Currently in cash, but we did have one very strong sector today. Many stocks from the Emerging 50 breaking out. The best setups are listed below.
|PLL||Diversified Machinery||Emerging 50|
|USEG||Independent Oil & Gas||Emerging 50|
|CHK||Independent Oil & Gas||Emerging 50|
|UNT||Oil & Gas Drilling & Explorat||Emerging 50|
|QEP||Oil & Gas Drilling & Explorat||Emerging 50|
|DVN||Independent Oil & Gas||Emerging 50|
|PXD||Independent Oil & Gas||Emerging 50|
|PXP||Independent Oil & Gas||Emerging 50|
|COG||Independent Oil & Gas||Emerging 50|
|RRC||Independent Oil & Gas||Emerging 50|
Looking at the Q's, we should get another day or two until we hit resistance at roughly 57. Until we break through that area with a significant breadth thrust I would recommend trading with caution or remain in cash.
We either break through causing another short covering run to higher levels or we bounce off and possibly make lower lows. We're do for a decent pullback, but normally when everyone is expecting the same thing the market finds a way to do the opposite.
Two sectors that caught my eye today were Electronics - Measuring Instruments (NVMI) and a mixed bag of Semis from solars to specialized. NVDA looked like the best break out from the bunch.
Whether you day trade or hold for longer terms, the general rules are similar. Looking at Nvidia today I noticed you could of traded the same setup on three different time frames, 15 min, daily and the weekly.
When I moved out to Colorado, I quickly realized that fishing was just not the same. Back in Florida, the bigger the bait, and the bigger the catch. Here in Colorado, anything larger than a goldfish scares half the fish away. Even when I brought the size of the bait down to 'norm' the catch was under-whelming. A sixteen-inch trout is a 'trophy' to anglers out here, while back in Florida, this was the average size used for trolling for Dolphin fish (Mahi).
Obviously, I had to make some adjustments if I wanted to enjoy my life long hobby. This is where fly-fishing came in. Seemed simple, toss this little fly out on a river and wait for the trout to bite. The trout would have a fighting chance before meeting my frying pan.
After hooking my dog in the nose, I began to realize there's a lot more to this "fly fishing" thing than meets the eye.
Besides using the correct fly for the river and time of year, you also need to know how to fling a 9 foot pole back and forth, tossing this weightless fly into an area about 6 inches in diameter. And you think trading stocks is frustrating!
Over time, I began to get a feel for this fly fishing thing. Casts became easy; reading the hatch (picking the correct fly) became effortless. To the chagrin of other anglers on the river, I could step onto it and have a rod screaming in minutes.
Trading stocks is like fishing. You're on the hunt, trying to catch the biggest fish for any given day.
This is where process comes into play. If you're constantly casting in the wrong place, you will never catch any fish.
For trading stocks, the process is simple. We've had people pave the path for us. We need to fish in the area with the biggest fish. This is where our relative strength scan comes into play. Using Bluefin we can find the stocks with the highest relative strength in the strongest sectors. These are the best performing stocks and can offer the largest reward.
Once we've identified our pool to fish, we need to figure out how to cast to that pool. When I took some casting lessons, the instructor kept saying 11 o'clock and 1 o'clock. Every time we went out, over and over I would hear 11 O'clock and 1'Oclock referring to the position of my rod. Eventually, it became second nature. Now, I cast effortlessly to most spots.
If you're a StockBee member, you hear this same thing with trading setups. "It went up, sideways, then it breaks out" and this is where you want to buy. When you've traded this setup a thousand times, it becomes second nature. You do not have to think about it, you just react and WHAM, the next thing you know you just landed a keeper.
Another piece of the puzzle is actually landing the fish. How many times have you seen someone with a huge fish on their rod, but the drag was too tight and SNAP, off it goes into oblivion? You can think of your drag as how you mange that stock once you're in it. The tighter the stop the more likely the fish will get off. The looser you have that stop, the more likely the fish will never get in.
This is where process comes into play. By defining how you manage a stock from entry to exit is how you will make progress in trading. By logging this information, over time you can look back on your trading history and tweak and refine your trading process. Eventually, this process becomes second nature to you; it's not tedious but just part of your routine.
With trading you need to be able to read the water, make the cast, and then reel in the reward. This all involves defining a process and sticking to your plan. Then you can look back and refine this process so you can be successful in each new cast you make.
Below is a link to a Google spreadsheet that you can use as a template. Use it to log your trades for future reference. It calculates the number of shares you buy for any given stock on the fly. Check it out:
Below are the stocks poised to break out over the next few days. Look for a break out on above average volume for entry. If you are a Bluefin subscriber, keep an eye on the Percolator scan. They will appear there when they reach a new 5 day high on 2% or greater move.
|EMS||Medical Practitioner||Emerging 50|
|ULTI||Internet Software & Services||Emerging 50|
|DHX||Staffing & Outsourcing Service||Emerging 50|
|MAN||Staffing & Outsourcing Service||Emerging 50|
|CMCO||Farm & Construction Machinery||Emerging 50|
|KFY||Staffing & Outsourcing Service||Emerging 50|
|TSO||Oil & Gas Refining & Marketing||Emerging 50|
|MDR||Heavy Construction||Emerging 50|
|ISLE||Resorts & Casinos||Emerging 50|
|DIOD||Semiconductor-Integrated Cir||Emerging 50|
|SNDK||Semiconductor-Memory Chips||Emerging 50|
|VOCS||Internet Software & Services||Emerging 50|
|FSII||Semiconductor-Equipment & Mate||Emerging 50|
|VRGY||Semiconductor-Equipment & Mate||Emerging 50|
|CIE||Oil & Gas Drilling & Explorat||Emerging 50|
|ASGN||Staffing & Outsourcing Service||Emerging 50|
BH, one of the long term StockBee members just started a new blog researching stocks that have made huge moves in the past year. The end goal, finding five trades in a year for gains of 50% plus. Check it out at:
We all get caught up with trying to find the perfect scan, the perfect indicator, the perfect system. I'm guilty, every so often I see someone with a new fancy equation and I sink some time into it, back test, trade it a bit and find the results fall short of my expectations.
Why do we keep bouncing from one indicator to the next or one method to the next? Most likely our expectations for trading are out of whack with the reality of trading. While it is possible to knock a trade out of the park, most gains will come from grinding out profits on N trades over a period of time. Sorry, I'm sure I just crushed some hopes and dreams of a few people who thought they would be on the Caribbean island next year.
Honestly, when I first started trading, I had dreams of making millions that year. While this is possible during certain market phases, I've come to realize you need a longer term plan for profitability over the course of many years. The plan should be able to withstand market downturns like we had between '08 and '09.
You need to find a method that brings in more money than you lose on any single trade or group of trades. Sounds simple eh? Not so much, when you're bouncing from one method to the next, never honing in on whether the last method was profitable. Maybe it was profitable, but you were not executing properly?
There are a ton of profitable strategies out on the public domain. Following a trader's trades is not enough. You need to build a foundation of knowledge for your trading business. To do this, dissect how and why a method works and mold it to fit your time frame and style. I see so many people who just blindly follow trades without ever understanding the components that make that system profitable. What happens if this person decides to stop displaying their trades? Either way, you'll never be able to match their returns because you're always one step behind.
Stop chasing pipe dreams, define reasonable goals for your trading business, focus on a method that works for you and then refine it to maximize its profitability.
I will be reviewing all stocks from Bluefin and posting setups over the weekend.
We pore over those books like “Monster Stocks” or “How to Make Money in Stocks”. You see the charts of stocks making huge moves and start thinking “just a few of those and I’m on my way to early retirement”. In reality, they are trying to capture 10 to 20 percent of a move.
For 2011, toss out those grandiose expectations and start thinking small, small gains are good. Small gains combined with proper risk and position sizing can lead to triple digit gains over a year.
For my method, I am looking to sell when I have 6% or greater on any given trade. Rinse and repeat. Most likely you are trading a different time-frame with different stocks. You need to figure out what is optimal for your style.
It’s not as glamorous as hitting the home-run, but it is a way to generate consistent and stable trading method that will pay out year over year.
A starting point for proper position sizing would be the risk calculator: