$Making it While it’s Obvious

National Oilwell Varco, Inc ($NOV-oil/natural gas equipment company) opened the day down .19c from the previous day’s close.  A brief history, the day before I had been trading it long after a pullback from a break of an important resistance spot. It never bounced and I ended up losing money on it that day as the SPY sold off from the 120 level. So today when it gapped down I was ready for the short and to get my money back!

I waited for the first 15 minute candle to form, which had a range of .66c! Over half the average true range of the stock. I shorted on a pullback in the next 15 minute candle. My entry signal was a swing high on the five. I entered at .38c and covered at .12c as the stock was pausing and the market failed to make new lows.

This trade, unfortunately was my last profitable trade in the stock. After making the first trade, I said ” I just got my money back,” to my boss sitting next to me. And perhaps this why I did not make another profitable trade in this stock for the rest of the day. It was personal and I didn’t want to lose. This not a way to make big money, because you miss opportunities.

So the rest of the blog is about what I wanted to do and should have done and easily made another .50c, without much sweat. Just wanted to give full disclosure on that.

5 minute chart of NOV on April 13th.

I tweeted about going short NOV below 42 and waited for it to sell off. I saw a level from the previous day hourly at .96c, that I thought might have some significance. Apparently not as the stock broke the figure and shot to .94c. I hesitated as it bounced, wondering if it might be a fake out and afraid it might just bounce right in my face. I should have hit the bid the moment it broke.

As you can see from the chart it did nothing but go down. I entered a few breakouts along the way, but just felt that hiding around the corner was the support level. So I exited most of them prematurely. The closest support I saw was .66c, which was the low from a few days prior. It pushed right through that level and found support at .52c.

Hindsight of course is always 20/20. The original short I could have held for .88c, without ever being out of the money. I am such a “lock in the profits” personality that I have to make sure I stay aggressive while the situation is obvious. So if I get out, I must reenter.

The market has really not followed through to the downside and all selling pressure has been met with buying. However, I have to trade the charts and the setups, because when they do work out I need to be making money. I don’t get paid just to watch stocks do what I think they will do!

This has definitely been a challenge that I have been working on lately. Making sure I get involved in the right set ups, yet still finding the balance so I am not over trading. That’s all for now!

Making Money When its Available

As traders we are always looking for our edge.  Whether its 5 hours or 5 minutes we need to constantly be prepared.  This preparation starts in the morning with formulating a plan for the day.  What stocks on your list were weak/strong into the close?  What were the important levels from the previous day?  Where do you want to be involved?  All of these questions need to be answered before the opening bell, that way on the open all you are doing is following your plan.  An example of having a plan and following it presented itself in GoldCorp Inc (NYSE: GG) today. 

Going into today I knew GG was a short below $38.  Looking at the charts it was a huge level that the stock could not trade below going all the way back to Feb 16th.  GG traded below it for a little bit yesterday but could not hold.  I knew that if GG held below this number that $37 was the next level of support.  So my plan was to wait for GG to trade below $38, wait for the stock to prove it could stay below this number and then find a nice area where I could manage my risk. 

All of this played out in the first 20 minutes of the day.  GG opened lower pushed above $38 then started trending lower.  I waited for GG to push lower below the opening range knowing that there was a good amount of profit potential and entered on the first pause I saw at 37.60 with a stop above 37.60, so I had a risk/reward ratio of 6 to 1.  I booked half of this trade into momentum when the 10 o’clock number came out and held the rest when GG consolidated around the $37 area. 

They key to this trade was having the plan and making what I should have when it was available.  Everything happened so quickly that if I wasnt ready I would have missed the trade and probably gotten in at a bad spot.  We watched the entire day today traders giving away money instead of trading when things were obvious.  I will take easy .60- .70 moves in 10 minutes any day of the week.  Good luck in your trading. 

Day Traders Satisfied with Market Volatility

Today was the type of day that Day Traders far and near have been waiting for. Follow through with volume. The markets sold off hard leaving this as the worst down session in 12 weeks. Threats of a tighter monetary policy in China, Obama speaking of tighter regulation in the banking industry and many selling the news after positive earning from EBAY, Goldman Sachs (GS), and Starbucks (SBUX).

Energy stocks dropped 2.0% as oil prices were pushed to a near one-month low of $75.66 per barrel before they finished pit trade with a 2.1% loss at $76.08 per barrel. Financials were down 3% as Obama anounced plans are being put together to ensure that no bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.

Some of our newer traders’ had never witnessed this type of volatility and some even made comments that “trading is easy , when the order flow is clear and the volume is present”. We could not agree more. Trading can be easy, when you are disciplined to follow your plan and trade when the conditions are right and trade lightly or not at all when conditions are poor.

At the close of the day, we had held the 50 EMA on the SPY. We will be watching the $100.74 level in the SPY for the next move in the market. The markets have held the 50 EMA at almost every attempt to break down. If we trade below, with volume, the markets may very well get the correction that many have been long anticipating.

The $VIX climbed from a low of 18.30 to a high of 22.02.

Trust Your Instincts

On December 2nd, I wrote a blog post entitled “Let’s Talk About Gold”.  I had written that their was just to0 much talk about Gold and their were way to0 many analysts putting unrealistic price targets on the price of gold. For example, Peter Schiff, president of Euro Pacific capital claimed by the end of President Obama’s term we may see it at $5000 an ounce! I had made it clear that, Yes, Gold may indeed trade higher,based on that recent market activity tends to overshoot both upside and downside moves, however, at the time it just felt that the pullback was inevitable and I cautioned getting long at those current levels.

That being said, the current correction in Gold and gold related securities began on December 3rd, very lkely catching alot of people off guard as they believed the rally would never end. GLD the Gold ETF made a new high of $119.54 on December 3rd and made lows of $107.14 last week, trading below the 50 EMA.

After the explosive move that Gold made, it should not surprise anyone that a pullback occured and a significant one at that. Only those individuals who did not have a trading plan would have been surprised. Those individuals who let themselves get caught in the hype of it all. This pullback has provided an opportunity to get involved at current levels with minimal downside risk. That is why we always stress to our traders, “Do not chase the move”, but rather “wait for it to come to you”, meaning buy it at a level that you feel comfortable with the downside risk.  This business has always come down to Risk vs. Reward.

We feel that getting long GLD at this $108.36 level presents a great opportunity. We have positioned ourselves to take advantage of the next move, which we believe will be back up. Short term, we may get a little more selling pressure as the economy does show signs of improvement, but after the new year, we believe that we have the best opportunity to make money being Long Gold.

So, the point here is this, Trust your instincts, When it just does not feel right, meaning the stock just seems like it has gone to far, heed on the side of caution and don’t take the trade, wait for the trade to come to you.

Ready, Set, Go!

1 day and counting till Black Friday! Retailers like Walmart (WMT) , Kohls (KSS), Sears (SHLD) , Target(TGT) and Amazon (AMZN) wait all year long just for this one day.  It is the day that they are supposed to turn profitable on the year, hence the term “Black Friday”.

With the economy still struggling and in the process of exiting one of the worst recessions in U.S history, many of the retailers have started slashing prices weeks ago and some even in the summer months.  Walmart (WMT) anounced that it will match prices from any one of it’s competitiors. This has fired up the competition, causing Amazon (AMZN) to lower its prices. An estimated 134 million people will shop this Friday, Saturday and Sunday.

This all comes on the heels of last year being one of the worst year’s on record. Will they or will they not come? And if they come will they spend? Well, based on the stock prices of these companies, Wall Street thinks ‘YES”. Walmart (WMT) has rocketed upwards in the month of November. Trading from a low of $49.52 to today’s current price of $55.

Based on this move, sales better not disappoint or we are going to see alot of selling pressure enter into the stock. We believe that Walmart is the leader of the pack and if anyone was to beat expectations they would be the ones to do it. That being said, we would prefer to enter the long side after a pullback of some sort.

I know one thing, you will not see me on line to enter the store at 3am. I will happily wait a few more weeks when the crowds subside.

Happy Thanksgiving to all!