Bo Yoder S&P 500

Hopefully you are part of the small minority which didn’t get suckered into going short the S&P 500, (NYSE:SPY) as the hidden bullish energy I forecast took the market back up to the highs as expected.

My thanks to all who joined me for my session at the recent “Round The Clock Event”. We traded LIVE together and I wanted to post a follow up chart to show how accurately the forecast I made resolved itself after our time together was over.

If you would like to learn more about 3D Apex Probabilility Analysis Layer™ please set up an appointment to speak with Roger Khoury, my partner at RBJ Financial Group and the creator of the methodology which drives these forecasts…

http://meetrk.com

Just like my recent “false signal” warning in the SPY, I see a false breakout setting up in the stock of Texas Instruments (NYSE:TXN).  The stock has rallied hard and has recently broken out to a new high with very little bullish power. I would expect to see this breakout begin to struggle and fail in the near future and will be watching this stock for patterns which would allow me to take some short exposure in the weeks to come.ES 5-31-16 spy 5-31-16 TXN 5-31-16

Please follow and like us:

A Setup for short term swing trading

[Register now for David Paul’s Smart Trader Workshop Tuesday, 31st May 7.30 BST – Click here]

As discussed in the last entry I would like to detail a simple and robust method of trading shares with great fundamentals that has an excellent expectancy. Expectancy just means that the technique makes a lot more money when its right compared to what it loses when it’s wrong. Remember the objective of the exercise is to build wealth and NOT to solve a puzzle.

The technique is mentioned in both the works of my mentors Gann and Wyckoff and I salute their efforts. In my early days in trading I was definitely trying to solve a puzzle. The works of Gann and Wyckoff are far from easy going and I have spent decades trying to decode what they were saying. This setup is a small but very profitable part of their work. Let’s begin.

I will be talking about long trades here but the setup works equally well in shorting markets.

 

  1. I only wish to trade “long” i.e. buy shares, cfd,s, or spread bet in shares with outstanding fundamentals. The technique buys at support. If the fundamentals are good then that’s what the professionals will be doing and that simply means that the probabilities of support holding is much higher. This means the share should be trading below the VectorVest valuation and that the Relative Value (RV) and Relative Safety (RS) should be well above 1. I normally like to see a RV of greater than 1.3 and a RS of greater than 1.2. If you have a look at Bellway in the UK market these metrics are met.
  2. Recently Bellway pulled back and fell below a major low. I like to see the market fall and make at least a 21 day low. Bellway fell through the major low on the 15th April and stopped out many who would have placed their stops below the last major low. The share closed below the last major low for a full 6 days.
  3. MR Gann would have been a buyer as the share reversed upwards through the old low. This can be noisy and I suggest that you wait for a close above the level. In Bellway the first close above the last major low occurred on the 25th
  4. The bar/candle that closed above the old low was an “outside bar” which is a potent reversal pattern. At these reversal points a knowledge of bar patterns and candlestick reversal patterns will be useful and push up the probabilities of success.
  5. After the outside day reversal at the old low the next thing to do is to buy the next open on the 26th This was at a level of 23.42 with a stop below the low at 22.29. This was a risk per share of 1.13 calculated by subtracting the stop level from the entry level.
  6. The next and most important exercise is now to calculate the number of shares to be purchased so as no more than 1% of the account will be risked if the setup fails. This is covered in detail in lesson 2 of the Successful Investing Quick Start course which is parceled within the VectorVest product.
  7. The first target is the next old high which is at 26.75. If you are a fan of the late Mark Douglas then that’s where half of the position should be banked and certainly the stop brought to entry. This initial risk/reward ratio is around 3. For swing trading this is more than acceptable and no one including myself would be critical if all the position was exited at this level.
  8. In shares with great fundamentals the pullback is invariably a liquidity drive by professionals which takes place prior to a large move. That’s why it’s critical to apply the setup to the very best shares fundamentally and Bellway certainly fits the bill.
  9. The next target is the 52 week high at around 29. There is no definitive rule on where you should exit. Short term swing traders should have got out at the first high mentioned in 6 above. Many traders are position traders but use the Lost Motion technique to enter the market at an excellent level. These traders will be letting the position run and managing the trade via a trading stop loss or just using the VectorVest stop loss.
  10. If the 52 week high is broken then the next targets are defined by FIB extensions. Take the 52 week high and subtract the low of the 20th This is the magnitude of the pullback. Multiply this number by 1.27 and add it to the low of the 20th April for the first target. Then multiply the magnitude of the pullback by 1.618 and similarly add to the low of the 20th April for the second target. Shares with great fundamentals after a liquidity drive frequently break upwards an onwards to these levels and much higher. JD Sports is a great example of that.

[Register now for David Paul’s Smart Trader Workshop Tuesday, 31st May 7.30 BST – Click here]

I could write for days about the nuances of the Lost Motion setup. It fulfills my three basic beliefs about successful trading and investing. The chart of Bellway and the trade is shown below.david

 

  1. The good trade is the hard trade. This doesn’t mean it’s intellectually difficult. There is no rocket science above. I mean that the trade should be emotionally difficult. As Bellway and all the UK builders were falling to support it took strength to become a buyer. The crowd were stampeding in the wrong direction.
  2. I fade the short term trend in the direction of the long term trend. The long term trend in Bellway and the sector has been upwards for years.
  3. I place my entries where the masses place their stops. In the setup detailed above the entry is just after most have been stopped at the lows. MR Gann didn’t wait for any confirmation and simply bought as the market reversed through the previous low. I think getting onboard after the low has been confirmed by an end of day close is just fine for our purposes.

The week ended on a positive note with both the Primary Wave and the underlying trend on the UK VectorVest Composite moving upwards. There is a green light in the price column of the Color Guard. For the last three sessions there has been a green light in the Buy/Sell column of the Color Guard which shows that the move upwards is occurring on strengthening market breadth. That’s an excellent development for the bulls.

The MTI indicator which defines the underlying trend just missed going negative at the end of last week but has turned upwards on a level of 1.15. The DEW should give a Buy signal early in next week if the move continues. If and when this occurs I will be adding to my share portfolio.

Try VectorVest for 5 weeks (UK & UK data) – start now

David Paul

May 28th 2016

[Register now for David Paul’s Smart Trader Workshop Tuesday, 31st May 7.30 BST – Click here]

Please follow and like us:

The Cost of Money Once More

Stock markets all over the world suffered sharp losses during the past week as the market focused on the prospect of a summer hike in interest rates from the FED. The last time they thought of doing this the market reacted with such authority that the raise was postponed. That was the cause of the selloff in January to the 11th February.

In the UK the VectorVest Composite the short term trend or Primary wave kicked up during the week but my key DEW market timing system didn’t turn upwards. The latter is an exceptionally robust method of knowing when to attack and knowing when to play a defensive game. Defense was the game plan last week although many of my shares had a good week. In the volatility of 2016 the DEW system has been a rock of stability giving timely signals just after the highs and lows of the year.

After the close on Friday the Primary Wave is down, the DEW is Down while the underlying trend remains upward. For those timing the market with the Confirmed Call system this remains positive but only by a hairsbreadth. The latter is the longest term signal on VectorVest and it’s close to a turn with the MTI (Market Timing Indicator) on a figure of 1.01. Below 1 the underlying trend is defined as Down.

My shares in a poor market did well during the week. My word you sleep well when you know that your net worth is mostly tied up in undervalued shares that are growing earnings both safely and aggressively. I am particularly happy with Persimmons and Gleeson. Both shares (and all builders) fell and tested their lows of the last year. In shares with great fundamentals these lows are outstanding levels to be a buyer. That’s the basis of the “Lost Motion” trading system that I was taught from the works of Gann and Wyckoff. I intend to write more about this trading methodology in the next edition of this blog. It’s made me a lot of cash over the years.

Persimmons and Gleeson have still got a lot of work to do but they are going the correct way. I see Bellway (not in my portfolio at present) has broken a down sloping trendline and also looks good for further advances. The share shows an excellent example of a Lost Motion trade as it fell through the last major low and then reversed. The reversal was confirmed by a text book “outside day” candle or bar chart pattern. The entry was the open of the next day after the outside day at an entry point of 24.14. The share is now over 26 and heading for the old high at 29. The good trade is always the hard trade.

If you feel that you are always getting in at the top of a move and always chickening out near the lows the “Lost Motion” setup will sort that out for you. The setup takes courage and if there were no ladies reading I would call courage something else. A point to note is that these trades should get into the black quickly. If the setup fails (and they do, I assure you) then the market can collapse. The “Lost Motion” setup should only be used in liquid counters and by traders who won’t hesitate on applying stops.

Marshalls issued a trading statement which disappointed and the share came back towards the support trendline defined by a symmetrical triangle. This support and a 62% retracement of the last range have a confluence at around 300. At around this level the share will also have charted a positive Gartley 222 pattern which adds to my enthusiasm for the share at these levels. If the DEW turns up and I see some confirmation candles I shall be tempted to buy a few more.

Dart is hanging around 625 buy my stomach tells me it will get to 600 before moving up again. It will take some very positive news to get the City to buy it above support which is at 600. I hope I am incorrect in this.

Keller is going well for me. I bought it based on reasonable fundamentals and a Wyckoff “spring pattern” on the weekly chart. This is a special form of a “Lost Motion trade and it’s worked exceptionally well in this case. Victoria is at support at 1400 and I am watching the stop here carefully. I am in defensive mode as stated above.

Join David at Round-the-Clock-Trader for his live webinar on market timing – click here

During the week I completed a webcast on trading with VectorVest and in this I was asked by a long term user of the program to suggest a series of steps to locate a high probability low risk trade and that’s what I will try and complete here. It’s my own way of doing this and may vary from that taught by other VectorVest presenters. It’s vital that a trading plan suits your beliefs about markets and consistent trading in markets. I am not saying that the below steps are perfect but they have worked for me over the years. Over the last 6 years when I have been using VectorVest in addition to my technically based rules, the success rate has risen. The setup is a breakout. The strongest shares don’t pullback to old lows. In these plums is where the easiest money is made.

 

  1. I wish to trade long in only the very best stocks that are undervalued, growing earnings strongly and safely. In my own trading I frequently look at shares with relative safety (RS) below 1. If I was managing money for others I would not. As the RS falls the probability of a surprise rises and the public don’t take well to that. Think of Plus 500 for example.
  2. I “cherry-pick” these stocks by using the VectorVest simple layout which is within the dropdown “Graph Layouts” on the top right hand side of each chart. This layout shows Value and price in a single window and Earnings per Share (EPS) in another. As is taught in lesson 4 of the “Successful Investing Quick Start Course” I look for the price to below the value and the EPS to moving from the bottom left of the chart to the upper right. The course is built into the VectorVest program under the “training” tab. Remember EPS growth is the engine that’s drives the share price. If the company is growing then it can spend on acquisitions and research and development on both new markets and products. I have found that the smoother the EPS chart the easier goes the trading. The price should be trending upwards with little volatility. Have a look at the JD Sports chart. The share is a great example of the above and has been an outstanding performer. The chart of JD Sports is shown below

david

  1. To find shares that are trending strongly with little volatility use the Comfort Index (CI). The CI is the unsung hero of VectorVest in my opinion. It combines trend, volatility and improving fundamentals into a single number between 0 and 2, akin to all other metrics on VectorVest. Above 1.4 in my view finds a share that is trending with little volatility.
  2. Unisearch is the tool within the VectorVest program that allows the trader to find shares with various combinations of all the VectorVest metrics. A search which includes Price less than value, Earnings potential (RV), Relative Safety (RS) and CI, finds some great shares that are undervalued and growing earnings strongly and safety. This can be done in seconds. If you are in any doubt about writing a search then just pick up the phone and support will talk you through the process. The call is free on 0800 014 8974 in the UK and 0800 981 891 in South Africa.
  3. Market Timing is 70% of the exercise. There are market timing systems on VectorVest for short term swing traders and longer term position traders. I use a medium term system which is between these extremes. It’s simple in derivation but very powerful. The DEW system gets me into a new bull market quickly after the turn and into a defensive mode or into cash or bonds just after the top. The Green Light and the advice on the front page of VectorVest is the least that should be in place before getting into the market. The DEW will be slightly later than Green Lights on the home page but the turn will be better confirmed.
  4. I have spent the last 25 plus years looking at charts and in particular chart patterns. There are two basic types of chart patterns. Firstly a reversal pattern which occurs at the very start of a trend such as a head and shoulders reversal or a double top or bottom. Secondly there are continuation patterns which is where an established trend stops for breath. These are literally money in the bank and the basis of this simple strategy. These patterns are invariably a triangular or a rectangular price pattern. Over the years they have developed a host of names. First prize for me is a triangular consolidation in a share that’s trending strongly with a high CI. I clearly like to see that it’s trading below the VectorVest valuation and that the EPS is moving upwards. I have noted the following. If, within the consolidation, the EPS is rising, the probability of a strong breakout is high. Again JD Sports is the perfect example of this. In the case of the recent move, the triangular consolidation was an ascending triangle. This is a triangular pattern in which the lower bottoms are rising. Within the duration of the pattern the EPS was rising and when the breakout came we had a highly probable move.
  5. I think that there is a little work required for some to become familiar with these simple patterns. It will be time well spent as when they are second nature you will have a skill where no computer or algorithm can compete. There are lots of references to these patterns on the net but I suggest a book “Getting Started in Chart Patterns” by Thomas N Bulkowski. In the book Thomas will show you how to compute targets for these patterns. I will do the same in the next series of UK Q and A webcasts. The book was the second I gave to my son when he became interested in trading. The first was “Reminisces of a Stock Operator”.
  6. The entry point is a close above the resistance line offered by the pattern. I use the VectorVest calculated stop and from this size the position so as I only risk 1% of my account on any single trade. To get the math’s of this calculation please study lesson 2 of the “Successful Investing Quick Start Course”. The lesson will also give you some excellent tips on managing the trade and especially not giving back any more than 50% of any profits.
  7. The technique above combines excellent fundamentals with a high probability technical breakout when the general market is rising. That’s the VectorVest edge in markets. The best of both worlds.

 

In my next post I will look at a much more aggressive trade which gets me involved well before any breakout. This is the “Lost Motion” setup that I have introduced above.  I use exactly the same shares with the same excellent fundamentals. In this case as we will see the CI is not quite as important and that the technique is more suited to the volatility of the moment.

David Paul

May 20th 2016

Join David at Round-the-Clock-Trader for his live webinar on market timing – click here

 

 

 

Please follow and like us:

Are you over-trading?

From childhood, we’re taught that hard work is the key to success in life. We take exams at school, write reports and essays all with the goal of ultimately passing our subjects with flying colours. This repeats itself with A levels and then University. The common theme is that hard works yields results. Even once we join the working population, those with a good work ethic tend to do better than those that don’t.

No matter where you look, captains of industry, successful entrepreneurs and long term investors will all say that part of the key to their success has been the blood, sweat and tears they’ve put into their chosen endeavours. The same is true for traders too. The most successful have usually put in a great deal of hard work to get to where they are.

However….. There’s a fine line between working hard at trading and over-trading. The skills we need for success in most other careers are not exactly the same as those we need for trading. You see if we sat down at a desk in a company office and did nothing for several hours, it’s likely we would soon be reprimanded by our boss for not being productive. But in trading, sometimes not physically doing anything is exactly the right thing to do.

Too many times, traders are overcome by their desire to feel like they’re ‘doing something’ and so start trading rather than being patient and waiting for the right setup to come along. I always say that as traders, 90% of our time is spent monitoring the markets, action is only around 10% of the time.

Sun Tzu once said “He who knows when he can fight and when he cannot will be victorious.” This is perfect advice for us as traders too. Trade to win, not to satisfy your desire to be seen to be doing something. Just remember cash is a position too….

Join Charlie on his special webinar “How to turn a $10k into a $100k account on 2nd June at 7pm – click here to sign up

Over to the markets, last week I discussed the Euro dollar and the potential for weakness ahead. It broke below the 50 day moving average (black line on chart) and still has potential downside space until next key support. With the view that the FOMC are more likely to increase rates in June, we’re seeing dollar strength come back into play. Although in the early part of this week we could see a relief bounce in the Euro, I would be looking for signs to then start fading any rally in expectation of another push for new lows.

eurosimon

Have a great week

Charlie Burton

Ezeetrader.com

Join Charlie on his special webinar “How to turn a $10k into a $100k account on 2nd June at 7pm – click here to sign up

Please follow and like us:

The FTSE is trading sideways lacking fundamental catalysts to drive the price action

After a couple of weeks full of professional engagements I am back with you to discuss the FTSE 100 and the way we should approach it over the next few sessions. At this time the London index is trading around the 6,150 points’ area and what we have been seeing over the past week or so is a broader sideways movement between the 6,050 and 6,200 points’ levels.

I believe that this kind of trading is strongly correlated to the recent US reports that shape Dollar’s and global markets’ outlook but also have to do with the economic and political uncertainty back here at home. After the recent NFP report investors’ focus fell on the Retail Sales figures that are closely monitored from stock traders as well but even though the consumer spending levels printed far stronger than expected this bullishness did not spill over to the global stock markets.

At the same time the Bank of England’s mixed outlook for the domestic economy is also playing a role in shaping the FTSE’s momentum while the potential of a Brexit still remains current. So given that the BoE appears having a mixed bias weighting the positive inflation expectations and the reduced growth results the FTSE remains hanging in the balance. To sum it all up, the fundamental drivers are mixed at this time hence the FTSE is trading in this sideways pattern and until we get a serious catalyst to drive the price action we should expect more of the same.

My approach is to look for intra-day opportunities in the London index and try to accumulate as much profit as I can while the index is trading between the 6,050 and 6,200 points’ levels. This means a lot of hands-on trades with tight limits and stops so if you prefer for smoother action then maybe you should lay back and allow the FTSE to build some momentum before entering the market again.

alpesh

If you want daily trade signals on the FTSE 100 and the Euro, the Pound, Gold and more Forex, Stock Indices and Commodities instruments I am recommending my Sentinel Signals report that has an impressive performance. You can find more information on Sentinel Signals by clicking on this link.

Please follow and like us:

Getting the right balance….

I was watching the Spanish Grand Prix yesterday where Lewis Hamilton and Nico Rosberg, the two Mercedes drivers took each other out of the race. Lewis was behind Nico in the first lap and went for an aggressive overtaking manoeuvre when he saw an opportunity. Unfortunately, Nico saw where Lewis was trying to go and so blocked him off, sending him onto the grass. This resulted in Lewis’s car spinning and crashing into Nico’s, sending them both off the track and out of the race.

Ultimately neither driver was deemed to be at more fault than the other and so it was deemed to be a racing incident which is fair enough as both of them had been aggressive in their own way.

When it comes to trading we have to strike a balance of being aggressive at times and knowing when to back away. For example, should we place a day trade just before Non-Farm Payrolls are released? That would certainly be seen to be aggressive but if it was a different lighter impact news release, it wouldn’t.

There are times as traders when we can be more aggressive in our approach. After a winning spell, many traders will put their foot down harder to capitalise on their gains. Personally, I tend to be more aggressive in the winter months and more passive in the summer due to the lower volumes and my personal desire to be out more.

There are also times when we should generally be more careful in our trading. For example if we’ve had a drawdown, the last thing we should be doing is trading with aggression. We should be reducing position size after a drawdown, not increasing it. That way, it helps us to regain any lost confidence and get back in the saddle knowing that we’re not going to be risking as much per trade. Yes it may then take longer to come out of the drawdown, but it’s better emotionally and protects capital when trading conditions weren’t suited to our style.

Knowing when to trade aggressively and when to back off is all important. Just like our Formula 1 racing drivers, there are times to go for that proverbial gap and times when we should be patient and wait for a better opportunity…..

Over to the markets, the Euro dollar has been an interesting pair this year. It’s had multiple tests of the 1.1450 resistance zone and I believe that longer term, it could want to go for a full scale break of that level yet. But for the time being, looking at the weekly chart, I would like to see the Euro pull back over the coming weeks. It’s currently sitting on its 50dma so that’s not a great place to be shorting from. However, sometimes you can have a view on a market but not necessarily trade that view. It just helps with trading other markets, in this instance the USD/JPY. Anyway, I’ll be looking to see if the Euro does indeed weaken over the coming weeks but am not interested in the noise of the daily chart….

eurosimon

Please join me next Thursday for the final ever 10k – 100k Challenge webinar where I’ll be revealing how I achieved these returns in the space of 2 years – and what lessons I learned along the way.  This will be a live session with limited space on the webinar so please book now:

The $10K to $100K challenge

By Charlie Burton

Thursday, 26th May, 7pm BST

Click here to book

Have a great week

Charlie Burton,

Ezeetrader.com

Join Charlie for two days free in his live trading room – click here to claim your spot

Please follow and like us:

Bo Yoder on S&P and AAPL

The S&P 500 (ETF Proxy – AMEX:SPY) Insiders continued to sell shares at a record rate, and finally we have seen a real correction in the S&P.  Many feel that this is a sustainable top, but our proprietary analysis process says that there is more bullish energy lurking just under the surface. We are forecasting that price will find support soon and push back up to the highs before the “real top” is put in.

SPY 5-15-16

Proctor & Gamble (NYSE:PG) has formed a lower high on it’s daily chart and is poised to begin a new downtrend with an initial profit target near the $79 per share area. PG 5-15-16

I keep getting emails asking about Apple (NASDAQ:AAPL) so I wanted to post a quick update.  You can see the forecast boxes where we called the top a while back.  Since that time, the bearish power has been building and last week the lows were broken after a breakaway gap pattern.  While the odds are not strong enough for us to be interested in taking primary risk, if short in AAPL we do have a liquidity zone that should be tested  in the $82-$74 per share before this bearish phase burns itself out.AAPL 5-15-16

Bo Yoder

RBJ Financial

Please follow and like us:

The Dow falls to a critical level

The price of Copper has been given a horary higher degree based on its ability to forecast and lead the entire commodity market. The price of Cu has been in a falling equidistant channel since 2011. Cu started the year at the lows of the channel and over the past few months has rallied impressively. The market seemed to be charted a very positive inverted head and shoulders reversal at the lows and based on that commodity counters made strong percentage gains.

On the 22nd and 29th of April 2016 the Cu market tried to break through the neckline of the inverted head and shoulders reversal. This would have confirmed a bottom in commodities but as you will all have seen the bulls failed. The Cu price was sold at this level by commodity bears on poor news out of China. The selloff has been strong and the first level of support defined by a simple trendline joining the lows between February and April failed during the week past. Yesterdays (Thursday 12th May 2016) price action charted an “outside day” which is a very bearish pattern which suggests more downside. The next support should arrive at 78%of the last range. Few reading will actively trade Copper but it’s hard to see commodity shares such as Anglo, Rio Tinto and BHP doing much until the price of Copper stabilizes. If you have bought into commodity shares please manage stops actively and do your best to protect at least half of your profits.

In Anglo the recent selloff has not been severe as yet. In the last week the share has broken the trendline defining support from the start of the rally off the January lows. There will be plenty of time to accumulate good quality commodity counters when this final “shaking of the tree” is done and dusted. I will become interested in Anglo at around 350 to 450. That’s based on a 62% or 78% retracement of the rally of 2016. The company is in the process of a large series of non-core asset sales. This will be the sale of 4 billion dollars of assets during 2016. Cutifani the CEO states that this will mean that the company becomes cash positive by the end of this year and that it will have sufficient cash on hand to expand production if required.

The balance sheet of BHP is in much better condition than that of Anglo but there is doubt about operation in Brazil after the disaster last year. Should the Cu price and commodity prices find a bottom and demand rises then BHP and Rio Tinto should be better placed to fund any expansion.

In the UK stock market the Primary Wave and underlying trend are UP and the market remains of a Confirmed UP since the middle of February. The DEW market timing system that I follow is however still on a SELL signal and I haven’t done anything during the week save monitor stop losses. The USA market fell strongly into the close on Friday and most of this 180 point move occurred after the close in London. All things being equal I would expect a gap down when we open on Monday in London. In the US the Color Guard printed a red light after the close on Friday with a black star within the red light. This indicates that the selloff in the USA is gaining steam. In both countries the DEW timing system is on a sell signal.

On the Dow there is an ugly head and shoulders pattern. The neckline of the pattern is easy to see and draw. In the selloff of Friday the neckline was broken to the downside by a few points. The target from the reversal pattern is roughly 600 points and that would take the Dow down to around 16900. As I said above watch those stops in the week ahead and ruthlessly protect capital. Short term traders be warned that the 650 points will be fiercely competitive with many false starts if it happens. The level to watch is around 17500. The bulls will be accumulating at this support level. The H4 chart of the Dow cash is shown below.

david

It was a quiet week for my short term trading using my pattern analysis. I don’t have a problem with this and over the years have developed the patience to sit and wait for the “plums” of opportunity to come along. In his courses, trading psychology guru Van K Tharp calls this the process of “stalking the trade”. In my short term trading over a few hours to two days I trade best when busy. I put in the order with stop and target and leave. The screen is frequently NOT your friend.

One such trade happened on the 10th May. I noticed a rising wedge on the Dow which is a bearish pattern. The top trendline defining the wedge and a 78% retracement of the last range were on the same level and that’s a powerful confluence. I shorted the Dow at this level of 17825 and the market fell nearly a 100 points quite quickly but regained the points just as fast when the US opened. Because of this sudden reversal it’s now difficult to see the rising wedge at all. I got stopped at entry on half of the position and banked 50 points on the first half. The Dow then went higher and flushed out the stops at the old high of the 2nd of May before falling for the rest of the week.

I took a second trade on the Dow long on the 12th May. This was at a 78% retracement of the last range and a Gartley 222 pattern. Again the market rallied against the trend 100 points prior to the move failing. I managed the trade in a similar way to the short. In lesson 2 of the Quick Start Course on VectorVest the concept of never giving back more than half of your profit is discussed. It is an exceptionally useful way of managing the trade robustly without a great deal of pointless analysis. There is two types of capital. The first is the cash and the second is your emotional capital. There is no faster way of flushing the latter away than letting winners turn into losers. Remember success in this business and in most sports and business comes down to perfect execution of a few simple rules without fear or hesitation.

The “Lost Motion” trade in Gleeson that I mentioned last weekend is still in process although the progress, although positive, has been slow. Marshall’s looks poised for a strong move and I will add to this share as soon as the DEW turns back upwards. Keller is making good progress and Trifast also. Dart had a good week and looks like breaking higher soon. There has been profit taking in JD Sports that’s pulled the share back a little. The share has made its short term target from the ascending triangle that I have pointed out here many times in the past. Victoria pulled back to the last old high once more this week and needs to be watched closely.  Persimmons is the weakest share as sorted by RT and during the week has charted a pattern that chartists refer to as an ABC corrective wave. This is a positive development and with some market strength should break higher from here. I have given this share a lot of rope. If it hits the VectorVest stop then it’s gone.

Building had a poor month in March with output falling 3.6% compared to February. This is being blamed on poor confidence surrounding the Brexit debate and vote. A particular weak spot in construction is the building of factories and warehouses where a survey shows output to be down 14% over the past three months. From a seasonality viewpoint UK building shares seem to go to sleep between April and October every year. I still think there is a lot of life to come in housebuilders in the year ahead.

The Wall Street Journal reports that during this year to date 90 billion dollars has been pulled out of the stock market with 8 billion leaving in the last month. This is due to fears of low growth and falling earnings and the inability of central bankers all over the developed world to do much about it.

In his weekly essay DR DiLiddo the founder of VectorVest addresses SP500 earnings in detail using the VectorVest Market Climate indicator. This should be a vital part of your weekend preparation.

Watch that support level on the Dow at 17550. If you see a close below Fridays low then extra diligence on stops is required.

David Paul

14th May 2016

Start David’s 5 weeks course including 5 week access to VectorVest program for only £5.95 ($9.95) – click here to get started

Please follow and like us:

Bo Yoder S & P Analysis

The S&P 500 (ETF Proxy – AMEX:SPY) Insiders continued to sell shares at a record rate, and finally we have seen a real correction in the S&P. It is coming into 50sma support (Orange line) and we expect to see the bulls regain control over this market.  Once we are able to measure the power the bulls bring into the next leg up, we will be able to forecast what kind of upside potential we forsee.SPY 5-5-16

Pacific Gas and Electric (NYSE:PCG) failed to follow through on its continuation pattern, and violated the highs of the green zone to trigger stop loss orders.PCG 5-5-16

Genworth Financial (NYSE:GNW) rallied up and broke out “hot” this week.  It rallied about 25% from the top of the green zone in just 2 days! This is the rhythm of many breakout trades…slow to get started and might cause heartburn as they chop…then a quick explosion of profit when they set up!GNW 5-5-16

Bo Yoder, RBJ Financial

Please follow and like us:

Get it logged….

Do you keep a trade log? Over 60% of traders admit to not keeping a trade diary. I understand why they don’t, it’s a chore and who wants to remind themselves of those trades they would rather forget about after all? But keeping a trade log can be a real asset to any trader. Documenting trades taken and why can act as an arresting mechanism to ill-disciplined trades.

Just like having to justify to your partner at the end of the day or week why you thought it was a great idea not to use a stop loss, having to document it also can help from making those decisions. But the real benefit is in the analysis. Doing a regular review can flag up any ‘style drift’ that could be happening.

For example a trader may not realise that over time, they start to drift from a prior style that was profitable and are now trading in a slightly different way. Having a trade log would flag up any changes in trading style and whether they are affecting performance.

Reviewing a trade log can also help improve performance in other ways. It can help identify if profits are being taken too soon or if stops are too tight. It will also identify if you’re susceptible to over trading or any number of bad trading habits. What about grading the trades out of 10? Could that help with sticking with only the very best setups?

I even spoke to a trader recently who logs his emotion at the time of taking the trade. He identified this as a powerful tool in assessing his mindset at the time of trading. All in all, using a trade diary can be a very important performance tool. Professional athletes have performance monitoring and regularly assessments, shouldn’t we as traders?

Join Charlie Burton in his trading room with 2 days complimentary access – apply here

 

simonaud-1

Over to the markets, a couple of weeks ago I discussed the AUD/USD and the resistance it had hit on the monthly chart plus the potential for trend-line breaks on the daily timeframe. It has now broken those trend-lines and is nearly back to old prior resistance which could now act as a support zone. I think there’s some probing of that support area to come but will be watching for bounces. If it does bounce, I will be looking for shorting opportunities once more…. Have a great week

Join Charlie Burton in his trading room with 2 days complimentary access – apply here

Please follow and like us: