SPY Update 20 April 2015

 

SPY W 20 Apr 2015 Close B

Equity indices breathed a bit of a sigh of relief today after Friday’s drop.

Price looks geared to spring higher through all time highs (yet again) in short order absent some intervening calamity.

That said, the pattern isn’t clean so be careful and mind the uptrend line even more closely… “Mind” meaning get gone if it breaks down through that line.

Good Trading.

 

This 20+ Billion Dollar Company Was Up Almost 20% Today

The shorts were impaled today...

The shorts were impaled today…

So how is it NFLX gapped up (if you don’t know what a gap is, click here) more than 18% today you ask?

Pretty simple actually…

A massive short covering rally.  There were lots of shorts in the stock with stops in the $490 to $500 area.

They got swept today.

Don’t get me wrong… I’m sure there was fundamental buying as well… just not a lot.

Is the company worth the 140+ * twelve month trailing earnings?

Doesn’t matter really.  The market took the stock to a temporary equilibrium in the stratosphere, but tomorrow will likely be an entirely different one.

What Now

This is a strong breakout from a long and wide range, so it’s probably true.  However, my guess is the next high probability trade is to catch a retracement back toward what was resistance and is now support in the $490 to $500 area.  If (as I suggest) you don’t play the short game with individual stocks you can wait for a pullback toward that same $490 to $500 support zone to initiate a long position.

If you already own the stock, do nothing, but hold it… and maybe have a (another?) celebratory drink tomorrow evening.

Good Trading…

 

Break That Rule Again?

USO W 25 March 2015 Close

On January 17th of this year, I published a post suggesting it might be time to take a countertrend trade in oil via USO.  The simple setup I was looking for was a break of the previous week’s high of $18.61.

That didn’t happen but, astute traders would have simply trailed their buy stops down and ultimately been taken into a long trade at $18.07 with a stop just below $16.30.

That trade would have been stopped out last week.  However, it would have been stopped out just as price was in the process of forming a new trigger bar for a long setup on the weekly chart with an entry level just above $16.80.

That trade triggered on Monday.

While it’s had a nice move already, if I am right about this bounce, there is plenty more in store.

I like swing entries here with a stop just below $15.61.  Be sure to position size appropriately.

In terms of an initial target, I like the $27.50 area.

Hope it helps.

Good trading.

 

 

The Advantage of Trading Rooms

Trading rooms used to be brick and mortar only... not anymore

Trading rooms used to be brick and mortar only, like the old SAC trading floor… not anymore…

The Chi Town Experience

A couple of years ago I was invited to Chicago to trade live with a veteran trader friend of mine who was visiting from Switzerland and another relatively new proprietary trader (he had many years of experience as a floor trader). The idea was we would get together in a single room, trade our own accounts and see what happened.

It was amazing.

There were only three of us, but being in a room with other traders engaged in the same activity was reaffirming, encouraging and, for lack of a better word, fun. We were each trading different securities, in our own accounts, and in our own individual ways, but the power of a group dynamic was present nonetheless. We didn’t share ideas and strategies per se (we talked generally about our strategies), but there was plenty of “Hey did you see…” While that was helpful, the more important contribution was being around other traders. Being quite fond of my own company, I never knew how additive it could be to be in a room trading with other traders. A big part of the allure of private trading for me was the opportunity to work alone. I was wrong… partially anyway.

I Trade Therefore I Am

At the risk of assuming the mantle of one learned in Existentialism (I am not), I know enough to know that there is something to be said for the collective power of a group. Teams of all sorts develop personalities that are different from the individual personalities of any of its members (even if influenced by the strongest individual personality). Similarly, people with shared macro goals tend to excel in environments where there are others working in the same direction. A perfect example is the Startup Incubator. At any one time, there might be 10 or 20 different startups at different stages in a single incubator. The individual companies are often working toward breaking into vastly different industries (and in some cases giving birth to industries), but the shared sense of creation and entrepreneurialism help propel each of the individual teams forward.

Trading Room Training Grounds

Trading rooms are much the same in that trading rooms provide an ongoing incubator of sorts to proprietary traders. Each trader trades in her own way, but benefits from the collective experience, energy and camaraderie of the trading room. Historically, these types of trading rooms were brick and mortar and incredibly hard to find, much less obtain a seat in.  New traders are brought in (these rooms still exist) and given a chance to learn at the feet of an experienced trader.

The advent of online trading rooms changed (democratized) all that.  Online trading rooms have the added benefit of allowing traders most of the advantages of traditional trading rooms, but enjoyed from the comfort of their own homes… or from wherever they choose to work…

Like here

Poolside

 

or here

Lakeside

 

or here

Mountain View

 

Like old school proprietary trading shops, the best rooms provide good trade ideas for new traders (noobie or noob) while they gain experience allowing them to “earn while they learn.”  The noob is then able to take his time learning and developing his own methodology without the added urgency and pressure of needing to make money from that method immediately.  The best new traders are able to take tiny accounts and grow them to enormous levels…

 

 

 

Stalk Candidate CBRL — Wednesday 11 March 2015

CBRL M 11 March 2015

Cracker Barrel is putting in a classic Bull Flag pattern.  There is no way to tell how it will resolve itself, but a break of the downtrend line to the upside looks like a good entry signal.  I would place a stop below $146.43, or what is essentially the bottom of the flag.

Given the previous (bigger) Bull Flag and the parabolic move to the upside, taking the long here could be pretty close to top ticking it, but the pattern is the pattern.  Given how small the risk would be here, it’s worth a shot.