Nasdaq Closes at a 7 Year High

I also managed to sneak in almost 500 bucks worth of gains today. It looks as if my preliminary volume estimates for the Nasdaq show a small gain in volume over yesterday's performance. That is an encouraging sign.

I was impressed with the strength of Clearwire (CLWR) and ARWR. Other than that, most of my stocks consolidated gains, with both GIGM and SWHC holding just above the 50 day average. I will feel better when both stocks rise above and hold $15.00 and $14.00, respectively.

MVIS printed an ugly candle today. It will not surprise me if it gets sold hard tomorrow, although with the impending contract announcement and the momentum behind the price, I also would not be surprised to see more new highs.

Good Morning World

I sold 1000 VRTB @ $5.84 for a small gain of 200 bucks over a couple of weeks. I do not like to carry more than 5-6 positions, and right now I've got 9.

***Update*** Added 200 CLWR @ $19.52 I feel that this one is going to move up, and quick.

Sell In May and Go Away

My math shows that from the open on May 1st to today's close, the Nasdaq Composite has returned 2.5%. With one more day to go in May and the index closing at the high-of-day, its safe to say that selling this May would have really been a big mistake. Record levels of shorts tell me that many have made this mistake. As the Nasdaq needs only 8 points to trade in record territory, it is possible that the index will test the recent high very soon. Will new highs prompt the shorts to begin unwinding positions? I'm also wondering if the shorts are holding out for the summertime doldrums and the associated low volume to provide a better environment for unwinding some bets.

As for now, it seems the market wants to keep going up. I included this chart of the Nasdaq to illustrate two points. The first point is that almost all of my positions made candles today that look exactly like today's candle on the Nasdaq. The second point is that the only element that has me a tad concerned is the lack of volume in the Nasdaq today.

The exception to all today's pretty candles,VRTB, made a very ugly candle. That position will probably be eliminated shortly, as I am over-diversified, and should be reducing "diversity-exposure" (I just made that up. I hope what I mean is clear. Probably not.) and using the extra cash to add to winners. Everything else looks great, with PFWD breaking out, MVIS going parabolic, ARWR winding up, and even my laggard CLWR closing green. Oh, and I bought 100 HANS today @ $39.76, even though I hate the stock. So much for reducing diversity-exposure.

I have to admit that I'm ready for the stock gods to rip my new gains from the clutches of my hot and sweaty digits. Also, I'm not getting anything done at work. I'm going to quit this post now as not to jinx things.

If you are searching for more ideas to trade, I found Stocktiger tonight, and he has some decent setups in his video charts.

Stepping Out for a Meeting

Wouldn't you know that on a day when I'm up 4% that I've got to step out and miss the close?

I'll be back after four to update this blog about all the money I've made today! Whoooppppeeee!

Good Morning World

Well it was nice to see the bears succumb to a market gap-and-crap.

Gigm initially lost almost half-a-point, but has now filled the gap.

With my money today, I want to buy more PFWD.

Also, I established a position in ARWR, 1K @ 6.50, because The Fly is "hearing positive chatter."

***Update*** Added 200 PFWD @ $16.42

Evening Wrap Up

Well, as you can see from my Stockalicious widget, I had another killer day. The account closed today at a year-to-date high, putting me up ~9%. While that peformance is really nothing spectacular (it is beating the Nasdaq and S&P, but not the Dow), I feel like throwing sand in the eyes of the stock gods, and celebrating this recent spell of success. I will start by posting a stockalicious chart which shows my performance since I started logging all my trades with stockalicious.

Next, I want to post two charts which show my recent success at buying the bottom of a dip. Buying counter-trend has been very difficult for me in the past. I typically used to only buy strength. Lately I have had success buying short-term bottoms. If I continue to be successful with this type of entry, I will certainly need to pair it with a good system for exiting.

Finally, I want to post a chart which I really like. Downtowntrader posted this chart last week. I post it because its pretty, because I have a position in it (hey, I don't make jack from my ads, at least let me pump my own positions) and because I want someone to speculate on why the chart shows such strength when a follow-on offering of 5 million shares was just priced. Any ideas? My experience is typically that any dilution is met with selling. Not so in this case.

Patience Pays Off If You Miss The Breakout

For many traders, there is nothing more frustrating than missing a breakout in a stock. Many breakouts are explosive and catapult the stock up 5-10% above the pivot point or breakout level. Often, the temptation exists to chase the breakout. Patience may pay off if one waits rather than chasing such an explosive move.

William O'Neil recommends not buying more than 5% above the pivot point or breakout level. The rationale behind this strategy is that if a trader buys a stock several percentage points above the breakout level, he or she will often get stopped out or shook out when the stock retraces to revisit the previous pivot point. This often results in the trader missing the big move that results after such a successful test.

Let's first look at a chart of Southwestern Energy. The stock first brokeout in April, but the volume was too low to support the move. SWN then spends the better part of April and May consolidating at the area of the pivot point before it breaks out again in late May. Traders who chased this breakout were either stopped out or had their money tied up while the stock traded beneath their entry level.

The second breakout in late May is accompanied with much greater volume and catapults the stock several points past its pivot. Again, traders who chased the breakout watch as their position goes red as SWN retraces the move. However, the patient trader could find a better entry point on May 24 as the stock again tests its previous breakout level.

The next chart of Gerdau AmeriSteel Corp. shows two breakouts, both which retrace to test the pivot point before the stock explodes to make its big move. Traders who bought too high during the February breakout were resigned to watch their position stagnate for two months. Patience was rewarded for the traders who waited for a test of the breakout level. The late April breakout offers several days where decent entries could be had before GNA goes on to gain 25% over its pivot point.

Full disclosure: long SWN.

Evening Wrap Up

I am leaving right at 4:00 today, so I will not be able to post a detailed wrap-up. I will post later this evening. It looks right now as if the account may close up over 1% today. Good times!

Good Morning World

This morning I established a small position in PFWD, buying 300 @ $16.23 This one features a gorgeous chart. Hat tip to Downtowntrader for this one. You can look at the chart here.

More updates later.

***Update*** Picked up 200 shares of CLWR @ $19.17 The chart shows that stock may be coming off of a bottom after the intial sell-off of the IPO. I really like the business model, and they are just beginning to roll out their service in the Richmond area.

***Update*** Picked up 250 shares of SWHC @ $13.72 I now have a full position.

***Update*** Picked up 500 shares of GIGM @ $14.19 I'm making a pretty big bet here that this has bottomed. If it can close green today, it will make a pretty candle and a bounce from support at 14.00

Part 3. Defining My Objectives

This post will conclude my work in the “Setting Your Objectives” chapter from Tharp’s Trade Your Way to Financial Freedom.

You can read my previous two posts, parts 2 and 1, here and here.

Part 3. Trading Ideas

What kind of markets do you want to trade? Is it appropriate to specialize? Do you want to trade only liquid markets, or are there some illiquid markets you’d like to trade?

I want to focus on trading stocks and ETFs. I am also interested in trading stocks listed on foreign exchanges. While I am interested in learning more about commodities and futures, I am definitely not ready to begin trading them. As for liquidity, I will likely test my systems on stocks trading at least 100K shares as a daily average.

Do you want any conditions to set up before you enter the market? If so, what are those conditions?

This is a hard question to answer as the type of system I’m trading may determine whether market conditions allow for entry. Because I do not yet have a system, I will simply say that if I were to test and subsequently trade a long-term trend following system, I would think that market conditions would not matter greatly. This seems intuitive, but may be incorrect. A long-only or short-only system may benefit from the market being in an up or downtrend. I am also considering testing several different systems so that if one performs better under certain market conditions, I might overweight that system if the market conditions become optimal.

What beliefs do you have about entering markets? How important do you believe entry to be?

I am learning that the entry is not nearly important as it intuitively seems to be. One could randomly enter any strongly trending market and probably become profitable. One could also enter any market at anytime and have news, world events, a fund selling out, etc. cause the entry strategy to fail. However, I do intend to manage risk by testing entry strategies that allow tighter stops with reduced probability of getting stopped-out before the big move. These strategies may involve using the average true range and other measures of volatility.

Lately I have been trading counter-trend moves. Trading counter-trend used to be impossible for me as I was initially indoctrinated with the “buy high, sell higher” philosophy. While I do not want to attempt to catch falling knives, I do think there are fairly robust entry strategies that will find moves off of a bottom.

Given your goals in terms of returns and drawdowns, what kind of initial risk stop do you want? If it’s close, will you be able to get right back into the market so that you will not miss a move? [In other words, discuss what kind of stop loss you plan to have.]

This is another difficult question as I think the system-testing will identify the appropriate stop-loss. Without over-optimizing the system, I think that a short-term swing trading strategy may employ a stop which would trigger if the stock trades below (or above) previous n day’s low. I would want to use this type of stop for counter-trend trades and breakout strategies.

However, if I were to test long-term trend following strategies where I’m attempting to catch just a few HUGE moves over a year’s time, I would expect to set a looser stop to ensure I would not get stopped out before the large move developed.

It is important to consider these issues when deciding initial risk. When trading a system that is often wrong, but wins big when it is right, one doesn’t want to risk too much, as the system will often get stopped out. Similarly, one doesn’t want to risk too little, and get stopped out before the big move. I want to test these stop strategies.

All that being said, my initial risk will likely be no less than .3% of capital and no more than .75% on any position.

How do you plan to take profits? Reversal stops? Trailing stops? Technical stops? Price objectives? Contrary to popular opinion, much of your emphasis should be in the area of stops and exits.

Again, this depends on the system. For short term systems, I will explore technical and time stops. For longer term systems I want to test reversal stops. I think that for my personal psychology, reversal exits will be hard to honor, as I will have to watch profits erode a bit before the system exits. This may be hard for me.

I guess I really need to decide what type of system (long-term or swing) will be the best for me, my family, and my work responsibilities. I’m hoping that the statistics generated from rigorous testing of both will help me decide.

What do you do in terms of position sizing?

I typically start small positions, usually ~5% of account value, risking between .5% and .75% on each trade. I add shares if the trade is a winner. I also want to test the effect of position sizing on each strategy.

In conclusion, If you have been following along, I think it is becoming clear why I will need robust software to run the tests and generate the statistics required to meet my goals.

Evening Wrap Up

Well well well- someone must have forgot to deliver the memo to the dip buyers. Today saw the Nasdaq crash through moving average support. The next support level that I see is at 2520, which is also the same point as the lower Bollinger Band.

All in all the portfolio held up very well today. I was suprised by the strength of MVIS, CMGI, VRTB, and SWHC.

I added 100 shares of SWN @ $45.87 and sold 6000 shares of CMGI @ 2.395.

I will proceed with my plan as if this is another dip to buy.

Evening Wrap Up

Well it turned out to be a gap and crap kind of day after all. I still made money, but I gave back most of it by the close.

However, making money again has proven to me that patience is rewarded in the markets. Now that my confidence is back on track and my system development is moving forward, it all seems to make sense.

Tomorrow I will look to sell off CMGI, as it seems to be developing a trading range. I certainly do not want to play that game, and I do not want to sell near the bottom of the range.

Tonight I will watch closely to see how Greenspan's comments affect the Shanghai index. I wonder if Bernake ever feels like giving the old man a swift kick in the rear. I also wonder, since everyone ignored Greenspan's "irrational exuberance" remarks and continued to party for 2 years, why he even bothers to warn anyone, let alone a foreign country.

Lunchtime

And I have lots of stocks to chew on. I'm out of my meeting and in a great mood seeing the account again up over 2%. If it closes near this level, it will be a new YTD high, and may just give me a slight gain over the benchmarks. That would certainly be a bonus.

I didn't sell anything today, although I did place a limit order to sell 1/3 of my LNN position (which wasn't yet hit). I have a target for LNN, and I'm going to honor it by selling at least 1/3rd at that point.

Finally, if you've been eyeing GIGM, now might be the time to start a position.

***Update*** Sold all of my MCHX (700 shares) @ $15.49. This made a ~9% gain and about 900 bucks in two days.

Good Morning World

The future looks bright around here. 6 out of 8 positions are looking like they will gap higher at the open. Of course it could turn out to be a gap and crap type of day. Who knows.

I have a meeting at 9:30, so I'll miss the opening. Good luck out there today. It is an exciting time to be in the markets with all the indexes making multi-year highs.

Holy Guacamole Evening Wrap Up

I don't know if I spelled guacamole correctly because I had such a great day today that I really do not care. Even with GIGM giving up 6.83%, the account still moved up over 2%. Fantastic!

Now comes the time for action, or inaction. Do I sit on my hands and watch some of these gains retrace? Or do I pull some triggers tomorrow and take profits. If you follow my trades, I always sell too early. I am well aware of this. However, I have about 10% cash, enough to add to winning positions. So do I add on the pullback, or sell and attempt to buy-back cheaper? These are the questions I will be struggling with tonight.

As I consider my options, I should note that recently I have not been selling in anticipation of a pullback, but have instead been holding through the pullbacks, and adding shares. This seems to be working well.

By the way, the account is up ~6% YTD, so I am still underperforming.

Finally, I hope some of you jumped aboard CMGI on the touch down at the 20 day. While some have commented about the fundamentals of CMGI, I would like to point out that this is a purely technical play. And so far, the technical levels have not been breached.

Good Morning World

I picked up 400 shares of MCHX @ $13.99 This is just a starter position.

This is a bottom feeder play, with a bullish MACD divergence, and huge volume coming into the stock as of late.

Also, The Fly loves it, and he is seldom in error.

***Update*** Added 300 shares of MCHX @ 14.4075

GIGM Reports and Trades Down in Pre-Market

Here is the ER.

As I write this at ~9:05 a.m. the stock is down about 4% in the pre-market.

The results look promising, with multiple new launches coming this summer. It doesn't look like the weakness today will hit my stop, so I will let my half-position ride for a bit.

Evening Wrap Up

As promised, I sold 500 GIGM, half my position, at $16.09 They report in the morning.

LNN continued to move today on volume. It is getting close to my target of 36.00

Everything I own continues to look good. We'll see what tomorrow brings.

If you were following along on the SLV post over the weekend, pull up a chart and you'll see that it looks as if it might have found support at a long-term trendline. It closed up .74% today on double the average volume. This area might provide a good entry if you were considering silver.

Set It and Forget It

That's kind of how my portfolio has been running lately. I just keep adding to positions here and there, and it keeps growing in value.

GIGM reports tomorrow a.m., so I am looking to unload half my position in order to save myself from being cut off at the knees, a la AOB, should they have any bad surprises.

Other than that, you can see from my Stockalicious widget that everything I own is up, except for MVIS.

More later...

Where Do You Draw The Line?

For this installment of "Where Do You Draw the Line," we will examine a one-year daily chart of SLV, the silver ETF. On a side note, if you want to print out some very helpful ETF Guides, check out Bespoke, a very well-done blog.

I should explain that I haven't been keeping up with the current fundamentals of Silver. Maybe The Ducati can help with that.

MDawsz at Get Short posted a chart of SLV, and ruminated that the possible long-term trendline might be broken, He also pasted a link to this article which mentions that it looks as if a Head and Shoulders Breakdown has formed.

It is late and I am bored, so what the heck. I can draw some lines on charts.

My lines show SLV price at a critical junction. On Thursday, SLV pierced both its H&S breakdown line as well as the long-term trendline. On Friday, it reversed and closed back above both lines. Recently, there has been above-average volume on the down days, and very little volume on the green days. However, MACD is not showing the move down to possess a great deal of strength.

What I like about this chart is that the bears can argue the trendline was broken, and the bulls can counter that SLV closed on Friday back above the trendline.

What I hate about this chart is that many of the candles have long tails. If one chooses to draw the lines only through the bodies of the candles, then the chart will show SLV breaking its trendline last week. This ambiguity makes the trendlines less likely to be firm price points; instead, such trendlines become areas around which the price might hover.

While this chart, like many, is ambiguous, a close below Thursday's low would confirm the recent downtrend.

It will be interesting to see how this techincal picture develops.

Good Morning World

Sorry for no evening update yesterday. I did not get home until after 8:00, and then I just fell right asleep on the couch.

The only trade I made yesterday was to add another 100 shares to LNN @ 32.08

***Update*** I just established a small position in SWN: 100 @ $45.22. Hat tip to Mdawsz for this play.

***Update*** I added another 100 SWN @ $45.67

***Update*** I added another 250 to SWHC @ $13.16

Good Evening

Today I made attempts to not sell low. Yes, I should have sold CMGI yesterday. However, since it retraced today but did not hit my previous entry, I bought 2K more at 2.285. Again, this is an attempt to add to winning positions.

I also bought 500 SWHC @ 12.80 as a blow-off bottom play. I almost bought it yesterday after it made the big bull hammer off the 200 day average. I hope it makes some of you feel better that SWHC has fundamentals to go with the techincals.

GIGM had a nice day today on news that it has the licensing for a popular Sega game.

Although the Nasdaq had a nice day, volume looks like it will be lower today than during the last two down days. That is never a good sign.

Last night I spent some time exploring Tradesim. While this product looks awesome (Just over a 1K gets you Monte Carlo sims / random entries and R multiple distributions) you must use it with Metastock, which is not cheap, and requires a fairly expensive data source. I would like to hear from anyone who has used Tradesim. From what I'm finding, it is going to cost on average 2K to get good backtesting / system development software.

Good Afternoon World

Well one day after me buying it, ONSM seeks a late filing for their 10Q. This news pushed the stock down through my stop. I sold 2000 @ $2.18, losing somewhere around 250.00. That was not at all how I expected the trade to work out. This move has pushed the stock down past long-term support, so I'm glad that my stop was set. But then, surely to throw mud in my eye, the stock has reversed to close almost flat for the day.

Based on Brent's Vector Vest scan (see comments section), I picked up 1000 VRTB @ $5.64 This stock appears to be breaking out of a long base, with volume double or triple the average. Brent also recommended VCC some time back. VCC has also done well, being up today 3.25% as I write.

The market still feels schizophrenic to me, with the Nasdaq taking a drubbing and the Dow chugging on up. I've read that money is flowing into the large caps because they are liquid and will be easy to dump in a recession. I've read that real estate money is still looking for a place to go. I've read that low unemployment means more 401K money going to fund mgrs. who have to put it somewhere (lets put it in large caps since we can sell those easily if we need to). Regardless of what I read, money IS flowing into the Dow, and money IS flowing out of tech. I'm not sure I understand WHY.

I know that I've watched GIGM lose a point in two days, and I didn't sell. I know that CMGI has flashed signs of a sell off, and yet I didn't sell it either. When they are going up, I want to hold them forever. When they sell off, I wonder why the heck I didn't sell them the day before. Both would have made very successful swing trades had I sold them yesterday. Developing an exit strategy, as well as deciding on a time horizon that fits my life and personality is a must. Adding to winners makes sense to me, but it also makes sense to sell when the momo stops and the stock starts to retrace. One cannot do both.

As for the Nasdaq, a test of the 2490-2500 level seems imminent.

Part 2. Defining My Objectives

This post continues my assessment of my personal goals and objectives as outlined in Chapter 3 of Tharp's Trade Your Way to Financial Freedom.

Part 2. Defining Your Objectives

"This section is probably the most important part of developing a trading system."

Objectives for Individuals

What is your advantage or edge in trading? What is the particular concept that you are trading that gives you an advantage?
I have successfully traded several different strategies. I have the most experience with trading breakouts. Over the last 9 months or so, I have had some success buying pullbacks to the breakout level, or to the moving averages. I am also experimenting with trading counter-trend strategies. I’m not sure whether any of these strategies provides me an edge currently, as I’m constantly adjusting my time frame for exits. For example, if a stock breaks out, moves 15% in one day, I am likely to take half or all my profits and move on. However, if a stock moves 15% over a week or two, I am more likely to hang on to it rather than taking profits. Often I give back a good percentage or take a loss as the stock retraces. One of the biggest factors in my lack of recent success I believe is that I’m trading without a clear strategy for exiting the trade.

How much money do you have personally? How much of that money could you afford to lose? For example, most funds stop trading at 50 percent. How about you? How much risk can you afford to take on a given trade.
My personal trading account has just over 100K in it. This is money that I could conceivably lose without causing any tangible damages to myself or my family’s lifestyle. I could afford to lose all of it. However, I do not have a strong stomach for loss, and I think that losing more than 35% would make me consider stopping trading. If I knew from testing that my system may have a drawdown of as much as 50%, then I could feasibly deal emotionally with such a loss, but I know it would be difficult. On any given trade, I typically like to limit risk to .75% of capital.

How much money do you need to make each year? Do you need to live off that money?
I do not need to make any money trading each year. My full-time job and my wife’s full-time job pays the bills and provides for a comfortable lifestyle. I do not need money made from trading to live. However, I do hope in the future to be able quit my occupation and take up trading for a living.

What if you don’t make enough to live off it? Can you make more than you need to live off of so that your trading capital can grow? Can you stand regular withdrawals from your trading capital to pay your monthly bills?
I do not need to live off it. I can absolutely let my trading capital grow. In the past, I have used the profits to pay off revolving debts and buy nice things for my family. Now we are virtually debt-free, except for one student loan and a mortgage. I will not need to make regular withdrawals from my trading capital to pay monthly bills.

Are you being realistic, or are you expecting to trade like the best trader in the world? For example, suppose you have a very good system that is right half the time and gives you profits that are twice as large as your losses. In that system, just by chance, you could still easily have 10 losses in a row. You system is still working as expected, but you could easily have 10 losses in a row. Could you tolerate that?
I think I am being a bit unrealistic. I am expecting double-digits returns, which I have heretofore been able to achieve. If I new from extensive testing that my system might generate 10 losses in a row and still be working, I could absolutely tolerate that. For me, I just need to trust that the system is robust, and have a general idea of various possible outcomes.

Do you have time to trade short term?
Yes, I can swing trade fairly easily.

How much social contact do you need?
I love social contact. It is something that keeps me happy, healthy, and grounded.

Can you work by yourself day after day? Do you need one or two other people around, or do you need a lot of other people around? How much do those other people influence you?
I would not be able to work by myself day after day. I would enjoy having at least one person around, but several or more would be better. I would not say that I need a large number of other people around. Very few people influence me unless I perceive them as being intelligent, perceptive, creative, talented, or possessing something that will help me to achieve my goals.

In summary, what do you expect to make each year as a percentage of your trading capital?
25%.

What risk level are you willing to tolerate in order to achieve that?
I am willing to accept as much as a 25% drawdown from starting capital to achieve that.

What is the largest peak-to-trough drawdown you are willing to tolerate?
35%

How will you know your plan is working, and how will you know when it’s not working? What do you expect from your system in various kinds of markets? Trending? Consolidating? Highly volatile?
I will know my plan is working if my winners are larger than my losers, if I have a positive expectancy, if my emotions and psychology are calm throughout the process, and if I have time to maintain the system without severely impacting my full-time job and home life. I will know its not working when my losers become larger than my winners, when I develop a negative expectancy, when I lose conviction in the system, when I trade frantically or without a clear edge, or when my family or professional lives begin to suffer. I expect to design several systems to work in both trending and consolidating markets. At this time I’m not sure that I want to trade highly volatile markets.

Evening Wrap Up

The account closed down a tad today, due mainly to losses in URZ and GIGM.

Which way is the market going to go? The Nasdaq continues to find support at the 20 day average. The large caps continue to go up. Something still feels odd about the whole affair, so I'm not doing very much trading.

That being said, I did buy 2K of ONSM @ $2.31 This is a counter-trend play. It is hard for me to trade counter-trend, but it is something I've been wanting to experiment with. The stock is sitting on support, but trading below the 10, 20, and 50 day averages. The MACD is rising, and the Stochs are showing a buy signal. Maybe I should just post the chart? Okay, I will. This trade should provide a risk / reward of 5:1. Strangely, other chart programs do not show the tall candle yesterday as it does on Stockcharts.

System development continues, but at a very slow pace. I'm still working hard around the new house, and not finding much time for research. So it goes. Look for a post this evening with more goals and personal objectives.

Good Afternoon World

I was out of the office all morning and early afternoon for a meeting. When I got into the office and got the computer fired up, I got online just in time to see my stop get hit in URZ, selling 500 @ $6.34 I held onto this because I really thought it would find support at 6.50 and at the lower Bollinger Band. Well it didn't! Oh well. This was a small position.

I do not have much else to report at this time.

Evening Wrap Up

Well today ended pretty well for a Friday. I am pleased with the performance of all my positions. Even my laggard, URZ bounced from support, closing up .4c and making a doji for the day. I have been doing well adding to positions by using limit orders, and I have done very well buying near the LOD rather than the HOD.

I received confirmation from the Van Tharp Institute to continue using content from the book Trade Your Way to Financial Freedom to flesh out my goals and objectives. I hope to get at least one more post up on that topic this weekend.

Good Late Morning World

Well I should have added to that GIGM position yesterday. Oh well. I added another 200 shares at $15.99. The way this is running, I'm wondering if it won't hit $17.50 before earnings. We'll just have to wait and see.

It looks like the Nas is going to bounce strongly from the 20 day average. If the bounce holds, today will be a good day to add to positions, and I think Monday might be the day to initiate some new positions. I may add another 100 shares to LNN.

I'm disappointed in the action in URZ, but I will maintain the position unless my stop is hit.

CMGI is looking decent again, but the way it has been selling off in the afternoon keeps me apprehensive about adding any here.

***Update*** Added 100 shares of LNN at 31.71. This stock is retracing on low volume, and pausing right at the 50 and 200 day averages. I feel there continues to be a good risk reward here.

Good Late Morning World

Is this the pullback? Or will the dip-buyers be out in force to push the indexes back up before the close? I expect that the Nasdaq will venture down near the 20-day average before resuming the uptrend.

Most of my positions are holding up well in the downdraft- GIGM, MVIS, CMGI, and now LNN. It might be a good day to add to these positions. URZ is down a few percent, but not close to my stop yet. I hope it holds because I have a feeling the URRE earnings report will be a catalyst, one way or the other.

I did pick up an initial purchase of 100 LNN @ $32.15. I tried to get some yesterday but the stock wouldn't slow down. My stop for this purchase is just under $31.00. I have a target of $36.00, which gives a 4:1 reward to risk.

While I'm typing this I see CMGI is exploding upward on volume.

***Update*** I just bought 1000 QQQQ @ $46.20 from a bounce off the 20-day average. I will more than likely close this position out today. Stop is at 46.09.

***Update*** I trailed my stop, and then got stopped out on the Qs, 1000@ 46.2114, for a net loss of 3 bucks. I have to say the Nasdaq's inability to bounce strongly from these levels has me a tad concerned.

Evening Wrap Up

Gains in GIGM, MVIS, and CMGI closed the account up over .5% today. I did not add any shares to any positions for two reasons: GIGM and CMGI are both above the upper Bollinger Band, and I did not want to trade with the Fed. speaking.

Nasdaq volume today was more than Monday and Tuesday's volume, and was above average. It seems to me the market will attempt to close at a new high tomorrow.

I believe that URRE reports earnings tomorrow, which will probably influence trading of URZ, in which I have a small position. URRE's chart is very similar to that of URZ. I like the consolidation of URZ at the 20 day average, with decreasing volume, and will add to this position on strength, and especially if it completes the consolidation and looks to break the blue line I've drawn.

MVIS reported earnings this evening. The lack of after-hours trading tells me it was a non-event. MVIS's chart is beginning to look interesting again as it looks like a volatility squeeze is building. With anticipation of a major contract in the air, I'm guessing the volatility squeeze will lead to another run towards $5.00, although the high number of naked shorts (it is regularly on the SHO lists) always leaves me unsure of the direction of the next move.

Good Morning World

Thanks to the Goddess for a wonderful happy birthday wish.

I have to say she certainly captured my best angle when she snapped that picture of me.

As for today, it looks as if my sale of QID was a little premature. However, anything can happen on the days when the fed speaks, so I will more than likely sit on my hands today. If the markets continue to follow through on a healthy pullback, I may add more shares of GIGM and CMGI.

I have had a very nice email exchange with a staff member at the Van Tharp Institute, and am waiting approval to continue publishing my objectives and personal assessment from Tharp's Trade Your Way to Financial Freedom. The Van Tharp Institute website has some wonderful resources. I suggest you check it out if you have not already. Download the trading game and give that a whirl, as well. It is a blast to play.

I have meetings most of the day today, but will try to get back and make some updates.

Evening Wrap Up

What a bullish day! The Nasdaq bounced firmly from ~12 day moving average to just barely close in the green. While I do not have the final volume numbers, today's volume looks to surpass yesterdays, but will probably still fall below average.

I sold my QID at the close- 200 @ 47.38, taking a miniscule loss. While the setup I entered yesterday still has merits, I am not going to bet against the strength of this rally. Furthermore, everyone expects CSCO to report good numbers this evening, and I do not want to face the QID gapping down tomorrow morning. In fact, here are the numbers coming across the newswire:

DJ Cisco Systems 3Q EPS 30c Vs 22c>CSCO
DJ Cisco Systems 3Q Sales $8.87B Vs $7.32B, +21%>CSCO
DJ Cisco Systems 3Q Net $1.87B Vs $1.40B, +34%>CSCO

and the market is responding AH by pushing CSCO down almost .75cents from its close. The earnings reports often make for volatile trading after-hours. We'll have to check later this evening after the conference call to see how things shake out.

Anyway, GIGM, CMGI and MVIS all outperformed today, which netted me over 1K, my biggest gain in a couple of weeks.

As time permits, this evening I will continue with my objectives and personal assessment.

Good Morning World

Is this the beginning of the pullback? Who knows. As I write this the Nasdaq is sitting on the 10 day average. I want to add 200 more QID, as I expect the Nas. to make the trip back to the 20 day average. I will look to add more if today's opening gap gets filled. My QID target is 49.00 and above.

MVIS had some news today, but I do not have time to link to it.

CMGI is still holding pretty strong. I was waiting for a dip to add 2K shares. We'll see if that happens.

Today I'm going to be slammed at work. I'll try and update this afternoon.

***Update*** Bought 500 URZ @ 7.06 with a stop just under $6.50. I'm testing the waters here with a small position.

Setting My Objectives: Part 1. Self-Assessment

Setting My Objectives

An over-used axiom is “Fail to Plan; Plan to Fail.” I will use part of Chapter 3 from Tharp’s Trading Your Way to Financial Freedom to begin developing my plan.

Part1. Self Assessment

How much time during the day do you have to devote to trading?
I can check the markets several times a day, devoting as much as an hour while the markets are open. During the evening I usually can devote at least an hour.

When you are trading, how many distractions can you expect to have?
Many.

How much time do you expect to have to devote to developing your trading system, to doing your personal psychological work, and to working on your business plan for trading?
I can devote at least an hour a night and several hours over each weekend. I am willing to maintain this schedule as long as it takes.

What are your computer skills? What skills do you need before you begin this trading adventure?
I have no programming knowledge. In order to program a system I will either have to hire a programmer or find a system that uses easy language, preferably with a large forum and support group. I am adept at googling and feel fairly confident that I can find help with basic programming. I have basic to moderately advanced skills using Excel spreadsheets.

What do you know about statistics?
I know more about statistics than the average person. However, it has been almost 10 years since my last Stats. and Probabilities class. I have used basic statistical analysis in graduate school to evaluate research. I enjoy statistics and probabilities and am slowly building a trader’s library on the subject. I am at the point where I am ready to begin integrating some of my statistics knowledge to make better trades.

How would you rate your market knowledge?
I have traded enough to develop a thorough understanding of the stock market--how to place orders, how to use indicators, and how to use a trading platform. I can read a balance sheet. I have limited knowledge trading options, and no market knowledge concerning futures and commodities, although I understand what moves these markets. I have no knowledge of international markets, or how I would trade in these markets.

What are your psychological strengths and weaknesses, especially in terms of trading system development?
My psychological strengths are that I’m very in touch with my own feelings; I’m very honest with myself, and I do not typically have much of an ego to feed. I am very open and aware of my own biases, and I am absolutely committed to conquering them.

My psychological weaknesses are typically a lack of confidence in my trading and methodology, and a difficulty in weathering drawdowns. I can also sometimes be sentimental and too emotional.

How about your strengths and weaknesses in terms of personal discipline.
I often stay up too late at night, and consequently can not perform at my best during the day. I am not very organized, and have problems keeping up with minute details. I tend to procrastinate on things I do not like and obsess over things I enjoy. I have several cigarettes a day during the week, my diet is not extremely healthy, and I do not exercise enough.

Do you tend to get compulsive (that is, do you get caught up in the excitement of trading), do you have personal conflicts in your family life, at your job, or during past trading experience), or do you have any emotional issues that constantly crop up, such as fear or anger?
I do tend to get compulsive, and impulsive, and make terrible trades because of that. Also, when I see the markets screaming up or down, and I see other traders making money, I tend to want to jump right in so as to not be left behind. I have no personal conflicts as my marriage is wonderful, my children are smart and happy, and I am very successful in my career. I do have some emotional issues that constantly crop up, mainly fear, and a need to create excitement. When the fear and the impulsivity hit simultaneously, I often am overwhelmed and make bad decisions.

Based on your personal inventory, what do you need to learn, accomplish, or solve prior to beginning trading? How will you do that?
Since I’ve been trading full-time for over 3 years, I feel that there is not much that I need to learn about the mechanics of the U.S. stock market. I would like to learn how to access international markets, how to develop basic options strategies, and how to trade futures and commodities. I also need to begin learning basic programming, and choose software that will help me backtest and perform statistical analysis of my strategies. I need to increase the detail and frequency of my journaling. Learning not to trade without a definite plan for entry and exit, and not trading to create excitement will be something that I must accomplish. Finally, I need to develop a strict routine for the morning and evenings so that I have time to research, journal trades, and develop my system.

How will I do all that? Part of it I’ve started right now by completing this self-assessment. I will talk to my wife about developing a schedule that will meet her needs as well as those of my children and still allow an hour or two a day to research, read, journal, and continue system development. I will continue to use my blog as a log, a sounding board, and a tool for marking progress and short-term setbacks.

Evening Wrap Up

Well I actually squeezed out a profit of a few hundred bucks today, despite MVIS continuing its slow bleed. I've been rewarded by sitting on my hands with GIGM, as it finally began to move again.

My readers may have noticed that I'm slowly dipping my toes in the trading water again. Last week I made 2 purchases of CMGI, both of which were instantly profitable. That helps get the confidence back. Today I picked up some QID, not because I think the markets are going to crash, but simply because the MACD is not confirming the price. Both of these trades have a clearly defined risk / reward. I've got stops set, and I'm just going to let things play out.

Finally, I have never received or been denied permission to reprint portions of a book on this blog as I use it to map out my system development. Therefore I will begin this endeavor shortly by writing out my objectives in an effort to determine whether I will be designing a system for long-term trend following or short-term swing trading. Honestly I'm not sure which I want to do (both maybe?) but I hope that some soul-searching through writing will help.

QID Presenting Bullish Divergence

I'm not calling a market top here folks. I would just like to point out that short-term the QID is severely oversold. A buy at these levels, with a stop under 47 and a target price around $49.50 provides a pretty good risk to reward ratio of 4:1. The target price will bring the QID back to its mean, and a prior support level.

***Update*** I'm putting my money where my mouth is. As you know, I'm trying to quantify my trades so that I can test what is working. I'm taking this trade as a bottom feeder setup, as the ETF is making new lows, but the MACD is not confirming the price. Furthermore, the Stochs are extremely oversold. My stop is below $47, and I will look to take profits above $49.00 I'm now long 200 QID @ $47.50

GIGM Update

I'm hearing through the grapevine that GIGM was featured in Investor's Business Daily over the weekend.

My weekend being crazy and filled with frothy mugs, family, and smoked pork, I didn't get to pick up the weekend edition. However, the stock is up in the pre-market.

I don't have time to post the chart, but GIGM has been consolidating gains around the 20 day average, and may be looking to run into earnings.

***Update*** I added 300 shares of GIGM @ $14.97 This is my effort to add to winning positions. If GIGM surpasses 15.00, I will look to add more on any retest of this area, before earnings.

An Email From Stockfetcher

I sent an email to Stockfetcher.com asking them if they had plans to
expand their backtesting capabilities. The following is their response.
The inability to backtest more than two years, and the inability to backtest
during a bear market is a fatal flaw. I can only guess that either their
subscribers or the company itself does not truly understand how useless their
service is without allowing backtesting over a much greater span of time.
I am not-so-secretly hoping that if enough potential subscribers or current
subscribers ask for expanded backtesting capability, that Stockfetcher will give
it greater consideration.

***Edit*** I should qualify what I mean by "useless." I am seeking development
of a longterm trend following system. Not being able to test over a long period
of time makes Stockfetcher useless to me. However, for short term swing trades
of a few days to a few weeks, their backtesting service may be very valuable.
If cornered, I would still argue that stocks will move differently 3 weeks after
an entry point in a bear market than they will during a bull market. Perhaps
Stockfetcher could include 2000-2001 in the periods covered by backtesting to
provide their users a downtrending market to test strategies. I would expect
that anyone testing short strategies is consistently stymied testing from
2002-2007.

Hi,

Thank you for the feedback. StockFetcher does limit a single back-test
to 2 years; however, the period covered by StockFetcher backtesting is
2002-2007 (i.e. you can test over any 2 year period in that range.)

Due to various performance requirements, at this time we do not have
plans to extend our backtesting period beyond the existing 5 years.

If you have any additional questions, please do not hesitate to send us
an email.

Thank you,

Tom
StockFetcher.com Support
Vestyl Software, L.L.C.

Evening Wrap Up

The account closed up a smidge today.

My parents arrived this evening and will be staying with us through Sunday. We always have a big party every year on or around Cinco De Mayo. We currently have 140 RSVPs, so there is a good bit to get completed so that it can be a memorable occasion for all. I am telling everyone this because my blogging activity may be light for the next few days.

Has anyone noticed all the volume coming into the Nasdaq since it broke out?

CMGI Looking Good Here

CMGI is one that has been on my watch list. For a nice chart of the issue, check out Downtown Trader.

Today CMGI looks like it is breaking out on volume.

Good Morning World

I can't begin to explain how good I felt coming in to work today and not having to deal with work stress and the stress of managing positions. I think part of my problem is that I just really need a break from active trading.

I'm still testing and demoing system development software. Last night, while I was over at Filtering Wall Street, Marlyn mentioned using Stockfetcher to test some strategies. If you are interested in quantifying your ideas, you should really check out what the Fetcher. It is neat. My only beef with the site is that it only allows for backtesting 2 years. I feel that this is a significant limitation in their product. I intend on emailing the company and finding out if they plan on extending the amount of time available to backtest. If they would extend the amount of time to say 10 years, I would pay the fee for their service in a second.

Keep the emails and comments coming about system development, and anything else you want to talk about. Additionally, anyone who is comfortable enough to share their system or strategy with me or my blog is encouraged to do so. The discussions of the last few days have been very very helpful to me, as many of you have struggled with similar issues, or are currently struggling as I am. I'm not meaning to turn this site into a love fest, but it is really cool for the trading community to be able to bounce ideas around.

Evening Wrap Up

Well I lost more money today, but the hell with it. At least MVIS went up. I'm still up for the year, by almost exactly 1 grand. That gain should pay for about half of the amount I need for the software I am considering for systems testing. I'm feeling this system development might be more interesting for everyone to read about than I had initially suspected as it seems that very few bloggers are trading a system.

It is really ridiculous that losing money has brought me to a moment of clarity. It is even worse that Shortdabull was right when he said I should have stuck to my guns 2 weeks ago and stopped trading when I sold everything off that one day. I guess while I'm making money that everything is rosy, and there is no need to consider alternatives. It is an expensive lesson, but a valuable one as long as I turn the losses into something positive. The one thing that I really have going for me is that I do not mind taking small losses. With all the ridiculous trades I've made this year, the only reason I've not blown the account up is because I can easily admit I'm wrong and take the loss. I guess that may be the silver lining of this year so far.

I'm really glad that all my bloggy friends stopped by here today to simultaneously bust my balls and add encouraging words. It really does help to hear from everyone.

STKL Killed Me Today

My stop just hit on STKL, selling 1500 shares at 12.07 This really hurts as I had unrealized gains of 600 bucks this morning, and now I have realized losses of about the same amount. Nothing like a 1200.00 swing to ruin a Tuesday.

My stop also took me out of NTRI, selling 200 @ 60.16

My account is however still up for the year, but just barely. The only positions I have left now are MVIS and GIGM. While this has been a painful couple of weeks, watching my account lose 7% has convinced me that I need to develop a system. The amount of damage my psyche alone has taken from this hit is almost worse than losing the money. I have to have a system that I trust so that I can trade with confidence again.

Good Afternoon World

Well it is another bloody day in Woodshedder's World. STKL has finally decided to make a trip back to the moving averages. That loss in unrealized gains should just about cancel out any profit I may have had from MVIS beginning to go back up.

With the exception of adjusting stops, I am not trading today. I have not set a stop on MVIS.

I am still waiting to hear if I may post and write about some points made in a couple of books I'm reading about system development. Should those authors give me permission to use some of their text, I will be off to the races.

Also, if anyone out there is testing systems, I would love to hear what software you are using, and what your opinion is of said software. I am considering a purchase of Trading Blox Professional www.tradingblox.com but am still exploring other vendors. Any comments, email, help, etc. will be appreciated as I do not really want to spend $2000.00 on software if it isn't going to be helpful in my quest.