Saturday, July 31, 2010

Outside the Bands

Long retests outside the bands:
LOGI, SOHU, SVVS

Short retests outside the bands:
None.
Inside the bands:
a shitload.
LPNT, CNC, QGEN, UHS, G, SSRI, PSS, KCI, AU, EGO, NFLX, GLD, SIVR, AGQ, ANV, COV, HSY, ZMH, GOLD, MCK, TJX, HSIC, SLV, WTI, OMI

Breakouts...remember not all of these are fresh, or confirmed on %R...so keep that in mind
Breakout Longs:
DST, ONXX, RCL, EQIX, AMP, BC, CBT, SHOO, EZCH, UAM, POT, EFX, BEN, HIW, RE, MGLN

Breakout Shorts:
AMAG, CBD, AKAM, GSIC, ASIA, VPRT, CTV, CRL

Breakout Shorts:

UPDATE Trade: RDY short via puts - loser

UPDATE 31-JUL-10: Got stopped out with the trade triggers. This was largely due to the wide bid ask spread on these puts. My triggers are based on the bid...I wish I could enter them based on the mid (please look into this TD). Regardless, you trade illiquid products and this is what you invite.

Sold 5 contracts for $5.80 each, loss of $350. Tough, but not that bad...

%R is still intact.

Charts...

Daily:



4HR:




26-JUL-10:RDY retested on Friday and I decided to pull the trigger on some puts...these weren't very liquid yet I got decent fill prices.

23-JUL-10: On the taxable account picked up 5 of the Sep $35 puts for $6.70, in the IRA and my sister's IRA I picked up 3 of these for $6.50 each.

Current stop is $28.95

Psychologically this wasn't very easy since the SPX was breaking 1100 and further confirming the rally...so being short isn't fun during a rally. However, RDY had reported crappy earnings the day before and it sold off pretty hard on that news...so Friday's action was a classic short covering retest...plus it was a fresh breakout below the bands and confirming on %R at the same time...so this retest gave me confidence to trade it.

Charts:

Daily:



4hr:

UPDATE: UL long via calls

UPDATE 31-JUL-10: Exited at the $6.20 price. For a loss of 70 cents per contract. Had 8 contracts...loss of $560

UPDATE 29-JUL-10: Yesterday I went long some more calls based on %R retest of UL. So I had another $6.90 per contract on the line. Today UL got massacred and these contracts are at a mid of $5.95. The share positions I had got exited at the defined loss ($140 and $254) due to trade triggers. However, the calls are really in pain now. I tried but failed to exit today at a decent price. Tomorrow I have to unload these.

Charts:
Daily



4hr




UPDATE 19-JUL-10: Trade triggers fired today and caused automatic exit in the options positions...for a loss of $192 in taxable account (I somehow get filled at $6.46 with a limit of $6.20...kudos TDAmeritrade..you won't see these words printed here often).
Other accounts suffered the $6.20 fill.

So losses ranged from $150 (my Roth) to $300 (my IRA)...Strange my sister's IRA had the same trade trigger and it didn't fire...wonder why...but I am glad it didn't...let her account at least have fun with this trade.

UL closed today with a %R back at 83.44 and above the accel bands.

Equity trades are still on...so more updates to come....

Lesson here was too a tight stop and I think with some options I should put the bid and limit price further apart...
so here I should have said when the bid is $6...sell at limit $6.20...what I need to do is look at the options chart and figure out its own ATR...THAT'S AN ARCHIMEDES MOMENT...I'm gonna go run around town naked now.
16-JUL-10:
Outside the band retest noticed intraday.

Again, used ATR to determine position size here...this is new for me and I am hopeful it works.

Calculator came up with

8 contracts of the November $22.50 call...Entry price is $6.70

Stop is set at $6.20

This is tight and it is due to the low ATR on UL...

So here is hoping this takes off like a rocketship.

Market was tough today big drop, 2 yr treasury yield hit an all time low...yes all time low...As a contrarian I consider this bullish for stocks bearish for bonds...but everyone says how bonds are under-owned and the bull in bond land is far from over...anyway not good for stocks for sure.

BVF did great thanks to an upgrade...so the folios were all performing decent.

Daily



4hr

Friday, July 30, 2010

Economics

Part of the Ritholtz blog that is so awesome yet not intuitively read by all is the Macronotes written by super economist Peter Boockvar...

It's one of the few places you can go to get behind the headlines of whatever economic data is released everyday. He also gives a great glimpse into the Foreign markets everyday including foreign bond offerings and spreads etc...anyway if you have become addicted to TBP...be sure to stop into Macronotes everyday as well.

Today Boockvar gave us a good glimpse into GDP:
Real Q2 GDP rose 2.4% vs expectations of 2.6% but Nominal GDP was better, up 4.2% vs the forecast of 3.7% as the price deflator rose 1.8%, .7% more than expected. Personal consumption rose 1.6%, which was below the expected gain of 2.4% but gross private investment rose a solid 28.8% led by a 21.9% rise in spending on equipment and software. GPI added 3.1 %pts to GDP. Also helping this component, non residential construction rose 5.2% and residential (helped by tax credit) rose by 27.9%. The rise in inventories added 1 % pt to GDP and Government spending added .9% led by Federal. Trade reduced GDP by 2.8 % pts. Real Final Sales, which takes out the impact of inventories, rose 1.3% and has been sluggish in the expansion over the past year where the 15 yr avg is 2.6%. Also included in the data are revisions for the past few yrs which saw Q1 GDP rise 3.7% instead of 2.7%. Bottom line, key contributors to Q2 GDP growth was government largesse as seen by the 4.4% gain in government spending and the large boost in residential construction mostly due to the home buying tax credit. Personal Spending was well below expectations and the rising trade deficit was also a drag. A key bright spot was the 21.9% rise in spending on equipment and software.

The key there is the spending on equipment and software...while that is usually manufactured overseas...eventually you need people to support companies in running the equipment and software...so perhaps eventually you need a buncha people to help run this new software and fix it and etc...so this is the "service" part of the service economy this country has.

The other thing that I keep hearing about is regulation and how bad it is. I work in a regulated industry, if anything regulation creates jobs because you need people to study and then implement and then ensure compliance with the new regulations.

I once caught up with an old friend who I used to play street hockey with. He told me his job was "Sarb-Ox" meaning he worked for a bank and his job was related to the implementation of Sarb-Ox.

If people aren't hiring then Government regulation is one way to force them to hire people to figure these crazy laws out...so regulation is not a bad thing for the economy. Particularly for the economy we have setup in this country where everyone's skill-set and cost of living seems to revolve around "management" rather than use of hands.

Anyway that's all I have to say about that.

Thursday, July 29, 2010

Trade: CIB long via calls...loser

I didn't get a chance to update my trades yesterday. But I have a few losers in the accounts now...

One was just entered today and it was rapidly a looser. CIB. Went long at the open based on the %R retest. I want to blame this mainly on entry and lack of stops put in place. However, no matter what the price I would have been stopped out today based on Headley's methods. Also, I wasn't at the computer today so that wasn't wise. Plus I had hoped to get in at the open instead of doing what I prefer and waiting a little bit to let the open dust settle a bit and finding decent prices prior to getting into a trade.

I haven't started putting trade triggers on all my orders to automatically stop my out. After today that is going to change.

Anyway enough of this self flogging. The money speaks for itself. Bad job Jorge. It is that simple really bad job.

CIB - Oct $50 Calls cost basis...$10.70...sold at $8.90...loss of $1.80 per contract and I had 3 of them...so $540 down the shitter.

Of course tomorrow it will add insult to injury and go higher, since it held the 13 day EMA...I am certain of this. 

Charts:

Daily



4hr

Outside the Bands

Retests outside the bands:

Longs:
AEIS, TGI, JLL, NSR, DRC, SKM, ARMH

Shorts:
None outside.
Inside the bands:
MANT, SFG, TWM, BGC, PSSI, ECRX, QID, SQQQ, SYT, RDY

Breakout Longs:
CAJ, CBG, VZ, APL, WYN, IACI, ABB
Some of these are not %R confirmed, some have already retested.

Breakout Shorts:
QLGC, HSP

Wednesday, July 28, 2010

The System...

Quick update on the trading system I have been developing. I have now tested all the way through the first half of the year on a 5 minute timeframe.

I have the following statistics to share.



Based on 1000 shares of IWM
Trade costs

Monthly total Weekly avg Net Total trades TD IB
Jan $1,320.00 $330.00 $550.00 220  $  2,197.80  $    770.00
Feb $970.00 $242.50 $200.00 220  $  2,197.80  $    770.00
Mar $2,080.00 $622.50 $1,107.00 278  $  2,777.22  $    973.00
Apr $80.00 $98.00 $1,053.00 278  $  2,777.22  $    973.00
May $1,290.00 $322.50 $408.00 252  $  2,517.48  $    882.00
Jun $160.00 $40.00 $1,210.00 300 $2,997.00 $1,050.00
Totals $5,420.00 $243.25 $2.00 1548  $15,464.52  $ 5,418.00







Max Profit $1,710.00 Best Day $2,130.00 Average Profit $0.28
Max Loss $720.00 Worse Day $1,910.00 Average Loss $0.13
Ratio 237% Ratio 112% Ratio 215%
% Winners 32% Best Week $1,810.00 Total Wins 251
% Losers 66% Worse Week $1,450.00 Total Losers 511
Ratio 49% Ratio 125%



I have added emphasis on the key statistics I feel have the most bearing on the validity of the system.

Prior to that...How about those trading costs? I think traders who try to develop their own systems eventually look at this column and say....hmmm...I think its time to start my own brokerage...what a business...no matter if you are winning or loosing THEY ARE WINNING. Always. Anyway that can be overcome with appropriate trading scale...and the power of compounding.

First the monthly totals...it is clear that winning months outpace loosing months by a wide margin. This is very positive and it means that if you take even a crude exit strategy which does not handle chop very well, and does not take profits at any point along the route...this is very good indeed.

Second and more concerning is the percent of the total trades that are profitable vs trades taht are loosers. In this case there are nearly twice as many losers for every winner.

The consolation prize is that the average winner is more than twice the size of the average loser..again speaks loudly to the validity of the system. This gives you enough edge to get those monthly totals...its a razor's edge though.

The system's details shall remain proprietary until I bear out all the testing and see if it works on different timescales and instruments. It is incredibly simple and I am goshdarn proud that something so stupidly simple can work decently well.

My next step in the process of backtesting is to tweak the exit strategy. I have at least 2 ideas for this one involves profit taking the other doesn't. I will probably eventually mash them both together to take profits along the way.

I want to bring the ratio of % profitable vs % losers UP while not sacrificing the average size of the winners vs losers...

If I am able to accomplish that with any of the next 2 ideas...I think I can start a hedge fund...

Especially if I can then take it to different assets and different timeframes...which is also part of the next steps in the process...but basically once I find the proper exit strategy...then computers will take over and help me figure out if it works accross time frames and asset classes.

The backtesting is arduous and I sacrifice many hours of sleep doing it. But I am confident now that the hard work is going to pay off.

The key to testing the first half was to see how well the strategy would do in periods of low volatility and high volatility. It doesn't do as great in high volatility because of the exit strategy. I saw lots of chop eating away profitable trades and taking me out of trades too soon.

So I am confident this strategy works...it works exceptionally well. I just now have to come up with an exit strategy that allows this thing to hang in with the trends it so precisely identifies.

Like I said...don't be surprised if in a few months you read about some guy running around Prospect Park naked Archimedes style. I feel I am on the verge of something incredibly awesome.

Outside the bands...

Retests outside the bands today...

Longs:
CIB, ALGN, LNCE, MUR, MSB, SSL, ONXX, NTGR, DST

Shorts:
None outside the bands..
None Inside..

Breakouts...

Longs:
CVX, LRY

Shorts:
None

Tuesday, July 27, 2010

Outside the Bands

Retest longs outside the bands:
ROP, CNH, ARMH, ABB(close enough), GPI, HXM (close enough), AXE, BMS, WRC

Retest Shorts outside the bands:
RST

Lots of high quality trades out there today.

UPDATE: EMS short via puts

UPDATE 27-JUL-10: Had to exit based on %R signals today. Exited for $8.50 each so nominal gain of about $100 minus vigs...this sucks because I had seen a much higher profit...Also on the daily it is facing resistance at the 13 EMA...one of my favorite indicators and a key resistance for this stock in the past.

Regardless I really have to consider just getting out of stuff when I see a big profit. I am considering this today with BVF (though I have sold one contract in each account today to take some profit).

Charts:
Daily



4hr




16-JUL-10: So I took a setup today to the shortside that is quickly becoming my second favorite setup...something that retest's inside the bands but finds resistance at the 13 day EMA...

Hence the EMS setup today. I was actually contemplating for too long and missed a better entry price.

In any case, I used ATR based on Delta to figure out my position size and stop price. In this case, defined risk 1.5% of folio= $260... I divided by the 20 day current ATR of 1.59 * delta (85 in this case)...so $risk/ATR*Delta = # of contracts allowed.

Anyway, purchased the following for the taxable account:

2 contracts of September 55 puts for $8.00...

Stop is in place at $6.70

but could have got them for $7.70 earlier in the day...the price of hesitation...even though i wanted a short badly...the reason for my hesitation was that the fundies aren't bad at all, it is in a strong group, and earnings are around the corner...hogwash in the technical world...hopefully it will more than make up for the lost $60.

Charts below

Daily



4hr

Monday, July 26, 2010

Outside the bands

I have decided to double my workload everynight and post Breakout results from my scans...These are based on 2 closes in a row outside the acceleration bands, and 2 closes in a row with %R in overbought/oversold territory...when I feel like it I will filter out those that are not yet confirmed on %R...confirmation is closing above a setup high...the setup is the bar where the thing goes above or below overbought/oversold territory.

I don't like trading breakouts, more often than not they come back to retest on %R and I would rather get in on them there than take the pain getting to a retest. One thing you can do is put half a position on a breakout, then put the other half on when it retests.

So today:
Breakout Shorts:
QLGC, RST, BEC (not all of these are %R confirmed yet)

Breakout Longs (a shitload):
IYZ, EPP, TLVT, LAMR, IYM, TRW, GTLS, DBV, XLI, MS, EWA, OMC, PH, MTL, SIAL, ALGN, PENN, KMT, DSW, GPI, LUX, TNB, CR, MUR, SYY, LEA, SXT, NXTM, WRC, OCR, EWY, PLY, DGIT, ADSK...again double check the %R on these...I don't think all of them have confirmed yet but they are accel band breakouts..and I am lazy to check all of these charts.

No retests outside the bands today.

So here are the Inside the band retests:

Longs:
BOH, AMT, DBA, CBD, VIT

Shorts:
IBKC, LHCG, MANT, SIRO, GPRO, ADS, WMS, CFN, BKE, CHSI, PXD, BBT, LPNT, KCI, DVA

Good ole TED

I remember back in the salad days of 2008 when you would turn on Bloomberg radio and ever other word out of Tom Keene's mouth was TED spread...I remember the first time I heard it thinking...what a great idea for Senator Kennedy to be pushing a butter substitute on Bloomberg every morning...I remember eating the English muffin Erin was so wonderful to prepare for me every morning thinking about how much money I was loosing those days and wondering how much better my life would be if I just went to Costco and loaded up on buckets of Ted Spread....

OK I digress...The TED spread is little understood (including by yours truly)...but it is basically a measure of trust in the system. Since 2008 nobody seems to even say those words together anymore...Maybe it's because Senator Kennedy died...and Ted just isn't a sexy name anymore?

Well I keep tabs on it and one thing that alerted me to the summer shitstorm was the Ted Spread...during April it got way low...and then it started a rapid trajectory higher...so much so that it crossed the 200 day MA decisively in Mid April...that was signal #1...then it kept going higher and in early May...it said by bye to the 50 day MA.
In any case...all the while people were talking about the sovreign debt issues...the TED spread was signaling its own hatred way before Souvlaki was on the minds of Wall Street and the press.

Now we had the next big thing which was the stress tests in Europe...and everyone was worried...all but the Ted Spread...in mid-June it cam back under the 200 day MA...and of course the Stock Market has been rallying ever since.

A nightly thing for me is to bring up the chart of the TED and you all can do it by going to stockcharts.com and typing in $TED.

It is by far one of the best market timing indicators out there.

Weekly expy gets expanded

Headley alerts me to the news that CBOE has expanded the weekly expy to more stuff.

Newly added are some major equities -- the latest CBOE data shows the following stocks and ETFs are now available on weekly options:

Stocks:  AAPL, ABX, AMZN, BAC, BIDU, BP, C, F, GOOG, GS, POT, XON

ETFs:  EEM, FAS, FAZ, GLD, IWM, QQQQ, SPY, XLF

Indices:  OEX, EO, DJX, SPX.

Cool stuff...this of course makes it probably a bit harder to trade these underlyings as now every week you have jockeying and hedging using the options...this is of course a wonderful time to be a market maker in these names...too bad that's not me.

Friday, July 23, 2010

Must reads

1. Global warming...over at Ritholtz a great summary of all the bullshit that's out there and why its bullshit.

2. Apple rules the Nazzy...Dave's daily is a daily must read...and sometimes he even does more than just get snarky on the charts...it's amazing how many people trade index ETFs and they don't know how sometimes they are overweight certain names.

3. Alphahorn posted...these have become rare..so they are always must reads..Alpha was spot on with this correction...and even before that...he is the only waver worth reading...and once I discovered that he decided to stop blogging everyday and instead focus on time with his family or something...anyway he's great...

4.  Turtle rules...I don't know if I mentioned this yet...but save this document to multiple hard drives in case the internet ever blows up.

5. Big Trends....5 things you need to do be like a pro-trader.

I think its kinda silly that I am pointing things out that are on my blogroll...but whatever. I don't know if anyone reads this thing so this is out there just in case someone is reading this.

The system is working

The trading system I am developing is working pretty decently...I have paper traded through the whole 1st quarter thus far...

The results are rather encouraging given the number of trades already executed. However, my goal is to trade all the way through the 2nd quarter as well. This will give me a period of low volatility and a period of high volatility. Thus far it looks like it works in the low volatility environment but the chop really kills me.

Also the % of winners vs. losers isn't wonderful, but the winners are much larger than the loosers I haven't done the average calculations as I am still figuring that out in excel...but here are the results for the 1st quarter.


Based on 1000 shares of IWM
Trade costs

Monthly total Weekly avg Net Total trades TD IB
Jan $1,320.00 $330.00 $550.00 220  $2,197.80  $770.00
Feb $970.00 $242.50 $200.00 220  $2,197.80  $770.00
Mar $2,080.00 $622.50 $1,107.00 278  $2,777.22  $973.00
Apr





May





Jun













Max Profit $980.00
Best Day $1,260.00

Max Loss $560.00
Worse Day $670.00

P/L ratio 175%
Ratio 188%

% Winners 34%
Best Week $1,380.00

% Losers 63%
Worse Week $650.00




Ratio 212%







Max Proft and Max Loss are single trade#s...this system is a day trading system so multiple trades per day are executed.

Now...IWM traded in a range of 59 - about 68...so for 1000 shares you need to have around $70k to work with....if you can net $1800 and you used leverage on an account of $35,000 you made 5% in the quarter...annualize that and you got yourself a decent money machine.

And this is without refining a very crude exit strategy...the entries in the system are quite sophisticated (hehe), but the exits are the hard part. In the paper trade posted here, I am not taking profits (although I have a strategy for that). I also have an idea for the exit that should reduce the number of trades as well as make some of the loser trades into winners...

Nonetheless...I think I am onto something here.

Thursday, July 22, 2010

Outside the bands

No retests outside the bands today.

Inside the band retests:

Longs:
CL, ESV, SON, FLIR

Shorts (aw man a shitload):
OK I am not going to look at all the charts on these...its too late in the evening for me already...so these may or may not be bonified retests...if you are interested in any please check the charts yourself.

SHLM, CRL, LM, UNT, SNI, AOL, SFY, RRD, AU, LXK, TCB, DBRN, HSIC, ARW, PLCM, WBS, EGP, COV, BBBY, LL, ZOLL, IDXX, TRLG, RSTI, HIG, FAST, AMTD, SIVB, AGQ, ACIW, DFG, UFS, OSK, CHK, RSH, SWN, SLV, ANN, PRGO, GG, DDS, JWN, AIR, PHH, CYN, STJ, JACK, GDXJ, MBFI, LMT, LUFK, HNI, XRAY, UFPI, VCI, SSD, TMO, COST, LNC, LOW, EGO, RTN, PLCE, ROST, MHK, COLB, BKC, PRSP, NICE, AON, IAG, MANH, KRE, TJX, BCSI, MLHR, ABX, WRB, POR, SAI, A, COH, GVA, UPL, SLW, KGC, FLO, HD, JCG, NYX, BCR, PKI, MLI, GRMN, HPT, VZ, HAIN, VSEA, CMG, BBY, RL, PNRA, AEM, ABM, FEIC, V, AUXL, CRDN, CERN, PRU, SNCR, TRMK, GDX, SHLD, SLF, FDP, CFR, ALL, BYI, GLD, UNP, B, QGEN, DISCA, CME, NNI, FISV, MRVL, NBR, HLS, WAT, HAR, INFY, SPLS, RS, DISCK, CGNX, G, IBOC, CTCT, MASI, VRTX, MFE, KSS

Breakout longs:
CYT (%R not yet confirmed), MEOH, MS (accel band only)

Breakout shorts (most of these are not confirmed on %R):
GPRO, DGX, HBHC, SYK, CMTL

Market musings for today

Today was a pretty good day. BVF moved slightly higher, EMS got hit hard again, and UL was going higher.

I missed the AGU setup the other day because I am still trying to perfect my options postition sizing model to avoid getting stopped out prior to a bonified stop on the underlying.

I had a pie in the sky price set to buy the options at...and it was clear to me that I was going to miss that opportunity.

I realized why my sister's IRA didn't get stopped out of UL the other day. I set the triggers wrong...I had set them to go off if the ASK had reaced $6.10 instead of the bid...I'm only human and prone to errors.

Now I am at a point where I could/should be taking profits here...but I also have nothing in the charts telling me to exit any of my positions...I just don't want to see my profits evaporate.

Today was a heckuva day in the market with all things flashing bulls in charge (minus volume of course...but its summer and that doesn't worry me).

90% up day so there was certainly force...it doesn't much matter why it happened and I don't put much stock in the reported reasons markets rally...the press is very unreliable.

I gotta say, if IBD says a rally is happening, I am prone to follow that call. They have a fairly straight forward simple system for assessing these things and they are very quick to turn their calls around should the market determine it is right to so.

Anyway, the market is tough these days and tomorrow could bring another big red candle...the stress tests are coming out and it might spark a selloff...plus going to the weekend...etc.

My setups have been doing well so I am happy. Now comes my weakest thing...exiting...and I am refining that as I go along but at least I am no longer bad about entering.

Without entering you have nothing to exit from...so here's hoping that MACD divergence indicator and some of the turtle ideas work out for exiting.

Better still, let's keep making higher highs on the longs and lower lows on the shorts.

Thanks Mr. Market.

Wednesday, July 21, 2010

Outside the bands

No retests outside the bands today.
FXE came real close as a long outside the bands...so let's just call it that.

Shorts inside the bands:
EPV, HGG

Longs inside the bands:
ENDP, CMS, SAP, TAM, CCJ, RDS/B, LBTYA, NNN, HOS, VGR, VEU, ETR, CTSH, RYN, BR, AZN, MCHP, JBHT, SHGPY, PPDI, WTR, GPC, HCP, GEO, EPI, NTAP, TEF, BF/B, LNT, RHT, ATO, ECL, FXE, MJN, ALTR, ITUB, BRCM, CLX, WERN, ABV, DEO, FIS, EMC, MCD, MELI, EBIX, PSA, AFL, MOS, AJG, JBL, CBD, ENB, LLY, REP, DUK, PNW, AIZ, BIN, EWD, ORCL, INP, SKT, TEG, BG, AFG, NSR, LPS, NUS, XLP, VVC, CRR, RVBD, AIXG, FFIV, LLTC, WFT, XLNX, NHP, NBL, IFN, EWP, DOX, DPS, SII, STT

Tuesday, July 20, 2010

Outside the band

Retests outside the bands today...

Short:
FCN...way outside the band...

Long:
None...

Inside the band Long retests:
HSP, CMCSA, BUD, MXIM, DBA, MBT, BAP, NVO, FXY (again!), CVC, BEC, ASML

Breakout longs:
LFL, EXPD (all three after a retest), UL (still closing outside the bands)

Breakout shorts:
None.

Monday, July 19, 2010

Ideas for profit taking

You will forgive me for at times writing shit that may not make sense at all to you. I am developing a trading strategy and I am back-testing it incessantly.

So I will chicken scratch my thoughts on the strategy on this blog since this is my trading journal and I can do with it what I want...y'a hear?

OK...Profit taking idea:

Maybe let the trade ride until the trend is confirmed in the opposite direction by a new entry signal...unless the original trigger bar's stop is violated.

For now I am paper trading based on taking the trade off at any setup in the opposite direction...

This may be one way to refine the strategy and reduce chop.


Don't worry one day I will sell this strategy on the internets...and you all will get a discount.

Outside the bands

Retests outside the bands today:

Long:
AGU

Short:
None

Shorts retesting inside the bands:
LOPE, HPT, IR, ADBE, JCP, BPI

Of these I bolded BPI...the others are really shetty barely retests actually have been skating above the %R threshold for a few days without violating...BPI is a clean inside the band retest...

Some analyst said the educators wont get hit so hard thanks to regulations yet to come out of Washington...Personally, I have a feeling that any stock currently being held down because of pending legislation or the effects thereof from Washington should start to rally as the election nears...it's all but a foregone conclusion that the house will switch hands...(Senate not so much)....so Washington will do what Wall St. loves best...Nothing or alternatively...cater to the lobbyists needs and call it Bi-partisanship.

AGU is probably worth entering.

Friday, July 16, 2010

Outside the bands

Long:
UL

Short...none today outside

Inside the band shorts:
EDZ, SKF, EEV

Interesting stuff here is that all of the retest shorts are actually vehicles that short the market...meaning the short vehicles are giving us a new entry to short them...this is good for stocks.

Breakout longs:

FXY

Breakout Shorts:
YCS

Hmm...both the breakouts are long Yen plays and they have happened after decent retests inside the bands...gonna have to check in with by buddy at BONY who's a yen master about this move....this of course isn't apparent on the USD/JPY pair, weird stuff....Nevermind...Ashraf Laidi over at Seeking alpha has the mystery solved ...not to mention a badass call on July 7th.

ITUB: UPDATE...loser

UPDATE: Stopped out 16-JUL-10 at 20.46 for total loss of $430.50 which was the defined risk I had placed prior to this trade. Trade trigger worked great and I am happy with the execution of the trade...of course this was a breakout and I rather play retests...this is yet another example of why I like doing that...breakouts get faded, retests are nice low risk entry points post breakout fade...

So after my eureka moment. I decided to test the waters using a breakout and using ATR based position sizing.

Based on an ATR (20 period) of $0.70 and my calculated risk tolerance of $430. I determined I could get 615 shares.

Entry point was $21.16

Stop is placed at $20.46

I will use the 2 for 1 method of profit taking here...I will halve the position at $21.86 and leave the current stop in place. This effectively gives me a free trade if I am right....if I get profitable, then I will keep riding this until the exit on %R is apparent (OR should I wait for my trusty 13 day EMA idea to pan out?)...nah I will stick with %R

The setup on ITUB was a breakout on %R and Accel bands confirming close in time. My buddy Shilpi gave me this one so I have him to thank either way.

Charts

Daily:

4hr:

Thursday, July 15, 2010

Outside the bands

Yesterday the scans weren't working so I couldn't post retests.

So yesterday's and today's retests are as follows...

No Shorts, No longs

Inside the bands:
Longs:
Yesterday:
PKX, THG (violated today), CBSH, BAX (violated today), LLY, NE, MMP

Today:
VR, WSO, TRH, ARST, NTT, TLEO, WRE, NETL, COF, WERN, OHI, TCB, CHL, PACW, KB, TWTC

Shorts:
Yesterday:
RAH, RTN, GXDX, and SHLD (all three violated today), NOC, VXX, XCO,IGT,

Today:
UHS, CYH, BBBY, KSS, KMX, TTES, HK, CRK, IMA, EMS, PSSI

oi...these inside the band retests take a long time to go through...i may not do this any more...i don't even trade them.

Of all of these, NTT may be the only thing I trade.

Tuesday, July 13, 2010

My take on the rally

I read the big trends blog fairly religiously. I mostly agree with their advice and their posts. Especially Bob Lang, he runs one of their more lucrative services called Grand Slam options and Extreme Options...anyway I have no idea what his real track record but he claims he kicks ass and I believe him.

None the less today he puts up this post about fear, and how it shouldn't control your trading psychology. Then he posts another one right afterward using the lack of volume as a fear mongering tool.

So which is it? Is it that we should be afraid of this rally that came off some very extremes in sentiment because of lack of volume? Isn't a rally worth reaping if you have setups that are time tested and work in your favor?

I know how market direction is important, and how everyone must take their cues from the market. However, there are many times when you miss out because you don't believe in a rally or a sell off. I missed shorting the May selloff because I didn't believe in it.

This is my problem I am biased to the bullish side.

Anyway, Bob Lang always talks about how there are a million reasons to sell but only one reason to buy...he doesn't ever say what that reason is. But in his posts today he led us in the direction of the reason NOT to buy...not very like him.

Anyway I also read Cobra a lot and he had a couple of reasons to buy in his post today. Namely, volume is relative AND very seasonal. Which is the point Bob was arguing against...that no matter what the calendar says...volume MUST always accompany a directional move...

However, it is summertime, and volume has died, who cares if its a bit early, all we have is retirees and teachers and idiots like me trading this market...Its all good if the setups are there.

IBD realizes that while it is nice to have above average volume, all that matters in their follow through rules is that the volume is higher than the day before. They realize that the average volume isn't always helpful when it comes to summer or holiday rallies...

Anyway those charts from Cobra say it all, whenever the institutional accumulation and distribution lines cross, its a rally...and it can be believed.

Earnings season moves stocks it always does and it is a bull's best friend. Once the May selloff began, I said to myself we may do this until July earnings season begins...I should have shorted the market then...knowing there was a vacuum of hunky dorey stock based news to move the markets (not to mention the overbought and high bullish sentiment conditions back then)...

Today we have the opposite, sentiment was really negative, and now we have earnings news to chew on and make stocks go higher...so the rally is real and it is tradeable.

Regardless, if you have a good short setup take it, if you have a good long setup, take it. Define your risk and your stops and you will be fine regardless of the market's direction. There is your one reason to buy.

Outside the bands

Uh...no Retests outside the bands today.

Inside there are a crapload of retests:
Shorts:
VZ, HD, LOW, ADBE, CHK, M, BBY, IR, A, TOL, TJX, BBBY, CFN, KMX, FDO, LIFE, APOL, ORLY, HPT, UFS, DDS, LH, VMC, ICE, PENN, MD, MHK, REGN, SSRI, CNC, COLB, GVA, HAIN, PRI, LL

Longs:
PPL, EW, VIT

I will say the following, most of the shorts are long in the tooth, or have flaws, like some of them are on their 2nd retest in less than 1 week...I included those only because of the fact that the first retest was not violated.

Of the longs VIT is probably the most attractive.

Sign up...it's free

It's a bit annoying but well worth your while...

Sign up for the Big Trends Free newsletter...they just added a nifty little proprietary score.

Price Headley has done wonders for me. I have gained a laser like focus on opportunities to trade as well as when to enter and exit them.

I am a believer in the IBD system, and to me Price just puts a lot more technical indicators behind IBD strategy. In any case, its worth signing up for the free newsletter.


You should do it.

Monday, July 12, 2010

Outside the band

No retests today outside the bands.

Inside the band retests...

Longs:
UN, MDR, ELP, SPR, SID, CIG, VRX, SBAC, HANS, MR, AMT, ARUN

Shorts:
JDAS, BZQ, OMC, SOHU, GPS, AMTD, AUXL

Code for Breakout Scans in TOS

I was toying with the scans to see if I can get a decent scan for breakouts based on Headley's %R and Accel bands.

They are far from perfect, but so is the scanner in TOS for these study based scans...nonetheless we should all be eternally grateful. I used to dig through something like 100 charts per day (once I did 300) to find opportunities. This does that work for you and really clears things up for you.

The following is what I got.

Breakout Longs:


Breakout Shorts:


I wont be posting the results of these just yet...this blog already takes up too much of my time..but I might...

If anyone reads this let me know in comments if you want me to post the results of these scans daily.

Position sizing...

Over the weekend I had what some would call a Eureka moment. I have been trading the Price Headley system for a few months now and I have had mixed to bad success. Not on my entries, a little bit of trouble on the exits, but also position sizing and profit taking. I have had big problems with the latter 2 critical areas of trading.

I had not given much thought to position sizing in the past. I just figured I wouldn't put more than 10% of my folio into a trade...however, recently I had heard a few things...in May Tom Sosnoff was constantly repeating that in periods of high volatility you can reduce your position size and make just as much money as in low volatile times...Then I read the turtle rules. They actually quantified position size based on "N" which was racking my brain for a long time but really its just the Average True Range or ATR.

Then in my googling I found some videos from the fellas at Informedtrades.com in which they delved deeper as to risk determination.

Anyway this weekend I pieced all of these together to make my own position sizing formula. I even toyed with one for options.

1st determine what you are willing to loose on a trade. For me this is 1.5% of my total portfolio (this is a little conservative but still fairly aggressive...then determine the ATR of what you want to trade....divide your risk $by the ATR and viola...you have the # of shares you can trade of whatever it is you are going to trade.

A stop must be in place 1 ATR below your entry point...which is determined by your execution of the trade.

This means that all trades will only loose the amount you have determined you are willing to loose. Plus ATR will determine your position size...if you have a winner and your position size is bigger so will your profits. Of course ATR is independent of winning or loosing but it is a measure of volatility, so if something is moving quickly you will put less capital behind it...but still the same money.

Anyway this is the best way I have determined to quantify position size based on volatility. I will be using this moving forward.

I have also developed it for options, in this case you have to take ATR and multiply it by Delta and use that as your denominator...if you use a high delta, with low theta, this should keep the rest of the greeks from messing with the formula too much....so that being said. It can work on options as well...the problem is with options you generally have more slippage so your risk is always going to be a bit more...even with the most liquid options.

So I am going to trade in equities using this strategy for now...and I will monitor the success of the options position sizing...for one this will allow me to enter breakouts instead of just retests because my risk will still be defined...

However, on retests this is of course even more powerful because that 1 ATR will allow for a bend don't break scenario (up to a point) and that point is the breaking point of the folio.

So no longer will I be waiting for the close...sorry Headley....I will be waiting for the ATR stop to be triggered...even if it happens intraday.

Saturday, July 10, 2010

Need to exit another one: CRI

UPDATE:
Exited for $8.30 per contract...this resulted in a minor loss of 10 cents per contract...However, here is where I messed this up. I didn't employ money management ideals in this trade. I was still well within my total risk tolerance. The 13 day EMA was breached however not confirmed, however this is not my primary indicator %R is and that was violated...so I did the right thing based on the indicator...but I hadn't reached my tolerated risk level on this trade (this means I got in at a great price). The 13 period EMA is really starting to become my favorite indicator...Over many of my trades I notice that if I use the 13 EMA as a stop with a confirmation bar requirement I could have saved myself some money...in this case I would still be in this trade...as I would need a 2nd close above the high of the bar that closed over the 13 EMA on the daily...

Such is life.

So CRI was a retest that i enjoyed seeing paper profits of about $250 disappear on. That always sucks but as Tim Hilliard says, "you always leave hot dogs in the cooker."

This violated on the 4 hr before violating on the daily but because volume was soft I thought would wait for the daily chart signals. Plus actual capital loss wasn't that bad.

I will exit this Monday morning and update the post with actual numbers. Again on the daily the 13 EMA is not even close, but it has been breached on the 4hr...also on the 4hr the indicators are turning less bearish.

Charts:

Daily


4hr

Outside the band

Retests outside the bands today include the following:

Long:
None

Short:
TEL, ADS

Inside the band long retests include the following:
JNJ, BND, ESV, NU*

NU has a caveat in that %R (79.72 today for NU) when rounded up is still at 80...so its kinda sorta but not really a retest.

Also a few days ago I said that BJ was a retest, this (my friend Shilpi) pointed out was not true as BJ did not actually confirm on %R prior to retesting.

Friday, July 9, 2010

Exit DCTH

well..lots of action on DCTH today.

Enough to drive me out of the trade. The 4hr chart was my guide here and the 13 EMA was violated in a violent manner...volume was also high. Lately there had been a massive gap that occured in the MACD divergence...meaning that there was a big divergence on the MACD vs. the chart. Also recently this thing flattened out a bit. There is now a DMI cross that occured. While %R is only now retesting....this is just one indicator...

I had already taken profits along the way on DCTH and due to its low dollar nature now is a good a time as any to exit the trade entirely...any profitable trade is a good one and this was a really good one for me.

Here are the details of this trade (this includes the vigs):

06/14/2010 Bought 5 DCTH Jul 17 2010 14.0 Put @ 4.4      -$2,213.74
06/24/2010 Sold 2 DCTH Jul 17 2010 14.0 Put @ 6.4          $1,268.48
06/30/2010 Sold 1 DCTH Jul 17 2010 14.0 Put @ 7.5          $739.24
07/09/2010 Sold 2 DCTH Jul 17 2010 14.0 Put @ 7.1          $1,408.48

Total Profit: $1202.46  or 54% of original investment

Daily chart



4hr Chart

Thursday, July 8, 2010

Outside the band

Retests today include the following:

Longs:
FXY

Shorts:
DNB, VZ, LHCG, DNDN, CM, YCS

The rules on retests are that you use the day of the retest's highs and lows for stops for shorts and longs respectively.

So, example is VZ...today's high is 26.78...if you shorted it, this would be your stop. Headley waits for the close of the bar to manifest this stop. Also, Headley says you should try to get in as close to this stop as possible (within 1-2% if possible). This keeps your cost basis in line with a good trade should it go your way.

It also keeps you from chasing things if they run away from you on the next day's open.

Trades today: CSTR exit

So...I relieved myself of a short CSTR position I had been holding for some time today.

My adjusted cost basis was after I had taken profits earlier in this trend.

This was one stock that I had been long at one point with a fairly aggressive 60/55 bull put spread....I did this back in May when I thought the rally was sustainable and CSTR at the time was a relative outperformer. Along with NFLX. Anyway these were July contracts and I had given myself plenty of time. Then the correction came and CSTR decided to trade under its 13 day EMA as well as break the %R stops it had put in place. That's when I covered the short on 60 put and let the 55 put ride. The hourly chart had also given signs that there was strength in the downside move.

After I had taken some profits, I decided that the 4 hr chart and the 13 period EMA would regulate this trade. Yesterday it closed above the 4 hr 13 EMA and today it confirmed by closing above yesterday's high.

So that means I was leaving the trade.

I only lament I didn't get out earlier. But still, at one point this was a heavy loss, I recovered that loss and brought in nearly $600..

Closed the last contract for $8.60...profit on total position $580.

Charts...Daily:


4hr

Wednesday, July 7, 2010

Update on a trade: HS

Why only yesterday I put HS into the taxable account.

Here is my rational for getting into the trade in the first place:
Short:
Bought 5 HS Aug 21 2010 20.0 Put @ 4.7

I picked this up in my taxable account today. This was something that popped on my scan on Friday. A short retest outside the bands. This is my favorite setup. I did this only in the taxable account because in this account I had missed the CRI trade in this account due to my phsycological crapping out...so I went for the next best thing which is shorting HS. I noticed Friday that this was not the only health care insurer that had this retest phenomenon, AET, UNH, also exhibited this behavior. So the sector is in trouble. However, my psychological issues right now are that we are long in the tooth with the downtrend and I fear these moves are nearer to their end than to the beginning. No matter, I am trading based on the setups.

Stop is 15.55. 

Today it violated the daily chart's %R retest stop of 15.55 by closing today at 15.88. Also it has closed inside the bands...One of my favorite indicators the 13 period EMA was not even close to being violated on the daily...but did in fact get violated on the 4h...So I should exit this position...that's what the indicator's are telling me.

So I will cut out of it tomorrow. However, it is interesting to note that every other indicator is still very bearish on this stock, and just today we had another retest in the Health Insurance sector in WLP.

Today was a very bullish day for stocks, bullish breadth, decent volume, IBD called it a follow through and a new rally...So being short is pretty tough to do...The wavers are saying this was a typical 2nd wave with the big 3rd wave down still to come. Kass also called a bottom.

Anyway the HS charts are below:

Daily





4hr




Bottom Line: Sold 5 contracts for $3.90 this morning (8-JUL-10) as the market in HS ran away from me. Total loss $400 plus vigs.

Outside the Band

%R retests occuring outside the bands today include the following:

Shorts:
BRY, AGP, CI, KCI, FO, WLP, TEL, CSC,

Longs:
BJ

Tuesday, July 6, 2010

Setups today

OK since this is a new blog, I should say what the rules for the setup are...better still a screen shot of the rules in TOS:

Short setup code:

Long Setup code:


The rules are based on Price Headley's Methods in this case I am looking for %R retests outside of the acceleration bands. I have not backtested this specific part of his methodology, however, he states in seminars that these are the highest quality, lowest risk setups.


Every night, I will post the setups that have popped onto this scan. I will also post %R retests that are inside the bands. Especially when there are no setups outside the bands.

One final rule for my scans, all of these will be optionable, the underlying trades at least 250,000 shares that day (be sure to check the average volume), and finally be at least $15 in price. I am a believer in the IBD methodology as well so that's where these "arbitrary" filter rules come from.

If I post retests inside the bands I will be sure that the retest is valid. Which means that I will confirm that the %R setup is confirmed. I will not post Retests inside the bands if there are any retests outside the bands...I will only post retests inside the bands if there are no retests that come up outside the bands.

That being said...today's setups are as follows:

SHORTS:
EGN, RJF, GIS, DBO, CAJ

LONGs:
NONE outside the bands.


The following are %R retests inside the bands:
RGNC, SWSI, ODSY