Lately we’ve seen some mixed market activity with the NAZ showing better strength than the DJIA and S&P 500, but all in all there is some constructive price action taking place out there.

Earnings season is behind us and the market isn’t yet consumed with election-related things, so we’re at a spot where some good trading conditions are emerging. A big move could be right around the corner one way or another, and that’s something I discuss in this week’s video.

So before you go pushing buttons this week, make sure to check out this week’s Market View video over at the main site for a closer look at the averages and some things to consider if you’re trading.

Trade well this week!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

Has the Easy Money Been Made?

August 14, 2008 at 1:51 pm

It’s a question all good traders find themselves asking on a regular basis…
“Has the easy money been made?”

Sometimes it’s in regards to an open position which has stalled out or losing momentum. Other times it’s tied to a look at the overall market, trying to determine whether or not the current move still has some fuel in the tank.

Indeed, few questions in trading are as important as this one.

As you evaluate your own trades, this is the question which will most often be your deciding factor in what to do. Perhaps you’re eyeing a nice setup for an entry… is the risk/reward structure as it should be? Or maybe you’ve been in a position which is warranting a second look right now… do you stay in, jump ship, or tighten stops due to a lack of trust?

How Do You Know?

Watching the rhythm of a stock’s (or market index’s) movement over time, and particularly the recent action, can provide you with some excellent clues as to what’s really taking place. Every stock has a personality, and your ability to decipher it will ultimately prove whether it’s trade-worthy.

Suppose we’re eyeing a rally which is underway and we’re trying to decide if it’s likely to continue. Gauging the upside volume compared to the downside volume can offer us some important clues. We can also glean a lot of useful info with a close look at the pace of the advance – is it sustainable? Measuring the depth of the dips, the quality of the rest phases, and of course the upside acceleration as strength resumes is going to complete the picture and leave us with some crucial elements to consider. Weighing each of these is what will ultimately bring us to action (or inaction).

A Fork in the Road

Whether it’s the current market move off the July lows, or any single position you are evaluating, always seek to determine if the easy money has been made.

If your conclusion is yes and you’re concerned the current wave might be closer to the end than the beginning, then be extremely cautious and keep any new trades on a very short leash. You might just be in the midst of one of those times when discipline and patience is needed while some new bases form in the charts.

However if your conclusion is no, then keep working your watch list in search of swing trading candidates which can leave you properly positioned should the move continue.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

Train Well to Trade Well

August 12, 2008 at 1:27 pm

While watching the Olympics, it never ceases to amaze me the dedication of these athletes and the preparation they go through in order to be at their very best. These people are what some might call ate up with it! They’re consumed with improvement, they’re completely focused on peak performance, and their commitment level is unparalleled.

I’m sure you see where I’m going with this.

If you want to be a good trader and turn real profits from your efforts over time, you can’t just treat it like it’s a short-term hobby. It can’t be something you work to improve at only on occasion or whenever you feel like it. That isn’t to say that it should dominate your life – because it shouldn’t. But I am saying that you’ll get out of it what you put into it. Good habits pay off.

Like a world-class athlete, you absolutely must train well to trade well. It’s a continual thing, regardless of your time availability. If you can only put 30 minutes per day toward your trading, then by all means do it – day in and day out. If it’s 8 hours, so be it – you’ll come to expect even more from yourself.

Make an effort to consistently improve, and you’re going to see the results. Think of it this way… hopping on the treadmill 5 days every week would have you in better shape a month from now, right?

Trading isn’t any different. It’s a honed skill that requires consistent action on your part. That doesn’t mean you continually press buttons, but it does mean that you set some attainable process-related goals to strive for each month.

Designate some tasks you know you need to perform regularly in order to keep improving, and get after it. Whether that’s your nightly homework, a month-end review of your trades, or something else, those frequent milestones will keep you on the right track. It’s all part of trading responsibly, which is what this is all about.

Now let me be clear… I’m sure not saying that your life should revolve around trading. I don’t believe that, and a balanced life has far more important aspects to it than trading. But when it does come to your trading, if you want to be truly good at it, then examine your level of dedication and adjust accordingly.

Remember – trading is a marathon, not a sprint. Treat your daily activities that way, and you’ll see that over time you are building up to much better skills than you currently possess. Keep aiming for patient progress, and the steady account growth you get as a result will reiterate to you that you’re on the right path.

But it takes practice, building each day on the previous day, just like an athlete training for something bigger.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

The Biggest Enemy of Traders

August 4, 2008 at 7:05 am

The day stands out in my memory quite vividly, but only because it wasn’t all that long ago. I had dug myself into a hole early in the day, and while I wasn’t too deep to get out of it, I was definitely frustrated. Let’s just say the guys taking the other sides of my trades were doing alright on this particular day. 😉 I had seen no swing trading plays to initiate, and the day trades were acting fickle. Shorts would break down with no conviction and bounce immediately back up, and the only stocks showing strength were doing so on poor volume, which meant they couldn’t be trusted as buys.

I had taken several losing trades in succession, and was having a dilemma of whether to take a break, call it a day, or stay and battle it out in an effort to recover. At about that same time, a thought crossed my mind as to why I was in this position, and I recognized it instantly. I had allowed myself to fall victim to the biggest enemy of today’s traders: overtrading.

While the shorts and longs I had traded were clearly not moving with conviction, the real reason I was underwater was due to my taking trades which were merely mediocre. I wasn’t waiting for my pitch, and rarely does that kind of impatience pay off in trading.

The Temptation of Convenience

It’s so incredibly easy to do these days. In fact it’s downright convenient to buy and sell stocks. With lightning-fast executions and dirt-cheap commissions, those unplanned trades tend to come along frequently and easily if we allow them. And yet, have you ever noticed how few of those impulsive trades yield great profits?

My work ethic has never been questioned by those around me. I never want to be still, so I’m always striving to move toward some kind of goal in several areas of life. Many of us face that internal pressure to stay ‘busy,’ but let me make one very important distinction: in trading, hard work does not equate to high activity. Just because you might be busy placing continual trades doesn’t mean you’re being effective or efficient.

Exercising Some Self-Control

At times we all have to remember that there’s serious value in simply concentrating on the correct things. Believe it or not, that means there will be occasions when not trading is best! Most of the time though, it’s going to mean that we formulate a flexible but well-defined trading plan, and then stick with it. Hunt continually for the setups you love, but don’t ever lower your standards out of boredom or for the sake of activity – that’s never worth it. Discipline plays a major role, so if you don’t have it, you’re in no place to be trading until that’s under control.

As you become a better trader and gain more experience at the screens, you’ll also find ways to stay away from those market conditions which prompt you to overtrade. Keep the phone handy. Have a stack of books to browse if the market isn’t moving. Go run some errands or catch a movie.

But by all means, when your ideal conditions do emerge in the market, get busy!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com