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Archive for August, 2008

Day Trading Technical Analysis

August 29, 2008 Leave a comment

8/29/2008

Day trading Technical Analysis:         

The Dow again ended below its weekly 200ma which is around 11,700. The Dow and the S&P put in a stellar performance this week which both indexes back tested there trend line making higher highs. Volume was extremely light with most of Wall Street on vacation. Let’s see what next week brings when volume comes back into the market.    The downside is still 10,700 if we cannot hold these levels.  This week’s economic data came in much better than expected.  Let’s see if the trend continues.

 Dow Industrials:      Support: 11,315         Resistance: 11,866- 12,100

The Dow Industrials regained its 20 ma and 50 ma . The monthly chart  still show the Dow closing negative for the month. Volume remains light .

S&P 500:  Trend line Support of 1260 – 1270-1280   Resistance at 1291 1320 1350

S&P 500 held the key support of 1260 making higher highs back testing the trend line. Next key resistance would be 1320.  

Spy:  Support 126.50  Resistance 128

Spiders broke well out of the trading range .  A close above 131.50 would be a bullish sign.

QQQQ Support 46.00   Resistance  47.50 – 48.50

Q’S back tested support this week and has yet to make higher highs.  This index has been the laggard this week.. 

Iwm:  Support 72.50    resistance 73.30

Iwm did back tested the 72 level and is now looking to take out resistance of 76.30.

XLF:  Support 19.80  Resistance 22.50

Xlf bounced off support and is now making higher highs.  If we can take out 22.50, this would be a bullish sign for the markets.

Quote of the day:

“The examination of a losing trade is tortuous but necessary that it will not happen again ”   Jesse Livermore….

Keep in mind the trend is your friend.  Have a great holiday  weekend!

 Keystone tech trader…

http://www.keystonetradinggroup.com/

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Buy the rumor-Sell the news

August 28, 2008 Leave a comment

Did you ever wonder why a company reports great earnings and the stock sells off? Well the old Wall Street adage “buy the rumor, sell the news” probably applies.

 

The saying refers to the fact that the stock market is a discounting mechanism. In other words the market tends to react to anticipated future events rather than what is taking place at the present moment.

 

For example let’s say that a company’s earnings are highly anticipated and the stock goes up 10% in the weeks prior to the earnings announcement. By the time the earnings are announced everyone who wanted to be long the stock for the earnings is already long. So that when the earnings are announced buying demand has abated and the only thing the stock can do is fall of its own weight helped by a lack of aggressive buyers and longs looking to take profits. By anticipating the earnings the market has” discounted” the event.

 

The same situation applies in reverse. If a companies stock sells of into an earnings announcement frequently it can do nothing but rally regardless of the news.

 

So the lesson is…. To get an idea of how a stock may react after a significant announcement look at what the price action has been in the recent period prior to the announcement. Think of that price action in terms of the supply of and demand for the stock.

 

Think like a contrarian and don’t get caught without a chair when the music stops!

 

 

www.keystonetradinggroup.com

Trading in the Dog days of Summer…

August 26, 2008 1 comment

Are you trying to keep busy as we plow through the dog days of summer? You are not alone. As it turns out we have been very fortunate this year in term of intra day volume and volatility. Up until this week, the last week of August, the summer has been full of news that has resulted in above average volume, and more often than not 2 or 3 intra day trends with follow through. It now seems like we are starting to hit a wall in term of volume. So what to do?

 

The important part is not to jump in and out of trades just for the sake of trading; small losses will turn into big losses, since for the most part it will feel like nothing is going on, yet you will be bleeding slowly. Have a couple of slow bleeders and you end the month on a negative note.

 

Keep yourself occupied. Review your trades over the last month. Review your ECN fees. Looks for ways to improve your trading by reviewing the last couple of months, that way when the market pick up, YOU will be ready.

Things you can do:

1-     Make sure when you review your trades you use hindsight to evaluate whether you followed your plan or not.

2-     Check to make sure you are being efficient in routing your orders

a.       Are you getting rebates when you need to?

b.      Are you paying to remove liquidity when you didn’t need to?

3-     Check your ECN fees

a.       Make sure they haven’t changed.

b.      Sometime ECNs change their fee structures.

 

I give these pointers because that is exactly what I am doing this week. When I see myself short M and less than 1mm shares have traded by 10.30am you check yourself and wonder why take a position when the volume is so low. The probability of a nice orderly follow through trade is much lower than when you have volume. The risk reward is not worth it.

 

Enjoy and get ready for September when the market traditionally comes back to life.

 

www.keystonetradinggroup.com

How Keystone Differs from The Rest?

August 25, 2008 Leave a comment

A question that i am asked quite often is what makes Keystone different from the other firms out there?

This is actually a good question and one that I never mind answering.  Both Pete and I have had the experience of trading at other firms before we began Keystone. (Andover, All-tech, Domestic Securities, E-trade, just to name a few). These experiences at the other firms is utimately what created our business model today. we took the good and bad of all these firms and got rid of the things we did not like and enhanced the positives of what we thought were good.

When I first started in the business the concept of being trained was a simple as this: There is your computer, your monitor and some buying power, go to work!  That being said, my learning curve was longer and more painful than it should have been.  I was paying as much as $20 per 1000 shares plus passthrough fees, yet, my manager would have me trade all day long regardless of the time of day, year, season or anything else.  It was not till much later on that I realized why he wanted me trading so much. He was making money every time my finger hit the keyboard.

Traders’ at keystone never experience anything like this. First of all, all of our traders’ go through a rigorous training course before ever making there first trade.  Once they start trading, commissions never are an issue. We have two different programs which are geared for different styles of trade. Traders’ must find a style that fits their personality.  Keystone only makes money, when you make money!  We actually tell traders’ to stop trading if there is nothing going on, because in fact they are trading our capital and the money is coming out of our pocket.

So in answer to the question, Keystone is different than most firms because we provide the training, the mentoring, the capital and the plan.

www.keystonetradinggroup.com

http://www.keystonetradingconcepts.com

Categories: Uncategorized

day trading with a trend filter

August 25, 2008 Leave a comment

One of the most common reasons for day trading is volatility. This volatility is what produces opportunity. The shorter the time frame for a day trader the more trades that will present themselves. The reason for this is simple, the shorter the trend the more often the trend will change.

Think about it, a five minute trend will change much more often than an hourly trend. If you want to keep losses small use a shorter trend to keep your stop loss points tighter. The downside to this is that your profits per trade will be smaller also. There is nothing “wrong” with this, it is a very consistent method of earning a living. It is actually one of the methods we teach to our ETF traders.

No matter what style or trend you choose to trade two things must be presnt BEFORE you trade. Number one is you must know very clearly which trend YOU are trading before you get into a trade so that you will clearly know how strong or weak it is (which wil help dictate leverage) and you must be able to quickly identify when it has changed so you can change your bias.

The number two thing that must be present in your plan (no matter what time frame you identify a trend) is to have a trend filter in place. This is a big part of multiple time frame analysis. Get in the habit of using a time frame higher than the one you use for entry and exit signals. In other words if you use the 5 minute chart for entry signals, ONLY trade those signals in the direction of the 15 minute or hourly trend. You should filter out any signals in the opposite direction of the higher time frame trend.

Using a trend filter you will probably be trading less but the trades will be much higher probability.

http://keystonetradinggroup.com/

Day Trading Technical Analysis

August 22, 2008 Leave a comment

8/22/2008

Day trading Technical Analysis:         

The Dow ended below its 200ma which is around 11,700. The Dow and the S&P broke out of the bear wedge patterns as indicated on the last news letter. The Nasdaq held up for the week but volume was very light. The dog day’s of summer is upon us so extreme caution is recommended when trading.    The downside is still 10,700 if we cannot hold these levels.  This week we still see weak economic data. Housing starts down 11% to 965,000.  Building permits down 17.7% to 937,000.  PPI up 1.2% and the Core up 0.7 % worst PPI since 1981.

 Dow Industrials:      Support: 11,315         Resistance:  11,700 – 11,866

The Dow Industrials broke down off the bearish rising wedge and is showing signs of further weakness.  Volume continues to be light.   

S&P 500:  Trend line Support of 1260 – 1245- 1235   Resistance at 1291 1320 1350

S&P 500 had also broke out of the bearish rising wedge. Lets see if it can hold these levels.  

Spy:  Support 126.50  Resistance 128

Spiders did break key support of 128.  Lets see if it can recapture this level today.

QQQQ Support 46  Resistance  47.50 – 48.50

Q’S have showed signs of strength and is now back testing support. 

Iwm:  Support 70   resistance 72.50

Iwm did pull back after making the double top and found support at 72.   

XLF:  Support 19.80 Resistance 22.50

Nothing has really changed in the Xlf.  It is basically chopping around support and resistance.  Watch for a break above or below horizontal support or resistance. This support is key if broken the  general market will follow.

Quote of the day:

“ Don’t try to play the market all the time.  It can’t be done,  too tough on the emotions ”   Jesse Livermore….

Keep in mind the trend is your friend.  Have a great day and weekend!

 Keystone tech trader…

http://www.keystonetradinggroup.com/

day trading during the summer

August 18, 2008 Leave a comment

For as long as I can remember day trading during the summer time was pretty much “get your trades in by 11 am and take Fridays off.” It was very common for most traders to not even bother during the summer, most focused on their golf game or took off the month of August.

That is simply not the case anymore. The volatility the last 3 or 4 summers has been fantastic. You would think that it was that way this year because of the sub prime mess but look at the energy stocks, they all had a terrific run up and a very easy to trade move back down.

The one key to trading during the summer is you may need to be a little more selective than usual, you must really focus on follow through before you start to build a position, follow through can be weak in this environment if you are not in a sector with good order flow.

We most likely will see a slow down in order flow the next 2 weeks as we approach labor day. Pick your spots and enjoy the rest of the summer. We will come out swinging after then!

http://www.keystonetradinggroup.com/