Trader Mom @ Home

 I was actually gloating when the market was edging lower in the AM.  The first 2 shorts I took was MET and ACH. By the noon, I was thinking of a 600 to 800+ day because I had a lot of hopes in the ACH short , which was so close to the  planed target.  Of course, the difference between realized gains and paper gains is huge, as we will see shortly.

So not long after the opening bell, I took a short position in ACH @ 29.23 and it dropped promptly to 28.48.  My planed target was 28.36, which was a 3% move. If it touched 28.36, I would sell it at market.  However, as we can see from the 5 min chart below, it never materialized.   It was very close to my target and I had a 200+ profit on paper.   I ended up exiting it with a tiny gain (27.20). 

Click on the image to have a better view

This trade was similar to the ARO short I took yesterday. But it was worse since the ACH trade was much closer to the planed target than the ARO short.

I believe exits are much harder to handle than entries.   It is easy if a position is taken out by your stop loss.  But when you have a profitable position, it becomes harder.  You can certainly scale out.   That is one way to protect some profits.  You can also use a trailing stop. Speaking of using a trailing stop, I do not know how effective it is on day trading since the margin of a typical day trade is very low.  Once your trailing stop kicks in, a huge chunk of profit is gone.

I do not scale out since I normally set an OCO (order cancel order) for a position and then forget about it.  I try not to watch it since it will not move in my direction no matter how hard I stare at the position. In addition, I can save a lot of energy by ignoring it and look for other possible opportunities.

It was a pretty flat day.   I took only  2 shorts(ARO and WAB) today and fell asleep, ZZZZZZZZZZZZZZ.  You can see these 2 days here in my portfolio, in which I post my trades in real time.

One trade I took was ARO (Aeropostale, Inc), which is a mall-based specialty retailer of casual apparel and accessories, which gaped down a little bit right after the open.   BTW, I like to short stocks that gap down or long ones that gap up.  Well, if they gap too much in either direction, I would not touch them.  Anyway, from the 5 min chart below, you can see my entry was not too bad.  It bounced a little, which was in my stop loss range, and it dropped soon after. My entry was 36.52 and it touched the low of the day @ 35.95 .  If I had covered it around 36, I would have made around 140.  That is a decent profit for me since it did not take ARO too long to drop to the low and my position was small.   But my plan was to exit it for a 2% move.  As we can see, I held it for such a long time just to get out break-even. Such is trading.

Click on the image to have a better view

Where would you get out if you were in my shoes?

Every stock comes down or goes up at one point or another. Key is timing.  Timing is especially important for day traders like you and me.  You and I do not have the stomach for deep draw-downs (risk). So we aim for small moves with little tolerance for risk.  Trading is not a contest of will or courage.

STEC broke down in such a strong market.  It is not a surprise since there are just too many people who have profitable positions.   I had been watching it in the past couple of days. And I shorted it a few times until yesterday when TS did not have any shares to lend to shorts like me.  Nothing substantial came out of my previous shorts in STEC albeit most of them were winners.  My pertinence was wearing thin after watching it for a few days and stopped watching it today. I did not even bother to check if Interactive Brokers had any shares to lend. In fact IB had!  Let’s take a look at STEC’s 3 min chart. If I had watched it and known IB had shares, I would have absolutely shorted it since it was a textbook setup.

Click on the image to have a better view

Do not get me wrong.  You were not supposed to look for a short entry in today’s market.  Good money could have been made much more easily on the bull side since the general market did not gap up at all.   The move in the AM was huge and anyone jumped in early on the bull side could have made good money.  That is why I stopped shorting right after the very first try.

I am bound to shorting this month since I am running a small test. My test is that I will have shorts only for this month regardless.   Once this month is over, I will be back to the flip-flop mode.

I hope you are all doing well.

The market today would have ended further down without AAPL.  The bulls should use some caution at this point since the market has seen quite a big run in the past few days.

I woke up this morning around 8:30 as usual, quickly packed lunch for my husband and sent him on the way to work.  At about 9, I sat down in front of my trading desk  and started to check if the stocks I picked last night were all shortable today. Most of them were.  Here was the list: PWRD BG X HES WLT CNX VMW FISV CNQ TJX and PCX.

I knew it was going to be another tough day for the bears since APPL’s earnings sent the stock higher, which held up the big market.   The first short trade was PCX.   The entry was good and the exit was not bad.  A good entry/exit is an entry/exit you make according to your plan.  It is not about catching a top or a bottom, which is a fool’s game.  See the picture below.  I actually had a 2% move on paper. But I was shooting for a 5% move.  Therefore it did not materialize.  I exited the postion almost flat.

Click on the image to have a better view

The coal sector was hammered badly a few weeks ago.   Except WLT, almost every other coal stock has broken down badly.  You can take a look at MEE, JRCC and PCX, among which PCX is the weakest.  Let’s use PCX as an example.  It applies to stocks in general.

Let’s take a look at the daily chart of PCX below.  When the bulls see bar 3(Drop 3), they should definitely get out at all cost for 3 reasons

1:  It broke the horizontal support line.
2:  It broke the trend line.
3:  It broke down with a big volume.

We would not know how much further down it would move back then.   But we knew one thing for sure.  It might take some time for PCX to move back up again.   Now we look back and we can see it moved from 7.10 to 5.41, which is a 30% move again. 30% is HUGE if you ask me.

We do not want to buy into consolidation blindly.  Like I said before, consolidation only means indecision.   For swing trading, it is very important to follow the trend.   You can buy into a consolidation only when it is in an uptrend.  It is the same for shorting.  

 PCX is still in a daily downtrend and it is overbought on the 30 and 60 min charts.   How would you play it?

Daily Chart (click to have a better view)   

60 Min Chart

I tried to short STEC 5 times today.  The results were not so bad considering the super strong general market, which helped a lot to hold up STEC. STEC itself was weak.  A lot of other stocks went up 2-3 times as much as the general market.

As stated last night in STEC: Do we have a short here? I was shooting for a 3% move.   That was my plan.   I followed my plan like the Bible.  If you were tracking my trades today, you know that the first short moved down 1.5% right after the entry, the second moved down 2% right after the entry too.  These 2 entries were impeccable since they moved immediately after I opened them.  If we add them up, it would be a combined 3.5% profit and mission was accomplished.  I wish trading was that easy.LOL! I actually made 0 dollars out of those 2 trades.  I did not take profits in those 2 trades because my plan did not allow me to do that.  We all know what happens to traders with discipline issues. 

There was nothing special about the other 3 shorts.  They were not as good as the first 2 since they wiggled, wobbled and squirmed for quite a long time after I opened them.  You can see the timestamps of all my trades here. Please note they might be 30-45 seconds off since I need to set up my stop losses first, post them on my website and then on Stocktwits.

It was a very strong market today.  It should be slightly easier to trade on the long side.  Why slightly easier?  It was because the market gapped up way too much.  If you pull out the 5 min charts of a lot of stocks that went up today, you can easily see that most of them had one good move in the morning and stayed flat in the afternoon.  So trading really is an art.

Once again, do not forget to control your risk at all cost. Your trading is as good as your risk control. 

I hope you did well today.

STEC has moved from 5 to 27 within 3 months.  I did not find too much information on why It had a late day rally on 7/13. Form the chart below, we can tell that the long up shadow today shows that the bulls are a bit long in the tooth.  There is no such a thing as “a never fallen stock”.   It is a strong stock in the long term.  But it might be a bit of tired after such a run. You know what most of the longs with profitable positions are thinking now.  They probably ask themselves one hundred times a day if they should lock in their profits.  Any weakness in STEC will kick them out, which will cause a decent drop for us to profit from.

See the charts below( click to enlarge).

Daily

5-Min

I will watch this stock tomorrow closely.  My stretgey is to wait for weakness and jump in on a break-down.  It will be a day trade though.   So my target will be a 3% move.   Nothing is for sure in trading.  Always remember to control your risk.

Are you interested in STEC?   If you are, how would you play it?

The market moved higher today, which I sort of expected since it was somewhat oversold.  That is why I stopped trading(shorting) in the afternoon. When the market rips higher and higher like that, we should stop shorting.   Yes, trend does not matter that much for day trading.   But you need to wait for some signs of weakness at least.

The first 2 shorts were OK.  But the 3rd one (CNW) was very contrived since I took that trade when the market was still moving higher.    That is I did not wait for signs of weakness.  Considering I have been day trading full time for so long, I should not make this type of low level (stupid) mistakes.   LOL @ myself…I do, and still will in the future.

Of course, what I did well today is that I stopped trading (shorting) in the afternoon.  Like I said on Twitter, this month will be all shorts.   I would love to go long on a strong day and go short on a weak day.   But reality is that it is extremely hard to flip flop like that.  You might get slapped hard by both sides.

Look at the 5 min SPY chart below.  It was just too hard for the bears.  But the least we could do was to avoid a market like this.

I hope you did well today.

When a stock has a big move with a substantial volume, it normally means that something meaningful and critical has happened to it.   A big move alone may not mean anything since a stock can happily drift along with its sector or the general market. ICE, POT and MOS have exhibited some strange behaviors lately. Let’s take a look at them

As we can see from the daily chart of ICE below, drop A tells us that ICE plunged from 72 to 52 after the first drop with some good volume.  Drop B is a bit different since the first big red bar did not have much volume.  However, the second one had a gigantic volume. The bulls can not take these big red bars lightly because it will take a lot of buying power to push ICE back up.  If the bulls are lucky, then ICE might start to consolidate from here.   But consolidation only means indecision.  It might very well break down again after  consolidation since the uptrend has been badly broken and this might be the beginning of a mid-term down trend formation.

ICE Daily (Click on the image to have a better view)

My take would be short into ICE if there is any dead cat bounce caused by some short covering. Let’s take a look at MOS and POT, Have you found anything interesting?

MOS

POT

Here are 2 ideas on the bull side.  One is STP and the other is TSL.  Both of them are leading the solar sector.  Here is a post I wrote about how to identify sector leaders.  Solar is definitely a hot sector that boasts advanced technology and alternative energies.  A hot sector normally has a lot of stories behind it and stories are catalysts for people’s speculation, which is the only thing that drives a stock up or down. 

STP and TSL are not only solar stocks but also Chinese stocks.  As I wrote in this post , STP had some potential even if it was a bit distressed back then, which stood around 13 dollars.  I still think it has more room to move up.   TSL is even stronger than STP.   As we can see from their daily charts below, they are in a very nice uptrend. 

TSL (Click on the image to have a better view)

STP

Since I am a short term trader, I can not give you a target price in a few months or even longer.  I would get out if they have a move of 15-20% from here. Of course, use whatever risk control means you see fit to protect your trading stake. Remember not to average down on any of your losers. If anyone tells you to do so, avoid him like a plague.

My main trading platform is TradeStation.  But I also have ThinkorSwim as a back-up along with Interactive Brokers for their combined long list of shortable stocks. ThinkorSwim has been rated 4.5 out of 5 by Barrons’ a few years in a row.  This is the highest score. TradeStation and Interactive Brokers tie with ThinkorSwim most of the time. 

Pros

1. ThinkorSwim has very good charting.  It is smooth and accurate.
2. It has a very deep database to provide you with up to 20 years of historical data, which is very important for back testing.
3. The platform (Think Desktop) is pretty stable.  
4. The software is written in Java.  So it can run almost on any operation systems such as Windows, MAC OS (a UNIX flavor),  and *nix.   In addition to their desktop application, they have Think Anywhere®, Think Micro® and Think Mobile® for various hand held devices such as Blackberry/Nokia, IPhone.
5. Superior customer service.   You can even chat with a Rep inside the desktop application.
6. A decent list of shortable stocks.
7. The learning curve is flat.   
8. No monthly data fees like TradeStation and Interactive Brokers charge.
9. If you take 40 or more trades every month, they will cover your Internet cost (39.95 per month). 
10. You can easily split ThinkorSwim into dual/multi monitor set-up.  Want to have a crazy 24 monitor set-up like this?

Cons:

1. ThinkorSwim commission is the highest among these 3 brokers.  They do have 2 fee structures for trading stocks. One is $.015 per share ($5.00 minimum) or flat $9.95 per trade (5,000 shares maximum).   Obviously it is too expensive if you compare it with TradeStation or Interactive Brokers.  Here is the commission that TradeStation charges.  Here is the commission that Interactive Brokers charges. 

In conclusion,   I like ThinkorSwim. But I only use it occasionally due to its expensive commission and the way I trade.  You can not use ThinkorSwim if you are a scalper or your trading style is similar to mine.  But if you are a swing trader, go for it.