The bulls surrendered their 4-week streak of gains via some profit-taking last week, shaking things up a bit on the charts.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week begins.
NAZ – The NAZ lost 1.1% for the week, but more importantly carved out some resistance which should prove very helpful to us going forward.
RUT – The RUT reached 4-digit territory last week for the first time ever, then quickly sold off to return to the 900′s. This small-cap index was overdue a dip, and we now have some short-term levels to utilize for support and resistance.
DJIA – The DJIA may be carving out a bit of a trading range up here, so we’ll keep an eye on the high and low of last week in case price moves laterally from here.
The buyers continued their domination last week, marking the 4th consecutive weekly gain since the mid-April pullback.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week begins.
NAZ – The NAZ is up 10.4% since the mid-April low, leaving it very extended with this nonstop move. Regardless of the near-daily upside progress, getting aggressively long after a run of this magnitude simply involves greater risk as profit-taking will eventually arrive.
SP500 – The S&P had a measured move projection to about 1665 out of the 67-point trading range (1530-1597) it left behind when it cleared 1597, and on Friday it achieved it plus a couple of points with a close at 1667. The momentum might last a little longer, but this isn’t a spot to be adding long-sided exposure until at a minimum some rest has taken place.
RUT – The RUT is pressing 1000 for the first time ever and is now within 19 points of its measured move to 1015. This incredible 4-week run has lifted this index nearly 11%, leaving it very extended and well overdue for a breather.
DJIA – The DJIA has nearly met its upside projection as well, closing just 26 points from it as of Friday. This index is moving at a more sustainable pace (or angle) than the others, but it’ll take cues from them. As they appear very stretched, caution is warranted in this index as well – particularly after this 500-point breakout in just over 2 weeks time.
Stocks continued to ramp last week since turning up from the mid-April low, packing a serious punch to the bears after a Wednesday pullback with back-to-back triple-digit gains on Thursday and Friday.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week begins.
NAZ – The NAZ just added 9% in about 3 weeks, which simply isn’t a sustainable pace. Nonetheless, the bulls remain in charge here and there’s no reason to become bearish even if a short-term pause is becoming overdue.
SP500 – The S&P continues to grind higher since its breakout two weeks ago through 1597 resistance. It has some breathing room here to potentially pull back on profit-taking and perhaps still hold the 1597 level. Either way, a higher low looks likely on the next pullback after this 100-point advance. Based on the height of the rectangle pattern it just broke out from, this index could see a measured move up to the 1665 area. At this pace, it wouldn’t take long either.
RUT – The RUT closed at a new all-time high on Friday and now stands 21 points above the breakout zone. That allows for some room should profit-taking kick in, although the last pullback low is now nearly 80 points away. A measured move from the rectangle pattern takes this index up to 1015, although pauses along the way could make that an easier accomplishment.
DJIA – The DJIA keeps easing higher since its breakout and still has room to fulfill a measured move to the 15380 area based on the height of the rectangle pattern it just left behind.
Stocks continued to ramp last week since turning up from the mid-April low, packing a serious punch to the bears after a Wednesday pullback with back-t0-back triple-digit gains on Thursday and Friday.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week begins.
Hit the gear icon on the player to select HD and then go full-screen for best quality.
There are many ways to classify traders, but one such way to describe styles would be that of an anticipatory approach vs. waiting for confirmation.
Not every trader will fall into a single category, and in fact you’ll find that experienced traders will at times do some of both. There’s nothing wrong with that, and shifting with the tide of the market is always wise and beneficial.
However, I wanted to discuss some of the pros and cons of these two approaches and then share with you some situations where I’ll employ them (because at times I’ll use them both).
Anticipatory Trading
The anticipatory trader is one who takes a position and then waits for a move to begin. The trader who anticipates is often thought of as a contrarian. The contrarian typically does have an anticipatory style by building a position against a key level and then looking for a reversal to begin. However, some breakout traders anticipate. Rather than waiting for the breakout, they might establish their position while the stock itself remains in a trading range or base.
Contrarian
The contrarian anticipates by establishing positions usually against a key level or into a pullback (whether a dip within an uptrend or a bounce within a downtrend). The advantage is that they can enter with better pricing than they would get by waiting for the reversal to begin. The disadvantage is that they might be early and therefore wrong (at least temporarily).
An example is RCII, which has continued to respect this nearly $6 wide trading range since the fall of 2011. Anticipating reversals away from support (any entry south of $33 has paid off well with limited risk) or away from resistance (any entry north of $37.75 has paid off well with limited risk) continues to work in this stock. This is a contrarian trader’s dream stock.
The anticipatory breakout trader is expecting continuation of the existing trend, but typically is entering a position in expectation of that trend resuming before it has actually happened. It might be a high channel pattern after a significant rally, which is a healthy base, and this trader expects it to be resumed to the upside. Instead of waiting for a new high, they get long within the channel in hopes of seeing price push through resistance sooner than later. As an advantage, it offers them better entry prices. The disadvantage is that price might continue to stagnate (thus exposing them to risk without reward) or even fail the pattern, in which case they end up with a loss.
Here’s a look at ABBV, which had been on my radar in recent days with a bullish pattern in development. Resistance had been established, and rising support was beginning to create a tightening base. I’ve been looking to possibly get long if it could make a new high in the $46.40 area. On Thursday, price broke down from the base. Anticipating a move here would have resulted in a quick loss by not waiting for confirmation of the pattern.
The confirmation trader waits for price to clear a key level or a reversal to begin before establishing a position. Waiting for this confirmation brings with it inferior prices compared to an anticipatory approach, but can also mean higher probabilities associated with the trades due to fewer pattern failures. This approach also tends to result in fewer trades since it’s based on price exiting a base rather than simply identifying a base as a means of entry.
An example of a trade I’m currently in is VCLK, which I entered on 4/17 after price cleared the descending trend line at $28.85. This gave confirmation that price was back on the move to resume the longer-term uptrend. it also meant I paid a higher price for entry, but since then price has steadily risen and currently is up more than 7% since my entry. As I’ve shared with members, earnings are due out next week so I’ve been tightening my stop aggressively behind this trade due to it running out of time. Either way, this has been a nice steady move to participate in and it was worth paying up a bit on the confirmatory move through the descending trend line.
Anticipatory trading is tricky, and you need to know when to make anticipatory trades if that’s your primary approach. Whichever route you go, it really boils down to personal preference since both approaches have benefits and drawbacks. The bulk of the trades I’m putting on and sharing with members here are confirmation plays, simply because that’s my style.
One other thing I should mention that I’m asked about frequently is whether I prefer to wait for a close above a level on breakout plays to further validate or confirm the move, or wait on volume expansion to confirm the move. The answer to that is no. Here again, it’s a tradeoff as it can result in more headfakes, but it also means I don’t miss out on any trades.
Waiting for a close beyond the breakout zone with intentions of entering the next day can in some cases leave you behind if price thrusts through the level decisively. It can leave you chasing a move with and entry farther away from an appropriate stop (greater risk), which is why I prefer to take trades as they push through the levels (tighter risk). It’s a matter of personal preference, but whichever route you go the key is to be consistent.
If this is over your head and you need the 101 on technical analysis, don’t worry. That is the kind of thing we teach in our Basic Course, and you need to be in that course if you need more help understanding the charts or the fundamentals of trading.
Posted on April 26th, 2013 at 6:15 pm
by Jeff White
Stocks rebounded sharply last week following the biggest pullback we’ve seen in quite a while, showing the bears that a downside shift of direction isn’t going to be an easy task to produce. The bulls have been paid to buy every dip since November, and they aren’t ready just yet to relinquish control of the trend.
Nonetheless, we have one thing in place across each of the averages which simply cannot be overlooked.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week begins.
Hit the gear icon on the player to select HD and then go full-screen for best quality.
Posted on April 25th, 2013 at 2:14 pm
by Jeff White
During a recent conversation with a trader, I was asked how I handle the pressure of making a living trading when I have not just the standard monthly expenses but a family as well. As I relayed my answer and spoke honestly about what it was, it hit me that I needed to share this with you, because for whatever reason I just don’t think I’ve done so before.
But first, I’ll introduce another element to this concept to add validity to my point: a long-time trading friend.
Months ago, I had traveled to a different part of the country to speak at a trading event. In planning for that travel, I made plans with this friend who lived near the city I was flying into. He invited me to come stay with him for a few days to discuss trading and life, to play golf, and just enjoy some down time. It was a wonderful time and he and his wife were phenomenal hosts. I was so glad I went.
This is a trader who has been full-time even longer than me, and he’s been highly successful. His annual income would impress many, but he doesn’t live an extravagant lifestyle compared to his income. His home is well-furnished and certainly very nice, but not ostentatious. He drives nice cars, but they’re affordable – and paid for. And he likes discounts (he even had a coupon we used for a discount on a round of golf). He could be living much bigger. He could be driving a 6-figure car. He could live in a house several times larger than he does, or even maintain multiple nice homes in different parts of the country, but instead, he and his wife choose to live well within their means.
Imagine that! Imagine what that one thing could allow you to do and the freedoms that single mindset could bring you.
As simple as it is, this notion of spending far less than you make can be absolutely magical. It’s not a ground-moving principle; I certainly am not the first to discuss it. But living it can relieve you of tremendous pressure as a trader. This is a wonderful concept for anyone to adopt, and in doing so, much frustration can be avoided. But for the trader who desperately wants fewer emotional ups & downs and less pressure, it’s absolutely necessary.
So, back to the conversation… I told the trader I was talking with that my wife and I are both frugal people. We’ve both been savers our whole lives. The fact that we see eye to eye on expenditures makes this far easier. (If you’re single, keep this in mind when that dating relationship gets more serious!) And if you’re already married, have an honest discussion with your spouse to find some ways you can cut back on your monthly expenses – thereby making it that much less difficult to extract what you need each month from the market. But it’s important to understand that we aren’t in the habit of living the jet-setter lifestyle based on some good trading.
The fact is that going up in lifestyle is far easier to do than to go down a step or two. Stay where you are as long as possible, and think very carefully before expanding your lifestyle to fit your income!
Traders often have a great year and are quick to live up to it by purchasing a new ride or taking a big vacation or buying whatever they want just because money is suddenly more available. But spending what you make, paying the tax bill, and then getting off to a poor start the following year brings a harsh reality with it. All of a sudden, the expectation has been set for more and more stuff, but the market will at some point put you on your heels. That’s pressure, and it can be avoided.
So take it not just from me as a full-time trader since 2000, but also from my friend who has been at it since 1999: living within your means is the simplest way to reduce the pressures on your trading. Doing so lets you pick and choose your spots with greater ease, grow your account faster, and stress less when the rough patches come.
Trading is tough enough already without adding more pressure to the equation. Your ability to remain level-headed and calm during times of elation or desperation will help you make better decisions, thereby keeping you in this game for the long haul. Stepping away from the market periodically for some down time is refreshing and it should be done, but living within your means on an ongoing basis can bring you stress reduction that lasts.
Posted on April 21st, 2013 at 3:58 pm
by Jeff White
Last week a slew of items hit the market, from gold panic to terror bombings to ricin-laced letters to Washington D.C. Needless to say, the market didn’t like it. Yet we’ve been waiting for a decent pullback after seeing persistent strength, and now we’ve gotten one. What’s next?
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week begins.
Hit the gear icon on the player to select HD and then go full-screen for best quality.
Posted on April 13th, 2013 at 2:36 pm
by Jeff White
The highly-anticipated new high for the S&P 500 was finally made last week as the 1576 level from 2007 was cleared with ease on a powerful Wednesday rally. The DJIA achieved the same feat of an all-time high, while the NAZ created new multi-year highs of its own. The more speculative RUT, however, once again lagged to send mixed messages to market participants. The big question now is whether the breakout can stick.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week begins.
Hit the gear icon on the player to select HD and then go full-screen for best quality.
Posted on April 9th, 2013 at 12:36 pm
by Jeff White
On Sunday evening, I was reminded of a dream I used to feed.
There was a kid, probably about 14, walking down the fairway of the golf course I live on. The sun was low in the sky, and the shadows were growing longer by the minute. Green grass was just starting to poke through the ground, as the first signs of color are starting to emerge from the trees. He was alone with the place to himself, and was focused on each shot. It was right where he wanted to be, probably having spent most of the day practicing while the course was full of players. He was carrying his school team bag and I suspect he walked with a dream propelling him with purpose toward the next shot.
I used to have the very same dream, so it’s not difficult to recognize in someone else even from a distance. It took me to some really neat places. I met some wonderful people and enjoyed every experience. Along the way, the highs of achievement and the lows of disappointment both drove me. It works that way, because when you have a dream, each end of the spectrum has a way of pushing you to keep working hard.
And so in the light of trading, I ask you…do you have dreams that are compelling?
Not just “I wanna make $1M” but a clear, vivid dream getting you out of bed every day, keeping you up late when there’s work to be done? Where have you come from in your trading, and where do you want to be? Is every position you put on not just an opportunity to profit but a learning experience that has the potential to make you better?
I’ve had clear dreams and I’ve been without, and by far I would prefer to have something driving me, lighting a fire under me to stir me to action, to nudge me beyond my comfort zone, and to inspire me to learn and grow and get better. But I’ve definitely been in that place where I’ve lost sight of my dream due to hard times and struggle and frustration. If you’re there now, it’s important that you know that you can use it to strengthen you rather than let it extinguish your fire. If you’re down or discouraged, stop and think about how you can reignite that passion, and what’ll happen if you don’t. And ask yourself…what’s the worst that can happen if you take that next step of commitment and truly pursue that dream with every single resource you have?
Let me be clear though: life shouldn’t be about reaching a financial milestone. Read that one more time. Because once you get there, you’ll almost immediately set another one. Its an endless pursuit, and when it’s all said and done, you can’t take it with you anyway. A coaching client of mine was recently relaying to me why he wants trading success, and it’s for a much higher purpose than buying a hot car or taking big vacations. He’ll get there, because he wants to leave a legacy that’s more than money.
A legacy isn’t a fortune, so I think it’s critical that we know what it is we want to leave behind when we leave this world. Money might open some doors, but it’s too hollow to be the only thing that you’re trading for. Truly tough times come for every trader, and dollars won’t be the driving force that pushes you through the pain.
The real sweet spot comes when you find satisfaction from not just the results but the process – from the work. Its about having that understanding that you’re blessed to even have the opportunity to pursue a dream – as many are not.
What’s your motivation for doing this? What’s your why? Do you trade for the result, or for the satisfaction of progression? Is there something you recognize as an opportunity to impact the world around you with those trading profits? Whatever it is that you trade for, you’d better know it.
So as you face the day, keep your dream fresh. Feed it and nurture it. Chase it. Remind yourself of it often. Because at the end of the day, you’ll want that satisfaction of knowing you gave your best effort today and made some headway toward it. And if you’re lucky, you’ll have another chance to improve tomorrow.
During a recent conversation with a trader, I was asked how I handle the pressure of making a living trading when I have not just the standard monthly expenses but a family as well. As I relayed my answer and spoke honestly about what it was, it hit me that I needed to share this with you, because for whatever reason I just don’t think I’ve done so before.
On Sunday evening, I was reminded of a dream I used to feed.
