Thursday, December 31, 2009

Happy New Year/End of Decade

It was a good year to be a trader in that we all learned something, be it noobs or veterans. This is our second crash since we started trading in the late 90s and the trench war experience has made us into stronger more seasoned traders. The positive of being a trader this decade is that it makes one have faith in one's abilities -- if we survived this, we can survive anything.

Short-term emotions will always reign supreme, but long term logic always wins out which is the reason we are technical based for short-term decisions and fundamental based for long-term decisions.

For purely psychological reasons (and not technical) we went flat in our day-trading and swing-trading accounts today with only nominal positions (LIWA and AVL.TSX) in our long-term fundamental based account.

Like experienced sailors going out to fish, we're confident and look forward to starting 2010 and yet will always be respectful of the power of the market.

Happy New Year to all of you -- have fun and stay safe, and we'll see you next week.


Wednesday, December 30, 2009

Base and break GS

As our readers know this week the #1 stock on our lists has been GS. We wrote in our newsletter last night, "No clean spot -- you just have to watch for the set-up, most likely a base and break near 165.5."

We were off by 30 cents as GS set up very well below yesterday's high of 165.2. The day-trade entry was anywhere from 165 to 165.2 as the volume surged in before 11 AM (we were in swing from 164.1 from yesterday but our day-trade add was at 10:57 AM at 165.08 av). Stop at this point on the day-trade add was 164.8 or max 164.6, that is 30 to 40 cent risk.

We wrote real-time about the basing under 165.2:

As our readers know base and break is our bread and butter day-trade strategy -- in which one can put on a large position with a relatively tight stop (on liquid stocks anyway). It's the most successful day-trade strategy that we have traded and one that we always rely on for large day-trade positions.

Tuesday, December 29, 2009

Market Talk

We love this commodity pull-back -- a few more days like this and we'll have a plethora of decent support trade candidates.

This is the type of trade we're looking for going forward -- CNX 47 support reversal. Note how many balls line up for this trade - trend line/50 SMA/ 20 SMA. Also hopefully we will have multiple stocks in the same sector in the newsletter -- another great factor which often lines up as the sector hits support at the same time (increasing chance of support bounce).

As we've written ad nauseum in our newsletters in the last 4 years -- the more ducks line up in a set-up, the higher the chance of it working.

A day in the life of a day-trader

As many of you know we have been watching GS for a while -- patiently waiting for the trend-line to break. GS has been acting terrible of late with poor relative action. Today it started to firm up and act better, showing good relative strength. Here is our trade (all tweeted in real-time):

At point (a) we have the base and break under the number (usually a clean number but in the case of GS was around 165.5 - 166). Note the volume spike. We were long in size at 164.60 av. The stock pulled back on light volume and then rallied straight up to R1, which is a great day-trader exit --we took off 20% at point (b). So far so good for the stock but the problem was that the S&P started failing and hit low of day, not good as GS can't run by itself. We sold most of our position at point (c) and held some at break-even stop (164.6), which was hit shortly after (d). We still made some money on it due to our size but we of course would have preferred a successful break-out -- if that had been the case we would have sold a good portion by end of day but kept at least 20% for swing.

Over the years we have normally day-traded 80% and swing-traded 20%. We've been increasing the swing position lately and plan to do so for as long as the market volatility remains low and the bull uptrend remains intact.

Monday, December 28, 2009

Continuation versus New positions

The strength in tech has been impressive and this chart is something to behold. If you've been swing long for a while are are enjoying gains every day -- great, take some off and be on the look-out for potential reversal. But it's our job to come up with new picks everyday for the newsletter and it's getting more and more difficult with each up day. A pull-back would freshen the air and set-up many more charts (tonight we had one of our thinnest newsletters this year with only a handful of new picks).

A January reversal would fit the bill.


This defense stock has been on our radar for a while -- looks great.


Within our system the only real difference between day-trading and swing-trading is time. Our entry strategies are the same (be it buy on support or buy on a break-out) and our exits are similar (an extended move away from the base/ a run to resistance).

We've shown before how we day-trade support -- buy on an extended move away from the intraday base on a bounce to daily support and sell into intraday resistance (often the 20 EMA on the 5 min chart).

Here is a perfect parallel swing-trade on a daily chart in which you would have done something very similar but instead of taking 30 minutes it would have taken a couple of weeks.

BHI 38 was a newsletter support buy pick -- the exit was today on the 50 SMA failure. We got in at the right time near 38 but sold much too early. We still have to work on that patience thing....

Thursday, December 24, 2009

Easy Tape

The current market is one of the "easy tape". Whatever one puts on (as long as its long) goes up - technicals work like magic and stocks do exactly what they're supposed to. We all look like geniuses. Don't get complacent -- this type of tape never lasts.

Don't be the happy little pig lulled and fattened up by the "kind" farmer (mother market) before your throat is slit one morning and you're on someone's plate served as sausage.

We were telling ourselves this morning how we're hitting the ball out of the park with every trade, like we can do no wrong, and how buying every dip is working like magic. Right after we said that there was a moment of silence -- we've been here many times before in our 13 years of trading and often it comes right before a change -- when suddenly stuff doesn't work, and stocks don't obey one's playbook. Don't be complacent. The gig is on full-play right now -- enjoy it, play it hard, but be on alert for the possibility of a change into a less benign trading environment.

And on that cautionary note, happy holidays to our readers, and we'll see you here next week.


Holiday Trading

Holiday trading can sometimes be so predictable as traders run third-tier names (i.e. AIG) and small-cap Momentum names.

This is the reason we had AONE 20.5 in our newsletter all week on break-out watch:

Wednesday, December 23, 2009

This is what a benign market looks like

ALL our triggers from this week -- as you can see, great continuation:

AAPL 197 on trend-line break

AKS 21.2 on trend-line break

APC 63.2 on trend-line break

BCSI 28 was our best trade this week:

CNQ 70 was channel break-out

GLD 105 was a support buy (we tweeted it our buy live at 105.4 yesterday)

GNK was a support buy with alert at 20.7 (didn't quite make it) on the 200 SMA

HGSI 29.5 worked well

Our only short, HIG 23, which didn't work:

RS 45 on resistance break

SPW 55.8 on trend-line break

XLE 57.2 long on trend-line break

XOM talk

XOM acts heavy but as long as the trend-line holds the long is valid. Relatively safe trade considering how close stock is to support:

Technically rewarding market

This is a perfectly benign market where stocks bounce where they should bounce and obey technical rules -- enjoy it and play it as hard as you can for however long it lasts.

Even though we're primarily day-traders our entries are based on daily charts. What we've been telling our day-trader subscriber base is to try at least holding partial positions as swings as the follow-through lately has been excellent.

Here's another example of a perfect bounce on support:

Here's another example of a perfect trading opportunity -- we "tweeted" on this when it happened on Monday:

GMCR buyers defend the 50 SMA

Close up -- awesome!

We're closing shop now for the week (holding long $GLD $AU $SLB $CNQ $APC $SPY). Happy holidays to all of you from the three of us at HCPG-- we'll see you next week.

Oil Power

Three energy stocks from our newsletter last night breaking out:

Market needs the fins

The market will not successfully break-out without the financials participating. This divergence is a bit worrisome and we won't get aggressively long until the financials firm up.

Tuesday, December 22, 2009

Chart talk

Volume is going to be aneamic but chances are the market is going to try to break-out tomorrow.

Steel acts great -- we highlighted AKS MTL yesterday, here's one more -- RS 45.

Starter positions for longer term accts

We dipped our toes in three stocks this morning for our longer term accts. Theme was gold and Ags.

We bought YONG at 7.16, GLD at 105.4, and AU at 39.7. YONG is very small position which we will probably not add on but GLD we will happily add at 104.5 and 100. AU we will add on at 39. Here are the charts:

Metal Strength

While gold is pulling back sharply other metals are at recent highs. Steel particularly is hot right now -- these are from last night's newsletters but still look good for near-term future.

Monday, December 21, 2009

Energy stocks trend-lines/50 SMA

We have literally a dozen charts like this one -- very bullish on a break above (over 100.5 on closing basis) but until then stay neutral.

AAPL talk

AAPL smashed through the 197 trend-line/50 SMA (in our newsletter last night) but stopped short of 200 resistance. Any basing over the 50 SMA and under 200 SMA would be bullish.

GDX through trend-line

GDX through trend-line and heading towards the 200 SMA. If we can reach that area quickly in oversold status we will be swing long GDX at 41.5

BVN trend-line 29

Still a bit away but we love this for a long support:

Oversold sector going into trend-line/200 SMA near 29 on BVN. The faster BVN gets there the higher the chance of success.

Sunday, December 20, 2009

Ag-Chem support

Ag-Chem stocks are slowly coming into very nice support zones. Our favorite is the following:


A lot of oil charts have similar set-ups -- basing under the trend-line/50 SMA. We'd be buyers of a high-volume break-out of the sector:

AAPL we'd be long at support near 185 or on a break-out through the trend-line.

Free Newsletter for Dec 21

We discuss some notes on swing trading support and have a decent amount of stocks for the week.

Free newsletter for the holidays.

E-mail us at info AT highchartpatterns DOT com

Friday, December 18, 2009

Gold talk

GDX today bounced on the trend-line. We hope it's temporary and that there will be a test of the 200 SMA/daily support near 41-41.5.

We would also love a pull-back to GLD from 104-100.

Natural Gas

Natural Gas is like the wild, wild West of energy and investing in it can be tricky. We prefer to invest in natural gas companies than the commodity or heaven forbid, the ETF (UNG).

Here is a handy chart that tells the tale well comparing an ETF invested in natural gas companies (FCG) to natural gas futures (pink line) and the contango-suffering natural gas future ETF UNG (purple line).

We don't want to chase price up at this point and are waiting for a pull-back to get into some natural gas companies (LINE PXD FST EOG SWN APC, etc). We are admittedly late to this party (ok, very late -- our focus has been oil and not natural gas) but we would be interested in buying pull-backs to support in this sector. Some would argue that the divergence between the commodity and the stocks at this point illustrates that one should sell the stocks and buy the futures but we'd rather take our chance with buying the stocks on support.

SPY test

Today we finally had the 50 SMA/bottom of channel test that we've written about -- this is the level that has to hold for the bulls.

Considering the number of sectors considerably off their highs the S&P 500 (think financials and energy to start) this resilience is impressive.

Thursday, December 17, 2009

Swing Candidates

Here are three trend-line break-out stocks we're watching.