WEEKLY TECHNICAL COMMENTARY

CHARTS GONE WILD!!!

2010-07-22T23:46:00.002-04:00

The wait is over. I have my own site at www.ChartsGoneWild.com, powered by the Stocktwits Network. Stop by and take a peek.

CORRECTION: I WILL BLOG OVER AT CHARTLY UNTIL MY VENUE IS COMPLETED

2010-05-07T16:49:00.003-04:00

You will find me here: http://blog.chart.ly/ for 3 weeks or so. After that, I will give an update upon the completion of my site.

THE WEEKLYTA BLOG WILL BE OPEN TEMPORARILY UNTIL THE NEW VENUE IS RELEASED

2010-05-06T21:58:00.003-04:00

DOJI PLAYS / GOLD TIME CORRECTION / SWING UPDATE / DELAYED DAY TRADING

2010-04-29T23:44:00.007-04:00

I expect this horizontal time correction in gold to continue with an upside breakout. I will make secondary entries in GLD, IAG, and GG, as well as other gold names during that time. I will exit the remaining 1/4 swing in WYNN today. So far all swing plays (MGM, LVS, WYNN, IAG , GG, GLD, etc.) have either been booked for a profit or are profitable on paper.

The market is in a channel, but more specifically, in a broadening reverse symmetrical triangle. This type of consolidation typically lasts for a while. At this point, this pattern is neither bullish nor bearish.

I have three finals coming up very soon, so I will not be executing rapid-fire scalps for the next 2 weeks (for the most part). Instead, most day trades will last longer than just a few minutes with more aggressive entries and delayed exits to accommodate my lack of time.

Below are two doji plays. Remember that doji are indecision days. How do you play doji gaps? You either go long or short either 1) upon a gap up above the previous days highs or a gap below the previous days low or 2) upon intra-day breakouts or breakdowns of said highs and lows. Once direction is determined, the prevailing side usually continues the price action in the direction of resolution.

GOLD UPDATE II

2010-04-27T16:36:00.001-04:00

The GLD did what I had anticipated and buy stops were triggered in the following today:

1) GLD - $114.10
2) IAG - $16.41
3) GG - $40.92

Here was the first Gold Update written yesterday: http://ibankcoin.com/chart_addict/2010/04/26/gold-update-i/

GOLD UPDATE

2010-04-26T20:42:00.004-04:00

I wrote a post on April 10th regarding my interest in gold. I was waiting for the sector to prove to me that it is good shape to make a full exit out of a multi-month base. The criteria I was looking for was one final consolidation. This criteria has been met in the form of a developing symmetrical triangle that is using the 20-day MA for support. In addition, referencing the GLD, I am using $114 as the neckline for an inverse head-and-shoulders.

The important aspect of this consolidation is the evolution of it. From December 2009 till early February 2010, gold formed a descending triangle. From that point up until this month, gold formed a channel. The entire pattern exhibits both an inverse head-and-shoulders as well as a rounding base. This month is the most important as short-term consolidation was able to maintain the 20-day MA as immediate support. The only concern is that all four MA's do not have positive slopes, still leaving remnants of a channel's characteristics.

The moment the GLD breaks through $114, I believe it will be time to accumulate gold for a swing, and perhaps, a positional trade. for a target as close to the December 2009 highs as possible. The only risk is one overlooked pattern, which is the ascending channel. As long as the following criteria are met, I will deploy gold positions:

1) MA slopes are positive on the 20-, 50-, 100-, and 200-day MAs.
2) The GLD breaks above $114.
3) The 20-day is not violated as nearest support.

If this is executed, then gold will have successfully breached the channel and the inverse H-and-S neckline. Keep an eye on this sector and it's components as we approach May.

Lastly, I have finals soon so don't expect me to do my usual rapid-fire trading for the next 2 weeks. If I will be trading, then the time frame will be longer than just a few minutes.

INTUITIVE TRADING: PART III SLIDES

2010-04-16T09:03:00.001-04:00

Here: http://www.scribd.com/doc/30025881

INTUITIVE TRADING SLIDES

2010-04-11T15:46:00.003-04:00

I started a new Intuitive Trading series on my last two Charts Gone Wild shows on Stocktwits TV. Part 3 will be this week. A got a lot of e-mails from people requesting the slides. Here they are folks, enjoy:

Intuitive Trading Part I: Right Brain vs. Left Brain: http://www.scribd.com/doc/29752005/psy1

Intuitive Trading Part II: Cognitive and Emotional Biases: http://www.scribd.com/doc/29752039

LONGER-TERM PLAY: GOLD AND SILVER

2010-04-10T09:59:00.006-04:00

Many folks requested that I post longer-term ideas, or plays that don't last for only a few minutes heh. Well, first it was the casinos, which still have more room for upside, and now I want to talk about gold and silver.

Prior to 2010, all of us at iBankCoin made predictions for 2010. One of my predictions was that "Gold will continue it's correction for the first quarter of 2010 and break the 2009 highs after Q1". Exact words. So far, part one of that prediction is true and part two has yet to be seen. With recent technical developments in both gold and silver, I think we have a play here, finally.

Gold broke out of a symmetrical triangle at the beginning of this month. It is also testing the channel high as shown in the continuous contract chart. We may need to watch some action between the sym tri's upper resistance and the channel's high. Also, notice that the price action is fully above all four SMA's (20, 50, 100, 200). The GLD tells a similar story. I posted some of the best gold charts I could find.

Silver also broke out at the beginning of this month above upper multi-month resistance. I did not find as many silver setups, but precious metals, in general, should be a place to focus on.

I am looking for a test of channel highs and possibly one more pullback before deploying gold and I am looking for some kind of foothold between 18-18.70 in silver before deploying silver positions in my positional account.

WRITE A REVIEW

2010-04-08T18:07:00.002-04:00

Right here on Investimonials.com: http://bit.ly/b2eV7Q

If you read my blogs, watch my shows, and follow my tweets (and I helped you out), let me know!

Thanks!

STOCKTWITS TV SHOW SLIDES

2010-03-29T23:35:00.002-04:00

I am making my Stocktwits TV show slides available to everyone in PDF format for download.

For my show archives, you can go to this link: http://www.stocktwits.tv/charts-gone-wild-with-john-lee/

Here are the slides:

AIG Trade Review: http://www.scribd.com/doc/29142022/AIG-Trade
Volume Patterns: http://www.scribd.com/doc/29142294/Volume-Patterns
Common Breakouts: http://www.scribd.com/doc/29142224/Common-Breakouts
Doji Strategies: http://www.scribd.com/doc/29142270/Doji-Strategies

TRADE REVIEW: ABIO

2010-03-27T22:23:00.005-04:00

For exact trade entries and exits, you can refer to the blog comments or on my twitter (@WeeklyTA). It's documented in real-time and I have about 60 traders who saw me trade it in real-time in 2 different live chat rooms.

I had my 2nd best trading day of 2010 thanks to ABIO. At 8:30AM Friday, ABIO announced that "a patent was issued to them for treating heart failure patients with Bucindolol based on genetic testing" (http://bit.ly/c08SLF). Like other plays, I do not care what the news is. I only care about the reaction to the news. This is the principle of momentum short-term traders. That's lesson #1 - don't get too absorb into the news, instead, trade the reaction to the news. We see this rule all the time, but do you really put it into practice or do you let your personal biases get in the way?

Lesson #2 is actually watching and "stalking" a stock prior to a breakout. It may take forever, and yes it is many times boring, but you gotta pay attention to the setups during the day. Use a 1-minute time frame for momentum stocks so that you're able to capture the first breakout out of a base. That's what I did...I caught ABIO's first breakout at $4.57/58 (after the opening gap). Do not miss the first breakout, or else it'll get more difficult to maintain your emotional stability. Don't let thoughts like "it's already up too much" get into your head. If the setup is great, then take it.

Immediately after a huge power spike, I immediately look back to the multi-month daily charts to find key support and resistance areas. This helps me identify where I need to buy and sell intra-day.

We can see a high of $4.50 in November 2009. We can see a high of $4.88 back in July 2009. The next level would be the breakaway gap back in June 2008 with a high of $5.29. After that, the gap started to fill and the target was the filling of the gap between $8-9. Technically, ABIO breached every level, every high, on the way up. I keep these levels in mind because when the stock does break..it's gonna BTFO. I've demonstrated this nearly every single week. Lesson #3 is to pay attention to past major price levels. Don't sit there intra-day wondering where the stock should be because the chart will tell you.

Intra-day, you have to have focus and discipline when executing the trades. Of course, in hindsight someone could say "why didn't you hold the stock till $9 and just get 100% in one trade?". Well, problem is that when the first breakout happens, no one knows where it'll end up by 4PM. Heck, I don't know, which is why I trade each intra-day 1-minute setup as if it were the last. It's a way to protect yourself from sudden reversals. Why? Stocks that explode to the moon will fall the hardest and many times, without warning. The important thing is to trade comfortably, take profits at appropriate levels, and play the stock till the wheels fall off. This is lesson #4.

The star that burns the brightest burns out faster than the star that emits a cooler, darker light. Don't forget this.

Lesson #5 - pay attention to volume. Volume is absolutely mandatory with momentum stocks. No volume = no trade. Notice how each intra-day breakout displayed some sort of sustained multi-bar volume spike? Combine that with a price spike and you got yourself a trade.

Key characteristics that make this spike "legit" vs. the other spikes in ABIO:

1) The gap was above all 4 MA's (20,50,100,200) immediately. Not true for the spike in November and July 2009.

2) Volume was exceptionally greater than any other day in the morning. This signified to me that there was going to be a massive move. This alone does not confirm direction however. It just tells me that it's going to be "one of those days".

3) The stock was able to breach previous highs with very little problem. Resistance is supposed to knock a stock down, but it didn't. ABIO would flag at, under, or above resistance (pausing) to launch itself again.

4) Once the gap was filling, the stock could not be stopped. A breakaway gap that fills in only one day is extremely, extremely, extremely RARE. This was an exceptional case.

Let it all sink in. If you have questions, then let me know.

Thanks to the folks who @replied me on ABIO. Hope you folks made some cash. (

CALL FOR TESTIMONIALS / FEEDBACK

2010-03-26T16:29:00.003-04:00

Hey, what's up? Hope everyone had a great week. I know I did. I'm just wondering about my readers, viewers, and followers and wanted to catch up on what you guys are doing. I hope this blog, my shows, articles, tweets, and everything else have greatly contributed to your growth as a trader. To me, it seems like I learn something new every day and that's how it should be.

If you made money from my calls, articles, or anything else, LET ME KNOW! I'd love to hear about it. In addition, if there's something you'd like to see on the blog, my show, or twitter, send me your feedback. My eyes and ears are open to you. I'll be free this weekend (no traveling) and would be more than happy to open up some dialogue with each of you. Shoot me an e-mail at JCLee84 @ hotmail.com (no spaces in e-mail address), or leave a comment below and I'll get back to you as soon as possible.

Have a great weekend folks, and yes, I'll do an ABIO trade review this weekend.

2-YEAR INTERNATIONAL MARKETS

2010-03-24T09:13:00.007-04:00

Nearly the rest of the world is in some sort of IT/LT consolidation range, most of them in rectangles, asc channels, or desc channels. However, we are blasting higher. There's obviously a divergence here. Look for any breakouts of breakdowns from consolidations in multiple international markets for clues.

LONGEST TESTIMONIAL I EVER GOT

2010-03-24T08:41:00.002-04:00

I received my longest (ever) testimonial from a private coaching student I trained in January 2010. I decided to post it, unedited (sorry about the cuss words, but I didn't write them):

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(March 20, 2010)

When asked to summarize the core of his philosophy, Ralph Waldo Emerson replied, “the infinitude of the private man." If you asked John Lee for his outlook on life, he would probably offer a similar sentiment. However, where Emerson was known primarily as a thinker, John is a man of action. John is an example of someone that refused to be pigeonholed by society into becoming an institutionalized slave, and instead carved a path for himself through mastery of short term equity trading. For those of us lucky enough to know him, he is a true leader that changes people’s lives.

Before signing up for John’s training session, I was a college grad with a fresh job doing financial consulting . In college I had the average mindset of everyone else in the pack, “do as well as possible in school, and try to land the best paying job that will look good on a resume.” Both of my parents are self-employed, yet somewhere down the line I was brainwashed by society into thinking there was only one way to secure a future. I wasn’t sure where I really wanted my life to go. Soon after starting work, I quickly realized that being a corporate slave wasn’t for me. My biggest issue is that I am paid for my time. I know I can use my time more productively. As an employee you are rated on your “utilization” but for fucks sake how can you look at yourself in the mirror when you are being “utilized” essentially for someone else’s gain? How about trying to utilize your own time for your personal gain and development? This thought would eat at me constantly and I needed a way to live on my own terms, within a framework for creating self-made success. John’s teaching is geared toward those with the individualist spirit of Emerson, who wish to take control of their lives, but have the motivation to make it happen. He offers a framework for owning your future.

If you follow John’s blog, you know his methods work. The results speak for themselves. John has synthesized the knowledge contained within his vast library of financial texts (which he will share with you if you choose to sign up). His concise teachings are essentially a rundown of the most effective and powerful strategies for maximizing your gains while minimizing exposure (and risk). In my first month of trading and testing the waters, I was pretty much break-even, which isn’t bad for someone that had never placed a trade in their life beforehand. In my second month, I am up 22% in three weeks. This is not a matter of luck; I work a full time job and have put in at least 20 hours per week scanning for set ups and studying the methods. John is a terrific teacher and offers continual support, both during and after market hours.

The $4,000 “fee” for his service is truly a gift if you have the motivation and discipline to stick with it. Would you pay Peyton Manning to teach you how to quarterback? Would you pay Larry Bird to teach you to shoot a basketball? This may sound like an exaggeration, but it’s not. Coaching by those athletes would also come with a disclaimer reading “does not guarantee results,” but it sure as hell would increase your chances of success. John’s training is just like anything else; the more time you commit, the better you will become, but how far you go is ultimately up to you.

This system requires organization, discipline, and self-analysis more than anything else. If you are motivated to self-improve, apply for the program. This has been by far the best decision I have ever made. I am incredibly motivated and will not let this opportunity go to waste. Two months after training, I feel like my life is at the apex of an ascending triangle, ready to BTFO.

-Michael H.

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That's whats up. Great work!

RANDOM PICS FROM THE PHILLY ZOO

2010-03-22T08:41:00.011-04:00

TRADE REVIEW: SOMX

2010-03-19T03:52:00.003-04:00

Yesterday was my best trading day for 2010...all thanks to SOMX. I caught the first spike for a good +$5K and the secondary breakout for another +$13K. SOMX could have been played by anyone that was alert and had the intra-day 1-min chart up. The first spike may have been elusive to 99% of people, but the secondary breakout is no excuse because you had every opportunity to buy the stock on the first spike out of it's base, then it's reach to the spike's high, and beyond.

SOMX got halted prior to 12PM for reasons of news pending. It was also announced that the stock would re-open at 12:05PM. Normally, one does not have the luxury of being able to be ready for the spike. Like NUVA and my various AIG trades, the first 1-min spike bar held up and sustained itself. This first spike automatically broke above 4.80 (Nov 2009) and 4.88 (March 2010), alerting of a full-scale technical breakout. The secondary breakout was marked by a break from the neutral range as well as another breakout above $8.

This is another example of a trade where you either caught it or you didn't. There is no in-between. If you were fast and on the right side, congrats. If you were slow and/or on the wrong side, there are lessons to be learned from the SOMX trade. Whenever the first spike holds up and immediately breaks through the nearest major resistance, it is a long trade. If it fails to penetrate major resistance, it will fade, for a short entry. Upon breaking out, it is a signal of further momentum, giving opportunities to scale-out of the position.

Looking back this year, I noticed that I had at least one intra-day spike play once every 1-2 weeks. I do miss some of them, but you only need one of these plays to make your day, week, or month. After a huge win, it is my standard protocol to take it easy the next day (t0day) and play with only 1/2 size positions and cut down on frequency. People say that you shouldn't trade with emotions, but since we're human, emotions are inevitable. After huge wins and losses, always remember to take a break, refresh, and then get back into the game.

Some charts with levels marked below. As each target is reached, you have to pull back to a longer time frame to find the next target. It is 4AM and I need some rest. Have a good one folks.

Earlie screenshots from the day and stuf f;:

LONGER-TERM: CASINOS

2010-03-17T02:09:00.004-04:00

I will be deploying casino positions in my long-term accounts. Charts on all timeframes are telling me that a longer-term holding is the best way to capture the majority of the upside. Take a look at the 10-month and 3-year charts of MGM, LVS, and WYNN.

TRADE REVIEW: AIG

2010-03-10T01:20:00.005-05:00

NEGATIVE VOLUME DIVERGENCE

2010-03-09T06:15:00.005-05:00

When price rises, but volume falls, it is called a negative volume divergence and non-confirmation price action. This is bearish. In addition, we should see large bursts of volume accompany periods of declining volume (these are your optimal trading days). Traders should be cautious from this point on.

REGIONAL BANKS

2010-03-07T23:42:00.002-05:00

If you want long setups, then regional banks are a great way to go. I encourage you to explore other setups within the industry.

DOUBLE DOJI

2010-03-04T06:21:00.003-05:00

Markets formed double doji the past two days. This is setting up for a major move. There is more leaning towards the downside, so I drew out major support on the SPX and COMP. January resistance is most important for the RUT, also drawn out. The DJIA has support at the 50-day MA (10370). There is one big variable, which is this morning's plethora of reports. In the event that we gap down below intraday support, expect continuation. Schedule from Briefing.com is below.

MARKET THOUGHTS (3/2)

2010-03-01T23:42:00.007-05:00

Do not go around searching for the next NUVA. You'll be wasting so much time. Instead, try to stay focused on your daily trading plan. I hate it when people ask me "How high do you think XYZ is going to go?" or "How do you find the next lottery winner?" Truth is, they just come on rare occasions and you either catch them, or you don't. Constantly expecting that you'll make a killing is comparable to the guy that goes to his local Wawa to buy a lottery ticket everyday. You may win big, but most likely you won't. I want to remind you to remain focused and aligned with your goals with reasonable expectations.

As for the market, it is still range bound, regardless of today's move. The SPX and DJIA are trading in rising wedges, both above the 50-day MA and also back within intermediate-term consolidation zones. The RUT looks the best with the highest chance of testing the January highs, followed by the COMP, both of which broke out of bull flags.

Most of the sectors are trading in consolidations.

Channels/wedges - XLV, XLK, XLF
Triangles - XLB, XLI, XLU, XLE

The best one that is holding daily highs and flagging is the XLP (staples). The number of consolidations indicate that there is a much, much greater move coming soon. Personally, I'd pay attention to the symmetrical triangles with near apex completions.

It is March, and I'm ready to buy some gold (IT/LT) on a successful break of the channel. There are multiple consolidation patterns, tight MA ranges, and a neutral range to consider - all of them indicating that a consolidation breaking move should be coming soon.

I always found Doug's work very interesting over at dshort.com, especially the "Road to Recovery?" diagram. I believe we will mimic the S&P 500 Oil Crash Recovery and the S&P 500 Tech Crash Recovery. Repeating the 1929 crash is unlikely.

I am neutral on the general market on all time-frames and continually stress selection of individual equities as the main way to go.

EPIC TRADE OF 2010 (so far) = NUVA

2010-02-26T14:32:00.003-05:00

Order: 13:25:57 (2 sec fill)

Entry 13:25:59 $31.2699

Scale Outs:

1/2: $36.92

1/4: $41.89

1/4: $41.18

Suffice to say, I am done for the day. This is a news driven power spike that I was fortunate to catch. I don't regret getting "only" 1,000 shares because I stick to my rules on position sizing specifically for intra-day spikes.

1st Target: $31.68 (high of day prior to spike)

2nd Target: $33.63 (100-day MA, kept spiking higher)

3rd Target: $37.08 (200-day MA, I always cut here)

4th Target: $40.54 (November highs - sell everything at this point)

...

Charts are for "Idiots"? Think again.

BREAKOUT SETUPS

2010-02-25T05:02:00.004-05:00

I like to scan the 52-week highs list regularly to see if there are some sweet swing setups. I did find a few that 1) broke and closed at or above resistance, 2) all made 52-week highs. It is an obvious sign of strength when stocks are breaking out to new 52-week highs while the market remains in a neutral range. In addition, follow up checks on a stock's sector group is encouraged as you may find those stocks mimicking the same patterns.

First chart is a 3-mo of the SPX. It is still caught between the 50/100-day MAs.

CAUGHT BETWEEN MOVING AVERAGES

2010-02-23T08:35:00.002-05:00

The general market as well as most sectors are caught between MAs. For the SPX, it's the 50/100-day. For the XLV ,it's the 20/50-day. For the XLU, it's the 20/100-day. They are all different. I expect more chopping today as the market continues to test the 50-day MA. On the 2-mo/60-min SPX chart, it's clear that we are back inside the neutral range that was created from December. Look for breaks above the 50-day or below 1102. As always, individual stocks should be carefully selected based on the best setups.

IS TECHNICAL ANALYSIS FOR IDIOTS?

2010-02-19T01:26:00.004-05:00

I wanted to bring up the ongoing conflict among two schools of thought - fundamental analysis and technical analysis.

A common question that needs to be answered is "Does technical analysis work"? As a discretionary technical trader with 8 years under my belt, I feel that it is my responsibility and obligation to defend technical analysis as a legitimate and effective approach to profitable trading. I use technical analysis every day, demonstrate it's effectiveness, have the returns to prove it, and I will champion this form of analysis till the day I die. As "The Chart Addict" nothing less should be expected.

This article is for all of the non-believers, bashers, those holding myths about TA, those that don't truly understand TA, and for the unfortunate ones - those that lost money and blamed it on TA. The truth is, I could really care less what you think about TA because it works for ME. Perhaps it doesn't work for you, and that's perfectly fine. We all trade the markets in different ways, and it's important to use what works for you. If something simply does not "fit" with you, then you should explore other options. This goes for both TA and FA (fundamental analysis).

Technically Speaking

Technical analysis, in it's most simplest form, analyzes supply and demand through price and volume action. TA is designed to help you identify the most probable future action based on price history. Note that I did not say that TA is used for predictions the way most people would think. There are jokes that using TA is "voodoo", "similar to using a crystal ball", "black magic", "hogwash", "hocus pocus", and whatever else you may have heard. The people that think like this truly do not understand what TA is and how it is properly used. I encourage you to open your mind and explore this realm. For those that have been following me for 1-2 years, you know that I champion TA as my most favored trading analysis.

We are NOT trying to find out the value of a company, and in most cases, we don't care. We don't sit here reading 50 page reports day and night. Most technical traders have short-term horizons (day/swing) and technical analysis, in my opinion, has the upper hand for these shorter time frames. Furthermore, there are enough technical analysts that have consistently demonstrated the value of this art.

Proven Success with Technical Analysis

Since I made my Covestor account on March 17, 2009, I still command a return north of +300%. Am I lucky? You have to be really dumb if you think that. In fact, returns for my last 4 years all exceed +100%. How is that luck?

The Stocktwits community is full of tens of thousands of traders, but there are quite a few that I will personally recommend to you. Time and again, these folks have demonstrated exceptional and consistent skill from the proper use of TA: Brian Shannon, Anne-Marie, TheEquilibrium, DowntownTrader, ZMoose12, Steven Place, Kunal, ldrogen, Stewie, John Welsh, Trader Florida, Tickerville, SMB Capital, Zortrades, Misstrade, Gtotoy, and many, many others. The list is too long, but the point I'm trying to make is "how can technical analysis be rubbish if there are SO MANY successful technical traders"?

Still have something to say? Before you say anything, first prove your returns and then we'll talk or GTFO.

Arguments

So, you still don't believe that TA works. Maybe it's because you subscribe to only one school of thought. Or, maybe you buy an academic's theory of efficient market hypothesis. For those that don't know, efficient market theory states that the current price is right and past information is already reflected in the price of a stock, therefore analysis is useless.

There are three sub-arguments with this theory. There is the weak, semi-strong, and the strong forms of efficiencies. The weak form states that any analysis into the history of price movement is useless. The semi-strong form states that fundamental analysis is also nearly useless. The strong form states that all information is already reflected into a stock and neither schools of analysis will help you.

Here's another "argument": "Charts are just full of stupid squiggly lines that have no meaning". Seriously? Each price bar is important. They show you the open, close, high, and low. Put these bars on a chart, and you have a pictorial representation of all market participants. As a technical trader, I am more concerned about how other market participants are behaving and their reactions. A good example of this is with earnings releases. A company could report stellar earnings, but the stock could gap down. Also, a stock could report a huge loss, but gap up. In some cases, a stock barely moves. The chart shows me what other traders are thinking, and that has huge value in itself.

How about "throwing darts on a dartboard"? This is false. Expert technicians sort through hundreds of charts to assemble only a few that are worth playing. Only charts with the best setups make the cut. How is this throwing darts? Are we lucky? Sometimes, but we don't rely on luck. We rely on concrete data presented on the charts (price, volume, MAs, support, resistance, channels, gaps, etc). Remember? Charts are created by the collective participation in the market or stock. There is significant value in analyzing the psychology behind their behaviors.

There are many arguments, and if you have one to PROVE that technical analysis doesn't work, then leave a comment and explain your thoughts. Key word is PROVE.

Reading the Charts

A problem with technical analysis comes in the way people interpret charts. Two people can look at a chart but have different opinions. How is this possible? We are human, we have biases, and we all have different opinions. The key is to look at a chart for what it is. I've seen people draw phantom trend lines that don't exist, probably because they have a position in the stock. Manipulating a chart so that it favors you is the wrong approach to analyzing charts (and you are also lying to yourself).

Charts do not lie. They show what has happened already, and it's all real. How many analysts do you know of are guilty of sticking their personal opinions in their reports? Countless. Funny thing is, many stocks with multiple firm coverage often have conflicting opinions amongst each other. What and who are you supposed to believe? The answer is to believe in only yourself. Use technical analysis as a way to make your decisions without emotions.

Charts don't move the markets, but people do. People can say anything, but what is reflected in each price bar represents what people do. People's actions form the chart. Your trades, big or small, help create the chart. So then, does it make sense to bash charts when your trades are reflected in them?

Entries and Exits

If you still have doubts about TA, please tell me how you enter and exit your trades. How accurate and consistent are you? Do you sometimes have to "wait for things to work out"? Technical analysis, among the two schools of thought, has the advantage of lower-risk timing. Keep in mind that technical analysis is highly favored by short-term traders, thus accurate entries and exits are more important to us. Generally, the longer the time frame, the more important the fundamentals. It all comes down to the individual and his/her methodology and style.

If you are a pure fundamental analyst and you are attacking technical analysis = "apples to oranges".

Follow the Big Money

Most institutions either do not use TA or do not make it a priority. Does this mean that TA is insignificant? No! Expert technicians can follow the footsteps that are created by institutions. A good example is playing momentum breakouts on high volume - prior to the breakout.

Co-existence

Many traders favor a hybrid approach of implementing both fundamental and technical analysis. I believe that this is a very powerful method of trading and it is highly recommended.

In conclusion

There is no wrong method, as long as it works for you. For me, technical analysis is my foundation and it has worked for me all these years. I would not be writing this article if I believed TA and charts were worthless.

Use what gives YOU the best advantage.

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-John Lee aka "The Chart Addict"

Twitter: @WeeklyTA
Chart.ly: http://chart.ly/user/WeeklyTA
StocktwitsTV: "Charts Gone Wild" Tuesdays /10PM EST

TRADER PROFILE: VADYM GRAIFER - TRADER, AUTHOR, TEACHER

2010-02-11T08:39:00.003-05:00

I’m going to add a few feature to the blog. Once in a while, I will be profiling a professional trader who I believe is someone you can learn something from. I feel that by doing this, you’ll be able to learn a whole lot more and expand your horizons to see all of the possibilities that exist in the trading universe. Each trader is specialized in a certain style of trading and has mastered it. I am profiling these traders so they can tell the rest of us how they became so successful in their own way. After all, no one stops learning, including me, and as long as you take away one big idea from these profiles, then I have done my job in furthering your education and development.

Today I want to profile Vadym Graifer of www.realitytrader.com. I wanted to discuss some of his works, trading methods, and market views. Let me give you an idea what I found about him as a trader, writer, and teacher. Turns out his trading style is very similar to mine (and he’s also a trading coach!). He was kind enough to provide me with an article on “Stops: Why Don’t We Keep Them?”, located be low the profile.

Trader. Vad has been trading for a living since 1996. He is exclusively an equities trader, mostly on an intraday basis. His trading approach is built on the method he constructed upon tape reading principles he carefully restored and applied to today’s markets. His simple but powerful setups can be seen everywhere in the market once you get a handle on them. His approach is very visual, consistent, and disciplined. When I asked him to describe it in one sentence, he said: “Distinguishing the Smart Money action from that of the Crowd by the footprints they leave on the chart.” Vad is one of few who published his verified trading records (http://www.realitytrader.com/vadrecord.html).

Author. Vad’s first book, Techniques of Tape Reading, describes his trading method. The first part of the book is devoted to a trader’s development and psychology. The second is about trading systems, with the principles of tape reading explained and categorized, and setups broken down by elements. The third part contains over thirty examples with all the ifs and buts. If you’ve enjoyed my articles on the application of tape reading, then you should read this book.

His second book is The Master Profit Plan (http://www.realitytrader.com/masterplan/). This book is taking you by hand and guides you through the whole process of turning yourself into trader, making the process understandable and logical. It’s built in a form of choices you need make, explanations of how to make them and showing your next step depending on those choices. It takes you from the very beginning to practical trading, not leaving a stone unturned.

Teacher. Vad has extensive experience as a speaker and is known as being a very clear, concise and logical presenter, keeping his audience at ease, comfortable, laughing and learning a lot. He spoke at many Traders Expo seminars in US, Financial Forums in Canada, and private seminars in both countries and beyond, including annual Cara Trading Advisors Conferences in the Bahamas.

I had a chance to have a peek into Vad’s new project. It’s planned to be finished before the year end and is one of the most fascinating writings on trading I’ve seen in a long while. Not to give away whole thing, but it’s an application of Taoism to trading, based on serious research of this ancient philosophy and turned into incredibly practical trading advice. From the piece I’ve read so far – you will want to read it when it’s published.

Talking to Vad, I sensed what I want to see in people I partner with – integrity and professionalism. Read his writings, I am sure you will too.

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STOPS: why don't we keep them?

With everything said and written on the subject of stops, it should be given that everyone is conditioned to keep them religiously even before they start trading. No matter what source a newer trader turns to, utter importance of stops will be underlined and emphasized up to the degree that keeping them is heralded as the ultimate key to success. We all heard adages like “Take care of your losses, profits will take care of themselves”.

Do all the stern warnings work? Not really.

Time and again traders blow their stops, widen them in a course of a trade, hold losing position in a false hope it will make them whole. If this destructive behavior continues despite all the warnings, there must be deeply rooted reasons for this. As with most trading flaws, failure to keep stops roots in fundamental misconceptions about the very nature of the market and trading. Such misconceptions cause incorrect psychological makeup which, in turn, results in behavioral patterns harmful for a trader’s performance. In order to re-condition oneself it is necessary to work out fundamental, even philosophical if you will, understanding of the market as an environment in which a trader operates.

Let us list and analyze the misconceptions that cause failure to keep stops.

Right action must result in profit.

This misconception stems from misunderstanding of the very nature of the market as an uncertain environment. Newer trader sees a market as a conglomerate of firm links between reasons and outcomes. In such a conglomerate, every reason results in single possible outcome. The simplest case of such link would be “good news – up, bad news – down”. We know it’s not true – price reacts to news in a wide variety of ways.

Similarly, an inexperienced trader applying the setup he knows “should work” expects every trade to be a winner, providing all the components of the setup are right. Have you ever heard complaints like “Everything was exactly like in that book, yet the trade failed”? That is direct result of this misunderstanding. Everything may be right, yet the trade fails – just because markets work in probabilities and not in certainties.

If a system produces certain percentage of wins over time, it’s just statistics – and, as it is always the case with statistics, it cannot predict an outcome of a particular trade. No matter how good the setup is, any given trade can fail. That’s why it’s imperative for a trader to distinguish between two kinds of losses.

The first kind is a loss caused by a trader’s mistake – failure to follow all the rules of system applied, or impulsive entry without any reason at all. Such losses must be taken as a lesson. The second kind is the case where every piece of puzzle was in place, yet the trade failed – such losses must be written off as a part of trading game, as a tribute to uncertainty of the markets.

Of course, if you identify a component of your trading system that regularly causes trade failure, you can and should tweak your system in order to minimize failures. However, during the trade a stop must be taken as soon as signal of failure appears. The line of thinking “The setup was so good, it must work eventually” is a disaster waiting to happen.

Failure to perceive the market as an uncertain environment can result in another misconception:

Losses can be eliminated.

In a paradoxical way, this erroneous notion leads to more losses. A trader tweaks his system endlessly trying to get rid of losses completely. In such constant adjusting and re-adjusting, the system evolves into something totally different, losing its original logic, or even stops producing entry signals at all. As a result, a trader either abandons his system, which was not a bad one to begin with, or in a worst case, simply refuses to take losses. After all, he made his system so perfect by eliminating all the reasons for failures, it just MUST work! Meanwhile, had he stayed with original approach, maybe with some minor tweaks, it would continue producing steady results.

My trade is who I am.

This is one of those hidden subconscious misconceptions that cause us to refuse to take our stop. A trader perceives the result of his trade as a reflection of his personality, his abilities. A trade failure makes him feel as though he is a failure. Winning makes him feel “right”, while losing makes him feel “wrong”. Nobody likes to be a failure, to be wrong. That’s why, in order to avoid being wrong, we refuse to take our stop. You can be right and still lose on this particular trade. You can be wrong and win, too.

It’s important to differ between good and bad trade, and we will be back to this later, in the Random reinforcement part. At this point it’s important to separate your self-perception from the result of your trade. Taking a stop loss, you are stopping your loss – nothing foolish about that. The major trigger for the right approach here is a realization that by accepting the market as an uncertain environment, we already have accepted the possibility of losses. If we haven’t expected the market to work in our favor every time, there is no reason to feel foolish when it doesn’t.

A loss is just a paper loss until it’s taken.

This is a big mistake in thinking. If a loss gets out of hand, it’s very real. It paralyzes you, it clouds your judgment, and it makes you miss plenty of other opportunities. Instead of taking a pre-determined loss and moving on to another trade, you sit and watch your losing one, twitching in pain and feeling remorse. Your chance to take a small stop is long gone. You are agonizing now over big one that is going to deplete your account too much and inflict serious emotional wounds. You hardly notice many other opportunities. The market has moved on, other sectors and stocks are in play, and you still nurture your losing trade, hating it and not being able to finally drop it. At some point you will ask yourself “Why was this trade so important to me? What made me hold onto it?” And this takes us to the next common error:

Putting too much importance into single trade.

A newer trader tends to see each trade as overly important, as if it’s going to make or break him. The market is an endless stream of opportunities. The next trade is right around the corner. No single trade is so important that it would be worth abandoning all other opportunities. Perceive your trading as a process, not as separate events. With the correct approach trading becomes natural, like breathing. Each entry is inhale, each exit is exhale. Breathe in and breathe out. Don’t choke yourself trying to hold onto each given breath.

Random reinforcement.

This is an important concept to understand. The market is not always rewarding right decisions and punishing bad ones. The practical implication is that a trader runs a risk to stop applying proper techniques if he sees wrong ones being rewarded sometimes. Take a stop, observe a stock reversing and going into profit zone – and you get tempted to skip your stop next time. If you try it and it works, there is significant chance that you continue doing just that – the bad habit gets reinforced. You may win several times by breaking your rules. What happens eventually is that one trade that does not reverse destroys your account. It’s important to define what good and bad trades are. Unlike many think, a good trade is not always a winning trade; a bad trade is not always a losing trade.

- A good trade is a trade where you kept all your rules that you know to be working in a long run. A good trade can be a winning one when the market acts accordingly to what your system indicates. It can be a losing trade when the market acts against it, but it’s still a good trade.

- A bad trade is a trade made against your better judgment, against your rules. It can be a losing trade when a market acts as it “should”. It can be a winning trade when the market rewards your bad judgment, and it can be a very dangerous trap as a bad habit gets reinforced.

The last thing to say in conclusion is that a certain psychological barrier for a trader to overcome to start applying his stops with no hesitation. When this barrier is taken, things suddenly become so clear and automatic that a trader can’t even believe it was ever a problem for him. When this barrier is overcome, you feel that stops became natural part of your trading, that you take them with no slightest hesitation and forget about them instantly, moving on to search for your next trade, that taking stops do not trigger any negative emotions. This is wonderful feeling of total self-control. Not only will it do plenty of good to your trading performance, it’s a very rewarding feeling in itself.

BLANK BOX SPX FOR TODAY

2010-02-09T08:59:00.002-05:00

We are operating within a very large range. The SPX 5-day chart shows the area of operations for today. Remember that any break in these boundaries is absolutely significant and must be paid attention to. If not, then we will continue to trade in a neutral range. Believe me, you don't want to get chopped up. On the daily 4-month chart, I added the 100-day EMA and 200-day EMA to create a more narrow range and to confirm the 5-day estimation.

THE THREE TYPES OF CHANNEL BREAKOUT ENTRIES

2010-02-06T23:29:00.008-05:00

The three types of entries are a prerequisite of the third part of the Art of Tape Reading Series. There are three types of entries: Aggressive, Regular, and Conservative. For the sake of saving time, I'll just use a positive market in my examples.

The Aggressive method is most favorable when the general market is up, increasing the odds of a successful setup. This is when you enter before the confirmation of a breakout. A good recent example was my LXK play, where I got in about 30 seconds before the breakout. This is aggressive because if you are wrong, then you will book a loss. I don't think I've ever broken even on an aggressive entry trade when I was wrong. However, if you are right, then this method maximizes your gains more than the other entries. you get in when there is enough liquidity/activity in the price movements and there is a volume spike towards the high of the channel indicating that it may possibly have a chance to break out. Your stop, mental or hard, would be at the bottom of the channel.

The Regular method is favorable during positive to neutral market conditions. It is when you aren't as nearly sure, but there is still a high chance of a breakout. Ideally, you want to get in when a consolidation pattern forms at the top of the channel on the same price/volume characteristics listed for the Aggressive method -or- immediately on the actual breakout itself. This entry's weakness is on fakeouts where you will most likely book a loss and sometimes, breakeven. Your stop would be on the breakdown of the stock from the upper channel to the lower channel. Most of the times, I use this entry because I am able to get in either immediately before confirmation or on the confirming breakout.

The final entry is the Conservative method. This is when you get in after the breakout on the first pullback, usually at the upper channel resistance, which turns into support. The problem with this setup is that sometimes the stock does not pullback for a lengthy time. I use this setup if I am late and actually find it. This entry contains the most confirmation of the other entry methods. If support is tested, then the stock retains it's strength allowing you a "second chance" entry into the stock. This setup is safer because you are not guessing as to whether a stock will breakout or not.

Since everyone's risk tolerance is different, you may want to key in on which entry suits you the best. Experienced traders can perform on all three methods, however, I advise beginners to master one type of entry that best suits your personality before you try to do all three at once.

Have a great trading week.

TRADE REVIEW: COH, APD, USO / INDEX REVERSALS - HIGH-VOLUME HAMMERS

2010-02-05T19:20:00.004-05:00

Today was pretty epic, I'd say. I shorted COH and USO and went long APD, AMTD, and the SPY. It was a no loss day. I'll profile only COH, APD, and USO, since they were more significant than the others, which were scalped for a few pennies.

I'm not sure why, but I didn't focus on my gut too much today. My last scale out in COH told me that I should go with my gut and not leave anything up to chance. For the USO, I covered too early and didn't follow my usual 50%, 25%, 25% scale out. Instead I went 50%/50% and missed an entire leg down with about 2.5%. Not sure how that happened. APD simply broke above the first 1-min price bars high ($68) and I saw the momentum and acted on it.

For the SPY, DIA, QQQQ, and IWM, the most important things here are price action, the high volume, and the hammer that was created. If this is a legit bounce, which I think it is, then we head up to the 100-day MA for a re-test. If not, we resume our adventure to the 200-day MA.

TRADE REVIEWS: LXK, APKT, BGP, PEIX, JCI / SPX IN 50/100-DAY MA RANGE

2010-02-04T04:58:00.004-05:00

For some reason, yesterday was a good day to trade. What I mean is that doji days are particularly unattractive days for day trading. They are best suited for swing entries. Nonetheless, it was a good day to work on execution and patience, and it all paid off.

Most breakouts require your full attention. Setting alerts is not enough as it is 'too late' many times. Sometimes setting buy stops is not enough because 1) the stock can gap intraday, 2) you can get a bad fill. Some days you watch a movie and other days you stare at your monitors all day long. I can usually tell if it's going to be a good day in the first hour of the morning by looking at the 1-min intra-day price bars. If they don't touch each other, then don't touch it.

The SPX, as mentioned on my show, is being caught in between the 50-day MA and the 100-day MA, both very powerful moving averages main support and resistance levels. We should see an intersection of the 20-day MA with the 50-day MA in the coming days.

I traded 5 names today (all imminent breakout plays): LXK, APKT, BGP, PEIX, and JCI. Ignore the MA's on the 1-min/1-day charts below.

TECHNICAL ANALYSIS FOR DUMMIES

2010-02-02T00:54:00.003-05:00

There's a car in front of you and you are trying to determine where it's going, just like how we look at price and volume to predict future movement.

If you look at the diagram above, you'll see an intersection. Now, only when the car reaches the intersection do we have the chance of figuring out the most likely direction the car will go (similar to when we first look at the chart of a stock).

When the car reaches the intersection, it can do several things:

1) Stop at the stop sign and wait.
2) Stop and go straight.
3) Stop and turn right.
4) Stop and turn left.
5) Not stop and speed straight through the intersection.
6) Not stop and turn right.
7) Not stop and turn left.
8) Make an illegal U-turn.
9) Stop and back up into you.

etc...you get my drift.

There are so many possibilities in this illustration. What if the car turns on a left- or right-turn signal, is there a guarantee that the car will turn in that direction? No, of course not. In fact, yesterday, I saw a driver turn on her left-hand signal in the left lane and then turned right, nearly causing an accident which reminded me of this illustration. The stock could go up or down, but is there a continuation?

We all probably busted illegal U-turns at intersections at one time or another. Is it easily predictable? No. I've also seen people accidentally shift in reverse at a red light, hitting the person behind them. Sometimes sudden reversals occur in stocks and if you aren't careful, you could hit or get hit.

Sometimes a car will ignore all the traffic signals and go straight through an intersection, whether intentionally or unintentionally. Sometimes, stocks can make extreme movements, up and down, and we could miss them or get caught on the wrong side. These are usually deadly.

Now let's say that you are in front of a driver that turns on his/her left-turn signal. You are reasonable sure that the next action will result in a left turn. It is the highest probable action the driver in front of you will take. Even still, it is not 100% guaranteed. When you see the car actually make the left turn, your odds significantly increase. You can predict that the driver will make the left turn before the left turn is fully complete.

These are signals that technical analysis produce on stock charts. These are your basic high-probability setups. Technical analysis itself is not enough, though. Ultimately, you are responsible for properly observing the signals you receive and to act in the best way possible according to the highest probable odds.

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Other stuff:

1) The tape reading series will resume this week.
2) The inside day yesterday was executed according to plan.
3) All four indices will be re-testing the 100-day MA. Beware as the 100-day is a strong and reliable MA.

Good night.

INDEX ANALYSIS

2010-02-01T08:44:00.004-05:00

Looks like this morning will start out s an inside day and then honestly, I'm not sure where it'll end. Odds favor it due to the ~20 point range it has on the SPX.

The 100-day MA is the most important MA at the moment. The last time the moving average was it was back in March/April for the SPX, DJIA, and COMP. Prior to that, the 100-day MA was hit in mid-2008 and there was always a major market move that followed. This puts the odds for a move to the 200-day MA as the 'most likely' scenario. In addition, note the textbook breakdown from the rising wedge and how each correction became larger and sharper up to this point.

MONSTER VOLUME - INSIDE DAY

2010-01-22T00:27:00.004-05:00

Take a look at the selected ETFs from yesterday's sessions, particularly the volume. It's noteworthy, except for the fact that many individual names remained spotty. I saw many people day trading like hell on a day like today. Success probabilities significantly decrease on days like this as I mentioned many times before. I see a high probability of an inside day forming today, doji or harami.

COOL STUFF

2010-01-20T07:41:00.006-05:00

I did mention that I was a visual person, right? I frequently browse through many sites for new and exciting info. Here are three resources that I use for some eye candy:

Dshort.com

Finviz.com

Stockcharts.com

Enjoy!

THE ART OF READING THE TAPE: PART TWO

2010-01-16T21:20:00.004-05:00

We left off of part one of the series by discussing the 'edge'. The edge is basically what works for you consistently and profitably. It is your system, and it's different for everyone. You don't necessarily need an indicator to see the trend because a chart is usually enough. A system doesn't have to be cumbersome, incomprehensible, or basically, complicated and otherwise a failure. There is a certain simplicity you arrive at after a series of complications.

This particular style of tape reading involves more with the reading of certain visual formations vs. analyzing numbers. In addition, these visual patterns work the very best with the intraday time frame. Since we want to utilize trending days for each individual stock, neutral range-bound days should be ignored. The probabilities significantly decrease on non-trending days.

The principles of tape reading basically match up price movement to crowd behavior as a 'rate of volume'. Through this, traders can see when the 'footprints' of a stock are made. These traders will be aware of when the majority moves into a stock that is presently dominated by the minority. Why tape reading is a lost art is beyond me. In fact, most trading systems don't even incorporate it, despite the fact that it stood the test of time for 400 years, give or take.

Trading wisdom states that the majority is usually wrong. Well, that depends. Tape reading is based on a handful of stock operators taking the money from the majority. We make money from the imbalance of buyers and sellers that is created. This is how trend reversals and explosive moves occur. The question is, "Are you the first one on the scene when the imbalance takes place"?

The important thing is to get there before the real breakout occurs, the path of least resistance. Consider this: not many people get in on the first sign of a major move. As more people become aware of the pending move, they accumulate shares. Then more people get in. Aggressive buying hits the stock and everyone wants to get in on the action. Keep in mind that that every buyer now is a potential seller. Finally, distribution takes place and the losers are left holding the bag. We all see it everyday.

How does the accumulation & distribution work with tape reading? The minority (you) watch how the other minority players are acting and then wait for the majority to create the mass movement. Typically, smart money can be identified by price movement when it is a slow, gradual movement with slow and steady volume. The general public's price movement can be viewed as euphoric with parabolic spikes in both price and volume to the point of exhaustion and instability.

There are six principles,k and I utilize all of them for my various day trading strategies:

1) Capitulation/parabolic exhaustion (long/short)
2) Beginning of a trend (accumulation-aggressive)
3) Confirmation of a trend (accumulation-aggressive)
4) Continuation of a trend (retracement-shallow)
5) Reversal (decreasing volume)
6) Accumulation and distribution (passive, non-aggressive)

1. Capitulation/parabolic exhaustion (long/short)

There is a pure acceleration in price movement with a massive surge in volume. Price usually advances/declines the most in the shortest period of time here. However, this move is usually unsustainable and can produce devastating sell offs or sharp bounces. This applies to both up and down price spikes. These moves usually last for only a few minutes, or even seconds, and they are the hardest to master. The key is identifying the price and volume and the accompanying imbalance in the accumulation/distribution through observing price and volume.

Usually, you see what I call "volume mountains". Yes, I call them that because they look like mountains. How do you know when to get out entirely or scale out and piecemeal your exit? We'll get in more detail on these 'mountains' in the future perhaps, but we've all see them.

2. Beginning of a trend (accumulation-aggressive)

This is a completely different idea than the one above. It is the steady, upward movement of a stock with consistent volume that usually precedes more serious momentum. There is consistent buying going on, with 'consistent' being the key word. There is not enough to attract everyone else, thus giving the stock an appearance of 'floating'. The key here is to scale in on each intraday breakout until you see signs of distribution. More on this on the future.

3. Confirmation of a trend (accumulation-aggressive)

This is a slow advance in the price movement with increasing volume, which makes it another momentum signal to pay attention to. The trend is beginning to draw the attention of the majority but is not yet ready to experience a full-scale momentum move. This precedes a powerful price move. What follows is the euphoric, sometimes idiotic, action of the majority. We'll discuss how to catch these in a future article with examples.

4. Continuation of a trend (retracement-shallow)

This is marked by a huge price increase, but with low volume. This is a classic pullback or short consolidation. You already know what these are and I don't have to explain them.

5. Reversal (decreasing volume)

Buying has slowed down and distribution is imminent = GTFO. The buying is drying up and this is your last chance to get out before you turn into a bagholder. Volume is especially important here. I will cover examples and models of how volume acts here in the future. Bottomline, volume indications help us determine our actions since price action is not as relevant or important as volume here.

6. Accumulation and distribution (passive, non-aggressive)

Large volume of buying with no price change typically tells me that there could be a shadow resistance level with a quite a bit of overhead supply. Most of the time though, the resistance is defined by identifiable resistance lines and even better, moving averages. I sure love those moving averages. This principle identifies 'stand offs' on both sides and I would be extremely cautious here. Of course, more on this and the others later on in the series.

THE SHOW & COACHING

2010-01-15T00:41:00.002-05:00

Thanks to everyone that watched my Stocktwits TV show "Charts Gone Wild" last night. Thank goodness there were no technical problems. A lot of people loved the show and the new program that Stocktwits is running. If you missed the show, it's in the archives on www.stocktwits.tv. The program will be back to the regular Tuesday 10PM scheduling.

The next tape reading article will come this weekend.

I received more inquiries on private coaching just randomly over the past few weeks. If you are absolutely serious, then shoot me an e-mail at JCLee84 @ hotmail .com (no spaces). We can discuss what it is that you need and how I can help you. I am willing to start my first session for 2010 on Janaury 23-24th. I have already e-mailed the ones that have expressed their interest. Thanks!

THE ART OF TAPE READING: PART ONE

2010-01-12T20:11:00.003-05:00

Trading is not about knowing. Trading is about acting on situations, patterns, and signals that you are familiar with. This all comes from experience, proper training, and something that you and I call intuition. Intuition is required for reading the tape.

Reading the tape is basically studying pure and magnified price action. Long ago, traders used to study the ticker tape to assess price action, the volume, momentum, and other signals long before the internet was born. You must have this skill to refine and perfect your entries and exits. Since most people already know a lot about technical analysis, I wanted to cover the next evolution in your development.

Most of you know that I keep things simple and focus exclusively on price action, volume, moving averages, trends, and other simple signals. If you master price action, then you will be able to tell whether a stock is strong or weak prior to breakouts, one of my most favorite and practiced strategies. You'll be ahead of the pack of technical traders that don't know how to read the tape. Instead of going into Level 2 or the bid/ask, I will integrate the tape with charts as I am most proficient in this area.

Learning to trade requires two things. The first was mention in the second sentence of this article. The other is creating the perfect mindset that can handle unusual and uncertain liquid trading environments. This isn't something that can be taught from a textbook or in a school. It must be practiced over and over again. A teacher must demonstrate what has to be done and I will be that teacher. In addition, I expect you as the student to work on the personal experience that's necessary. Luckily, that's developed over time.

I chose "art" for tape reading because that's what it is. It's not a science. The physicist Yakov Zeldovich once said, "Science has one answer where art has many." Tape reading requires an open mind. It is also interpreted differently among traders, therefore I consider it an art. You are the artist and the trade is your artwork. A big side of trading where art plays a big role is when you adapt when the market changes it's tune. You must adjust or face indefinite loss.

The biggest benefit of tape reading for me is how it defines my entries and exits. Most of you have been following me for months, perhaps even a year and a half when I first started blogging. You already know what I do, and you know my trades already. My job is to read stock price action correctly and then viciously attack each trade. You may have witnessed me attacking the same stock over and over again in a single day. This is possible because of the synergy that technicals, charts, and reading the tape produce.

All of this leads to the "edge". Do you have it? I can tell you that my personally trained army of traders do and demonstrate it on a daily basis. They are confident in their actions. They are consistent with their results and their emotions. Our plays are easily distinguishable and we have our own style. We know exactly what to do with each setup. There is no hesitation to attack. How do they do it? It's their edge and reading the tape is a huge component of it. There's only one way to develop an edge and reading the tape and it's through experience.

The highest possible level a trader can reach is intuitive trading. As we continue to trade, we reach critical mass that profoundly results in second nature reactions. This is your ultimate goal in developing as a trader.

The next article in this series will explain the tape in detail. We'll talk about various emotional attributes to the tape such as capitulation or euphoria, as well as accumulation and distribution,trend continuations, select high-probability setups, and many other things in future articles.

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If you haven't done so already, vote for me in the ShortyAwards in Finance. It only takes a minute and I'll appreciate it greatly. For those that already voted, thank you so much.

http://shortyawards.com/WeeklyTA

INTERVIEW WITH TIM BOURQUIN (TRADERINTERVIEWS.COM)

2010-01-11T18:18:00.003-05:00

I was interviewed by Tim Bourquin over at TraderInterviews.com a few days ago. It is up and running right now (the audio is where the red arrow is):

http://www.traderinterviews.com/free/2010-01-11_JohnLee-iBankCoin.php

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Here's a little on Tim:

Tim Bourquin is the co-founder of both the Online Trading Expo (now Traders Expo) and the Forex Trading Expo. While a police officer with LAPD, Tim was trading the stock and currency markets by morning and arresting criminals by night. When he went looking for a convention for traders to learn more about how other traders were approaching the markets, he couldn't find any.

So in 1999, along with a business partner, he started an annual convention and tradeshow for online traders and investors. Those events continue to be the premier events for active retail traders with shows in New York, Las Vegas and Los Angeles.

After speaking with countless traders throughout the past 14 years as a trader himself, Tim realized that the best way to learn how to make money trading was to ask those who were already doing it every day. Tim set out to find the best in the business and ask them exactly how they made their money. Some people talked to him and others refused, but through persistence, he was slowly able to interview hundreds of traders about their strategies. In 2006 Tim founded TraderInterviews.com, an online media site featuring those frank discussions.

Each week Tim interviews successful full-time traders and asks them tough questions about the strategies they employ, the software they use, and how they became confident in the markets.

THE ART OF TAPE READING SERIES

2010-01-11T08:06:00.002-05:00

I'm going to restart my educational articles.

Tape reading is only thing that I value just as equally as my charts and technical analysis. Being able to properly read charts and analyze technicals gives you an edge over many traders. However, reading the tape gives you the advantage over all of the technical traders that rely solely on charts and do not know how to read the tape. Perhaps you are missing this one element and I will use this entire week to talk about reading the tape.

I am #9 on the ShortyAwards for Finance. I know you guys can do better than that. Take a minute out of your day and vote, no matter how 'non-hetero' you think the awards are: http://shortyawards.com/WeeklyTA

TRADE REVIEWS: GENZ, CYCC, VVUS

2010-01-08T07:14:00.005-05:00

My trades from yesterday and all of this week so far has put my YTD gains at over 10%. Yesterday was the best day of the year so far, despite my absence. I am trading, but I am sitting in a small advanced sociology winter class at the same time between 9am-12pm. To make up for the lack of real-time trades, I decided to continually post screenshots of all of my trades. I'd like to see more people do that since there's so much bullshit flying around on the internets.

Before I continue, don't forget to vote for me in the ShortAwards (Finance category) here: http://shortyawards.com/WeeklyTA. Help me beat out #9's Suze Orman and others and take a top 5 spot for iBankCoin. I greatly appreciate it.

GENZ was a cool momentum pattern. It is an example of being patient for a stock that has spiked intra-day AND sustained/based itself. We wait for the secondary breakout, which I did. I first caught GENZ at $50.88-90 and my final exit trades were at $52.30-31.

Who would have known that CYCC was going to be up +152% for the day? I didn't, but I kept playing it multiple times and as far as I could. Since there's really no way to predict a 100% gainer, you just have to roll with it and focus on each setup as they come. Never ditch a stock on your watchlist because it's "up too much". I first caught CYCC at $1.5199 with my last trades ending at $1.91-92 before leaving to run some errands.

VVUS was a pre-market volume mover and opening breakout play. The execution was near perfect and I made two solid profitable trades in it ending around 11AM with both adding around 1-1.5% each.

Lesson: Don't ignore the secondary breakouts.

SHORTYAWARDS IN FINANCE

2010-01-07T22:09:00.001-05:00

Don’t forget to vote for me for the ShortyAwards in Finance: http://stk.ly/92djAH

Thanks!!!!!!!!!!

INDEX UPDATE / TRADE REVIEW: STEC

2010-01-06T07:34:00.003-05:00

The upload speed on the show was too slow due to internet connectivity issues. I am getting that resolved. I posted charting requests on Chart.ly and answered the Q&A questions on my twitter.

The indices are, again, at different stages of development. For example, the SPX is forming the apex of a another more steep rising wedge. The DJIA is in a tight ascending channel. The COMP is the best performer with a solid b/o in Dec, needs follow-through action to carry the other indices. I am impressed with the RUT as it pushed passed the weakness at the end of last year and broke to a new daily high. Keep an eye on these four indices and any changes that they may exhibit.

Here is a half-day chart of STEC. I traded it in the morning, but couldn't post it. I provided the buys/sells below as well. As liquidity improves, I will go back to increasing my position sizes to my standard size. The entry was at the breakout of the opening's high. Another entry would have been the pullback from the breakout. My first exit with a 75% position sell was at $19.60 and my second exit with a 25% position sell was at $19.88.

I used the daily chart as my targets to exit and to scale out. The entry was determined by the intra-day breakout.

That's pretty much it. Have a great trading day folks.

FOLLOW ME!

2010-01-04T02:26:00.005-05:00

I played too much crap last year. There's no way I can compile everything and I just said "F it" after analyzing a few months. Then, I realized that I should make all of y'all go through my archives and I can go travel around the Mid-Atlantic. If you followed me for a while, there is no way you should forget my plays. Yes, 2009 was truly an epic year.

I remember that from January till March, I focused more on macro direction plays and heavily used breadth alongside my usual charts. I also saw how much I cussed in the first half of the year so I made an effort to clean that up. I also saw that the first half of the year was full of haters, and my results for the entire year shut them up completely. Here are a few of the haters back then in January alone (quite amusing):

April 11th was when I first started sharing one of my portfolios (when I went to Cancun). I had stuff like FEED, SIRI, and solars. I made over 8% when I got back from vacation. April 13th was when J0sh1ngU became the first persistent hater. That quickly ended with him burning in flames:

Now, April 22nd when the first time I actually made a live, real-time trade (which was in CAR). I made 20% the next day. This started everything, and shortly after, the dollar stock circus lasted for the next 4-5 months and everything else is history. After that, I focused on more liquid, higher priced stocks. A part of trading is realizing when to abandon a strategy and to go with another one.

I realized that I had no desire to look into the past. I am looking forward, here in 2010, ready to do some more damage. I stated that my goal in 2010 was to make 400% and I have already planned it out. Have you?

I am still unsure of what the intermediate-term holds, therefore, I will stick with the higher priced, more liquid stocks, the pre-market gaps, parabolic movers, long/short exhaustion plays, etc. (the 'specialized' trades). I am not interested in the general movement of the market unless volatility comes back in full force.

My goal in January is to lock in a double-digit portfolio gain for the first month, and then build up on it. Nothing is worse than having a crappy first month, so I encourage everyone to do their very best this month. This way, you have a buffer against any future potential drawdowns. It's important to have this buffer, due to unforeseen circumstances.

My show, "Charts Gone Wild", is becoming more and more popular and if you read my blog, then you should tune into Stocktwits.tv every Tuesday nights at 10PM EST. The folks over at Stocktwits really made me happy with the new upgrades and I can assure you that you will not be disappointed.

There is a statue in Ft. Benning called "Follow Me", the location of the Army's infantry school. It is the motto of the U.S. Army Infantry. Stay with me and I will continue to lead you into 2010.

WINDING DOWN

2009-12-30T03:10:00.001-05:00

If you didn't make money in 2009, then that's too bad cause it's pretty much over now. Better make your plan for 2010 real soon. It's time to wind down and preserve your gains for the year. Don't be the idiot that loses it all at the end of the year because you want to "boost your YTD returns". Sorry bud, better luck next year. My position sizing usually reduces to 5% standard during Decembers simply because I don't feel like screwing up. An end-of-the- year killing would be great, but mentally, I am already thinking about 2010 and what I can hit in January. I like to think ahead like that.

We had a doji day yesterday and I expect more of that action. Doji days are great for initiating swing positions, but terrible for day trading, especially during the holiday season. The volume simply isn't there, but that doesn't mean that I won't try out and test out trades. You never know what will come to you. I see a mix of small cap dollar stocks and higher priced volatile stocks still in play, but again, be cautious of the illiquidity.

I am reviewing all of my posts for the entire year (there are 254 in total) so it'll take me a while to compile a year-end review. For now though, feel free to leave a comment on what you would like to see more from me, what I could have changed and made things better, and anything else you want to write. I read everyone's comments, even though I may not be able to reply to them all, so leave your thoughts (and trades, of course). Thanks.

MERRY CHRISTMAS EVERYONE!!!

2009-12-25T01:05:00.002-05:00

Hey traders! Hope the early morning Christmas festivities are going as planned. I actually couldn't find my cork screw so I thought of a creative way to open up a wine bottle. You need a screwdriver and a hammer. Position the screwdriver on top of the cork and repeatedly hit it with a hammer until the cork is inside the bottle (some splashing may follow). When you pour the wine, the cork floats to the top, leaving the wine to freely flow into your glass. Cool, huh?

Anyways, we have only one week left to make money in 2009 and I am determined to make it my last profitable week. If you know me, then you know I'm serious about it. I don't do "tax losses". That's bullshit. Just keep making money. Who cares about paying more taxes? Warren Buffett stated that he enjoyed paying more taxes because that meant that he was making more money. Therefore I say to you, keep banking that coin hard.

I hope that my services here have helped you guys tremendously and made you into better traders. Although I don't monetarily benefit from posting trades or giving out educational articles, I do get the benefit of knowing that I have helped hundreds and hundreds of people. I made money and you made money - nothing better than that.

2009 was a great year for me in terms of expanding on the internets. I was fortunate enough to make many friends, even if I may have not met you personally. We all have the same goal, therefore, we can get along. I got heavily involved in Stocktwits, running the "Charts Gone Wild" show on Tuesdays. I found it to be the best way to be personal and to connect with you, my readers. The show is only 1 hr long, but it takes me about 3 hrs to prepare for it. I have no problem spending my time for you guys.

I also had the pleasure of personally training my students who are with me each and every day, live. It's a great feeling when you have a great and qualified team whose members help each other out on a daily basis. I temporarily ceased my travels to spend more time with myself, family, friends, and a new girlfriend. However, I will start up the private coaching program again, starting in January. I look forward to helping you guys in the best way that I can.

I am appreciative of all the regular readers on my blog that contribute. You know who you are. I also love the fact that you have the balls to post your trades. You and I are in the minority. I post my trades not so that people can follow me, but for my own record keeping and reference. The blog is my trading journal. Here's an idea: if you want to become a better trader, post your trades. You are less likely to make stupid decisions, especially when the whole world is watching.

2009, so far, has been an epic year for me. It is my best year ever. It is also my 5th straight year of triple-digit gains. I hope that you guys also scored big, especially in the summer. I'd say that my trading in 2009 really took off starting in late March. If you've been with me during that time, then you know why. We absolutely crushed it.

I chose to be with iBankCoin because I believe that it will actually be the #1 destination for serious people that want to make money. This isn't some conventional site with the same bullshit that 99% of other sites have. We have unique contributors and exceptional content on this site. Of course, if you disagree, then I'd have to ban you forever (just kidding, sort of). Appreciate what the writers here are presenting because after all, they don't have to do anything. They are offering a public service and offering their knowledge and expertise. Don't take this for granted.

I am in the process of creating an epic post. It will highlight my greatest trades for the year and also my failures. It will be the ultimate "trade review" post. I know that I can learn from what I did right and wrong, and so can you. Look forward to it in a few days. If you have any trades in mind that are memorable, let me know.

I'd just like to say thanks to Fly for bringing me on board last year. I somehow found iBC and randomly starting posting in the Peanut Gallery. Then I got my tab and everything else is history. If you have trades or knowledge to share, I encourage you to post in the Peanut Gallery. Who knows, we might pick you up from there.

Finally, enjoy your Christmas with your family and friends. I have clients that are worth hundreds of millions, but have broken families. They do not celebrate Christmas, such a shame. Know what's most important to you and never compromise it. With that said, I wish everyone a safe and wonderful Merry Christmas!!!

TRADE REVIEW: ATHX

2009-12-23T08:53:00.004-05:00

I banked some serious coin yesterday in ATHX, eventually amassing 12,000 shares before it hit $3.85. This is a particularly rare setup that I see once every few months or so. Here's how it works:

1) The stock gaps up HUGE, typically a 100% 1-day gainer.
2) Stock fades throughout the day and closes much lower than the open, but still way above the previous day's close.
3) The next day starts with a large gap up within the previous day's range and must always be followed by significant pre-market volume.
4) Buy when the current and previous day's highs are breached on heavy volume.
5) Enjoy the ride. Take what the stock gives you, but don't get greedy.

This stock was the day's example of pure emotional madness. Make sure you're on the right side and never, ever get caught up and trapped in the mania.

Many folks on twitter followed me in and made bank. Congrats to you:

A FEW THINGS

2009-12-22T08:44:00.004-05:00

The SPX is still in the range, however the COMP is not. Also, note that the SPX range has an upside tilt.

The RUT is making a move to reach the highs on the daily.

I also stated on my 12/8 Stocktwits show that I was no longer bullish on gold and expected an "extended pullback. Well, here it is - Wait for it to carve out a base.

The USD$ is making a move to the 200-day MA.

I am incorporating some swing trading going into the end of the year, simply because it is easier to deal with as we head into an even more low volume holiday environment.

That's all from me now.

$5-10 SETUPS

2009-12-14T01:43:00.005-05:00

Here are some examples of setups that I look for when I do my nightly scans. Tonight, I chose to look at the $5-10 range with 1MM+ volume.

There are a variety of things that I look for. For example, BLC is a stock that will test the Oct highs. INCY broke the Sep highs and is consolidating in a flag. MTW is a dual support play. NYT is a potential late sym tri breakout. TTWO is a breakaway gap down stabilization play. VVTV is a multi-month breakout and consolidation play. DTG is a classic flag pattern testing two MA's.

DEVELOPING A COMPLETE TRADING PROCESS

2009-12-10T08:26:00.003-05:00

Depending on who you ask, anywhere from 80% to 90% of individual traders are ultimately unsuccessful in the market. In order to avoid becoming one of them the most important question we need to ask is, “Why?” There are many lists available online that detail the top mistakes new traders make, and each list contains valid reasons for failure. What these lists fail to identify however, is that 95% of all trading mistakes can be boiled down to a single underlying reason, defined by a single word: Unprepared.

Hall of Fame football coach George Allen, who never had a losing season in his career, once said, “Winning is the science of being totally prepared.” That same philosophy can be applied to any pursuit in life, but particularly to trading. If you want to succeed at trading, regardless of what market you participate in, it is essential that you develop a complete trading process that totally prepares you for the adversities and challenges that all traders will undoubtedly face.

Unfortunately most new traders tend to have a myopic perspective when it comes to trading, focusing on only one or two aspects of their trading development at any given time. They may focus on trading signals, believing that where they enter and exit a trade will produce the success they desire. They may work on developing trading systems or strategies, applying multiple technical indicators in order to find the “perfect” combination, only to eventually realize that such a combination doesn’t exist. While trading signals, systems, strategies, and methods are all important components of successful trading, they will never achieve consistent, repeatable success by themselves. They must be executed within the framework of a complete trading process.

The aspects of trading that most new traders tend to overlook, much to the detriment of their performance, are elements such as risk management, trading psychology, good record keeping, constant and immediate feedback, clearly defined trading goals, and an organized structure for trading plan development. Trading without a strong foundation built on trading principles such as those just mentioned will make you an inconsistent trader at best and an 80% to 90% statistic at worst. Successful trading involves much more than just reading charts and placing trades. If you don’t adequately prepare yourself for all aspects of trading, you’re heading into a gun fight with a very small knife.

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Scott Beck is the founder and president of the Trading For Life program and trading education website. After working as a trader for four years with large brokerage firms he became a national instructor with a trading education company, where he taught thousands of students successful trading strategies over a five-year tenure before leaving to develop his own program.

LOOKING AT THE DAY'S BIGGEST GAINERS/DECLINERS

2009-12-09T21:25:00.006-05:00

One of the things that I do each evening is to look at the biggest and best gainers and decliners for the day. You can always pick out continuations or reversals, especially when a stock is up/down double-digits and more especially if a stock breaks out/breaks down on the daily.

The volume on the first day is nearly always the highest. The second day's volume declines vs. the first day, but usually still remains higher than average, giving more than enough liquidity to get in/out of trades with ease. I like to stick with stuff that's about 500k+ in volume.

Then, I check the stocks the next day in the pre-market session for any activity that catches my interest.

As an example, here are today's biggest gainers and decliners:

MARKET = NEUTRAL

2009-12-09T02:38:00.004-05:00

As covered on my Stocktwits TV show tonight, I am neutral on the market, as I was last week and the week before that. Why? We are still in a neutral range, as marked. The COMP and RUT have different patterns developing, but both are also neutral.

The sectors also spell out "neutral". I never try to force one side of a market unless I am more than reasonably sure that I have a high chance of being right. Instead, I just go with the individual stocks that work.

Gold went parabolic and I believe it will see a longer consolidation period. After that, who knows. The USO also is neutral as marked by a descending wedge.

In the end, never forget the higher probability trade setups. They will save you from a lot of unnecessary pain.

SPX REMAINS IN CONSOLIDATION / SECTOR ANALYSIS

2009-12-03T02:39:00.003-05:00

Market remains in consolidation, however current 3pm futures shows an immediate break from the consolidation, so keep an eye on it in the morning.

The sectors are very interesting at the moment. Looking at the SPRD Select Sector ETFs, I came up with the following:

XLV - Bullish (breakout)
XLB - Bullish/Neutral
XLK - Bullish
XLP - Bullish
XLI - Neutral
XLU - Bullish (breakout)
XLY - Bullish
XLF - Neutral
XLE - Neutral

FURTHER CONSOLIDATION

2009-11-20T07:04:00.005-05:00

My activities today will be limited as I make preparations to head back to Los Angeles this weekend.

I expect further consolidation across the general market as well as further pattern failures in individual names. Consolidation generally makes it more difficult to day trade, fyi.

KNOWING WHEN TO CHILL OUT

2009-11-18T19:06:00.005-05:00

That's right. Chilling the F*** out. After making 2 trades today, I realized that today was just gonna be "one of those doji days". In fact, that's what happened. I was in the city (DC) for the afternoon, realizing that my time is best suited elsewhere. There's no point in wasting your time on a day where you know you will not make big-d**ked gains. (I am making an effort to stop cussing on the internets).

Realizing when to take the day off is just as important as realizing when you have to be 100% committed to a day. Do not waste your time. Maximize your opportunities. Think about it - my mantra is "to make the most amount of money in the shortest period of time". I cannot do that in this environment, especially with the lack of follow-through that I have been stressing for weeks now. The thing is, you never know when you will get that huge, epic day. It just comes, and BAM! you take home a double-digit total portfolio gain. Just like that.

I have yet to see the intra-daytrading environment improve. Therefore, I will continue to test out certain trades until the moment is imminent. It will improve when you least expect it and the question is, "Are you ready and prepared for it?" Stay vigilant, traders. Never lose focus toward your goal in making a F***ing killing. That's how we roll.

Bottom line: don't trade like a clueless idiot.

BROADENING RISING WEDGE

2009-11-17T08:58:00.002-05:00

The pattern in focus is the broadening rising wedge. The rally continues, but this is an intermediate-term consolidation pattern, one that may not have been clearly visible to most people.

I continue to see the lack of follow-through and so far, intra-day tests confirm it. Careful selection and money management play critical roles here.

INDICES ARE FLAGGING

2009-11-16T08:54:00.002-05:00

Tight consolidations on the indices, but like I mentioned before, they are all at different stages. Pay attention to any range expansions/contractions and breaks on either side.

I just got back from LA. It sure was fun. I would write a whole blog post on my trip, but I have money to make starting at around 9:30AM.

THE GOOD AND THE BAD / VOLUME + FOLLOW-THROUGH / HAPPY B-DAY IBC!

2009-11-12T02:43:00.004-05:00

Yesterday started with several losses (mostly from AONE) which were mitigated with one sweet trade in AIG in the afternoon. The TOL trade was peanuts. It pays to pay attention, you know. Below, I posted annotated charts with my AONE loss and my AIG win. Things to be learned from both trades. In the end, I won. Winning sure is more fun than losing, but I don't have to tell you that.

There are a lot of people that try to mimic my style, but it's not for everyone. In fact, it's probably not for most people. I never had a mentor to teach me so I found my own way all by myself. Stop copying people and go explore your own path. What I do should just be one tool in your toolbox, mostly likely the HAMMER. Go through my educational articles and find out who you are and what style best suits you.

The SPX, along with many other indices and individual sectors, formed shooting stars, black-filled candles, and all types of doji. The narrow range, again, made it difficult to trade. Know when to just stop and watch. You're not missing anything. This lack of follow-through is killing the probabilities of even the highest probable trades, thus reducing the chances of success. I am looking for range expansion, follow-through, more volume, and other characteristics so I don't have to deal with uncertainty.

Beware of false breakouts and breakdowns. The tell is the volume. Here's a little summary:

To go long:
Breakouts - bullish on high volume. Buying with pressure and conviction.
Pullbacks - bullish on low volume. Indicates healthy consolidation.

To go short: Breakdowns - bearish on high volume. Selling with pressure and conviction.
Pullbacks - bearish on low volume. Indicates healthy consolidation.

Didn't I write an article on this? Anyway, HAPPY BIRTHDAY to iBankCoin! Almost exactly a year ago, I got on board and enjoyed it ever since trading with some good folks and dealing with a bunch of assholes.

Have a nice day.

CHARTS GONE WILD - CHARTS FROM SHOW

2009-11-11T07:44:00.005-05:00

FOOD FOR THOUGHT

2009-11-10T08:17:00.004-05:00

Here is the SPX back in 2003-2004:

Now, here is the SPX present:

Let's add some blank days in there. We are forming this broadening wedge and it fanning out.

Here's the DJIA - same thing.

We are in a huge intermediate consolidation. That is all.

INDEX UPDATE: NEUTRAL-BEARISH

2009-11-09T02:41:00.005-05:00

Currently neutral-bearish. My sentiment has not changed and I believe the correction may take a while, but that's just my thoughts. What are we looking for?

SPX - The 20-day MA test continues with a possible H&S pattern developing. The criteria is that a lower high is produced on the daily which is TBD.

DJIA - Possible ascending triangle still developing.Out of all the indices, if we do continue with the rally, the DJIA should be the first to break to new highs.

COMP - Currently the most neutral out of all the indices. Between the 20/50-day MA's. Will be neutral for several days. Possible channels are drawn out.

RUT - Still the weakest of all.Broke an ascending triangle and now flagging. The 20-day MA has crossed below the 50-day MA and may be used as future resistance. Look for further consolidation.

BKX - Weakest sector is the banking index. Forming a bear flag. The market will have difficulty if the financials do not rally. Pretty obvious, right? Watch them carefully.

All of this is where the neutral-bearish stance comes. When you trade, never forget to look for the high probability setups. I am playing them daily, and winning daily. The better the intra-day and/or daily setup, the better odds you have at success. Don't just "play anything" or people like me will take your money.

Don't complain about my wins. If you aren't winning, then you're doing something wrong. Figure out what you're doing wrong, fix it, and start winning with me.

MORNING THOUGHTS (UPDATED WITH FSYS TRADE)

2009-11-06T08:22:00.005-05:00

Yesterday's best trades were in WFMI and FSYS. I am nearing a 20% total portfolio gain for just this week alone and the week isn't even over yet. If you don't believe me, then obviously you're a nOOb reader in the CA Trading Room. I am the one and only Chart Addict and my returns are far superior than yours. Stick around for a while and you might learn something.

Yesterday's call on the general market was very wrong, and I don't care. I don't even trade the general market. It's such a beautiful thing when your predictions are wrong, yet you still make a +6% total portfolio gain. Hope that's a lesson in playing only the best and highest probability trades, regardless of overall direction.

I have to see how this next leg turns out. I estimate that it will be another week before a IT determination can be made. Always keep an open mind and never let your opinions get in the way of great opportunities. You are your own worst enemy. Never forget the POWER OF CHARTS.

I have no idea where we are going in the markets, but I guarantee you that I will win again today - that would make every single day of this week a win. Watch and learn, folks.

Here was the FSYS trade yesterday. All documented on my Chart Addict blog and on my twitter in real time:

BEARISH / THE TRLG TRADE

2009-11-05T00:01:00.009-05:00

Yesterday's big trades were in TRLG for me. It wasn't like the day before where I absolutely killed it, but nonetheless, I managed to hit TRLG twice and profit twice. The diagram of trades taken is pictured below. The green squares are short entry points and the orange squares are scaled out exit points. I "missed" two trades, but only because the volume wasn't there and also because the 2nd "miss" was right after the FOMC decision. Execution was near perfect on this, so study it.

Moving onto the general market, I am bearish as the title of the post suggests. We formed a gravestone doji on the SPX, shooting star on the DJIA, and a dark cloud cover on the RUT. All three are bearish signals. In addition, note how the indices are "churning" at their respective MA's. If you watch my shows on Stocktwits TV, you would know that I consider this move mostly bearish. The last chart is the IWM, the Russell 2000 iShares ETF. Note the massive sell off volume. The RUT did and will continue to lead the way.

FOMC DAY / SPX in DESCENDING CHANNEL + FLAG

2009-11-04T07:53:00.002-05:00

Thanks to everyone that watched the show last night. If you couldn't, it's in the Stocktwits.tv archives.

I am undecided on direction for today simply because we have the FOMC announcement today at 2:15PM. I don't suggest trading prior to that announcement (if you are trading the indices). I suggest careful and decisive trading based on the reaction. The full reaction should take 30-45 minutes.

The SPX is in a downward channel. As the day progresses, note that we are near dual resistance levels (on the 10-day chart). We are forming a flag that is most clearly visible on the multi-month daily chart.

DESCENDING CHANNEL

2009-11-03T07:45:00.002-05:00

Below is the 5-day chart of the SPX with a 'extra day' added on for today. See the descending channel? Use that as your short-term guide.

The RUT is now at the 100-day MA as it formed a doji yesterday. There wasn't much of a fight at the 50-day, so let's see if we see some struggle here. Make note that this is the first time the RUT touched the 100-day since April.

WEEKEND THOUGHTS ON THE SPX, DJIA, COMP, RUT, SECTORS

2009-10-31T18:43:00.006-04:00

All indices have formed stick sandwiches or modifications of them. I am short/intermediate-term bearish and will reflect this sentiment by incorporating my primary swing strategies with the current day trading. Day trading is great and all, but I'm looking to capture larger chunks of the moves. Also, it'll ease up my time to focus on other things. A swing trade can be a simple overnight 2-day hold or a multi-week hold and everything in between.

Charts shown are 9-mo and 5-mo.

The SPX is short-term bearish and intermediate-term neutral as it is with most of the other indices. I'm looking for a 1-day neutral/reactionary move for entry. The RUT continues to lead the way down as I have predicted. It is testing the 100-day MA. The DJIA is testing the lower ascending range as well as the 50-day MA. Finally, the COMP is in a neutral range and threatening the lower boundary. Notice how all the indices are in different stages of the correction?

The transport index is also testing the 100-day MA and is in a neutral range.

Not only are all the indices in different stages, so are the individual sectors.

SPX 20/50-DAY TRAP

2009-10-30T08:57:00.002-04:00

Long before the SPX formed the 20/50-trap, most stocks formed what I call the "20/50-day churn" which is essentially the same thing except that we do not know if the SPX will churn. The only way to tell is if a lower high is made, and that is yet to be seen.

The trap is basically when a stock or the market tests the 50-day and then test the 20-day MA's, creating the possibility of continued narrow-ranged consolidation. The trap the turns into the churn if the range cannot be broken in it's entirety.

In the case of the SPX, a churn is bearish as it cannot form a higher high. If the SPX can bust through the 20-day and flag, it is likely going to make the attempt to test the high of the rally. I am and have remained mostly neutral on my stand on market direction.

On the char below marks the 20/50-day MA's. Also noe that we are forming an ascending broadening wedge within a larger rising wedge. In the first two corrections, the market was able to successfully bounce without the need for the 50-day. The past correction in the beginning of Oct required the 50-day. This correction needed further room lower. Make note of this trend as a mark of weakness.

I am still looking at my standard names such as AIG, but am also looking at CAR, NANO, NVTL, CROX, DAN, PVTB, CNXT for major reversals/continuations. I will mark trades if I take them.That is, if I make to campus before the open.

KEEPING EYE ON THE RUSSELL 2K AND THE TRANSPORTS

2009-10-27T03:05:00.002-04:00

Watch both closely over the next several days.

Rising Wedge Divergences in the Indices (And Stocktwits Charity Poker Tournament)

2009-10-24T14:56:00.002-04:00

What’s up, ya’ll?

I was looking at the DJIA, SPX, COMP, and RUT to assess how each index compares with each other when it comes to the development stages of the “rising wedge”.

First, the DJIA is in a perfect wedge. The apex is still developing.

The SPX is the chart that I look at with most frequency. We are close to touching the lower trend line.

Next up is the COMP. The COMP is technically out of it’s wedge and forming a possible ascending triangle. Pay close attention as the apex becomes fully developed.

Last but definitely not least, I’d like you to turn your attention to the RUT. If anything, the RUT has to be paid attention to the most. Notice how I haven’t been seriously playing the small caps for 2 months straight? This is why. Make note that the RUT IS forming an ascending triangle. The ascending triangle is textbook bullish, however, don’t forget that I mentioned several times that failed patterns can produce large profits if you are on the right side. The range here is definitely tightening. Mark the 50-day as the most important support (notice how the RUT will be the first to test the 50-day vs. the other indices?).

Finally, I will be playing in the Stocktwits Charity Poker Tournament tomorrow. This is a really great thing that Joey (a.k.a Downtowntrader) started up. There is a bounty for knocking me out: a bottle of grey goose, courtesy of Joey himself.

UPDATE: Rising Wedge Possibilities

A LESSON ON CONCENTRATION

2009-10-22T06:59:00.003-04:00

Thomas Edison was asked how he was able to accomplish so much with his time. He said, "It's simple. You and I both have eighteen hours a day in which to do as we choose. You spend the eighteen hours doing a number of unrelated things. I spend it doing just one thing, and some of my work is bound to amount to something."

If you want to be successful in any field, there is one rule to observe: concentrate your efforts. Get one thing in your mind. Learn to ignore all the distractions and temptations along the way. Then, put all the power you have into forward motion.

If you've read Ralph Waldo Emerson, you'll know that he wrote two essays that apply to success, one titled "Power" and the other titled "Wealth". The main theme in each is concentration. Emerson said, "Stop all miscellaneous activities. Do away with distractions, other duties, property cares, chores, errands, diverting talents and flatteries-all are impossible." And he said elsewhere, "The one prudence in life is concentration. The one evil is dissipation."

Can you concentrate on one goal when you aren't quite sure what that goal is? Can you move forward firmly and decisively on one road without constantly looking elsewhere to see what's going on? People who know how to concentrate put all their effort into their projects, continually improving their ability to succeed.

Dissipation is the opposite. A person who dissipates is like an archer who tries to shoot several arrows at once: the arrows move with dissipated force and rarely ever hit the target (unless you're Robin Hood, maybe). People who dissipate jump from one thing to another, neither improving their abilities nor moving forward toward success.

How does this apply to trading? This can apply several ways. The most obvious is if you quit your job to trade, then find that trading might not be for you, so then you move onto something else and beyond. Perhaps your efforts in trading were not concentrated. How about continually trying to find the "holy grail"? We heard this term used so often, but surprisingly, many traders are still looking for it! Stop moving from one thing to another and concentrate your efforts in improving your core skills.

Let's take the case of two brain surgeons with equal prospects of success. One puts all his efforts into his work and all of his money into a relatively safe investment to ensure longer-term financial success. The other doctor tries to play the stock market and practice medicine on the side (or vice versa). Ultimately, the second doctor's practice suffers when the market goes up and his money when it's going down (provided that he's just another retail loser). How would you like to have brain surgery performed on you by a doctor who had just lost $100,000 in the stock market?

The point is, trying to diversify too widely will always detract from your success."Where you believe the treasure is, there will your heart be also." That is an immutable law. Can you then be a success if your heart is in three different places - or five or a dozen? No, of course not. I am having this struggle right now as I am juggling so many things at once such as my course work, fund, real estate, internet stuff like iBC and Stocktwits, and much more.

Whatever you choose to spend your time on, spend it well. Whatever your goals are, make sure they are unified. Only a person who specializes becomes truly successful these days. Word?

STOCKTWITS.TV SHOW #3 CHARTS

2009-10-21T08:58:00.011-04:00

A LESSON ON THE "AS IF" PRINCIPLE

2009-10-18T15:46:00.003-04:00

In the 1880s, the psychologist William James developed and began teaching his "As If" principle of life. This might not make any sense to some of you, but it works. For example, if you want to be courageous, try to act courageously. If you want to be a nice guy, start putting a smile on your face and be friendly. If you want to be a great trader, then think like the great traders before us. You cannot be a great trader without first thinking that you are one. You get it?

A person that constantly thinks that he or she will fail in trading, cannot learn how to trade, or just simply has feelings that he or she will "never make it", will inevitably fail. Think, act, and be like Jesse Livermore, Bernard Baruch, Nicolas Darvas, Gerald Loeb, Richard Wyckoff, William O'Neil, Jim Roppel, Steve Cohen, and many, many others. They play (played) to win and that's how you should play: play to win.

Soon, you'll find that your mental and spiritual faculties are like damn fine bartenders. They always give you exactly what you ask for and never ask questions. If you act as though you expect to be a bad trader, your mind and spirit assumes the demeanor of a nobody with little prospect of success. After all, being a nobody doesn't require much skill at all. None, in fact.

In As You Like It, Shakespeare wrote, "All the word's a stage, and all the men and women merely players...And one man in his time plays many parts". William James would tell you to pick out any part in life that you want to play and then play it with all your heart. If you are good at it, that is what you will become. If you pick trading as one of your life's primary goals, then play it with all your heart. It's as simple as that, because the "As If" concept works.

Suppose a play has been written for you in which you portray a person who is in the process of making a fortune in trading. The part requires a person of great psychological control, have a burning desire to learn, be able to make quick and informed decisions, possess strong self-discipline, develop and master a winning strategy, be willing to take risks and accept losses, adapt to the ever-changing conditions in the market, have tremendous confidence in his or her's own abilities.

Could you play that role? You could if you practiced enough, that is, if you worked on your abilities enough. You can do this successfully when you get the focus of your mind to support you and reinforce your efforts.

However, suppose you were assigned a part like this and you chose to play it by dressing up as a bum, slouchy, shiftless, and irresponsible. How about in a lazy, irresolute manner, acting as if you had no ambition, no determination, no confidence, no plan, and no faith in yourself that you could ever accomplish being who you want to be. Combine this with telling yourself, "I can't do this" or "I'm too afraid" or "I wasn't cut out to do this", then you're really in trouble. This would make a terrible performance and no one would attend!

Consider something: How long would it take a person to become a successful trader if he or she continually depreciated themselves, thinking and talking failure, dressing like failures, and always in an environment that breeds failure? The answer to this question is all too obvious, yet millions of people are trying to achieve a level that never dreamed of ever achieving but still play the part of failures. They do nothing about it, or if they are, they aren't trying hard enough.

Have you heard of the "poorhouse atmosphere"? Sometimes, you can gauge the quality of a person's outlook on life by simply looking at them. You can tell how big the streaks of pessimism are in their lives and how much they have been soured by bad experiences. That's how powerful the effects of their negative thinking have become -- it manifests itself in their outwardly appearance. This is truly a powerful force. When people believe the worst about everyone and everything, this is called the "poorhouse atmosphere". Avoid it at all costs.

The "As If" principle is a tool to get you from where you are right now to where you want to be. So how do you bring about such an extraordinary change? The laws are many, but none are difficult. One of the more important ones is to put yourself apart, letting your energy, determination, eagerness, and faith take you in one direction and one direction only. Focus your efforts through the power of this principle. Whatever you want can be yours. The end result will amaze you.

A great thing about my blog is that traders from all over the world can come here and perform. I view my comments section (and my twitter replies) as a stage. You are the actor/trader. There are many that are giving all that they have and demonstrating that they want to be great traders. I am not blind and I know who all of you are. Your efforts will be greatly rewarded as you all strive to become some of the greatest traders in the world. In fact, that's one of my goals in life and I have a long ways to go. See you on the other side.

3-DAY, INTRADAY SPX, DJIA, COMP, RUT

2009-10-16T12:58:00.002-04:00

INDIVIDUAL SECTOR ANALYSIS

2009-10-09T08:38:00.003-04:00

I like to look at the individual sectors especially during times of consolidation. This is especially helpful if you are inclined to build a both long/short portfolio. Sector analysis helps you separate the strongest and the weakest sectors. After all, not all sectors move in the same way as you will see below.