Update and new Momo's emerging

Well I'm back. I decided to follow both trading services, but currently I am focusing mostly on Stewie's Art of Trading service and his alerts. I started off papertrading the alerts, but then quickly started using real money, after being impressed. I am using small account sizes (and small trades) to start. For now, I'm going back to trading basics and trading straight stocks, not options. And I am finalizing a set of rules. For the week, I am in the black, albeit not by much-- in part because I ignored one alert to sell for a loss, and I was afraid to take the loss. I later took it, but by that time it was a bigger loss. I am learning to not be afraid of taking small losses, because if you don't they just get worse!

It's very interesting what is happening in the market. Some of the old leaders are still around, such as:

Cramer's 4 horsemen: AAPL, GOOG, RIMM, AMZN.
Ag's: POT, MOS, etc.
Medical: ISRG
Bank: GS

At the same time, new leadership is emerging. Hear are some of the new
momo's, many are in the IBD 100:

HEAT, PCLN, RAX, NANO, RINO

Check out this post:

http://stockbee.blogspot.com/2009/12/39-stocks-with-momentum_17.html

Also - get ready for the "Santa Claus rally" coming soon. Time for the fund managers to goose the returns and apply the window dressing:

http://www.crossingwallstreet.com/archives/2009/12/the_best_time_o.html

Deciding where to go from here

I haven't updated this blog in a while. Part of it was depression, since I had to review my prior trading when filing my 2009 taxes by the mid-October deadline. What really hurt was all the work I had to do in TradeLog to get all my *LOSSES* accounted for. At least the total amount I have lost so far in the market is only about 7k, but I want that 7k to be the first and last "tuition" I pay. Some time ago, I switched to papertrading, and my initial ThinkorSwim Papermoney account is now at $166,000 from $100,000, mostly as a result of going long stocks at about the right time. In my "real money" and retirement accounts, I've done basically nothing - just too afraid to trade. I'm trying to come up with a plan of action, and at the same time following good traders, including Bo Yoder's cash bomb sequence, which attempts to help people with low account sizes explode their accounts into larger sizes.

We shall how the market goes this week. Most of this year, every time there is a panicy sell period, it turns out to be a fake-out and we march higher, probably due to large hedge funds finally buying in. I know from past experience that the 1st of the month is always interesting, expect the unexpected...

Goldman conspiracy theories/ talk won't die

More good stuff from zerohedge.com

http://www.zerohedge.com/article/goldmans-selective-trading-disclosure-legal-way-preferred-clients-front-run-market#comments

Interesting indeed, and very depressing for the "retail" trader. I need to use thinkback to look at GOOG calls from last week before the conviction buy list got updated. I don't even know if regular people can access the conviction buy list at all, even *after* it comes out ;). Oh well. If this stuff is true it makes strategies that try to follow the "big boys" like the sizzle index and the options heat thermometer (at OptionsMonster) very prescient. Stay tuned.

Going for the Cash Bomb

OK I've been following Bo Yoder's recent "Cash Bomb" project and I've signed up for the initial alerts and video modules to support it. The idea is how to risk under a thousand dollars (e.g. $600) and double your money (or more) to achieve a decently capitalized account --- an account that you can then trade using more traditional risk management rules (e.g. 2% loss maximum per trader). We'll see how it goes.

Here is the link: CashBomb Sequence

Zerohedge.com - Conspiracy Theories with Meat Behind Them

I like reading ZeroHedge.com - it seems to be a credible site exposing market manipulation. Unlike other such sites it appears to be written by an heavy hitting anonymous insider. The site recently transitioned from blog to full-fledged site with forums. In the forums, I found a plausible account of how this fake rally may have come about:

http://www.zerohedge.com/forum/how-hank-and-ben-initially-rigged-market-rally

As individual traders, we don't have access to the kinds of inside information that would allow incredible guaranteed gains, but we do have access to volume information and price action, which don't lie. Well at least as long as there aren't too many "Dark Pools"!

A good example of the telling power of volume and price is in AIG this week. Some big players piled into this stock for some heavy hitting upside. It also makes me think of making more use of the Najarian brothers strategy, when they look for unusual call or put volume -- these kinds of things reveal the tracks of the "smart money", sort of reverse engineering what the big movers and the "people who know something" are doing.

Still Papertrading

I am still papertrading. I think this whole rally since the lows of March is fake. The liquidity that the government pumped into Banks is being used to buy equities, so that banks can run up their own (now diluted) bank stocks. The media is in a frenzy about 'the recovery' - meanwhile everyday people like myself continue to struggle - they can't get a mortgage refi or modication, only those who have a clunker that meets the requirements can take advantage of "cash for clunkers" --argghgh. My neighbour had a vehicle to trade in and took advantage - and his property tax is next to nothing due to the flawed Prop 13.. arhgghg. Bottom line - sooner or later reality will set in, since the American Consumer is 70% of the economy.

I do intend to get back into trading heavily soon - I think the current environment with (surprisingly) low volatility is good for swing trading - finally. On Aug 15 I will be taking a local all-day options class from TOS (Think or Swim). Since no one is going to bail me out, I need to take control of my own future and nail this stock trading thing..

Bought some QQQQ puts

Well I sold my QQQQ and bought some QQQQ puts today:
20 x 17-JUL-09 QQQQ 37 strike PUT, stop when QQQQ >= 37 (Paper Money Account)
1 x 17-JUL-09 QQQQ 31 strike PUT, no stop -risk entire option (Real Money)

This is based on my theory that after a good quarter, the market will drop down again in early July. In my paper money account, which is well capitalized, I bought at the money puts. In my real money account, I bought the highest strike that I could afford ;) Needless to say, we'll see if this hunch pans out. Yes I still need to review my trades, however, I've been so fearful of the market lately, it is good to get back into the market. We shall see.

Searching for stock charting programs for the iPhone

I am looking into various ways to obtain live streaming stock charts on the iPhone. Unfortunately, iSwim, the iPhone app that my broker provides, does not have charting. If anyone has any information or suggestions, please post a comment or email me at momostocktrader "at" gmail.com.

Update: I was informed by TOS (Think Or Swim) that iSwim will be getting graphs in the next release. Looking forward to it!

Shelved the refi - Going back to Trading Soon

Well I found out the hard way that banks are being a PITA - those good rates area nearly impossible to get, even if you have good credit etc. For me I have 5.875 and was trying to get to 4.875 ... but it didn't work as rates have gone up and property values have gone down. We'll have to wait until the FOMC meeting with Ben next week to see what happens to mortgage rates in the future. For now, slowly getting back to following the market, reviewing my trades, and trading.

Update: Tried a refi a second time with Fremont Bank (http://www.fremontbank.com) They lead me to believe they could use my prior appraisal despite the new HVCC rules, but when push came to shove, they wanted to redo the appraisal. In addition, the fees for the Good Faith Estimate came back higher than discusses on the phone. Various agents I talked to told me things I wanted to hear like the application fee was relatively easily refundable. However it took me two weeks of calling and bugging management until I could get my $495 back. Caveat empor, and definately avoid them.

Bo Yoder's latest project: "Cash Bombing" your account

Bo Yoder, noted trader and author, has some new blogs and YouTube videos describing his latest project called "Cashbombing". Basically he noticed that many people following him were trading with accounts less then $5,000, and instead of just lecturing them on how this is wrong, he is attempting to devise a system whereby people risk a small amount (say $500) in a highly volatile environment (e.g. Forex) and with high leverage and risk, try to use that money to explode it into an account large enough for regular-type trading. The concept is interesting.

http://www.tradingaintpretty.com/

Update: Bo Yoder has removed some of his content due to regulations now that he is becoming certified but will be back up soon.

GM - Government Motors

I've heard it said that the US is the largest hedge fund in the world. Well now we are going to gamble that the US government can run a car company. Good luck.

I personally am not doing too well - my father in law's funeral was a few weeks ago, and I am not over that. The mortgage rate I had tried to lock in never worked, and now rates are skyrocketing. The house appraisal I paid for out of my own pocket is now useless, and I am going to have to stop the process of finding another loan because I don't want to run up additional credit card costs, and the new HVCC rules require the consumer to pay for a new appraisal with their own credit card.

The good news is that I had the sense to not trade or do any stock market because I'd be too emotional. The recent rallies in the stock market puzzle me, even though I used to be the biggest bull. Very few if any business people I talk to can tell me anything good about the economy, yet the stock market is itching to go higher. I guess it is a trader's market for sure, and the old adage applies: "The trend is your friend until it ends." But watch out for that end. I just don't have a good feeling about the massive government debts, and the artifical reflating of all the banks - something in my things this will all end very badly.

I'll be offline for a while, until my lifes resumes normalcy and I am back to trading again.

Trying to lock a mortgage

Hi,

I got back from Disney and had fun. My wife's father is not doing well and I've had to take care of the kids, so I am taking a break from trading. Still working on analyzing my past mistakes. One thing I am doing is trying to lock in a mortgage at a good rate. A friend who is a broker told me about the ticker that mortgage rates are associated with (at least partially): TNX. I am currently doing some plots and sure enough this seems to correspond with rates. I was trying to lock in a mortgage at 5.00 or less today for a super conforming, and rates gapped up badly, so waiting until tommorow.

On Vacation

Doing Disneyland

In the meantime had bought some $9 and $10 BAC calls that seem to have done OK, deciding when to close them out. Will have some updates once I return.

Got chopped up

After feeling good about my successful trade, dipped my tows in the water some more, buying some qqqq calls and a goog call. All were stopped out, which may be a symptom of my newfound interest in tight risk-management. In the meantime, I've gone back to completing once-and-for-all my analysis of my prior trades.

Also, a seasoned pro acknowledges that it's tough out there here:

http://hardrightedge.com/dor.htm

Made money on those calls from last week

In the interest of transparency, I'd like to post the actual results of my trade from last week. Here it is.

BOUGHT WED 18-MAR-09 ORCL MAR CALL $18 STRIKE 2@ 0.05 ($ 5) + 3.00 comission = $13.00
SOLD THUR 19-MAR-09 ORCL MAR CALL $18 STRIKE 2@ 0.15 ($15) - 3.00 comission = $27.00

The good news is that I more than doubled my money. I risked $13 (the entire cost of the options), and I ended up with $27 after ORCL reported good earnings after hours, and the stock popped up overnight. To bad I didn't have like 5k in this trade.

The bad news? Well, this is really bad. In this particular account, this was the last $13 I had in my account. I risked 100% of my account because it was toasted anyway. The account started off at 2k. There is something psychological about not going to actual $0.00 from money that started off at 2k. I realize I will have to fund this account again - I am not under the illusion that I can trade my way back to 2k.

The other piece of good news is that I've been reviewing my trades. There is so much to report that I've been delaying doing a post. But to preview the bottom line, it comes down to this: avoiding the fear of taking a loss, and proper money management. What I've discovered is that I am not a horrible trader. In fact most of the issues I ran into came in the September - October timeframe when things tanked at a speed not seen in 80 years, and fighting the trend (going long) cost me dearly. A few big out-of-control losses will quickly ruin an otherwise decent trading account. If I had only been able to cut off a few medium sized losses before they became big losses, I would have been fine. From now on I am going to have one rule above all rules: decide in advance how much you are willing to lose (maximum), stick to that, don't move or take out your stop - and live with it. Even expect a lost, so that your positively surprised if you actually win. Controlling your loses seems to me to be my biggest problem and the biggest killer of my accounts. More details to follow.

Bought some calls

Bought 2 out of the money ORCL 18 March calls late Wednesday for .05 ($5) each + $3.00 in commissions , making a $13.00 bet that ORCL will release good earnings. So far so good in after hours. Unfortunately I could only affor the 18 calls so I'll most likely be able to make back what I paid, but we'll see how much I net. At the same time the Fed announced a huge treasury buying plan that stimulated a closing rally. Let's see if there will be some follow through and the market can break through a lot of its overhead resistance. Triple witching is coming Friday so we'll see what happens. The more I learn the less I try to to predict what could happen, and only try to control my risk level.

Sucker's Bounce or the Big Bottom?

Nobody knows. Place your bets. The media is going all ga-ga over the 3 day rally. But we are hitting major resistance on the charts tommorow, and it is Friday the 13th. We shall see.

Nationalization or Dow 4000

It's funny - I haven't posted for a while and the "have we bottomed" post is still relevant. By the way.. the site I pointed to was a joke - it doesn't use artificial intelligence! Heck - no one knows when we will bottom - a bell won't magically ring. Traders are waiting for capitulation and it seems we just have apathy.

I think there is a reason though, why there is no bottom in sight. I have a theory that there are very powerful people, either bankers, friends of banker, and/or head of foreign states, that have too much to lose if the Citibank and Bank of America, our two toxic banks, are nationalized. A very intelligent person who has a background in finance told me today what amounts to the same thing - in order to protect the wealthy, the American taxpayer is going to have to pay 3x what it would normally cost before we heal. However in the process we all have to be boiled slowly like a crab being cooked. At some point even the wealthy and/or the government will realize this is all so bad that we have no choice but to nationalize the banks before the entire financial system goes to hell. At that point the damage will have been done. I hope to goodness I am wrong. The sooner this gets over with, the better.

I've been studying my trades and I have some preliminary findings. Will get back to regular posts on trading soon. In the end, the system is all rigged against individual traders, so the key thing is what rules & system can I put in place for myself to protect against loses, preserve capital, and make a few bucks along the way.

Have we bottomed?

I doubt it. My take is that powerful people in the banking industry have successfully persuaded government that we can keep pouring good money after bad into our toxic waste dump known as BAC & C so that we can pretend for a while that they can survive some stress (haha). So, the latest "details" from our friend Timothy will merely prolong the pain.

In any case, I came across a website which can tell through artificial intelligence whether we have bottomed at any one time. Check it out! http://isthisthebottom.com/

Did make 2 trades but back to studying

Hi,

Well I did make a couple of real trades during OE expiration last week. I bought a qqqq call earlier in the week, which expired worthless. But on a positive note, on Friday I bought a couple of BAC calls right before the mid-afternoon rally took off, and doubled my money (wohoo!). See my posts in the wallstreak forum. Unfortunately I was not playing with a lot of money, so it was mostly a psychological win.

In the meantime, I am back to studying. I feel that our 2 toxic banks (BAC and C) will be nationalized soon, apparently some announcement about the latest bailout plan is coming Wednesday, and if the government does what it needs to do, there could be a huge rally afterwards.

Thank you Tim Geithner for an easy trade

Am I still working on reviewing my trades? Yes. But today I allowed myself to papertrade the Tim Geithner announcement. I did a bunch of things correct: 1) waited until after the announcement - don't be in a trade during the announcement , 2) waited until some time after the initial announcement (to avoid some of the whipsaw right after the announcement), 3) entered a short of BAC shortly after it broke resistance (used 6.00), 4) trailed my stop down, 5) declined to add to my position (of 10 puts), just in case it reversed on me, and 6) declined to follow 1 minute charts and get scarred out of my trade on little reversals, stuck with 5, 10, and 15 minutes instead. At the end of the day I am up $200 with my puts. I decided to hold overnight - that may not have been good but we'll see in the morning. The nice thing about the trade today is that Tim made it easy - the market reacted so bad that I didn't have to worry to much that my stock (BAC) would make it back up to resistance. The BAC chart is starting to look like the Lehman brothers charts, as John Carter pointed out in last night's free video.

Review or Bust

Ok I'll admit that while professing to review my trades I have gotten diverted by other more "pressing" things, such as tweaking my son's wii, immersing myself in work, and other things. I've even managed to regular read WSJ and the IBD newspaper. Time to face the facts, and this week I will review at least some of my trades, and makes some sort of post here. BTW as I write this late Sunday night / early Monday morning, it appears that we could be headed a lot lower again. However, I won't make the mistake I've made before, and that is to put in some sort of a market order for Monday morning based on the news right now, because it could change a lot between now and then, and because I don't want to contribute to amateur hour.

More Study

I'm taking time do serious study and analysis. I'll be getting to the analysis of my trades soon -- for now I am studying overall guidelines / principles. It seems that to become a good trader, you need to consider each trade a small "bet" and not hold to any preconceptions of what will actually happen. You expect to lose a certain small amount and set your stop and maximum loss BEFORE going into the trade. You place your best bet based on a setup, and move on, win or lose. The more you rely on things like hope, emotion, feelings of "it should to this", the more you will lose. You can't control the market, only your own (small) bets, and your own reaction to it. If you can cut off your losers quickly, you can survive even on a small % win ratio. It also helps to have a set of rules / indicators etc that are objective, not based on emotion or how you "feel". Most analysis / homework is done after the markets close, to keep objective. Some people I consider models are: John Carter, Bo Yoder, Linda Raschke. Good trading is non-emotional and should appear "boring".

AAPL - will it lead us lower?

I am still in study mode, but this Steve Jobs news is disconcerting. The thing about cancer is that while it can be in remission, once it comes back, health can deteriorate really quickly. Tonight there are articles that the rest of Steve Jobs' pancreas may need to be removed. That doesn't sound good. While the "skinny Steve" trade has been around for a while especially to those who follow trading sites, tommorow's morning paper may cause a lot of regular people to sell their AAPL in a panic. In the after hours today, AAPL was in the 70's, busting through the previous support level of about 80 to 85. Then again, the more I learn about the stock market, the less I try to predict us, hence the question mark in the title of this post. Time to get to bed so I can get up early to see the open.

Study & Review Mode

Well the end of 2008 came up too soon. It doesn't really feel like 2009 - more like the 13th month of 2008. Even more importantly, I haven't yet sat down to analyze what worked and what didn't in 2008. I also need to develop a strategy for 2009 and beyond, as others have done (e.g. see Market Monk's blog). I've put a hold on any trading (real or paper) until I analyze my past trades. I need to go back and see what worked and what didn't - analyzing individual trades as well as charting my own performance. It is going to be pretty depressing and not fun, but I need to do it. Apparently, many if not most traders do not review their trades and as the saying goes "those that do not learn from their mistakes are doomed to repeat them." So, while analyzing, I may not post for a while, but once I finish, I will have several big posts.