Monday, June 8, 2009


Here is this week's Q & A educational post. Answers are in bold. Sorry for the delay, but I was REALLY tired yesterday.


Trader Keith

a) Other than the MA’s, what are your other favorite indicators to use to find stocks that are BTFO?
No indicators (I already answered this one).

b) After you enter a stock, how do you decide when to exit? Based on the candlestick? % drawdown? trailing stop? hard stop? MA? Mental stops bring in the whole aspect of emotions doesn’t it? Candlestick and/or MA's.

c) How do you size your positions? Is your risk a certain $ or % amount of your overall portfolio equity, such as 1-5% to make sure you don’t blow up? Typically 10% per position. However, if there is a multitude of setups, I will do 5% per position and hold more of them.

d) How do you ensure you have an edge over others? remain disciplined and manage your risk? Pure discipline insures you have an edge over everyone that doesn't have it.


2) Jiri

a) What do you think about OCNF and PLLL? I own them both and I have to see what direction they take outside of their consolidation ranges.


3) Dudette

a) Would love to know what you see for ILMN and OPTR. ILMN is imminent. OPTR...I'd wait for a breakout above $14.70 or a consolidation right below that level for entry.


4) Moose

a) Any opinion on SCLD? Dangerous.

b) Is there a software that you can draw free hand trendlines on your own custom charts, and be alerted of touches via email. You already have it (your brain). Don't be lazy.It only takes seconds to look at a chart to see if stocks touch their trendlines.


5) Hawaii Five O

a) Since at this point, I’m not buying individual stocks,but the S&P, when you say, ” A breakout above 948 or a breakdown below 923 is technically significant to me,”Are you saying that above 948 is a continuation and below 923 is a breakdown? A breakout must clearly breakaway from consolidation without any question and it will mark a continuation in the uptrend. A breakdown must clearly breakaway from the same range to indicate reversal. Fakeouts do exist, so be aware of that.


6) Looters

a) Sometimes, I see a stock which has been trending up nicely for weeks. Seems if I wait for a pullback before buying, it continues to run up on me. However, if I jump in, I end up buying at the top. How do you handle a situation like this? Wait for the pullback for entry. Many stocks will higher without you. In that case, move on and keep looking for setups. Don't be a sucker.

b) I’ve read Edwards and McGee and they stress the need for the volume of a pattern to meet certain criteria along with price action. In reality, it seems to rarely play out this way. Do you give more weight to price action regardless of vol., or wait for vol. and price to both meet the criteria set by E-M. Volume plays a huge role when confirming price action. I already answered this question in the first Q & A.

(for example…an otherwise textbook H&S top where vol. increases for each rally rather than lessening on each sucessive rally). Massive volume (many times the average) mark blowoff tops and bottoms.

c) Are you avoiding stocks who are heavily involved with the government or attract a lot of gov. attention such as banks,oil co.’s, insurance,housing, auto’s etc. Personally,I hate to risk money on something that can be affected by a comment made by a bureaucrat,or a descision made for political reasons rather than being based on sound business principles. What are your thoughts on this? I will trade anything with a good setup. I have personal reservations gain auto's and airlines (just because).

d) Any advice for someone who cannot sit at a computer all day and babysit their stocks? May want to develop a longer time frame and/or set stops on everything you have.

e) Your thoughts on SLT, HIG, BHP, HME? SLT is forming a nice flag. HIG is forming a nice symmetrical triangle. No opinion on BHP. HME appears like it will consolidate between the 50-day and 200-day MA's for a few days.


7) Mimi

a) Thoughts on CVM? Highly likely to consolidate between $0.55 and $0.70.


8) GonzoTrader

a) VMED nice high and tight flag on the daily. I would dare to say text book? Yes.


9) Kush

a) Have you ever considered finding a list of stocks that have ridiculously low PE ratios before doing your regular TA? They might be better for long-term trades. I don't do fundamentals. P/E's mean nothing to me.


10) Deecie30

a) Thoughts on spng, synj? SPNG is nearing resistance at $0.12 and an exhaustion top is highly likely. SYNJ looks like a spiker with more upside potential, but it's a $0.0016 stock. Are you trying to get rich quick? I personally don't encourage people to play stocks priced THIS low.


11) Berky

a) CA- why did you jump into PWAV late on Friday at 1.57?? I have 10m shares at 1.50 and wondering if you think it will go much higher. Something isn't right with your question. First, when did you buy 10 million shares (as you claim) and second, if you bought that many shares, why are you asking me if it will go higher? Something isn't right here...


12) BeeRy

1 - How long, on average, do you keep your positions? Is there a time of day that you prefer exiting positions? I am a swing trader, so prefer to hold for several days. If a stock gains +40% or more, then I will highly consider exiting the same day. If a stock moves immediately against me, I will also exit on the same day. I prefer to sell closer to 4PM, since that's when I can estimate the appearance of the candle on the daily chart.

2 - Out of all your picks, how often would you say you are correct. (I know this is a pretty high %age). 80%+ (on average).

3 - Do you have an entry criteria (such as an indicator or other) that you use to scalp a few extra pennies on your entry price? I don't scalp.


13) Lindsay

a) On your bio it looks like you started trading at 13– you told us you are teaching your niece how to trade– did someone teach you or how did you get interested? Not niece, cousin. I started investing at 13, trading at almost 18. I learned everything on my own.


14) Ying

a) I’d like to ask your opinion about XRM, CTIC, FTK, OCNF, OVTI. I don't know why you're asking me about stocks I already own (except FTK). If you are a blind follower following my trades without knowing why, then stop.

b) Also would like to ask what will happen to these penny stocks if general market suddenly pullback to 925 or even lower. Each penny/dollar stock's price action is individually determined. Most stocks follow the general market to some degree, but you have to try to find the ones that aren't as affected by declines, but also head higher most of the time.


15) Steve-o

a) Any thoughts on holding or playing into earnings? I generally go not play earnings unless the chart setup shows me that I have greater odds for success. Betting on a stockfor no good reason is ill advised.

b) Could I also get your take on URRE for the weekly timeframe? Looks good still.


16) Finclyde

a) and I see that has the higher chance, by far, for a lower-rick entry for more upside.

b) Here’s a few random questions, what got you into stocks, how many followers do you have on twitter, what size of portfolio do you trade with, do you hold anything long term (dividend yielding stocks, gold, real estate, foreign currencies) or are you strictly dedicated to swing trades, you say that you read 100 books a year, which ones would you highly recommend (top ten maybe, you may have already listed these before), when’s your book coming out? Stocks became an interest just like everything else I enjoy. Twitter followers - why does it even matter? Portfolio size - larger than most people here. No long-term holdings in my personal accounts. I am a primary swing trader. What kinda of books are you looking for? My own book - I thought about it, maybe.


17) Casino3

a) I’m still holding CTIC and bought more on the pullback. What’s your sell target?
What's YOUR sell target? You should already know when to sell before you buy. You are traveling without a map. My target is in the $2's.


18) Q

a) Do you think you could make a living just day trading and not holding positions overnight? Yes, people do it all the time.


JWC4 said...

Was the big rally today a buy program kicking in? how do you get that sort of info? THX

John C. Lee said...

Usually is. No way of knowing who does what until it's too late.