Saturday, April 09, 2011

How to run a straight-up business: newsletter case study

We have been running the HCPG newsletter now since 2006.   We are very happy with what we have created over the years and believe that many of the lessons we have learned in running HCPG also can apply to other businesses.   So here’s our case study.

1. Don’t claim anything.    The quality of your product is the only thing that matters.     We could be three punks trading from a double wide in some trailer park,  or we could be three very well-off successful traders.  We’ve never claimed one or the other.  Does it matter?   No, not at all.   All that matters is whether the information we provide can make you more profit than you would have without the newsletter.  Stay with what is relevant.   We stay under the HCPG moniker without providing personal information because frankly, our personal life is no one’s business.   All we do is provide potential set-ups for any one who pays $44.76/month.   You’ll find out very soon (including a 10 day free trial) whether it’s all nonsense or whether it can add to your bottom line.

2. Unless you intend to provide an audited PnL record that you will provide to your subscribers every week never talk about dollars or brag about how much money you’re minting.   You will never hear us talk about money, be it on stocktwits, twitter, or in the newsletter.   You will never hear us say Big Kaching!!   If we’re happy with a trade we’ll say it was a good trade; whether we had 100 shares or 100,000 shares should have no effect on your trading.  Keep your ego out of your business.

3. Be nice and always look at the big picture.  If you’re in it for the long-term as we are (HCPG 5 year anniversary in a few months) then try to build solid relationships with your readers.  Don’t nickel and dime people.  If a subscriber forgets to cancel a trial and gets billed on the 10th day  and emails us that they don’t want to stay on, we refund the money.    We believe that readers should consider us a lucky find — rather than trying to trap people for an extra month because they forgot to cancel in time.   We want readers to stay with us because they want to stay with us.   This is also the reason we do monthly payments.  No contracts, no specials.

4.  Be the best in what you do.    Easier said than done but what will propel you on this path is to specialize.   Find your niche and then be the best.     We only trade high-beta very liquid US equities, mostly in the commodity and tech space.  We’re not interested in trading small-caps, Chinese time-bombs, biotech-time bombs, and while we like to watch currencies and hear about options, they’re not our specialization and you won’t find them in our newsletter.  We want to only talk about things we know very well and frankly, options and forex do not fit into that category.

5.  Teach people.   Subscribers who have been with us  for a good chunk of time  know our strategies as well as we do.   Create a community and  build bonds and you will see the benefits of organic growth.

6.  Keep your cool.   When you are writing the newsletter or posting on twitter/stocktwits you are representing your company.  Don’t get emotional, or get into cat fights with other traders.    If you are dying to rant then open up a personal twitter account and go nuts.   But everything that comes under your company name should reflect professionalism and integrity.   Don’t get us wrong, we love to joke around, and believe that’s an important part of relieving stress in a very stressful job.   But you won’t find HCPG losing it in a temper tantrum.

7.  Don’t fret about the competition.     We often retweet posts from our competitors, and consider many of them as online friends.   Don’t be afraid.   There’s always room for a quality product in the market.

Friday, April 08, 2011

Market Notes and Week Review

Everyday in our newsletter we review all the triggered trades from the previous night’s alert list.   We’re going to do a modified version for this blog, reviewing all swing trade ideas shared in the blog that trigger during the week.   Last weekend we gave you $GDXJ $GS trend-line long ideas, and both worked well.   GDXJ was straight-forward, broke trend-line and never looked back.  We swung it into today but closed the last partial of the position today.    GS was more tricky as it didn’t trigger for a few days and thus trend-line moved from 162 to 160 (as we told our subscribers in our newsletter) with targets of 162 and 164.  GS hit our two targets and then reversed back into congestion zone (and hit our raised stop).  Mission accomplished.

We have a feeling that next week we’ll be looking more at support trades than break-out trades.  We like the refiners and are half-regretting not putting on an overnight position near the close as they are all finished right at daily support.   However,  since our brains seem to be constituted of 80% daytrader/20% swing genes we wanted to be flat and re-assess on Monday.   We’re all cash going into the weekend.
On a final note:  $USDX death and crude oil $CL_F rip  are reaching “too much/too fast” regions and we think there should be some reversion to mean soon in the names.   As we tweeted today the market is starting to be more “reactive” to crude movements.  We believe we’re at the point now where this relationship will increase at a much greater speed than in previous weeks.   The weight of the price of oil is finally showing up in the market price-action.  Crude rallied almost 4% in the last 2 days — market dipped on both days but was able to regain its composure by the close.  Another move up like that in crude and we don’t think late buyers will show up with the same enthusiasm.

Do or Die Time: Refiners

The four refiners we like to follow,  VLO HOC TSO WNR all re-tested support today on very heavy action even though crack spreads were up 5%.  The bounced off their lows and all of them closed near support.   Bounce or die time coming up on Monday.   We tried our hand in VLO TSO but were early and weren't able to find any traction in either (sold both for small gains/losses).   It's often a good time to buy support when the whole sector hits it at the same time -- however, it also often needs to be held overnight, something we didn't feel like doing today.  Let's go through them all.

HOC through 60 support and overshoot into 20SMA.   It held and stock closed right at support.  Stop here would be the loss of the 20SMA. 

 TSO through 26 support and bounced off the lows but couldn't regain support.   Next support not until 24.5

VLO went through the 50SMA, overshot, and then bounced back to the 50SMA.   Again, if you're long you want Friday's overshoot low to hold. 

WNR had support at 17.5, again overshoot, and bounce off bottom back to support.  

The most common move from overshoot is a bounce back to initial support.  The perfect example here is HOC as first support was 60 which didn't hold, and stock overshoot move to 20SMA which held, and then stock bounces back to initial support.  As our readers know, when you get in an overshoot the first target is a move back to initial support.  This means if you got in HOC on the reversal at the 20SMA near 59.1, then your target is 60 which was primary support.

For more overshoot examples please see these links:

Overshoot definition and examples: 1, 2, 3, 4, 5, 6, 7 

Thursday, April 07, 2011


When $AAPL kept testing the 50SMA we made some "old teat" jokes saying that it was pushing it's luck, that if it kept sucking at the teats of the 50SMA it would give out.   That's exactly what happened as the 50SMA cratered.   Note it's doing the same thing now with the 100SMA:   336 was defended today but if you're long you don't want too many revisits to the area.

Two for Two

We put up a post this weekend of two G ideas $GS buy on trend-line (160) and $GDXJ buy on trend-line (39.6) and already  gave an update when one of them triggered.
Now here’s the second update.   Yesterday we got our 160 trend-line break, first target of 162 (50SMA) and today second target of 164 (100SMA 164.3).  We’re out 3/4 of the name with stop now raised over 162.   As more targets fall, stops are raised.
If you got into the two thanks to our posts please take some off and get your stop over entry — targets have been achieved.    If you can though still hold partials on both since the charts look great.  If you got in as per our recommendation you will be deeply in the green and have the cushion to hold through any chop.
Here are the charts:

GDXJ was more straight-forward,  trend-line break was very clear for a very good run.  GS became more complicated when it didn’t trigger for a few days, thus moving trend-line down.   We’re happy both worked and hope some of you got involved.   Note something we tell our readers — the best trades, at least for us,  come from stocks/levels you have watched for a while.   We tweeted about the “change of character” on GS on March 29 as it bounced on the 200 SMA and it was front and center of our screens from that time.  We posted the GDXJ trend-line already on March 27 and were watching for the break already from that time.   Our style is to watch a few, really get to know their behavior, and then have the conviction to hit them hard with decent size.

Wednesday, April 06, 2011

What would make us nervous

Momentum leaders such as $NFLX $BIDU $OPEN $UA $LULU $CMG all red today as they take a well deserved breather.   Oil and gas also weak; again not a big surprise considering the run they have had.     We are worry-types by nature, possibly a personality trait, and also possibly because we started our career trading tech breakouts right before the Nasdaq lost 78% in the bubble crash.     However,  that being said, it’s hard for us to lose too much sleep over today’s action because of the following reasons:

Support is still being bought.   Notice $NOV 50SMA perfectly defended today — as long as support buyers show up, you have to stay long.   Once this changes though it means the music is stopping and you better grab your chair.

As our readers know we love following copper and what is this metal doing today?  Having a huge rally right to its trend-line.  How can we worry about  market health when copper up 2.6%?   What would make us nervous?  If 421 goes.

We had two ideas this weekend for our readers,  long $GDXJ through trend-line near 39.6 and long $GS on trend-line (which we put at 160 in our newsletter last night — trade 160 to 162 resistance).

Financials and semis have been lagging this market but both have a bid today.  Rotation.   We would get much more nervous if there was a broad breadth sell-off.  As long as you see rotation, stay long.

The leaders of this market, silver and gold, act great.   Big break-out yesterday ($SIL $GC_F $SI_F $GDX $GDXJ) and nice consolidation today.    We take our short-term cues from silver/gold more than any other sector in the market.   What would make us nervous?  If silver/gold start breaking down.

As long as 1) support keeps being bought  2) copper holds support 3) we see rotation instead of strong breadth sell-off  4) silver/gold don’t break-down   we’ll trade to the long side.    If any of those factors change, so will our bias.

Tuesday, April 05, 2011

What's working and what's not

What’s working and what’s not working, at least in the sectors that we follow,  couldn’t be more clear.  Let’s start with what’s working — gold and silver.   $GDXJ $GDX $SIL fresh break-outs today not to mention the underlying commodities $SI_F $GC_F which are screaming higher.    Oil and Gas remain strong ($APA $APC $NOV our favorites) with a special boost from the refiners $HOC $VLO $TSO $WNR breaking into fresh territory and continuing their recent strength.  Coal acts great with our favorite $WLT making fresh multi-year highs today, we also like $ANR $ACI $BTU.  Ags not at highs but are coming back strong and our favorites here are $CF $POT $MOS and $AGU.  Miscellaneous leader momentum remains strong as stocks like $LULU $OPEN $CMG $NFLX are close to highs.  Copper $HG_F  is missing in action somewhat but holding its own and refusing to distance itself  from the 100SMA support.  Rails act great with $UNP $NSC $KSU all looking solid.   Small caps are rockin and rollin as the Russell melts up on daily basis.
What’s not working?  Basically financials and  tech.    Financial sector dead money right now even though we hope this changes if  $GS can break through it’s trend-line.  Semis have been laggards even though they got a little juice today from the $TXN $NSM news but still need to prove themselves.  How?  A close over the 50SMA (35)and continuation up tomorrow on the $SMH would be good for starters.   Network related stocks are also still in the dumps as recent darlings $JDSU $FFIV still can’t find traction.   $AAPL has lost its mojo even though today’s bounce on the 100SMA was impressive.  $GOOG dead money right now and acts bearish.
And of course let’s end one more that is certainly not working, the $USDX as this poor currency chugs along downwards losing a bit of value every day.

Update on this weekend's swing ideas

Our two swing long ideas for this week were $GDXJ $GS on their respective trend-line breaks.    As we tweeted on the actual break this junior gold miner ETF broke through the trend-line today (and currently up 2.7% from time of our tweet).  Great action, looks solid.    If you’re active trader take a few profits and move stops up to at least above break-even on trend-line — but stay involved and swing on a good close as there’s lots of free air now:

The second idea was $GS long on 162 break which would have been a break of trend-line and 50SMA and which still hasn’t triggered.  This has become slightly more complicated now as stock has moved down thus moving down trend-line and creating space between trend-line and 50SMA.
We still like this idea but now it’s become more of a buy through trend-line and take first partial on 50SMA trade which makes this a potentially less lucrative trade.    We would have much preferred little space between trend-line and 50SMA for a double break-out.

Monday, April 04, 2011

Technical Stars Line Up

We see it all the time — just as a stock hits a significant technical level some fundamental news comes that makes it bounce. We think to ourselves, this has to be a coincidence, we just got lucky, but it occurs with such frequency that it makes you go hmmmm…
The support longs in our newsletter this weekend consisted of tech stocks and within those domination by semi stocks (it’s almost always commodities so this was an anomaly), with BRCM being the star. The alert was 37.8-38 (today’s low was 37.78, and it traded to 200 SMA 39.4 in AH session). We also posted some freebies during the day about INTC BRCM and SMH mentioning that support buyers were putting up a fight.

he semi complex is up across the board tonight as $TXN buys for $NSM with a fat juicy 80% premium. We don’t actually believe that $TXN decided to time its release of the acquisition news of $NSM based on the stock hitting it’s 200SMA/ $SMH hitting 100SMA. That of course is a coincidence, and it would be very naive to believe otherwise. But at same time there are many similar examples, and it’s hard to believe in coincidences that happen with such consistent frequency. However, we have often seen analyst upgrades come exactly as stocks hit support and we believe those indeed were intentional in order to maximize short squeeze potential. We’re not going to over-think  it — we’ll just keep going with what works. Chart voodoo indeed.