Bears and Bulls tug-o-war

The market for the past few days has been the battlegrounds for deciding the future direction of the S&P 500.  The upward trendline since the middle of July is currently intact, however may be on its last legs.  Technically, the formation of today's price action in the SPY was bullish, and formed a bit of a bullish hammer candlestick...although candles are not my strong spot so I may be wrong.  Point is the market tried to fall lower, and was soundly rejected shortly thereafter.  Carl Futia wrote in his blog today that the reversal was a very bullish move, and I definitely respect that decision.  I still think the market will correct a degree in the near future, however I am not sure when this will happen. 

This leaves me to wonder what will be in store for the resulting price action as the 3 day triangle comes to a close.  There are a few scenarios that I can think of: 

Bearish breakdown
Bullish breakout
Bear/bull trap in either direction then continue in the opposite direction. 

For a trade play, I think the conclusion of this triangle, because of such violent price action within the trendlines, will continue for a few days after the market chooses a direction.  I may end up trading after the breakout in either direction on BGU or BGZ, with a stop under the trendline, plus a trigger to flip the position to the opposite side in case of a trap.  The reason I am so concerned about a trap is that the triangle is so damn obvious, that I think its pretty likely.  I will update this with a chart, and my intentions for this order tomorrow am.

Tuition paid $45.52 9.29

Yesterday did not work out so well for me.  I was eyeballing a sweet setup on the 10 day 15 min chart for YRCW, which was about to break a multi day trend line.  My thought on the trade was to enter into the a bit above where I would be chopped out on a false breakout, and to ensure I wasn't ripped off in price with a market order, I placed a buy stop limit, both at 4.54.

The set up was good, and sure enough the short squeeze caught fire, however I was left in the dust as my stop was hit, but I was left with an open limit order for 1000 shares at 4.54, and no execution as the stock ripped past my target price.  This really frustrated me that I took the time, found an awesome setup, and because I wasn't willing to dive into the melee I missed out on some awesome gains.

The second half of my mistakes today added inslult to injury, as I, even against my better judgement (I tried hard not to look at the chart again since the train had already left the building on the set-up I was watching) I traded YRCW hoping that a bull flag was emerging, and not at a breakout point, within the consollidation range.

Lo and behold I was stopped out shortly thereafter as the price could not hold those levels after such a wild run-up...WTF was I thinking???  Chalk this one up to the first tuition paid to the market for this trader.  Lesson learned, when buying into a short squeeze make damn sure I am ready to place a market order and hold on for the ride.  And do NOT trade a chart again after the set-up I was waiting for has come and gone.

Trade Recap

Stock - YRCW
9.29  Buy 500 shares @ 4.81
9.29  Sell 500 shares @ 4.75

Stock - PCYC
9.29 Buy 500 shares  @ 2.01

777

Taking a break to point out the sharpest point drop in Dow history happened 1 year ago today.  An insane 777.68 points in one day.  

Happy trading.

Risky Business

I need to address some of the risks and doubts out there that I am taking by participating in my test.  I definitely understand the many risks that I will be taking by borrowing money, from a retirement account no less, in supplement my trading activity.

The other day I made the announcement in one of my favorite non-trading sites out there www.reddit.com (this is a link to the comments section) that I will be undertaking a challenge of a lifetime.  I guess I was expecting some pretty positive feedback, since I was following a dream of mine to really put in the effort and test myself, I mean how many times have you read about business owners who got started taking out loans to get up an running?

Well the article wasn't as well received as I had thought, after more downvotes than upvotes (latest count 15 up, 20 down), and some concerned comments which I addressed - it was clear that this isn't a very popular move.  I certainly appreciate the feedback I received, because getting other opinions is very valuable to keep a fresh perspective.  I just took me by surprise...so I figured this would be a good time to write out the risks that I am taking, as I understand them.

Here are the risks I percieve to be taking by taking the plunge:

• Risk of total loss, or -$5,000.00
• Risk of delaying my retirement, having my 410k account go from 21k to 14k
• Risk that I will default on the loan, and have an early withdrawl 5k taxable event (plus 10% penalty) which amounts to roughly $3500 dollars in taxes, mind you this can only happen if I lose my job.
• Risk that the trading commissions will eat my returns alive, I am paying $8 dollars per trade, $16 for an round trade, thats .3% of my capital each trade.
• Risk that losses will make a recovery impossible without taking insane risks, again due to the size of the account.

I have read you should have an account worth roughly 25k to get started, because at this level I have to commit a large amount of my capital to each trade.  I never said it would be easy!  And to be honest, I planned on only being able to succeed after very careful trades, and some damn good luck.  As for as my background, I have traded before in a personal account, was about net neutral as far as my returns went, plus some earlier stupid calls on financial stocks as they were falling apart.  However, stupidity aside, I was always trading those accts knowing I needed to use the funds down the road for either a wedding or a house, so super tight stops and short day trades every so often.  I have done quite a bit more homework since then, and I am back for my final exam with this project.

Current watchlist

This week for short term quick momentum plays.  While I feel a bit embarrassed that the answer for today's lackluster volume was because of Yom Kippur (I should know the holiday's that affect volume a bit better) I am still not very confident in another longstanding run up, so I picked out a few setups that looked like they may be good.

LOCM, HEAT, CBAK, ACGY, NOG, RSO, and ZIOP are all on my radar.

Still waiting on favorable conditions to go long VXX or BGZ

A muted market

I didn't participate in the move at all today, the market made quite an impressive comeback from the 3 down days, and I was not quite ready for that type of move.  However the stocks that I was watching really didn't offer any good swing trade type entries, and I hated the volume on any bullish moves.

Where did all the volume go?

I have a feeling that we are pretty close to forming a short to mid term high soon, and that will be my bias until I see volume return to these bull days.  My understanding is that volume precedes price, and if today's lackluster volume continues we will see the market roll south once more.

However the relentless uptrend hasn't been bucket quite yet, and is the standing trend until proven otherwise.  Some stocks that I will be watching for swing entries in the next few days are BGZ (large cap bear 3x), VXX (VIX ETF), however I may play a quick trade on the bullish side since this run up hasn't exhausted itself completely...

You miss 100% of the shots you don't take - The Great One

I would like to take some time to break down my goals for this experiment.  I initially started this blog to report my thoughts, the trades and progress along this trail, and weather it be for myself or the greater community, to take my shot.

Unfortunately I didn't have enough capital to start trading without taking a 401k loan, but the way I figure it, I am getting a guaranteed rate of return on my 401k now through my after tax loan payback (3.75%) and also contributing more to it as well.  It is also only temporary and I have the full ability to pay back the loan from my borrowings with whatever remains.  And I am investing it, playing both direction of the market, which you can only be bullish in the 401k, so hopefully the returns are better.

Onto the goals of Trader's Tuition:

Short term:

• Get more trading wins than losses (I will start a "batting average"of sorts)
• Get more weekly wins than losses.
• New post 5 days/week
• Read trading books, list is on the way
• Make my first $1000.00

Mid Term:

• Get a better annual return than the SPY.
• Get at least 100% return.
• After 15-20k, pay off 401k loan.

Long Term

• $100,000.00

The long term goal of 100k is my ticket to trading full time.  That is a mere 425% away or so (not including taxes).  An advantage that I have in this goal is that my wife has a job where she will be earning enough to support our lifestyle in a few years solely on her income, and creates a whole lot of flexibility to making this into a reality.

Week 1 Trade Breakdown

I have been giving some thought as to how I would review my trades, and I think I will start off with a weekly trade recap.  Each trade I want to use as a learning experience, as a part of my "tuition" for participating in the market.  Either gain or lose, I will at least be learning either something about the markets, or something about myself which will be invaluable and absolutely critical as I progress.  I also would like to create a scoring system, which grades each trade that take, so I can spot any bad streaks sooner and correct them.

Now onto the trades:

My first trade that I took was AMD.

This trade was a mistake that turned out positive for me.  I spotted a good developing opportunity, however entered in much to early, and mistook a breakout for a false one, and simply bought into resistance.  My biggest concern with this trade is the amount of risk there was during the next day, almost 5% risk.  The flat out truth is I cannot risk such heavy premiums for long without them catching up to me, and also stay in business at such a cost.

Also the buying activity at the top of the price move was silly.  I was trying to sell a piece and secure some good gains, then the chart looked like it was developing into a bull flag at the 5 minute interval.   Should have sold out the 300 shares, and held the rest long without buying back in unless it was a much more obvious opportunity.

This trade was helpful in that there were plenty of mistakes to look at and learn from, but I also made some good gains from it.

The second trade of the week was long BGZ:

There was a very long term downtrend intact on BGZ since March, and this buy was simply playing a short term pullback.  I do expect the market to move higher once more before a much bigger pullback (no evidence on this I feel the market is over corrected bullishly however).

Number 1 concern on this trade was the lack of preparation for the trade.  I knew it was a fed announcement day, which usually carries a choppy trading day afterwards, with the SPY being so close to its highs, it was very likely that another test was coming.  It turns out that it was good that I didn't have a bullish bias, but I did hop aboard this trade a bit late in the day.  There was also another opportunity to add to my position had I been quick the next morning, again I was not expecting such quick and thorough follow through.

My sell out turned out to be a bit too early, however I was getting the right feel from the market...It looked like there was an "all too obvious" set up for an upside breakout, and when it finally did, I would have liked to see more volume to continue the tend.  As it turns out I sold just before the false breakout, but enough to save most of the gains.

I will spend most of today looking for set-ups, nothing is on my radar at this time, we had a busy weekend and I have not had a chance to get prepared for this trading week.  I will hang low unless I spot some good looking charts.

Sold Out - Trade Recap

Stock - BGZ
9.23 - Buy 75 shares @ 21.09
9.25 - Sell 75 shares @ 22.18


Net for trade +$65.70

Museings

I wanted to take a moment to give credit where credit is due.  First off I want to give my wife all the credit in the world for supporting me in this experiment and blog.  She is amazing, and I can't say enough about her.

I also want to give credit to all the blogs out there that have been daily reading for me for the past 2 years while getting familiar with and outright fascinated by stock trading.  In no specific order:

Afraid to Trade
Trader Stewie
Dr. Brett
Don Miller
The Bondad Blog
Zero hedge
Carl Futia

I visit others occasionally, however these are the daily's for me.

Support

It looks to me like the SPY took a breather right at the support line of an shorter term uptrend that has been intact since July 9th.  I need to keep in mind that we are still in a strong bull market, and any pullback is exactly that, a short term pullback.  BUT if the SPY should manage to close below that trend line, we should see a pretty significant pullback, maybe to the 50 EMA at 101.25. 

I have a few decisions with my outstanding position, I could either put in a stop and ride it out, I could sell it when there seems to be running into that trend line (perhaps near yesterday's high), or I could wait on it, and take a stronger short position on any bullish pullback. 

Right now I am leaning towards riding it out and seeing if the bears can follow through on their selling efforts, it is a pretty small position, and sometimes you just gotta go for the home run!  I'll keep an eye on the charts today, and update here if I make any changes.

Update

Will spend today trying to figure out where to place stops/add to position.

Waiting Game

I will be looking around today for other opportunities...we'll see where the spy heads today.  I am thinking if it is either unchanged or lower then there my be some follow through from yesterday - we'll see.

Long BGZ

The one thing regarding these charts that is encouaging...even though they have been relentlessly down, is the big momentum divergences, and also the high volume from today.  Stop will be just past the lows.

 

All Aboard!

The one thing I really want to establish and get into the habit of for this blog, and my trading, is to go into a trade with a clear head, a good established theory on price action, and smooth entry.

Today, my second trade in this account, comprised of none of those factors.

There was pretty low volume before the 2:15 fed announcement, and after, there seemed to be a strong move to the upside.  I figured that was pretty typical, I was out of the market lazily looking for possibilities for another trade to take.  Then between work and everything else, I checked the market and damn!  There was some serious selling going on.  I threw out the clean entry strategy and just tried to hop aboard at the end of the day, buy a small 75 shares of BGZ @ 21.09 ...with some much follow through on the rejection of new highs, I figured this has to be the start of a couple of day downtrend.  Which leads me to the conclusion that I came into today very under prepared, and will try to have some plays in mind before they explode in front of me.

The bears have been getting smoked every time since March, now I am one of 'em - I plan on only being a temporary passenger on the short bus.

Trade Breakdown

Stock - AMD
9.17 - Buy 600 shares @ 5.68
9.22 - Sell 300 shares @ 6.22
9.22 - Buy 400 shares @ 6.21
9.22 - Sell 700 shares @ 6.09

Net for trade $204.84

"Even the sun shines on a dog's asshole occasionally"

A friend once said that to me during an unusually lucky stretch the night before leaving on a Colorado ski trip, I won a ski weekend vacation at a local bar. But then on the trip I managed to lose my fiancé’s digital camera on the last run of the last day...at lift closing time. So there went an entire week of vacation pictures like that. I also managed to have my goggles stolen and ski helmet crushed, however it was still one of the best vacations I've had.

That scenario made me think of my first trade on this blog. I closed out my AMD trades today...why you may ask? I decided to wrap up that position because I really made piss poor trades on both ends of the game, my entry was poorly times with a really loose stop, and my exit was stopped out because I was waiting for a follow through on the early up move. So even when I made a poor showing on my trading, I still finished the trade in the positive, up almost $205 net commissions.

Somehow it just so happened that AMD was the tech sector leader and I was along for the ride. While I expected my trip to be rife with luck if I were to ever succeed, I didn't imagine I would start off on that foot. However where luck is present, when you're a dog's asshole, you gotta expect some shit. I realized last night right after posting my internet connection to my home computer went down.

Anyone know what a blinking light means on a router?

Now I am a bit of a computer guy, I built the one I use at home, and the best I can figure, the Ethernet port on my motherboard must have shit the bed. And I was thinking about how to fix it, which after testing wires, and figuring out the wireless still works, leads me to believe it must be a problem with the computer motherboard. Here's where my (now wife) taught me a lesson which I could really learn from in trading going forward.

I was telling her my theory, and explained to replace the motherboard, since it is dated, would also require a CPU change, and the RAM that goes along with it. I am the cheap one in the relationship, so I am always looking for ways to get by, and she comes back with "does the computer have wireless? Why not just get wireless for it?" Genius!  I can easily pick up a wireless adapter from newegg for a few bucks.

I quickly realized that I was not thinking out of the box, and when you approach a problem from an outside perspective, you will usually see different solutions. As a trader, this should always be something I need to remember, since it is simply a game against everyone else that I am playing, maybe they missed something?

Due to the computer issues, I will do my best to post the trade pics, unfortunately no promises though.

First Trade - AMD

So here is my first trade...it is currently still open.

My position is long AMD 600 shares @ 5.69.

I looked in a stock screener www.finviz.com (awesome site, btw) for stocks with above average volume, near their highs, and with some pretty good short interest out there to add some fuel.  AMD came up and looked like a promising bull flag opportunity.  Unfortunately a good thought mixed with poor timing and entry will leave something to be desired.

The stock did not break out as I bought it (unfortunately I had to place a buy stop order because I can not get my entry 100% due to work obligations) which leads me to think I should wait for a break in short term trend, or try to buy in at the lower trend line to get a better price with a smaller stop loss.  I left the position open as it was running against me because the lower trend line had not been violated and let the price make one more attempt at my target.

Right now I am stuck weather to sell out at 5.94 as price approaches resistance and re-buy it on an upside break, to let it ride some more and tighten my stop, which is currently at 5.74 because I also do want to keep my trading commissions paid for at least.

I will give it some thought overnight...right now I am leaning towards lowering my stop to reduce the risk of getting stopped out on morning chops.....

Number one!

Not much in the way of that "I am number one", although I would love to believe that, this is the first post of my blog!  I think I will spend some time to go over the whys, the whats, and certainly the wtf's of this blog.  As I mentioned my profile I am 25 years old.  I don't have any background in finance or economics, I do however have a B.A. in Journalism, however this focus was more so on the television journalism rather than the typed stuff, so I will be learning quite a bit here in all respects.  I do work in finance however, and have my series 7 and 66 licenses.  While I have always had a deep down itch and curiosity about the stock market and trading, it never became fully realized until I was immersed in it.

My plan for this blog number one to be flexible.  After all, I do have a vague journalistic background and however things develop, I want to report things as straightforward as possible.  I want to post my trades, gains, losses and thoughts on them afterwards.  I don't have the time or skill to try to pretend to be an economist so I will try to keep the market commentery to a minimum.  This is more going to be a record of my journey.  Speaking of my journey...this is what I have decided to do:

I recently took out a loan against my 401k, which had somewhere in the ballpark of 14k for five thousand dollars.  I will be using this 5 thousand dollars as the jump start to my trading.  I will report my account and progress, positive or negative, through the blog.  My strategy will be to look for short term trends, swing trades, and momentum trading opportunities, and I will not short any stocks (however I my utilize the double/triple short trading ETFs).  I also plan to do a fair share of reading as well, and probably provide some type of reviews as I finish them, in addition to my daily usual blog reading.

My hope is that in a few years from now this blog experience could serve as inspiration for those on the sidelines asking "what if", or another horror story of getting wiped out.  More simply however... it will be the results of one amateur who decided to "put my money where my mouth is" and go for it.  Fuck it, its just money, after all.