All Entries in the "Trading Tips" Category
Something Special in GSM
October 29, 2010 at 11:38 am
Globe Specialty Metals has shown some special characteristics in the past 2 months (pardon the pun), and it may not be done yet.
Yahoo! Finance is showing an earnings reporting date of November 8, and that event could certainly prove meaningful – one way or the other. However, as a technical trader, I’m only interested in avoiding the stock on that date given the impact which such major fundamental news can have on a stock. This may not be a long-haul type of stock anyway, but with the price action of the past several weeks it deserves to be on the radar for a possible trade.
Watching for Movement
GSM is acting quite well from a technical standpoint. First, the stock has rallied big over the past two months, adding more than 50% to its value during that stretch. Second, and perhaps more importantly, it has put in some well-deserved and needed rest over the past two weeks, pulling back quietly and churning to digest its recent run.
That dip has allowed weak holders to dump shares while others have stepped in with bids to offer support. Shallow pullbacks and coiling price action also prevents the stock from becoming too extended to the upside. Momentum is good until it gets out of hand, at which point pullbacks tend to become all-out reversals. Healthy trends need rest, and this one is doing just that.
I’m looking at this one for a trade on the long side if it’s able to break out through the trend line at $15.50, and would expect a quick push up to new highs. I’ll of course look to be out of it ahead of the earnings report, as holding anything into such news is merely a gamble. On a technical basis, support has been found in the $14.50 area, and we could see momentum return if the trend line gets cleared.
Here’s a closer look at the chart of GSM for you:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Narrow Your Scope With Basic Stock Filters
October 27, 2010 at 11:09 am
Each night I work through literally hundreds of charts, aiming to find those setups with an edge. They’re the ones which allow me to not only clearly define my risks, but also offer potential profits which greatly outweigh those initial risks.
I’m asked quite frequently by traders how I narrow down the universe of stocks to a more manageable list. The short answer is to start with price and volume filters in order to eliminate the low-dollar stocks, as well as those with poor liquidity. That alone will give you stocks to consider which aren’t as highly-speculative as penny stocks, as well as stocks which are liquid enough that there should be a buyer when you go to sell and a seller when you go to buy.
Beyond those basic filters though, you may still wish to narrow the list. In the charting program I use, dozens and dozens of additional filters are available. Among them are things such as Beta, Trade Range, Average True Range, Expanding Trade Range, Contracting Trade Range, and a lot more.
Just that brief list is enough to help locate stocks which move faster than the broad market, or to eliminate names which simply don’t move enough.
Base Filters on Broad Market Movement
When dealing with ‘trade range’ types of filters, you can accomplish a lot. For example, you might generally use Average True Range to knock out stocks which don’t fluctuate much, helping you to eliminate the ultra-quiet stocks. When the market is starting to break out, look for Expanding Trade Range to help you locate stocks which are likely participating in the move or gaining momentum. When the market has made a big move already and is beginning to rest, use Contracting Trade Range to locate more stocks which are basing and may be starting to create patterns.
Don’t seek a one-size-fits-all filter, because it doesn’t exist. Keep an open mind, and put some thought into what it is you’re wanting to find. Stay flexible in your approach, and you’ll continually be able to avoid wasting time sifting through stocks which aren’t worth a second look.
The key to effective filtering is to learn over time how and when to vary the filter you’re using based on general market conditions. As you develop that skill, you’ll get really efficient at narrowing down the universe of stocks to a more manageable, appropriate list, depending upon whatever conditions you find yourself trading in.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Stay Sharp
October 25, 2010 at 12:52 pm
A year ago, I was in a surgeon’s waiting room. He was running late after having to do an emergency appendectomy. He hadn’t overslept or blown off his appointments for a tee time – he was operating, just as I’d expect a surgeon to.
With scheduled surgeries on the calendar, as well as the emergencies which inevitably pop up, he wakes up every day knowing he must be on his toes. He has to be prepared for whatever comes along. Routine procedures will even occasionally throw the proverbial curve ball his way, and he’s the one that must respond accordingly for the well being of his patients.
Some of you might be surgeons, but I’m confident that all of you reading this are traders. And at this point, hopefully you know exactly where I’m going with all this.
Maintain Your Edge
As a trader, it’s important that you stay active and stay sharp. You’ll of course take vacations (hopefully of the exotic type) and have times when life calls your attention elsewhere temporarily. That’s fine, and I’m certainly not suggesting putting your trading before all else – that would be unhealthy and out of balance. I’m all for maintaining perspective and priorities. However, if you truly want to get good and continually improve, you’ve got to be in the game on a regular basis to some extent.
I attended a couple of preseason NBA games this week. During the offseason, one player in particular had just signed a huge contract. Now, preseason games don’t mean anything at all. The fans love them, of course, but they’re generally treated like scrimmages and an opportunity for teams to start developing some chemistry after a few months apart.
Watching the game, it was quite clear who’s been working hard over the summer and who probably took the mindset of “it’s a long season, I’ll eventually get sharp.” The aforementioned big-contract player was of the former attitude. It was clear he worked on his (already great) game, and he was eager to get all the playing time he could – even in a preseason, so-called meaningless game.
This guy wants it, and he shows up to play every time out. In terms of dollars, he’s long since arrived and would have a hard time spending what he’s already amassed. But money is not his sole definition of success, and it’s clear in how he plays the game.
Plan & Play to Win
As you reflect on your trading, I wonder if you’re seeing some glaring problems standing in the way of your success. Some take more time to work out, such as learning to accept a loss or understanding the times when sizing up isn’t appropriate. But if it’s just more “minutes on the court” that you truly need, that’s a much easier goal to reach…and one which will pay many dividends.
The end of the year is approaching, but it isn’t here yet. You’ve still got a couple of months before you’ll need to review 2010 and look ahead to 2011 and set appropriate goals. That time will come.
For now, you still have time to make 2010 better. You still have time to gain some momentum into the end of the year, so that you can hit the ground running when January hits. But you’ve got to look at each day as an opportunity to grow.
Let me be clear though – it won’t happen from the sidelines. You’ve got to make it a habit to be in the market regularly. Modify your timeframes if you need to, and trade small when you’re struggling to get a feel for the tape, but be active, stay sharp and on your toes.
Surgeons operate, and get their hands (gloves) dirty. Athletes play and sweat and push for improvement. Traders trade and face the pressure and find ways to grow. The best simply do not allow themselves to go cold.
Earlier this year, I completed a major trader training project which required a lot of my time. It took a few months to finish it all. I could have cut that time at least in half, but I maintained a daily devotion to trading, even in the midst of a big undertaking.
I write blog posts like this one every week, and I produce a nightly stock newsletter for subscribers over at TheStockBandit.com. I’m a husband and a dad, and trading isn’t my entire world. But I’m in the market every day, moving my money into and out of opportunities as I see them. It’s the focus of my work day, and it’s what my evening preparation points to. Staying in the game is how I stay sharp.
Are you doing the same?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Trading vs Investing
October 7, 2010 at 11:42 am
A recent email exchange with a new subscriber brought forth some important concepts I want to share here on the blog. Among this guy’s comments were the following:
“I’ve decided to take more control of my money and future after investing for several years with a financial advisor. I’m sitting on a lot of cash..in setting up my portfolio should I scale in and out of some core positions in a separate account? Currently I feel as though I’m under invested, and it sucks to watch undisciplined investors make so much money. I guess the real question is, should I trade my entire account or should I trade some and invest some?”
During any nonstop rally like we’ve seen from the August lows, this is a natural reaction from a trader who has exercised good discipline. Sometimes it seems like it would pay better to just be ignorant and chase extended market moves like this one! Unfortunately though, that’s not an option for anyone who understands the two-sided coin known as risk.
Taking the ‘ignorance is bliss’ mentality may be great on the way up, as every gap higher and afternoon recovery adds to the bottom line. However, when the tide shifts and the tape gets painted red, it’s a recipe for feeling helpless and stupid for not exiting when the opportunity was there.
The Best of Both Worlds
I’m all for people taking control, because many financial advisors simply want to ‘outperform’ the market rather than make money – the only reason to have money in the market to begin with.
Here’s what I personally do with my money in order to benefit from both the short-term fluctuations and the longer-term trends which occasionally emerge…
I like to diversify my timeframes. I don’t trade Bandit setups with all my money, but I do direct all my money. By that I mean nobody else manages it for me. What I do is devote a chunk of it to my short-term trading. I want enough of it available there that no buying power issues arise, and so that I’ll have plenty of cash available to put on any trades I like.
I also take a chunk of money to devote to intermediate-term ideas, so these are plays which I like for the next few months but not short-term or long-term. I’m riding these out with smaller positions, wider stops, and I’ll often exit by way of shorting options against my common.
Finally, I leave money in long-term accounts (retirement accounts) where all I do is trade ETF’s for durations of 6-18 months. Those long-term plays are simply to have market exposure when I feel a big-picture trend is present which I want to be on board for, but do not want to react to every tick. For example, earlier this summer I was buying ETF’s for a bounce, and more recently I’ve been reducing exposure there (by selling to raise cash) and getting called out of those trades after selling calls against those positions.
So for me, dividing funds into different timeframes is really helpful. Also, I maintain separate accounts for these differing timeframes. That means I don’t login to my day trading account and each time see a 6-18month ETF play I’ve been in for 9 months and get tempted to exit after a 30-minute selloff. It is a little more to keep up with, but helps me avoid feeling like I have a lot of cash going unused.
Think of day trading with a stopwatch, swing trading with a clock, and position trading with a calendar. Each can be an effective way to watch the time, and they can all be used simultaneously.
If lately you’re feeling underinvested after this market run, you certainly aren’t alone. It’s a frustrating feeling, but there will be other trends to participate in, and one of these days you’ll be very glad to have cash on hand to put to work.
Any other thoughts?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
One Intraday Setup That’s Working
September 28, 2010 at 9:38 am
In a world dominated by algo’s and machines, the astute trader can still turn a profit. It’s true, despite what many losing traders might tell you.
It takes adaptation, some ingenuity, imagination, and of course, thinking outside the box. For the creative trader though, new patterns will emerge from which profitable trades can be made.
So today, I wanted to point out to you one such example. I won’t name the stock, because it doesn’t matter, but here’s the chart from the opening 50 minutes or so:
As you can see, this stock gapped higher, ran a little more initially, and then began to roll over. The selling intensified as new lows were made on the session, and the gap began to fill before a brief period of rest set in. But that wasn’t the end of the story. Conventional day trading wisdom says this gap keeps getting filled, but only if another new low is made with a break of that intraday support.
Lately I’ve noticed this kind of setup – and you can reverse it with a downside gap if you’d like – offering some good plays. I had one finger on the trigger to short sell this one upon a break of that support, but it held just above the whole number. As the stock started to catch a bid, I went long with a very tight stop – only $0.06 from my long entry. And only 10 minutes later I was flipping out my shares for a quick $0.50 winner.
** For those wondering, that’s a reward-to-risk ratio of better than 8:1.
This setup offers two things I really like…
First, it offers very minimal, defined risk. If support (or resistance in the case of a morning gap down) gives way, I’m out quick for a small loss.
Second, it offers a great pivot area where emotion is building. The battle that took place at support was really something, and once one side began to win out (in this case the buyers), it sparked a quick move away from that level.
So, keep an eye out for this setup – it’s been a great one to trade. Gaps which only partially fill before hesitating at a level just might offer you a quick, profitable reversal play like this one.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
How and When to Use Moving Averages
August 22, 2010 at 5:42 pm
Price action provides me with chart patterns to trade from, and usually, that’s enough. However, occasionally I’ll see a situation where adding a basic indicator can really help out.
Many traders rely heavily on indicators, and while it’s my style to keep my charts nearly bare, indicators can be helpful. I think where traders tend to get into trouble is when they rely solely on the indicators, rather than seeing how they confirm or deny the overall price action.
If you’re looking for a one-size-fits-all indicator to rely on in all market conditions, or which all stocks will respect, you’re going to be looking for a very long time! However, if you’re willing to learn when, why, and how to apply indicators to your charts, they can be an aid to your trading process.
In this post, I want to show you how and when I use moving averages when eyeing potential trades. It’s a very basic indicator, but when there’s a trend present, it can help you gauge momentum, as well as help you decide on entries and exits.
Let me suggest going full-screen with the ‘HD’ option for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Interview Archive with Charles Kirk
July 30, 2010 at 2:20 pm
Today’s live interview with Charles Kirk of The Kirk Report was a lot of fun, and I hope you were able to join us for the discussion.
