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.

Agriculture stocks have under-performed a lot of other sectors.  However, they have been on the move for the past few days. We all know that MOS, POT were stars in the last bull run in 2007.  I doubt that they would run up to their previous highs any time soon.  But it really should not matter because it is much harder to hit a home run than the hit-and-run guerrilla tactic.

Here is a list of the agriculture related stocks in order of their strengths. They are relatively safer than those that have risen 200-300% because they just started moving out of their consolidation ranges.

TRA [Terra Industries Inc.] is the strongest among its pack, which has broken out to the 52 week high.  With a relatively low P/E (12.5) and a mid-cap size, institutions like it.  Here is its daily chart

Click on the image to have a better view

AGU[Agrium Inc.] is strong.  The chart is fine since its uptrend is intact. However, it might see a small pull-back soon since it has moved quite a bit from the last low.

 
MOS[ The Mosaic Company ] and POT[Potash Corp./Saskatchewan] are on the move too.

BTW, it  is very important to  Follow Leaders , in whch I deteailed why and you can also see a few examples.

STEC has dropped from around 42 to 26 within just 2 weeks.  There are different kinds of rumors floating around about the steep and fast drop. One is that there is increased competition from other solid state driver makers such as Pliant Technology.

I believe that was just a trigger to the crash since STEC moved up too fast and there were a lot of profitable positions ready to be dumped at any moment.  But the drop is a bit exaggerated.  This is trading.  Fear and greed is everywhere.  Due to this type of market exaggerations, there exist money making opportunities. We, as short term speculators, are like vultures that fly wherever there is a possible meal.  I really like the vulture analogy when it comes to shorting.   It is a win-win scenario where you get a nice meal and clean up the environment at the same time.

I believe we might see a bounce very soon in STEC.   Will it make a new high?  I neither know nor care.  What I care is if it can have a quick bounce of 20% from here.  Technically speaking, STEC is still in its uptrend.  And theoretically, every dip of an up trending stock is a good opportunity to buy.  In addition, the little green bar on the daily chart looks like a bullish morning star to me.

Click on the image to have a better view

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.

American Superconductor Corporation,founded in 1987,is an energy technologies company, offering an array of solutions based on two proprietary technologies: programmable power electronic converters and high temperature superconductor wires. You can read more from AMSC’s website.

Because of this report, Shanghai Electric Cable Research Institute Expands Strategic Alliance with American Superconductor, the speculation that AMSC will have some solid growth started to run wild and it broke out its base in April.  Speculation is what drives stocks up and down.   If all you see were facts, the stock market would be dead. 

So we have some stories behind this stock.  let’s take a look at the chart.    The chart says AMSC has been in an uptrend since April and the trend is preserved pretty well.  After a swift jump from 20 to 29, it started to pull back and has been trading sideways for quite a while.   A solid double bottom formation is in the making.  Last Friday(6/19/2009) was the first day that we saw an increased volume.Therefore, a good long entry could have been made on the last Friday.  The reason I did not open a swing long position is because of the weekend.  I think I might have another opportunity to do it on Monday.

 Click on the image to have a better view

Did you buy FAZ around 30, 20, and 10 thinking it was cheap?  Did you not cut your losing FAZ position in a timely manner?  If your answer is “Yes”, then you are in deep doodoo.  These leveraged ETFs are not meant for the “buy and hold” strategy.  They are for day trading.  I know you did not want to hold it. You wanted to make some quick dollars but FAZ moved in your opposite direction. Now you are holding a bag due to your hesitation to cut losers.

When I started out trading, I was a bag holder for a while too. I remember I shorted HANS around 80, when it moved from 4 to 80.  I held the bag so firmly that I lost 50% on HANS.  So it is OK to be a bag holder when you just start out.  As long as your account is not totally destroyed yet, you might come back one day. But you will have to learn from your mistakes.  Let’s take a look at your mistakes.

1: buy and hold a leveraged ETF as if it were an investment grade stock
2: ride your losers for as painfully long as possible

Do we have a solution to your current deep losers?  Yeah!  Forget that you bought FAZ/SRS around 30, 20, or 10.  Take Friday’s close price as your entry price. For example, on 6/05/2009, FAZ closed @ 4.47. That is your entry price.  Set a stop loss no more than 10% and do not touch it.  Then, set a profit target like 25% or 30%.  If it drops and triggers your stop loss, you are out. If it moves up to your profit target, you are out. That is how I would handle it.

After you are done with it and have learned something worthwhile about trading, you can chalk it up as a tuition.

Here is the 60 minute chart of S&P 500 index. It is a promising double top and it has broken the short term trend line.   Will it materialize?  A lot of people actually talked about S&P touching 1000 before a meaningful retreat would happen.  It is a dangerous sign when a lot of people are expecting the same thing from the stock market. The stock market never behaves as the majority would like it to.  We see a lot of sudden moves in individual stocks because people are caught off guard.   Have you noticed that the stocks you watch like a hawk almost never move?

We might not see wild 500-600 point swing days like those we experienced early this year.  General volatility will dwindle and the general market might bounce around in a big trading range for the next few months.  

Day trading is bread and butter.  If you are skilled enough, it is your ATM. If you are not, you will be the ATM.

It has been quite a while since I took a swing trade last time.  One reason is that I focused too much on the short side.  Consequently I found almost no good opportunities for swing trading.  Another reason is that I wanted to hone my day trading skills, expescailly scalping.

I have been watching MOS and POT lately for a possible swing long position.  These 2 are the leaders of the fertilizer stocks.   I talked exclusively about MOS and POT on the mailing listing last night.  The fertilizer stocks lagged behind the other sectors during the rally that started in March.   Sectors rotate.  I also mentioned about the coal sector about a week ago. But I was too slow to join the rally in those coal stocks such as MEE, WLT and PCX.

From the daily charts of MOS and POT, we can see that the first pop came about 2 days ago.  If I had been quick enough, I should have bought into them that day, instead of today.   Another sign that they demonstrated was that they were extremely strong in a very weak general market yesterday.  POT was up 2% and MOS was sligtly down 2%.  They performed much better than most other stocks.  These strong stocks will be the first to move up once the general market is stabilized ,as we all saw how they performed today, MOS(+8%), POT(+5%).

POT performed slightly better than MOS yesterday.   And  I figrued that MOS would try to catch up with its brother later on. That is the reason I chose MOS today.  I kept my postion very small due to the risk of holding it overnight.  I am always prepared for the worst in case anything like Lehmen Brrothers or Bear Sterns happens to me.

Once I have identified a possible opportunity for swing trading,  I will use my day trading techniques to open a position.  So basically I open a position once my mid-term and short-time time frames are aligned. This greatly reduces the possibility of being whipsawed.  Normally day trading entries are much more accurate than swing trading due to the much higher requirements for accuracy.  With the accuracy of day trading and a wide stop loss of swing trading, you can greatly improve the success rate of your trades.  See the 5 minute chart below. If you use TradeStation, you know that it marks every entry and exit of yours on the chart.  My entry was a text-book wedge breakout.  

Click the pciture below to have a better view.  You can see a white lable saying (150 limit).

 
Of course, paper profits are nothing more than illusion.   Let’s see if my MOS can hit the target.

The system opened another trade in SRS.   Now we are long 200 shares of SRS @24.53.  This is the third try.  Let’s see how it plays out.   For people who are not familiar with this experiment,  Here is Planning Day 1 Day 2 Day 3 Day 4

Here is the chart. Click on the image to have a better view

The market moved in a choppy way today.  Wells Fargo led the Finical sector in the AM and ran out of steam in the PM.  The sell-off near the market close was really hard and fast, which is one of the reasons why it is hard for people to profit from shorting.

As we can see from the picture below, the weakest sector was Financial today partly because of Morgan Stanley (MS).  That is why I took a short position in it.  The entire move from my entry was about 6%.  I captured half of it, which was not too bad. The market has many opportunities everyday from either side.  Trading is not like any kind of 5-9 jobs.  Your success can only be limited by yourself.

There is no entry yet in the automated trading experiment.  The last 60 minute bar is an engulfing bar.  However, the system is programmed to wait until the bar is closed. Once the engulfing bar is closed, it will send in a buy order right at the open of the next bar.  In other words, we will have an entry tomorrow morning no matter where SRS stands (gap-down/up).  Let’s see what will happen.