Satuki @ Home

Send me your favorite stocks. If you already have my email, send it directly to me. If not please use the contact form here. I will then select one of them and do the following

• My Technical Analysis for swing trading them
• How I would take on them assuming that I not have a position in it
• Post these 3 on my blog so others can benefit too

Your picks must meet the following criteria

1. Above 10 dollars
2. Traded on NYSE, NASDAQ and AMX only
3. Last volume traded is above 500k
4. No leveraged ETFs.

So far, I can only provide this for short swing trades(3-7 days). In the future, I will probably provide my takes on long swing trades(10-30 days)if I have enough energy.

As for day trading, there is no way I can do it. Most stocks I trade move just too fast for me to provide anything meaningful to you. Thank you for your understanding.

Dow was down 200+ points in the AM and had a dramatic reversal toward the end of the day. The reason was that there are some rumors that the President is working on a plan to subsidize mortgage payments for troubled homeowners. No matter how you look at your charts, you can not predict something like that unless you trade inside information which is totally illegal. There is no need to over-analyze your charts. We react to news which is reflected in price action. We can find out the “why” after the market is closed.

My accuracy today was only 50%. I took 4 trades, 2 tiny losers and 2 big winners. I am up 1200 for the day. Let’s take a look at the first 2 losers. TZA had a ugly chart. I did not realize that after I opened a long position in it, my stop loss was around 3% for both TZA and FAS. When TZA rebounded, I quickly got rid of it since I had realized that the chart was super ugly by then. However, FAZ was fine. So it stayed. Nothing exciting happed to FAZ before the noon. So I closed it with a tiny loss and decided to look for a good entry in the PM. I dislike stocks that keep chopping around. I love movers. Who doesn’t?

After a sweet little nap, I woke up fully re-energized. Nothing was too bad in the AM. I just lost 50ish. FAZ went up big when I was napping. I was thinking that the SRS trade repeated again. It moved without me. How dare you MR. FAZ? It was up close to 17% by then. I was thinking how much more up it could go. So I test shorted 200 shares at the first sign of resistance. And I added 200 more on its way down. I was going to add 800 more to make it 1000 in total. But I pulled back thinking why I need to take the risk. I am already up nice this month. One of my rules is to scale back on a winning streak. So I had a total of 400 shares of FAZ short. It turned out to be a great trade although i left half money on the table. After FAZ started to drop, I was chanting something like “No Fear, No guts No glories” on Twitter. That was all bravado as you can see how quickly I covered. But still I was up 6% on that trade. LOL. See my full daily updates on StockTwits

I opened a swing long in ERX. Let’s see how it plays out. On a side note, I made 6 dollars in HES after 9 days. In fact it hit my standard 15% profit target. So I was up 1500 on paper in HES. But somehow, the order was not executed. One good thing about not looking at my swing account during the market hours is it helps me control my emotions. One bad thing is sometimes the software just malfunctions. My target for leap is 20% minimum.

ALL Triple Leveraged ETFs in order of liquidity are here. Day Traders could not be happier! If I missed any other 3X EFTs, please add them in the comments section.

What a drop! I have not seen this kind of drop for a while. This is the kind of days all traders like you and me want to see. If you stayed on the right side and held onto your positions you’d make a killing. Today’s drop was caused by many reasons such as

• Treasury Secretary Timothy Geithner did not address exactly how the government will spend the rescue funds.
• The Old bulls took profits
• The Bears came back with a vengeance

I think the first reason is the least important. That was just a trigger. Reason 2 and 3 are why the market plummeted.

I had 6 swing long positions and reduced them to 2 yesterday. I also went long on SRS today. It is not hard to see a baby bear crept into my mind.

As for my day trading today, I took one long trade in SRS @54.78, an inverse fund that goes up when the market goes down. So if you go long on it, it is like shorting the market.I ended up break-even (a tiny loss if the commission is included)in the SRS trade. My entry was almost close to perfect. Right after I entered it, it spiked to 56.60. I was talking to someone on Twitter. My first target for SRS was 57.00. After the spike, I moved my stop loss quickly to the break even point. I would never let a position that is up 4-5% turn into a loser. It retraced and took out my stop loss. With gut-wrenching pains, I watched it climb all the way to 62+ subsequently.

Did I do anything wrong in this trade? I totally stuck to my game plan. That was to trigger my trailing stop when it hit 57. What if I did not move my stop loss so quickly? What if I just closed my position during the first spike? What do you guys think? How would you take on this trade if you had the same entry as mine?

For swing trading, if you did not enter any short positions today, do not chase it. We might have another chance. Neither am I going to open any swing longs from here.

The realized profits are 4000+, the rest is still on paper. As you can see, all my positions are only worth around 10K each. What if I traded 50K each? 50K each position is too normal to even talk about it. It would still be the same signals and the same set-ups. I’d be up 30k in a week. This kind of money would make a brain surgeon jealous. That is what you and I are aiming for. But the journey to that kind of money is paved with the bones of dead traders. Most traders will fail. But if you can make it, it is extremely rewarding.

As for the remaining 3 trades of mine, If they die, they will not eat into my profits since they all have a nice cushion from where I opened them. If any one of them hits their target, that is extra bonus. I am very relaxed now, which is good for my trading. Of course, there is possibility of a huge gap-down. This is where the risk of swing trading is. I still clearly remember that a stock I traded last year gaped down 41% right after I bought it. I cut it in the pre-market hours. And it was delisted later. That is the kind of business you and I are in.

I received a few questions about how I select stocks and why I traded POT and WLT. My stock selection is very simple.

1. anything that moves fast, which is volatility
2. anything that is easy to buy and sell which is liquidity
3. anything that might rise like THE rocket of all rockets or drop like THE rock of all rocks, which is sector leaders

POT. WLT, SOHU and STP

There is nothing complicated. Pay attention to the trend line I drew. They all have formed tripple or double bottoms. As for how these bottoms are formed, they are documented in Encyclopedia of Chart Patterns (Wiley Trading) All of them were in a short term uptrend. After I entered POT/WLT, they retraced slightly. It did not scare me since I was not even watching them. Here are 3 good things I followed religiously during those trades.

1. No Fear. I f you pay attention to the trades I took in WLT, you know that I failed a few times. But I kept entering it when there was a signal.
2. Still No Fear. I held onto them until they reached their targets.
3. No Greed. My exits were very quick and clean. They were out once their targets were reached.

POT

WLT

SOHU

I was a bit late opening the sohu trade, But it was not too bad. It has formed a few solid bottoms. As for STP, this guy was the weakest. I was just following the best trading advice, cut the losers/weakest, ride the winners/strongest. Could I be wrong? Oh Yeah, But I do not care. All I care is following my game plan. That is it.

I received quite a few requests to recommend some good technical books, especially on candlesticks. As you perhaps already know I use candlesticks and volume only. Simplicity is a beauty in trading. I do not use any oscillators, Elliot waves, Bolling Band, Price channels, Andrew’s pitch fork. Fibonacci retracement etc.. I am not saying that those indicators are not good. I have heard that some traders are really good at using those indicators.

Candlesticks originated from my home country, Japan. I heard that a Japaneses trader took 100 trades using candlesticks alone. All were winners. That is a legend. You and I are not going to have that kind of accuracy in real trading. But I do think it is a very effective indicator. The best is Japanese Candlestick Charting Techniques(the yellow one) by Steve Nison, which is a classic. Please read the reviews on Amazon.


 

I believe 50-60% of your trading success depends on your psychology. The following books might help you learn one single most important thing in trading, “cut the losers and let the winners run”.

 

Here is a collection of books written by Alex Elder, a practicing psychiatrist and professional expert trader. I have every single one of his text books. I don’t have the study guides. I think his books are required readings. I do not want to write any reviews about his books here. You need to go check what others say on Amazon. I started with his “Entires and Exits”(the White One).

 

Since FAZ is a triple leveraged Financial short fund, its daily volatility attracts a lot of market gamblers. I am still trying to get used to trading it. It perfectly fits my day trading profile

• volatility
• superb liquidity.

We need volatility since stocks with volatility move fast and big. We need liquidity since when you need to get rid of it, it can not be like a piece of gum stuck on your shirt. The only con of liquid stocks is that it is hard to trade since there are a lot of professionals trading them. But it is worth your while to practice with all these liquid stocks since one day you might want to scale to a much bigger size once you have full confidence in your system. For example, the market should not have any problem absorbing a single shot of a million dollar position in FAZ. Hopefully you and I will be able to trade positions of that size in the future. That is why I never trade penny stocks or thin stocks. Nor should you.

I only took one trade shorting FAZ today. It was a fine opening trade. Here were some indicators i used

• StockTwits
• Candle sticks + Volume
• Chanting

Let’s go though them one by one.

1. StockTwits is the best indicator. I go there everyday to check out what other traders/investors think. Here is the link http://www.stocktwits.com/t/FAZ. Today I saw there were so many people trying fervently to go long on FAZ. I decided it was about time to fade it. Here is one simple most important reason. A stock goes up only if there is lots of buying power. If most of the buyers are prepared for the pop, that means it is going to die very soon. there are just no one left to push it up. You must think I am kidding….. Go flip through the pages on Stocktwits. You will see how many people there went long on FAZ for various reasons that I would never care.

2. Some people might think my system has some fancy magic indicators. No It does not. I use 2 very simple indicators. They are candle sticks and volume. Of course, it takes a lot of pratice to master them. As you can see from my portfolio, my sentiment is cautiously long. I do not have any short position. That is another reason why I shorted FAZ. Look at the bar where i shorted it. It does not have a tail. Other people like to call them upper shadow and lower shadow. A clean red bar like that means there was no resistance at all from the bulls. Coupled with slightly enlarged volume, it was a go signal. did I know It was sure fire? No. But I thought the odds were in my favor.

3: Right after I placed the trade, i started chanting “FAZ, show me some love”. I did that three times in a row. And it started to drop. Give it a try. It works! LOL……

How my swing positions are doing..

POT, Fantastic Little Runner. I give it 5 stars out of 5. There is nothing bad about. The way it moves is gold.

WLT, Not Too shabby. 4 Starts. Its moves are not as smooth as POT. It chopped a bit. But this stock would shoot up like a rocket if there is some fuel.

HES, Not Too shabby, 4 Starts. Solid oil company that moves at its own pace.

Leap, Nothing fantastic so far, nothing bad. It is just floating with the market. 3 Stars. This stock is like WLT. It is a rocket when it moves. There is nothing I can do to prod it. Maybe I should start chanting my magic words.

STP, what a lazy guy so far!. I do not like how it behaved today. It is perhaps because it went up too much yesterday. 2 starts. It is on probation. If it does not move up in 2 days, it will go to my garbage collectors.

New Member SOHU. I have a small position in it since I have already had quite a few long positions. I have been saying to long Sohu on Twitter for the past 2 days. Talk is cheap. So I am in.

Today, NASDAQ was up 30+ points and became red in the end. The bears were running amok. What hat should we wear now?

Theoretically, we are at a strong support which is around 8000. I do not want to open any short positions until the support is cracked with a big volume. But I can not always sit on the fence. I need to take a stance. So I am cautiously on the bull side for now, which is reflected in my portfolio. Every single one is in a different sector. I like diversification. Although I am a trader who likes volatility, I am very risk-averse. And my risk management is ingrained in very single one of my trading neurons.

There is no such a thing as loyalty in trading. We are always aligned/sided with the stronger side. At least, we should attempt to do that. If you hear someone around you who babbles fervently about how good a company is because he owns the stock, please stay away from him. And also there is no such a thing as over-valued or under-valued. Those 2 terms are what investors normally use along with PE/PEG. We all know how pathetically inaccurate those things are. Let’s just focus on 2 things, price and action.

I missed an entry in WLT this morning since I forgot to put WLT on auto-pilot last night. it was too late when I found it. When I was banging my head aginst the desk wondering why I forgot it, it shot up to 19.69. The entry signal generated by my system was around 18.93. Anyways, it retraced as I was blaming myself. When it retraced to around 18.60, I decided to get in with only ONE reason. That is my entry is better than the signal generated by my system.

Let’s see how this batch of my swing longs perform. I might add a few more if the general market goes up. Here are all my open positions.

I lost 400+ on 2 long FAS trades today. I broke one of my rules on the first trade ,which I did not realize. So I took the second trade. Both of them died. After the second loser, I realised that the first trade was lost because I traded a “pattern” that I never saw before. That “pattern” was no pattern at all. In other words, it was a forced trade. The second trade was fine even if it was a loser. As a self-imposed punishment for breaking my rules, I stopped day trading for the day right after the second trade and I will not day trade tomorrow either. Only Swing trades are allowed for now.

As for swing trading, I am long on POT. LEAP, and HES. HES and Pot are my pets. And LEAP is new. Here is my portfolio. Let’s see how they play out.

Are you a trade-holic? Do you feel excited or high when you place a trade? If your answer is “Yes”, then it is detrimental to your trading. Today was another smooth day for my day trading. I took only one trade. It was one solid run from the beginning. I stop right there if my opening trade is good. There is no need to push my luck. Here is why.

If you are religiously following your trading plan based on probability, you should scale back when you are on a winning streak, and you should be aggressive when you are on a losing streak. This might be totally opposite of anther school of traders. They think people should be bolder when they are on a winning streak and conservative when they are on a losing streak. Although that theory makes sense,it is just not for me. Let me use a simple example to illustrate my strategy. And you decide which one is for yourself

Assuming I could follow my system to the letter, that is I take every signal it generates and I know its probability and my risk/reward ratio, I placed 3 trades and lost all them in a row. Now my system generates another signal, I take it and slightly increase the size of that trade because I know the probability of a successful hit is around the corner. By “aggressive”, I mean that you take every trade you system feeds you and you also slightly increase the size of your trade as long as you do not to exceed your maximum daily/weekly/monthly risk threshold. For example If you reached your daily loss cap(say 1000), you must stop no matter what your system tells you.

Let’s reverse it. Now I am on a winning streak. I placed 3 trades and won all them in a row. Now my system generates another signal, I ignore that signal or slightly reduce the size of that trade because I know the probability of a successful hit has greatly diminished. Therefore, it is not hard to see why I use this strategy.

OK let’s move onto my daily trading analysis. Major indices have been chopping around the previous lows. The bears wanted to crack the support quite a few times. But it has been very trying for them. We are at a very strong support here. The odds of profitable trades are on the bull side. However, it does not mean the strong support can be cracked. Once it is cracked, we could possibly see a quick drop to 7500 and even lower. This only matters to my swing positions which are my core trading. As for day trading, who cares?

FAZ,FAS,TNA and TZA are permentely on my day trading list. Under normal circumstance, I will only day trade these 4 stocks. Today I went long on FAS. And It was a 4+% gainer. I posted my FAS entry in real time on Twitter/StockTwits.

I am closely watching the following stocks for possible swing longs if the bears do not crack the support. RIMM, FSLR, MOS, POT, X, GOOG, AAPL, HES, RIG, NOV, AMG