All Entries in the "Chart Reviews" Category
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?
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?
Trading Webinar Archive Now Available
June 11, 2009 at 7:04 am
Thanks to those of you who were able to make it on Tuesday for the webinar, I really enjoyed it and the turnout was great. Hopefully you learned a lot during our time together, as well as added quite a few stocks to your radar for possible plays going forward.
Many of you have mentioned though that you were unable to attend for various reasons, so I wanted to be sure to let you know that the archived recording is now available.
Here is the link to the recorded webinar.
(Right-click the link, ‘Save Link or Target As’ to desktop)
Even viewing this after the fact should still offer some insights on the kinds of setups you can locate with a good charting program, as well as what to watch for when seeking out plays.
Stated otherwise, some of the stocks we looked at during the webinar have already moved, but you’ll find them to be good examples as you continue to hone your charting skills.
Enjoy the show (it runs an hour) and see you back here soon with more!
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]
Reminder: Webinar Tonight!
June 9, 2009 at 10:50 am
Here’s a quick reminder about tonight’s free trading webinar, as I would love to see you there if possible.
Chart Reading with TheStockBandit
I’m excited to run through a number of interesting chart setups, from both the bullish and bearish sides, in order to teach you some concepts and of course put some quality plays on your radar.
The webinar is scheduled to run 45 minutes, with 15 of those minutes set aside at the end for Q&A and a look at your favorite charts.
Visit this link for registration to the 8pm ET webinar:
Chart Reading with TheStockBandit
See you tonight!
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]
Free Webinar This Tuesday June 9th
June 7, 2009 at 4:05 pm
I wanted to be sure to post a quick announcement here that I’ll be presenting a Free Webinar this Tuesday (June 9th) with the folks from StockFinder, and it’s gonna be fun so I hope you can join us!
Chart Reading with TheStockBandit
It’s scheduled to be a 45 minute webinar and for the first 30 minutes I’m going to be working through quite a few stocks of interest, pointing out to you what I’m seeing in the charts for both bullish and bearish candidates.
The final 15 minutes is going to be Q&A time where you might want to bring forth your favorite stock and we can take a look at those too.
I certainly do not have all the answers, but it’s going to be a chance for me to convey what I’m seeing out there and hopefully not only teach you a few things, but also put many stocks on your radar which you might find interesting.
Oh, and the best part about it is that this event will be FREE, so be sure to register at this link for details:
Chart Reading with TheStockBandit
Remember, free webinar this Tuesday night, 45 minutes of charting reading with you and me – I can’t wait!
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]
We Now Interrupt Your Normal Programming
May 14, 2009 at 7:21 am
Perhaps the automatic buy button got disconnected somehow, but Wednesday’s decline marked the 3rd consecutive decline in as many days – something we’ve not seen since early March when this market caught fire for 9 very green weeks.
And although a 3-day losing streak is far from the worst thing this market could see, it begs the question of whether or not it’s the beginning of, um… a change of character.
A short-term turnaround.
Ok, a reversal, to put it bluntly.
After all, a pullback is going to happen eventually which lasts for a few weeks – not just a few days, and now might be just as good a time as any for that to happen.
No Crystal Ball
Now, I’m not one to make big bold predictions, but some of you might recall that on the day of the low in March – yes, 9 weeks ago – I showed you right here the “technical threat of a short-term reversal.” I wasn’t going out on a limb, just calling it as I saw it.
It turned out pretty well.
So here I am again, simply pointing out what I see.
And if this does prove to be the early portion of the first meaningful pullback we’ve seen since early March, it’s important to first recognize that it would be a healthy event. The strongest markets do have pullbacks along the way, and that actually can help to perpetuate a trend.
Think of it like a rest – nobody can run nonstop forever, and the market is the same way. Some time on the bench can be a good thing.
Winds of Short-Term Change
This question of whether conditions are shifting or not is at the forefront of the discussion right now. Most individual stocks will take their cues from “the market,” which is developing a bit of a rolled-over appearance on the daily charts here, I might add. Stated otherwise, it might play out to be more than merely a 3-day dip, with a pretty big if. (See the caption on the chart below.)
StockFinder Chart courtesy of Worden
3 Positives of a Pullback
And so it may very well be that a decent correction is finally starting here, which if it does, could serve to do a number of things – all of which are good. Assuming we don’t go straight back to the March low, that is. Here they are:
1. The widespread overbought conditions we’ve seen for the past several weeks can finally go away. That means when a bullish setup appears, it’s less likely to need a “stay away” sign in front of it for those of us who prefer to manage our risk accordingly.
2. Stocks should (once a good pullback is completed) be able to set up some new bases, patterns, and support zones for trading. While this might take more than just a few days, it’s ultimately great news – especially if your preferred timeframe is swing trading. The stocks which have produced nothing but steady climbs without rest can finally pull back and establish some new support – like a higher low. Combined with the higher highs we’ve already seen in recent weeks, that would keep the uptrend intact.
3. A meaningful pullback is going to help separate the men from the boys. During this run from the March lows, few stocks have failed to participate. It’s almost like everybody’s doing it. It seems virtually everything has joined in the rally, making it difficult to determine which stocks are merely being squeezed higher and which ones are developing into true, lasting leaders. Separating the also-rans from real leadership should help to narrow our focus as traders, and give us higher quality plays on both sides of the tape. That’s something we all stand to benefit from, whether bull or bear.
So in closing, let me just say I’m no perma-bear. But don’t hate me if I’m rooting for a little more of a correction here. It sure doesn’t have to last forever, and I think it’ll lead to much better things for those of us trading this market.
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]
7 Trading Lessons from the Masters
April 13, 2009 at 1:58 pm
As a trader who loves my job, I find it difficult to witness any big event without looking for some parallels to trading. The sports arena is one of those places, and it doesn’t take much of a stretch of the imagination to recognize frequent lessons that are applicable to trading.
Just about anytime someone’s talent or emotions are being tested, you’re likely to also gain some insights which can help your trading.
This past weekend in watching the Masters tournament, I couldn’t help but notice a few things about some of the players. Here are some of the things which caught my attention and the corresponding lessons…
1. Some days you don’t have your best game, but grind it out anyway. Tiger was a little off all week. He verbally discussed it, but it was also easy to see if you’ve watched him at all when he’s at his best. But in spite of not having his “A” game, he chose to grind on every shot and concentrate as much as possible. He came up a little short, but he had a chance on the back 9 on Sunday – which he admits is all he ever wants. What if you’ve done the same all week with your trading by the time Friday afternoon rolls around – do you think you’d be satisfied?
2. Stick with your style and be confident in your approach. Jim Furyk isn’t a long hitter compared to the guys he’s competing against, so he of all people is not going to overpower Augusta National. He had to lay up on some of the par 5’s, but he kept to his strategy and it put him into the mix with a chance to win come Sunday. Waiting for your setups to come along as a trader means not attempting unfamiliar approaches or those which don’t work for you. Trust your method!
3. When you’re hot, ride it – and enjoy the moment. Anthony Kim at age 23 is just one year older than Nick Adenhart, the Angels pitcher who died tragically last week. Recognizing the similarities of not only their ages but careers as professional athletes, Kim was touched by Adenhart’s death. Thinking of how brief life can be, Kim decided to enjoy himself and put life into perspective. After reading about Adenhart on Friday, Kim went out to set a Masters record by making 11 birdies in a round. He got out of his own way and allowed his talent to take over. When you’re reading the market well and your trading is on track, trade a little bigger and see what happens. It’s only trading.
4. Take your lumps with maturity. During the second round on the 15th green, Padraig Harrington addressed a short birdie putt when a gust of wind moved the ball. In accordance with the rules, he replaced the ball to its original position with a 1-stroke penalty, and made his par putt. Having won the previous 2 major championships and having been in good shape on the leaderboard Friday, Harrington would have had plenty of reason to be upset or shaken. But he went on about his business, not allowing a bad break to rattle him. When a good trade suddenly reverses on you or unexpected news costs you money, accept it like a mature trader. Keep plugging away with unflappable confidence.
5. Embrace opportunities with confidence. Kenny Perry has been close before in a major, having been beaten in ’96 in a playoff during the PGA at Valhalla in his home state. He’s won a number of times on the PGA Tour, and worked himself into the lead during the Masters. Success would have meant he’d become the oldest winner of a major championship, as well as his first major win. Facing the opportunity which Sunday brought along, Perry knew he’d either succeed or fail. And he relished the chance to walk that fine line. Trading afraid or scared won’t bring the success you crave. View every chance as an opportunity to build greatness, and face it head-on.
6. A little bit of nerves are good. Chad Campbell found himself right in the mix all week as he searched for his first major victory. When asked by the press about his nerves being on such a big stage and facing such a huge opportunity, he openly admitted that he had been and would be nervous. He also noted that having some nerves are a good thing, that they show you’re intense enough to care. When you find yourself nervous over trades, is it because it matters to you or is it because you’re afraid?
7. Don’t let a poor start steer your day. Angel Cabrera struggled early on Sunday as he found himself playing in the final group. At 1-over par through 5 holes, he was playing worse than everyone else on the leaderboard, losing ground and clearly uncomfortable. But he settled himself down and played solid for the remainder of the day, finishing with 3 birdies in his last 6 holes to get into a playoff – which he eventually won. Allowing your first few trades of the day or the week to define you isn’t the best course of action. Even if your year is off to a poor start, you can still salvage success. Stick with your game plan and trust that your experience and effort will pay off. Your attitude is a weapon – either you hurt yourself with it or you use it to your advantage.
I hope your trading week is a great one!
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]
