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picture of sunset in aguada, puerto rico

821x sell: LITE

If you followed the sell suggestion in my tweet on December 29th, you should be completely out of LITE now.  (BTW, because it’s more timely than a post, I’m planning to publish my sell suggestions solely on Twitter going forward, so be sure to follow me @marketchameleon.)

Although, the weekly chart still looks good, we trade using the daily time frame where the trade went against us.  The last thing we want to do is get stubborn and start rationalizing a reason to hold.  That said, you may want to keep an eye on it to see if it flashes a compelling 821x buy signal in the future.

daily candlestick chart of LITE

the big picture still looks good, but I don’t want to let a small paper cut turn into a gusher…

In the meantime, enjoy the festivities tonight and see you next year.  Happy New Year!

 

kra

821x sell: KRA

(watch video below for market recap and trade details)

KRA – sell at market.

Other 821x buy ideas:

domestic equities:
HRL – buy with a limit price of $37.92 (ex div 10/20)
ASTE – buy with a limit price of $58.89 (earnings 10/25)
MWA – buy with a limit price of $12.32 (earnings 11/2)

ETFs:
ECH – buy with a limit price of $37.45 – (Chile)
GBTC – buy with a limit price of $37.45 – (Bitcoin)
SH – buy with a limit price of $37.45 – (Inverse S&P 500)

Remember, I only track one 821x model trade at a time for educational purposes.  IT NEVER MAKES SENSE TO PUT YOUR WHOLE ACCOUNT INTO A SINGLE TRADE.  Please refer to the section on position sizing in the 821x Trading Manual.

Please read the terms of service.
kra

821x buy: KRA

(I FINALLY GOT A DECENT MIC! – watch video below for market recap and trade details)

KRA – buy with a limit price of $35.04

Other 821x buy ideas:

Domestic equities and ETFs:
VRTV – buy with a limit price of $50.17 (if KRA doesn’t get filled we will track VRTV)
PAYC – buy with a limit price of $50.13
CNCO – buy with a limit price of $9.01
BCO – buy with a limit price of $36.86
RP – buy with a limit price of $25.70
IWM – buy with a limit price of $124.21 (small cap ETF)

International ETF (emerging markets):
EEM – buy with a limit price of $37.45

Remember, I only track one 821x model trade at a time for educational purposes.  IT NEVER MAKES SENSE TO PUT YOUR WHOLE ACCOUNT INTO A SINGLE TRADE.  Please refer to the section on position sizing in the 821x Trading Manual.

Please read the terms of service.
img_4317-1280x719

821x sell: NTG

It’s been a good run, but the sun has set on our model trade.  As my family and I are out in the hill country of western Puerto Rico housesitting and taking care of our friend’s animals we received an 821x sell signal in NTG today.  Even though it appears to be oversold in the short term, I recommend selling AT LEAST half to lock in our hard fought 6% gain, which includes the fat dividend we received in August.  If you decide to hold half, I would sell it if NTG closes even one penny below yesterday’s low of $19.03.

doesn't look good but it is outside the bollinger bands...

doesn’t look good but it is outside the bollinger bands…

As far as the market as a whole, it’s at a crossroads right now.  The violent pullback of the last few days could be nothing more than a healthy retest of the breakout zone before the next leg higher.  On the other hand, we might be witnessing the beginnings of a failed breakout which could lead to a fast move lower.  Let’s continue to monitor price action for clues and stay flexible.  In the meantime, the proper course of action is to honor the sell signals in your individual holdings to both lock in profits/limit losses and raise cash.

healthy retest or failed breakout?

healthy retest or failed breakout?

After I get situated back at my place later this month, I will make a video with a new official model trade.  For now, I have a handful of 821x trade ideas that I hope you find helpful.  Have a good week!

SUPN – buy with a limit price of $22.51
ADS – buy with a limit price of $213.21
XBI – buy with a limit price of $63.54 (biotech ETF)

Inverse ETFs: (I would NOT get aggressive with these)
EFZ – buy with a limit price of $32.36 (short European stocks)
SH – buy with a limit price of $38.86 (short the S&P 500)

Remember, I only track one 821x model trade at a time for educational purposes.  IT NEVER MAKES SENSE TO PUT YOUR WHOLE ACCOUNT INTO A SINGLE TRADE.  Please refer to the section on position sizing in the 821x Trading Manual.

Please read the terms of service.
bigwinner2

breakdown of a big winner

Last week I closed out the last half of my biggest winner of the year.  Let’s take a closer look to see what lessons and tactics we can take from it and use going forward.

As I’ve mentioned before, I had a lot of success trading precious metals miners from 2008 to 2011 which, understandably, caused me to grow fond of them.  Unfortunately, this fondness had me “going back to the well” more often than was warranted, resulting in unnecessary losses.  The lesson here is to not become so enamored with a particular investment that you are ignoring or discounting the pitiful technicals.  In other words, don’t fall in love with something that can’t love you back unless you enjoy losing money!

Having gotten burned several times, I was initially skeptical of the rally when gold shot up at the beginning of the year.  Unfortunately, by the time it was apparent that this move was different and appeared to have legs, I didn’t see a safe way to get involved.  The key was to be patient and wait for a low risk buying opportunity.  The signal I was waiting for arrived on March 29th in the form of an 821x buy signal in GLD which I tweeted out.

821x buy signal

821x buy signal with obvious place for stop around $116

Seeing this, I went through my watchlist of miners looking for a good setup.  The one that looked best to me was Pretium Resources (PVG).

PVG consolidating around the 200dma

PVG consolidating around the 200dma

I entered a limit order for $5.30 a share which was the closing price on the day PVG first flashed an 821x buy signal, and got filled the next day.  After a week of consolidation, it broke out of it’s wedge formation and was up over 50% in little over a month!  Shortly thereafter, it had a sharp pullback to the 21 day ema where it put in a pivot with a low of $7.43.  When I saw that the pivot wasn’t going to hold a few days later, I sold half of my position at $7.33 locking in a nice gain of 38% on that piece.

sold half here with the pivot broken and the moving averages curling down

sold half here with the pivot broken and the moving averages curling down

A few days later, PVG gave an official 821x sell signal.  Having already locked in gains on half of the position, I felt comfortable giving it one more day to see if the closing low of $7.04 would hold.  If PVG had closed even one penny below that low I was prepared to close the rest of the position.  Fortunately, it held and proceeded to give an 821x buy signal a week later!  In hindsight, I can see that it would’ve made sense to go back to full size at this point.

PVG held $7.04 and the 50dma and then gave an 821x buy signal

PVG held $7.04 and the 50dma then gave buy signal number 2

The second move was even more explosive than the first, putting my remaining half position up well over 100% by mid July!  Then last week, it finally gave another 821x sell signal.

second 821x sell signal of this trade

second 821x sell signal of this trade

Again, because I had already locked in profits on half of the trade I felt comfortable giving it one more day to see if the closing low of $10.61 would hold.  Unfortunately, this time it didn’t, so I closed out the balance of my position at $9.71 for a gain of 83%.

all good things come to and end...

all good things must come to an end…

Putting the two halves together, I netted a gain of 61% on this trade making it my best trade of the year so far.  For reference and comparison, my biggest loser of the year was WYNN for a loss of only 6%.  Letting your winners run and cutting your losers short is the key to successfully growing your savings in the stock market.

I hope that reviewing this trade demonstrates one way the 821x trading system can be used in practice.  If you have any questions about this trade or the 821x trading system in general, don’t hesitate to ask!

bullriding2

how to ride a bull

After a year long consolidation, the market has broken out to new highs.  As I’ve mentioned before, we have to take seriously the possibility that the post Brexit shakeout ushered in a new bull market (or a resumption of the bull market that started in 2009 depending on how you look at it).  A bumpy ride higher, north of 2,400 in the S&P 5000, seems quite reasonable.

 

beginnings of new bull run?

bull market breakout?

So how do we ride this potential bull?  Sure we can buy an ETF that tracks the S&P 500 like SPY, but that would only yield average results.  To generate alpha we need to actively put together and manage a basket of above average stocks that will outperform passive index funds.

One of the most common questions I get is, “What stocks should I buy?”  Well, no matter how much I believe in a company I would NEVER put a blanket buy recommendation on ANY stock.  I only want to buy a stock when it looks like it’s ready for an IMMEDIATE move higher and there is a stop loss level close by to limit risk.  I call the system I use help me identify these optimal entry points 821x.

When I want to add a new position to my portfolio, I scan HUNDREDS of charts looking for 821x buy signals and only enter the very best looking setups.  Some of the watchlists I scan through are from paid services and others I have built myself.  However, I am going to share with you two of my favorite watchlists that are completely FREE.  Both of these lists are focused on companies that are expected to experience above average earnings growth, which is a great place to put our money in a bull market environment.

IIC 100 – the Sharp Traders site has a wealth of resources on it, but the IIC 100 in particular is a go-to list for me that I review EVERY weekend.

IBD 50 – you have to subscribe to Investors Business Daily to gain access to the most up-to-date IBD 50, however, you can get a decent idea of what’s on the list for free by checking the holdings of the FFTY ETF.

Riding these stocks is actually a lot like riding a real bull.  You are likely to take plenty of bumps and bruises along the way when a trade doesn’t play out the way you hoped it would.  You’ll also likely experience the frustration of getting “bucked off” a big winner before it makes it’s run like we did in OMN and we almost did in NTG.  If it was easy, then everyone would be doing it.  However, if you do your homework and follow your trading system, you’ll come out of this bull run with a lot more money than you had beforehand.

feelinghigh

how do you feel at new highs?

The S&P 500 closed at a new all-time high yesterday.  Upon hearing that, the average investor’s first instinct is to think that the market is topping out.  Stocks are too expensive.  Valuations are dangerously stretched.  The higher they fly, the harder they fall.   We are overdue for a crash etc., etc..

However, we here at DIY Investor know better.  Perma-bear fearmongering is as unhelpful as unchecked bullish exuberance is dangerous.  Emotions and feelings aside, here are the facts: after making it’s FIRST new intraday high in over a year on July 11th, the S&P 500 made 8 additional new highs and there is no reason to think that there aren’t several more on the way.  Only ONE of these new highs will be a long-term top.  MOST of them are just stepping stones to higher and higher prices.  That’s why, counterintuitively, new highs are bullish.

the powerful uptrend that started in 2009 is still intact

high as a kite with no sign of coming down…

If this rally continues, fears of a failed breakout will give way to a fear of missing out.  IF this happens, the market can enter a mania phase where the uptrend gains EVEN MORE momentum.  IF the last remnants of fear give way to unbridled greed, the market can explode into full-on bubble territory, which would mean we would see MUCH higher prices than we are seeing now.  When this hypothetical bubble inevitably bursts, it will end badly for those that are unprepared.  However, those of us with a plan will do very well and be able to lock in the lion’s share of our increased wealth.

Before you accuse me of smoking something, let me just say that I fully understand that this is a far-fetched potential scenario.  Nevertheless, I do believe it is one worth keeping in the back of our minds as we break out of a year consolidation to new highs.

P. S., I only provide the actual buy and sell instructions for our 821x model trade here on the blog and through email to subscribers.  Be sure to follow me on Twitter @marketchameleon for updates in between.  On Tuesday, we received an 821x sell signal on NTG, our model trade. However, I recommended via Twitter that we not close the position unless it closed below $18.10.  The stock pivoted and proceeded to put in an 821x buy signal on Thursday so far averting an unnecessary shakeout!

 

mansplits2

stay flexible

“Turn that off, it’s time to go to sleep”, my wife said.  But I couldn’t pull my eyes away from my phone.  The market that had closed the regular trading session just shy of all time highs a few hours earlier, was now plummeting faster than I had ever witnessed before.  The “expert” consensus was wrong.  The majority of British voters wanted to leave the European Union.

The “Brexit” whipsaw underscores the importance of staying flexible.  A bearish macro pattern of lower highs and lower lows that had controlled the weekly chart of the S&P 500 for most of the last year was broken a couple of weeks before the Brexit voteBullish!  The post Brexit crash sliced through TWO potential higher lows AND the 200 day moving average.  Bearish!  The snapback rally that followed reclaimed ALL of the moving averages in just 3 days.  Bullish!  I don’t think I ever flipped my stance back and forth from bullish to bearish faster.

above the moving averages bullish, below bearish

Above the moving averages we are bullish.  Below them we are bearish or at least cautious

A few weeks on, with the S&P 500 now at all time highs, it’s easy to say that the Brexit whipsaw was just a bunch of noise that was best ignored.  Keep in mind though that one of these days we may see the beginnings of a REAL crash.  Never forget that complacency can quickly wipe out all of your hard earned gains and then some.

So where does the market have the potential to go now?  The S&P 500 has just carved out an ENORMOUS bullish “W” formation visible on the weekly chart.  As I mentioned before when discussing the two smaller W’s that make up the bottoms of this larger W formation, the potential measured move is calculated by adding the height of the W to it’s top.  I calculated a conservative height that ignores the “tails” of the weekly candlesticks as well as a more aggressive target which includes the full height to draw in the rectangular “measured move zone” in the chart below.

a monster "W" in the S&P 500

a monster “W” in the S&P 500

As you can see, a move to the potential measured move zone is good for better than 220 points or 10% over the next year!  As long as the S&P 500 continues making higher highs and higher lows above it’s moving averages we will maintain a bullish stance… but as always, stay flexible.

Facing-a-Fear (2)

no need to fear a big drop

“News” that George Soros is shorting stocks grabbed headlines once again this week.  I don’t see why this is getting people so worked up.  Soros has supposedly been making big bearish bets since the beginning of the year.  He’s been warning of a repeat of the 2008 financial crisis and apparently has a 2.1 million share put option against the S&P 500.

I have no clue if George Soros is right.  However, I do know that “news” like this does nothing to help us make money.  We make money when we position our trades in the direction of the 8 and 21 day moving averages.  Right now these moving averages are rising, so we are bullish and long stocks.  In fact, this week the S&P 500 poked through the highs of last November, essentially negating the macro pattern of lower highs and lower lows that has controlled the big picture over the last year.

The only argument bears can make now is that this was a failed breakout which will lead to a fast drop lower.

failed move leads to a fast move?

failed move leads to a fast move lower?

I will grant that this is a possible scenario.  However, the weight of the evidence we have right now still points to higher prices.

If Mr. Soros and the bears turn out to be right, we will have plenty of time to change our stance and position our portfolios accordingly.  We would lock in profits and raise cash as our holdings give us 821x sell signals one by one.  We could look to move some money into other asset classes such as bonds and/or gold.  Finally, we may take bearish bets against stocks alongside Soros by purchasing inverse ETFs,

We will have sufficient early warning.

We have a plan of action.

There is no reason to fear.