Friday, April 16, 2010

Market Talk

For long-only portfolio managers today's market set-back might be bad news but for active traders such as ourselves it was a wonderful shake-up of volatility. We wrote in our newsletter last night, "What's keeping us sane in this insane market is simply not thinking about it too much, making jokes, and trading the set-ups. That's it." The frustration was audible.

Even though we shorted today (FCX through trend-line whose chart we posted on our account and some fun with SPY) we also traded long on support (GG AEM CNQ SU) and will be looking at long support set-ups for next week.

Bullish sentiment as strong as the one we have been swimming in does not die this easily (AAPL closed down 0.54%!) and for now we believe support long trades will work well and that will be our focus-- until proven otherwise.

For the first time in a while we'll be looking forward to writing the newsletter this weekend. Thanks Goldman!

As an aside we couldn't agree more with Reformed Broker's Post
"Spare me the Outrage"

Cynical? Yes. But alas so is the reality of Wall St.

Wednesday, April 14, 2010

Ag talk

Ferts have been stinking up the joint for a while but today looks like bottoming action. For you value type dudes entries here with stops close to today's lows offers a good risk-reward trade.

Note how the price action has been pricing in today's downgrades for weeks. Never ceases to amaze us how irrelevant analysts have become. We wrote a while back on the RIMM break-out that the least successful break-outs occur due to upgrades (best are earnings), and most likely it holds that the most successful bottoms are on analyst downgrades.

MOS held the 200SMA

CF again held the 200SMA

AGU found footing on the 100 SMA

EMA strategy for buying support

Here are the charts we posted real-time on the GMCR trade. It wasn't a big win but it's a decent strategy we use for buying support and it was fun discussing it real-time (and was satisfying seeing traders make some money in it).

Most traders are aware of buying dips on trending stocks in the  stock market on the 20EMA/5 minute chart. We do that all the time and it works very well. One less common strategy  is to look for stocks that have bottomed, make higher lows, flatten under the EMA, and then buy through the EMA with stop under the higher low. Let's take a closer look at the charts we posted today.

The first chart is one we noticed on GMCR weakness on the daily chart. Stock was hugging the trend-line again and we were looking to see whether it would get downward pressure.

Stock broke through the trend-line but bounced right on top of a mini-support right under it. In a market as strong as this one our main focus has been long, be it break-outs or support longs, so we were interested.

Here's a closer look of the support right under the trend-line. Typical head-fake under trend-line shaking out weak holders.

Stock made higher low which was good -- next step was to base under the EMA and stop it from trending down. Flatten the EMA and through was what we were looking for.

We got the start of the move through the EMA and as we posted real-time, we started buying.

After that the point is to adjust the stop, always just below the EMA or if you want to make sure not to get head-faked, then a closing candle under the EMA.

As we posted when GMCR was at 96, we took off all the day-trade size but left on a small swing trade with stop above entry over 95.2. This is a "house money" trade that we'll keep on with little risk in case stock wants higher in the next few days.

Again, not a big trade, but a close, real-time, look at how to use the 20EMA to help buy support.

Tuesday, April 13, 2010

Pattern Discussion

We first started posting the GOOG pattern on April 10, on

This was the chart:

And this is today:

One of our favorite patterns is the break of the symmetrical triangle. And what's the best action right before? Stock bases in the upper range right below the trend-line. This gives the added strength to the pattern of a stock jumping from a mini-base within the triangle pattern and the added safety of using the base as a stop if the break-out fails. Keep that detail in mind next time you are looking for a triangle break-out.