Search Results for 'traders'

Welcome Barron’s Readers!

Just wanted to say welcome to all the Barron’s readers visiting TheStockBandit.net. Thank you for stopping by and I’d like to give you a quick tour of the blog so that you can get a feel for what I like to write about.

You can read the about page for more info on my background and this blog. I write a nightly stock newsletter over at TheStockBandit.com for traders wanting daily ideas, but I put out regular content here on the blog which I hope you find useful whether or not you subscribe to the paid service. I’m a technical trader, a new father, and I wear t-shirts to work!

As for the tour of this blog, you will find over 300 posts here from the past couple of years along a variety of trading subjects. I’ll run through a few highlights from the archives which you might want to check out.

Here are a few articles about my trading style…
*Deciding if a Stock is Trade-Worthy
*Small Mistakes = Small Consequences
*Goal Number 1
*The Day After
*Check Your Rolex
*Another Definition of Trading

A few articles on trading psychology…
*Slay Your Trading Giants
*Trading Discipline
*How Gaps Change Motivations in the Market
*When Bulls Become Sellers
*The 2nd Worst Feeling in Trading
*My Biggest Trading Fear
*3 Signs You Have a Pet Stock
*Gap Lessons: When Trades Get Lucky

Here are a few how-to articles I’ve written…
*How to Grow Your Trading Account (Part 1)
*How to Grow Your Trading Account (Part 2)
*Gauging Urgency in Chart Patterns
*3 Keys to Buying Dips
*Finding Short Sale Candidates
*Stop It!
*How I Use Worden’s TeleChart 2007
*Watch List Management
*Blending Your Style With the Current Environment

Regardless of what you choose to read about while you’re here, I hope you find it useful to your trading approach. This blog exists for that very purpose, so make yourself at home and come back often!

And by the way, if you’d like to subscribe to this blog, here’s the feed you can put in your RSS reader. There’s also a feed reader icon in the righthand sidebar which will do the trick, or just beneath it you can subscribe by email so that you won’t ever miss a post!

Thanks for stopping by to visit, and enjoy your weekend!

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, Barron’s[/tags]

How Pullbacks Help Build New Chart Patterns

The recent market pullback may or may not be finished, but it brings up an important subject which is why pullbacks within trends are good and healthy. Whether we’re talking about an uptrend like the one the market is currently in or a downtrend like we’ve seen before, prices don’t move nonstop in the same direction without taking some breathers along the way. Call them pullbacks or retracements or dips or whatever, but the fact remains that contra-trend moves certainly help to produce new chart patterns for potential new entries as the trend continues.

In the current market uptrend, pullbacks help to shake up the charts and allow them to reset. This creates new base-building opportunities for stocks which had previously gotten too extended to chase. As a stock goes parabolic and keeps climbing higher without a rest or dip, new buys become very high-risk.

I never want to buy a downtrending stock, but I do get excited when I see pullbacks come along. Even just 1 or 2 bars of downside within an uptrend can lay the foundation for a new base or chart pattern to build. Let’s look at an example and I’ll show you what I mean (click the thumbnails to see the full-size images).

The Uptrend

HANS has been trending higher at a rapid pace, hardly slowing down for new entries. Here’s a look at the run:

(Click for full-size image, courtesy of TeleChart)

The Pullback

A week ago, HANS sold off hard with a pair of downside spikes coming right off the highs, shaking up the overall appearance of the chart and signaling a temporary end to the nonstop run. Although traders who held the stock during the decline no doubt felt some pain, this kind of shakeup is exactly what can bring opportunity. The pullback itself doesn’t make a new base, but it does create the framework for a new base to mature from. Here’s a look at HANS post-pullback:

(Click for full-size image, courtesy of TeleChart)

The Rebuilding Phase

Since the dip, HANS has bounced again and currently is back near the highs. This allows us to draw two trend lines, one along the recent lows and the other along the recent highs, creating a bullish ascending triangle pattern. This hypothetical example shown below needs more time to mature and really develop fully before it would be a trade I’d take, but I’ve drawn in yellow bars to show how price might cooperate in order to allow this pattern to be complete. Some additional horizontal price action within the blue triangle would create a solid base from which a new advance could build on, while simultaneously providing a tighter natural stop-loss level as the triangle narrows. Here’s a look at one way in which this pattern might progress:

(Click for full-size image, courtesy of TeleChart)

I like the HANS setup and would consider taking it for a trade if it develops the way I’ve hypothesized, but the example should help to show you the kinds of things to look for after seeing a dip in the market or a particular stock which you’ve noticed climbing nonstop. The initial dip sets the base-building process in motion, and that’s always a good thing. Pullbacks should be a welcomed sight for any technical trader, and now you have one example of something to watch for in the charts the next time a dip comes along.

Trade well today!

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]

Technical Picture Improving

Last week MSFT the bulls produced a turn back up, bringing about the possibility that the short-term correction might be coming to an end. Each of the major averages poked above their pullback trend lines, setting the stage for another leg up to begin. This is of course looking at the indexes from purely a technical standpoint, so the bulls now have something positive going for them and will have a chance to build on it this week.

Speaking of this week….Halloween is sure to provide some excitement, and not just for candy-lovers like me. 😉 The real fun will be Wednesday afternoon when the FOMC announces its decision on interest rates and its policy statement, which the market will undoubtedly respond to. Big Ben certainly has the ability to shake things up, so although the technical picture is improving, come Wednesday afternoon all bets are off because it will really boil down to how the market likes what it gets from the Fed. Either way, the volatility isn’t likely to go away quickly, which means ongoing opportunity for nimble traders.

Regardless of your directional bias, be sure to check out this week’s Market View page over at TheStockBandit.com before you start your trading week for a closer look at the indexes and some chart comments which were posted this evening (and every Sunday).

Trade well out there 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]

When Good Trades Go Bad

Last week, the market took a turn for the worse. A move like we saw on Friday inevitably leaves more than a few traders caught off guard as they watch profits evaporate and losses escalate. Take for example the energy sector, which has been such a leadership group for many months. Numerous stocks within the group took quick dives after making 52-week and, in some cases, all-time highs. This likely left many traders scrambling to make a decision – sell or hold?

Many traders tend to gravitate to the strongest sectors and the strongest stocks within those sectors for trading. This is a good approach to trend-following, but what happens when a move like last week comes around and you get smoked? A reader e-mailed me over the weekend with valid questions about this very topic. Here were a few of my solutions. My answers were applied to the energy sector which this trader has been playing, but it applies across the board to those individual trades which sometimes just turn and misbehave.

When a trade goes bad, cutting losing positions has several benefits.

For one, it will free up cash which can be used for other trading ideas. If your capital is tied up in a trade in which you are wrong (losing), you are suffering opportunity losses. A cash position is better than a losing position (and cash IS a position). Other stocks could be showing you a gain, so consider at least partial sales to free up cash for new ideas, possibly even on the flip side.

Secondly, selling or lightening up on losing positions will help to free up your mind and help you start fresh. Leaving some mental baggage behind is always a good idea – none of us want it! Some of my worst stretches of trading were a result of having just one losing trade on my screen which I should have already kicked to the curb. I would turn my screens on in the morning and there it was looking back at me. This not only put me in a poor frame of mind to begin the day, but it had effects on other trade ideas I should have taken but was afraid to put on because I didn’t want to lose any more. A losing position should be cut down in size at a minimum, and often times should be cut completely. Starting fresh allows you to get back to your big-picture game plan of taking trades in good setups without the mental baggage of big, ugly losers which weigh down your confidence.

Finally, a losing position should be cut because you are flat out wrong. Naturally, stopping the loss will save your hide! Some traders refer to losing positions as “paper losses” and convince themselves of the old argument that “it’s not a loss until you take it.” This could not be further from reality, because the damage has already been done. The market is telling you what the stock is currently worth. Take some responsibility – those red numbers mean you’re on the wrong side and it’s time to get out and stop the pain.

So the next time your stocks take an ugly turn, remember to at least lighten up on your position. You’ll reap a number of benefits and immediately feel better about your next trade!

Don’t let a losing trade turn you into a loser!

10/24 UPDATE: Jonathan over at A Trade A Day expanded on this concept and has made some excellent points along these lines. Check it out.

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]

Breather Becomes a Beating

Last week I mentioned that the bulls were taking a breather, but the weak-to-choppy price action turned decisively sour on Friday as the selling intensified and the bulls got hammered to the tune of 2.5% or more across the board.

Obviously this implies more weakness in the short term and the need for further resting action before the buyers get back in gear, so the key at this point becomes capital preservation. Trying to catch this dip can mean getting your head handed to you, so be patient with new buys if you venture into the market on the long side. Then again, as individual traders we have the luxury of waiting for things to stabilize before buying again, so embrace that advantage. The big funds simply don’t have our agility.

As your trading week begins, be sure to check out this week’s Market View page over at TheStockBandit.com before you start your trading week for a closer look at the indexes and some chart comments which were posted this evening.

Trade well this week and always protect your precious trading capital!

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]

Earnings Are Tricky

The mother of momentum stocks is set to report earnings tonight, and I have no doubt that GOOG will shake and bake one way or another after the news is out. With the odds of a large gap tomorrow morning in the stock, the allure is there for some fast profits on either the long or short side.

On that note, I know that some of you feel compelled to satisfy your craving for risk. If that’s the case with GOOG, then let me encourage you to define your risk and limit your downside exposure through a call or put purchase. If you absolutely can’t stand to pass up the gamble opportunity, then at least you’ll know what the worst-case scenario will be in case you’re wrong.

Personally, I like to save money and confusion by avoiding earnings plays. That might not sound very exciting, but I’m not a trader for the excitement. I like making steady profits with consistency, not roller-coaster emotional swings betting on coin-toss earnings reports and hoping to be right.

They’re just too tricky to play! Not only do you have the reaction to the top-line number, but soon after there is a reaction to the conference call & any guidance that may be offered. Don’t forget that expectations going into the report play a huge part in how the news is accepted, and someone’s sure to be disappointed or surprised. In addition, there are far fewer traders in the after-hours trading session, which means less liquidity. That’s a really bad thing when you discover you’re wrong and need out of a trade!

Best bet: stay away from earnings and let the amateurs duke it out. Instead, find the chart patterns you like and trade them. Exploit your edge over time for profits, and don’t worry about the gambles for the sake of excitement.

Trade with discipline!

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]

Time For A Top?

So, is it time for a market top? Is this the start of the big one? Has the run ended and now the only place to go is straight back down?

Honestly, I don’t think so yet. I’m never one to make predictions, but let’s hash this out for a bit and see what kind of logic we can come up with.

First, the case for the bulls. They have the momentum, the charts and new highs. That might not sound like a ton, but in this game momentum is everything. With higher highs in place, uptrends intact, prices well above key moving averages, and buyers oozing with confidence, the bulls could hang around for a while before they feel compelled to really raise excessive cash. Although they might stumble a bit by way of profit-taking, some major changes are going to need to occur before they actually break a leg and fall, and I’ll be keying off the charts to make that determination.

Now, the case for the bears. I could simply say “China” here and that would be enough I know, but that’s not all there is to the story. Obviously, stocks with virtually any ties to the Far East (including their names alone) have made incredible runs, as have the solar stocks. In fact, speculation has run rampant in a great number of the smaller stocks, which in itself tends to raise some eyebrows from traders who know that they can’t provide leadership for a lasting run. We also have a bull market which just turned 5, so there are plenty who can argue that perhaps the advance is getting a bit long in the tooth. Furthermore, there’s the debt crisis, economic concerns, and a host of other fear factors which are pointed to regularly as potential causes for meltdown. At the end of the day though, these are simply arguments which I should note that the market is largely shrugging off.

The verdict? Of course the market always has the final say, and I will definitely defer to the price action when it comes to my trading decisions, but I’ve gotta go with the bulls based on the limited evidence we have of the selling we’ve seen in recent days. We’ve seen some distribution taking place, but so far no major technical damage has been done, and everyone can agree that even strong trends have bouts of profit-taking (just as downtrends have bounces) along the way. Will we go up forever? No, there will be bear markets in the future. I simply am not convinced that the past few days of selling is marking the beginning of a new bear market, as there’s no technical reason to call for an end of the trend.

Earnings season is just getting underway, and that could certainly have an impact on not only prices but market psychology as well, impacting the motives of both bulls and bears alike. Ultimately though, price has the final say and right now the long-term and intermediate-term trends are pointing up, in spite of some short-term profit-taking.

I believe prices simply got too extended in the short term and that some profit-taking is warranted. At TheStockBandit.com, we moved to cash last Wednesday and are letting this corrective price action play out without us while we wait for new bases to build. We’ll be looking to get active again before long, but for now the market weakness is causing us no pain.

Stay vigilant with your trading capital and don’t simply throw caution to the wind. Respect the pullback. Be wise in not only cutting losses quickly but also in booking profits along the way. If you’re playing the momentum game, be careful and keep one finger on the eject button. Let the charts guide your decisions, from entries to exits, and as long as you do that, you shouldn’t even be concerned which direction things go from here.

Trade well out there!

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]