StockPunk answers your questions!?!

Welcome to the second official StockPunk question and answer post! I went back and read the first official StockPunk question and answer post and I was surprised by how much I've changed since then. In a question about technical analysis I responded that TA wasn't "my bag".

Thanks to all of you who asked questions!! Questions about what I do force me to reevaluate and think through some of my decisions and makes me a better man--or something like that. OK, that enough, on with the show:

Why have you abandoned your Zweig stock screening strategy?

I had a few good years of trading using stock screens and they really fit in well with my lifestyle. I still think they are a great way to learn how to trade with minimum effort. They also provide a good way to invest without having to be too active in the market. I am employed full time and can't be close to a computer all the time so stock screens are perfect for me.

But as my passion for the stock market flourished, and I saw stock bloggers who were successfully trading for a living, I began to wonder if I would be able to do it myself. Even though it seemed like an obtainable dream I got a few titters and eye-rolling from family and friends. There’s quite a stigma out there that stock trading is dangerous and foolish.

I thought that I might be able to accomplish a trading lifestyle through stock screening. I felt I could consistently make 20 to 40% a year which would eventually cover all my expenses. When I got kicked in the teeth after the downturn in August 2007, I started wondering if there was a better way to limit my downside risk while still keeping my gains.

I knew that the Zweig screen outperformed marvelously over the long term, but I needed to put some reliability in my system to avoid the big drawdowns. I stumbled upon the Pitbull Investor website which specializes in mechanical investing through screening but also heavily emphasizes chart analysis. The site’s founder, Henry Ford, had just started offering personal mentoring over the phone, so I decided to invest in some trader education. My understanding of the markets and of technical analysis grew in leaps and bounds during our 6 hours of one-on-one instruction and I grew much more comfortable looking at a chart and understanding patterns in stock behavior. Henry also introduced me to the world of options, and I began to trade them as proxies for the stocks I liked.

But, the first six months of 2008 were brutal to my account. I was combining stock screening techniques with the technical analysis that I learned from Henry Ford without success. I had weeks of big gains followed by weeks of big losses. Nothing I did seemed to work, and my dreams of trading for a living were starting to look pretty silly.

Finally, in May things were finally starting to click. I clawed my way out of a 20% deficit to break even. My account was ready to take off, and I thought I was trading a system that was capable of 10% - 20% months and 100% years. My dream of trading for a living was alive and well.

Then the bottom dropped out on me again. In four days I lost nearly all of my gains for the month. I kept thinking each day that it couldn’t drop any further but it did. I was holding several options that were getting hammered and I couldn’t sell them because nobody wanted to buy them. Plus, I thought that the market “had to recover”. I ended up the month with a slight gain, but I wanted to figure out a way to trade where it didn’t matter what happened in the broader market—where I could care less whether the market was up or down.

My ongoing conversations and mentoring with Corey at Afraid to Trade also convinced me that if I was going to do this without the benefit of another job, I was going to have to increase the frequency of my trading and probably look at shorter hold times for my trades. Corey is a futures trader, and he doesn’t care at all about whether the market is up or down, he just wants to see a “trend” either way.

I went back and read some older posts that Ugly and TraderMike had written back when they first started day trading. Their journey toward day trading really seemed similar to mine and how they were trading really started making sense.

Another thing that I had read about on Uglychart.com but didn’t understand was position sizing, expectancy, and risk or “R”. Both Ugly and TraderMike used those terms to measure their success. I read Van K. Tharp’s book, Trade Your Way to Financial Freedom in 2007, but I really didn’t understand the concepts even though I tried to implement them in my stock screening. As my portfolio disintegrated during January and February of this year, I went back to the drawing board and re-read many of the books that I read in the past. I knew that there were some “gems” of wisdom in Van Tharp’s book, and with my wife’s help I began to dissect them to gain a deeper understanding. The concepts are really quite simple, and I’m a bit embarrassed to admit that they were over my head last year.

So that brings us to this summer when I decided that I needed a more dependable system that would allow me to limit my risk on a daily basis and create more frequent trading. I really think this is the best way for me to work toward trading full time. I enjoy the “clean slate” each day. Waking up with no worries about the direction of the market is extremely fulfilling. The money seems to flow much more readily.

I'm going to put all my effort into this, and if it doesn't work, no big deal. If it does work, I'm one step closer to my dreams.

What is does your trading office look like?

Here is my monitor setup.

Just kidding. I trade with a laptop at my dining room table.

What does your trading day look like?

I really don’t start anything until the market opens (9:30 am EST). I print out my watch lists before the open. I don’t make any trades until about 10:30am (market time) and I quit trading at 12:30pm (market time).

I see you scuba dive. What has been your best dive site?

Without a doubt, Fiji was the most amazing place I’ve ever scuba dived.

I’ve never seen anything like it . Incidentally, the dive master that took us diving in Fiji disappeared on a routine dive a year after we went with him—spooky.

What has been your worst day as a trader?

Back in 2006, I noticed that the highest relative strength stock in the Zweig screen always outperformed the rest of the screen (by more than 900%). So I brilliantly deduced that I could just put all of my money in that one stock and laugh all the way to the bank. I lost 9% of my portfolio in one day and decided that my strategy sucked. I was lucky that I didn’t lose more. I’ve learned a lot about risk management and position sizing since then.

Would you recommend any books on technical analysis?

I’ve tried to read books on the subject, but they cause my eyes to glaze over. It’s hard for me to look at charts that are already weeks to years old and that are printed in black and white. I have learned nearly everything about TA (and I assure you—it isn’t much) through stock blogs like the ones I list as my favorites on the side of StockPunk. I would also suggest having a mentor who understands TA take you through a few charts. It has been invaluable to me to have somebody walk me through chart patterns and TA concepts.

What did you get your Masters degree in?

I got a Masters in Human and Family Services. It’s basically a counseling/social work kind of degree. Two years ago, when I began the masters program, my goal was to stay in the counseling field. Now my goal is to trade for a living in the next few years. So I’m not sure what I’ll do with my degree right now.

My bachelors degree is in marketing which was never a good fit for me. I was completely miserable at a few marketing jobs that I had. I literally cried before I went to my first marketing job—I hated it that much. I haven’t used my marketing degree for the past 13 years, so we’ll see if I ever use my masters. If anything, I’m able to use a lot of what I learned in my current job as a counselor of teenagers.

What would be your advice to someone who is just starting out as a trader?

Don’t believe the hype. Trading is hard work. It takes a lot of time to learn. It can be financially dangerous. It probably won’t make you rich.

But if you love to do it, none of those things will matter and the money will eventually come.

Can you explain your “narrow candle” system a little better?

Many readers have asked about the “narrow candle” system that I’ve been using recently. It’s a daytrading system developed and shared by Maoxian back in early 2000. He called the posts “trading for dummies” and Ugly from Uglychart.com went on to term them “Dummy Trades”.

I first became interested when Ugly took it on as a personal trading system for himself in 2006. I was really into stock screening and mechanical investing during that time, and I considered technical analysis a sort of “voodoo” way of analyzing stocks. I preferred the “hard science” of stock screens with all their cool formulas (most of which I didn’t understand).

Ugly has a ton of examples of what the narrow candle trades are all about. Basically, I look at overall market direction first. Then I look for stocks that are trending with the overall market. I look for gaps in the direction of the overall market along with higher than average volume.

I use several watch lists to determine what stocks I plan to follow that day. I use a couple of stock screens (I just can’t give them up), along with high alpha stocks from Barchart.com. I also use real time scans from TradeIdeas.

Week In Review 8-22-08

I was at the hospital all day with a kid that I work with, and although the hospital offered internet access, I didn't feel right about streaming real time quotes using someone else's connection. When I got home at 2pm, there weren't many stocks on my watch list that I would have taken anyway. So, no big deal.

My fake account brought in 11.76R this week which makes me much more confident that I'm making the right move. To trade for a living I need around 5R to 6R per month. For August, I'm up 23.86R so far. We'll see if my success continues, but right now things are looking pretty good.

I went back and read a bunch of Ugly's posts from 2006. He made 40R during one of the first few months he started trading. He struggled for the next several months, so I need to take this success with a grain of salt. A lot will change when I start using real money.

Both Zweig screens suffered drawdowns this week. Zweig RS 5 is was down 3.26% while the Zweig MACD screen was down 1.61%.

I'll take it

Another good day in terms of "R" value. I took 9 trades and made 3.53R. After reading Fooled by Randomness, I'm getting worried that a successful August (so far) is just the result of dumb luck.

I've already received several questions for Saturday's questions & answers post. Keep them coming!

StockPunk Questions and Answers This Saturday

I've been receiving a lot of questions about how I'm trading lately and since I just finished my masters degree (yay me), I now have some time to answer them. So for the next couple of days, you can send your questions to stockpunk@yahoo.com. Saturday I will attempt to answer all of the questions that I receive.

Please remember that I'm pretty much an idiot, so you might want to keep your questions simple.

What a mess

That was one sloppy market day. I scanned for stocks for three hours and came up with zilch. I made a trade on ENER just because it was the best looking chart that I saw. It didn't give me a very good setup, but I took it anyway and made a (lucky) 2R.

Here is the 5 minute chart of ENER with a couple of low-risk places that you could have entered the trade.

No time to trade

I guess one of the drawbacks to daytrading is you have to be around when the market is open. Today I had several unexpected things come up, so I wasn't able to comfortably make any decisions.

HOG had a good setup this morning and would have made 5R had I taken it. I didn't see any other good setups today, but I only had about 15 minutes to look.

Another good one

I decided to stick to virtual trading today. It would have been a good day to put some money to work. I made a virtual 6.2R.

Below is a dumb trade I made today losing 1R. I really had no reason to buy this stock (TITN) besides the volume surge at the open. The market was trending down and I thought that this would make a good counter-trend play. I had done well with this stock in the past and my bias directed me into a dumb trade. Notice there are no narrow candles near where I bought--just dumb.
I made over 3R shorting ENER. It was a much better play that made more sense both on the 30 minute and 5 minute charts.

Week In Review 8-15-08

This was another good week for pretend trading. I ended up making 7 times my risk on 18 "trades". Since the beginning of August, I have 48 trades under my belt with a 14.88R return (not including commissions). Expectancy so far is .31 which isn't too shabby.

I plan to return to using real money next week.

The Zweig RS 5 screen had another tough one with a 5.05% loss. The Zweig MACD screen made .79%.
I've been keeping Zweig stocks on my watch list and two of them made pretend money for me this week. MSO on Thursday had a swell setup that made 6.88R. Today AMED set up for a 3.4R day.

Broke Even

I was making money until the market turned around for a bit. I ended up breaking even (virtually) for the day.

Too busy to trade

I had too much going on today for pretend trading. AMED was on my watch list (unfortunately it is a Zweig top 5 RS stock) but I didn't put in a pretend trade on it since I figured I wouldn't have time to pretend sell it.

It would have been a good one. If you sold short after the 12:30 candle at about $65 with a stop at $65.50 held it through the close you would have risked 50 cents per share. If you held until the close you would have made $10.57 per share or 21.46R. That's a nice setup.

I didn't find too many other setups today as the market kind of meandered back and forth.

An encouraging day

Man, I wish my money wasn't pretend today. I made a "virtual" 7.8R.

Here is an example of one of my "trades". I bought at $33.75 with a stop at $33.55 which risked 20 cents per share. I sold at $35.44 which is a difference of $1.69 per share. That's a gain of 8.45 times my risk.

Since the money was pretend, I made some boneheaded trades just to get a feel for what works and what doesn't. So far, stocks that are under $10.00 have been really hard to make any money on. I find I get stopped out rather quickly.


I also practiced scaling out of my trades today, and two of them paid off well. AMZN was up 10R when I "sold" part of the position. The stock came down pretty hard after that. I pretended to sell a position in BBY as well and that would have paid off as the stock came back down.

I'm trying to find a broader indicator to let me know when to take profits. Since I'm trading in the direction of the indexes, I'm toying with the idea of selling when the trend in the index loses strength (like when the 20 period EMA is crossed).

I'm still learning, but I've been encouraged so far.

This week with StockPunk

Despite the counter-trend rally that were seeing as of late, I still plan to pretend trade for a while longer. Let me assure you that I'm chomping at the bit to get back in, and I'm bothered that I may be missing out on some gains. But, this is the best thing for me right now.

In his latest newsletter, Van K. Tharp says "Given that everything is psychological, success in the markets is 60% discipline, 30% position sizing, and 10% system. You can have a great system that will be destroyed by mistakes created by a lack of discipline."

I need to work on the discipline aspect of my trading, so I plan to spend a while just pretending.

The Zweig screen has 20 candidates this week which is the most I've seen in some time. I take that as a good sign as the Zweig screen looks at growing companies that have good value.

It's still a tricky market out there. The indexes are still in a downtrend and there are still some scary things that the market is facing. But for the immediate future, things are looking better and it's worth a shot to go long for a bit.

Week In Review

The indexes may have done pretty well this week, but the Zweig screen got killed. It just doesn't do very well in see-saw market action like we saw all week. Equally weighted the screen lost 5.99% for the week.

The Zweig MACD did a little better coming in at +2.04% this week thanks to big gains in MSO and SUNH.

My account remains the same as I decided to have use virtual money this week. In terms of "R" value, my account came out up 5.10R. That's not bad. I'm always surprised when I run numbers at the end of the week.

I'm shooting for a 10 to 15 R gain per month, so this is a good start and I'm encouraged to continue hashing things out (especially after seeing the loss in the Zweig screen). I plan to have at least 100 virtual trades under my belt before committing to a trading program. 100 trades should give me a pretty good idea of what I can expect from my trading over time.

I hate downtrends

I started trading in March of 2003. I had absolutely no idea what I was doing. Some would argue that I still don't.

The market has been in an uptrend since then and my love for long position trades was rewarded by the trending market. Things have changed, and we are officially in a downtrending market. I've never traded in this kind of market, and my frustration and confusion has demonstrated that I haven't been around long enough to know quite what to do.

The Zweig screen did quite well in the last downtrend (2000-2003), and it will probably do well (eventually) in this one (chart is from AAII.com). I don't intend to abandon my bread and butter. I'll continue to keep an eye on different screening ideas.

I'm trying to develop some flexibility so that I can face new market situations without the frustration that I've experienced this year. I love to screen for stocks, and I love mechanical investing. It just isn't working for me in this environment, so I'm trying something different.

Fake down day

I lost .86R in my pretend trading account today. Boy, this daytrading stuff sure seemed easier when I was looking at charts in retrospect. I think with phony money I took trades that weren't quite up to snuff. It's easier to do without real money on the line. I'm learning, and I think it will take a few months before I'm comfortable with this style of trading.

Stocks above their 200 day moving average seem to be leveling out and growing in number a bit.

This market can't seem to make up its mind on where it wants to go. Things seem a bit stuck right now as we wait for a break up or down. The DOW shows resistance at the 11650 level and a break above that could invalidate what looks like a Bear Flag formation. Look out below if we break things to the downside.

Which Broker?

Anonymous guy replied to my last post with this:

Well, you probably can't be a daytrader paying $7 a trade. You'd need to consider Interactive Brokers or Tradestation or something similar.Actually $7 is too much if you are trading weekly screens too.

I've been thinking about this and wondered what everybody out there uses for trading and why. Just reply to this post. I think it will give everybody some good ideas (including me).

I'll start:

I use Scottrade because I'm comfortable with it and have been using it for 5 years. I'm the type of guy who feels weird about moving my money from place to place even if it means saving some money. I'm familiar with Scottrade Elite and I like the way it works (I really have nothing to compare it to). I like the guys at the office here in Omaha.

I'm realizing though that there are greener pastures out there. Seven bucks is a bit much for daytrading. Trader Mike says that he pays per-share commissions and saves a lot. I've read that other brokers offer 4 times my principle for margin (Scottrade only offers two times). Scottrade doesn't offer futures trading (which interests me).

So that's me and I'm dumb. What do you brilliant traders out there use?

Commissions are eating up my profit

I've decided to go back to virtual trading until I have 100 to 200 "trades" under my belt. I've been risking far fewer dollars, but when I make 4 trades a day it eats up $56. That's not a big deal when I'm risking $1,000 per trade. But when I'm risking $100, it doesn't make sense.

So, my plan is to figure out an expectancy for my system so that I can get an idea of what I should risk (and if I should even trade the system). I'll let you know when I get it figured out.

Today I lost 1.83 times my risk. I forced several trades against my better judgment. I should have done better.

Missed the rally

I had some unexpected meetings today so I wasn't able to lock in any positions. It seems like I do better when the market isn't experiencing a strong trend anyway, so I'm not too disappointed.

Yesterday things worked out pretty well. I had a +4.21R day on four stocks, UNP (long), CLF (short) , FRO (short), & WLT (short).

A better day

Today I made 2.62R on four picks. I went long on FDG and shorted MA, AGU and CLF. I lost 1R on AGU but gained on the rest. That gives me a little more confidence.

I was tempted to virtual trade today after my 4R loss yesterday. I decided that I'll learn much quicker if I'm using real money. I dropped the dollar amount risked on each trade to $100 which is a tenth of what I normally risk. I'm going to spend a few months figure out what kind of R (or risk) value I can achieve each month. If I can average 5R a month, I'll up my dollars risked.

If I don't have a knack for daytrading, I'll probably return to position trading using screens again. We'll see in a few months, but I'm encouraged by a better day today.

Another one that got away

BUCY was another "watch list" stock that I ignored today. If I would have bought it after it broke its 10:00 candle I would have risked 40 cents per share. Selling it at the close (at $75.86) would have made 6.48R.

I got stopped out of four stocks today. All of them were stocks that I pulled from different sources. Most were up on big gaps. I'm wondering if it would be better to just keep an eye on stocks that I've been following for awhile so that I'm more familiar with the stock's recent movements.

I won't be able to last long if I stop out of four stocks every day, so I better start learning quickly.

Not as easy as I thought

I took four positions early today and things looked pretty good until lunch time. All four stopped out for a loss of 1.45% to my account. I like the "every day is a new day" philosophy of day trading, but the quick gains and losses (as opposed to waiting days or weeks) is a bit unsettling so far.

I had to resist the urge to just jump back in. I've set a limit for losses per day, and I need to stick to them.

Missed this one

This is a good example of the type of daytrades that I am looking for. I ignored this one even though it was on my watch list. Dumb.

This is a chart of Union Pacific Railroad (headquartered here in Omaha, NE) I've circled what is called a "compression" candle at 10:00am. These candles indicate indecision, and often the breakout from these candles is large in either direction. You have to wait until the breakout to make your move.

On this chart if you bought as soon as you saw the breakout (about 78.26) and placed a stop at the bottom of the signal candle (about 77.83) you'd risk 43 cents per share. If you held until the end of the day you would have gained $2.84 per share or 6.6 times your risk. If you risk $1,000 per trade that means your would have made $6,600 on that trade.

Both Ugly and Trader Mike have much more information on their sites about trading this way if you're interested.

Day Two -- Not so good

I felt pretty good about staying out of the market yesterday. I made 5 trades today and lost .60% on a day the indexes muscled their way back. I'm a bit disappointed.

I made 1.69R on SAP. I bought it at the narrow 10:30 candle and sold it near the close.

I lost 1R on FDG. I probably should have waited a bit more for the uptrend to be confirmed. I'm learning, but it sucks being down on a day like today!

I'm back

After a relaxing and fun-filled vacation with my extended family, it's good to be back! Today was my first day live as a daytrader, and I couldn't pull the trigger on anything. Nothing on my watch list moved like I hoped it would, so I quit at noon. It felt really nice to avoid getting pulled down by the market (although the urge to trade frustrated me a bit).

Off to the Ozarks

Before I leave on my trip, I wanted to thank everybody who has responded to my posts via e-mail or by posting on StockPunk. I am truly blessed to have so many of you spend so much time writing me words of encouragement and bestowing excellent gems of wisdom. Some of you write more than I do! That's what makes the blogging community so great. I wouldn't have the first clue how to do what I do if it wasn't for the help I've received from other bloggers and from the folks who read StockPunk.

I hope that I haven't sounded too whiny lately. I'm not really going off the deep end. I realize that drawdowns are inevitable. This drawdown is not even near the worst that I have experienced. I know that I'll be up-to-speed sometime.

My goal is to provide the perspective of a part-time trader who is often confused about the goings-on in the market place. Things can get a little frustrating when you watch your hard earned money fly out the window. Trading isn't easy and it isn't for everyone. But I love it and I don't plan to ever quit.

EPS screen still sucks

This screen usually screams--especially when the averages are doing fair to OK (like this week). But these outperforming stocks are still struggling (just like me). Sometimes things just don't work the way you think they're supposed to.

I took a big hit today on AZZ and on another ill-advised purchase--ATHR. Those two stocks drug my portfolio down 1.77%. I day traded 4 stocks today and ended up even on them. I'll take that over the loss.

My portfolio is once again, stock free. I'm taking Thursday and Friday off and will return on Monday from a family vacation. The market will probably gain 1,000 points during my time off. You guys should buy StockPunk futures. Sell when I'm in the market and buy when I'm not.

I've dug myself a nice new 18% hole. To think that I was back near even for the year one month ago makes me a bit ill. The crazy thing is the losses have been small--but they've been consistent. Since June 17th I've had 5 up days and 19 down days. That can't be good for the ol' portfolio.

If the market continues to show the strength like it has recently, I might have to move the StockPunk Market Meter next week. Exciting!

Why I want to be a day trader

AEHR is one of the Zweig picks this week. It had a good showing a month ago, but recently has been quite pathetic. It gapped down 30% over night (despite being rated a "strong buy"), so if you were long with this one you were left holding the bag. I've had this happen a few times to me, and I hate the feeling of not having control over night. Several people have told me that trading intra-day is too risky. But I think you have more control when you don't hold positions overnight.

I won't be able to have a day job if I'm selling before 4:00, so that's something I'll need to work out before I jump fully in. I really think this is more my cup of tea than the weekly screen trading I've been doing for the past couple of years. Maybe when the market corrects and starts a new bull run I'll change my mind. But the last six months has really punished my stock screen trading right out of me.

I plan to keep everybody informed as I start trading in a new direction. I'm "going live" next Monday with my first day of selling at the close. I plan to detail at least a trade a day on the blog. If it works, it will be a less stressful (and hopefully more lucrative) way for me to trade. If it doesn't work, it will be another good lesson for me and the 2 others who read StockPunk.

It's official

I am the world's worst stock trader. Down another 1% on a good day for the market. I spent most of the morning dumping the stocks that I bought on emotion and jerry-rigged technical analysis. I held on to AZZ and a couple of dumb options that wouldn't sell. I feel like I'm having some sort of nervous stock breakdown.

I have NEVER felt this incapable with my trading. Thanks to all of you who have encouraged me to take a step back and re-focus. I think that is some great advice. I think I've muddied the waters with too many ideas and too much information. I leave for a family vacation on Thursday and I hope to regroup.

Here's the thing though. I tried my first day-trade today and stopped out in about 3 minutes. Of course I got all worked up and quit. I decided to spend the rest of the day virtual trading. I know virtual trading isn't the same as the real thing, but I managed to somehow (virtually) make 47 times my risk. That's more than my YEARLY goal! How is it that I can do so well in my virtual account?

Lost some more

Today I lost another .41%. Typical.

I tried some virtual day trading today and I really liked it. I made a virtual $1,000 in 20 minutes with no worries about what is going to happen overnight. Maybe I'm just not cut out for longer term stuff. I'm going to investigate things a little more.

This week with StockPunk

Your guess is as good as mine on the direction of the market this week. I've decided to focus my trading account more on what I do best -- stock screening. The last couple of weeks have slapped me around. All of that slapping has come from a trading style that I'm not entirely comfortable with. Screening has been my bread and butter for the past 4 years and it seems silly to abandon it (especially for something I'm not especially good at).

I still want to learn more about which stocks work in my screens and why. I think I've relied too much on the screens themselves and I haven't done enough "homework" to really know what's going on underneath.

I got a mention on UglyChart last week. Thanks Ugly! His blog is one of the most informative and fun stock blogs out there. When I first started reading stock blogs, most of them bored me to tears or overwhelmed me with stuff I didn't understand. Ugly has a unique gift for combining humor, sarcasm, and information all together in a refreshing and entertaining way. If you haven't seen Ugly's videos you're missing out. They are hilarious!

Week In Review 7-18-2008

That just sucked. It isn't very often that I have a week as frustrating as this one. I watched most of my screens scream ahead while my account continued to lose money.

For the week my account lost nearly 3%. The Zweig RS 5 screen made 5.53%.
The Zweig MACD screen came in at 5.46% for the week.I'm not sure if I would have been comfortable buying NSYS because of its low volume. Some days it was trading below 7,000 shares. That stuff scares me a bit.

Hopefully I'll be able to turn this ship around and start making some money. Sometimes things just don't work the way you think they will.

Oh well . . .

After another sucky day (down .53%) I decided to check some of the screens I follow to see if they suck as much as I do.

The screen on the right takes the 5 highest relative strength stocks from AAII's "EPS est. revision up 5%" screen. Most of those stocks looked pretty good on Monday (click on the chart for a better view).

I'm getting dinged on high momentum stocks that are crashing as the stocks in the dumpster start to show some life. I guess this is just another life lesson.

Stupid, stupid, stupid

For those of you who have followed this blog for a while you know I am prone to emotional (translated--stupid) decisions. Today was a classic day for stupid decisions.

• I didn't trade my plan
• I let market movements dictate my decisions
• I traded against the longer term trend
• I worried about not making money on a big-move day
• I placed sloppy stops
• I rushed into stocks that were up heavily hoping to catch some gains

Despite the positive day for the major indexes, my portfolio was down over 1%--not good. I had two round trips (bought and sold the same day) for losses.

I think a lot of it was suffering through the worst June in a long time and anticipating a strong move every day. When I saw the move happening today, I made uneducated decisions that hurt me. The excitement of the market hooked me today and I got my buttocks kicked. Will I ever learn?

Another volatile one

I ended up losing .40% on a wacky day that still didn't lend any confirmation as to where we are headed. I lost a bunch on an ARO option that traded 1 contract today. Nobody else would buy the dumb thing to bring it back up. Punks.

I traded my first short today. It wasn't quite as dramatic as I had pictured it being. After trading options for a few months, it wasn't even a big deal. I don't know why I waited so long.

Fade that gap!!!

I thought for sure that with the negative bias this morning that there was no way that the opening gap would get filled. It didn't take too long to prove me wrong--yet again. Corey at Afraid to Trade has been tracking these gaps on his site and it is remarkable how many get filled.

Corey has been my personal "stock instructor" for the last couple of months and I must say that the benefits I have received far outweigh the piddly price he charges. Most of the charting that I have been providing over the last few weeks come directly from what I've learned from him.

Lately, instead of stumbling around the market (like I usually do) I've been able to actually make some educated decisions. When it comes to trading, I think the more you can learn from people who have done it, the better off you are. Corey trades for a living and is extremely gifted at breaking down the market in a way that is practical and educational. I highly recommend reading his blog daily. If you really want to grow your knowledge, take his mentoring course. It's the best I've seen so far!

A tiny gain

I managed to squeeze out a .14% gain today. I'll take it.

The weekly chart of the S&P 500 looks pretty ugly.

However, if I would have followed the trends (trend changes indicated by arrows) and sold when the trend flipped to the downside and bought when things were trending up, I would have ended 2007 with a 53% gain (instead of 40%). This year I'd be up nearly 20% instead of down 12%. Interesting stuff.

Must resist . . .

When I saw the premarket numbers, I must admit I was chomping at the bit.

From Reminiscences of a Stock Operator:
"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"

I haven't got the skill of sitting tight quite down yet. If I had I'd probably be up 20% for the year. But we all need to be able to adapt to a changing market and be able to accept the fact that it has changed for now. It will pass, but right now doesn't seem to be the time to be aggressive.

This week with StockPunk

It seems like there may be some opportunity out there this week with as oversold as the market is now. But I thought that last week as well, and that didn't turn out too pretty.

There aren't really any stocks that jump out at me in the Zweig screen this week, so I'll probably use this week as an opportunity to learn how to short a stock. I've never done it, and I know that puts me at an extreme disadvantage (especially in this market).

We're officially in a down-trending market which hasn't happened since 2003. That can't be good. Corey at Afraid to Trade pointed out to me that the S&P monthly chart looks eerily similar to the run up and subsequent sell off in the late 1990s and early 2000s. Time will tell.

I began trading in March of 2003, so I haven't had to deal with a down-trending market yet. I'm trying to quickly learn, but trading short doesn't come naturally to me for some reason.

Join the Club

If your portfolio is suffering, you're not the only one. Both StockSuperstars which is run by AAII and the Prudent Speculator have suffered this first half of the year. I admire both of these services for their candid sharing of portfolio performance. Both services are extremely profession and trustworthy which is why I follow them now and have subscribed to them in the past.

But it's pretty obvious that even the professionals are having a hard time navigating this market.

Week In Review 7-11-08

7-11 didn't bring me any luck today. I capped off an entire week of losses with a final -.23% For the week I lost 2.27% even though I held very few positions. If I had been fully invested in the Zweig RS 5 screen I would have made 2.54% even with a nearly 15% sell-off of AEHR. NSYS was the best performer in the screen with a 14.38% gain, but it was very thinly traded (less than 2,000 shares today), so I wouldn't have bought it anyway (I've got to find something).

You guys posted some great comments on the Zweig Screams post! I love discussion about different approaches. I wish I would have followed the advice of one of the anonymous posters and just played the screen this week!

I've decided to quit paying for Zack's Rank numbers for the time being. I haven't bought stocks lately based on Zack's Rank, and I think there are other methods to screen for stocks with earning surprises for less than $200.00 per year. StockBee has an interesting article in that regard.

So now that I am no longer a Research Wizard I won't be able to specifically screen for Zacks #1 ranks and will stop keeping track of the Zweig and Zacks screen from here on out.

Zweig Screams

Get it? "Screams" not "screens". Get it?! Whatever . . .

Anyway, I was cleaning up my portfolio tracking information (I used Smartmoney's excellent site) and found the Zweig screen from February which I hadn't deleted yet. Here's the thing. If I would have bought the Zweig screen (12 stocks) as it appeared at the beginning of February and held it until now, I would have gained 23.35%. Interesting.

Looks like a positive open today, but these last two days have been really goofy. We'll see where things go. I still think there is a lot of short term opportunity out there, but I'm still too nervous to be very aggressive. What do you guys think?

Just as expected

The bulls came rushing in, just as many had thought they would. Now well see if they have any traction. A small pull-back is natural in the next few days so don't flip out over a couple of down days. We have a set up for a bear-market rally, so I put some money to work this morning. We'll see how things play out.

Chris Perruna has a great article (if you're bored with this market) called the 10 Steps to Profitable Trading.

Way Oversold

I use this chart as one of my market "health checks" to help determine where the market might be headed in the near future. Right now it says that there are so few stocks trading above their 50 day moving average that a bounce is likely soon.

Oil Bubble?

I saw this chart on PitbullInvestor.com on Henry Ford's daily commentary. It always interesting (to me) to compare and contrast different things on charts. It sure would be nice to see the price of oil come down to "normal" levels again. Time will tell, but this doesn't seem the best place to buy oil stocks if you ask me.

Ths week with StockPunk

This should be a sort of "recovery week" for the indexes. I expect that those stocks who were hit hard last week will show the strongest recovery this week (ie agriculture, metals and energy). I plan to lay low this week unless things go nutty. I've got one position which will probably tank. Good luck out there!

Month in Reveiw --June 2008

I'm a few days late, but I wanted to discuss the month of June.

Thanks to Seeking Alpha for this chart showing that this was the worst June performance since the Great Depression with nearly a 10% drop.

I began to get more defensive and stopped aggressively going long the 3rd week of June. I made a few mistakes along the way, but overall I'm pleased with my ability to limit my losses. For the month I was basically even. I was down about 2 times my risk for the month, but my tiny position sizes toward the end of the month saved me from big dollar losses.

The screens had awful months as well with the Zweig RS 5 screen losing 10.48% and the Zweig MACD screen losing a whopping 21.54%. Zacks and Zweig gained a bit, but only had one stock qualifying for one week during the entire month.

Back from vacation

It looks like I didn't miss anything while I was gone. What a mess.

I have one open position now as I have stopped out of everything else. Everything on my watch list yesterday was down hard--like 3% or more. That doesn't make me want to jump back in any time soon.

I'm going to enjoy the holiday and regroup. Have a great 4th of July everybody. Enjoy the freedoms we have as a country!

Week In Review 6-27-08

I'm glad that one is over. My portfolio lost another 1.29% today as I continued to stop out of my last few positions. For the week I lost 2.18% which wasn't too awful considering what the indexes lost. According to Charles Kirk, the Dow dropped -4.19%, the S&P 500 declined -3.00%, Nasdaq -3.76%, and the Russell 2000 -3.80%.

The Zweig RS 5 screen lost 5.26% this week led by AEHR's 21% decline.

I'll be out of town until Wednesday, so I'm not sure if I'll be able to post (or monitor the market).

Fighting the urge

I'm trying to resist trading this morning. After an awful day like yesterday there are usually some stocks on my watch list that are ripe for the picking. I think it's better for me to wait a bit longer before I jump in full throttle.

We didn't see a bear capitulation yesterday so I wonder if we're truly done with the downside. Many good traders are seeing this awful month as a great opportunity to make some money in July. I agree with them, but I'm going to wait until next week before I get my feet wet.

The news this morning said that this is the worst one month drop (in June--thanks StumpJump) since the great depression. I guess there's nothing like learning how to trade in the worst month in 80 years!! Be careful out there!

I told you things suck

What a day! Not much went right today for pretty much anyone (unless you were shorting). I came out OK despite being long (someday I'll learn to short). I lost 1.11% as the major indexes tumbled more than 3%. I'll take it.

So far this month the DOW has lost 9.3%. The good news for me is that I've lost less than 1% this month. In all my years of trading I have always lost more than two times what the indexes lose. I was 19% in the hole back in March.

That's been OK because I've usually made 8 to 10 times what the indexes gained (in the past few years). If I can limit my losses like this and keep the gains I make, I'll be a much better trader in the long run (and I'll make a lot more money). So for me, this month has a silver lining. I've done a better job at preserving my capital, and I'll live to fight another day when the market is giving me excellent odds.

I have no idea where we go from here. There isn't much good news anywhere so there is hardly anything to move this market upward right now. The media is wallowing in bad news, and the public is eating it up.

I'm not smart enough to know if things really are that dire. But I do know the market has been through worse things and it has always recovered very nicely for people who were willing to take some risks and who were patient enough to wait out the nastiness.

Ho Hum

I had an OK day. I made about .35%. Around lunch time I was down about a percent and a half.

Tomorrow could be a bit of a disaster. I decided to hold RIMM through earnings and they didn't have very good results (missed earnings but made revenue). Oh well. I'll live to fight another day.

The Zweig screen had a pretty good day except for AEHR.

I've enjoyed reading Harry Domash's site over the last couple of years. He has a nice question and answer post this week.

I've changed StockPunk's Market Meter to "frowny face". Things suck.

Nastiness under the surface

Nearly all the stocks on my watchlist were down 3% or more today despite the overall market's modest decline. I don't know if that is a bad sign or a good one (do I ever?). My portfolio lost almost 1 percent today. I'm not digging this.

The Zweig RS 5 portfolio was down another 1.71% today.

We'll see if tomorrow brings some of the end-of-the-quarter window dressing that everyone's talking about.

It's not getting much better

The Zweig portfolio took a beating today. Even though the market traded sideways, the Zweig RS 5 portfolio lost 1.66%. Ouch.

My day went OK. I made .88%.

I withdrew some money from my portfolio for the first time in a year. Owning a house is expensive. I'd forgotten how much I dislike paying for heat, water, electricity, and property taxes. It's been over 10 years since I've paid for any of those things, so this will probably take some getting used to.

I'd like to get back to as few financial obligations as I can before I begin trading for a living. I'd like to have the house paid for, and I think that would alleviate much of the stress that comes from not having a steady income.

This Week with StockPunk 6-22-08

After a bruising end to the week I'm not so keen at jumping back in full throttle. The Zweig screen has 7 candidates this week which is half of its average. That may mean there is opportunity or it may mean that the market sucks.

Charles Kirk is hinting that conditions are ripe for a moderate rally this week. We'll see, but caution is probably the best way of traversing this market right now.

Week In Review 6-20-2008

According to the Kirk Report--Since last Friday, the Dow declined -3.78%, the S&P 500 declined -3.78%, Nasdaq -1.97%, and the Russell 2000 -1.07%.

Considering how the indexes did this week, I'd have to call this week a success. I made 2.48%. Today I lost 1.76%, despite my lightweight portfolio, so I'm glad I wasn't loaded up. I'm in a much better position now than I was when the indexes were flirting with this level back in mid-March. On March 10th I was down nearly 20%!

I was able to beat my screens this week which rarely happens. The Zacks and Zweig screen continues to outperform the others and it gained again this week. That screen has been a great indicator of when to be in and out of this market and overall it's performance has screamed compared to the broader market. You have to take it's performance with a grain of salt, however, because many weeks had only one or two stocks meeting criteria which is way to risky for a portfolio.

There's chatter about end of the month window dressing moving this market back up in the next couple of weeks. I know this was a particularly volatile week because of options expiration and stuff, so who knows what the future holds. I'm not too happy about testing the March lows, and there's hardly any good news to turn this thing around.

The chart I use for short-term decision-making is about to turn bearish. We had a good run from April 3rd, but it looks like momentum is drying up and it's time to get defensive again.

This whole thing is wearing me out, but this is the time when I learn the most. We'll have turnaround again, and I'll be even more prepared to make some decent money.

Indecision

I lost .83% today.

I had a hard time deciding what I wanted to do today. Some of my best performers took a dive today which is what I was anticipating (it always seems to happen that way). I got out at OK prices, and I didn't get whipsawed, but I continue to question my methods. The next couple of weeks will verify if I made the right decision or not.

My main goal was to maintain some of the gains that I made over the last few days. I've been unable to find the "sweet spot" between letting my profits run and avoiding big losses (including giving up big gains). I've developed a better trading journal with automatic updates in Excel, and that has really helped me with my decision making. I just wish it made EVERY decision for me. I guess that wouldn't be any fun, would it?

I'm uncomfortable with this downtrending market right now. I know there will be opportunities this summer and later on this year, so it is starting to make sense to avoid fighting this tape and get a little more strategic in my trades.

STOP IT!!

I'm growing tired of watching the indexes self destruct as the news continues to emphasize what's wrong with everything. Now when people find out I trade, they 0ffer their sympathies.

Despite the drop today, my portfolio held together pretty well. I lost less than the indexes (.89%) which isn't much to brag about, but I'm certainly much better off today being down half of what the indexes are than I was in mid-March where I was down more than double what they were.

I trying to learn how to read the broader market while attempting to understand patterns in individual stocks. I continue to learn from Corey at Afraid to Trade through his tutoring service and I have been very pleased with what I've learned and what Corey offers.

Hello Again . . .

I apologize for my lack of posts lately. I thought school was a good excuse and then the market started sucking and that became my excuse. I will try to do a better job of keeping you informed about what's going on (as if you care). I know I enjoy looking at The Kirk Report, Ugly Chart, Stockbee, and others several times a day, and I'm disappointed when something new doesn't pop up. Charles Kirk is probably the best at having multiple posts every day so I rely heavily on his take on things each day.

I've actually had the best three-day stretch I've had in a long time. I've gained over 8 % since last Thursday which usually means that I am about to get my buttocks kicked. I'm going to hang in tight and we'll see what happens.

I've changed my strategy a bit lately after selling a couple of stocks too soon. I sold SQNM at 9.11 after gaining 20% on it. I had a trailing stop that grabbed most of that gain, but then the stupid thing went on to new highs that would have looked good in my portfolio.

The mantra we hear all the time in trading is "sell your losers and let your winners run". I sold this winner, and many others too soon. So, this month I'm using a scaling in technique on all my stocks that have gained one or more times what I risked. The last few days have worked out well as I've let my winners run. Here are a couple, AGU and CF:

Mark's Question

Scott-

Can you go through what subscriptions you use other than AAII and Research Wizard?

Also, have you been more successful trading in and out of the Zweig screen as opposed to simply buying Monday at the open and holding.

Thanks,
Mark

I'm sorry I haven't been posting lately. The market has put me in a sour mood and nothing I'm doing seems to be working. This is the most frustrating six months that I've experienced in the last five years and I've been through a lot of frustrating times I assure you.

The only other subscriptions I have currently are to StockFetcher, Pitbull Investor, and Trade4Cash. I use StockFetcher to find stocks that meet my criteria--it is extremely easy to use and I get instant results. It's also extremely cheap for what it offers.

I use Pitbull Investor and Trade4Cash to gather ideas different from my own. I'm trying to go beyond screening into some technical analysis, and I gain a great deal of insight from both services (they are also both extremely reasonable for what they offer).

I have NOT been successful with making my own decisions using the Zweig screen. Aside from paring the whole screen down to 5 to 10 candidates based on relative strength and the Zacks ranking, every other attempt at improving the screen or setting productive stops have ended in disaster (I exaggerate--but you get the idea) for me.

I have ALWAYS been beat by the screens despite my brilliant attempts at making them better. This year has been particularly bad for me because I've been trying other ideas and ignoring the screens and I am getting my clock cleaned while the screens once again out-perform the market.

Losing my shirt

I haven't had much to write about lately. I keep losing money and am now down over 10% for the year. I'm compounding my mistakes and I'm getting a bit frustrated.

What the FLIP was that? Week in Review 6-6-08

Things were looking pretty sweet for me until today. I made .70% for the week after losing 3.46% today. I had a good pick in SQNM from my own research. I had a trailing stop on it and got out after a 20% gain. It went on to gain over 30% more yesterday and today. I think I need to change my strategy a bit.

The Zweig RS screen beat me again, of course. It made 3.75% for the week after falling 2.6% today. Once again my overthinking cost me. I hesitated on a clear signal for AEHR which made nearly 19% this week. GHM also had a good week gaining 8.69%. I didn't own it either.

Zweig MACD suffered a 3.37% loss for the week with ESL pulling it down 9.87%.

The major indexes are sucking wind again this year. After breaking even at the beginning of May they are back down to mid-April levels.

The good news for me is that I'm holding up pretty good despite the market's insanity. I'm even with the indexes which I don't mind when the market has been so erratic. I don't like to be even with the indexes when the bulls are running, but when the bears are in control, I'm satisfied to lose what the indexes lose.

Maybe someday I'll be able to make money no matter what the markets do. I think it's extremely difficult to do, but I know there are individual traders who do it. There's certainly no way I could trade for a living if I went nearly 6 months with no gains (besides drawing down my equity). We'll see how the rest of the year pans out, but this has been the most difficult year I've had trading.

Just another crazy day

I was way up this morning and feeling pretty good, and then I was way down this afternoon and feeling pretty bad, and then I ended up making a few bucks as the broader market stumbled.

The Zweig Top 5 Relative Strength stocks are up over 4% today after the market has had two straight days of losses. You unemotional investors are making a killing. Guys like me who can't stick to a system to save their lives have been getting their teeth kicked in. When will we learn?

A reader commented this morning:

"I'm doing a bad job of following this system too. I should have bought AEHR this week...I didn't because Scottrade wouldn't let me without a live broker...so I said..forget it. Dumb...it's up over 7% at the moment today.
So, had I bought GHM and AEHR I'd be having a great week so far...instead I'm down for the week...the system works...the system works....follow the system......"

That sounds sooooooo much like me--even today! I've followed the system for three years and I still think I can outsmart it. AEHR had a perfect entry point yesterday (it broke out of its consolidation pattern) and I skipped it because it was too much work to call my broker (I use Scottrade as well). Stupid.

This Week With StockPunk

I hand in my comprehensive exams tomorrow (I'm still working on them), so I should be able to post more often after that--not that anyone really missed me.

AAII's Zweig screen only has 9 candidates this week. The screen had a fantastic week last week and is doing much better than my portfolio is.

The screen had no Zack's #1 candidates this week. This has been a rough year for Zack's rank. Last year the Zweig screen was averaging 5 a week. This year it has barely been one a week. Interesting.

I show 3 stocks with bullish MACDs this week.

There are a couple of Zweig stocks with interesting chart patterns. AEHR has set up a long pendant pattern. It will be interesting to see where it breaks out.

I've asked AAII permission to list the results of the Zweig screen each week. So far I haven't heard back from them.

To The Moon Laid To Rest

I've tracked my To the Moon screen for a few years now and it's time to let it go. My intent in creating the screen was to show that even a simpleton like myself could put together a winning screen if it was followed without emotion. Since September of 2005 the screen has made over 300% compounded.

The screen was made up of the highest Relative Strength stocks in four different screens I ran. One screen was AAII's Zweig screen and the other three were Screens from Zacks Research Wizard. I just took the highest Relative Strength stock of these three screens:

bt sow best buys
bt sow big money
bt sow filtered zacks

This was a "buy on Monday sell on Friday" stock screen that did very well in a pretty lame market. I wanted to show that there are opportunities in the market for individual traders who don't have a lot of time and who don't want to have to monitor the market on a consistent basis.

My subscription to Research Wizard runs out this summer and I don't intend to renew. I think Research Wizard is a great product, but for me it is too pricey and I don't like that it doesn't have an established community of users who share ideas and information.

I will continue to use AAII's Stock Investor Pro as I work on new ideas while following the simple screens that I've been watching for the last several years.

Week In Review 5-30-08

I was happy about coming out this week with a little over 1% until I ran the numbers for my screens (which I all but abandoned for my own ideas).

FUQI helped the Zweig Relative Strength 5 (8.19%) and the Zweig MACD (12.51%) screens this week.

Sometimes I really question my sanity when I try something new. I was up 15% for the month of May two weeks ago and thought I was a genius. As I watched most of it slip away the last two weeks, I wondered why I hadn't just stuck to my stock screens.

We'll see how the last 6 months of the year pans out. Maybe I'll be taught a hard lesson about trying to think my way to success in the stock market.

Still Busy

Man, the stock market is such a distraction when I'm trying to get these tests done. I didn't look much today, and that was a good thing because I lost half a percent. It was good to see some strength return to the market. We'll see how all this shakes out, but now I'll be happy to get out of May in the green.

Corey at Afraid to Trade has an interesting article about selling in May and going away (as the saying goes). Several StockPunk readers have been discussing the idea as well.

Corey has been teaching me some technical analysis stuff along with some market indicator stuff. I think it is important to continue to learn, and when guys like Corey offer their services for dirt cheap, I can't help but try to learn from the masters. I've noticed another master trader, Van K. Tharp, charges upwards of $100,000 for one-on-one tutoring. Yikes!

Gas Is Cheap

The price of gasoline is on everybody's mind, it seems. I've never had so many complete strangers talk to me while filling up my tank.

But the price of gas hasn't really bothered me. I lived in Romania over 10 years ago and the price of gas there was about $1.00 per liter or $4.00 a gallon. In a country where the average wage was $100 per month, that WAS expensive.

In London in 2000 I paid nearly 5 bucks a gallon and my friend in Ireland says that gas is now over $9.00 per gallon.

We're a whiny bunch, and we really should focus on how good we really have it. Sure gas is more than it used to be, but life is still good, we're all more rich than 99% of the world, and we're still paying less for gas than most of the world.

For more on the price of gas, MSN has a good article tonight.

Week In Review 5-23-2008

Things didn't go any better for me today. One week ago, I was flying high. This week I got kicked in the shins. For the week, my portfolio lost 9%. The market has a way of teaching guys like me painful lessons. The key is to live to fight another day. I know that what I do works over the long run. One week is just a blip. This week was a nasty blip, but a blip nonetheless.

None of my screens suffered like I did. Zweig Relative Strength 5 (down 5.92%) was brought down by GHMs 15% drop--ouch. There is a lot of good discussion on StockPunk this week about using stops and about some of the struggles Zweig screen traders had this week. There are always going to be weeks where the screens blow up on you. Most people who trade don't make money because they quit after a week like this. If you just realize that you've got to experience the bumps and bruises and just stick with the program. Don't over-think things. Just trade your plan and hang in there.

The other screens did relatively well considering the trading environment this week. Zweig MACD lost 1.79%, To the Moon was up 1.45%, and Zweig and Zacks was down 2.01%.

It will be nice to have a break on Monday (its been a long time since I've looked forward to a holiday from the market). Take the long weekend to relax, rethink, and enjoy the freedom we all enjoy to trade our money in the freest market in the world.

A kick in my buttocks

Genius on Monday morning, idiot today. I was up 13% for the month of May on Monday morning. At today's close I am barely holding on to 4%. What a mess.

This always seems to happen to me when I hit a new high. I know the market does its thing without any care about my piddly contributions, but sometimes it sure seems like it does.

I'll use this as another learning opportunity. I thought I was pretty bullet proof this month as I only had one losing day until this week. I was making way more than I needed to trade for a living, and I got a bit cocky. I was even contemplating upping my risk substantially to take advantage of my new found genius. This is all good for me, because it will help me make better decisions in the future (hopefully).

Humbled

I was up 2% at lunch time thinking I was a trading genius. At the close, my portfolio was down .80%. Just a day in the life of a stock trader.

I was hoping things would bust out a little heavier today, and it looked like they would. But something got the market a little spooked. Things seem a bit overbought anyway, so it will good to let things settle down a bit before the next leg up (if that happens).

This Week with StockPunk 5-19-2008

The Zweig screen is still pretty sparse with only 10 selections this week. With the major indexes hovering below their 200 day moving averages, everyone seems poised for either a huge breakout or a pullback. Of course no one really knows what's going to happen, so my suggestion (as always) is to just let the screens do their work.

The S&P 500 monthly chart has just peeked above its 20 period moving average. If it can hold out above there for the next couple of months, things look good for more of a long-term rally. If not, hopefully we'll avoid a repeat of 2000.

Week In Review 5-16-08

I was surprised when I looked back over the week. Based on the daily ups and downs I assumed that the broad indexes would be relatively flat for the week. They all did quite well, with the Dow up +1.82%, the S&P 500 +2.59%, Nasdaq +3.35%, and the Russell 2000 +2.92% according to the Kirk Report.

I had a good week, but it would have been better had the indexes struggled more. My portfolio made 7.94%. I am .04% away from being even for the year! Yay! What an awful 3 months that was.

I had to make 26.5% the past two months to make up for the 19% that I lost since the beginning of the year. That was a major pain in the buttocks.

Now that I'm (almost) back to even, I can set my sights on grinding out 40% for the year. With only 7 months left, it won't be easy. But I still think it's possible.

Even though I handily beat all the stock screens, it was still a bitter/sweet week since they did a pretty awesome job as well with To The Moon leading the pack. Zweig Relative Strength 5 has busted out of the gate and has a nice return for the year already at nearly 8%.

I've veered off the trading path over the last couple of months and I have been dabbling in options and trading chart patterns. I've been feeling pretty cocky about my returns until I realized that the Zweig Relative Strength 5 screen has pretty much matched what I've done in the last two months.

Week In Review 5-9-2008

This was kind of a sucky week for the broader market, but the screens did OK by comparison. To The Moon did the poorest with a loss of 3.59% for the week. A 16.76% loss in HA drug the screen down.

All the other screens beat the DOW--Zweig Relative Strength 5 lost .30% while Zweig MACD lost 1.28%. Zacks and Zweig had no picks again for this week.

I was traveling for half the week so I wasn't able to monitor things. Once again that proved to be a good thing as my portfolio was up 4.03%.

I went with my wife to Parris Island, South Carolina, to see one of the girls we took care of graduate from the Marine Corps. Here is a photo of me with her right after the ceremony. I'm the goofy looking guy on the left.

This week with StockPunk 5-5-2008

The screens didn't change much this week. Zacks and Zweig still has no candidates. The Zweig screen picked only nine stocks this week and they are mostly the same from last week.

I continue to work on my Master's Comprehensive Exams. I don't like them.

Have a good week. I'll chime in when I can.

Week In Review 5-2-2008

I got handily beaten by the stock screens this week. I was down 1.58%. Zweig Relative Strength 5 made 3.53% with a nice pop by AMED and GHM. I didn't own anything in any of my screens and I'm looking really brilliant right now.

All of the screens except "To The Moon" have climbed out of the hole and are in positive territory for the year. I am once again wondering why I even try to do better than my screens.

I don't like being busy

I just looked over my comprehensive exams for my masters degree and I'm a bit overwhelmed. I've got a couple of weeks to complete them, which means I really won't have much time for anything else.

I guess this is a great time to test my "automatic" system and see if I can really live in a world where I don't monitor the market all day.

My posts will be sporadic and short, so please feel free to e-mail me any of your brilliant ideas and if they ad to the blog I'll post them. There have been several contributors lately who are much smarter and more disciplined than I am and I think everyone has benefited from their unique perspective. Keep the information flowing as I slog through these tests!

Behave everybody!!

Measuring Risk

A few of you have asked what I mean when I say that I made "4 times my risk" in my previous post. I'll try and explain:

For each trade I risk a dollar amount. It's different for every trade. So, for example, I buy KEX today (not a recommendation) at 54.84. I see that on average it hasn't lost (or gained) more than $2.24 in a day over the last 2 weeks. I decide that I will sell the stock if it varies more than 2 times that amount in a day (2.24 X 2 = 4.48). I am willing to lose $4.48 per share on KEX.

My portfolio is $100,000 (as an example--I really have billions). I decide to risk 1% of my portfolio on each trade--or $1,000. For KEX that means I can buy 223 shares ($1,000/$4.48).

If KEX goes $4.48 against me, I sell and I lose what I risked or $999.04 or 1 times my risk. If KEX gains $8.96 I make 2 times my risk. I keep track of each trade and record how much I risked.

At the end of the month, I add the winners and losers and come up with a risk number for the entire month.

Here's are my stats for April: I had 14 winners that totaled 9.55 times my risk and 11 losers that totaled 4.96 times my risk.

Calculating risk this way can help you get a feel for your system while allowing you to "plan" your earnings. So, I know that if I can average 4 times my risk each month and I risk $1,000 on each trade, I can earn $4,000 per month with my system (theoretically of course).

Month in Review -- April 2008

I'm learning that every time I have a terrific day (or week) and I get a bit too cocky, the market ALWAYS kicks my buttocks and makes me re-think everything. Once again, the pattern continues. I was euphoric about my best day ever on April 16th, and then I managed to allow the market to siphon off 6% by the end of the month.

I still managed to meet my goal of making 4 times my risk this month. That is my new measure of progress since percentage gains really doesn't reflect the accomplishment of my trading system. I was up around 10 times my risk a few weeks ago, so once again, the market humbles me. Maybe one of these days I'll be able to keep my gains. Probably not.

For the month of April, the screens looked like this:

To the Moon: 5.39%
Zweig MACD: 10.79%
Zweig and Zacks #1: 10.63%
Zweig Relative Strength 5: 12.9%

My returns for the month were 9.68%.

The Market is Mean

I got another 1.34% taken away today. Thank you Mr. Market.

I don't have anything witty or amazing to say. Maybe I'll recover a bit tomorrow.

Lame

I gave back my wimpy gains from last week today. Things look a bit uncertain out there, but I'm going to hang on. I like the smaller movements the market is showing lately.

This Week With StockPunk

It's been busy. I did some research on Portfolio 123 and StockFetcher over the weekend. Both look like promising applications, but I need to spend a lot more time in each one to figure out if they can help my trading.

I don't think that I'm going to be able to get the portfolio to break-even by the end of April. Unless we have an amazing week, I think I'm still stuck underwater for the year. If I would have stuck to the Zweig & Zacks screen or the Zweig MACD screen I'd be sitting pretty right now. So much for all my thinking and analysis.

Zacks and Zweig has no qualifiers again this week. The Zweig screen has only 10 picks. I'm not sure if that means anything, but it's worth thinking about. Happy trading!!

Week In Review 4-25-2008

This week was disappointing for me. It started off really good and I have to admit I got a bit cocky about my stock picking and whenever that happens I get kicked in the pants. I had very few stocks from the Zweig screen this week and naturally the screens kicked my buttocks. I made a whole $16.86 this week.

The Zweig MACD screen screamed thanks to an excellent performance by GDI at 18.29%. MACD had many other good performers including AMED, ARO, GHM and AME. The screen is also out of the hole for the year now (I wish I was).

Zweig Relative Strength 5 had a pretty good week as well with a 3.47% return. WFR drug the screen down while the top 3 in the MACD screen also appeared in this one.

Zweig & Zacks had no qualifiers this week so it gained (or lost) nothing.

To the Moon didn't do much.

Yeeow!!

There's nothing worse than seeing green across the board as my portfolio takes a dive. Nearly every one of my stocks lost money today and I was handily beat by the indexes. In fact, I was down 1.72%! I guess all of my positions were top heavy because they sure came tumbling down.

To me, it's kind of a good sign that some of the former leaders took a hit while stocks that were languishing did very well. MS was on my watch list and made a major move today. Of course I didn't own it.

Things are starting to get interesting and we may be on the precipice of a nice extended rally. Don't count your chickens yet, however.

Ho Hum

Another consolidation day today. Nothing much to worry about. My portfolio lost .19%. No big deal. This kind of stuff will probably go on for the next couple of days. I'm just going to ride it out.

Not bad

I made nearly 2% on a consolidation day. I'll take it.

MSN has a bunch of doom and gloom article about the stock market in their Money section. I'm becoming more and more convinced that it is detrimental to my trading when I watch or read stock market news. I stopped my subscription to the Wall Street Journal (I felt guilty when I didn't have time to read it) and I no longer watch any stock news on TV. I'm limiting my total TV time to 3 to 5 hours each week (mostly for Lost and The Office). Yesterday, I avoided any contact with the market until after the close.

I'm trying to get back to reading a book a week. Right now I'm reading The Progress Paradox by Gregg Easterbrook. It's about how much better things are now than they were 50 to 100 years ago and still people think things are worse. Interesting stuff.