Market Update 8-17-12

Sorry I’ve been away from my blog for a couple of days trying to get some other work accomplished.  We can a fantastic rally yesterday and there is a lot of strength in the market going into today.  Unfortunately I guessed wrong on my Walmart trade but that’s just how things go.  I normally don’t like to trade off of earnings because earnings are so subjective.  I just thought that Walmart would have better numbers going into back to school.  Oh well, I’ll hold my options and see if it rallies up next week.

Market Update 8-14-12

A bunch of reports have come in with all positive numbers so the market is looking to rally today.

Market Update 8-13-12

The market is in a slow choppy pattern so it’s best to hold off at the moment.  A lot of traders are on vacation and volume is light.  It’s a good time to just practice set ups at the moment with paper money and look to get in the market at the end of the month.  If you are going to buy anything, I would look at low cost retailers like COST, WMT, TGT, DG, FDO and yes AAPL because of the back-to-school season. 

Reports out for Today 8-9-12

Jobless claims declined by 6,000 and the trade deficit was narrowed down 11 percent.  These are all good numbers for the economy showing that we are improving overall.  Let's see how the market reacts this morning.

Avoid the Pitfalls and Market Maker Tricks

After listening to several radio interviews of a few traders who used to work on Wall Street, I have a better understanding of the market and important pitfalls to avoid.  It is important to know that there are a lot of sharks in the water waiting for inexperienced an emotional traders to make irrational and quick decisions.  However, that does not mean that you can’t make any money in the market.  The opposite is true.  You can make a good living trading in the markets, you just have to be smart and know how and what to trade.  

One key piece of information I just learned from a guy who used to be on the NASDAQ was that market makers (the guy at your brokerage house) will watch people’s trades and look to see where most people place there stop loss price and some unscrupulous guys will move the price just beyond the point to where the majority of stop loss orders are and trigger the stop loss so they can take their commission.  For the trader who’s gone golfing and not watching his trade, he will lose money plus the commission he paid to the market maker.  

This just underlines the point that you can’t trade blindly and not watch your trades.  You also have be patient and wait for the proper setups so you don’t get caught waiting on the market to move.  The best way to engage this current market is to be either long term buying high yield dividend stocks or very short term, trading the market swings for only a day or so.  

There's another thing you have to watch out for as well and that's the penny stock sharks.  These guys will put messages all over the place about a particular stock that trades below one dollar.  They will talk about how this is the best stock of the year and it is going to go sky high.  However, they don't have any information that lets you know why.  What about this stock is so great that it is going to be the hot stock of the year?  The problem is that you can't get detailed information on many of these stocks because company data is harder to come by for penny stocks.  So just use common sense in these situations.  If someone tried to sell you something saying that it is the best thing in the world, but didn't have any information on the product, would you buy it?  I think not.

Market Update #2 8-7-12

After making a short move higher in the beginning of the day, the market flat-lined then fell off at the end.  I’m still waiting for my WMT trade from yesterday to recover so I’ll have to wait until tomorrow.

Market Update 8-7-12

The market is chomping at the bit before the bell even opens.  It’s like yesterday’s fall off at the close didn’t even happen.  A cup and handled formed overnight in the S&P signaling a move higher.

Market Update 8-6-12

We are still in earnings season but it looks like there isn’t anything on the radar that’s going to affect the market drastically.  Look for stocks to just move on their own technical setup.  I like the way Walmart is looking right now because it spiked up from a bull flag. GE is also looking strong and it has weathered the storm pretty well over these past few weeks.  I saw this move upward a over a month ago, it just took longer than I expected to develop.  If it gets above $21 then look for it to push even higher.

Market Commentary 8-4-12

It felt good to be back in the plus column yesterday with my Walmart trade.  This market has been very volatile over the past few weeks and timing is everything.  It is so important to remember the basics when trading so you don’t get too emotionally involved.  The market will only go in three directions: up, down or sideways.  Granted the best and most conventional ways to make money are when the market is going up or down, so let’s take out sideways.  This means that your job is to make your best judgment (not guess) as to what direction your trade is going to go and timing your entry with enough space to make a profit.  Now what do you need to know to do that? You need to know how far you think it will go in either direction and you need to know how much money you have to invest in order to pay your commissions and see a profit.  You also need to know the technical setup, the fundamentals of the company (valuation – is it cheap or expensive), overall market conditions, and the news surrounding that company and its sector.  These are all key in helping you determine your entry and exit points.

For me on options trades, it is a little more complex because options move differently than stocks because of the Greeks.  I don’t know what the exact price the option is going to be because of this.  So I always try to choose options that move closer to the stock and that means options that have a Delta between 30-70.  This also means that I have to buy at least 3 contracts to be able to make money on small moves.  I like to buy between 5 and 10 contracts so the moves will happen quicker but that also means more risk.  

The current market was moving sideways for a while without enough of a move to make any money.  However that all changed within the last week and the market rallied on Monday (starting from the Friday before) and then tanked on Tuesday and Wednesday.  Then Thursday and Friday saw a big rally again.  These moves were all directed by the news .  However if you looked at the technical setups and many stocks they followed they were true to their form.  

Take Walmart for instance.  I saw it make a pullback on Thursday and it looked like a textbook bull flag setup.  The trend was up and it had just broke through a resistance level only to come back down to a level of support.  I waited for the bullish candlesticks and for it to break above the halfway point of its pullback.  Then I got in the trade with enough money invested to make a profit if it went to its original fall off point.  It took a day to develop but this morning after good news from the jobs report the stock moved up to my price target and I made my profit.  

News plays a big factor in the movement of stocks and it is best to stick to the other indicators (technical and fundamental analysis) because no one has a crystal ball and we don’t know what the news is going to be.

Market Update 8-3-12

Ok, I woke up late this morning but thankfully I hit my target price on Walmart this morning.  The market looks poised to rally today and I see a bunch of great setups.  Microsoft (MSFT), GE and DNKN all look good.  The three stocks that have been giving me problems these couple weeks all have a bullish candlestick and are moving up on strength.  MSFT and DNKN are oversold in the stochastics, they also had a stochastic crossover, and are at the bottom of an upward channel.  All of these are red hot signs of a nice upward move.

Alright, the jobs report was better than expected.  It’s the best month we’ve seen since February.  Around 50,000 more jobs were added than expected and the market responded favorably to it.  You can never be sure what the market will do even when the news is positive because many traders are waiting for QE3 (Quantitative Easing 3 from Ben Bernanke and the Fed) and the Fed won’t intervene unless they have too.  That’s the reason why the market has been going up sometimes off of bad news and down on good news.  It seems contradictory but ….that’s the market.  Thankfully this time around the market went up off of good news.

Chart Analysis 8-2-12

Here's a Facebook post from Investools Instructor Dave Johnson talking about the overall market movement.  He is pointing out that the market has broken through a resistance line and has gone back below it.  His belief is that the market will go back down to its support line and then back up to break out of its resistance line again.


An ascending triangle pattern is a potential trend continuation pattern that occurs in an uptrend that moves to a higher high, pulls back to a higher low, rises to a similar high and then pulls back to another higher low creating a horizontal resistance line and a rising support line. If the trend continues a breakout of the horizontal resistance occurs. In my experience, very often a breakout of resistance is followed by a pullback or test of the breakout where old resistance can become new support. This pullback test is common and can be expected on breakouts.

Market update 8-2-12

Cramer said exactly what I said in his show yesterday.  He said that in times like these the best stocks to look at are those with high dividend yields.   So we had our first of three big market movers yesterday.  Ben Bernanke made his statements and the market fell off after he spoke.  I saw WMT take a dive to lower levels and then start to head back up so I took a position.  Hopefully there will be an early morning run and I will get out after I hit my profit target today.  I don’t want to be in this position tomorrow waiting for the jobs report.  Today’s announcements are happening right now with the ECB making statements. 

Market Update #2 8-1-12

There are a number of reports that are coming out this week but the main one that everyone is waiting for is the jobs report on Friday.  All of these reports can have an effect on the market and will most likely cause a lot of volatility.  As I said before it is best for newer traders to hold off and watch what happens and wait for a trend to develop.