Trading Tips

Various tips and ideas for regarding trading and investing such as placing orders, using stops, etc… These tips are included within the content of the posts listed below.

Jul 242014
 

The CSGP (Costar Group) short trade has been stopped out today, exceeding the previously suggested stop of 153.85 shortly after the open following an earnings induced gap. As mentioned recently, each trader must decided whether on not to hold or close a position before they report their quarterly earning results. A link to the Briefing.com Earnings Calendar is available under the Tools of the Trade area on the right side of the home page.

Gaps are unavoidable events with any type of trading other than day trading (where all positions are closed out by the end of each day).  Sometimes they go they way of your trade, sometimes against you.  My preference on any gap that goes against a short position is to wait until the order imbalances at the open moderate and then place a stop just above the peak high in the stock.  Sometimes the stock will power higher after the initial thrust, taking out your stop, but very often the opening gap proves to be an over-reaction with the stock moving lower afterwards.  Essentially a trader has two choices when caught on the wrong side of a gap:  1) Immediately close the position, thereby guaranteeing a loss or large give-back of any imbedded gains or 2) Set a stop above the initial reaction high, which will result in either a slightly larger loss (or give-back) or the gap is faded and the trade continues to play out, allowing for a better exit price and in some cases, the original profit target to be hit.

In the case of CSGP, the stock gapped to open at 148.08, below the suggested stop of 153.85, but quickly moved higher, exceeding the stop within the first minute of trading. The opening order imbalances continued to push the stock sharply higher for the first 20 minutes of trading until peaking at 165.83 before falling back nearly 9 points. Therefore, a trader that did not have a standing GTC stop-loss order that was taken out around 153.85 today & still happens to be short this one might consider a stop just above this morning’s peak reaction high of 165.83. However, as the 153.85 level was taken out shortly after the open, CSGP will now be moved from the Active Trades category to the Completed Trades category as a stopped out trade.

Jul 222014
 

First off, I just wanted to point out that the next few trading sessions are likely to be marked with increased volatility and above average chances for some fairly sizable opening gaps in either direction. The largest component of both the Nasdaq 100 & the S&P 500, AAPL (Apple), is scheduled to report earnings after the close today as well as another top component of both leading indices, MSFT (Microsoft). FB (Facebook) reports after the close tomorrow with AMZN (Amazon.com), another market leader, on deck for Thursday after the closing bell.

As far as how to or even whether or not to trade around earnings is completely up to each trader. Long-term investors shouldn’t be overly concerned with a companies quarterly earnings release other than maybe to time entries or exits on a position that they were already considering buying or selling. In other words, if one had a fat profit in a position of AAPL that they have been holding since the lows last year and they were already considering selling the stock as their profit target has been met or exceeded, why not step aside now vs. gambling on a possible 10%+ gap against their position tomorrow, should AAPL miss expectations or give less than stellar guidance?

In regards to swing trading, whether or not to hold a specific position into earnings or even to hold any positions during a period of such potential market moving releases as mentioned above is an important decision that each trader will have to make for him or her self. Some traders will always close positions before an earning release as part of their trading rules as to avoid Continue reading »

Jul 012014
 
VHI Valhi stock chart

VHI First Profit Target Hit

VHI (Valhi Inc) has now hit the first price target for a quick 26.4% gain in less than one week. Consider booking full or partial profits and/or raising stops if holding out for any of the additional targets.

For those new to Right Side of the Chart, multiple price targets are often used for the trade ideas to accommodate various trading styles (e.g- very active traders who prefer to book relatively shallow, quick profits & move on to the next trade; typical swing traders with holding periods measured in weeks or months; trend traders & investors who attempt to catch the bulk of a trend in a position, etc…).

Various criteria go into determining the price target levels such as significant price support/resistance levels, Fibonacci retracements, volume-at-price clusters, etc… Typically, price targets are set at level where a reaction (i.e.- pullback and/or brief consolidation period) is likely upon the initial tag of that level. Price targets (T1, T2, etc…) are usually set slightly below the actual resistance level for longs (slightly above for shorts) to help minimize the chances of missing a fill, should the position reverse just shy of support/resistance. Some traders might opt to book partial profits as certain targets are hit while very active traders might even micro-manage their trades around these levels (e.g.- reversing a trade from long to short at a target where a reaction is highly likely, then recycling back into the original direction of the trade either on the pullback or once that target level is cleared.)

Whatever your individual trading style is, the important thing is to have a trading plan in place for each trade which includes: How much capital you want to commit to the position; Whether you plan to scale into the position (average in) or take a full position upon your entry trigger; What your entry trigger will be; Your profit target(s) if the trade is successful as well as your stop level(s), if the trade does not pan out.

Jun 052014
 

With both GDX (Gold Miners ETF) & SIL (Silver Miners ETF) now solidly inside the thin zones, the chances for a continued move higher towards their respective targets is good. SIL gapped just above the top of the R1 downtrend line at the open today and hasn’t looked back. With prices solidly inside the thin zone, a continued move towards the top of the zone in the coming days is likely. Any pullbacks to the R2 level Continue reading »

Apr 242014
 

I wanted to add some follow-up comments regarding the two recently posted charts of the $OEX, both the 20 year weekly chart highlighting the time symmetry of the previous bull markets as well as the weekly chart posted earlier today highlighting the primary uptrend line of the current 5+ year bull market. Weekly charts spanning years or even decades are primarily used to identify secular and cyclical trends (bull & bear markets). Regardless how close those charts might appear to be signaling a primary trend change, those signals, or a least a break below the bull market uptrend line has not happened yet and could take months, possibly even years. Remember, support is support until broken and although the divergences currently in place indicate waning momentum and warn of a likely correction, sometimes divergences are negated when prices continue to climb, thereby eventually causing the indicators & oscillators to make new (higher) highs.

When trying to identify a primary trend change there is no single technical event that signals a change from bull to bear market, other than a price drop of the commonly used 20% figure. There is a common saying that market tops (and bottoms) are a process, not an event. That statement can be interpreted in several ways, Continue reading »

Apr 112014
 

Just to elaborate on my previous market comments, any bounce that may or may not materialize around the current support level on the Nasdaq 100 is expected to be a counter-trend rally in what I still believe to be the early stages of a much larger downtrend. Today the $NDX hit the first of four downside profit targets that have been listed on the $NDX live daily chart for some time now. My expectation at this time, which could change depending on how the charts play out going forward, is that before all is said & done, the $NDX will have fallen to my 4th & final (at this time) target which comes in around the 3150 level or the primary uptrend line on that chart, whichever comes first. That could take as long as several months or a short as several days, should the nearby support levels give way quickly.

With that being said, in order to most effectively utilize the trade ideas on RSOTC one must align the entries & exits of those trades with their own unique trading style and typical time frame. For example, very active, short-term traders like myself might opt to micro-manage a swing trade listing multiple price targets by booking profits as the earlier targets are hit (assuming the short-term charts confirm that a bounce is likely) while re-entering the position on the bounce with the intention of swinging the trade down to the final target(s). A less active, longer-term swing or trend trade might opt to ride out any short-term counter-trend bounces in the position with the intent of holding out for the 3rd or 4th target.

The bottom line is that trying to time all the minor swings in the market is not always easy and typically something best attempted by more seasoned traders. Those traders or investors that are longer-term bullish at this time should focus on initiating or adding to positions on pullbacks to support or breakouts of bullish chart patterns. For example, I’ve recently highlighted how well the 40-week EMA has defined major bull and bear trends in AAPL (Apple Inc.). After breaking down from the recently highlighted symmetrical triangle pattern on the daily chart, AAPL has now fallen to the 40-week EMA (which is the same as the 200 EMA on the daily chart), thereby offering an objective long entry, again for those who believe that the current correction has most likely run it’s course.  Those with a longer-term bearish view could wait for a solid weekly close or two below the 40-week EMA in order to establish a swing short position on the stock.

AAPL weekly April 11th

AAPL weekly April 11th

Again, we may or may not get a tradable bounce in the $NDX from this current support level and as such, I plan to update some of the trade ideas that still offer an objective entry for those looking to add any long or short exposure at this time. As I might be updating a number of trade ideas today, email notification may not be sent out on each update so best to check the site throughout the day or over the weekend if looking for any trade ideas at this time. On a final note, for the most part, I try to avoid establishing any new positions on a Friday, especially towards the end of the day due to the extra overnight risk associated with weekends. Based on all the volatility lately, chances are that the market is going to gap one way or the other on Monday and that gap could be sizable.

Apr 102014
 

When I was in my early 20’s, I found myself at the blackjack table while vacationing in the Bahamas. Never having played the game but chock full of liquid courage, I was blissfully ignorant of the fact that I was rapidly hemorrhaging cash, losing many more hands than I was winning. However, before my losses got to the point of doing any major damage, I received a bit of advice from an unexpected & surprising source.

After playing numerous hands without hardly a word spoken from the dealer, suddenly he muttered something indiscernible under his breath. Continue reading »

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