Saturday, April 18, 2009


When I was a kid, I would help my mom gardening by plowing the ground, planting the seeds, and watering the plants each summer. We planted all sorts of vegetables and fruits, such as lettuce, strawberries, carrots, melons, radish, tomatoes, eggplants, cucumbers, and many others. We even had a large row of apple trees, which would have provided 100% all natural apple juice if it weren't for all the bugs getting of them first. It was tough work preparing the ground and helping them survive, but in the end, we all got to enjoy the fruits of our labor.

Trading is a lot like farming (and gardening for suburban folk, but I'll stick with farming here), especially with my style of swing trading. We are all farmers if you haven't realized it already. Every stock you buy (or short) is a seed which you are planting in the ground. Now, before you plant anything in ground, you have to make sure the weather and season favors any such plantings. You have to make sure the ground is soft, moist, and fertilized. You also should have a fence around your garden to protect your plants from animals and neighborhood kids.

You toil endlessly, day after day, making sure the ground is prepared to plant your seeds. Every stock that you buy (or short) is the seed of a plant that you are hoping will provide you with sustenance. You make sure the seed is deep enough into the ground, but not too deep, so that it will have the chance to grow. You watch over your garden each day.

As the days go on, you may notice some weeds. You must remove the weeds or they will rob the soil of the nutrients that your germinating seeds require. As your baby plants poke their heads out from the ground, they will require sunlight to activate the process known as photosynthesis. However, if you do not remove these weeds, they will grow tall and block out the sunlight. remove these unwanted weeds from your garden, or they will kill your plants. Some of your plants will not make it, so cut your losses early so the others have a chance.

Now, some people are very impatient and expect their plants to grow up in one day to be harvested. Ridiculous, who taught you that nonsense? Does make any sense to pick a seedling? No. Give your baby plants time to show you what they can become. It might seem really exciting to see them start to grow, but i you pick them now, you will never realize their full potential. You kill your plants the moment you pick them. Some plants need time, so give it to them.

You'll also notice that not all days are sunny and clear. You'll have days like this:

or this:

But, do not fear. You are the farmer and you are watching over your plants every single day (I hope). If the rain and winds are strong, you can put tarp (not TARP) on top of the garden for protection. Again, some plants will die because nature is not always nice. Cut your losses and give the others a fighting chance.

One day, you may notice a nosy deer walking. He likes what he sees. The deer may look pretty and gentle, but as a farmer, you know what kind of destruction that deer can bring. Good thing you have a fence around your garden, but sometimes, the deer will fight to get into your garden. You'll just have to scare him off, or if you're Alpha, just shoot the thing so it never comes back. There will always be creatures trying to kill your garden. It is your job to watch over and protect it. The fence is there to act as your support.

Towards the end of summer, you're garden is lush with life. It practically looks like a jungle full of colorful vegetables and fruits. It is time to harvest. If you do not harvest now, you will let the bugs eat up everything. You can spray pesticide as often as you'd like, but your veggies and fruits won't stay on their mature plants forever. They will fall to the ground and rot. It is time to harvest, so do it now. Know when to buy AND when to sell. Too many people buy without knowing when they will exit. You may lose all of your strawberries for no good reason.

A great thing about fruits and veggies is not only are they delicious to enjoy, but they provide you with even more seeds than you previously had. You may even be able to double the size of your garden in time for the next season. If you just eat up all of your fruits and veggies right now, then you will not have any seeds left. You have become greedy and wasteful and the only seeds left are the ones that go through your digestive track, if you know what I mean.

Save the seeds and grow your garden.

Friday, April 17, 2009


I won't be able to gauge any levels until after all of the pre-market earnings are out of the way, but if needed, immediate support is located at approx. 858 SPX. If you look on the 40-day chart, you can clearly see the narrowing rising wedge. A major move is coming soon. Typically, in most cases, these patterns are bearish. Coupled with the fact that the market rallied 28% from it's March low, it seems likely that we will start heading down sometime soon. All options are on the table.

Pre-market earnings: C, GE, FHN, MEG, STU, AOS. None matter more than C and GE, obviously. As for econ reports, we have only the U of Mich. Consumer Sentiment coming out at 9:55AM EST. Consensus is 58.5 with a range of 58.0 to 61.0, with a previous reading of 57.3.

The SPX is closing in on my near-term target of 875. Even though I am long, I grow uneasy as the wedge continues to take form.

Thursday, April 16, 2009


Today's earnings and economic reports will move the market for sure. I say this because yesterday's last hour spike helped create a Rising 4 Method. There are combinations for this pattern, such as the Rising 3, or 5, or 7 Methods, and they were prevalent enough to keep this rally alive. the Method is created using a long white candle, 2 minor distributional days, and another white candle to sandwich the pattern together.

For the reports, we have Housing Starts, Jobless Claims, and the Philly Fed. This first two come at 8:30AM EST and the latter comes at 10:00AM EST. The consensus for the starts is 0.570M with a range of 0.500 to 0.645M, with a previous reading of 0.583M. The consensus for the claims is 658K vs. the previous reading of 654K. Finally, economists expect the Philly Fed reading to come in at -30.2 with a range of -37.5 to -28.0, with a previous reading of -35. Their charts can be seen below:

As for earnings, we have some notable ones coming out pre-market: BAX, FCS, GCI, HOG, ITW, JPM, KNL, NOK, SHW, SON, LUV, USAK, and UTEK. There are some big names in this bunch that will lead the market today. By looks of the chart alone, it appears that the market will head higher. If we do, it is important to note that the SPX is likely to get stopped at the upper bollinger at 868, provided it passes through some minor resistance levels. The rising wedge on the 6 month chart itself, is not a bullish pattern, but as you can see in the orange box drawn, there is enough support at the bottom of the Method.

I added the chart of the COMP to show the striking distance to the 200-day MA for the Nasdaq. The index will first be met by resistance at the January high of approximately 1660 as well as the upper bollinger at 1677. I received several questions regardling the matter of scaling in shorts. I have not. I decided to add on the first breakdown of any group bullish pattern, such as the Method. So far, that has not occurred. Lastly, you can see the breakdown of the VIX to confirm and support the rally at hand.

Wednesday, April 15, 2009


There are a lot of bears testing the waters here. I typically do not indiscriminately add shorts whenever I 'feel' like doing it, but I think it may be a good thing to start building a position, perhaps 2-3% sized positions at a time, every few days. Do not commit. This is the safest way to play the bear side. I've seen people add, and add, and add shorts all the way up until they could no longer take the pain. That will destroy you as your position size and losses multiply faster and faster. So, be careful.

My main position, FEED, is doing absolutely phenomenal. The initial position placed 2 weeks ago, is now up 42%, and the rest of the parts are up between 8-32%. Whenever you find these wave 1 symmetrical triangles, put it on the top of your priority list. They usually become parabolic momentum patterns and are accompanied by wave 2 and 3 advances with equal consolidations in between. They are one of the most powerful long side set ups you can ever find.

For the bulls, find support at the 100-day MA (828-830 SPX), which also coincides with the lower intermediate-term upper sloping range (825) and the multi-month long-term upper trend channel also hitting around 825-830. Immediate S1 support is located at approx. 834, prior to reaching 830, which is also the location of the April 9th opening gap's marubozu. Make note that the April 2-8th bullish flag is being penetrated.

Monday, April 13, 2009