Satuki @ Home

Our first swing trading competition started on 2/16/2010 and ended on 2/19/2010.  People coould enter/exit their trades during that time frame. We try to make it as close to real time as possible. However, people can still enter trades off hours. But their entries are calculated using the last close.  For people who enter their trades during the market hours, we use real time prices determined by the time stamps generated by the forum. 

OK here are the 3 best performing trades.

Let’s take a look at these 3 trades.

ARUN [Aruba Networks, Inc.]

IEM_Chris was expecting good EPS after it bounced off a recent support.  There is a maximum 3% stop loss in place.  His entry was 11.09.  The stop loss was 10.75.  The stock touched a low of 10.80 after his entry. It was close to being stopped out.  But it turned and popped almost 12% on last Friday. 

 Click on the image to have a better view

SNDK (SanDisk Corporation) by jaybee216, who is an old hand in stock options. Here is his logic behind his pick

1. Forming nice triangle for break
2. Sitting below 34 EMA break-out above 27.14.
3. CCI, which is indicator I use, moving up strong here. (We need to get him to talk more about his CCI)

SNDK never retraced after his entry.  So this was a very smooth trade.

Third is my own pick, LZ(Lubrizol Corporation)  My logic was

1. It is a very strong stock
2. It is still in a uptrend
3. It has stories.
4. It bounced at a very strong support

So the prize (25 dollar Amazon gift card) winner is IEM_Chris. Of course, the best prize is participating in the game and honing one’s trading skills. I will also keep a log of who are consistent winners because winning over a long period means a lot more than anything else.

Not long after the market open today (2/12/2010), I got a call and had to run a few errands.  So I was not able to trade until the noon.  My pre-market analysis suggested “short”. Naturally all my attempts today were biased toward shorting.

I never chase hot stocks. When I have selected a few targets, I trade them repeatedly throughout the day. AFLAC Incorporated (afl) was my target because it was weak all day long and it has a decent beta of 1.77. After I chose my target, I started to follow it closely. 

So a short opportunity presented itself around 12:35 because it was very close to the morning gap.   A gap normally has a strong resistance/support.  So I shorted it at 46.85.  The entry was perfect. It never churned.  I set the stop at 46.97 and went to nap.  As we can see the chart below, it went down to 46.41, which showed a decent paper profit of 200 bucks.  I am normally content with anything over 150 dollars per trade, which flips on my profit taking switch.

But I was napping. So when I woke up around 2, it almost bounced back to where my entry was.  So I just moved my stop loss to break even and forgot all about it.  Naturally, it was a flat trade.  Actually, I lost 16 bucks, which was the commission for that round trip trade. I would have moved my stop loss to the horizontal line if I had not napped.  Nevertheless, napping is part of my trading plan.

You can see the timeline of all my day trades here

Click on the image to have a better view

There are different types of stock manipulation in the stock market.  Penny stocks, small cap or even some mid cap stocks are prone to manipulation. The Chinese stocks are the worst.  Let’s take a look at TSL(Trina Solar Limited).

TSL was one of the strongest bulls during the recent run. The performance of other solar guys such as FSLR( First Solar, Inc), LDK (LDK Solar) or STP (Suntech Power) was very pathetic during the same period. There must be some reasons behind this run.  However, if you look on the Internet, you can hardly find any concrete evidence to support this run from 4 to 31( 8 t0 60 before the split).

Why was this guy so special while other solar stocks were pinned down by the overall weak solar market? It was the split.  Technically speaking, a split does not make a share holder any richer. But a stock split is normally regarded as good news for a company becuase only decent companies can afford a split.   Poor companies do reverse stock split.

So a split normally carries a very favorable market sentiment toward a company. But how the hell could an average Jane or Joe like you and I know this in 2009?  The split news hit the wire around 1/06/2010. Here it is from thestreet.com http://www.thestreet.com/story/10656574/trina-solar-to-split-stock.html .

Nevertheless, some people must have known this way ahead of the time and ran the stock up. The SEC is basically powerless in dealing with this kind of manipulation.  Do not blame the SEC though because it is extremely hard to gather concrete evidence. Let alone a Chinese company.

Click on the image to have a better view

Having said that, I personally do not mind this kind of stock manipulation (penny stock pump and dump excluded) because it adds liquidity and opportunities for us. It took quite a few months for TSL to run from 4 to 31.  If you are a trend follower, you would have plenty opportunities to make some dough in TSL.

TSL is just an example.  As for the stock itself,   the swift 30% reaction with huge volume tells us that It has lost the momentum and might face a prolonged consolidation from here.  You can see a bunch of similar stocks such as STEC and MED(Medifast), both of which are dead from a bull’s perspective.



Now, let us watch two vdeio clips from the movie Boiler Room. which talks about how people manipulate penny stocks. It is basically pump and dump. Rent it if you have not seen it. It is one of my favorite movies.

Disclosure:   No positions in any stocks mentioned in this post.

Today’s drop was gut-wrenching for the bulls. We have not seen this kind of drop for a while. The bears were in total domination throughout the day. As I have said a couple of times in the past few days, the market desperately needed a reaction. It was just waiting for a trigger.  Here came the trigger today, the deteriorating fiscal health of a few European countries such as Portugal, Greece, and Spain.

Short term and mid term is somewhat bearish.  The SP 500 has punched through the last low. See the chart below.

Click on the image to have a better view

Like my yesterday’s short in GES(Guess?, Inc), the exit of my today’s short in ATI(Allegheny Technologies Incorporated) was not optimal either. As you could see from the chart below, I left quite some money on the table. I am not implying that I should try to catch the whole move. Nevertheless, I should have caught 2% around 40.69.  One way to mitigate this problem is to scale out.

Bears had their revenge today .

January is over. I did OK because my profits broke the 3K mark, which is close to the goal (4k per month) I set for 2010.  Nothing has changed about my trading except that my size was slightly bigger.  This is just a start.  Hopefully one day, I will be able to short/long 2000 shares of something like AAPL or GS without blinking an eye .

Speaking of trading super liquid stocks like AMZN, AAPL or RIMM, they are extremely hard to trade. Why?   It is because there are just too many professionals in them.  These guys put out big lines from time to time. When they need to get out of a stock, they do not want to crack it wide open.  So liquidity is key for them.

Anyway, the market had some decent reactions near the end of Jan, which is not a bad thing. The market desperately needs to digest the wild bull run we had in 2009.  Lets take a look at SP500 below. It indeed broke the trend line.  This shows some weakness on the daily chart only.  The weekly is still fine.  So I do not see an imminent crash from here.  But I would at least have 50% of my assets in cash.  If you have a full line, hedge it properly.

Click on the charts to have a btter view

The bulls might ask if they would buy into this dip just like dip 1, 2 ,3 showed on the chart above.   I would say why not.  A small long position is fine here.  But caution should be exercised since the higher it goes, the more likely a dip becomes a bull trap.

Here are 2 double top set ups for shorts.   It is too late to get in.  But they are eye candies.

AMZN (Amazon.com, Inc) and IOC(InterOil Corporation)