The Left-Field Move ($SUNE)

To be up-front, let me just say that trading from the charts provides no guarantees.  The spectrum of opinions on it is wide, ranging from some who call technical analysis hocus-pocus to others who swear by the accuracy of their obscure indicators.  Of course, there’s everything in between too.

For me, the charts are more than just an engagement tool, although I don’t ignore all else.  Earnings, for example, are events which are fundamental and ground-moving, plus they’re scheduled, so since they often produce sizeable gaps I always try to avoid them.  But the price action is what I base my decisions on, because I believe there’s a lot reflected in the price action.

On the charts, we get a reflection of where supply (highs) and demand (lows) are, as well as just how broad the participation is (volume).  It’s a picture of group psychology, it’s the picture of how attitudes have played out.  Even better, it’s real-time so everyone gets the same information simultaneously, which is more of a level playing field than something like analyst actions (upgrades/downgrades) which some folks are privy to ahead of time.

Trading from the charts is not perfect though.  That’s of course why I place such an emphasis on losing the right way, knowing that I’ll at times be dead wrong no matter what I thought the chart looked like.  But aside from being right or wrong, there’s also the element of surprise.

Sometimes we see a left-field move, out of the blue, fill-in-your-cliché.  A move which flies in the face of the story which the price action had been telling.  And you know what?  Nothing can be done about it, so when you’re caught by surprise and it’s off and running while you’re flat-footed, just let it go.

On Tuesday, one of those moves came in $SUNE.  From a price-action standpoint, the case for a failing bounce was certainly credible:

  • Lower highs have been in place since March 6th with every bounce being met with supply at lower levels.
  • Several descending trend lines were temporarily broken in recent months, only to fail just days later.
  • Last week’s falling wedge breakout was lackluster and upside volume was diminishing.
  • Price finished off its session high in each of the previous 5 sessions despite advancing.

SUNE-4-22-2014

Why I Use TC2000

 

The case for a heavy-volume spike higher was certainly not one I would have made.  I had no position in the stock, but when I ran across it last night in my research I just had to make a few points.

Take what you can from the charts, rely on them like I do if you will, but understand as I do that they don’t foretell anything.  They show us what has been happening, and what we do with that is called trading.  No legal approach to trading is perfect – even HFT’s have a down day every year or two!

The charts don’t provide the perfect plan, and there will be missed moves which didn’t appear imminent.  Surprising moves, gravity-defying moves.

I’m still a chartist though.  Studying the price action can still give us an indication of the rhythm of the moves, it can still allow us to be decisive in our actions, and through it we can still often determine the path of least resistance.  After that, it’s all about good management anyway.

Trade Like a Bandit!

Jeff White
Take a trial to my Stock Pick Service to get my trades.

How Do You Measure Your Risk?

How do you measure your risk?

tsb_riskIt’s a question I field frequently, and one which every trader should ask themselves.  Sometimes it’s asked in relation to the percentage of portfolio per trade question I discussed last week.

Beyond my comments there, there are a few things I consider anytime I’m putting on a new trading position:

Position Size – I do not try to put the same dollar amount into each trade, because for me that does not matter.  Two trades can be night and day different from each other in terms of their respective price action and personality.

In the post referenced above, I explained that I have a set $ amount that I’m willing to lose if the trade fails, which is my risk.  Position size is then calculated based on that number.

So for ease of example, let’s say I’m willing to lose (risk) $1000 on a trade if I get stopped out for my max loss. Let’s look at 2 trade candidates for a fair comparison…

Trade 1: XYZ with $25 buy point, $24.50 stop (beneath support on chart). There is $0.50/share risk, so I would enter 2000 shares ($50,000 worth of the stock).

Trade 2: ABC with a $25 buy point, $24 stop (beneath support on chart). There is $1/share risk, so I would enter 1000 shares ($25,000 worth of the stock).

So while my actual capital outlay for one trade vs. the next might really differ, I’m keeping my max $ risk constant across trades.

Target setting – The targets for my trades will also vary in terms of absolute $ or %, but they will be pretty consistent when comparing risk/reward. I want to always be putting capital at risk for a defined max loss amount, while still looking to make some multiple of 2-4 times what is being risked if the trade does work out.  That’s the case for swing trades and single-day plays alike.

I do put money behind my ideas. What I’m sharing with Bandits in the nightly report is my trading plan for the following day, so these are the actual trades I’m setting up for the following day to make in my own account, not a recommendation for others to take these plays.  I don’t decide what’s right for anyone else, I simply share my plan, my levels, and my reasons for the trades I’m making.  They’re the best setups I’ve found, so that’s where my capital goes.  But a crucial element in that process is measuring my risk and ensuring the trade fits my needs.

Trade Like a Bandit!

Jeff White
Take a trial to my Stock Pick Service to get my trades.

5 Setups to Watch This Week

A 4-session trading week last week gave the bulls limited time to act, but they did the best they could with what they had.  The result was four straight advances for the broad market, lifting stocks from their recent correction lows.  However, it’s not likely to be smooth sailing on the way back up given the lower highs which the averages still have to contend with.

I reserve my daily trading plan for members of the site, but I wanted to share 5 setups of interest with you as we head into a new week of trading.

Put them on your radar and keep assessing them daily. As setups are negated or fail, seek out some replacements. As setups confirm their patterns, observe their price and volume behavior closely to gauge whether or not they still have some gas in the tank.

By the way, I do not have any positions in the stocks listed and am only interested in entries beyond the highlighted levels. Should price fail to push beyond the levels listed, I’ll take no action.  Price provides the proof, then I make an entry. Here we go:

GME has pulled back and stabilized over the past 2 1/2 weeks. Now, a trend line break could produce a quick lift.

GME-4-20-2014

Why I Use TC2000

FSL has pulled back and rested here and now a trend line break at $24.90 could invite attention. Earnings are due out Thursday and I won’t be holding it then.

FSL-4-20-2014

Why I Use TC2000

CHD is facing a breakout from this ascending triangle pattern and a new high at $69.50 frees it up for higher prices.

CHD-4-20-2014

Why I Use TC2000

TRIP has bounced within the downtrend but any rollover from here may invite more selling pressure.  Watch Thursday’s low as a tell.

TRIP-4-20-2014

Why I Use TC2000

INTU is bouncing within a downtrend but a break of rising support would offer a play on the short side as the next leg lower begins.

INTU-4-20-2014

Why I Use TC2000

 

Through the nightly service, I share swing trade setups with members here including my planned entry, stop, and target levels. Check out the trial if you’d like to kick the tires.

Trade Like a Bandit!

Jeff White
Take a trial to the Stock Pick Service to get my trades.

Month in Review (Feb/Mar 2014)

Whether you’re a member here at the site or not, I want to be in a better habit of looking in the rearview mirror together at some of the trades which have been shared of late with Bandit members.  There are always lessons to be learned when you see which kinds of plays have worked best, which kinds of trades failed, and which were the better movers you may have missed out on.

Because I recently covered the swing performance for this same period, I wanted to go back and review the charts which yielded some of the better single-day moves for me.  I prefer to trade on both the day and swing timeframe, and I view these single-day setups as the cashflow trades to get me through the week, particularly when swing setups are less plentiful.

I’m not a hyper-scalper darting in and out of trades, because these days you can’t compete on speed.  However, these setups look good on the daily charts to me but for a variety of reasons I don’t take them for swings.  Being able to grab these for anywhere from a few minutes to a few hours offers plenty of opportunity to capture as they cross key levels or break out of bases.

I always set these up & share them the night before as single-day plays where I’m only looking to participate in the initial move out of the patterns.  These plays are set up when I don’t trust the chart or the market for a lasting move, or when the bases are too loose to justify a much wider swing stop.

Understand that although the charts below highlight winners, I do take plenty of losing trades.  Those of you who read my posts know the importance I place on losing properly, as losing trades are part of trading.  As per my day trading strategy though, I limit losses on single-day trades to 1% from entry, so the losing trades are extremely small and therefore it’s easy to cover multiple losses with a single decent trade.  My hope in sharing these charts is to share which kinds of plays have generated the best moves for me of late.

Also, the list below does not include all of the winning trades, as there were many others in the 1-3% range which added up nicely.  But this is a snapshot of the kinds of plays I take for the single-day timeframe.

I like to take these for cash-flow trades with a 1% initial stop from entry and aim to ride whatever momentum is present for the day by monitoring the intraday chart.

February:

DDD-feb

Why I Use TC2000

 

TSL-feb

 

MU-feb

 

NQ-feb

 

SHLD-feb

 

MNST-feb

 

YRCW-feb

List: here is a list of many of the single-day movers from Feb. 2014:

feb-list-2014


 

March:

CTSH-mar2

Why I Use TC2000

 

NUS-mar

 

RAX-mar

 

YPF-mar

 

CSIQ-mar

 

PETM-mar

 

AAL-mar

 

FANG-mar

List: here is a list of many of the single-day movers from Mar. 2014:

mar-list-2014

The best plays lately have been trend line breaks after pullbacks, followed by lateral level breaks and compression patterns.

You could be making more from your trading.  If these are the kinds of plays you like to take, now you know where to find them.

I dig out the best setups in the market each day, structure my trading plan for the following session, then share those trades with members via the nightly report.  They include swing trades and single-day trades like those above.  Not only am I explaining where I’m looking to trade them, but I also explain why I’m looking to trade them.

If you’re not a member, why not give it a try today?

Trade Like a Bandit!

Jeff White
Take a trial to our Stock Pick Service to get our trades.