Pretty Spot Worked

We wrote this afternoon near the bottom:

“This would be a pretty spot to bounce – if bulls want it, this is the place to defend ”

And once again dip buyers won the day.

We find it astounding that no matter how ugly the market support keeps working, for a trade.   If we want anything more than that then bulls will need to give the all important confirmation move tomorrow.  This also applies to all the sweet hammers on the financial stocks today.   Also recall that we tested the support last week in overnight session and we finally had regular session test that many had been waiting for today.  Bottoms are never made in one day — confirmation is always needed.

As noted before we’re swing long partial $SPY.  Why?  We got off decent entry and have cushion, we like how market acted post low, we like copper holding, and we like the financial bounce off the lows.     Stop now break-even (maximum, we’d probably bail at 130 break) at $SPY 129.66.

Even with all the red, there still is very little fear in this market (note $AAPL all time highs today — as an aside great trading there by our buddy @gtotoy )

Until we get smacked in the face our modus operandi will be to buy dips.   It’s been working for 2 yrs, and we’ll keep doing it until/unless we break 2009 trend-line or we get hit.  Whichever comes first.

SPY talk

We tested the top of the previous range last week at 3AM in the futures and we finally tested it in the regular session today.   If there was ever a place for the bulls to push — and not just a good close but a continuation tomorrow, it is now.

Position long $SPY and will swing on any close over 130

Trading Screen Configuration

HCPG trader screens are more or less configured in a similar fashion — emphasis is on a layout which  gives us a quick idea of what is happening in the market in terms of sector strength and breadth.   Let’s take a detailed look:

The following configuration can be done with 3-4 monitors, our ideal size.  We’ve basically had this configuration for our entire trading career (and have sent versions of it over the years to our subscribers).   It’s basic, and it works for our style.

On one monitor we have our trading broker and a  range look on an Interactive Broker page with some of our favorite trading stocks/etfs gives us a quick read during any time of the market:

We use E-Signal for our charting platform.  Even though HCPG hammered out a  partnership with E-Signal in May  (HCPG subscribers who transfer over to E-Signal are eligible for significant discount) we started using E-Signal even before that date as they are the best charting service that we can find for our trading needs.

We follow our “core” stocks in loose sector groups in one monitor.  Note that we have different pages on E-Signal that we flip through — but this is the main one.

On another monitor we have different time-frame charts of any stock we pull-up.  Note that we use 20EMA, 9EMA   and pivot points.  These are the only intraday indicators we use and find them invaluable to our style.

We follow 3 min, 5 min, 15 min and 60 min.

On another monitor we have our StockTwits desktop and Tweetdeck.

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We’d like to thank everyone who sent us screenshots of their configurations — included below.  Enjoy.

@joeyfishface     I mostly employ a VWAP reversion strategy, supported by OHLC, Volume, T&S, and Volume Profile.

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From @IndependentTrdr

I have been doing a lot of trading lately on a laptop. It’s not a big laptop either. 11.6″ screen, running at a resolution of 1366 x 768. When I started day trading full-time back in 2005, I had 6 monitors going. Over time, I have found it to be more of a distraction than anything else to have so many screens. I do have another computer that I use for net browsing, TweetDeck, etc..

My setup is simple, Esignal and my broker platform. The broker platform is mostly hidden behind Esignal. Starting on the bottom left there is my position monitor, showing symbol, position size, and avg price. Then to the right, I have two order entry windows. All the rest of the windows are from Esignal.

 This screenshot shows the daily chart in front, behind it are two intra-day charts. One for 60-min/120-min charts that is zoomed out pretty far so I see a lot of data, and one for lower time frames (1-min, 2-min, 5-min, and 15-min) that is zoomed in closer. Switching the bar interval in the Esignal 11 is simple. When a chart window is active, just type the interval number you want, then press enter. For example, if I’m currently viewing a chart with 2-min bars, and want to see 5-min bars instead, I just type 5 and then enter.

To the right of the charts are my quote/alert windows, called “Watchlists” in Esignal 11. I’ll start with the first column to the right of the chart. On top is my Focus List for the day. These are the stocks that I’m most interested in for that session. Below this is my Alert List.

All of my Watchlists that are for alerts have the following columns.

• pPrice = shows the price of my alert
• ExtHtsL = last traded price for that symbol
• %Ret = how far the last price is from my alert price (this is the field that the Watchlist is constantly sorted by)
• Vol % = shows the current days volume as a percentage of the average of the past 30 days volume

The final column of Watchlists contains 4 different windows. On top are my support long alerts, and directly under are my resistance short alerts. Like all of the other alerts, they are sorted by distance to the spot. The third Watchlist down shows my Key Stocks. Just a group of about 20-30 stocks that I want to always keep tabs on. I also sometimes switch this Watchlist to display my ETF sector list. The bottom most Watchlist contains the 3 index ETFs that I follow, SPY, QQQ, and IWM.

That’s pretty much it. Keeping my setup simple helps me maintain calm and focused while trading.”

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From @alfietrade

I’m not sure how best to capture it cleanly because I have limited screen space so with many charts open at the same time, I tend to just move charts to the forefront when I need to look at it.

I always have the following open:

- IB TWS

- IB option trader

- IB charts (ES, NQ (two days and one month timeframes), and about 12 other names I trade regularly displayed in the 2 days, 5min bars configuration), other charts I need I would open and close as needed.

- Freestockcharts.com

- Tweetdeck

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From @steelertrader

My Screen Real Estate has changed over time but here is what I am currently watching on a daily basis:

Center Monitor:  Upper Left is my main QuoteTracker Window that shows my core watch list for the day.  The columns in all my watch lists are Last Price, Net Change, % Change, stock’s current % within daily range, % of average daily volume. Just underneath that is a list that is populated from stocks that may have fresh news that morning that pop onto my radar and below that is a watch list of index and sector ETF’s.

Next to those are my futures charts (NinjaTrader Platform) for the 3 main Indices- They are usually set on 5 minutes but can be changed easily.  Those charts contain 8 and 34 Ema’s along with a parabolic SAR.

I also have ThinkorSwim platform open with two quote windows (Indices/Futures) and charts for the TICK and Advance/Decline Line.  The red and green dots on the AD Line chart are for extreme tick readings.

The remaining ThinkorSwim Charts on this Monitor are USD futures, TLT, TNX or /ZN and Copper Futures.  All of these are 5 minute charts with 2 trading days of data.

Underneath those are 3 Quote tracker charts are for the 3 Sector ETF’s that I watch most closely- IYR, OIH and IYT.  All my quotetracker charts contain the 9/21/34 EMA’s, VWAP, Pivot Points and the prior day’s Hi/Low/Close.  I start the trading day using 1 minute charts, switch to 3 minutes around 9:45 and eventually sync them all to 5 minutes as the day goes on.  In late afternoon they are sometimes changed to 10 minute candles.

Left Monitor: Upper Left is a Notepad where I do my best to write down some thoughts on entries and exits which help me with my trade review and journal.

Next to that are 4 quote windows each containing approx 20 tickers: Retail/Casino’s/Misc Momo, Tech, Financials/REITS/Industrials and Commodity.  Several come and go but probably 70% of these tickers will typically stick around with the most change coming from the left most watch list.   I also have one “bellweather” quote window (12 stocks) for giving me a quick read of what I consider the markets key stocks.  I also have one list for levered ETF’s and for Alerts

Below the watch lists are room for 6 equities charts that I am keeping an eye on at that particular moment and one space for one random Futures chart (/GC, /SI, /ZC)

Right Monitor:

Ninja Futures charts for Euro and Crude

ThinkorSwim 6 window linked Multi-Time Frame Grid (5 min, 15 min, 30 min, hourly, daily, weekly)

Browser with FreeStockcharts and Stocktwits

Chatroom from @gtotoy’s daytraderbootcamp, where I hang out during the trading day.

GChat windows for traders that I rap with throughout the day.

TweetDeck

Laptops: On one laptop I run my Lightspeed Trading Platform.  It has 4 separate linked windows for order entry, level II and Time and Sales and on my other Laptop I have a newsfeed

 

 

Screen Configuration Bonanza

There are lots of threads out there on traders sending in snapshots of their workstations — that’s fun to look at but what is more useful for a trader is how they actually configure what’s on their screens.  We’re doing a post on how we configure our screens and would like to add other trader configurations.    Please e-mail us at  info AT highchartpatterns DOT com with snapshots/(and if you wish explanations) of how you configure your trading software and we’ll add it to the post including your StockTwits/Twitter handle.

Here’s a random one found on google image.   Go $GOOG!

 

Like a Zombie that won't go down

Like a zombie that won’t go down this market keeps getting hit with bullet after bullet and yet refuses to roll.    Many are looking for a regular session test of the $SPY 130 test (we already had that test in the overnight session on Tuesday $ES_F).

The market is absorbing bad news well.  Let’s take a look the afterhour action of Wednesday and Thursday of the Moody and S &P rating news.  The market immediately went down 10 points on Wednesday after the Moody’s review news and then recovered within hours:

Next on Thursday came the after-hour news of S&P possible downgrade PLUS the little detail of the agency asking for 4 Trillion deficit reduction deal in order not to get downgraded.    Again, ES plunged and recovered.

Dip-buyers have now been rewarded for two years.   There will come a time when the dips cease to be bought — we think it will come if/when we break the March 2009 trend-line but until then we’ll keep doing what has worked so well now for so long.

Note that range-bound strategy rules supreme in the current market hence the other side of the equation  has worked equally as well (at least this year) which is  sell the rips.    However as long as we are holding above a 2 yr trend-line we prefer to focus on the long side as we believe the force is stronger in the bulls.

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SPY areas to trade against

We’re at the close here and bulls  held the 20SMA/50% retracement of recent rally/ $ES_F AH low.

So what if doesn’t hold?  Next support comes in at 1295 on the $ES_F which is the top of the previous range (corresponds to around 129.8-130 on the $SPY) which also is around 61.8% retracement of the rally.

As to our position, we’re all cash.   If market rips then we’ll pay up for it and trade whatever sets/triggers.    However, we won’t be looking dark until we lose that 2009 trend-line — so far all we’ve had are mean reversions up and down as rips have been faded and dips still have been bought.  Until that changes we’ll be trading the status quo.

Big beat by the $GOOG machine in AH — ball is in bulls’ court now as they need to hold this technical level and rally from it using the earnings beat as a  catalyst.  A push from this 20SMA/50% retracement area would be a great start which in turn could bring in the “fear of missing” mentality.

Watch that Tuesday night low on the ES_F

 Remember this line in the sand we posted yesterday?  It’s baaaaack:

Tuesday 3AM futures tested and passed the top of range test.  We’re getting close to it again now.  Click to enlarge:

And on the $SPY it corresponds to 129.8-130 range.

Fun times.

Thank You

First of all, we completely forgot about our 5 yr business anniversary mark (June 13, 2006).    However, a belated note hopefully is better than nothing.   Opening the HCPG business forced us to step up our game — and for that we’d like to thank our subscribers, many of them who have been with us for years.  We may have many faults but lack of loyalty is not one of them — we always remember the people who have helped us over the years and want to give a quick shout-out on this 5 yr mark.

A year and a half ago we joined the world of StockTwits/Twitter and for that we’d like to thank @downtowntrader for giving us the initial push to join,  @howardlindzon, @ppearlman and @ldrogen for welcoming us aboard and getting us started via the Suggested Stream and later with a partnership with StockTwits.    Working with Dr. Phil has been a fantastic experience — he makes you feel you’re on his team and like a good coach, he’s always looking out for you,  pushing you to take it up a notch, and take that next step in becoming better.

We’d also like to thank all those that have given us increased visibility, too many to mention, but especially early RTs from (now) buddies like @gtotoy @traderstewie, @szaman @chessnwine ,  The Reformed Broker and the WSJ links, @DinosaurTrader for links to his early blog and the RO,  Charles Kirk for early links over the years on the The Kirk Report, and @abnormalreturns for links on his fantastic site.    Being part of the community of such a young and growing company such as StockTwits is very exciting — for us it’s a great win-win.  We’re happy to contribute value to the community, grateful for the friendships we’ve made, and for the fanastic exposure we’re experiencing alongside the growth of StockTwits.
Looking forward to the next five.

Look what happened while you were sleeping

We bounced right at the previous top of the range on the $ES_F — click to enlarge:

Too bad it happened at 3 AM…   Anyway, that’s the line in the sand going forward and the line that the bulls will have to defend against all lehman-cello type events.

News tapes are our least favorite tapes, add the fact that our beloved semis are getting clocked today, and you’ll find us mostly chilling today.  We have numerous alerts that could trigger but the market would need to firm up before anything like that occurs.  As for being a bear — not until we close under the March 2009 trend-line on the $SPY.

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In it for the long term

We’re active traders (probably 80% day-trade, 20% swing) and quite aware that the burn-out (and blow-out) rate in our business is quite high.   It’s a given that trading is stressful, probably more stressful than many jobs out there, and because of this  there are certain measures we’ve taken which have helped us avoid burning out (so far anyway, going on 14 years trading, and 5 years since we founded HCPG).

1.  The most important decision for us was to become trend traders.  For the most part we’re breakout traders.  Even when we do support longs we’re buying oversold markets bouncing on longer-time bull-trends.   We sometimes engage in contra-trend trades  but rarely for long stretches of time.   Why?     Because going contra-trend for extended periods of time is exhausting.
Have you ever noticed those that are bears in bull markets cover way too early when the tide finally turns?  Or perma bulls  in bear markets who sell into the first real rally when things are just getting started and go into cash very early in the rally?  It happens all the time.   They’ve been underwater in their positions for so long that when they finally go green they’re psychologically burnt out and running on empty.  They take meagre profits when the run has just started.     This isn’t to say that contra-trend traders don’t make any money.  We’ve always said that there are many ways to make money in the market and for the most part it’s a personal preference.   But it’s not for us –we find contra-trend trading too exhausting.  Kudos to those who can do it long-term.    In life often the easy path is the wrong path.  In trading the easier path (trend-trading), we’ve found,  is the right path.
2.  We’ve accepted the idea that we don’t have to catch every turn.   There are times, for example, when we feel the market is very bullish but extended.  Instead of looking for break-out failures the next day we instead chill and wait for the long-setups to get ready.   In the beginning of our career we weren’t like this — we were hungrier and wanted to catch every turn up and down.   As the years passed though we slowly decided the extra stress of constantly switching directions didn’t warrant the extra profits.   In the end it’s all about risk (stress)/ reward (trading profits).     In extreme choppy range-bound markets we still go back and forth but in strong trending markets we try to stick to one direction.

For example, as you can see in this chart of the $SPY it was smart to trade range-bound while in the box, but once we broke out of the range we were happy to stick to the trend and not try to go long/short at every small opportunity.

3.  Trying to find a balance between work/life is always a juggling act.    Our goal now is not to maximize profits but to find some form of balance between a good income and a good life.  A good life for us is one that consists of retaining a certain economic comfort while still having enough time to spend with family, friends,  on leisure, and exercise (post on home gym relevant to this point).   To state the obvious, consistent balls to the wall will wear you out.  There’s a time for intense work but there’s also a time to step back and balance out the work/life equation.  One of the most useful points taught in any ECON 101 class is the concept of the law of diminishing returns.   Our thinking is not to maximize PnL but to find that sweet spot between work/life that will most efficiently allow us to maintain a good life-style (money coming in via trading) while having enough free time to enjoy life.

Easier said than done of course but finding the balance between work and life is one that we’re constantly trying to achieve.
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Market Talk SPX

After a 100 point rip on the no-Greek default bottom $SPX finally seeing some fatigue in the market.  That being said the market held the gap today which is very impressive in itself considering how much it has already run.  Our general rule is to always sell the gap up after a large run.

We are looking for a consolidation phase now and a fill of the gap (blue rectangle).    This would aid in setting up new longs and be bullish going forward.

March 2009 trend-line, linear versus log

If you were watching for a bounce on the 2009 trend-line  you would have had two very different conclusions if your chart was set to linear (as ours are) or log.    Here’s the linear version that we always use:

$SPY sat on the 200SMA long enough for trend-line to catch up and bounced.

Log version shows complete break (interestingly enough we’re testing the underside of trend-line now).  Bears were very excited about this break.

What’s the difference?  In a linear chart there is no adjustment for a percent move.  A chart moves up 2 points if its a move from $20-$22 or $100-$102.  Of course a 2 point move in a $20 stock is worth a lot more percentage wise than a 2 point move on a $100 stock.   A log chart adjusts for that by moving same amount on chart based on percentage, not points in price.    For us, this is meddling we don’t want in our graphs.   We want pure price and time, not adjusting for percentage.   However, there is no “right or wrong” in this argument, more a preference.  E-signal uses linear as default for example while other charting platforms often use log as default (including stockcharts).
The 2009 trend-line for us is the big kahuna — it was THE focus for us in June as you can see in these four posts  March 2009 Trend-Line Sirens calling,  A visit to the Nasdaq Trend-line, Buy the first test not the second, and The only chart that counts  (hint, it’s the 2009 trend-line chart
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Daytrader Toolbox: anticipating breakouts

In benign momentum markets such as the one we have enjoyed for the last week a lot of break-out moves start before the alert.   Two of our day-trade strategies, base and break, and The Indy, were created to take advantage of this phenomenon.     A quick glance at two triggers from last night’s newsletter in $OPEN and $YOKU.

We wrote in yesterday’s newsletter “OPEN 85 not bad for a squeeze — type of stock that sets up before on base and break/Indy” and indeed the set-up before the alert today — on the lift-off from the 9EMA near the open 1 point under.    Best way to catch a move like this is if you were stalking it — yet another reason why we like small watch-lists.

Second entry if you missed 84 was after it had based on 85/R2 for second lift-off from actual alert at 85.

YOKU 37.5-37.7 we wrote yesterday to look for set-up which was a good spot to enter for a quick 1 point run.    Another entry was off the 3rd/1 minute bar off the open gap.   You will see this pattern quite often in benign momentum markets — gap up, 2 x1 minute bars that are fairly tight, and 3rd bar lift-off.   The highs and the lows of the first 2 bars were within 25 cents which is great risk/reward.   When you see a tight stop like that buy the 3rd bar that takes out the high with stop on any reversal into new low.

As extended as the market is right now there are some very good momo moves for day-traders.     We’ve had two extremes since the beginning of the summer — complete bear sentiment where every rip was faded and now the complete opposite in a true momentum tape.  It should be an interesting summer.

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My best purchase in a long time

With that title you would think I (have to use “I” here, this one is all me, not from my partners who work in offices) I am talking about a stock purchase, but no, I’m talking about a home gym.    I’ve had exercise equipment in our rec room downstairs for years but never took it too seriously, maybe I’d use it once in a month.  Maximum.  Aside from that I’d try to get some exercise at least 3x a week but a lot of times it was a time-struggle fitting it in.    I often wanted to get some exercise during the trading day but being away from the computers, even for 1 hour, often made me hesitate.
About a month ago I decided to change things up — I knew very well that as per the HCPG trading strategy there would be chunks of time where I would be doing nothing, just waiting for alerts to set-up, or targets to be hit.  At the same time I knew I would always hesitate leaving the office for too long.   I decided to build a quality home gym in our rec room.
First purchase:   a quality dock/speaker for the music via iPhone.    I went for the Bowers and Wilkins Air Zeppelin which is one of the only systems that allows AirPlay.   It also has formidable sound.   I’ve been using it almost every day for a month and couldn’t be happier with the quality.

We already had an Elliptical machine in there but I never really took to it — but I do like running, so I bought a LifeFitness Treadmill.  I did some research into treadmills and thought LifeFitness was a good fit. Again, very happy with the quality thus far.     The Air Zeppelin can be controlled via my iPhone on the treadmill and I have my Interactive Broker app running on the iPad to monitor my positions/market.   The only pain here is that you can’t have two running at same time so you have to log-out of the main office TWS and log into the one on the  iPad.

In order to add some variety I bought a free-standing bag for punches and kicks.   I went with the WaveMaster but that was the only one they offered — didn’t put too much research into this one but no complaints, works great.


A couple of yoga mats for sit-ups, etc is a must for the room.


A few medicine balls for strength-training.


And so far that’s about it — there’s nothing I want to immediately add.     It’s been the best material quality of life jump purchase I have made in a long time — I am working out now around 6x a week, I feel better about trading, and I’m much less tempted to trade for trading sake (one of the most common errors for day-traders).   If I’m bored, I’ll go downstairs, blast some music and go on the bag.  Today was a very good example.   I came into the day with no alerts and just nursing a few swings.    There was really nothing to do (even though my buddy DinosaurTrader did get me involved in a nice little miner short for an hour, thanks dude).  I worked out for 45 minutes and feel great.
This is my first foray into giving  non-stock advice but it’s one I feel strongly about — if you already have a home gym think about  upgrading/sprucing it up so it becomes more attractive to you and if you don’t, think about it setting one up  for your next purchase.  I think almost more than any other profession, having a home gym is a great asset for  home-office traders.

Charts are never enough

We  rarely trade only on what we see in charts, nor in fundamentals.  We always defer first and foremost to price action (especially to divergences), and a lot of times to “feel”.     Yesterday was a good example — we went long late in the day on a basket (tweeted before close) of $ANR $CMI $SMH $GDXJ $OIH $XME and it certainly wasn’t what we saw in the charts (even though we liked the potential of trend-line breaks in CMI ANR) but price-action.    We started to sound more bullish in our tweets yesterday and finally purchased the basket — why?  Two reasons:
1.  We had $UA 70 in our newsletter for a few days and it finally triggered and worked very well.  Appetite for momentum was coming back into the market as retail stocks ripped.
2. Market  refused to die no matter how much bad news it was bombarded with from overseas.    As our readers know we don’t like to buy support when there’s basing — because often what happens after the base is the stock craters.  But on the flip-side when a stock refuses to die even though it’s basing on support then there’s a chance it will rally hard, which is exactly what we saw yesterday.   We didn’t think the 200SMA would hold but it was holding — and that was enough to flip our bias and to initiate a position long.
We’re out half of the basket  ( up on the worst position SMH 2%, and 4.7%  on ANR, our best position).   Stops are on lows of day on everything but will be updated after the close.
It’s still hard to trust this market as these one-day rallies have consistently been sold, however this is a good start with the break of trend-lines.

Long  $CMI 93.38 (posted real-time yesterday) and made it in our newsletter for trend-line break long.

We’re playing it tight enough (already out 1/2 and stops over break-even is tight in our books) but also leaving some room (might swing 1/2 but at least 1/4) in case today’s bounce has some legs.

We posted this yesterday as our SPY road map –$SPY now has passed several short-term resistance areas but still has to deal with the big kahuna resistance of 130.

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Update, sold 1/4 more, swinging last 1/4 into the night.