Wednesday, December 16, 2009

Sector Focus on Airlines

There are bullish patterns appearing across the airline sector. Many of the charts are currently forming bullish consolidation patterns under resistance and I am looking to trade these on a breakout. Below are setups that I am watching.

Thursday, December 10, 2009

Time for Oven Mitts

When trading is tough we (I) like to say put on the oven mitts. One can not punch too many keys with oven mitts on. In other words, sometimes the best trade is the trade not done at all.

The market lately sure has the feel of holiday lull. I am mentally prepared to do less size, less decisions, and less risk. When the market pays me to increase these variables I will.

Check out our last two plays of the day from the Trading RM twitter feed:

1) On Wednesday December 9th pre open we said:

"Trade off open: Short $MW only on a bounce and hold under the 19 level. Shorts have been tough lately. entry and exits are key"

Check out the MW chart and we see that it could not hold below $19 (light blue line) and thus our trade off the open was a no trade:

2) Today, Thursday December 10th our we sent out via twitter this play of the day:

"Play off the open: Wait. we are seeing nothing. very quiet $$"

Again, sometimes the best trade is no trade at all.

Recall our post on maximizing "1 star days." If I can eliminate just one $500 loser every day I save $125,000 a year. Recognizing early that it is a 1 star day can help us. Today did not feel like a day to push our chips in.

Friday, December 4, 2009

Great job today by all our traders, followers on twitter, and users of Trading RM Real Time who got into gold names, specifically ABX. Check out our tweet pre open today:

"TradingRM trade off the open. short $ABX on a bounce back and hold under the 45.45 level $$"

Below is a 2 minute chart of ABX. The thick blue line shows our entry level from this morning's tweet.

Below is a video screen shot of the opening few minutes. The shot is a bit blurry, excuse us as we work on video quality. Please click on video and make it full screen for optimal viewing.

  • The top right shows out Trading Rm Real Time Chat room. This is available to outside traders. Notice the buys of ABX puts and the timing. (It is noted as +ABX P MM, trader MM bought ABX puts).
  • The bottom right shows and options entry window with time& sales to the right. (we pull up the ABX 45 puts to start.) Our first entry was $1.60. When we pull them up for the video they are trading $1.70. As of 12:45pm the high of the ABX 45 puts was $3.40.
  • The top left and middle of the shot shows various time frame charts of ABX.
  • The bottom left of the shot is an "option chain"

    Followers of our twitter feed and users of our Trading RM Real Time were able to see our ABX idea before the open and see our ABX trades real time from the open of trading on.

Thursday, December 3, 2009

It is important to be familiar with patterns in order to time your entries and to understand a stock's price action. In this example from Wednesday's trading session we see CTRP form a bull flag. Here we see a green candle followed by three inside red bars. The inside bars form the flag and a green candle following the inside bars that closes above the inside bars confirmed that there would be a continuation move higher.

In this example of the SPY chart of today and yesterday's session we some more patterns that can help us understand the price action. In the first box we see a failed bull flag. A lot of times the biggest moves come from failed patterns. Within that sell off a bear flag pattern formed and we got our confirmation candle close below the three up inside bars which led to taking the markets to the lows of day. In today's action we see a larger bear pattern form over several candles. Here we see the initial up move off the open followed by strong selling. For the remainder of the session we traded in a sideways and slightly up formation that could not retrace the move down. This formed a slightly rising "L" pattern which is very bearish. When the selling began, a candle closing below the morning lows confirmed the pattern which caused a sell off into the close.

In this example of the SPY daily chart we see the well publicized head and shoulders pattern form and fail which led to a major move in the opposite direction. The pattern was in play when we got a confirmation close below the neckline, but it did not play out. The pattern became negated once the stock recaptured and closed above the neckline. The pattern failed and a big move followed as soon as the stock took out its right shoulder.

We encourage all our readers and users of Trading RM Real Time to follow us on twitter: (@ tradingrm). Throughout the day we post trade ideas, news stories, and other items important to traders. Every morning we post trades ideas for the day. Check out this mornings post at about 8:15am cst:

"TradingRM trade off the open is focusing on retail weakness: Short $ARO on a bounce and hold under the 30.40 level"

Click on the posted chart for a look as ARO kissed $30.40 and dropped. In the above chart ARO is in green and SPY in red.

Wednesday, December 2, 2009

As traders it is important for each of us to have a well thought out game plan and execute that specific game plan. Executing your game plan means doing the work necessary to prepare for the day ahead and when you see your setup going after it.

This morning there was some two way action in the market. Although it wasn't spectacular, there were things to be done, and trades to be had. However, I found myself not finding "my setup" until an hour into the trading session: that setup involved CMI

CMI had many of the characteristics that I personally look for when looking to get involved in a "weak/strong" name.

  • Divergence with the market
  • Higher volume on down moves
  • Smaller volume on consolidations and retracements
  • Sector support (JOYG , BUCY, DE & CAT all down on the day)
  • Aggressive option buyers: having to "pay up to get filled"
If you look at the chart below you will see that CMI tipped its hand today, and when the market began its pullback (albeit a minimal 5 handle pullback) CMI extended its move down. Although it wasn't an "easy" trade, at one point pulling back 50 cents, the trend for CMI was consistent as it headed lower and eventually made new lows on the day.

Missing marginal trades, that are NOT your setup is part of the game- we can't be in every trade. However, when you see your setup you have to take advantage.