Grinding it out

charts, IBD

We started trading in the late 90s as active CANSLIM type traders, trading the new IBD 50 adds and momentum stocks on the list.   Our guess is that most people who were actively trading at the time will feel a nostalgic shared moment  and nod their heads reading that piece of shared memory.

Trading was a national obsession back then and you couldn’t leave a cab or a Dr.’s office without talking stocks, it really was all we could think about all day long.   Fast forward 20 years and it’s still a passion, but a more muted one as the energy for the career also has to fit along with family and children and all those other things that come into play once you leave your 20s.  Our time-frames now are longer and we don’t have the same manic obsession to trade at all times and often are found content sitting in swings.   Coming full circle, but from the other side, we’re also quite happy to announce HCPG partnership with IBD and Marketsmith.   IBD we have known well for many years, but MarketSmith is a newer product for us and we’re having a lot of fun exploring it and making it work for us.  We’ll have future posts to show how we are integrating it into our research.

Market seems to be on hold waiting for a catalyst —  typical range bound tape.   SPY 255-270 has held now for over 20 sessions.

Weekly shows it best:  stuck between 50sma  on bottom and 20sma on top.    Dips are being bought and rallies are being sold — typical of a range bound market.  We bought some stocks on Thursday, sold most of our positions on Friday and are left with a few half positions coming into today.    Be nimble in this tape or any profits you have will likely evaporate.  Not fun, but definitely part of the business.

Two projects we have for today:  one take a look at selective stocks that have earnings this week.   Our absolute favorite trades are post earnings on stocks with strong patterns– especially in a tape like this with very little momentum.   This is your typical weak sauce tape where nothing can get going and indices often bob up and down every day.

So it was time to fire up the espresso machine, bring out the iPad, sit on the deck and go fishing for new ideas.  We were quite surprised at how much we liked the MarketSmith mobile app — looks fantastic on the iPad Pro.    Here is a page sample of stocks in  the “Near Pivot” list — you can either do Full Chart, or Multi Chart and look at several at the same time.  We like to go through this page fast, with a notebook writing down notes on stocks that potentially will interest us for further research.    After looking at literally hundreds of charts a day for 20 years you learn to see patterns fast, all we need is an initial 3 seconds.  If it passes that test, we jot down the name.

If you want to try it out (mobile and PC) click here  MarketSmith trial   

Couple points in general about this current market:

  1. We think it’s quite possible it’s going to be similar to 2015 — large consolidation zone, versus a new bear market.
  2. Shorting in the hole has not worked well — what has worked is buying dip (not sure if it would work again, we would not be buyers on another trip to 255 SPY. We would wait for confirmation/follow through next time meaning we have a lot less confidence in that support) and more than anything else, selling rallies.    As we have regularly told our readers in the past few months, STAY NIMBLE.    Sell that half partial right away into the next day gap up/rally.  We are not seeing follow through in this market.   Once that changes, adapt, but until then…  quick trades.
  3. There’s no momentum in this market up or down, typical of range bound tape.   One potential strategy that we have been doing is to go through the earnings schedule of the week and look for stocks that have solid patterns, and then look to trade them the next day.  Easier said that done, some gap down, some gap up too much, some gap up and fail, but there are some good risk/reward potential trades in this strategy.

We’re trying to tap into reserves of creative energy and bring back blogging (we used to blog regularly 2006-2012 — basically once we started Twitter/StockTwits we ran out of steam for blogging).   Key to writing now is to just start.  Just open up a draft, put down some words, and go from there.   What we’ve realized is that writing has often little to do  with the romantic scenario of being inspired — it’s like anything else in the long run, you just have to grind it out.

#promoted #IBD Partner

 

 

 

Summary of the most important pivots we are looking at on all time-frames

charts, strategy

If you follow us on StockTwits or Twitter you’ve seen all of these ideas but we wanted to put it all together in one succinct post:

Shortest time-frame we follow for trend is the 60min and when there is a smooth ascending/descending 9/20EMA on that time-frame we pay attention.

SMH 5 sessions under 60min/20ema — looking to see if this can break tomorrow — a close over 97.5-98 would do the trick. 

TNX exact opposite — 6 sessions trending perfectly up — would like this to fail.

 

Intermediate time-frame — we’ve been talking about $SPY 270 for months– first as support, now as resistance.  Chart explains it all — we have horizontal resistance, weekly 20sma, and trend-line.   If bulls really want to get going, they need to get price over this on closing basis.   Note also the hold on the 256 weekly (plug here for our newsletter that called for that bottom — was a strategy to look for overshoot of 200sma daily into that weekly SMA).

 

We’ve mentioned this week how we’re looking for a reversal on SMH 50sma weekly — held today but needs to get some distance in next two sessions.  First time in 2 yrs it’s been tested so let’s see if bulls come out to defend it.

And finally long term time frame:   we have been talking about the 2015/2018 market now for weeks.  We feel like we are not in a bear market, and not going to make new highs but carving out a range just like in 2015.  We’ve probably seen the top of the range for now, but not sure we’ve seen the bottom yet.

So what to do?   Trade the range by shortening time-frame. In a bull market you can often get away with chasing without having your fingers chopped off — in range bound markets you will have no digits left within weeks.   Don’t be that guy, don’t be a silly carrot.  As long as we’re range bound, quick trades, very defined risk, and whatever you do, don’t chase.

 

Chop, chop, what to do?

charts, IBD, strategy

HCPG #IBD Partner

With the market smack in the SPY 255 – 270 range we’re not finding that many candidates for swing trades that we think will follow through as most of them (we tested a few last week) are just fluctuating up and down with the choppy tape. One strategy we like going forward for potential trades is to look for

a) stocks that fit our momentum criteria in terms of fundamentals and technical action

b) out of stocks that fit first criteria, those that have decent technical patterns

c) put on watch-list post earnings for potential trades.

Reality is that some will gap down, some will gap up too much, so actually in the end only a small portion will trigger.   But doing the homework for a bunch to find the one is  a reality of the grind part of this job.

So here it is step by step:

1. First we set up a screen on MarketSmith that we like for momentum (we called it momo) and it spit out over 67 candidates:

This screen combines momentum fundamentals (strong growth) and technicals:

2.  Out of the 67 stocks we look for recognizable patterns that we like (and if you want help with that you can choose to turn on Pattern Recognition.

3.  Out of the candidates that make that list we look at which ones have earnings on deck.

Here are three for your watchlists:

MA with earnings out May 02 — love the flat base here on the stock near 180.

WYNN with earnings out tomorrow with a nice flat base near 194:

CAT also with earnings out tomorrow and we like it on a breakout of 158:

When in trending markets it’s easy to find swing candidates.  When in range markets like this stocks often need earnings boosts to leave range.   This is an easy strategy to copy — either set up screens for your own criteria as we did above, or go through pre-determined lists such as the ones in IBD 50  which you know will already have solid fundamentals and price action.

Hope that helps and that you’re enjoying the blog.   If you want to try out MarketSmith for a trial click here.

 

$MA $WYNN $CAT #IBDPARTNER

state of the market

charts

When this correction started we wrote that we thought that instead of a bear market we could simply be in a market like in 2015 and that market was trying to carve out a new range.

Let’s take a look at monthly chart SPY — so far similar action.   Traders, including us, are guilty of short-term views– we want things to happen now, bottoms to be hit, ranges to break.    But quite possible we’ll be in this one for a while.

That being said, that initial fear of the correction now has waned and individual swings should work better than they have in the last few months.    Tons of earnings this week and a lot of them on stocks we are watching for breakouts.    Our favorite moves of all come from break-outs combined with earnings (and the other side, our least favorite, is breakout with analyst upgrade).    See you on StockTwits/Twitter.

Blog again?

general

We’re firing up the old blog again — let’s see how much juice we have to post on StockTwits, Twitter and on this blog.

We started our first blog in 2006 alongside our newsletter.  We blogged quite a bit until we started on Twitter and StockTwits and after that our blogging efforts started waning.  So this is our attempt #2 as the recent volatility in the market this year has amped our creativity.

If you want to read the best of our posts from 2006-2017 please go here.