Lessons learned (Part 1)

DISCIPLINE /[dis-uh-plin]
1. training to act in accordance with rules; drill: military discipline.
2.activity, exercise, or a regimen that develops or improves a skill; training:


Lessons learned in the market can be very expensive. To not learn from our mistakes can cost us over and over again. For every trader from beginners to those who have traded for decades, one of the major rules to trade by is DISCIPLINE.

For example:

-If we stuck to our original plan this week on our Netflix (NFLX) trade, we would of sold at 36 instead of 34 (an extra 6%)

-We would have WAITED until Apple (AAPL) hit the 50 day EMA and bounced back down instead of anticipating (guessing) such a move

We have a loyal reader to the site that we will call "Bill". He was trading Dryships (DRYS) this week. What could he have learned by using discipline to help lower his risk?



Here are 4 things that NEEDED to be taken into consideration either before or after a buy had been made:

1: stock fell below 21 day MA
2:Volume went down as the stock moved higher (2 most recent rallies)
3:stochastics had rolled over
4:MACD turned negative

Now we can say that this is hindsight and it's easy to figure out after the fact. The truth is, by having discipline and factoring the risks, "Bill" could of limited his position size knowing the risk was high.


ANY TRADER MUST ADHERE TO RISK CONTROLS ESPECIALLY IN TODAY'S MARKETS

Trade well,
Trader D

Danger Will Robinson!

Very bad close + Very good volume = watch out below

(We will be back this weekend with charts and ways to play the downside).

Trade well,

Trader D

Thursday night thoughts

Yesterday we wrote if there were any intelligent forward looking individuals they would short the financials. let me know if any of you did (you would of done extremely well today!). Moving on...this market looks HORRIBLE (in other words - most likely set up for a positive bounce). Any chart you look at is BRUTAL. So in the interest of all contrarians, I offer you:

DXO



















This ETF represents ultra (2x) oil future contracts and is known for severe volatility and volume. The chart highlights another symmetrical triangle like the one we just had with Netflix (NFLX that broke out perfectly and hit the price target (and more). If we see a break to the upside then we could see $6. The only negative is this pattern is in a downtrend and probabilities say the next move most likely is down. We will buy a small position tomorrow at the open and if we see a breakout on volume we will add more.


Trade well,
Trader D

Patience

Going through my charts last night I figured there would be a ton of great looking short-term bullish picks to choose from. Nope, barely a few. Now as I watch AAPL reversing back below resistance I feel strongly that if we close in the negative today on decent volume...we are going to see the mother of all declines. Right now this market is chopping traders to pieces. If you are patient, the trades will come to you.



















Trade well,
Trader D

Exiting Apple..

For the first time since September, AAPL has moved above it's 50 day EMA. We will exit our put and see if we can close today at these higher levels. We will look for volume also to accompany this "surge".

WWED?

An intelligent, forward looking individual would short the Financials here. If seen..please let me know.





Trade well,
Trader D

Apple falling ??

We don't want to turn this blog into a daytrader "pick-o-the-day" sort of thing, but this market and it's volatility calls for it.

Today we are shorting (puts) Apple Computer (AAPL). The stock is trading against it's downtrend resistance and pushing up against it's 50 MA. We shall call it a double-double negative reversal.

For the fundamentalists in the group:

Earnings were great - but in the past
Steve Jobs is still not working on a daily basis
The overall market is ugly

Trade well,

-Trader D

NFLX Update

Netflix Q4 profit up 45% to $22.7M

Taking a quick 12% gain and moving on......

Netflix

Netflix (NFLX) reports earnings tonight. With the gloom and doom of the recession upon us, families have searched out ways to cut back on expenses. One simple way to do it:

Keep the kids in
Pop some microwave popcorn
Serve leftover Halloween candies
And treating them to a in house movie on DVD (rental or streamed on your computer/laptop)

Technically this chart looks great especially when over 28% of the outstanding stock is short. We are going to take a small position here being that the risk in this market remains.....high.

Our price target is just below 36

Trade well,

-Trader D

ALL THAT GLITTERS...

First off, the bad news:

Democrats: Stimulus plan no quick fix for economy

Democrats warn that economy will continue to slide, even with big infusion of government aid

Without a quick and decisive plan by the Obama administration, the markets are going to have ZERO confidence that anything is going to change.

Now some better news....

The GOLD sector has broken out of resistance on high volume and a few of the gold companies are looking poised for a possible breakout:

GLD (the GOLD ETF):


NEM - breaking out on nice volume


ABX - close to breaking through resistance


AU - Close to breaking out also with BIG volume Friday



Trade well,
Trader D

ITM IS BACK !!

Welcome readers,

After a 6 month hiatus we are back. We don't need to get into the ups/downs of the last few months....we need to start looking ahead. As far as the 3 major indexes go, we are at critical juncture. The three charts below detail where we are (on a monthly basis) and what support to look for in order to have any chance of things getting better.

There is NO reason to go long (unless you are day trading) until we test and move higher. The only positive here is that volume is clearly declining as we get deeper into this steep decline.
(*click on the chart image for a better view)

Trade well,
-Trader D