This was a wild week that turned out OK in the end. For the week I made 5.41R.
The Zweig screen finally had a good week making 6.26%.
The market was very choppy today. I found it hard to keep profits and sold several stocks at break-even. I did manage to make some money on a couple of trades.
NIHD was a decent trade, but I didn't hold to my target which was met near 1pm. You'll noticed that momentum shifted downward right after my target was met. I made 1.02R but I could have made an additional 3R if I had held until it hit my target.
AGU was another winner, but again, I sold too soon. I could have held a little longer and made an additional 3R. I pulled 3.54R out of it.
I got out of AMED right on time and made 1.09R.
All told I made 4.69R on the day.
I got out early. Things were chopping around way too much. I managed a decent trade that was more luck than a decent setup.
This half hour trade made me 3.12R -- not great, but decent for today.
My other trade was on FDG. It refused to go down yesterday so I bought it when things were looking good at the beginning of the day. I sold it as things soured and lost .54R.
I somehow managed to pick the only two stocks in the market that didn't go down today.
I assumed the market was in a downtrend so I shorted AMT when it bounced off the 20 period moving average (green line and arrow). It had a pretty good run down to 29.50 but then bounced up with the market just after 2:00pm. I trailed my stop on the 50 period moving average and stopped out about even.
FDG was an emotional buy as evidenced by my entry point. Dumb. It was a losing trade until it headed down, but for some reason it bounced back up near the close. I had placed my stop on the 20 period moving average later in the day to avoid a loss in this stock. I thought it might head down with the rest of the market (and the rest of coal stocks) but it jolted higher.
I'll live to fight another day. I did make 7 bucks today, so I guess I shouldn't complain. I'm sure there were quite a few people that lost their shirt today.
I took two trades today and neither went my way.
TRMA could have been a good trade if I had set my stop a little further away. It went just a few pennies past my stop and then ended up with a pretty good drop for the rest of the day. Could have been a 5R+ winner. Instead I lost 1R on it.
MWV looked like a nice continuation of yesterday's gains with a consolidation pullback. It tanked with the rest of the market for a 1.11R loss.
I knew this would happen. After getting burned several time last week thinking that we were going to bounce, I got all conservative today. I didn't trust this bounce and even though it held throughout the day I played it with little risk. I got paid back with little gain--a measly .11R. There were several opportunities for 10R gains today, but I was too scared to jump in. That'll learn me.
My best trade today was LLL for a 2.38R gain.
I sold with about 10 minutes left in the day--just before the final huge push up where it met its target. Oh well. 2.38R.
AOC was probably the only stock that didn't make money today--that's because I bought it. It quickly deflated and left me with a 1.11R loss.
I bought IMCL because I thought it would break out of a consolidation. It didn't. I lost 1.11R on that one too.
My beloved Zweig Stock Screen that takes the 5 highest relative strength (26 week) stocks is now down 43.74%. Since I began tracking the screen I have hardly ever seen it underwater and have NEVER seen it down this month.
Last year I blindly followed the screen and made a nice 40%. My schizophrenic trading this year has been a blessing in disguise. Although I abandoned my bread and butter screens and was regretting it for most of the year, this last few months has proven that blindly following screens doesn't always work.
Occasionally I enjoy comparing my performance to The Prudent Speculator which is a newsletter service that is highly rated by Hulbert Financial Digest--a well-respected stock newsletter rating news source. For a newsletter service, The Prudent Speculator has had a fantastic run averaging over 20% return for the past 20 years.
This year hasn't gone so well as you can see in the box to left. The pain of this market crash has been wide spread and affected nearly everyone--including funds and services that usually perform quite well.
Don't feel bad if your portfolio is down 30 to 50%. Nearly everybody's is.
Hopefully, we'll be presented with an amazing buying opportunity in the coming years. I think it's much more easy to make money when the market is going up and I look forward to a time when things turn around.
I still believe that the market has a remarkable ability to heal itself and absorb all manner of disasters. My foundations have been shaken a bit, and I have become hesitant to assume that I can make a living trading stocks. However, until they tell little guys like me that we can no longer trade, I still see opportunity out there.
I'm looking forward to the opening bell on Monday.
I also follow the performance of the Stock Superstars Report, a stock newsletter service provided by the folks at the American Association of Individual Investors (AAII). I have a great deal of respect for AAII, and I learned a great deal when I subscribed to the Stock Superstars Report. The newsletter introduced me to stock screening and helped me to create market beating returns.
YTD they are down 40.4%!! That means to get back to break-even (for the year) they'll have to make 67%!! Whoa!!
I'm glad its over.
From the Kirk Report:
For the week, the S&P 500 crashed -18.20%, Dow -18.15%, the Nasdaq -15.30%, and the Russell 2000 -15.65%.
"Crashed" is the appropriate term here. Holy moly.
Despite the devastation out there this week, I managed to "only" lose 2.75% of my portfolio. I lost 4.5R for the week, but I was trading smaller positions sizes as things continued to go south. Today I continued my string of losses with stupid emotional trades that I made based on rumors and emotion. I traded MOS as the market headed higher and then lost it all (and more) as the roller coaster headed back down. I broke all of my trading rules again (I didn't have a good entry point and I hadn't even calculated a stop when I entered). Just dumb.
I need to learn to be much more patient during times like these. I let my plan get sidetracked by indicators, news, and emotions.
I''ll have to admit that this week got me a little worried. I'm starting to see folks that I deeply respect and who are market geniuses wonder if things are so broken that they can't be fixed. That scares me. I've always been impressed with the market's ability to absorb bad news, but it doesn't seem to be doing that lately. Every single technical indicator is SCREAMING that we should be seeing an enormous pulse to the upside, but it just hasn't happened.
I got into the markets in 2003 thinking that we'd never again see the kind of detestation that we witnessed from 2000 through 2002. The market had learned its lesson about "bubbles" and "irrational exuberance". In many ways things seem much worse than they did then.
I kept expecting to see the big bounce this entire week. It never came and I got chewed up for my incorrect assumptions. It's going to take some time to convince me that I can pull money out of the market once again. Maybe this is an incredible opportunity, but with every passing day I get a little more worried that my dreams of trading full time might be extinguished by a market that no longer works the way it is supposed to.
I didn't trade my plan at all today. I made the assumption that we would have a snap-back rally based on news and comments on blogs. I opened two positions right after the open thinking the only place they could go was up. One hour later I was out of both of them for a 2R loss on the day.
There were a million opportunities to go short later in the day, but yesterday's see-saw action frightened me out of making any trades. I was pretty amazed when I looked things over after the close. Holy cow. I picked the right time to be a day trader. The market is down more than double what I am and I've had a really sucky year. Yikes.
No matter what happens tomorrow, I'm committed to my style of trading. No more shooting from the hip because I'm afraid of missing out on something big.
I dipped my toe in this morning a got it chewed off in short order. Fortunately, I had the discipline to quit when things quit making sense (have they made sense for the past 6 months?).
Every time I glanced at my computer the market was up 100 or down 100 points. I hope this kind of stuff doesn't continue, because I'm not very good at trading it.
For the day I lost .30R
Today could have been a pretty good day if I had stuck to the plan. I took 4 trades all of which could have made money had I managed them correctly. Instead I let my bias about the market being too oversold control my trading. It hurt me in the end, but fortunately I lost only .84R for the day. Let's take a look at my mistakes:
I made money on TIF, but I got out too soon. I was too worried about the market turning around like it did yesterday. I wanted to protect my profits and I moved up my stop too soon. Could have made 3.66R.
I had my stop set too tight on SRE. After I made 1R I set my stop at break even. I stopped out and the stock went on to my target. I could have made 8.25R.
XRAY just didn't go my way. It never got up to +1R and hovered around break-even before losing .80R.
I missed a decent trade on this one (1st pattern in blue). I instead bought at the 20EMA bounce and quickly got killed stopping out with a 1.11R loss. This was a pretty dumb trade that I made because I thought the market would end positively today.
I had a crazy day and the few moments I was able to spend alone with the market spooked me into staying away.
We finally have a nice looking "capitulation candle" that may indicate that going long (at least in the short term) might be an option again.
Nearly every indicator out there is showing that we are ridiculously oversold and due for some sort of bounce.
Glenn Beck was telling his listeners today that he is posting a newsletter on how to can fruits and vegetables so you won't starve during the coming apocalypse. Even Jim Cramer is getting into the mix. I started trading in 2003 so I really wasn't paying attention during the last decline. I'm guessing this kind of panic was going on then too.
According to the Kirk Report, here are the numbers for the week:
The S&P 500 declined -9.38%, Dow -7.34%, the Nasdaq -10.81%, and the Russell 2000 -12.12%. That's pretty nasty.
For the year the S&P 500 sits at -25.14%, the DOW -22.16% and the NASDAQ -26.58%.
I did pretty well this week despite the carnage. Amazingly, I made most of my money on long positions (thank you Cambell's Soup).
For the week I was up 7.25R.
Finally, for the first time since June, my portfolio is doing better than the indexes and the stock screens I follow. I still have a ways to go before I get to break even (I'm still down 16.63%--which includes the IRAs that I manage), but the last month of trading has been very encouraging as I've gained confidence in a new style of trading that has done well during an extremely difficult market.
If I had risked 1% of my capital on every trade starting in September I would be at break even (YTD) by now. As I gain confidence in my system (and my ability to trade it), I should see percentage returns that are closer to my "R" values.
What a wacky market this is. We get the decision that everybody wants and has been anxiously waiting for and thing go down the toilet fast. I made two trades today. Fortunately I managed my trades adequately even though I had dubious reasons for taking them.
I bought FDX on a channel breakout after the opening gap. I really didn't have a high probability setup, but I thought that FDX would mimic the general market and head up more. It was up 2R until the announcement was made and then it fell like just about every other stock in the market. I protected some of the gains and made off with 1.2R for the day.
I got this in my e-mail from Investment U yesterday:
Short Sellers and Speculators Are Heroes,
Not Villains
by Dr. Mark Skousen, Advisory Panelist
Dear Investment U Reader,
I'm expecting a lot of nasty e-mails on this column, but the truth needs to be told. Short-term traders, especially short sellers, are often blamed erroneously for manipulating stock prices, forcing them down far below their real value, and for creating crashes and general chaos on Wall Street.
In fact, short sellers have been identified as so vile by SEC Chairman Christopher Cox that he has banned short selling for some 980 publicly traded companies. Chairman Cox and other critics of the market blame short sellers for several grievances:
1. Short sellers destabilize prices in a shaky market, and in a panic can make matters worse, causing a crash.
2. Short sellers artificially engage in "bear raids," where traders gang up on an illiquid - or thinly held - publicly traded company and push the price way down below their intrinsic value. After the stock plunges, traders cover their shorts and buy up good companies at bargain prices.
By temporarily banning short sales, Chairman Cox hopes to prevent the stock market from declining further. (So far he has been unsuccessful.)
So who's right, the short-selling proponents, or Chairman Cox? The best way to determine the truth is to look at what short selling is, and the evidence on what it does.
What Exactly is Short Selling?
Short selling is a way for investors and speculators to bet on falling prices, and for long-term investors to protect their investment portfolio during a bear market.
Most investors profit from stocks by buying a stock and then selling it when the price goes up. Short sellers do the opposite. They sell a stock first and then buy it back when the price goes down.
They accomplish this by borrowing the stock first and then selling it. To close their trade they purchase the shares, hopefully at a discount. When they buy the stock back, they return the borrowed stock to the owner and pocket the profit from the difference in price. Short sales must take place in a "margin account" because the sellers are using borrowed money.
"Naked" short selling is more controversial. It's defined as a short sale by brokers/dealers who sell a stock short without borrowing it first. The SEC recently banned this practice as well.
Investors can also sell short a stock that they own. This is the least controversial technique. It's often used at the end of the calendar year to lock in profits in a stock that has gone up in price.
But with the potential positive and negative aspects of short selling, what do the facts from the scientific community show?
Adam Reed, a finance professor at University of North Carolina, and Arturo Bris, a finance professor at Yale, have done extensive studies on short selling. He has come to the following conclusions.
On bear raids:
Short sellers and speculators are in fact helping us make the markets more efficient and more profitable for investors. In today's market environment we can use as many of these heroes as we can get.
Let's hope Chairman Cox comes to his senses and reverses his ban on short selling soon.
Good trading, AEIOU,
Mark
I had a .57R day on one trade. I could have done much better if I had avoided over-thinking a few stocks on my watchlist. I had too much of "it can't go any lower" mentality today and it cost me. Here are 3 trades I was considering taking. All were down over 5% and I thought that it would be expecting too much for them to go lower than that. I was wrong.
The stock I did trade had no real setup whatsoever. My thought was that as the market rolled over, NOC would follow suit and end up at the lows of the day. I'm not sure what convinced me of this. I was up 2R at one point, but gave back most of it by the day's end. Not very smart.
Total R for the month 14.08
Win percentage 40.68%
Total trades 59
# of days I traded 14
Average # of trades per day 4.21
Average "R" per trading day 1.01
Expectancy for the month .30
All in all a pretty decent month. I'd like to bump up the number of trades to 100, but it is difficult when I trade only part of the time.
As I've said before, I'll need about 5R each month to be able to be financially free, so I'm happy with this month's results.
This first example is a trade that worked for me today. Unfortunately, I let my fear and emotions get the best of me and risked less than half a percent of my portfolio on this trade. The stock was liquid enough, but my plan of buying more than 4,000 shares caused my heart to flutter when I saw how much it would cost--nearly $200,000.
I've never put that much into one stock so I decided to go with a much lower number. The market is still pretty fragile, so I am hesitant to go full bore right now. I could have made a bundle, but I guess it's better to feel somewhat safe going into a trade.
I shorted PCLN after the "bear flag" broke out at noon. Things looked good as the stock dropped to $64. But then the whole market turned and started heading higher and PCLN went along with it. I feel OK about this trade. I lose on more trades than I win, so this one wasn't a big deal. The only thing that bothers me is that I lost more than 1R. I must have calculated my stop loss wrong or something.
All in all, this was a good day to trade. There was enough action in the market, and we didn't see huge gaps that made things difficult to trade. For the day I made 5.48R.
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