FOCUS for stock trading

I think in the past few weeks that I’ve been at Keystone, the one  resounding theme has been “focus”.  You can go into the morning, fresh and prepared (having already set your game plan for the day) and then have it all thrown against you because you lost focus (for even 2 minutes) while in the game. 

I think the past few weeks have been extremely helpful in helping me to understand what to focus on while I’m trading.

FX has been a driving factor of the markets and focusing on the USD and the EUR moving  has been extremely helpful in reacting to moves.  Making sure to focus on currencies, and broader market indices (VIX, SPY, DOW, ETF’s, etc…) at all times, have allowed me to have a greater understanding on the way certain stocks move.

It’s not to say that things are always going to play out the way you “expect them to” (green on the screen) but you could definitely limit your downside over the long run making an effort to understand and focus in on all the moving parts while in the game. That’s what I learned at least…

Liberty Global Inc. (LBTYA, LBTYC)

LBTYA/LBTYC are two stocks for the same company, just different classes. They provide voice, video, and broadband Internet services. Some of its competitors are also seeing positive order flow coming in, such as CMCSA, DTV, VIA-B, TWC, and DISH. LBTYA is a 10+ long on the charts, 10 above the 20, above the 50, above the 200.

It has been rallying from a breakout starting September 1st, 2010 and has had only 8 days since that closed lower than the open, all of which never dipped below the previous 5-6 day range. Significant volume started coming in on October 15th and since then the lowest volume day was a down day on 2.2million shares traded, while the other days usually have a range of 3-4 million shares traded. Unfortunately the ATR for this stock is only 0.67 but the beta is 1.44. Today is unfolding very bullish, it could be an energy candle.

The hourly chart looks very orderly and easy to trade, it doesn’t pull back hard or gap around much. But again this stock does not move too far, usually about 40 to 50 cents a day. If you are looking to trade this sector, which is pretty bullish, this is definitely a stock to trade, either intraday or swing trade.

The Trader Talk Think Tank

Announcing an unprecedented opportunity to learn…

We are visiting Chicago and Philadelphia!

Keystone Trading Concepts presents the

Trader Talk Think Tank

Each month in our NYC office Keystone Trading hosts and moderates a two hour networking event that empowers our attendees to:

· Discover how to assess market conditions like a professional for the upcoming quarter

· Gain insight into which sectors have the lowest risk opportunities

· Discuss ideas you have previously traded and new ideas you are considering

· Review of previous Game Plans and how Keystone’s proprietary traders and students executed those ideas with real money

· Get a glimpse into the Keystone Trading Plan and how we plan to attack the markets in the coming week

Additional topics on the schedule include:

· The most common and (most costly) stock trading mistake and how to avoid it

· How to eliminate the anxiety caused by reading your brokerage statement

· The difference between a risk only trade versus a trade with a high probability to earn money

· How to qualify to trade firm capital for Keystone (remotely)

On Wednesday October 27th at 7:00pm EDT Keystone Trading Concepts will be hosting a preview webinar for the next Trader Talk Think Tank to be held in Chicago at the Sofitel hotel on Monday, November 8th 2010.

During the Preview Webinar we will be discussing the top 5 reasons why attending the Chicago

Trader Talk Think Tank on November 8th will stimulate new ideas for you, learn how a professional trading firm allocates capital to scenarios and most likely develop some great new friendships.

Think Tank attendance has no fee with pre-registration however we normally have standing room only so there is a $75 fee at the door for those without an entrance ticket.

We strongly encourage registering with a friend or spouse!

Once again the preview webinar for the Chicago Think Tank is this Wednesday , October 27th at 7:00pm EDT, (6pm in Chicago) .

Please call 212-594-8900 to Reserve your spot Today!

$SPY in a tough trading area

Trading the $SPY for the last 7  days long has been relatively easy. Technically speaking it is text book. Large range days with good volume on rallies. Significantly lighter volume on days with small price ranges.

We rallied into the 200SMA on the daily chart last week @$111.78 and paused, with everyone looking at the same charts this created a lot of indecision. (again, perfect technical structure)

Keystone traders went home Friday with a game plan with two scenarios; what do I trade if the 200SMA holds as resistance and what do I trade if buyers some back strong and this significant level gets taken out?

Based on the light volume pause for the better part of 3 days (after the violent momentum rally) we expected a bullish day (this was not a guess it is technical analysis 101). However if we did get the bullish stampede there was an even bigger level to be aware of in the SPY at just over $113.

This $113 is the level that excites the sellers to come off the sidelines, it has been the trigger since just after the flash crash in May.

Now here is the situation you are faced with as a trader: long (being a buyer) is the correct trade, but there is limited upside potential to the trade taking into consideration this mornings gap to the upside.

What do you do? This is the zone where a lot of money is lost. The buying ideas are still valid but have less profit potential but there are not that many solid short sale scenarios.

I will ask again, what do you do?

Most inexperienced traders who feel the longs are not following through will put out short sale probes or actually in allocate capital to a full short sale position (because longs seem to have used up all their energy).

The correct play here is to be patient on the longs for new levels or better risk reward (from lower levels, which would be a flag on a daily chart) or do nothing. Doing nothing is the hardest thing to do.

Remember, not wanting to be long is not necessarily a reason to be a short seller.

Game Plan 9/8/2010

Just a quick post before the open today.  Commodity stocks were in play yesterday and look to be continuing with their strength on the open today.  I am specifically looking at US Steel (X), Freeport-McMoran (FCX) and Mosaic(MOS) today on the open.  All three are up in the pre-market and approaching important intraday breakout levels. 

X was very strong all day yesterday and is up about .50 in the pre-market and currently trading around 48.70 which happens to be yesterdays high.  If we clear that level the next resistance I see is the 200ma on the daily at 50.85 and then 51.40.  If we clear those levels 58 is the next reistance I see. 

FCX is currently trading around yesterdays high of 78.80 in the pre-market.  The level to watch is 79 which is basically the 2-day highs.  The next level to watch for resistance after that is 81.66 and then 82.20.  Longer term profit target above these levels is 88.30. 

MOS has basically been in a consolidation box for the past 15-days.  The levels to watch are 60 and 55.  Currently we are trading around 59 so I don’t think we are going to get to 60 today but I may put a piece on if I see some strength on the open with the intension of adding on above 60 for a profit target of 65.00. 

Best of luck today. 

Kyle