XRT Closed

I closed down the XRT trade yesterday. The reason I closed it down was because it (along with the markets in general) aren't really moving anywhere - they are basically going sideways.

Since it's going sideways and not going in my intended direction, it seems to me like it's just kinda floundering around. I'd rather use that money in a better set up than a stock just floundering.

Check out the XRT chart to see what I mean - I got in on the green day and out on the red day.

I made $1 on the trade, but the trade commissions (what my broker charges me) cost me $3 - so I lost $2 - as in 200 pennies on this trade. I could've made it break exactly even or took in a tiny profit as compared to a tiny loss (by spending some time to watch it fluctuate and then get out), but I'm not overly concerned about a couple of dollars - literally.

I also got out because the markets seem to be floundering as well. Like I said, I'd rather take that money off the table and wait for a better entry. Here's a snapshot of the markets:

I'm still in IWM - I figure that this is my only trade and I have plenty of money left for new trades, and this has NOT given me any real reason to get out, so I'm staying in it.

From here, it's a wait and see - I'm a cherry picker, I wait for the best set ups and then I get in. By doing this I put the "odds" more in my favor - I'd rather have the best of the best, as compared to trading just to be trading. Besides, you make much much better profit being a cherry picker.

New Long Entry - XRT

Give me a "P". No, not for "Pat" Sajak, instead for "Profit" from this trade in about a week or so.

Yesterday the markets gave me an indication that we are going higher. The markets gapped up at the open and then most of them moved higher. So yesterday was a very bullish day. Today a pullback is expected, and that's exactly what is happening.

So, I looked for a good entry and found one in XRT. Check out this chart:

Today's entry is in green. If you first look at yesterday's candle you'll see that we had that nice pop, just like the markets - so this stock follows the market nicely.

You'll also notice a few things if you look close enough:

1. The MACD lines have been going steadily bullish

2. The stoch had a crossover

3. The 50 day moving average was broken to the upside yesterday and we're testing it today.

I like this entry because we are getting in at a low point, so there's more room to move before we hit our target, which is just before the next level of resistance around the $40.90 zone.

I got long Sept 36 Call for $2.83. Looking for this to be a week or two trade. We should get maybe another sideways day and then get a few good bullish days.

I'll solve the puzzle shortly Pat, and will take the prize, thanks.

Time to Play

Time to start playing this market.

I've been waiting for a confirmation from the markets to get in and I got it today. Here's what happened today in the markets:

First you'll notice that we're currently in an uptrend - i.e. higher highs and higher lows. The next thing you'll notice is that we're above the 50 day moving average for these markets. Lastly you'll notice that we had a nice little pullback and then a bounce off the 50 day moving average (or close to it) and the stochs are looking like they are going to cross up (i.e. bullish).

So, I did a ton of searching today but wasn't happy with anything. Either earnings is just around the corner, or stocks are hitting resistance with this big day up, or the volume on the option contracts aren't to my liking. So, I went with IWM - the bottom left market. I took a long call option on this because it's the laggard regarding the other markets. Notice the recent highs in each market and contrast them with where the price closed today - DIA is leading the market, SPY is just behind that, followed by the QQQQ, and finally our boy IWM (slacker).

So, I'm looking for the other markets to pull slacker-boy along. Here's his chart without all the markings:

I'm looking for price to get at least around 69ish. I'm thinking a higher high and a continuation of this uptrend. But, I'll let the markets tell me when to get out, that's just my idea for a target.

I went long September 63 Calls for $4.75. Not looking for a home run, just a nice base hit. I'll get out with a loss if we break below the 50 day moving average and below the most recent low. However, I don't plan on taking a loss, I plan on getting profit on this trade.

Game on, let that wheel spin Bob!!

Patience

Right now it's time to be patient - just like the dog above, because we don't need to find ourselves getting foolishly into a trade and then experiencing some nastiness. So, we gotta be patient right now. I'm looking for a bullish entry, but first I want to make sure that the markets all line up. Here's a screen shot of the SPY, IWM, DIA, and QQQQ - i.e. "the markets".

The key things I'm looking for is the markets to start gaining momentum to the upside. I'll be able to tell this via candles and the stochs. I'm not getting into exacts right now to explain my trading, it's just going to be a work in progress and you'll learn as we go.

I'm thinking we have another day or two down and then we go back up. However, being as close to the 50 day moving average as we currently are, we could be ready to pop back up on Monday.

Until we do get our entry signal - just be patient.

I DECLARE WAR!

I declare war on the markets.

Losses have occurred, frustration mounted, and a hiatus was taken. The plans have been re-drawn and the axe has been sharpened. Time to take the stored up wealth from the market for re-distribution.

Proverbs 21:5

"The plans of the diligent lead to profit, as surely as haste leads to poverty."

Proverbs 16:3

"Commit to the LORD whatever you do, and your plans will succeed."

Proverbs 13:22

"A good man leaves and inheritance for his children's children, but a sinner's wealth is stored up for the righteous."

Ecclesiastes 2:26

"To the man who pleases him, God gives wisdom, knowledge and happiness, but to the sinner he gives the task of gathering and storing up wealth to hand it over to the one who pleases God."

So, look for some trading coming soon. I'm now actively looking for new trades. I'm not going to go over my revised and inspired style of trading, you'll see it as we go. Right now the markets aren't in a position where I'll put on any new trades. However, when I do put on a new trade, it'll be posted.

I'm looking for great set ups and looking for great returns, some quick, some not-so-quick. But all profitable.

Get ready.

Soon Come, Soon Come

I've been paper trading and tweaking my trading rules and style. I've got most of everything de-bugged, however like all traders, I will be constantly "sharpening the axe" in order to get better and better. Which, should be relatively easy to do considering my performance from last year.

I'll be trading with the trend of the major markets focusing on long call and long put options. Supplementing those long options, I'll also be putting on credit spreads where ever I can.

The focus will be aligning myself with the markets with entries and exists while trying to maximize my ROI.

I predict to be back up and running within the next couple months. So, until then, just be cool.

Let's get down to basics

While I'm de-bugging my trading, I thought I'd give some basic info/insight to what's coming in regards to the new style of trading.

We have to basically get down to what the stock market really is. The stock market is simply an auction - an auction of buyers and sellers. There's nothing magical about the stock market, it's like any other market. Buyers and sellers see "value" in stocks and they buy and sell those stocks according to their value beliefs.

Think of any open market and you'll plainly see this. For example - Ebay. You might be hunting for a particular item on Ebay and let's say you found it - but you are only willing to spend a certain dollar amount for it (i.e. your "value" on it). If the auction goes higher than what you are willing to spend (i.e. it's "value" to you) then you won't buy the item. However, someone else may have a higher value in mind to them and they will purchase the item at a higher price.

Stocks are the same way. Different traders (buyers and sellers) have different values of what that stock is worth that they are trading. If the value gets too low then the buyers will come in and buy it - they figure "Hey, this stuff is on sale and I'm buying tons of it". (This is similar to what Warren Buffet does). If the value gets too high, then the sellers come in and sell it - they figure "Hey this stock is just too hot and I'm going to sell and make a profit before the bubble bursts on this thing."

From now on, try to look at every chart with this in mind. Think of the price action in terms of buyers and sellers. When you get price swings then you know that there's quite a bit of buyers or sellers thinking the same thing.

Let's look at a few charts. This first chart is an uptrend - uptrends are bullish because the buyers keep on buying the stock at higher and higher prices - why??? Because they think that at the price they buy the stock (no matter what price that may be) that the true "value" is still higher than what the bought the stock for. Therefore the stock's price just keeps going up.

Here's a downtrend - which is bearish because the sellers keep on selling the stock at lower and lower prices - why??? Because they think that at the price they are currently selling the stock (no matter what that price may be) that the true "value" is still lower than what they sold the stock for. They don't want to have any of that stock because maybe the bottom will fall out and they will miss their opportunity to get rid of the stock before it loses any more value (and thus their profits). Therefore, the price of the stock just keeps going down.

Here's a sideways trend. This is where the sellers and buyers are basically neutral. The buyers buy when the stock gets down to a certain price, and the sellers sell when the stock gets up to a certain price. Therefore, the price just goes up and down in roughly the same price range. Neither party is stronger than the other - unlike bullish trends where the buyers keep buying higher and higher, and bearish trends where sellers keep selling lower and lower.

So, keep this concept in your mind - the stock market is simply a place where people buy and sell stocks. There are buyers who buy when the price seems like a good deal, and there are sellers who sell when the price seems like it's just too high.

More to come...