The technical indicators are definitely signaling a short term sell signal for any long positions, which is the reason why many stocks listed below have notes to sell half of long position.  There was not much change in the market on Friday but take a close look at the Telechart Daily chart of VIX—X, the Chicago Board of Options Volatility Index as well as the T2108.  The S&P Oscillator, put to call ratio and the Smart Money-Dumb Money index are also flashing danger signals to our long positions.

Even though various indicators may be signaling to reduce positions, they can stay at an extreme level for some time before eventually being “equalized” by the market’s tendency to balance extremes but it is wise to pay attention to these indicators throughout your investing and trading career.

Stocks in this situation of coming out of a deep low in early March can peak by making a slow rounded top as opposed to a sharp drop and that’s what many of these stocks appear to be doing. 

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The stock market looks like it is on a runaway bull run with more and more money being put to work by mutual fund managers.  It looks like we are mostly past the short covering and actual investors are starting to buy.  Many different sectors are moving up and stocks that were harshly punished are being bid up.  Even goofy stocks like specialty retailers have been moving up, which were stocks that were treated like leprosy a couple of weeks ago.  So we could see further uptrend in the indices and sectors that have been severely punished.  Anticipate that we have some pullback, particularly in the banks.

The focus is on the good news events like positive earnings, improved economic data, and investors are ignoring the bad news at the moment.  It is becoming that any bad news events are having less and less effect on stock prices.

 We could even start to get into a panic buy situation on the short term yet the banking sector is still mostly down today, even through the close.  There are quite a few sectors that we didn’t notice were moving up so much because we were focused so much on the short side of the banks and life insurance companies looking to profit on our 4^th cycle of trades with these sectors.  My apologies, it’ll never happen again.

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March 16, 2009  Monday Evening

The Dow30 had a nice run caused by the Bernanke comments on 60 minutes last night, until the last two hours of the session.  It was probably a staged talking head ordered by the Commander in Chief himself and the very statement of “the end in sight” is like guessing an end game of a chess game after the first few moves are made.  For decades, the Federal Reserve was insulated from influence by other politicians but we saw Greenspan be President Clinton’s puppet a few times in the late 90’s but Bush seemed to leave them alone for most of his 2 terms.

The trading strategy that we have been taking the last 4 weeks on the banking stocks may seem aggressive to many of you but this is how you rack up serious profits.  Anytime you follow the chart of a single stock or sector as we have in the banking stocks JPM, USB, BAC, WFC, KEY, STI, and even GE with three round-trip trades starting with long, short, long and now short again is extremely profitable. 

Remember we came from intraday trades (aka scalping) most of September, October, November and part of December to swing trades with a few failed attempts at intermediate trades (that last for more than a week).  So we are using the techniques that work for the current market conditions.  If you are only a long term buy and hold investor, you may be waiting a long, long time before market conditions are conducive to making that a profitable strategy.  We go with the strategies that work and even though this may be a fast pace for many of you, this is what is working now.

You could always sit out this current cycle of short positions if you are tired or exhausted mentally.  OR a good fix for that is to have a very small position than normal so it won’t stress your nerves but keeps you alert and your head in the game.  A rest is fine by having no positions at all but keep monitoring what happens so you don’t totally get stale and indifferent to what is happening in the market.  Even someone as good as Tiger Woods will take some weeks or months to get back into tournament play after a 9 month layoff from golf so it is wise to be somewhat updated as to what the market is doing even though you may not have any positions.

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December 9, 2008 The most important part of your brokerage firm’s online trading platform is the charting. What information does it display and how easy is it to setup and change for different looks is the question that comes to my mind. For example, I like to use a lighter background with a darker price chart, green for fast moving average, red for slower moving average, orange for On Balance Volume (OBV), red and green for the MACD signal lines, red and green up and down volume bars, candlestick style price chart, yellow for %K and medium blue for %D, and possibly an orange histogram with the MACD signal lines overlayed on top of it. To get the full set-up instructions step by step, click here to receive the stock chart set-up instructions for all 5 brokerage firms from Schwab, Fidelity, Etrade, Ameritrade and Scottrade. Some people like a black background and that works too. It comes down to what you get used to and what suits your tastes. It is the reading and interpreting of the information is what is of prime importance. As I mentioned in the last blog post, Schwab has a tick chart available, the only large online brokerage firm that offers tick information at the moment. But it is very likely other firms will add that feature in. This can be set for 1 tick or all the way to 25 ticks. A 1 tick setting means that you want each and every order to show up on the chart, 1 tick for each order that goes through time and sales. See time and sales in glossary. To be continued . . . . . Time and Sales: The official record of all executed trades during a trading day. Each stock has time and sales and this is provided by most brokerage firms for no charge. You will see a window showing every order displayed with the time in hours, minutes, seconds and fractions of seconds. (hh:mm:ss.x), 12:31:06.3)

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Thoughts from The Daily Stock PIcks Newsletter that I write.  I still think we are going to have a lot of opportunities both long and short with continued volatility.  Currently, this makes intraday and swing trades the highest probability for the most profit in stock trades.  If your desire is to not trade frequently and you are looking for stocks to buy and hold for several months, then it would be better to wait until we see a more obvious point at which stocks may rebound substantially for an extended period of time.  You may be waiting for some time though.  In the meantime, the short term strategies we have been using from intraday to swings and lately as long as 5 days, have been working for us.  I like the idea in this market of taking small bites as opposed to going for a home run.

Best odds only, be decisive, aggressive, mentally flexible, stay in position size, don’t overtrade and wait a little longer to buy and wait a little longer to sell.  You will find that will make you more money on your trades.

Mitch King, Founder

www.TradeStocksAmerica.com

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