Author Archive for Jeff White
Jeff White is the founder of www.TheStockBandit.com, a nightly newsletter for active traders. He has been trading his own account for over a decade and currently trades full time in Texas.
Just What the Bulls Need
July 20, 2011 at 11:41 am
I noted yesterday that we were getting an upside resolution to the bull pennant pattern in the S&P 500, and it was no doubt a big day. The point and percentage gains across the board were impressive, yes, but were still outweighed by the technical move.
Breakouts need to see follow through. Sometimes they need it immediately, and other times it just needs to happen soon after.
For example, a minor breakout really needs to be followed by some immediate strength to build on the breakout and prevent a failure. On the other hand, a major breakout doesn’t necessarily have to see second-day strength to prove its validity. In those cases, a day or two of digestion are perfectly fine.
That’s how I’m interpreting today’s price action. The market made great strides yesterday to leave the pullback phase it had been stuck inside of, and today has been pretty quiet so far. Because of the size of yesterday’s breakout, I don’t think it’s imperative that we see continued strength today. A day or two of rest are a healthy way to digest that move, particularly for the case of the bulls. It allows for some churning between profit-takers and those nibbling at shares, and it lets the market catch its breath before possibly making another run.
We’ll see how this plays out, but that’s how I’m viewing it at the moment.
Here’s a closer look at the S&P 500 daily chart:
This day of rest is also highly important for the charts of individual stocks, as sharper moves tend to lead to reversals rather than pullbacks. Keep that in mind as you work your watch lists.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Upside Resolution
July 19, 2011 at 1:13 pm
The 7-bar pullback off the July 7th high has been a pretty methodical one, despite some wide-ranging bars and overnight gaps. Nonetheless, the pace of the pullback has been well-defined by the upper descending trend line, while the lower descending trend line has marked support.
Monday’s test of the lower trend line resulted in a temporary breach, but the S&P 500 recovered enough to reclaim that level by the closing bell. Not only did that erase a chunk of losses from earlier in the day, but it gave a bit of an exhaustion appearance on the daily chart.
Today we’re seeing widespread strength with a solid thrust back up through the upper trend line. This is marking a multi-day high, at least for now making it an upside resolution to the large bull pennant pattern which had been building.
Going forward, holding this breakout on a closing basis and seeing the bulls follow through on this advance will be key to making it stick. If it does, we’ve got ourselves a higher low on the daily chart, and recent highs could quite easy come into view soon.
Here’s a closer look at the S&P 500 daily chart:
The wide trading ranges are still intact for now, but a continuation of the summer rally which started at the end of June is certainly a bullish technical event. I’m currently long and eyeing more setups.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Pro’s Are Patient
July 18, 2011 at 9:11 am
The British Open is my favorite major to watch. It requires so much of the players, from execution to mental toughness to using their imagination to get the ball in the hole. Plus, it happens in July when it’s 147 degrees here in Texas, and I like to disappear into the home theater where it’s cool and dark and watch the guys wearing sweaters as they fight the sideways rain squalls!
In watching yesterday’s final round, the leaders were each asked during their pre-round prep what the most important element would be for their game in the final round. Without exception, they all said the same thing: Patience.
Experience taught them that. Eventual winner Darren Clarke was quick to admit he’s not normally a patient person, yet that was his focus as he headed out to try to claim his first major title.
A little gray hair goes a long way.
Had it been an interview with amateur leaders of the local club championship, the answers given may have been along the lines of “I need to make a lot of birdies.” And while that may be true, it’s not the priority of a pro when conditions are less than ideal.
True Confidence
Patience is not my strongest suit. I’m aware of it though, and therefore continue to keep impatience in check. I have to work on it. Self-honesty is important though, so I can’t ignore the occasions where impatience costs me opportunity, and those in turn serve as reminders to wait for the best opportunities to come along.
Through my premium service, I encounter a lot of traders who are overly anxious. Impatient doesn’t even begin to describe them. They’re willing to throw caution to the wind just for the thrill of being in something.
Or to avoid looking scared.
I think they fear it’s a show of cowardice if they sit on the bench for a little while. Ironically though, the biggest sign of confidence that you know what you’re doing is having the guts to sit on your hands when you don’t see what you like. You don’t chase the wind – you have a plan, and you execute it when the time is right.
Instead of taking that approach, these highly impatient traders don’t realize the primary importance of preserving capital and the secondary aim of turning a profit. Instead, they want to be highly active every day, and it’s as though they’re missing out if they exercise some caution. I don’t mind telling them that my service isn’t the right fit for those who feel the continual need to be in something.
Wait For It
The fact of the matter is that there are times when the sidelines are the best place to be. Just like the British Open leaders identified the greatest virtue of the day to be patience in the face of harsh weather conditions and tremendous pressure, you as a trader have to recognize when patience is the best course of action for you.
You’re still agile enough to take action should conditions present an opportunity, so it’s not as though you’re immobilized or stuck like a buy-and-hope investor type. But when the market is overly sensitive to the news flow, we’re getting huge gaps on nearly a daily basis, reversals are happening frequently, and the setups are sparse, the best course of action is to take very little to no action.
We all know the oft-used quote from Jim Rodgers, but it’s this kind of attitude I’m referring to…
“I just wait until there is money lying on the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, ‘I just lost my money, now I have to do something to make it back.’ No you don`t. You should sit there until you find something.”
If you’re predisposed to trading the long side, then wait for market weakness to dissipate before committing capital. If you like the short side and we’re seeing relentless rallies, the only thing you’re missing out on by not trading is pain. Recognize that and embrace the option of doing nothing when what you see doesn’t fit your skill set.
Professionals know there are times to lay low and wait for the best opportunities, but amateurs tend to force the issue out of impatience. Which would you rather be?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Taking It to the Bank(s)
July 12, 2011 at 7:49 am
Banks stink. Since February they have stunk. (Stank? Stunken? I’ll figure that out later.)
What’s interesting though, is the overall health of the S&P 500 without the participation of the banks. Generally the banks lead the market, yet they’ve been sliding for months and this market has stayed afloat rather well.
So are the banks no longer important, or is this a signal waiting to be recognized?
Either this market is going to turn and follow the banks, or the banks will at some point turn and add another layer of strength to this market. What’s your take? I’ll give you mine down below. Let’s look at a few of the majors…
BAC – It’s difficult to locate a more methodical downtrend anywhere in the market than this.
C – One-for-ten reverse split included, this one has gone nowhere but south. See that downtrend line? Yeah, so does everyone else. But why isn’t anyone talking about it?
WFC – This one has had glimmers of hope and potential stabilization a few times, but in every case it has failed to do anything but produce new lows. Lower highs: check. Broken rising trend lines: check.
JPM – Bounces continue to get sold here as well. Why even think about getting long until that changes?
GS – The money-making machine continues to work its way toward lower levels with lower highs and a downtrend line currently driving it steadily lower. Great company, perhaps, but hideous stock.
MS – Another picture-perfect downtrend which will perhaps at some point end, but not yet. New lows were made yesterday, and while it’s getting ‘cheaper’ it clearly isn’t done yet.
Other brokers like SCHW, AMTD, ETFC and the like are suffering similarly, as are major asset management firms (JNS), other banks, etc. The technical damage in the financial sector is widespread, and while there will be bounces, I don’t think the market will be out of the woods until we see participation from this group.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Strong Coffee
July 11, 2011 at 9:39 am
Truth be told, a Slurpee is the beverage that’s actually on my mind (happy birthday 7-Eleven), but if you’re looking at the charts of anything drinkable right now, it’s all about coffee.
Granted, it doesn’t quite have the same ring to it as the 1999 Bubble or the Crash of 1929 (or ’87), but the Great Coffee Rally of 2011 is on.
Names like CBOU, JVA, PEET, GMCR and SBUX have been ramping in recent weeks, putting them squarely on the radar of momentum players far and wide. This isn’t your typical grind (no pun intended) higher. These things are hotter than a car hood in the Texas summer.
Like quite a few other stocks, most of these could certainly stand to put in some rest here in the short term, but once that’s done, these are among the strongest (no pun intended) stocks in the market. Let’s take a closer look at each one.
CBOU – Nice pick up in not only activity, but of course in price as well since the higher low was established in early-June. Next levels are $14.30 then $14.50 to set this one free for higher prices.
JVA – The July run alone has been more like a quintuple shot of espresso than your average cup of coffee. We’ve also seen a 323% gain since June 6th – how’s that for a wake-up? Incredible short squeeze action here and way too extended at the moment to consider an entry, but certainly deserves a spot on the watch list for one of these days when it has settled down and created a new pattern.
PEET – More of a steady grinder, this one has actually built a couple of bases along the way up. It’s not in a place where I’d be getting long, but once it puts in some rest, it’s certainly one to revisit. Lighter volume than the others.
GMCR – At $95 per share, it’s a little rich (no pun intended) for some, but the uptrend is steady and this one continues to run. This year alone, we’ve seen 3 breakaway gaps which never saw attempts to get filled, serving as reminders that this one is very strong.
SBUX – The grandfather of them all might be kinda old, but he’s still got it! SBUX left a multi-month channel with a solid push higher a few weeks ago, tacking on nearly 15% over the past month. Currently it’s trying to put in a little rest, which is healthy to see. Once that’s done, don’t be surprised if another leg higher begins.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Stretched is an Understatement
July 8, 2011 at 9:19 am
To say the run of the past two weeks has made the market stretched to the upside is clearly a major understatement. It’s been a face-ripping rally for anyone caught on the short side, while underinvested bulls gnash their teeth in nearly equal frustration.
It’s been a tricky environment in recent weeks, yes, but there is still opportunity if you search for it. The momentum run has offered some nice day trades, even if it has left many stocks overbought on the daily charts. Even a few days of rest would do wonders for those charts.
Speaking of rest, this market is poised for it, but will we get it?
The reaction to the jobs number this morning offered the perfect sell-the-news scenario as extremely overbought readings (no matter how you gauge it) left the market badly in need of some profit-taking, some lateral price action, or both. While the result of the turn lower this morning remains to be seen, we do know this: the buyers are finally standing aside to take a breather at the very least.
Thankfully, as short-term traders we don’t have to predict what’s going to come of this market in the next few days. What matters is that we continue to work the charts and trade what’s right in front of us.
With that said, a pullback here for a few days or even some short-term trading range price action would help to establish some new patterns and bases from which to take multi-day plays, one way or the other. That may not mean excitement for a few days (if we do get a rest), but it would certainly mean greater opportunity on the other side of it. I, for one, am excited about that possibility.
Those who have walked away for the summer have already missed considerable movement, and yet the market promises more going forward. Are you ready for it?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
The Naked Truth About Your Trading
July 5, 2011 at 1:18 pm
If I asked you how your trading was last week, or actually even if I let you pick any other week of June, what would you tell me? Something along the lines of:
“…well, last week wasn’t really a good week to do that because I had (this or that) going on…”
That would be a typical response, and it’s one I’ve been guilty of answering with in the past. Excuses about your trading only delay the inevitable truth though, so they’re really not worth making. The fact of the matter is that your performance last week is the naked truth about your trading.
Uncomfortable? That’s what you’ll have to face if you want to get better. Your call.
You’re going to have to confront reality, and take a “typical” week and see if the results are anywhere close to what you’re wanting. If they aren’t, then your trading doesn’t look good naked and needs some help!
Your profitability as a trader is the bare naked truth about how you’re doing. Get equipped if you need to in order to improve. Get committed to cutting losses better or planning with greater precision. Get inspired if that’s what you need to move beyond mediocrity. But don’t sit there idle and expect your results to magically change.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
