Tilt, Two sells near close

Whether it was the response to Dell's 10% drop or more likely there could be potential bad news brewing for RIMM, it shows the tilt factor has reasserted itself with a vengeance.

Fortunately, ESRX and BUCY aren't doing much, but then again, that's not good either.

Sells:
1) all 100 FXI at close, around 185-6
2) all 350 RIMM at close. Here was where there was no excuse. I saw this at 116 before I left for the morning commute. Here's something to remember. When the market averages are gapped up but your stock has gapped lower, there's something wrong with the stock and you must get out immediately. I was too busy thinking "it's a fake move or what's going on" and the move was a $1k mistake.

Also notice the reversals, notice FSLR gapped 12 points higher, but now its looking to close in the red near the lows on higher volume. That's a possible high volume reversal pivot point.

I know I'm on tilt. Maybe a round of golf this weekend thinking of my co-worker as the adversary will get me back to something closer to the frame of mind of making money.

Post Thur Notes: Market flat, three new buys made before close

One of my fellow co-workers was giving me problems so I was lucky to enter my trades a minute before the close. A recap of the new buys:

a) 3rd purchase of RIMM at 122.10
b) 200 of ESRX at 68.38
c) 150 of BUCY at 87.62

I'm still having difficulty with getting a good entry so it means external factors such as co-workers or tilt remnants are affecting my judgment. I won't know until Mon how this trade develops as I'm playing a combination of factors.

1) Calendar tendency: end of mutual fund reporting year, beginning of new month, monthly 401k buying by funds at least one day next week.

2) ESRX and BUCY at new 52 week highs.

I feel a little better having a 45% long position so that I won't miss any material upside move. But its going take some positive catalyst to show a decent gain in these positions.

Solar stocks are one of the few sectors to lead the past three days as FSLR hit a new high today.

Winners versus Losers

Near the end of the movie "The American President", Andrew Shepard in the beginning of his speech to White House reporters says "America isn't easy. You have to want it...."

Jotting down some notes I've learned from my fellow trade breathren.

1) The best traders do their own research before the following's day's trading. They have preset their entry and exit points along with their position size.

2) The best traders always have at least one new goal. Such as, "I resolve to make one less losing trade this year."

3) The best traders are always improving themselves. One of the dangers of early success in the markets is the inevitable feeling of "I am a Genius". Once you stop improving yourself, you are going to get runover on a gap day when the markets unexpectedly turn against you.

4) The best traders have a track record in both uptrending and downtrending markets. As Lou Manheim stated in Wall Street, "Quickbuck artists come with every bull market. The steady players make it through the bear markets." There is a reason Wall Street firms will not look at 99% of non-Ivy League candidates without a 5-year track record.

5) The best traders trade to win. My freshmen U.S. history professor posted the following sentence on the blackboard before beginning his lecture. "No Whining". This best applies to life in general. When something is not going your way, suck it up, and do something about it. When trades are not going your way, reduce your position size to get your confidence back.

6) The best traders associate with people who want to make them better. You have a choice with whom you spend your free time. When people start putting you down to make themselves feel better, don't associate with them.

7) The best traders have confidence in their abilities. If you do not believe in yourself, why should someone else believe in you?

I choose to be a winner. What do you choose to be?

Dow up 350 points and patience

Fortunately, the mutual fund year end effect was in play. As many of my fellow traders have told me, better to be lucky than smart. Holding all positions no trades today.

The ideal scenario is for a down day tomorrow for no more than 1/2 of today's gains on lower volume than today. We're back to playing the calendar tendency so if this occurs, look for anywhere from one to three potential trades near the close. Most likely its a 3rd buy on RIMM, a 2nd buy on FXI, and a probe buy of a new position.

We won't know until near the close tomorrow but you have to like today's action as it is the first time in five weeks there's been two consecutive up days in the major averages.

The thing to watch out for is allowing the longer term charts to influence trading in the here and now. While I'm thinking about how I want to be allocated six months from now, remember to make money today. Having such a big cash position is a blessing on the down days, but it is a sin when you have these rare 3% up days in the averages. Always work on improving your entries, even if it means an extra 25 or 50 shares. Even that small a difference can add up to a higher profit over one year's time.

Two adds, and still slightly on Tilt

Markets volatile the past four days. Similar to historical precedent, Dow dropped 200 points day before Thanksgiving, then gained 160 on day after Thanksgiving on short 3 1/2 hour session.

Unexpectedly, the Dow drop 237 on Monday with most of the losses in final half-hour.

Now on "Turnaround Tuesday" we're up around 200 points. I'm placing two buy orders near the close today:

a) 2nd purchase of RIMM, 100 sh around 115
b) New trade, buy 100 FXI around 175

Long 150 RIMM at 113.97

Did we miss a 2 point move? We'll find out because I missed a trade from Wed before the Thanksgiving holiday.

No trades, justice served against FRE

While I haven't made any trades, I am laughing at the 33% drop in Freddie Mac. The organization that supposedly assists families to buy homes has imploded on $2 billion in subprime losses. People said, they are an organization that does a public good. BULL! Justice served.

Ironic that SKF at $109 now. Some moves I'll miss, but since I didn't get caught in yesterday's or this morning's fake up move in the Dow or QQQQ, I'm happy.

Seems there was a 2pm FOMC minutes release and the market didn't like that the FOMC admitted U.S. GDP growth is expected to drop to the low 2% range for 2008.

Right now, the Dow is down 100 and there is no sign of a bottom. Any guesses on support, how about 1366 on the S&P. But that's another 4% from here, which is nothing in the grand scheme of things.

I am looking forward to Xmas.

Post Nov 16 Options Expiration Thoughts

After two days of not watching the markets, I used most of today to catch up on what happened on options expiration Friday. The Dow was up 66 points on Fri and finished the week up 1%. After looking at all the rhetoric from Barron's to various finance sites, I pretty much have to look at things from several viewpoints:

1) If I want to go long on anything, I'm going to have to cherry pick the top performer in a given sector. So if I'm making a list, let's go with this:

Primary List:
Solar - FSLR (+21 on Fri)
Brazil - EWZ (+3% on Fri)
Fertilizer - POT (one of the trader's mentioned this to me)
Copper - PCU (beware the 30-day trend of the spot metal is downward)
Metals - RTP (up $1 on Fri for a $440 stock)
Water - VE (a different trader reminded me it was on the Oxford Club portfolio)

Secondary List:
Consumer Staples - CL, CLX (both near 52 week highs)
Healthcare - ESRX (this might be a Dec play as it was a $7k winner in Dec 2006)

2) Keep those probe buys around $10k. I get a sense I want to be somewhat aggressive and go 15k on a first position probe.

3) I haven't heard much from Dana Telsey at Telsey Advisory Group. She has the best 10 year track record on evaluating the retail sector. I am guessing she has already advised her select cliente on who she thinks will be the winners for Black Friday, aka the unofficial first day of the Xmas shopping season. One interesting note, is this year's Xmas shopping season is one of the longest possible, its 32 shopping days. So that will make year to year comparison's to 2006 somewhat messed up. If I were to pick one retail winner, I will guess its COST (Costco), because its the only chart that I somewhat like.

Let's take it one hour at a time, and who knows, maybe we add some trades to wittle down that 79% cash position.

Late day thoughts from yesterday and today

When casy and I had our weekly chats, he was helping me with getting back to generating consistent month to month returns versus the make everything in five months and underperform the remaining seven months of the year.

I think he had a very good sense to know when I was on tilt or out of sync with the markets because it occurred at least once a year when I would have a 10% drawdown. Since he knew I wouldn't stop watching the markets, he would share a euphemistic means of discouraging me from taking a bad trade, such as "I ain't buying no sissy retail!", or "Java Junkie, why would you want to buy SBUX when you can make some Yuban." Remember this was back before Short ETFs were available to trade. He was right on at least 80% on his market insights, (although he won't admit it now, he knew I was better at trading SBUX).

Since I'm on tilt for probably at least a few more days, it means I have to reduce my share size down to 100 shares or $6-10k blocks for new trades.

Ironic, that yesterday's 310 point up move in the Dow, I only made $600, but on today's flat session, I'm up $1400. It is the wackiness of a 79% cash and being lucky that the one long position is moving up with a specific sector move.

As I mentioned to the traders last night, the 1490 S&P level would be resistance because it was previously the support levels from October. This level held four times before it broke below it a few days ago. Now I'm actually hoping we retest the Mon low and go a little bit below it on a high volume drop so that we finally have people throwing in the towel. This way it will suck in some shorts and possibly be a chance to rebuy some of my favorites that I sold a few days ago.

Sold all SKF at 90.50

Definitely on tilt.

Overnight notes before Options Expiration Week

Feeling better about those sells on Thursday. Going from 87% long to 75% cash in nine seconds could have been one of my best moves ytd or one of the dumbest. For the moment, we're looking lucky. Now we can just watch for opportunities both long and short.

Only three stocks hitting 52 week highs of note:

RTP - Casy's hi-ho Rio Tonto looks like its getting a buyout from BHP. It is the only stock on his list that's still rising.

ATLS - The difficulty of playing this is that "the line of least resistance for the QQQQ is downward". That is what the index chart is telling me. I usually do not want to initiate a new long that's going against the current short term trend of the corresponding index.

FXF - I should have taken my own advice on this one as I told everyone back in Sep that it was a buy at 84. Look at it now, its almost 91.

Now let's look at the one position that's sitting as a loss right now, SKF. I think we will have to get lucky to breakeven or even earn a profit. It will be news dependent since there are no brokers or major banks reporting for the quarter. I was depending on institutions with annual reports closing in November to dump their financial shares as they don't want to tell their shareholders they were dumb enough to hold financials.

Despite the setback, we still want to look for opportunities both long and short even though I'm coming up on my historical period where I do nothing in the final month of the calendar. I think it's because I don't want to do anything rash to ruin eleven months of gains. But it doesn't mean I shouldn't look, because one never knows when the market will throw us a dog bone in a literal sense. Remember, always play to win. When you play to not lose, you're going to get killed.

Two sells at close, PCU and SPWR

Checking on the SKF trade, it now shows I'm out of the sync with the markets after a good three months. A sure way to know when things are no longer going your way is when you lose money. We're still long although I'm wondering if I'll get prematurely stopped out before it takes another leg higher.

Because I'm out of sync, I'm selling the full positions on PCU and SPWR.

For PCU, I don't like that the 10, 20, and 30 day moving EMA's have rolled over to the downside. I would rather sell and enjoy the profit.

SPWR has traced with Livermore described as "beware the high volume reversal" , where a stock hits a new high but closes below the low of the previous day on higher volume. It means the stock is moving from strong hands (institutions) to weak hands (dumb money), and I don't want to be around when this thing decides to implode as everyone seems to want FSLR versus this one.

Really steaming, 2nd purch 100 SKF at 102.95

Either I'm reading the chart right, or I'm getting lucky.

Might be steaming, Long 100 SKF at 101.24

I think I'm trying to make up for missing a trade because I executed this on fear of missing out.

This is a dangerous time. The natural tendency is to makeup what was lost on the next trade. While that may work in professional sports, it does NOT work in the markets.

The market does NOT discriminate between the rich or poor. It discriminates between who is right and who is wrong.

Anyway, since I'm in the trade, I'm going to set a 10% stop and see what happens.

Closed CSCO, Sold 300 at 30.52

$1200 tuition payment.

Thoughts after the Dow -360 Day

Only four stocks on the watchlist finished green for the day:
SKF, RIMM, ATLS, and PAAS.

SKF up 7% after that low volume pullback. Closed just under $100 today.

ATLS is a natural gas utility that reflects the casy mentality. I've traded it several times and it hasn't done much recently compared to its other four letter brethren, but showing up tonight on the list, has me thinking maybe.

PAAS seems to be the favored pick of the silver crowd although that down move in the SLV is a bit disconcerting. Maybe it's just me not following this stock as well as others in the sector.

Tonight's lesson in humility is when to take a loss. And the obvious answer is when the trade does not go as you predict. As we saw, I had a 50/50 shot at picking the right trade. Both trades moved 7% but the one I picked moved in the opposite direction. So what do we do? My notes were written before the trade was taken and it says, if the stock is not showing a profit by the close of the following business day, close out the position. I am used to the fact that the initial reaction after hours could be a fakeout or it could be a precursor for the following day; however, for the rules of this trade, I'm letting it play one business day, and prepared to jettison the position just before the close on Thursday.

Now some might argue, why not hold on to the position and wait it out? The problem with that is: it only takes one mistake in the markets to wipe out one's account or even several month's worth of gains. Once your account goes to zero, you're no longer in the game. One could get lucky, the stock turns around in the next month, and then you're thinking, see it came back. There are far more examples of where the stock doesn't come back. The reason nobody remembers them is because they are delisted. Sure the $800 to $1k loss hurts, but that's a fraction of what will happen to your confidence when you start seeing that loss morph into something that was preventable.

Despite the drop in the markets, we only gave up about 60% of yesterday's gains and judging by the reaction in FSLR afterhours, there's a good chance we're looking at a great day tomorrow in our SPWR position.

Late night notes

While I'm raising my stops on my long positions, jotting a few notes from fellow daytraders who had double digit percentage big gains today.

52 week highs today
Solar - FSLR, SPWR (FSLR received a $1 billion contract today and reports earnings on Wed)
Tech - CSCO, APPL, RIMM, GOOG
Silver - PAAS, SSRI
Uranium - URRE (T. Boone Pickens mentioned this sector in a Nov 2 bloomberg video)
Gold - NEM, AUY, ABX
Oil Service - SU, APA

Reminder, to trade your plan, I should expect the stock to try to shake me prematurely, so we'll see if I can ignore the action and make a decent gain.

Earnings trade, buy 300 CSCO before close today

The QQQQ are up .75% today as it feels like earnings reports for FSLR and CSCO were leaked given the high volume on their gains.

Both are at new 52 week highs and since I already have a solar play, I'm going to go conservative and choose CSCO. Although CSCO could do nothing between now and 4pm Eastern tomorrow. It's what happens after hours on Wednesday that will increase or decrease my account. I'm choosing a small number of shares since most of the positive reaction seems to have already played out with CSCO up 3.3% today.

A reasonable target is about $.65 as next week is options expiration. If the reaction is positive, they'll bid it up to around $34.90. The only way it goes above $35 is if the perception of other QQQQ components is also positive.

Others on the 52 week high list

Noticed them this morning:

Gold - AUY
Silver - SLW
Oil Service - SU, APA

Gold must be at 28 year highs. I thought of taking the silver trade given the law of numbers. Which is the bigger % gain, gold moving from $800 to $1000 or silver from $15 to $20.

Regardless, I think its more to keep in the back of my mind if I have the spare cash to play a swingtrend. Interesting that VLO reported that their margins would be weaker going forward despite oil at $96/barrel. So perhaps the refiners may not reap the benefits, but other oil service companies will.

Remember remember the 5th of November

Volatile session. S&P 500 bounced off the 1490 support for the moment.

QQQQ still best performing index. GOOG, BIDU, SPWR at new highs along with gold stocks ABX and NEM.

SKF was up 3% on news that C will writedown another $11 billion.

Only bad trade was letting CME go about 60 minutes early, could have gotten another 10 points. The good out of this was having an extra 16k as firepower.

Markets could go either way, so we do have our plan. For us, Tue afternoon will dictate whether we go long CSCO or go long SKF. We won't do both because there are two forces at work.

The one argument for CSCO is that the QQQQ is the one index in an uptrend, with the 10, 20, 30, and 50 day EMA's still rising.

The one argument for SKF is because the BKX is now at 2 year lows and is down 20% ytd. As the price is near the $100 point, there could be an incentive to push it through triple digits.

It's a 50/50 call, so it will be a last minute decision depending on how the markets react in the final hour.

Was forwarded this link from the New York Times. It's an online tool to determine whether its better to rent or buy a home based on a given scenario. Based on this tool, I was right NOT to purchase a home. Goes to show having a trader's mentality can be beneficial. http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=1&oref=slogin

Sold 25 CME at 650.23

Took the $700 loss.

Trading notes, post Fed reaction

Although the Fed cut rates on Wed 10/31 and watching the Dow rise 130 points, the following Thursday saw the financials such as MER and C lead the market down as the Dow dropped 360 points.

Today, the market is down about 40 points and the only watchlist stocks that are up are GOOG and BIDU, unfortunately I have no position in any.

The SKF or double short financials has rallied about seventeen points from the initial watch point but we didn't take advantage of it because at the time, the trend of general conditions did not favor the trade until yesterday. Now we are in the conundrum of whether to buy it 20% higher than it was.

Thankfully we only gave back half of Wednesday's gains and our concentrated portfolio has weathered the storm. However, I haven't made any new buys, sells, or shorts.

I am tempted to take that long CSCO trade at the close on Tue, Nov 6. Will take another look at it to see if I'll go 200 shares to play a positive reaction.