Jack The Trader

The Trend Is Up Until It Isn't...

2010-02-27T14:24:00.000-08:00

I have been reviewing the major indexes this weekend to see where we stand with the long and medium term trends. As the charts below illustrate both time frames are still in an up trend. That being said the medium term charts are starting to look a little weak after the recent pull back. It is my opinion that we are in a side ways market which will make short term trading very difficult until the trend is resolved in one direction or another.

I also checked the current year to date market performance by index and market capitalization. You will see in the charts below that Mid Caps are out performing Large and Small Caps. Also, the S&P500 is doing slightly better than the Dow and NASDAQ.

Market Capitalization Year To Date (Large, Mid and Small)

Index Performance Year To Date

S&P500 Monthly Trend Is Up (Monthly Price Above Blue Line)

S&P 500 Medium Term Trend Is Up (Blue Line Above Green Line)

Dow Jones Monthly Trend Is Up (Monthly Price Above Blue Line)

Dow Jones Medium Term Trend Is Up (Blue Line Above Green Line)

NASDAQ Monthly Trend Is Up (Monthly Price Above Blue Line)

DJIA Medium Term Trend Is Up (Blue Line Above Green Line)

Waiting For An Entry

2010-02-23T19:14:00.000-08:00

I am watching a few inverse ETF's for a possible entry tomorrow. The first is QID which goes up when the NASDAQ goes down. The entry is on a close tomorrow above $20.41. The second is SDS which goes up when the S&P 500 goes down. The entry is on a close tomorrow above $36.22. Charts are provided below. I am still short AMZN and have a stop on a close tomorrow above $121.67. Notice on the chart below that AMZN has been in a sideways channel and should break out one way or another.

This Should Be Interesting

2010-02-18T19:19:00.000-08:00

The big news today came after market hours with the Fed raising the rates on banks that need emergency loans. Is this a signal that interest rates are going higher sooner rather than later? We shall see. In the mean time I am still short AMZN and have a stop tomorrow if the market closes above $121.67 (see chart below). Other ETF's I will be watching tomorrow are:

QID - Buy on a close above $20.45
SDS - Buy on a close above $36.56

Back To The Future

2010-02-17T18:47:00.000-08:00

In recent posts I talked about DTG being in a weekly up trend while experiencing a pull back on the daily chart. The long trade triggered at a close above $25.69 and was entered at $25.86. Take a look at the chart below for how this trade turned out. Note the entry above the blue line and the current trailing stop at the red line. Fantastic! I am still short AMZN and the stop for tomorrow is $121.67.

One Out and One Still On

2010-02-16T17:04:00.000-08:00

I got stopped out of my position today in SDS which resulted in a loss on the trade of $2.32. Am I upset? No, I followed my trading plan and got out of the trade with a small loss. I didn't let the trade turn in to a big loser by not following my plan and hoping it would turn around. I am still short AMZN and have a small open trade profit. The fact that the stock moved down today when the broad market rallied speaks to the weakness in this stock. I am looking for a long entry tomorrow in the following ETF's as the weekly trends are still up. They are:

SDS - Buy on a close above $37.62
QID- Buy on a close above $21.08

AMZN - Stop for tomorrow is a close above $123.28

Weekend Thoughts and Market Direction

2010-02-13T14:35:00.000-08:00

Every weekend I take a step back and review the mid and long term charts of the major indexes to gain an understanding of the overall market direction. In my opinion we are still in a bull market but with the current pull back are getting very close to a change in direction. This next week should tell us if this pull back was a correction in the bull market and prices head higher or if we have a change in trend and prices continue to head lower.

The charts below are my mid term and long term charts for the major indexes. If the blue line is above the green line on the mid term charts that tells me we are in a medium term up trend. If prices are closing above the blue line on the long term charts than we are in a long term up trend. When both of these charts agree on direction then buying stocks and ETF are a good idea.

As you can see in mid term charts the the blue and green lines are starting to turn down. On the long term charts the closing price is getting very close to falling underneath the blue line. This is what gives me cause for concern that we are approaching a change in direction. Again, this next week should reveal which way the markets are headed.

The last chart in this series is a 10 year chart of the S&P500. When the monthly closing price is above the blue line it is a good time to be invested in stocks and ETF's. Take a look at this chart and see how accurate this indicator is. How much better would your portfolio perform if you were invested only when the monthly closing price was above the blue line?

Dow Jones Industrial Average Mid Term Chart

Dow Jones Industrial Average Long Term Chart

NASDAQ Composite Mid Term Chart

NASDAQ Composite Long Term Chart

S&P 500 Mid Term Chart

S&P 500 Long Term Chart

S&P 500 10 Year Long Term Chart

Hangin' In There

2010-02-12T19:01:00.001-08:00

My current positions are still hanging in there as the closing price has not closed above or below my stop loss points. I am short AMZN with a closing stop for Tuesday above $123.57. I am long SDS with a closing stop for Tuesday below $36.55. I will be posting on the broad market trends over the weekend.

Same Old Song And Dance....

2010-02-09T18:55:00.000-08:00

Not much to report today as we got a short term rally in a oversold market. I continue to hang on to my positions according to my system. The stops are the same for Wednesday:

AMZN - $123.57
SDS - $36.55

No Follow Through...

2010-02-08T14:05:00.000-08:00

After the late day rally on Friday the market struggled to continue higher and then reversed to close significantly lower Monday. I did not enter any new trades today but have updated stops for my two open positions. They are:

SDS - Exit Tuesday if the close is below $36.55
AMZN - Exit Tuesday if the close is below $123.57

Weekend Market Notes

2010-02-05T19:14:00.000-08:00

During the final hours of market action today we got a huge short covering rally as many traders did not want to be short going in to the weekend. It was widely reported that the G-7 would meet this weekend to address the problems in Greece which in the short term could cause a rally. That being said I still follow my system and trade base on the signals. To that end my open position stops (charts below) for the close on Monday are:

AMZN: $123.57

SDS: $36.16

Nobody Told Me There Would Be Days Like These...

2010-02-04T19:03:00.000-08:00

The market experienced a huge sell off today as traders and investors became more concerned about the strength of the global economic recovery. While I was stopped out of all my positions except AMZN the good news is I followed my system and got out with only a small loss in each position. My system delivers some big winners while keeping the losing trades to a minimum. It is always a good idea to have some short positions on (like AMZN) even in a bull market to take advantage of days like today. I did enter SDS today as my system triggered a buy on the close. I entered at $37.91 and have a stop tomorrow if SDS closes below $36.16. The weekly chart of SDS is in an up trend and the daily chart had a slight pull back allowing for a long position in the direction of the weekly trend. There are no new trades for tomorrow.

Closing Out A Winner

2010-02-03T18:53:00.001-08:00

Trailing stops in my opinion are one of the best ways to let your winners run while protecting the profit that you have. We have all heard the old adage "never let a winner turn into a loser". Trailing stops do just that. Today my system gave me an exit in GS as the market closed above my trailing stop. The position was closed for a profit of $14.25 per share!

I also entered positions today in RSX, TBT and FXY per my entry levels from yesterdays post. The following is a list of my open positions and the stops for tomorrow.

AMZN - Short from $118.87. Stop on a close above $126.41
RSX - Long at $32.62. Stop on a close below $31.42
TBT - Long at $48.68. Stop on a close below $47.35
FXY - Short at $109.04. Stop on a close above $110.36

Entries, Stops And Other Matters

2010-02-02T19:02:00.000-08:00

The strong market action to the upside today provided an entry in RSX. The stop for this trade is listed below. I also continue to be short GS and AMZN with new stops listed below for tomorrow. I will be watching SDS tomorrow (chart below) as the rally today produced a nice pull back giving me a possible entry. SDS seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the S&P 500 index. This means that when the S&P 500 declines this stock goes up. This is a great tool to use as it does not involve a short sale.

A fan of Jack The Trader has asked for my take on GE. The monthly, weekly and daily chart are below. All three time frames are up according to my system. I do see overhead resistance at around $18 and then again just under $20. It will take considerable momentum for GE to break both of these levels. I would continue to hold GE this week until Friday. If near the close on Friday the stock is trading below $15.59 then I would exit the position as this is where the weekly chart will turn down.

Here are my stops and possible entries for tomorrow:

GS - Short from $171.48. Exit on a close above $157.16
AMZN - Short from $118.87. Exit on a close above $126.41
RSX - Long from $32.62. Exit on a close below $31.42
SDS - Go long on a close above $37.22
TBT - Go long on a close above $48.41
FXY - Go short on a close below $109.38
DTG - Go long on a close above $25.69

The Waiting Is The Hardest Part

2010-02-01T19:16:00.000-08:00

As the market continues to look for a direction I am being disciplined and entering trades at the prices my system dictates. I did get short AMZN today (chart below) at $118.87 and have a stop loss (blue line) for Tuesday if the stock closes above $127.39. This is a rather wide stop but will give the stock room to move about without getting taken out of the trade.

I am also watching SDS and QID this week for a pull back and a chance to enter these ETF's as the weekly charts are long.

For Tuesday I have the following stocks and ETF's I will be watching for an entry on the close:

TBT - Long above $48.41
RSX - Long above $32.43
DTG - Long above $25.69
FXY - Short below $109.38

Not For The Faint Of Heart....

2010-01-30T19:03:00.000-08:00

What a week! Volatility has returned to the markets which can often be a sign of the end to the existing trend. While difficult to trade it can be a great opportunity to make good profits. The key is to stick with your system and use a trailing stop to lock in your profits. The open position in Goldman Sachs continues to be profitable. As of Friday's close I have an open trade profit of $22.76 per share. The trailing stop for Monday is a close above $157.16.

For next week I will be watching the follow stocks and ETF's (charts below). Each symbol is listed below with it's corresponding entry for Monday only.

GS - Short at $171.48. Trailing stop at $157.16
TBT - Long on a close above $48.41
RSX - Long on a close above $32.43
FXY - Short on a close below $109.38
DTG - Long on a close above $25.69
AMZN - Short on a close below $119.73

A Kindle For Everyone?

2010-01-28T19:01:00.000-08:00

Today I was watching the price action on amazon.com with interest as the company announced it's earnings. From a technical perspective the weekly chart (chart 1) is in a down trend starting on the highlighted bar. The bounce on the daily chart gives me a potential entry on the short side if the stock closes below $119.73 on Friday's close (Chart 2).

I did not get a signal in RSX or TBT today and will not be looking for an entry tomorrow. DTG however was very interesting today. The signal was to go long on a close above $25.69. I monitored intra day prices and bought just before the close at $25.72. However, just after my trade was filled the stock fell back slightly and closed at $25.68 therefore not triggering the official entry! This can happen when the entry price is very close to the market action prior to the close. I will watch DTG closely tomorrow and sell quickly if there is a significant sell off during market hours. Such is life!

Chart 1

Chart 2

One Way Or Another.....

2010-01-27T18:52:00.001-08:00

This is the type of market that drives traders crazy. For the past few weeks the broad indexes have been sideways. As stated before the long and medium term direction is still up. A new stock that has caught my attention is DTG. Chart 1 below is the weekly chart. The trend is still up as long as this weeks close stays above the blue line. You will also notice that DTG has retraced a little below the 61.8% Fibonacci retracement level. Since the weekly chart is up I will be looking for a buy signal on the daily chart. Chart 2 below is the daily chart. DTG has retraced exactly to the 50% Fibonacci retracement level. I will be looking to buy DTG if the close tomorrow is above $25.69.

TBT is still a buy watch on a close tomorrow above $48.79 and RSX on a close above $25.69.

Chart 1

Chart 2

Market Action On Tuesday

2010-01-26T18:48:00.000-08:00

We did not get an entry signal today on either TBT or RSX. The set ups are still valid and I will be looking for enty points on the close Wednesday if price is above $48.79 on TBT and $32.70 on RSX. Meanwhile my positon in Goldman Sachs continues to grow in open trade profit (chart below). As of the close today the open trade profit is $20.60 per share. I will exit the trade on the close tomorrow if price closes above $159.19 which will lock in a nice profit. See prior post on GS for more details.

Two For Tuesday

2010-01-25T18:45:00.001-08:00

Tomorrow I will be watching two ETF's for a possible entry on the close. TBT is the ProShares UltraShort 20+ Year Treasury that seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index. The weekly chart (chart 1) turned up on the highlighted bar. The market has pulled back on the daily chart (chart 2) but is still up on the weekly. I will buy TBT if the market closes on Tuesday above $48.79.

RSX is the Market Vectors Russia ETF that seeks to replicate as closely as possible the price and yield performance of the DAXglobal Russia+ Index. The weekly chart (chart 3) turned up on the highlighted bar. The market has pulled back on the daily chart (chart 4) but is still up on the weekly. I will buy RSX if the market closes on Tuesday above $32.86.

If filled on either or both of these positions I will publish the initial and subsequent trailing stops.

Chart 1

Chart 2

Chart 3

Chart 4

The Anatomy Of A Killer Short Trade

2010-01-23T16:55:00.000-08:00

During an up trend I always look for a few short trades to compliment my long positions. One of my current open short trades is in Goldman Sachs. Why did I enter this trade when the current market is rising? Goldman Sachs is one of the key stocks I watch as it can tend to be a leading indicator for the general market. The first chart below is a weekly chart of Goldman Sachs. After the close of the bar highlighted on the chart my system identified a change in direction from bullish to bearish. I then began to monitor the daily chart looking for an entry signal in the direction of the weekly trend. That signal came at the close of the daily bar highlighted on the second chart below. This trade currently has an open profit of $17.36 per share in only eight trading days. Using my trailing stop method I will lock in my profit if the stock closes above $162.69 on the daily chart on Monday.

Weekly Chart of GS

Daily Chart of GS

Current Market Trend

2010-01-22T19:11:00.000-08:00

The last couple of days have certainly shown some blood letting in all the major indexes. While these types of days can motivate traders to jump in to short positions I will wait until my trend indicators confirm a new down trend. As you can see from the charts below both the long term and medium term trends are still up for the S&P 500. With the exception of one short position in GS I am still looking for long opportunities.

Long Term Trend: Market is above the blue line.

Medium Term Trend: Blue line is above the green line.