Sunday, February 15, 2009
A good self-check resource
While researching a topic for km, I discovered a stale blog called Forex Technical Analysis. While he has several very good articles, This One seems to be pertinent to my life; sometimes a succession of bad trades lead to destructive behaviors.
Saturday, February 14, 2009
In Sickness and In Health
Today is Valentines Day. I am not in Indianapolis, I am at my in-laws home. My wife and I have no time for concerns about romantic holidays, work, ourselves, or what's for dinner. My mother-in-law, who has been in and out of the hospital, is on her way back in. The full-time nurse just told us to call 911. The medics arrived and carted a very important person away.
All that to say, if your stock wins, forget about it! If your stock looses, try to learn something from the mistake if there was one, then, forget about it. Move on.
I hope this message reminds y'all of a bigger picture, (hint: it ain't the market). Please remember this, especially when you loose big.
Now go give someone a Happy Valentines Day.
All that to say, if your stock wins, forget about it! If your stock looses, try to learn something from the mistake if there was one, then, forget about it. Move on.
I hope this message reminds y'all of a bigger picture, (hint: it ain't the market). Please remember this, especially when you loose big.
Now go give someone a Happy Valentines Day.
Friday, February 13, 2009
Cabella's in a bullish trend
In my post "boy did I goof" earlier this month, I discussed that stocks can both have a Price and an intrinsic value. One of the three intrinsic value categories is "short interest." High levels of short interest can cause Price to rocket, therefore I hold a longer term investment in Cabella's, ticker symbol CAB.
Cabella's is a huge sporting goods store chain spread across America. Since their stores are spread widely across the country, they also have a huge mail-order program. Their customers include most sports enthusiasts, wanna-be's, and customers who wish to buy high quality clothing, outerwear, and footwear. Their stores are large, well lit, and often include a food court, thus offering a welcomed rest stop from a long drive. I love the stores, the catalogs, and I love the stock right now.
ShortSqueeze.com is a wonderful site to research CAB's short interest.
From this information, we can see that there are almost 10 million shares, or almost 23% of all the stocks shares are being shorted. That means that there is a guarantee that these shares will eventually be purchased.
At average volume, it would take over 27 days of continuous buying to satisfy that debt, and buying has begun reducing the burdon by almost a percent.
This is HUGE!
As I analyze Cabella's daily chart, I can see a 32 day bull market, therefore, I am in! I currently hold a small position and plan to add more as politics and consumer sentiment become more favorable.
It's just good Market-Tao.
Cabella's is a huge sporting goods store chain spread across America. Since their stores are spread widely across the country, they also have a huge mail-order program. Their customers include most sports enthusiasts, wanna-be's, and customers who wish to buy high quality clothing, outerwear, and footwear. Their stores are large, well lit, and often include a food court, thus offering a welcomed rest stop from a long drive. I love the stores, the catalogs, and I love the stock right now.
ShortSqueeze.com is a wonderful site to research CAB's short interest.
| Short Interest (Shares Short) | 9,892,500 |
| Days To Cover (Short Interest Ratio) | 27.2 |
| Short Percent of Float | 22.76 % |
| Short Interest - Prior | 9,984,200 |
| Short % Increase / Decrease | -0.92 % |
From this information, we can see that there are almost 10 million shares, or almost 23% of all the stocks shares are being shorted. That means that there is a guarantee that these shares will eventually be purchased.
At average volume, it would take over 27 days of continuous buying to satisfy that debt, and buying has begun reducing the burdon by almost a percent.
This is HUGE!
As I analyze Cabella's daily chart, I can see a 32 day bull market, therefore, I am in! I currently hold a small position and plan to add more as politics and consumer sentiment become more favorable.
It's just good Market-Tao.
Thursday, February 12, 2009
Daily wrap up
What a freaky day!
While the fear and selling volume indexes were increasing, so were some of the major indexes. Overall, the day was very napish until 2:30 when the days low was breached. From there, sell volume increased and Price dropped rapidly, but only for a few minutes. Once a line in the sand (support) was reached, a fantastic buying spree happened. Of course, my friend IIC at sharptraders.com was nimble enough to profit from it.
Let's see how today's activity affected our favorite ETF's:
- FAS: essentially flat since Jan 20, briefly tested an all-time low
- ERX: bouncing off the range lows
- TNA: choppy. going nowhere since Jan 23
- BGU: choppier. bouncing off the Jan low
Not yet time to become comitted to the stock market. Staying in cash removes all risk.
While the fear and selling volume indexes were increasing, so were some of the major indexes. Overall, the day was very napish until 2:30 when the days low was breached. From there, sell volume increased and Price dropped rapidly, but only for a few minutes. Once a line in the sand (support) was reached, a fantastic buying spree happened. Of course, my friend IIC at sharptraders.com was nimble enough to profit from it.
Let's see how today's activity affected our favorite ETF's:
- FAS: essentially flat since Jan 20, briefly tested an all-time low
- ERX: bouncing off the range lows
- TNA: choppy. going nowhere since Jan 23
- BGU: choppier. bouncing off the Jan low
Not yet time to become comitted to the stock market. Staying in cash removes all risk.
Begin Market Awareness
OK. We are getting close to an overall trading plan. Based on previous posts, here is the general direction of my thinking: (For the background of these concepts, read all the post in this blog.)
We need a better rate of return than checking accounts, savings accounts, and CD's. Bonds might be suitable but we don't understand enough about them and their risks yet. The stock market grows at an average of about 8% per year when measured from its inception, so it has sufficient potential. It is suitable only if we carefully trade the better winners and quickly exit our trades to protect profits.
The Foolish Four trading paradigm can often beat the market's 8% rate of return. The Foolish people now recommend trading the new index funds for an even better rate of return. Three X leveraged funds offer much better rate of return than basic index funds and are beneficial in bullish and bearish markets.
From the first post in the blog we know that Price goes up and down. From another post, we know that Price is what we care about because it is the only thing that puts money in the bank. Also from that post, we know that there is an underlying intrinsic price that has been deeply violated by our current recession. Recessions last on average 18 months so this one should be in its final throes.
Whew!
Now, all we have to do is look once each day at four investment vehicles for signs of being bullish. I can do this! If they take a bearish direction, (who knows, since politics are at least as important as stock fundamentals rite now) I can profitably trade that too.
So, here is the first instalment:
- FAS: essentially flat since Jan 20
- ERX: was in a bull rally but now testing lows
- TNA: choppy. going nowhere since Jan 23
- BGU: choppier. testing Jan low. falling with momentum
So there we have it! A simple long-term plan to trade on the daily chart to gain from the markets inevitable recovery. We expect to reap almost three dollars for every dollar of the market recovery. This is HUGE!
We need a better rate of return than checking accounts, savings accounts, and CD's. Bonds might be suitable but we don't understand enough about them and their risks yet. The stock market grows at an average of about 8% per year when measured from its inception, so it has sufficient potential. It is suitable only if we carefully trade the better winners and quickly exit our trades to protect profits.
The Foolish Four trading paradigm can often beat the market's 8% rate of return. The Foolish people now recommend trading the new index funds for an even better rate of return. Three X leveraged funds offer much better rate of return than basic index funds and are beneficial in bullish and bearish markets.
From the first post in the blog we know that Price goes up and down. From another post, we know that Price is what we care about because it is the only thing that puts money in the bank. Also from that post, we know that there is an underlying intrinsic price that has been deeply violated by our current recession. Recessions last on average 18 months so this one should be in its final throes.
Whew!
Now, all we have to do is look once each day at four investment vehicles for signs of being bullish. I can do this! If they take a bearish direction, (who knows, since politics are at least as important as stock fundamentals rite now) I can profitably trade that too.
So, here is the first instalment:
- FAS: essentially flat since Jan 20
- ERX: was in a bull rally but now testing lows
- TNA: choppy. going nowhere since Jan 23
- BGU: choppier. testing Jan low. falling with momentum
So there we have it! A simple long-term plan to trade on the daily chart to gain from the markets inevitable recovery. We expect to reap almost three dollars for every dollar of the market recovery. This is HUGE!
Wednesday, February 11, 2009
The Foolish Four
Once upon a time, there was a trading strategy called... well... the Foolish Four. Trust me, it was not intended as a foolish strategy. The trading paradigm was actually proven very successful (compared to the broad market index) over the back-testing period.
Now, since the invent of indexed funds, the strategy has been outclassed. ETF's Spyders, Holdrs, ETN's, and probably other oddly named vehicles are expected to surpass this success proven strategy.
I like these vehicles for a number of reasons: built in diversification, fantastic liquidity, news isolation, and more. My fav's are: BGU, TNA, ERX, FAS, and their bear market counterparts: BGZ, TZA, ERY and FAZ. (See my article about FAZ below.)
My picks, being leveraged by three, can be expected to outpace the broad market quite handily. Will you pick them in the next bear or bull market?
Update: I don't want to loose this article... people shorting the bull and bear pair and making $$$ on the slippage!
Now, since the invent of indexed funds, the strategy has been outclassed. ETF's Spyders, Holdrs, ETN's, and probably other oddly named vehicles are expected to surpass this success proven strategy.
I like these vehicles for a number of reasons: built in diversification, fantastic liquidity, news isolation, and more. My fav's are: BGU, TNA, ERX, FAS, and their bear market counterparts: BGZ, TZA, ERY and FAZ. (See my article about FAZ below.)
My picks, being leveraged by three, can be expected to outpace the broad market quite handily. Will you pick them in the next bear or bull market?
Update: I don't want to loose this article... people shorting the bull and bear pair and making $$$ on the slippage!
Market is choppy
The fall yesterday was very powerful. Today, the market has yet to pick a direction; it goes up, it goes down, it pauses, it makes me dizzy.
This is not a good place for position traders, swing traders, or even those who plan to hold for most of the day. My friend IIC at sharptraders.com (see link in sidebar) is totally in his element. He is sufficiently nimble to get in and stay in while the getting is good, then be done with it. His success rate in trading the one minute chart is phenominal, 46 wins in 51 trades (and counting). Mine is not.
Ya might want to visit his stock trade chat room. From time-to-time, Doug offers lists of potentially active stocks in the room. Further, his newsletter offers stock pick suggestions based on longer time-frames.
I have placed two trades this morning and they both resulted in losses.
Thats the point
Since I now have made two losses, I am done for the day. I am confident that my next trade will also result in a loss. It has happened many times in the past; I get to the point where I don't like myself and my thinking becomes clouded - bad Market-Tao.
Are you the fast and nimble type? Today is made for you.
I will wait for the market to become unified in a direction and resume normal trading where I am confident that I will prosper.
I conclude that I am able to prosper when trading a ten or 30 minute chart. Bigger chart are too choppy in today's market, quicker charts are too (IMHO).
Here is probably the simplest trading strategy: Buy a stock that is above the 20 day Moving Average and check it daily. When it closes below that line, sell it. As it runs, it will pull the MA line up as a boat rises with the tide. That same strategy works on faster and slower timeframes as well.
This is not a good place for position traders, swing traders, or even those who plan to hold for most of the day. My friend IIC at sharptraders.com (see link in sidebar) is totally in his element. He is sufficiently nimble to get in and stay in while the getting is good, then be done with it. His success rate in trading the one minute chart is phenominal, 46 wins in 51 trades (and counting). Mine is not.
Ya might want to visit his stock trade chat room. From time-to-time, Doug offers lists of potentially active stocks in the room. Further, his newsletter offers stock pick suggestions based on longer time-frames.
I have placed two trades this morning and they both resulted in losses.
Thats the point
Since I now have made two losses, I am done for the day. I am confident that my next trade will also result in a loss. It has happened many times in the past; I get to the point where I don't like myself and my thinking becomes clouded - bad Market-Tao.
Are you the fast and nimble type? Today is made for you.
I will wait for the market to become unified in a direction and resume normal trading where I am confident that I will prosper.
I conclude that I am able to prosper when trading a ten or 30 minute chart. Bigger chart are too choppy in today's market, quicker charts are too (IMHO).
Here is probably the simplest trading strategy: Buy a stock that is above the 20 day Moving Average and check it daily. When it closes below that line, sell it. As it runs, it will pull the MA line up as a boat rises with the tide. That same strategy works on faster and slower timeframes as well.
Subscribe to:
Posts (Atom)