IPO's in last five days
Slowly this market is reviving. There are more IPO in pipeline for next month.
Tuesday, June 30, 2009
Stocks up 50% in a month
Currently 17 stocks that were priced above 5 a month ago are up 50% plus in a month.
One of the things you would notice is all these rallies started with release of some new information. Surprises create explosive trends.
AM
ATAI
ATNI
CRTX
DTG
FOLD
ISRL
NNI
PMFG
RAP
RBCN
RENT
SLM
SVNT
TEN
TIVO
USBI
Monday, June 29, 2009
Chinese Stocks continue to offer opportunities
Member compiled list of Chinese stocks trading in US market:
ABAT
ACH
ADY
AOB
APWR
ASIA
ASX
AUO
BIDU
BWEN
CAEI
CAST
CBAK
CDII
CEO
CGA
CHA
CHDX
CHINA
CHL
CHLN
CHT
CHU
CISG
CMED
COGO
CPSL
CSIQ
CSKI
CSR
CSUN
CTRP
CYOU
EDU
EJ
FEED
FMCN
FSIN
FUQI
FXI
GA
GIGM
GRO
GSI
GU
HMIN
HOGS
JADE
JASO
KONG
LDK
LFC
LFT
MPEL
MR
NPD
NTES
NWD
PTR
PWRD
SDTH
SINA
SNDA
SNP
SOHU
SOL
SOLF
SPIL
STP
SVA
TSL
TSM
TYP
UMC
UTA
UTSI
VISN
VIT
WATG
WH
WX
XIN
YGE
YZC
The hundred year old art of swing trading Part5
Last week we looked at the basic philosophy behind swing trading . In that post we also looked at some of the books on swing trading. In next series of posts we will look at some of the details of method discussed in these books. We will start with Dave Landry. The basic idea behind all the Dave Landry set ups is "pullback" in a strong thrust. The objective is to capture the thrust after the pullback. The method works only in stocks with momentum.
Trend KnockoutThe next pattern which Dave Landry likes is Trend Knockout and which once you understand it will find to be a very common pattern in strongly trending stocks. Strongly trending stocks often have sudden shakeouts that knock your stops and then the trend resumes all over again. You would see this everyday in strong stocks. Trend Knockout enters such stocks post trend resumption.Again he gives you the basic concept , you have to take it to the next level. From a concept to tradable strategy. The set up conditions are very simple:Now this is the basic concept. Not everything is spelled out completely. But there is enough to recreate a scan. How can this be done in Telechart. If you think through each condition you can build a scan which will help you find such stocks.
Friday, June 26, 2009
The hundred year old art of swing trading Part4
Basic building blocks for Dave Landry's Persistent Pullbacks will be :
Scan for 20 day persistence.
One way to do this is using our relative linearity or fractal efficiency scan. The Relative Linearity or Fractal Efficiency scan in Telechart can be done as:
(C - C20) / (ABS(C - C1) + ABS(C1 - C2) + ABS(C2 - C3) + ABS(C3 - C4) + ABS(C4 - C5) + ABS(C5 - C6) + ABS(C6 - C7) + ABS(C7 - C8) + ABS(C8 - C9) + ABS(C9 - C10) + ABS(C10 - C11) + ABS(C11 - C12) + ABS(C12 - C13) + ABS(C13 - C14) + ABS(C14 - C15) + ABS(C15 - C16) + ABS(C16 - C17) + ABS(C17 - C18) + ABS(C18 - C19) + ABS(C19 - C20))
Using above scan you can pick stocks with greater than +0.30 readings. They tend to have smoother trends.
Scan for 20 day persistence.
Or another way is by defining persistence as ability of stock to make say a new high every 3 or 4 days. A scan for that would be , if using 4 days:C >C4 AND C1 > C5 AND C2> C6 AND C3 > C7 AND C4> C8 AND C5 > C9 AND C6> C10 AND C7 > C11 AND C8 > C12 ANDC9 >c13 and c10>c14 and c11>c15 and c12>c16 and c13>c17 and c14>c18 and c15>c19 and c16>c20
Scan for stocks up 10 points in 20 days
Stock should be up 10 points in 20 days prior to pullback, one of the ways to do this is:((C1 - C21) > 10) OR ((C2 - C22) >= 10) OR ((C3 - C23) > 10) OR ((C4 - C24) > 10) OR ((C5 - C25) > 10) OR ((C6 - C26) > 10) OR ((C7 - C27) > 10)This gives you stocks in last seven which had 10 points move in last 20 days.Condition to show trend resumption after such a pullback: C>c1and c>h1
Some liquidity condition to eliminate low volume stocks: AVGV20 > 3000 or you can use Volume (Dollars) 1 day greater than 10 million or MINV3.1 > 1000
This is just one of the ways to translate it in to Telechart.
Thursday, June 25, 2009
The hundred year old art of swing trading Part3
Sometime back we looked at the basic philosophy behind swing trading . In that post we also looked at some of the books on swing trading. In next series of posts we will look at some of the details of method discussed in these books. We will start with Dave Landry Dave Landry's Persistent Pullbacks
Persistent Pullbacks is Dave Landry's favorite strategy out of the 10 strategies he details in his book. Persistence as he defines it is stocks ability to follow through from one day to another. He offers his set up conditions for buy and sell for this strategy as follow: Now this is the basic concept. Not everything is spelled out completely. But there is enough to recreate a scan. How can this be done in Telechart. If you think through each condition you can build a scan which will help you find such stocks. Basic building blocks will be : So if put your Telechart thinking hats on and give it a try there are many ways to build this scan. Some scans will give you very few good candidate some will give you lots of them, then you have to manually select candidates. The Yahoo Telechart group has scans for this if you go through the archives. Related Posts:
Wednesday, June 24, 2009
The hundred year old art of swing trading Part2
Sometime back we looked at the basic philosophy behind swing trading . In that post we also looked at some of the books on swing trading. In next series of posts we will look at some of the details of method discussed in these books. We will start with Dave LandryLike every other swing trader the methodology looks for a trend and then looks for a place to enter it. the objective is to: According to Landry there are three phases of trend that can be traded: He uses ten setups to identify such low risk entry points. He has over the years identified ten such pullback set ups. Setups are set of conditions which needs to be satisfied for a stock to be considered for a pullback entry. the ten set ups are: This week we will look at some of these set ups in detail and how one can possibly build scans for them in Telechart.Related Posts:
Tuesday, June 23, 2009
Buyers strike
Monday, June 22, 2009
Market in pullback mode after big rally
Market Monitor Market in pullback mode
after a
big three month rally Type Indicator Value Comments Daily # of Stocks Up >4% on high volume 318 A positive day. Need to see 500 plus
day to be aggressively bullishDaily # of stocks down >4% on high volume 136 Primary # of stocks up >25% in a quarter 2542 Primary # of stocks down >25% in a quarter 437 no major damage to breadth so far Secondary #of stocks up >50% in a month 20 Secondary #of stocks down >50% in a month 2 Secondary #of stocks up >25% in a month 154 Secondary #of stocks down >25% in a month 24 not climbing fast indicates sideways move Not much opportunity for shorting. Primary fast MM 34/13 + 1828 This ratio will be the first to indicate
breadth has turned negative.Primary Fast MM 34/13 - 1272
Friday, June 19, 2009
How to find stocks likely to make 50% plus move
The key to finding stock with potential for explosive move is to find stock with explosive earnings. Some of the stocks with explosive earnings have now started to breakout and some have already made big moves of 40% to 50% in a quarter. What really is explosive earnings. On Members site we are looking at series past examples and trades of past explosive moves and earnings behind them. Two stocks with such explosive earnings we discussed were NTRI and CROX. Nutrisystem has been around in the market since 2000.Till 2005 no one cared about it. It was a neglected stock. In 2003 new management took over. The new line of food introduced in 2004 was what kicked off the earnings. Crocs is often cited by shorts and critics of growth investing as an ideal example of what is wrong with hot momentum stocks. But what they don't understand is that if a growth stock is bought at right level, you can make incredible amount of money. One of the ways to find such stocks is to run a scan in IBD scanner with following conditions: year eps sales low
pricehigh
price2002 0.08 28 1 1 2003 0.03 23 1 2 2004 0.03 38 1 4 2005 0.59 210 2 44 2006 2.30 565 32 76 2007 3.00 776 20 74 2008 1.75 687 10 30 This table tells you why NTRI made a explosive move of 2 to 76 in two years. It had explosive earnings and sales growth. From a 20 million company it became a 776 million company in 3 years. That is what is really explosive growth looks like. This is the kind of stock one should look for in EP. This is what Cliffman was trying to explain in this very good comment. His comment makes a very good point and if you understand the significance of it, you will be able to find such stocks. Comment posted by Cliffman on 6/16/2009 4:58:00 PM EST
Article: Pre Market movers
In my studies of historical EP's, i believe that nothing quite has the potential and tradability of a hot consumer discretionary stock particularly when the expansion of that product is mostly a matter of distribution (as opposed to opening physical stores). If the story gains traction then the market opportunity factor can be given a lot of value and that can lead to an incredible move in the stock. They trade at increidble PE's sometimes because it is not seen as a product cycle, it is secular and long lasting. Something like HANS is the ideal example of a success story here. Very simple high margin product, easy to mass produce, with a huge market opportunity. The stock can trade ahead of YEARS of EPS growth instead of just a few good quarters of a product cycle situation.
I always take very seriously anything in consumer discretionary, i have a natural inclination to "like" GMCR's story because i see the similarities to HANS, NTRI, etc. Even if its a CROX it wouldn't be bad, CROX had a very solid EP in '07 that led to a 6 month rally. It turned out bad but it had a great rally on 2 data points (2 EPS reports), the 3rd killed it obviously. Just look at how CROX's rally was framed within the EPS reports and you will see that it was very tradable and not as risky as it looked.Crocs IPOed in 2006. Look at the earnings and sales from 2004 to 2007. In three years it went from 14 million to 847 million. That is when it went up from 10 to 75 before crashing. This kind of explosive growth is possible in such consumer products kind of stocks because if a product becomes popular it is very easy to ramp up production and distribution is easy as you just have to push it in exiting distribution channels. That is the point Cliffman was making. year eps sales low high 2003 -0.01 1 - - 2004 -0.01 14 - - 2005 0.22 108 - - 2006 0.81 355 10 25 2007 2.00 847 21 75 2008 -2.04 721 39 1 Screen Criteria Parameters% Change in Latest Quarter's EPS vs. Same Quarter Prior Year Greater than or equal to:100Current Total Annual Sales(Mil.) Greater than or equal to: 20.0%Change Latest Quarter's Sales vs. Same Quarter Prior Year Greater than or equal to: 50Current 50-Day Average Volume(1000) Greater than or equal to: 50The entire idea behind the Episodic Pivots method is to find such stocks early in their price growth cycle before they make the big move.
Thursday, June 18, 2009
Market in pullback mode
Market Monitor Market in pullback mode after a
big three month rallyType Indicator Value Comments Daily # of Stocks Up >4% on high volume 150 Daily # of stocks down >4% on high volume 260 Another negative day.
The pullback continues.Primary # of stocks up >25% in a quarter 2529 Breadth is still positive. So this is
correction/pullback
in primary bullish trend. Primary # of stocks down >25% in a quarter 437 There is no major deterioration in breadth so far. Secondary #of stocks up >50% in a month 17 Overbought levels are finally below 20. Secondary #of stocks down >50% in a month 3 Secondary #of stocks up >25% in a month 101 Secondary #of stocks down >25% in a month 31 Primary fast MM 34/13 + 1926 This ratio will be the first to indicate
breadth has turned negative.Primary Fast MM 34/13 - 1374
Wednesday, June 17, 2009
Some new books
There is a pile of pending books to read currently. Some quick notes on some noteworthy books I am currently reading are:How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth EditionLot of new material in this latest edition. 100 plus charts of biggest historical winners. Must read. Good overall view of all green technologies and companies in sectors like solar energy, wind power, fuel cell, geothermal, biofuels, smart grid, green buildings,and so on. Recommended reading to give you good perspective on this alternative energy sector. Inside the Mind of the Turtles: How the World's Best Traders Master RiskNew book on risk management by Curtis Faith. Nice book on risk management. Market Wizard style interview with 13 big names in technical analysis. But the interviews were conducted by mail. So it does not work. A good concept badly executed. Don't waste your money.Detailed reviews later.
Tuesday, June 16, 2009
Your methods are under your control
Methodology trumps the market. The market is a unknown variable, it does its own thing, you cannot control it.
Market is ever changing.
Market is full of surprises.
Market is not predictable all the time.
Market is complex.
Market offers too many choices.
Market is full of traps.
Market is not controllable but.....
your methods are compltely under your controll. Your reaction to the market is under your control. What you can control is your own method to trade the market.
Trading decisions fall in to five "controllable" categories which I call Trading Mix:
1. What time frames to trade (trade frequency)
- Day trade
- swing trade
- position trate
- macro trade
equity
growth
momentum
value
technical analysis
futures
options
currencies
etf
3. When, where, and how to enter them (entry selection)
4. When , where , and how to exit them (exit selection)
5. How to manage risk (risk management)
how much to risk per trade
where to put stops
how and when to use margin
The profit opportunity is in the market if you get the mix of above elements right the result is profit. Each of these five variables are completely under your control.
If you change these variables your profit increases or decreases. So for a same size of profit opportunity in the market two traders using two different set of trading mix will have completely different profit outcomes. Controlling your trading mix is the key to profitability.
Monday, June 15, 2009
How to find pullbacks using Telechart
The market has been churning at this level.Many stocks which had gone up in past month or so are having a pullback now. Some of these are having very orderly low volume pullbacks. Some of these stocks will resume their uptrend after few days.
There are many ways to find such stocks. One of the ways is by using a Telechart scan
(100 * (C - C21) / C21) >= 20 AND (100 * (C - C5) / C5) <= 0 AND (100 * (C - C5) / C5) >= ( - 15)AND (100 * (C - C1) / C1) < 2 AND C >= 5 AND V >= 1000
As of now the scan will give you 164 stocks. You can further reduce the list by taking only pullbacks which are within 8 to 10% of 52 week high or six month high.
If you want to take stocks within say 10% of six month high you can use the following scan to sort the above list:
(100 * ((C + .01) - (MAXC130 + .01)) / (MAXC130 + .01))
To further eliminate low liquidity stocks you can sort the list by Volume (Dollars) 1 day and take those with above USD 5 million volume.
Saturday, June 13, 2009
Why do you invest in the stock market?
This is a guest post.
-------------------------------------------------------------
Christopher Colvin
Chris is the Founder, CEO and Managing Director of JLCC Capital Management, LLC, a private investment company that provides investment opportunities through equity-based and private equity funds. JLCC Capital manages The Crucible Fund, a long-short US equities fund that focuses on ETFs. Chris founded JLCC Capital Management and The Crucible Fund with his partner, John Lee, in 2005, and they began trading operations in January 2006. Chris and John met when they worked together as stock brokers in New York City. They began to see fundamental and disturbing flaws in the transactional retail brokerage business that prevented clients from making money consistently. So, they developed a trading strategy and struck out on their own. Originally having designed their strategy for trading in individual common stocks, Chris began back-testing the strategy on ETFs in 2007. Chris and John switched over completely to trading ETFs in August 2007, when market volatility started to crank up. Their strategy was put to the ultimate test in 2008, and, despite the extreme volatility in the financial markets, they produced a net return of 36.4% for the year. Since their switch to ETFs, Chris and John have produced a total return net of all fees of 87.3% as of April 30, 2009.
Chris is happily married to Jessica Yunker, a licensed acupuncturist and traditional Chinese medicine practitioner, and they live in New York City.
----------------------------------------------------
Why do you invest in the stock market?
If your answer is anything other than, ‘to make money,’ then stop reading, because I cannot help you. A great percentage of people, tragically, invest to satisfy needs that have nothing to do with making money, and frequently have everything to do with losing money. This, incidentally, is why businesses like TD Ameritrade and MF Global will be around in one form or another for a very long time. …Bars too. So, what does it mean to invest? Unless a gain on an investment can be realized and pocketed, there is no point to investing. If Warren Buffett’s cost basis on 1million shares of GE is 25¢, and he gifts his GE shares to a charity when the stock is $50, he looks like a superstar because he ‘made’ all this money by correctly buying and holding the position. Buffett is the best at what he does and is truly alone in his class when it comes to long-term investing. However, if the charity simply holds the position with no clear plans to liquidate it, or, perilously, borrows against the stock on margin, and the position drifts down into the single digits, and then, at the worst possible time, the charity needs to sell the stock in order to fulfill their operational needs, the gifted stock position valued at $50million is suddenly just a fraction of the original gift size, and hardly what it seemed at first. Therefore, if you have no exit plan for your investments, you have no plan, period, and your ability to make money in the stock market becomes nothing more than pure chance.
Stocks are paper, and, therefore, each stock investment must be viewed as a trade – a position that you enter by putting money at risk, and at some point exit, retrieving more than you started out with. Simple enough. Really – it is. There is no need for complexity in trading. What most investors lack is a simple systematic approach to trading profitably. It is utterly hopeless to attempt to attain, understand, evaluate, and then act correctly on every piece of information that affects the equity markets. So what are we to do? What are we to rely on to consistently make money in the market? Since our goal is to take out more money than we put in, the only thing that matters is price. You go long because you aim to sell at a higher price, and you go short because you aim to cover at a lower price. So, one must be a student of the movement of the price of equities, i.e. price trends, in order to trade successfully.
Am I preaching to the converted? Let’s not pretend that we don’t stray from our core trading strategies from time to time trying in order to justify the position we’ve just entered. It starts out innocently enough: your system triggers a buy, and you go long the fertilizers…you’re up 3% – nice entry - off to a good start…quickly you’re up 5% – your system is working great - rock n roll…your position drifts down 2% – you scoff at those foolish bears, who’ve been wrong the whole way up anyway…back to break-even – it’s a natural pull-back - steady as she goes…-4% – you call a few friends who you know will reassure you that your position is solid…back up near break-even – look at those fools on CNBC wondering if this is ‘the beginning of the end’…+2% – slight bearish RSI divergence, but it’s no big deal – you’re back on track…-5% – let’s wait for the oil inventory numbers…-8%...um…-10% – but India and China are supposed to be consuming everything except anti-matter in ever-increasing quantities for as far as the eye can see!...-15% – but that perma-bear just turned bullish!!! -- what the hell?!... and before you know it your position is well below your ‘mental’ stop-loss, and your news-searching and rationalizing have steered you deep into the Crab Nebula, light-years away from your core trading strategy. We’ve all played that game too many times, and we all know how it ends.
Even if you have a workable trading strategy you will get taken off course. You absolutely know when you are straying from your core strategy – when you feel yourself about to stray, stop and ask yourself, “Should I be trying to scalp 2% out of this short-term move even though I trade weekly trends?”, or, “Should I really be holding onto my position for three days even though part of my strategy is to go home flat every day?” The solution to straying is to devise a system and test it rigorously for robustness in all types of market environments – this will give you complete confidence in your strategy. (I will leave the fundamentals of strategy generation for a future discussion, as it is an important topic unto itself.) Devising a profitable trading strategy is much easier than sticking to it, but it helps immensely if you have a system that you believe in.
Once you have a system in which you are confident, study what is important for the current trend in the timeframe in which you trade – each trend is always different from prior trends in some way, and you must correctly discern those differences, not the similarities, which are usually quite salient, in order for you to apply your core strategy correctly. That is, study what price levels/trend-lines/moving averages/oscillators, etc. that the market is reacting to in the current trend. Maybe in the last uptrend the market bounced every time it pulled back to the 30-day simple moving average (SMA), but this time it is bouncing at every test of the 15-day SMA. Maybe in the last uptrend the market pulled back every time the RSI hit 60, but this time it’s not pulling back until the RSI hits 70. News flow and fundamentals will always be different in different trends, and there is no reliable objective way to measure the impact of news and fundamentals on the market. We can say the average P/E of the S&P500 over the past 50 years has been 16, and currently the P/E is X – but how does this help you to make money? If the P/E is currently 22, then should we just short the market, assuming it will revert to the mean? What if it reverts to the mean not via a drop in price, but rather via growth in earnings? Then shorting would be a major misstep. Or what about the 4th quarter of 2008 when the P/E was Ø because there were no earnings for the S&P500 for that period? How does a P/E of Ø revert back to the mean?? Taken seriously, trading based only on analysis of fundamentals and underlying businesses assumes that others will eventually come to the same conclusions that you have come to. If others do arrive at the same conclusions, this will manifest itself in price movement – market participants vote their opinions by buying and selling, which determines the price of equities. So why not just cut out the guesswork and go straight to the price action so that you have an objective idea of when others have come to those conclusions and how strong their opinions are?
Bringing the study of price to the real world of trading, there are two opposing trends, one long-term and one intermediate-term, that are converging right now in the market. A study of price trends in the major stock indices going back to 1928 shows that the 200-day SMA provides a useful demarcating line between primary bullish and bearish market activity. That is, the market behaves differently when it is above the 200-day SMA versus when it is below. Following are a few charts from each of the rolling multi-year bear markets since 1929 – in each of the charts the red line is the 30-day SMA, the green line is the 50-day SMA, and the yellow line is the 200-day SMA. Without looking at the actual price, just follow the market along with your eyes and notice how it reacts close to the 200-day SMA.
Here are a few charts from the 1929-1932 Bear Market in the Dow:
It is as if the 200-day SMA is a light bulb to the market’s moth: the market is curiously drawn to the 200-day SMA, but once it nears it, the market gets too heated and retreats, only to return later on and repeat the process all over again.
Now take a look at the current bear market in the S&P500:
Notice any differences? Any real, structural differences? …Me neither.
So how do these massive multi-year bear markets end? What does the new buying paradigm since the March lows imply? What is the market likely to do from here? Stay tuned for my next post on How Bear Markets End/How To Know When an Emergent Bull Market Has Arrived at my blog Trendseer.
Friday, June 12, 2009
20% profit trade example : WH
Bought on 10th June 2009 for 5.30
Trade Alert 20% plus potential stock (6/10/2009 10:09:00 AM EST) |   |
WH
5.30
stop=4.75
20 Comments..
Posted by: easyguru
Started booking profit in pre market on this today...
6.45 10 Comments.. Posted by: easyguru | ||
6.50 5 Comments.. Posted by: easyguru 20% profit in two days. |
How to find stocks likely to go up a lot
Big earnings explosions create big trends. Doubling of earnings is good but the stocks which really make big monster move have huge earnings and sales.
For example if you have Dailygraphs subscription look at the yearly earnings growth trend table on weekly tab (it gives you yearly earnings and price high and low range for the year) for following stocks:
NTRI: between 2004 and 2005 the earnings jumped from 3 cents to 59 cents. That is monster earnings growth. What happened price of the stock went up from 1 dollar to 44.Look at the sequence of earnings before that . For 2002 it was 8 cents, for 2003 it was 3 cents , for 2004 it was 3 cents and then the explosion happen.
GMXR: Between 2004 and 2005 earnings went up from 19 cents to 79 cents as a result price went up from 6 to 42.
MT: 2002 earnings was 40 cents. 2003 was 1.83 dollar and 2004 was 7.31. What happened price went up from 1 dollar to 42 (actually it was below 1 dollar when I first found EP on this stock but IBD rounds it to 1 dollar)
SINA: in 2002 had 3 cent loss. In 2003 had 75 cents earnings. Stock went up from 1 to 46. This was the best performing stock in first phase of 2003 bull market.
SOHU: 3 cents loss in 2002. 81 cents profit in 2003. Price went up from few pennies to 43 in one year.
MICC: earnings went up from loss of 5.90usd in 2002 to 2.26 profit in 2003, stock price zoomed from 1 dollar to 20 dollar.
FSLR: from 2006 to 2007 earnings went up from 6 cents to 1.43 dollar. Price went up ten times from 27 to 283
NTRI: between 2004 and 2005 the earnings jumped from 3 cents to 59 cents. That is monster earnings growth. What happened price of the stock went up from 1 dollar to 44.Look at the sequence of earnings before that . For 2002 it was 8 cents, for 2003 it was 3 cents , for 2004 it was 3 cents and then the explosion happen.
GMXR: Between 2004 and 2005 earnings went up from 19 cents to 79 cents as a result price went up from 6 to 42.
MT: 2002 earnings was 40 cents. 2003 was 1.83 dollar and 2004 was 7.31. What happened price went up from 1 dollar to 42 (actually it was below 1 dollar when I first found EP on this stock but IBD rounds it to 1 dollar)
SINA: in 2002 had 3 cent loss. In 2003 had 75 cents earnings. Stock went up from 1 to 46. This was the best performing stock in first phase of 2003 bull market.
SOHU: 3 cents loss in 2002. 81 cents profit in 2003. Price went up from few pennies to 43 in one year.
MICC: earnings went up from loss of 5.90usd in 2002 to 2.26 profit in 2003, stock price zoomed from 1 dollar to 20 dollar.
FSLR: from 2006 to 2007 earnings went up from 6 cents to 1.43 dollar. Price went up ten times from 27 to 283
and I can go on and on. Many of the mortgage stocks which were the biggest winner in 2003 bull market first phase had earnings growth of 500% plus. All of them have gone bankrupt now. But they made 1000% plus price moves in few quarters because of explosive earnings.
Those are the kind of stocks one should look for if you are looking for explosive gains. All the above stocks were unknown , neglected stocks , before they were noticed by market because of their explosive earnings growth. In current market some of those kind of stocks with explosive earnings have started to move now.
You can spend lot of time drawing trend lines, support and fib extensions, or looking for value stocks and cigarette stubs and turnaround situation or search for macro theme, or latest charting techniques or exotic Japanese charting technique, or listening to Crammer, but none of that stuff matters.
If you see the history of stock market for 100 year or more there is one simple thing you will learn, explosive earnings growth leads to explosive price moves. Earnings or expectations of future earnings is what drives stock prices in the long run.
Thursday, June 11, 2009
How to use technical analysis :-)
Most traders are devote followers of technical analysis. Many only know technical analysis. So in current market what do these traders see. What are the major topping formations: These are the major topping formations according to most technical analyst. These kind of formations are seen in stocks after a bull move. So typically such formations are seen on stocks in Double Trouble list. As of now there are 1700 stocks in DT list. Or you can see the list of top 15% stock by MDT ranking, that is stock with 85 plus MDT rank. Do you see such topping formations in them. If yes show me 100 such stocks with these formations . If you cannot find such formations then what kind of formations do you see in them. What are major continuation formation These are the most common continuation patterns. If you see the stocks in either DT universe or stocks up 25% plus in a quarter majority of them are showing such continuation patterns currently. What does that tell you, after a first up leg most stocks are now forming continuation patterns. They have higher probability of breakout to upside post such patterns. Even if the market corrects here these stocks are just basing and will b/o post a correction. So why don't the chart monkeys see these patterns. Because they are not operating from charts but a hypothesis that "how can the market rally if we are in such a fucked up condition".
Wednesday, June 10, 2009
20% profit trade example
LDK SOLAR
This trade was intiated yesterday at open.
First profit taken on 25% of position
Second profit taken on next 25% of position
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Why you should focus on top sectors
Market Monitor Type Indicator Value Comments Daily # of Stocks Up >4% on high volume 313 A minor weakness yesterday is immediately bought Daily # of stocks down >4% on high volume 82 Primary # of stocks up >25% in a quarter 3294 Primary # of stocks down >25% in a quarter 229 200 is the number to watch on this. Secondary #of stocks up >50% in a month 29 But this does not as yet indicate extreme bullishness. Secondary #of stocks down >50% in a month 2 Secondary #of stocks up >25% in a month 207 This is where we play, trying to catch as many
20% move as possible.Secondary #of stocks down >25% in a month 34 Primary fast MM 34/13 + 2822 Primary Fast MM 34/13 - 644
Tuesday, June 09, 2009
How to improve your trading
Here is a version of story I have heard in many training programs and used in some of my training programs: One day, an old leader manager with great reputation for building businesses , was invited to lecture on the topic of “Effective Management” in front of a group of senior executives representing the largest and most successful companies. Standing in front of this group of elite managers, who were willing to eagerly listen to his every word. The old leader manager slowly met eyes with each manager, one by one, and finally said, “we are going to conduct a simple experiment”. From under the table that stood between him and the listeners, he pulled out a big glass jar and gently placed it in front of him. Next, he pulled out from under the table a bag of stones, each the size of a tennis ball, and placed the stones one by one in the jar. He did so until there was no room to add another stone in the jar. Lifting his gaze to the managers, the leader asked, “Is the jar full?” The managers replied, “Yes”. The leader paused for a moment, and replied, “Really?” Once again, he reached under the table and pulled out a bag full of pebbles. Carefully, the leader poured the pebbles in and slightly rattled the jar, allowing the pebbles to slip through the larger stones, until they settled at the bottom. Again, he lifted his gaze to his audience and asked, “Is the jar full?” At this point, the managers began to understand his intentions. One replied, “no!” “Correct”, replied the old leader, now pulling out a bag of sand from under the table. Cautiously, he poured the sand into the jar. The sand filled up the spaces between the stones and the pebbles. Yet again, the leader r asked, “Is the jar full?” Without hesitation, the entire group of students replied in unison, “NO!” “Correct”, replied the leader. And as was expected by the managers, the leader reached for the pitcher of water that was on the table, and poured water in the jar until it was absolutely full. The leader now lifted his gaze once again and asked, “What great truth can we surmise from this experiment?” With his thoughts on the lecture topic, one manager quickly replied, “We learn that we can look at the jar as half full or half empty. Your attitude matters."” “No”, replied the leader. Another manager quickly replied, “We learn that as full as our schedules may appear, if we only increase our effort, it is always possible to add more meetings and tasks.” “No”, replied the professor. “The great truth that we can conclude from this experiment is: If we don’t put all the larger stones in the jar first, we will never be able to fit all of them later.” The auditorium fell silent, as every manager processed the significance of the leaders words in their entirety. The old leader continued, “What are the large stones in your job? in your company ? in your environment? Are you putting the large stones first or wasting time on small things? ” “What we must remember is that it is most important to move the larger stones first . Get the larger issues right , because if we don’t do so, we are likely to make very little progress. If we give priority to the smaller things in life (pebbles & sand), our lives will be filled up with less important things, leaving little or no time for the things in our lives that are most important to us. Because of this, never forget to ask yourself, ‘What are the Large Stones in your Life?’ And once you identify them, be sure to put them first in your ‘Jar of Life’”. With a warm wave of his hand, the leader bid farewell to the managers, and slowly walked out of the room. Same thing is true of trading. If you don't get the big stones in your trading jar first you can spend lot of time on small issues. What are the big issue in trading: Each of this is a big stone. If you get these right then other things are tactics. Some traders get it and some do not. Those who don't get it have issues beyond trading , they are not focused on trading or are trying to avoid making progress. So they continuously run after something very small. Or use distraction to avoid getting large stones in place. If you want to improve your trading get the large stones in first.
Monday, June 08, 2009
How to trade biotechs profitably
In recent market rally, the biotechs have seen some major moves. Many of the drugs and biotechs related stocks have seen 300% plus moves in compressed time frame.
This has attracted lot of investors and traders to focus on them. The biotechs have a unique trading pattern. Understanding how a specific industry trades can provide you with an edge. Most of these stocks have no sales, no earnings and when the sector is in favor they make 100 plus moves in jiffy.
Biotechs is pure speculative game. One can make lot of money in it if one manages risk properly. Some of the things I have found over the years by trading biotechs
are:
If you want to really understand the sector and what happens behind the scene in biotech, I highly recommend the book :From Alchemy to IPO
by Cynthia Robbins- Roth
This book is by a former Genetech scientist. It will give you an excellent perspective on the entire biotech industry. It covers both the inner working of biotechs and the business side of it.
Biotechs is pure speculative game. One can make lot of money in it if one manages risk properly. Some of the things I have found over the years by trading biotechs
are:
- Episodic Pivots are best to time entries in biotechs. Most biotech moves are precipitated by some news events.
- The sector gets in favor and out of favor. Mostly these things are also linked to decision cycle by FDA. When sector is in favor the more speculative ones pop one after another.
- One must buy the first breakout and on first day. It is pointless to buy second breakout. One must put full position at beginning itself. The rallies in these names are so compressed that in few days or week they make bulk of their move. So either you are in or you are a spectator.
- In most cases there is one intense 10 to 30 days burst followed by long sideways move, which invariably fails. It looks very attractive like a flat base and often has upside breakout which fails. I normally liquidate my position in 20 to 22 days in such plays.
- Insider buying on biotechs is very good indicator.
- Playing biotech is like playing lottery. There is very high risk.
If you want to really understand the sector and what happens behind the scene in biotech, I highly recommend the book :From Alchemy to IPO
by Cynthia Robbins- Roth
This book is by a former Genetech scientist. It will give you an excellent perspective on the entire biotech industry. It covers both the inner working of biotechs and the business side of it.
The IBD kind stocks with earnings momentum are having breakouts
So currently there are abundance of stocks with 20 and 50% plus profit potential. In such a environment if a open position is moving slowly, it is better to move out of it and get in to a new Episodic Pivot with better prospect. That is why I closed some of the positions with small profit or small loss and moved in to new better prospects. Market Monitor Type Indicator Value Daily # of Stocks Up >4% on high volume 222 Daily # of stocks down >4% on high volume 145 Primary # of stocks up >25% in a quarter 3362 Primary # of stocks down >25% in a quarter 241 Secondary #of stocks up >50% in a month 38 Secondary #of stocks down >50% in a month 2 Secondary #of stocks up >25% in a month 276 Secondary #of stocks down >25% in a month 25 Primary fast MM 34/13 + 2960 Primary Fast MM 34/13 - 605
Friday, June 05, 2009
Since March this has been a dream market for swing trading
Market Monitor Type Indicator Value Daily # of Stocks Up >4% on high volume 445 Daily # of stocks down >4% on high volume 59 Primary # of stocks up >25% in a quarter 3383 Primary # of stocks down >25% in a quarter 223 Secondary #of stocks up >50% in a month 31 Secondary #of stocks down >50% in a month 3 Secondary #of stocks up >25% in a month 221 Secondary #of stocks down >25% in a month 41 Primary fast MM 34/13 + 3014 Primary Fast MM 34/13 - 596
Thursday, June 04, 2009
How to make money in stocks
The new edition of William O'Neil book How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition
What can you do to improve your focus dramatically
Stop paying attention to macro issues. Are you a macro trader? Then why are you worried about macro issues? All I care about is whether the stock I buy today or tomorrow will make 20% or 50% move. Macro themes are worth a rat's ass if you are looking for a 20% or 50% move. Stock make 20% or 50% move due to company or sector specific catalyst. Unless you are trading 100 million plus account size stop worrying about macro themes when making trading decisions. Mass media is obsessed with macro issues and if you see lot of trading blogosphere it spends 95% of its time masturbating over macro issues. If I want my blog to be read by largest number of people I will pontificate everyday on macro issues.Scratch below the surface and look at what returns all these luminaries who are pontificating on macro issues are getting. If you want to figure that out subscribe to stock picking service offered by the most popular market blog or another popular blog which puts out pretty graphs and pie charts of all kinds of macro stuff daily. You will get lots of very well presented macro graphs and pie charts which will give you great mental satisfaction. And some shitty stock picks based on their macro themes which do not beat the street. So If these people are so smart in macro themes, why are they not making money. Macro factor do not manifest themselves in days or weeks. Just because somebody says there will be hyperinflation, it does not mean it will happen tomorrow (if at all it happens). If you are losing sleep over issues like:US deficitInflationHyperinflationDeflationDollar depreciation/appreciationaging populationhealth-care cost inflationunderfunded pensiongeopolitics Stop trading and start running for the job of President of USA.
Wednesday, June 03, 2009
New sectors keep breaking out
Market Monitor Type Indicator Value Daily # of Stocks Up >4% on high volume 325 Daily # of stocks down >4% on high volume 132 Primary # of stocks up >25% in a quarter 3407 Primary # of stocks down >25% in a quarter 240 Secondary #of stocks up >50% in a month 38 Secondary #of stocks down >50% in a month 2 Secondary #of stocks up >25% in a month 272 Secondary #of stocks down >25% in a month 40 Primary fast MM 34/13 + 2999 Primary Fast MM 34/13 - 629
Tuesday, June 02, 2009
For a day like yesterday you need to be positioned right
Market Monitor Type Indicator Value Daily # of Stocks Up >4% on high volume 985 Daily # of stocks down >4% on high volume 62 Primary # of stocks up >25% in a quarter 3363 Primary # of stocks down >25% in a quarter 241 Secondary #of stocks up >50% in a month 61 Secondary #of stocks down >50% in a month 1 Secondary #of stocks up >25% in a month 413 Secondary #of stocks down >25% in a month 21 Primary fast MM 34/13 + 2942 Primary Fast MM 34/13 - 647
Monday, June 01, 2009
What to do when your acount goes up by 10% plus
Market Monitor Type Indicator Value Daily # of Stocks Up >4% on high volume 551 Daily # of stocks down >4% on high volume 136 Primary # of stocks up >25% in a quarter 3222 Primary # of stocks down >25% in a quarter 317 Secondary #of stocks up >50% in a month 51 Secondary #of stocks down >50% in a month 1 Secondary #of stocks up >25% in a month 335 Secondary #of stocks down >25% in a month 39 Primary fast MM 34/13 + 2564 Primary Fast MM 34/13 - 859
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