Trade Plan for Friday, Every Friday.

1. Let the trade come to you. Buy dips, sell rips. Do not ever chase.

2. Trade only ideal patterns and ideal entries. Never force a trade.

3. Cut losses quickly. Live to fight another day.

4. It is Friday, you had a good week and a good start to the day. Watch sizes. There is always tomorrow. You have no reason to take on unnecessary risk.

New Theme, New Context

Ok, so here I go again for the third time. I started the blog initially, stopped because of how busy I became, then restarted after I had a baby, and now here I am ready to begin journaling once more. However, this time I am back and I’m humbled by what I have learned over the last year. I certainly do not know as much as I thought I knew. On second thought, I know much more than the average trader, but what I have learned is that I am not a master of myself. I lack discipline and I regularly fail to execute my trading plan due to my own emotional insufficiencies.

The last year has been full of amazing trading streaks but it has also been full of trading slumps such as the one I am in right now. I am most motivated to begin writing in order to journal my daily trades and to identify the flaws in my daily habits. My purpose is to focus on my successes so that they can be duplicated rather than constantly looking at mistakes.

$TSLA Triangle Still Working

I posted this same chart yesterday, here it is updated. I’m long TSLA from 89.90 yesterday. It is still behaving very nicely from this triangle breakout on the 15 minute. Targeting new highs. I have to say, I’m quite nervous about all the optimistic holders on the stocktwits and twitter streams. People are already calling for 100-120. Let’s just manage risk, keep raising stops and see how it goes. I hate when people shout out crazy AND CONFIDENT price targets. 

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Also long SCTY from $48.4. It is breaking out of this flag pattern and also targeting highs. It backtested the breakout and looks ready to go again this afternoon. 

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TSLA LONG

I’m in TSLA from 89.93. I’ll hold this overnight based on the nice breakout on the 15 minute chart. New highs tomorrow?

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Playing the VIX Buy Signal

This is an old and trusted buy signal that almost every seasoned trader knows about. Seeing as the market has made a huge gap down this morning, I thought it to be appropriate to show how I plan on playing this sell-off if it decides to continue.

I’m now out of all my long positions. I took some profits in PCYC, RSH, LOCK and stopped out on GLUU and ZNGA. Overall I saw much of my profits from yesterday’s morning run up evaporate, but still it’s been a winning week. The big red reversal candle sure spooked many traders, myself included. However the market has been quite resilient, so it is smart to watch and be ready to jump on when a recovery occurs. A good trader must be opportunistic, and I believe the VIX signal is a great tool for knowing when it is a good time to be exposed on the long side again. 

So here is how it works. When the market sells-off, there is elevated fear in the markets. This is why the VIX is often called the “fear index” and this is what the VIX measures, the premium that is placed on put options. The VIX usually moves opposite the SPX and when it spikes, this often signals bottoms in the market. Here is one way that you can play off these spikes. 

1. Set up your VIX chart with the default Bollinger band study. 

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2. Wait for the VIX to spike above the upper Bollinger band. 

3. Watch to see if the VIX can close above the Bollinger band for a 2nd consecutive day. This is a requirement to have 2 consecutive closes above the upper Bollinger band, one is not enough. 

4. On the 3rd day, if the VIX closes back within the Bollinger Bands, this is your trigger to go long. You can either buy an index ETF, go long some stocks of your choice that are setting up, basically this is a good place to get exposed to the long side again.

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5. In the below chart for example, I bought the XIV, which is the inverse VIX ETF. This is an intraday chart which shows my entry point for this trade. Although for this signal to work, it requires a close within the Bollinger Bands, you can sometimes take a risk and enter early if the VIX makes a big gap down like in this instance. 

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 Today at the open, the VIX is above the upper Bollinger band. I’ll be watching to see where it closes today and tomorrow which could set up a possible buy signal early next week. 

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Some Further Squeezes Will Happen

The markets finished down slightly today, but under the surface there were a lot more breakouts and continued strength is carrying over from last week. Again it was solar leading the way, but awakening were gold and silver stocks as well as energy plays. Eventually this rally will roll over, but as each day passes and we continue higher, our job is to find the next big breakout until this stops working.

Last week I got shaken of a few positions, but I reentered LOCK which looks good again, I remain long RSH, which is consolidating after a big more higher and I’m eyeing a reentry in BBRY.

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RSH- No problems with this pattern. As long as it stays above the breakout area above 3.9, I think it sees continues strength in the coming days and weeks.

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Additionally here are some good names on my watch list.

FRAN- 33% float is short. In a market with short squeezes happening daily, this one is one of the better set ups.

Screen Shot 2013-05-20 at 9.03.55 PMGLUU- 20.5% float is short. This one can run quickly if it can get over 2.86 with some volume.

Screen Shot 2013-05-20 at 9.25.34 PMHappy trading to all. The market is passing out some free money these days, so take advantage.

 

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Best Trade of the Year: Short Gold Miners

Can you believe that the gold mining sector has down down more than the best performing market sector has risen this year? With the market flying to new highs daily, who would have ever thought that buying the strongest market sector of the year (Healthcare) would not be the best trade of the year so far. You would have been better off short GDX.

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Gold mining stocks have been selling off hard since September of 2012. These names are so beaten down I can’t even believe there is a single bull left. Sentiment is so incredibly low in this sector that a rally must be coming sometime soon. Don’t buy into this continued sell off blindly, you must look for evidence of a bottom first, but I think it is coming very soon. Looking at the weekly chart there is no real support until the 2008 lows at 15.83, but it seems crazy to me that we could lose another 40% still after losing 40% already this year. A scenario to watch for would be a further sell off which abruptly ends in capitulation and a huge volume reversal. Perhaps we break through the recent lows at 27.27 and see a huge bear trap and subsequent reversal higher once breaking this support level.

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This is just a scenario to keep in mind, do not buy into the sell off thinking this will happen, just be prepared for the possible scenario. Happy trading.

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What Facebook Needs to Do to Be a Buy

Facebook hasn’t done anything all year long. After breaking higher in late 2012 from its lows, likely many Facebook investors have been disappointed with the sideways action. However, if you look at the historical chart from when it IPOd, the consolidation we have seen all year could be quite constructive if we hold this last higher low at 26.50 and continue higher. If this scenario plays out then I think FB will be forming a nice constructive “cup & handle” pattern which could lead it much higher for the rest of 2013. Of course we could break lower and this entire scenario would be pure fiction, but it is something to be on the look out for. 

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BWS to New Highs?

If you look at the chart of BWS on multiple timeframes, you can see that this one has lots of upside potential in the long-term. I don’t have any idea what this company does (retail footwear if I were to guess?) but they are certainly showing a nice healthy consolidation pattern after a strong run in 2012. The rest of 2013 could be very good for them also if they can break out from this falling channel and then later break out of the long-term base around 19.65. I’d keep an eye out for it here, I’m looking to get long around 17.40 with a stop around 17.20. This is minimal risk for something that looks like it could run for a long time.

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Daily Update 5.13.2013

I didn’t have as good a day as Elon Musk is having. Since the short squeeze began last week in TSLA, he has seen a similar trip to the moon with SCTY, the other company he is chairman of.

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The day had 1843 declining stocks to 1192 advancing stocks, yet the markets finished slightly to the positive. When you look underneath the surface however, there was a continuation of last week’s strong moves with Solars and 3D printing standing out. Biotecs also made a strong move today, which shows that this market is correcting through sector rotation and time rather than by selling off.

As much as I feel like moving completely to cash at this point and waiting for a pullback, there is just no evidence to suggest the market is going to sell off. Sure, the market is tremendously overbought, but we can continue to stay in this condition for much longer. We are in a strong uptrend and it makes sense to stay exposed to the market as long as the individual names continue moving higher.

I was stopped out of LOCK today, but the rest of my holdings showed some positive action. I’ll begin getting concerned if I start getting stopped out one at a time from these names. But the consolidation is no reason to fear. Healthy action so far.

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