Oct 01

What A Difference A Day Makes

Twenty-four little hours… or in market terms, six and a half.

There were some big moves out there today.

If you’re a daytrader, new highs are already a distant memory and you’ve possibly been shorting into strength now that the trend for your timeframe is lower.

If you’re a swing trader you’ve possibly been stopped on a few positions already, are struggling to find new opportunities and are concentrating on preserving capital.

If you’re trend following with a medium-term timeframe like I am, the number of positions you have remaining has decreased, stops have been triggered on a handful of positions, and fewer and fewer names are presenting themselves as potential replacements.

If you’re longer-term or institutional, you’re probably watching with interest but haven’t needed to make a move yet. Maybe you’re waiting to see the weekly close, get that payrolls report out of the way, see the market reaction to that and how it fits into your long-term view.

Your perspective will depend on your timeframe. If there’s one thing that could prevent the vast majority of bull/bear debates or disagreements in the world of punditry it would be a simple declaration of timeframe at the outset.

One by one those timeframes get impacted by a market move as it gathers pace. For my part, using the examples described above, today I felt as if the weakness moved over into my timeframe. And it was a little more indiscriminate price action today, taking out long-held names and new additions in equal measure.

Let me give you an example using a name I’ve had on my watchlist but haven’t owned – Greenbrier ($GBX) – which has been in one of the strongest most consistent trends out there. Today it fell over 10%.

AlphaCapture

If you like to use previous breakout areas, previous support, last swing lows as your stop, you got hit today.

Prefer to use moving averages? Sliced through both the 20EMA and 50-day.

Prefer your moves with volume? Had that too.

Prefer trendlines, 5-week trailing stops, or ATR’s? Coming right up.

AlphaCapture

Trendline broken, a new 25-day low, and a very generous 6xATR (100-day) all taken out.

Now you can keep re-drawing those trendlines and go back far enough to maintain it’s in an uptrend (and incidentally, it’s still 20% above its 200-day MA), but the point is it’s all about your timeframe.

One day doesn’t make a trend, but it can end one, and with today’s market move in my opinion all but the longer-term timeframes are now feeling the impact, even more so when it happens all at once in a range expansion move like $GBX and others had today.

It might be worth keeping an eye on the biotech sector via $IBB which I believe has $GILD $CELG $AMGN as its top three holdings. This has been a phenomenally strong sector, and if the market decline gathers pace, its movements could take on extra significance as ‘last man standing’ and act as some kind of confirmation for a potentially broader decline if it starts to mimic the technical breakdowns seen elsewhere.

AlphaCapture

 

 

 

 

 

Sep 27

Weekend Review and Watchlist

Volatility returned to the market this week, and how you reacted or interpreted it will depend greatly on your strategy and process. It may also depend on how you define ‘the market’, as from my longer-term view what is unfolding still appears to be a form of rotation rather than a full blown correction that many commentators have called for. A quick look at the major index ETF’s ($DIA, $SPY, $QQQ, $IWM, $IYT) tells the story:-

So what’s your market doing?

Dow – broke its 20EMA, held its 50-day, bounced back, uptrend intact.

S&P – broke its 50-day, reclaimed it next day, uptrend under pressure.

NASDAQ – marginal break of 50-day, bounced back, uptrend intact.

Russell – below its 20, 50, 200MA’s which are also all now falling. Ugly.

Transports – broke its 50-day, bounced back, uptrend intact.

If you’re just using ‘the market’ as your guide on what to do, you can be forgiven for being confused. This not only highlights the need for you having a defined process for dealing with such situations but also provides a good example of why I prefer to use the technical condition of the individual stocks themselves to determine whether I should still be holding them or not, rather than an unrepresentative or arbitrary market index.

It’s not uncommon during such periods while taking exit signals for stocks that invalidate their trends for my timeframe, to also have new entry signals still present themselves. We saw this happen several times last year, and they can often go on to be some of the biggest winners when the market later resumes its uptrend. Think what it means for a stock to be showing its leadership to you during a time of broader market weakness. These are the names you want on-side, the names that can continue to lead should a further market advance materialize. But they’re signals you’ll never see if you impose a moratorium on new positions because of what an index full of stocks you don’t want to own has done recently.

This week was no exception with one exit and one new entry.

Alcoa ($AA) triggered an exit on Monday’s break of support and our trailing stop. This has been a huge trend we’ve been riding since the end of March for a 24% gain. These current levels could be used as an initial stop on a new position should it return to fresh highs, so it’s one to keep an eye on, but for our timeframe it was time to step aside.

 

Skyworks Solutions ($SWKS) has been a super-smooth trend and gave a fresh entry signal with Wednesday’s move to fresh highs. Textbook stuff.

 

Much like the broader market, we had some wide ranging price action amongst our open positions.

Marriot Intl ($MAR) had a marginal break of its 20EMA before recovering with the market on Friday. This is still one of the best trends out there.

 

Gilead Sciences ($GILD) continues to hold up very well. It’s incredible when you consider the way this used to be kicked about alongside momentum names in market sell-offs, and with everything we saw this week this is still sitting above its MA’s and within spitting distance of new highs. The beast of biotech.

 

Apple ($AAPL) felt the full brunt of this week’s volatility, slicing through its 20EMA and 50-day in one fell swoop, only to regain both with another gap and run in the opposite direction the very next day. We’re still sitting a safe distance from the noise, but should it reclaim the highs from here the next level for our trailing stop is obvious.

 

Dr. Pepper Snapple ($DPS) was one of the few names that didn’t see a break of its MA’s this week, not even on an intraday basis. Solid trend.

 

Lockheed Martin ($LMT) put in some impressive price action this week, suffering only a modest pullback on Thursday as the market sank lower, and powering to all time highs in Friday’s bounce.

 

JCPenney ($JCP) paid a visit to its 50-day for the first time in two months and at one point looked like it might trigger an exit as it flirted with our trailing stop. We’ve already been generous with this given its volatility and had already marked the 9.73-9.50 as being important to its intermediate trend so it was interesting to see it find support there on Friday.

 

Home Depot ($HD) finished higher on the week, putting the data breach firmly behind it and moving close to fresh highs.

 

Nike ($NKE) was the star performer this week with much better than expected earnings and a strong outlook sending the stock sharply higher. We had used the tight consolidation of its initial breakout as our entry two weeks ago and this week we got a moonshot of a follow-through. Our stop now moves up to $79.75. We can afford to give this room to breathe and trail it higher again once we see how it consolidates and acts from here.

 

There are also plenty of other stocks shaping up well that remain on the watchlist. Similar to our existing positions it’s dominated by consumer discretionary, pharm/biotech, industrial, and technology, with a notable absence of financial or energy names. Here are just two examples:-

Sherwin-Williams ($SHW) is on the verge on new highs with the possibility of placing a stop at a previous swing low, breakout level, and 50-day MA, providing a potentially attractive risk/reward trade.

AlphaCapture

 

Alexion Pharma ($ALXN) has been consolidating for nearly six months now and with this week’s clear rejection of the 200-day it’s looking as if it’s ready to breakout from this range, with a series of higher lows in place and its MA’s stacked and rising. The 168-173 high closes on a daily and weekly basis could be used as an entry trigger.

AlphaCapture

 

 

 

 

Sep 19

Weekend Review and Watchlist

It always fascinates me how when you sit watching the day to day market moves, your short-term memory of where we are can get severely distorted. With a ton of major news events this week; the Fed meeting, the Scotland vote, and the Alibaba IPO to name just three, the noise level became the most elevated since last year’s taper talk.

By the end of it all, with markets reversing their gains to finish flat to lower in Friday’s session, and with the return of the hapless top-callers, you’d be forgiven for thinking it had been a poor week for the markets.

Far from it.

The Dow and S&P finished +1.7% and +1.3% on the week, while the NASDAQ put in a still respectable 0.8% gain. The Russell however declined 1.2% on the week. Of course it was this, rather than the new highs, that became the focus for the bears, giving them hope that a bunch of stocks they’ve mostly never heard of will bolster their narrative.

I dealt with top-calling a lot in some of my commentary over a year ago, and it beggars belief that this should still need to be said but let me make it perfectly clear. Top-calling is not brave, it is not heroic or smart, it is vain, arrogant and downright irresponsible. These people do not deserve your respect, they deserve your derision.

There have been maybe six or seven major tops in the last 27 years that I have been trading. Think about that. That’s probably one for every 1,000 trading days. Are you really going to tell me dear top-caller that you are vain and arrogant enough to think that you, YOU, can predict the very day the market turns on a dime and never looks back?

Why do people continue to do it? Because they’re not held accountable. If they’re right their name goes down in history. If they’re wrong, ‘well don’t worry about it, no-one expects you to be able to call it anyway’. It’s a vanity call.

Why do people continue to listen to them? Because the media encourages it. They don’t want to promote people who keep you in huge winning trends and manage risk, that’s boring. They want bull/bear debates and controversial comments, conflict, drama, got to keep those advertisers happy and get those page views up.

It’s been five and a half years now since the 2009 lows. If you’ve been bearish all that time it’s a fact you’re not managing money. And there is a very simple solution for any analyst, blogger or pundit, by which they can be bearish and yet emerge with respect should they be wrong. It is very simple. Are you listening carefully?

Spew forth your bearish narrative to whichever unfortunate soul has been condemned to hear it, listing as many reasons you can why the end of the world is nigh, 10, 20, 50, 100 reasons if you please, but, then give caution that whilst you believe all these gloomy predictions to be inevitable, acknowledge that until price confirms the uptrend is over, your mark should not act.

Voila! Should the market continue to go higher, your poor wretch of a client will continue to benefit from it and be ready to act when circumstances change as you predicted. Should the market decline, and the trend is confirmed to be over, he will immediately recognize the path of misery you so ably described unfolding before him, and will gladly endure the small loss he encountered to see your tale of woe come to fruition, as it will surely be as calamitous as you foresaw. You have a win-win. I’ve even managed to make you look noble in the process. You’re welcome.

OK.

Rant over.

Let’s talk about some stocks.

We had one exit earlier this week in $ATVI. It sliced through first support and the 20EMA and 50-day early in the week, and given it was a very marginal break of our trailing stop I gave it a day’s grace but it found nothing, finishing slightly lower on a decent day for the market. That was confirmation enough and we exited at Wednesday’s open.

AlphaCapture

That was the only change to the portfolio with no other exits or new entries. Here are some current positions:-

$MSFT put in a great performance on Friday to a fresh 14-year high. Our stop is still a safe distance away but you can already see the $45.33-$44.87 band that will be the next logical place to trail to in the next week or so.

AlphaCapture

 

$AA has been an incredible performer this year but it’s really started to tire in the last couple of weeks. It’s broken below its MA’s, which are also close to a cross of their own, and even if we only see a marginal break of that $16 level where our stop currently resides it looks as if it will be time to take the money and run.

AlphaCapture

 

$MAR still possesses the smoothest trend of all our holdings. There’s a chance that stop could move a little closer this week, as other than Friday’s reversal from highs, the volatility still appears to be low.

AlphaCapture

 

$DIS has been in a tight range for 4 weeks now, but it’s allowed us to move that stop a little closer, and there’s a chance if it can resume its uptrend we could move it even closer to the base of this consolidation to coincide with the longer-term trend line and the current path of the 50-day MA.

AlphaCapture

I also remain long $FISV, $GILD, $AAPL, $DPS, $HPQ, $LMT, $TSLA, $JCP, $HD, $BRK.B, $NKE.

Here are some other names worth monitoring:-

$DTV appears to be on the verge of new highs, potentially ending a 4-month consolidation.

AlphaCapture

 

$GBX broke out to new highs and followed through impressively before paring gains on Friday.

AlphaCapture

 

$INTC continues to coil very tightly. I’ve shown the potential stop down at $32.60, but by the time this triggers an entry it may even be possible to use something at the base of that consolidation around the $34 mark.

AlphaCapture

 

$SLXP put in a huge performance this week, that last pivot low makes for a wide stop but this is one to watch.

AlphaCapture

 

$SWKS continues to trend smoothly with another move to fresh highs this week.

AlphaCapture

 

This portfolio is for informational and educational purposes only and has been created by Jon Boorman for Alpha Capture as being representative of a trend following strategy and is not tailored to the individual circumstances or investment needs of any individual. This portfolio does not represent an actual portfolio held by Jon Boorman, and the performance of this portfolio is not necessarily the performance experienced by Jon Boorman with respect to his securities holdings and trades. Jon Boorman may have a financial interest in the recommendations he makes as he may hold or trade some of the same securities for himself, family members and his clients. It should not be assumed that future recommendations will be profitable or will equal past performance. As with any potential opportunity to earn profits, there is a risk of loss.

 

Sep 14

Weekend Review and Watchlist

I won’t go into a full top-down review here as there are others who do that far better than me, but I want to just briefly touch on the $SPY as from where I stand the pullback we saw in the S&P this week looked to be well contained.

AlphaCapture

So far it looks as if we’re just testing that previous breakout level inbetween the 20 and 50-day MA’s. I actually welcome these choppy overlapping moves so typical of countertrends, because they provide a good opportunity to more readily identify the leaders and laggards amongst individual stocks.

 

Last week I highlighted the break we saw in $PCLN which triggered an exit for Monday’s open.

AlphaCapture

There is always a possibility when exiting close to a perceived area of support that a stock can bounce back and compound your frustration, but $PCLN had clearly been acting poorly, and after a brief rally Monday continued its path lower throughout the week.

 

It was a similar story with $IPG which had been languishing for several weeks.

AlphaCapture

This was a signal harder to take than most for a couple of reasons. First, it was a marginal break of a trailing stop at a previous support level, the kind that can keep you in as you repeatedly give it another chance, and second, it’s well known that $IPG has been the subject of interest to activist hedge fund managers and has been talked of as a takeover target. This last factor is a double-edged sword, as whilst it’s tempting to think there is increased upside and reduced risk involved, the danger is it can influence you to deviate from your trading plan. At Friday’s open I took the exit Thursday’s marginal break of the trailing stop had triggered, and by the end of the day was very grateful I had. That opening print proved to be the high of the day (the exit is shown slightly above to reflect the 9.5c dividend from 8/28) and it slid lower throughout the session taking out levels from early July.

The only new entry during the week was in $NKE.

AlphaCapture

This looks good on multiple timeframes and had appeared on our watchlist for quite a while as it neared a long-term breakout level. The subsequent tight consolidation is a positive development, and a resumption higher from here may even enable the stop to be moved up from its initial level up towards the 50-day.

 

Of our existing holdings $MSFT was again a highlight moving to fresh 14-yr highs.

AlphaCapture

 

$MAR continued its remarkable climb and saw its trailing stop move up to the July highs just below the 50-day.

AlphaCapture

 

$AAPL was another obvious standout and it will be interesting to see how it acts this week as the dust settles around its product releases. Despite the noise generated that day, the much vaunted ‘sell-the-news’ action never materialized finishing more or less unchanged on the day and rallying for the rest of the week. This is where it now gets interesting. With a new high we will have another higher low in place and an obvious next trailing stop level. With a new low we’ll have lower highs, lower lows, a break of the 50-day, and will quite possibly trigger an exit.

AlphaCapture

Other existing positions are $AA, $FISV, $DIS, $ATVI, $GILD, $DPS, $HPQ, $LMT, $TSLA, $JCP, $HD, $BRK_B.

There weren’t many names added to the watchlist this week. I have a total of 20 that I’m watching, more than the total number of positions I have, so for me to make room for any of them they really need to be special.

$DTV continues to set up nicely:-

AlphaCapture

 

$JACK broke out this week:-

AlphaCapture

 

$INTC is holding a remarkably tight range:-

AlphaCapture

 

$NFLX looks similar:-

AlphaCapture

 

Solar is looking interesting again. $SCTY is worth considering, currently though I prefer the look of $FSLR:-

AlphaCapture

 

 

Sep 06

Weekend Review and Watchlist

The market is a stone’s throw from new highs yet again, after giving a few scares in a handful of names this week. Anyone who plays momentum names is all too aware of the ‘stairs up, elevator down’ price action that comes with it, and we saw it happen this week with swift but arguably modest pullbacks in $GILD, $AAPL, and $TSLA.

Elon Musk said Tesla ($TSLA)‘s stock price was ‘kind of high right now’. Well I guess he is ‘kind of right’, I mean isn’t that just a statement of fact if your stock is at all time highs? The price is high. Yes it is Elon, isn’t it great!

AlphaCapture

I would be surprised if this turned out to be anything more than a speed bump, but either way I’m still giving it some room here. It would need to go back below that previous breakout level and the 50-day MA around the $240 mark for me to think the intermediate trend was in doubt. This is one of the benefits of having a longer timeframe and smaller position size than short-term oriented traders. If you’re a little too close to the action you will get hit on noise.

 

Apple ($AAPL) stumbled then steadied ahead of its launch event this Tuesday for the new iPhone and iWatch. Wednesday’s move was certainly big relative to the lack of volatility that preceded it, and it left the stock inbetween new highs and what I would consider the first invalidation point near the base of the previous consolidation around $94. Clearly there’s some imminent event risk, but in the grand scheme of things I think it’s fairly modest. A new high from here within the next week would be extremely bullish in my opinion, and leave in place another higher low (and future trailing stop level). New high or stop, I don’t mind which happens, I have a plan for either.

AlphaCapture

 

Despite the high profile names stealing the headlines, there were several stocks worthy of attention that received very little, and that’s just fine by me. New highs are boring for the media. They want volatility, drama, panic, something people can react to, something that generates opposing views.

Here’s some of what they missed:-

Microsoft ($MSFT) still has the small matter of the dotcom crash to retrace, so we’ll forgive it for not being at all time highs, but I’ll take 14-year highs thank you very much. That was a good-looking breakout on Friday on increased volume having been held in a tight range for the last two weeks, and this looks to be on its way again.

AlphaCapture

 

Alcoa ($AA). The return of the beast. A solid resumption of its long-term uptrend providing an opportunity to enter anew or add to existing positions with the trailing stop moving up to $16.00, just below the 50-day.

AlphaCapture

 

Fiserv ($FISV) is another name you won’t hear people talking about, quietly going about its business with a new all time high close every day this week, extending its winning streak to six straight days, and four straight weeks.

AlphaCapture

 

Marriott ($MAR). Still taking the stairs. Not sure what floor it’s going to but it’s been a slow and steady climb and we’ll rest when we get there. I’m amazed there’s still a 7% short interest on a stock like this, what are they thinking?

AlphaCapture

 

Activision Blizzard ($ATVI) got a little choppy throughout most of August but notice the 3-day pick-up in volume that took it to new highs, that’s a nice breakout and follow-through and it finished the week with a new high close too.

AlphaCapture

 

But it wasn’t all new highs and lunch at The Palm.

The one big disappointment this week was Priceline ($PCLN). That last breakout entry was swiftly retraced but then frustratingly never completely invalidated, and it briefly looked ready to resume higher before sliding relentlessly through some big levels this week.

AlphaCapture

I have no doubt this is the level at which shorter-term players will be stepping in, but that’s not my game and I can’t be hanging around to discover how it all turns out. A stop is a stop. In cases like this I’m reminded of something Michael Martin discussed in ‘The Inner Voice of Trading’, that you should place your stop at the price where you’re willing to transfer the risk to someone else. We are precisely at that point in $PCLN. It was a well-placed stop.

 

As we’ve already seen, there are plenty of strong trends out there, and there are also numerous other setups vying for our attention with some good risk/reward opportunities.

Here are some names on my current watchlist:-

Actavis ($ACT) has been a tease but seems to be on its way now. I’d need to have a very generous stop on it though to enter here, down near the previous base and the 200-day, and that might be a little too rich to make it worthwhile. There may be a better opportunity down the road if it breaks out again from a fresh base and this current breakout level could then likely be a much closer stop.

AlphaCapture

 

Crown Castle Intl ($CCI). This looks like a major breakout technically, but in price and percentage terms it’s been a modest move so far. I’ve had others that just screened ahead of it in the last few weeks and kept me from taking it, but it’s definitely one to watch.

AlphaCapture

 

Google ($GOOGL). An obvious choice, and an obvious chance if it can take out those previous highs, with two higher lows in close proximity setting up a potentially juicy risk/reward trade.

AlphaCapture

 

Directv ($DTV) is starting to set up nicely. Friday’s close was a 50-day high and saw the 20EMA cross back above the 50 to leave the MA’s stacked and rising. A couple of daily and weekly highs from May are all that remains.

AlphaCapture

 

Harman Intl ($HAR) has been frustrating breakout players with several false starts, but it seems to be coiling and setting up again here with another potential higher low in place which could give several good risk/reward angles.

AlphaCapture

Additional notes:-

I also like the look of $GBX, $ILMN, $INTC, $LOW, $NKE, $SLXP, $SNCR, $THRM.

I don’t currently have any financials. I have $BRK.B but I don’t consider it to be one despite how market websites classify it. To me $BRK.B is a conglomerate or a value ETF. The only financials I’ve found screening for me recently have been $LNC, which looks to be retesting its breakout, and $OKE & $MS which show strong breakouts.

I’ve missed the move in Airlines this year, and the most recent one to catch the eye is $UAL. It looked as if the 9/2 breakout had immediately been reversed the following day, but then it came back with an even stronger breakout that followed through the next day. That’s impressive action but the stop needs to be a bit too far away for me.

 

 

 

Sep 01

Futures Update

This is a record of all futures signals mentioned on this blog from January 2013 – August 2014.

PLEASE NOTE:-

Since becoming an RIA I have slowly been winding this part of the blog down, not showing new futures signals and just taking exits. This is because despite my best efforts with disclaimers, the inclusion of futures on my blog creates potential areas of conflict for what I am pursuing professionally longer-term.

As of 8/29/14, with only one remaining position (Long 30yr) now rolling from Sep to the Dec contract, I have taken the opportunity to mark its exit here and bring an end to showing futures signals until further notice.

Going forward I will make further changes in the coming months and align what information I can provide with what the existing regulatory framework allows, but for the moment I’m sure you will appreciate I have to make that compliance my priority and hope to eventually make this part of the blog active again.

I am NOT a Commodity Trading Advisor (CTA) or Commodity Pool Operator (CPO). 

This investment blog (the “Blog”) is created and authored by Jon Boorman (the “Content Creator”) and is published and provided for informational and entertainment purposes only (collectively, the “Blog Service”), The information in the Blog constitutes the Content Creator’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You understand that the Content Creator is not advising, and will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information contained in the Blog may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

From time to time, the Content Creator or its affiliates may hold positions or other interests in securities mentioned in the Blog and may trade for their own account(s) based on the information presented.  The Content Creator may also take positions inconsistent with the views expressed in its messages on the Blog.

The Content Creator may hold licenses with FINRA, the SEC or states securities authorities and these licenses may or may not be disclosed by the Content Creator in the Blog.

Investing in the investments discussed in the Blog may be risky and speculative. Trading in such securities can result in immediate and substantial losses of the capital invested. You should invest risk capital, and not capital required for other purposes, such as retirement savings, student loans, mortgages or education.

My full disclaimer can be found here.

Signals are shown for 10 major futures markets as follows:-

EQUITIES: S&P ($ES_F), NASDAQ ($NQ_F)

RATES: 30yr ($ZB_F)

CURRENCIES: Yen ($6J_F), Euro ($6E_F)

COMMODITIES: Crude Oil ($CL_F), Gold ($GC_F), Coffee ($KC_F), Corn $ZC_F), Live Cattle ($LE_F)

This is a smaller blog-friendly version of the universe of 40 futures markets I follow. In March 2014 for the 10-market universe shown here I replaced the 10yr, Dollar and Pound, with Coffee, Corn and Live Cattle. This was to better reflect a diversified futures portfolio and realistic mix of trades, representing the typical combination of futures markets utilized for trend following, with commodities accounting for half of the markets covered, and with each commodities subset of energy, metals, softs, grains, and meats now represented.

You will NOT see an overall portfolio return or the position size. This is because position sizing is unique to each person’s objectives and risk tolerance. To show an overall portfolio return could imply you would achieve the same results from replicating these signals, and to advise position size would be akin to personalized financial advice, which I cannot give. Therefore you should consider all returns shown here to be hypothetical returns for a single contract for the entry and exit dates shown.

 

SUMMARY AS OF 8/29/14

OPEN:- Total 0: 0 winners, 0 losers. 

Average winning trade +$0 per contract, average losing trade -$0 per contract.

CLOSED:- Total 71: 28 winners, 43 losers.

Average winning trade +$3,717 per contract, average losing trade -$2,372 per contract.

TOTAL:- Total 71: 28 winners, 43 losers (39% win).

Average winning trade +$3,717 per contract, average losing trade -$2,372 per contract.

 

OPEN AS AT 8/29/14

None.

 

Closed signals are detailed below with links to original entry and exit posts. Over enough time once you have a worthwhile sample size you can better judge the merits of the system than from the handful of signals available currently. Even as this blog reached its one year anniversary in January 2014, the most signals in any one market was eight. The bottom line is you trade a positive expectancy system based on thousands of trades, not eight, so until enough time passes do not draw too many conclusions from the data shown here.

Here’s a quick of summary of all the closed signals by market so you don’t need to wade through them individually, avg gain/loss is always on a per contract basis:-

ES  – 8 trades; 5W, 3L, avg win $2,198, avg loss $1,829.

NQ – 5 trades; 3W, 2L, avg win $3,008, avg loss $1,617.

ZB – 6 trades; 3W, 3L, avg win $6,344, avg loss $1,240.

ZN – 7 trades; 2W, 5L, avg win $2,055, avg loss $1,125.

DX – 7 trades; 1W, 6L, avg win $245, avg loss $964.

6J – 6 trades; 3W, 3L, avg win $6,833, avg loss $2,088.

6E – 8 trades; 3W, 5L, avg win $696, avg loss $2,143.

6B – 8 trades; 3W, 5L, avg win $1,510, avg loss $1,675.

CL – 8 trades; 2W, 6L, avg win $3,685, avg loss $4,165.

GC – 6 trades; 2W, 4L, avg win $12,155, avg loss $6,895.

KC – 0 trades; 0W, 0L, avg win n/a, avg loss n/a.

ZC – 1 trade; 0W, 1L, avg win n/a, avg loss $213.

LE – 1 trades; 1W, 0L, avg win $1,870, avg loss n/a.

 

CLOSED AS AT 8/29/14

Long 30yr ($ZB_F) 2/3 – 8/29 +$10,031.25 per contract

Long Live Cattle ($LE_F) 3/28 – 8/11 +$1,870.00 per contract

Long NASDAQ ($NQ_F) 6/26 – 8/8 +$855.00 per contract

Long S&P ($ES_F) 5/13 – 8/1 +$2,000.00 per contract

Long Yen ($6J_F) 5/21 - 7/31 -$1,850.00 per contract

Long Gold ($GC_F) 3/13 – 5/28 -$10,390 per contract

Long Corn ($ZC_F) 3/5 – 5/16 -$212.50 per contract

Long S&P ($ES_F) 2/26 – 4/11 -$550.00 per contract

Long Euro ($6E_F) 3/7 - 4/7 -$2,037.50 per contract

Long NASDAQ ($NQ_F) 2/14 – 3/25 -$610.00 per contract

Long Pound ($6B_F) 2/14 – 3/20 -$712.50 per contract

Long 10yr ($ZN_F) 2/3 – 3/10 -$640.63 per contract

Long Dollar ($DX_F) 2/3 – 2/14 -$1,035.00 per contract

Long Pound ($6B_F) 11/28 – 2/4 +$193.75 per contract

Long NASDAQ ($NQ_F) 7/18 – 1/28 +$8,120.00 per contract

Long S&P ($ES_F) 9/18 – 1/27 +$4,462.50 per contract

Short Yen ($6J_F) 11/22 – 1/27 +$1,200.00 per contract

Short Gold ($GC_F) 11/13 – 1/27 -$460.00 per contract

Short 10yr ($ZN_F) 12/6 – 1/24 -$453.13 per contract

Short Oil ($CL_F) 1/14 – 1/24 -$5,680.00 per contract

Long Euro ($6E_F) 12/31 – 1/20 -$3,325.00 per contract

Short 30yr ($ZB_F) 12/5 – 1/13 -$1,312.50 per contract

Long 10yr ($ZN_F) 10/412/6 -$1,078.13 per contract

Short Oil ($CL_F) 10/1012/6 +$4,930.00 per contract

Long 30yr ($ZB_F) 10/411/11 -$1,750.00 per contract

Short Dollar ($DX_F) 9/1911/4 -$525.00 per contract

Long Euro ($6E_F) 9/1911/4 -$287.50 per contract

Long Pound ($6B_F) 9/1211/4 +$656.25 per contract

Short Gold ($GC_F) 10/1410/28 -$7,720.00 per contract

Long Gold ($GC_F) 8/1610/14 -$9,010.00 per contract

Short 30yr ($ZB_F) 5/1310/1 +$8,906.25 per contract

Long Oil ($CL_F) 7/49/26 +$2,440.00 per contract

Short 10yr ($ZN_F) 9/49/25 -$2,328.125 per contract

Short S&P ($ES_F) 8/229/10 -$1,800.00 per contract

Short Dollar ($DX_F) 7/239/6 -$400.00 per contract

Long Euro ($6E_F) 7/229/4 +$350.00 per contract

Long S&P ($ES_F) 7/188/20 +$1,625.00 per contract

Short Yen ($6J_F) 7/87/29 -$3,687.50 per contract

Short Pound ($6B_F) 7/87/23 -$2,968.75 per contract

Short Gold ($GC_F) 4/57/23 +$22,010.00 per contract

Short 10yr ($ZN_F) 5/137/18 +$4,000.00 per contract

Long Dollar ($DX_F) 7/87/12 -$1,900.00 per contract

Short Euro ($6E_F) 7/87/12 -$3,400.00 per contract

Short NASDAQ ($NQ_F) 6/217/11 -$2,625.00 per contract

Short S&P ($ES_F) 6/217/10 -$3,137.50 per contract

Long Pound ($6B_F) 6/76/27 -$1,712.50 per contract

Short Dollar ($DX_F) 6/76/24 -$925.00 per contract

Long Yen ($6J_F) 6/76/24 -$725.00 per contract

Long Euro ($6E_F) 6/76/24 -$1,662.50 per contract

Long Oil ($CL_F) 6/176/21 -$3,160.00 per contract

Short Yen ($6J_F) 4/106/6 +$62.50 per contract

Long S&P ($ES_F) 5/66/6 +$12.50 per contract

Long NASDAQ ($NQ_F) 5/66/6 +$50.00 per contract

Short Pound ($6B_F) 5/206/6 -$1,387.50 per contract

Long Dollar ($DX_F) 5/156/4 -$990.00 per contract

Long Pound ($6B_F) 5/25/14 -$1,593.75 per contract

Long 10yr ($ZN_F) 4/55/6 +$109.37 per contract

Long 30yr ($ZB_F) 4/85/6 -$656.25 per contract

Short Oil ($CL_F) 4/185/3 -$7,390.00 per contract

Long Dollar ($DX_F) 2/254/15 +$245.00 per contract

Long Oil ($CL_F) 4/34/12 -$3,440.00 per contract

Short Pound ($6B_F) 1/244/5 +$3,681.25 per contract

Long S&P ($ES_F) 1/284/4 +$2,887.50 per contract

Short Yen ($6J_F) 11/214/3 +$19,237.50 per contract

Short Oil ($CL_F) 3/83/27 -$4,400.00 per contract

Short Euro ($6E_F) 2/273/20 +$1,400.00 per contract

Short Gold ($GC_F) 2/193/14 +$2,300.00 per contract

Long 10yr ($ZN_F) 3/1 -3/13 -$1,125.00 per contract

Long Oil ($CL_F) 1/32/22 -$920.00 per contract

Short 30yr ($ZB_F) 2/12/21 +$93.75 per contract

Long Euro ($6E_F) 12/212/21 +$337.50 per contract

 

 

Aug 26

New Highs, New Fears

There’s a scary chart doing the rounds this morning. It wouldn’t be a new high without one. Take a look:-

Let’s assume it’s well-intentioned, and it’s trying to give us some context of where we are in relation to previous occurrences. The implication is two-fold, that the markets will see a stunning reversal not dissimilar to the two previous bear markets, and whether intended or not, that we’re at that reversal point right now.

Here’s the problem with charts like this.

You could have shown this chart at any point in the last two years and its message would have been the same. What has the market done during that time? How would seeing this chart back then have helped you?

When we see charts like this we always assume by looking at the previous turning points and seeing similarities in the formation that the next one is imminent. Hindsight is a wonderful thing. I wish I could trade it.

Now take a look back at the previous data and imagine you’re seeing this chart in 1995. Wipe out what you know now. It would have looked pretty scary then too with the market at all time highs and an extreme negative credit balance level never seen before. Did it help?

You could argue the message from the chart was eventually right some 5 years and a few hundred percent later, but this is a good example of how in the business of top-calling you can eventually be right but have nothing to show for it. The cost of maintaining that position is just too great. Emotionally and financially. Only newsletter writers get to stay bearish that long and claim victory, you can’t do it with real money.

There is nothing to say the message from this chart won’t eventually prove to be right again, but the real message should be to have a plan to deal with such an eventuality rather than live in fear of it, or worse try to position for it.

Better to acknowledge the trend we’re in, and trade a method that allows you to benefit from further upside, but protects you once it’s over.

Easier said than done?

Of course.

It wouldn’t be a strategy worth following if it wasn’t.

 

 

Aug 24

Stocks To Watch

The run to new highs has not surprisingly provided a new wave of stocks flashing buy signals. Whether or not they’re actionable for you will depend on your own risk profile and timeframe. Earlier this week I took entry signals in $HD after its gap higher, and an arguably belated signal in $BRK.B which continues to act very well. I have two other positions that may trigger for me Monday which will appear on the blog at a later date should they confirm.

The main frustration with selecting positions now is that there are so many great setups you just can’t take them all. That’s a nice problem to have! For my own part it’s been exacerbated by the fact I’ve slowly been moving to a more concentrated portfolio, so at the end of last week I made a one-off adjustment, a kind of rebalance if you will, where I exited some positions that haven’t necessarily invalidated their trends ($DOW, $FDX, $F, $BAX) but I considered them sub-optimal compared to existing positions that remain strong, as well as the new signals emerging now. I also exited $NOC which remains perfectly valid, but I already have $LMT, obviously a very similar company, which I prefer in terms of of its technical position and trend strength.

I’ve got 15-20 names on a watchlist, some of which I’ll go through now, which is as many stocks as I currently already own, so anything that comes from that list as a new position will need to be exceptional. This is where you can be more demanding of the trend in order to take new signals. A good example would be $ACT:-

AlphaCapture

Strictly speaking that’s already a new closing high in place right there, even if it is only by a nickel. It’s a marginal break and a good example of what I mean when I say you don’t need to take sub-optimal signals when there are so many stocks breaking out to new highs. Believe me, $ACT was a good name last year that gave a great trade and I have some bias that would want me to get back in to this, but I have plenty of others that look better so it needs to be an unequivocal signal when it’s got competition to make it to the portfolio. It’s not necessarily that we want it to ‘confirm’, it’s just that we can afford to be more demanding. Can it follow through, can it then follow through again, when it consolidates will it give back a whole day or will it be a tight one suggesting it will move higher again soon? Is it going to drive you crazy to sit there waiting to find out? Are you prepared to watch it for a week in order to get the signal you really want, and then would you still take it? It’s really hard to do, but it’s a great discipline, and when there are so many valid signals it can be necessary to be a little late in order to be sure.

Here are some other attractive setups:-

$GBX – I love this trend, and arguably could have taken it earlier this week, you still could now, but for where and how I place my stop the risk is a little less favorable than other positions I have. If your timeframe is shorter than mine or if you place your stops tighter then it may still be good for you.

AlphaCapture

 

$INTC is another one. Beautiful trend which made a fresh high Thursday for a new signal. That swing low near the 50-day looks like a good level for a stop too, although there’s also a gap there so it might need a little more room.

AlphaCapture

 

The breakout potential for $NKE is arguably the market’s worst kept secret, this has been so long in the making. As a result this could have a lot of option plays in place around the prospect of it happening so I wouldn’t be surprised to see some volatility when it gets close and more backing and filling or a false move before it finally confirms either way. This is an example of where if your timeframe is long enough you can afford to just let it play out before you make your move, be more demanding, maybe use a weekly close instead of a daily one.

AlphaCapture

 

$GOOGL is another company I love where as long as it’s in an uptrend that meets my criteria I want to be involved. I consider it a tech ETF it has its fingers in so many pies and has so much insight into consumer behavior and technology trends. If it takes out $605 cleanly I could happily get on board with a stop down in that $571 area.

AlphaCapture

 

 

 

 

 

 

 

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