What I’m Thinking — Week Beginning 15 September 2014

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With a full slate of economic announcements, a 2 day FOMC meeting and a Quadruple Witch on Friday, the markets are looking forward to a week of data points and, more than likely, activity.

I just posted an update on my current thinking about some of the major indices including a few price levels to watch.  I also included a new Stalk Candidate.  Members can see the video here.

Have a great week of trading or whatever you find yourself doing until you CAN trade…

The Trader

 

 

WHole Foods Market update as of 5 September 2014 close

I completed and posted an update on Whole Foods (WFM) as of Friday’s 5 September 2014 close.

You can find that update here.

I also tested the playback function on one of my trading platforms.

You can find that “experiment” here.

Have a great trading day/week.

 

How To Control The Future

Two words… you can’t (nor can I).

You can’t even predict the future (nor can I).  And you know what else?  Blustery assertions and proclamations  aside, neither can anyone else.

Fortunately, there’s no need for either skill set in life or in trading/investing.

 

No You Just THOUGHT You Had Plans

The Labor Day BBQ my family was planning to attend was cancelled at the last minute.  I was initially annoyed because the late hour “disinvite” effectively foreclosed  alternatives for entertaining my boys for the day.

Hmmm… What to do…

Turns out, providence was smiling on us as the day started off hot and muggy and proceeded to get hotter…

Much hotter.

simple trading principles

For the military time challenged among you, that’s 100 degrees Fahrenheit at 6:32 PM.  Tepid to say the least… And, incidentally, I do not live in Arkansas, Arizona, Mexico, Sub Saharan Africa or Hell.  100 degrees at 6 in the evening is NOT usual… nor fun for that matter.

I think the technical term for any avoided outdoor event today is “good miss.”

So why am I burning your eyes (no pun intended) with this unsolicited personal anecdote instead of talking about where the market is going this week?

2 reasons… Well, 3 actually, but if you don’t “get” the first 2, the third doesn’t matter.  The reasons are:

  1. I have no idea where the market will go this week (although it’s possible to have a pretty good guess) and
  2. I don’t need to know where the market is going this week (or tomorrow for that matter) to make money
  3. The sooner 1 and 2 become a part of your investing DNA, the sooner you will find yourself on the path to consistent profitability

Fortunes are spent and lost (and liberty taken I might add) all in pursuit of increasing the certainty with regard to some future event.  And not only is it not possible, it is entirely unnecessary.  One’s reaction to events is far more manageable and determinative than any attempts to  control the inherently uncontrollable could ever be.

The Trader’s Point

In trading as in life, you can’t know (predict) the future… and you certainly can’t control it in any meaningful (or legal) way.

The good news is that you don’t need to acquire any such capability.  You don’t need to know what life or the market will give you.

“One’s reaction to events is far more manageable and determinative than any attempts to  control the inherently uncontrollable could ever be.” — The Trader

You need only know that you will respond in the best way possible under the circumstances.

In other words, if you know exactly what you will do at different price levels in a security is there any real reason to fear volatility?

Survey says?

Hell to the no…

 

Lemons to Lemonade

So how did we respond to having no Labor Day plans at the last minute?

We hit the pool early and spent the better part of the morning and early afternoon there.

We then had an early (inside) dinner at one of our favorite local restaurants.

And I avoided heatstroke.

Couldn’t have turned out better had I planned it that way all along.

 

 

 

How To Beat Goldman Sachs

The Power of Tips
As the graphic above suggests, there are many who believe that investment bank Goldman Sachs rules the world… is on the right side of every trade… and that the firm gets there by cheating.

In the interest of full disclosure, I admit that I spent 8 years employed by the bank in a single division. What I learned during my time there is that there is not widespread cheating (at least when I was there) and the firm is not even close to always right. Admittedly, my experience may have been colored by my employment in a single division as well as the fact that it’s not possible for an owner to know everything about his business… to say nothing of a mere employee. Still the losses that we took at times made it clear that we weren’t always right and that the firm’s strength lay in its management of risks as opposed to the avoidance of risk by cheating.

What’s my long-winded point you ask?

Goldman Sachs was full of smart, talented, driven folks and the company managed to get quite a few things wrong (still does). In May 2013, I posted an analysis of 11 stocks that Goldman analysts deemed significantly “overvalued” on a fundamental basis and thus likely to retreat in the near term. The post was a video of the Business Insider article detailing Goldman’s calls as well along with a look at the current charts and my thoughts on the matter.

As I write this it’s 31 August 2014.  Take a look at the video in the post and see what you think about the fundamental versus price argument.  Neither is perfect… however, using price as the ultimate determinant is far more effective and consistent than using “just the fundamentals.”  That is, of course, my opinion.  Feel free to disagree but please send me your thoughts, comments and criticisms.

The Trader

P.S. One more thing… I can promise you that Goldman lost very little money where they were wrong.  The secret sauce at Goldman Sachs is not that they cheat… but rather that the firm does not stay wrong for very long… ever.  You could do worse than following their lead…

simple trading, GS

 

TAOST Market Thoughts 18 August 2014

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I’m on a “mini vacation,” but have gotten a ton of questions expressing confusion about what’s going on in the markets right now.

As you can see from the screenshot above, price on the DIA bottomed out right at previous support (from back in May) at $163.13 and proceeded to bounce.  A good buy signal flashed on Monday 11 August 2014 as price took out the high of Friday 8 August 2014 (165.38).  In truth, I would have been interested in buying the previous day’s high because of the Support Level combined with the rising MACD Histogram noted by the arrow.  Whichever long entry was taken, that $163.13 level would be the initial stop loss level.

Obviously, the trade would be working out quite well now.  If price can make it through the top of the Magnet Zone (denoted by the top left pointing arrow… at the 61.8 Fib Level), I suspect we can start looking for a new assault on the all time high at $171.32.

Whatever way price proceeds, be sure to keep that protective stop in place a little below 163.13

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Simple Trading Pre-Earnings Chart Review – FB – 21 July 2014

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FB is scheduled to report quarterly earnings after the close on Wednesday 23 July 2014.  If I traded single stocks, I would still be long at least a portion of a long initiated here.  Facebook has maintained the uptrend established in early 2013 basically intact since that time.  It now looks set to easily breach the $72.59 (especially with today’s positively received new product announcement) level in short order. If indeed that happens, remember “Bull Markets have no resistance.”

That said, anything can happen in the stock market.  If Facebook’s price does reverse there are multiple support levels not least of which are around the $62.00 and the $55.00 level (respectively).

Which way will price go?  Hold your finger up to see which way the wind is blowing… you get the rest.

Protect your downside.

Good trading

 

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Simple Trading Pre-Earnings Chart Review – AAPL – 21 July 2014

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AAPL is scheduled to report its quarterly earnings after the close tomorrow 22 July 2014.  I’ve talked about AAPL a few times in the past… you can see a couple of those posts here and here.

Of course, I have absolutely no idea how the company’s numbers will look, nor, more important, how they will be received by the market.  I do however have a couple of thoughts on price points that may be of interest leading to and following the announcement.

First, last week’s price action engulfed the previous week negatively and closed down for the week albeit after recouping some of the losses.  As a result, last week’s price extremes ($97.10 High & $92.57 Low) offer interesting initial price levels to watch.  A break through the high resumes the uptrend and how high is anyone’s guess.  A break through $92.57 is a bit more interesting if only because it brings the 10 Week EMA and then the recent Minor Swing Low at $89.65 (Support 1) directly into focus as potential areas of Support.

A break of both those support levels will turn attention to the 20 EMA around $87.00 and Support 2/the 40 EMA around $82.50.  Incidentally, the Support 2/40 EMA area also happens to fall squarely between the 50% and the 61.8% Fib Retracement Levels of the January 2014 Low to last week’s high move.  Given my affinity for price clusters, that is perhaps the most interesting area on the chart.

The January low obviously represents Major Support, but if price makes it to that level in the near term, there’s a good chance all hell has broken loose, so your concerns would likely be better placed elsewhere.

Good trading.

 

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Simple Trading Stalk Candidate Update – SWKS – 18 July 2014

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SWKS reported and guided higher yesterday sending the stock on a run this morning.  I first wrote about SWKS on The Art of Simple Trading Facebook Page in February 2013.  I worte about it again on 2 September 2013 and 22 January 2014

The stock has done extremely well over that time period.  As a result, the question becomes (as ever)…

What Now?

In the paraphrased words of Nicholas Darvas, “there’s no reason to sell a rising stock.”  However, since prudence is the better (wiser?) part of valor, it might make sense to scale out of a portion of your position… assuming of course you have on more than a single share, contract, etc.  Selling half and sitting on the balance with a stop down around $34 looks fairly logical…

Alternatively, you might consider selling the whole position and then patiently stalking the name for a good reentry.

Whatever you choose, make sure it is based on sound trader logic… and then stick to it.

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