I think I will make it a habit of posting cool battle images for the purpose of motivating people.
I feel very comfortable being in approx. 65% cash with a 30% long and 5% short exposure. I am prepared to deal with both an up and down market. I made no purchases yesterday and also removed five of my positions in the morning (FEED, COIN, CPE, NXG, WRES) primarily to build a large cash position. Not bad on the timing part. In the end, I was only down -0.27%, or basically flat, on a day when the SPX dropped -1.32%. This is the result of my morning sales, the FAZ hedge, and gains in TVL and BZ. My worst position was FLOW, down an ohh soo scary -5.9%.
Recently, I've heard grumblings from people who won along side me with 20-40% returns. They want more and are no longer satisfied with 5-10% gains. Well, unfortunately, you can't play $1 stocks forever. It's one of those strategies that work in certain situations (like the past 2 months). Many of the names I played will go back to $1 or out of business. Don't get greedy up here, raise cash and/or add a hedge and lock in profits whenever you get the chance.
As for the general market, I am very cautious. One of my short conditions may have been met today via the exhaustion bearish gap up and it was accompanied by massive volume (look at 7-month SPX chart). This kind of volume has been associated with bottoms, but it can also mark tops. Pullback volume should be much lower. In the past, however, tops were marked by decreasing volume which means that this could mark an initial phase of a blow-off top. I wouldn't surprised since we are up 34% from the March bottom.
A bearish scenario would be a "bump-and-run" reversal shown in my amateur diagram below. This occurs when a stock/the market (I'll use market) releases itself from it's primary support and simply runs up too far, too fast. It consists of 3 phases: the lead-in, bump, and run. The lead-in is the 'normal' trend support that the market has been following. The bump is when the market makes a sharp advance, leaving a 'pocket of air' between it and the support. The run is when the market rolls over to revert back to the mean. Before it rolls over, the consolidation looks like a normal pullback. Something to keep in mind.
The COMP has broken down from the 200-day on it's highest volume since November. Not good at all. I expect a lot of whipsaw around this area. Fair warning.
Long holdings are now as follows: AHD, BZ, CNO, CNXT, EMKR, FLOW, HGSI, TVL. Few of them will be sold in the morning, but I wouldn't know which ones until I see how they act.
Alright, ya'llgot me. I did sell my soul to the Devil. That's why I am up +28% month-to-date as of today's close, not to mention +55% in April and 142% year-to-date 2009. You think I use technicals for my trading decisions? Wrong. That's just an innocent ruse to hide my sinister involvement with secret societies infiltrating the stock market.
For all the mentally stable people that made money off of my calls, congratulations. These "dollar menu" stocks are cash freakin' cows. I think I've proven that point week after week. Finding the setup is the first step, which is easy to do. However, the timing must be flawless, or you will miss the initial spike. Let's look at three calls I made just today alone:
HGSI was an imminent breakout call that was executed at 12:52PM at $2.025:
FLOW was also an imminent breakout call that was executed at 2:08PM at $1.889: TVL was the final imminent breakout call for the day, executed at 2:55PM at $1.73:
My trading philosophy is all about getting the biggest bang for your buck for the least amount of risk in the shortest period of time. Are there more $1-3 plays? Absolutely. I have an entire pipeline full of these monsters ready to "BTFO". However, I am trying not to add any more longs at this point (but I'm sure I will though). I want to ride my existing positions to their fullest extent and then dump them to all the latecomers. That's how this game is played. Either you're early, or you're late. If you miss a breakout, don't chase it. There are plenty of setups out there, so catch the next one.
As for the general market, we really need a pullback now. I did not expect this up move, though I did say 2 days ago that the bears would get screwed. What we are seeing right now is the gradual meat-grinding capitulation of the most stubborn short sellers. Like said many times before, I have only 2 criteria to commit to the short side: 1) exhaustion gap via black-filled bearish gap up, or 2) a major breakdown of -3% or more. If neither of these scenarios take place, then get the fuck out of my way.
I am currently 79% long, 3% short (FAZ), and in 18% cash. My personal holdings are as follows: AHD, BZ, CNO, CNXT, COIN, CPE, EMKR, FEED, FLOW, HGSI, NXG, TVL, WRES. They will be sold off one-by-one when they are ripe for the picking.
On a final note, I received 62 e-mails from random people asking me all sorts of questions. You can stop flooding my inbox by leaving your comments below. The simple answer to all of your questions is "look at the chart". Stop free-riding on me if you can't take 1-2 mins to figure out the entry & exit targets. If you don't know what you are doing when you buy a stock, then you already made a huge mistake.
It appears that many people are aware of my gains. In fact, I got accused of selling my soul to the devil AND conspiring with the Illuminati. That's ridiculous and absurd. All I do is sacrifice a goat every night. What's the big deal about that?
The range between 908 down to 890-892 must hold. We need the consolidation. It's that simple, yet people like to complicate or over analyze things, and then later accuse me of sorcery.
I have a list of dollar menu stocks full of McDoubles and triple cheeseburgers. If they meet my criteria, they will be executed intra-day and posted in the comments section. The only way I will endorse a stock is if I am personally in it myself.
First of all, I racked in a solid 12% MTD May gain so far. You should be around there, unless you went short. Don't forget this quote from Keynes: "The market can stay irrational longer than you can stay solvent. My only two critera to short is either on a huge exhaustion gap up via a black filled bearish gap up -or- a major breakdown greater than -3%, intraday or pre-market. Both must be executed on massive volume. Keep that in mind.
Second, I totally expect a pullback, most likely a doji day. This is necessary after a major move. I want to push these $1-3 stocks to the limit, therefore I will not be selling (as of now). If you don't like pullbacks, then you better mentally prepare for one. I recommend that you go out and watch Wolverine sometime during the day. I heard it's a great movie. The important thing is to not get freaked out and ask me all sorts of questions that will waste my time. Stick to your plan and let the charts make the decisions for you.
Congratulations to everyone that scored huge today. And also congrats to my special group of peons who followed me into PQ, XTXI, and XTEX for the day. If you noticed, these stocks (along with CPE and WRES - swing trades) do not move in tandem. They move in a particular sequence. PQ moves first, then XTXI, then XTEX, then CPE and WRES. Likewise, PQ was the first to pullback, and those stocks listed above pulled back exactly in the same order. This anomaly started on Friday and I caught it during the last half hour that day. Don't believe me? Ask RC. He was trading with me live Friday and today. These inefficiencies are rare, but the profits are totally sick and very easy to obtain, as you can see.
Don't forget - expect a pullback. If any of my stocks actually gap up and spike, I will sell them. This dollar stock circus cannot last forever.
875 continues to be in focus (as is the 867-877 range). The market needs to break from this holding pattern quickly to meet resistance at 888. Frankly, if we continue to flag in this range, then it is bullish. If we breakout, it is obviously bullish. Even a breach of 860 leaves the uptrend still intact. There will need to be a major breakdown or a huge exhaustion gap in order me to go short at this point.
As you know, I already own CBB, CNXT, COIN, CPE, IO, THC, and WRES. I have a few other cheapies in my sights: EMKR, NXG, XTEX, GSIG. I made over 50% last month playing only $1-3 stocks. In addition, there are a lot of oil/gas earnings plays that should breakout, including CHK and FST. I've said it many times before and I'll say it again: be selective in your picks. Don't pick random stocks and definitely don't pick anything just because I'm buying something, despite the fact that I'm banking some serious coin.
I received hundreds of questions/e-mails over the past few weeks on a variety of topics. I think I'm going to cover moving averages. The main question was, "what MA's do you use?". That's simple. I layer all of my long charts with the 15, 20, 50, 100, and 200-day MAs. For shorts, I add the 5 and 10 as well. The MA's for the long-term are the 200-day (primary) and the 100-day (secondary). The intermediate-term MA is the 50-day. Short-term MA's are the 15 and 20-day, and the most important for swing trading.
The most ideal situation is when the 15 and 20-day both provide underlying support. What's even better is if the 50 and 100-day MA's also provide underlying support. Right now, in the majority of stocks, the 200-day acts as an initial price target for exit. The 200-day MA is the strongest MA out of the ones mentioned. It defines the long-term trend. The COMP is the only MA that is testing the underbelly of the 200-day. Interestingly, the QQQQ is resting above it. Technically, if something is above the 200-day, it is in bullish territory, so keep an eye on tech.
The MA's also gets rid of headaches and panic attacks. If you know where one of these significant MA's are located, then you know there will be a bounce, at a minimum (in most cases). Conversely, if a stock is approaching a major MA, you know there will likely be a pullback or failure. Besides price, volume, and the basic chart patterns, I've relied primarily on the moving averages to make my trading decisions. I let the MA's make the call. Stop panicking and impulse trading for no good reason. Let the charts make the decision for you.
