Author Archive for Jeff White

Implementing the Time Stop

September 15, 2009 at 10:03 am

Staying patient with a position can sometimes pay off nicely.  After all, not every trade works out exactly when we want it to. It might require a little more time than we originally expected before we see that P&L turn the shade of green we were looking for, and it’s sure nice when that happens.

But there is a flip side to the coin.

Sometimes you can be overly patient with a trade, giving it more and more time (dare I say too much?), just waiting for it to make its move.  And I’m not referring to letting it move farther and farther against you – you know better than that!

I’m talking about the trade that simply goes nowhere.

Fortunately, there is a solution to the flatlining trade, which is to implement a time-based stop.  This is essentially a countdown placed on the trade, that if nothing happens by a certain time, then either an adjustment is made to stop & target levels, or the trade is simply closed out.  You know – so you can move on with your life!

After all, why tie up capital in a position which isn’t performing as expected?  Kicking a stagnant trade to the curb can translate into more money to be put toward another opportunity, plus it enables us as traders to put our attention toward something more worthwhile.

Show Me the Money!

Just this week I faced this dilemma.  I was swing trading SHLD on the short side due to the breakdown from a bear pennant pattern (see chart 1 below), but aside from the initial weakness, there was no follow through (see chart 2 below).

I had designated 2 targets for my exit, and of course 1 stop loss in case the stock reversed and went back above resistance, but none of those levels were reached.  The stock refused to go down far enough for me to start booking profits (according to my trading plan), and yet it wasn’t bouncing enough to stop me out either.

Chart 1:

StockFinder Chart courtesy of Worden

Chart 2:

StockFinder Chart courtesy of Worden

Although SHLD was certainly underperforming the market, and I felt confident if market weakness ever arrived that SHLD would crack pretty good, that never happened.  The stock simply formed a trading range, and I began to realize it was essentially a stagnant trade.

Time to Move On

Over the weekend, I decided I’d give the stock through Monday before making any moves, and so when it remained in its range, I tightened my stop heading into Tuesday, and today as the stock reached my adjusted stop I closed the position for a minor loss.

I know what some of you are thinking… Why give up on what might eventually develop into a good trade?

Don’t think of this as surrendering or giving up on a trade, because I know that can be difficult for traders who don’t mind being patient.  Rather, consider it your responsibility as a trader to keep your capital working for you in the best manner possible.

That means putting it at risk when there’s a good possibility of profiting, and it means protecting it from risk when that potential isn’t present.

The longer we’re in a position as traders, the more we become exposed to company-specific, unplanned news…a surprise, if you will.  Leaving a position at risk indefinitely raises the likelihood that news will eventually push the trade one way or the other.  The problem with that is that a trade initiated from a technical standpoint should not evolve into a trade which is hopeful for news to make it move.  We want real selling or buying to be the deciding factor, and when that turns stagnant then the basis for the trade is negated.

So as you work through your position sheets this week, consider whether some of those stocks are merely resting or if instead they’ve completely lost momentum and are now simply range-bound.

Do your best to determine if a little more patience is needed, or if instead a little less patience is warranted.  Time is money, especially for a trader.  It might be time to put that trade on the clock and set a deadline.  A far better trade just might be waiting for you.

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 9-13-2009

September 13, 2009 at 2:58 pm

Although last week was an abbreviated trading week, the bulls wasted no time in getting back to work.  In the process, they propelled the indexes to new recovery highs, reaching levels not seen since last fall.

Needless to say, that keeps the uptrend very much intact, but it doesn’t mean reckless buying is warranted here.  In fact, in the near term the market has become rather extended, and some rest and/or profit taking could easily develop.  And actually, that wouldn’t be such a bad thing…new bases could be established after some rest which would offer a new mix of potential plays.

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 9-7-2009

September 7, 2009 at 3:55 pm

Hopefully your Labor Day holiday was a good one!  Mine was spent with family, relaxing and celebrating the 2nd birthday of my son – a great way to completely forget about the market in fact!

But it’s time once again to gear up for a brand new week of trading, and I’m excited about it.  With Labor Day now behind us, seasonal volume should ratchet up in the weeks ahead, bringing along with it some stronger momentum – regardless of which direction this market moves.

Let’s examine some important levels in the indexes to keep an eye on in the days ahead, as that will have the greatest influence on how individual stocks are going to move.

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?

Stack the Odds for Daytrading Success

September 3, 2009 at 5:04 pm

Trading is all about stacking the odds for success.  Risks must be taken in order to get paid, but the key is gauging under which circumstances the potential reward really outweighs that risk.

I discussed taking risks in a recent post, and I felt that a follow-up and an example of what I was referring to was in order.  Here it is.

Many of my trades are continuation plays.  They can be great for offering situations which warrant putting some money on the line once clues of a continued move are present.

However, there are many opportunities on the intraday timeframe which are exhaustion/reversal kinds of setups.

Buy or sell programs, news, and just plain old momentum drive stocks far beyond the pain thresholds of traders, carrying price a considerable distance in one direction or the other.  That opens the door for some recoil, and catching the turning point can be quite lucrative.

Stacking The Odds

Here in a moment, I’m going to show you exactly what I mean in a video, but first let me outline a few keys which combined to produce a great trade in this situation.

• Corresponding market action.  With the indexes having a distinct possibility of a short-term turnaround, conditions were ripe for similar price action in individual stocks.  This is a point I make over and over in the weekly index videos.
• Prior key level on the daily chart of this stock was being tested.  A huge intraday move which carries price right to a previously important level on the daily chart will increase the odds for a quick recoil move.
• Intraday price action suggested the move was becoming exhausted.  That indicated that a reversal could quickly develop in the stock.

Here’s a video explaining it. Select the HD option and go full-screen for best quality:

Stack multiple factors in your favor for a great trading situation.  They’re worth waiting for!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or Facebook to keep up!

Video Review of the Indexes 8-30-2009

August 30, 2009 at 2:02 pm

The bulls had a wonderful opportunity to thrust the market higher last week, but they passed it up.

Instead, they merely provided support on the dips, preventing any downside damage from being done.  It wouldn’t have taken much to push the indexes to new recovery highs once again, but the light-volume action which is so prevalent in late-August conditions prevented any momentum from gaining traction, leaving us in a holding pattern.

This week, we could see that change.  The bears could reassert themselves and spark a selloff, thereby giving the bulls something to ponder over the coming 3-day Labor Day weekend.  Or, the bulls could simply return to business as usual and keep on doing their thing.

Let’s examine some important levels in the indexes to keep an eye on in the days ahead, as that will have the greatest influence on how individual stocks are going to move.

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?

Reversal Characteristics & Candidates

August 25, 2009 at 12:30 am

Stocks can reverse suddenly or slowly.  Sometimes it takes place in one big bar, and other times it’s a process that occurs over time.

Because there are differences in how downside reversals can happen, after running across a couple of reversal candidates in the charts, I wanted to share a couple here on the blog.

Uptrends will often times be followed by corrective action, which may pave the way for further upside down the road.  But a reversal is often a longer-lasting change of direction, and that’s what I’d like to discuss in this post.

When looking for reversal candidates, the thing to watch for is a change of character.  Something that’s different from previous dips and stands out as a potential shift in the stock.  That might be a lower high, or it might be a sudden decline which proves to be much sharper and faster than previous pullbacks were.

Show & Tell

In the video below, I want to point out 2 stocks which might be undergoing reversals.  That means there’s plenty more to prove before they can be considered to be in corrective mode (as opposed to merely a dip within their uptrends), but chart reading is always a work in progress.  If the characteristics which we’re seeing now happen to change, then so should our expectation.

For now though, let’s take a look at what’s going on and see if these show us the necessary price moves to confirm what the charts of FUQI and RL may already be saying.

Here’s a video explaining it. Select the HD option and go 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 8-23-2009

August 23, 2009 at 1:38 pm

Following a rest phase after the big run from the July lows, the indexes threatened last week to break down, only to reverse higher and breakout instead.

As the bears got trapped, they were forced to cover shorts while the bulls seized another opportunity to push the major averages to their best levels on the year.

But just as the bears saw a false breakdown last week, this week all eyes will be on the bulls to see whether they’ll be able to produce the necessary upside follow through to avoid a similar trap.

Let’s examine some important levels in the indexes to keep an eye on in the days ahead, as that will have the greatest influence on how individual stocks are going to move.

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!

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?