Market overview for March 31

The market gapped up this morning on no particular news. Financials were strong again and led the gains in the market along with big cap techs. My feeling today was that there would be some profit taking as it is the end of quarter and it felt like institutions might lock in some recent profits in an otherwise horrible quarter. So, I had a bias towards shorting the market but was waiting for confirmation all day.

My first trade of the day was indeed a Long in SDS at around 10:45 after the first reversal from the very important psych 800 level on the SPX. The trade was good for .50c where I sold half. The other half was stopped out at entry.

The market was choppy and meandered most of the morning and early afternoon in a very tight range around that 800 level in SPX. However, after getting a signal to go long just before the 800 level was to be tested for the 5th time, I decided NOT to take the signal thinking it would reverse again. Bad mistake, as the market surged past this level and SDS would have been good for at least a 2.00 gain.

As usual, the final hour provide some fireworks again. The market lost most of its gains in the final 30 minutes of trading on heavy volume. I was able to go long SRS which was good for 1.20. I was also long ERY before the selloff started, but was not patient with the trade and sold it for B/E. I also took a short in POT as it did not participate much in the rally and had come in just prior to the selloff. that was sold for a 50c gain.

Tomorrow, I am expecting the selloff to continue, but as usual, I will wait for the setups and confirmation in the charts before committing.

Update on APOL: earnings are out this evening and although they beat estimates, the market reaction is not good and the stock is down post-market. This might setup as a short on a move below 75.

Good luck!

Market overview for March 30

Futures we horrible this morning following GM's news and we gapped down pretty big. President Obama was scheduled to make a speech at around 11:00AM, so it was a choppy morning to trade.

My first signal to short the market was around 10:15 when the SPY was rejected at the VWAP. Instead of trading SDS Long like I normally do, I decided to go with a long in SRS. I was a little early on the call and was stopped out for .50c (I think my stop was too tight and something I need to rectify).

My next signal was around 1:00PM, again to short the SPY. I did not take the signal and was willing to sit on the sidelines as the market was holding support at the 780 level on SPX.

I think we are at an important juncture for the market this week. SPY is holding the 200MA on the 60Min Chart (with a Stochastic Buy setting up) and if we hold 76-77, especially on lower volume, then I think the chances are pretty good we move back up next week. We'll see how the market unfolds and I hope to be ready take advantage. Other than my daily signals, I'll post what signals I get for a short term (multi-day) move for the SPY on Twitter.

All the stocks I highlighted over the weekend gapped down (as did almost all stocks today) and continued moving down most of the day.

Good luck!

How I use earnings in my trading, and a look at MON and RIMM

Someone said that the we have had the "largest three-week move in stocks since 1938". Wow - that's quite amazing. Does this signal the all-clear? I don't know, but I sure hope so. I would much rather go long than short, but I'll take my setups either way.

With earnings season coming up, I wanted to share some of my thoughts on how I use earnings along with chart setups to build a watchlist of stocks to trade. I am not a big fan of holding stocks into earnings announcements. Even though that's how I made most of my $$ a few years ago - anyone who remembers Forward Industries (FORD) and Dynamic Materials (BOOM) knows what I am talking about. I remember riding these for 200% and 300% gains (among others) - aaah, the good old days!

But knowing HOW to trade a stock prior and post earnings takes out the 'unknown' factor and gives you a much better advantage to trade. In general, I usually look at 'whisper' numbers for a stock that interest me at a site like EarningsWhispers.com about a week or so prior to earnings. Knowing if a stock is overbought or oversold prior to earnings, combined with analyzing the whisper number and then finally when the earnings result comes out, gives a trader many ways to trade a stock prior and post earnings. For example, if a stock is overbought into earnings, the whisper is below consensus, and the earnings are not good - definitely a very strong candidate to short after earnings.

Keeping in mind that we are in one of the worst bear markets ever, momentum type trades are almost non-existent (some exceptions include AMZN and NFLX). So I would definitely NOT be chasing any strength in this market (yet).

Looking at MON and RIMM, both are reporting earnings next Thursday. Like many stocks, both are over-extended in the short-term.

MON is sitting right around resistance at 87-88, with the 200MA lurking above around 90-91. I believe it is too late to go long here, and the stock is definitely primed for a pullack. I am expecting good results from MON and I believe a close above the resistance levels would push this stock back towards 100.






RIMM gave a warning back in February, and after an unbelievable run in January, dropped like a rock. So, even though the bad numbers might already 'baked' in, the stock is still overbought going into earnings and looks ready for a pullback. It is late to go long here, however, if the stock pulls back to around 40, holds and then cracks 46-47 again after earnings, then look for the gap in early Feb to be closed with a move back to 60.

Update on APOL - will be releasing earnings on Tuesday (thanks Crazycolo1).

Good luck!

Building a watchlist of potential shorts? Some ideas...

There is a plethora (I love that word) of stocks showing up as possible short candidates for next week. First off, many financial stocks are a) overbought and b) showing tight consolidation patterns over the last few sessions. A look at XLF shows that a move towards the lows of this week will most probably invite a wave of profit taking and a resurgence of wounded (or hibernating) bears. However, a break of the highs around 9.70-10 and this rally may have some legs. Potential names with weaker charts include BAC, C, AXP and WFC.

Steels and some weaker energy names also look vulnerable here as well. STLD, X and CLF are sitting right along the 50 day MA (like soooo many other names as well), not to mention right at the 38% Fib retracement level. Other energy names include D, COP and GMXR.

APOL setup discussed earlier is looking ready to setup for a short below 75.

Good luck.

Have we bottomed? Does it really matter?

When I first started day trading, I used to let my 'swing trading' instincts guide the way I treated the market on a day to day basis. That thinking left me vulnerable to missing out on some huge moves during this past year. Why? Simple: Markets tend to go much lower or higher that one might think. Especially in a bear market! The science (or art :-)) of picking a bottom is simply a waste of time in my opinion. One can try justify the (many) reasons for the call - whether it is technical analysis, fundamental, astronomical or whatever, one simply does NOT know what will happen tomorrow or next week. I would much rather let the market play itself out and show its hand BEFORE I react. So, my preference is to react and NOT to anticipate.

If one is an investor, or a swing trader, then in my opinion, it is more important to know that the bottom (MAY) have happened (like we have now) and use it to make their trading decisions. In other words, I would prefer to get CONFIRMATION of the move instead of guessing when it will happen.

Which brings me to the other point - as a day trader, it should not matter whether or not a bottom (or top) is in. It may give you bias as to the direction you want to go in, but should NOT determine your trades. A day trader needs to be nimble enough to adapt to market conditions that change very quickly during the day and trade based on setups, news, whatever, to gain an edge. If you have a set of criteria (such as MA crossover, MACD, Stochastics, whatever) that you use effectively, and you get a sell signal in a down market - a day trader should not be afraid to take the signal just because the market is "down too much already" and will surely turn soon. The key is to KNOW your criteria for taking a trade, such as support/resistance zones, profit target, and most importantly, a logical place to put your stop (i.e. your risk).

So, come Monday morning, everyone and their brother is expecting some kind of pullback in the market (myself included). But if we don't go down, and go up instead - then you follow the trend (until you are proven wrong).

Good luck with your trading.

Market overview for March 27

Friday was a very choppy session and we spent most of the day meandring between the opening range low and high. I took a long in SRS around 10:00AM in anticipation of a continuation of the gap down in the market, but after scalping .50c for half, I was stopped out at entry for the balance as the market could not decide which direction to move. The indexes finally closed the day at the lows of the session.

The TA system I use for signals on SPY did not generate any buy or sell signals today, which is just as well as it was a difficult session to trade.

APOL Possible Short

APOL is setting up as a possible swing short in the next few days. It currently sits at the 62% Fib retracement from the swing high/low and setting up beautifully on a stochastic overbought indicator. Last few sessions volume has been drying up too.

I'd be looking to short on a move down below $75 (yesterday's low).

V-Shaped bottom

Like upsidetrader, I do not like V-shaped bottoms - it shows a lot of emotions on the part of traders and investors. We have had virtually NO time to digest and consolidate in this market for the last 2 months. February was straight down, and March is almost straight up. I would have much rather seen some sideways action along the way, followed by a breakout (or breakdown). But it is what it is, and we must act and plan accordingly.

We are overbought on many levels and a pause in the action is certainly to be expected. However, a lot of folks are feeling antsy about missing this move. I am expecting a bit of a pullback here to last week's lows around 75.50-76.50 on the SPY which would be a 38% Fib retracement and might be an important support level. A breach of that level then we might be testing the lows again.

As usual, the market leads and we dance! We must be prepared to adapt and move as the market unfolds each day.

Thoughts on FAZ and FAS

Ok, a couple of days ago someone on twitter posted a link to a group discussion originated on Google Finance about a guy who lost something like 60k in 2 weeks on FAZ. As astonished as I was, I could not believe the amount of replies he received from people who were in the SAME boat! I was shocked! Flabbergasted! Floored! Even funnier were the advice some people were giving like "Sell everything and switch to FAS", or "Hold - it will get back to 100 in a week"

In my opinion, especially in this volatile market, FAZ (et al, the usual suspects: SRS, FAS, TZA, etc.) should be bought and sold PURELY on a day trading basis - NO overnights! The headline risk is WAAAY too risky for these things. FAZ was down 45% on Monday - 45 Freakin %!!! Down from 120 to 19 in 2 Weeks!! If anyone wants to gamble, then they should go to Vegas where they might get better odds on Black Jack or Roulette.

Even buying these things for day trading poses a lot of risk, as do many other investment vehicles. But one MUST know what their risk is BEFORE putting on a trade. Every buy order should be accompanied by a STOP order that is not too close or you'll risk getting stopped out very easily. Therefore, the amount of shares bought should be dependent on HOW MUCH one is willing to LOSE! I believe many traders think "how much money I want to make" before they put on a trade, when the thinking should be "how much money can I AFFORD to lose if this trade goes against me".

I strongly believe that finding entry points (buy or sell signals) is only a small part of trading. An even more important part is Money Management and when to sell/take profits. A stop loss ensures your survival! Capital preservation ensures you live to fight (trade) another day. It amazes me how often emotions take over when a trade goes against a trader and then they become emotionally attached to the position. If the trade goes against you, sell it! Admit you were wrong and move on! If for any reason it comes back, then buy it again! How hard can it be!

In addition, many traders buy more when the price goes against them. In my opinion, one should NOT average down - you can do that if you are Warren Buffet. But if you depend on trading for a living - then I believe it is the wrong thing to do in the long run. It may work today or tomorrow - but over time, it is a losing strategy. It is amazing how liberating it can be to actually sell a losing position.

So, please consider the risks of trading these extremely volatile ETFs FAZ and FAS, know the risks they pose to your portfolio (not to mention your health), and always have a plan of how much is at risk and when to take profits.

Good luck with your trading!

Switch to Blogger...

Well - that didn't take long! I started my first ever blog on Monday, and by Wednesday I decided to change from Wordpress to Blogger! I should have used Blogger to begin with but it was a toss up and after using both I think Blogger is currently more effective for someone like me.
Wordpress might be better for the serious blogger with their own domain, etc. Besides, I could not customize Wordpress to put my Twitter updates ;-) So it was an easy decision to switch.

Market overview for March 26

The market gapped up yet again today after the GDP and unemployment numbers came out (not good but not worse than expected). It seems this is a daily occurrence now of either gapping up or down at the open. In any event, the market attempted to fill the gap but we were unable to break the Opening Range Lows and we chopped around quite a bit around the 820-830 level on the $SPX.

My first signal of the day was a long on the SPY at 11:15AM. This was a difficult session to trade as there was pretty strong tug-of-war going on between the buyers and sellers at a pretty important resistance level for the SPY. We eventually inched higher throughout the day and closed at the highs of the session.

I had POT and NUE on my radar today, but did not pull the trigger on either because of the choppy conditions (which was obviously a mistake with POT). Oddly, a lot of the financial names were down today (GS, MS, C, BAC) but FAS was up! Go figure :-)

I'll post on twitter during the day as I get these signals on the SPY and I usually trade them by going long/short SDS (or BGZ).

And for the first time in several weeks, I was able to short SRS today. My broker (IB) was always out of shares to short on this ETF.

Market overview for March 25

Today was a wild roller coaster ride for the market! What a rush (whew)... A look at the SPY chart shows two signals for today. The first was a short at around 11:00AM. After chopping around for about an hour or so, it started moving down almost non-stop until around 3:00PM. The selling was relentless and there was almost a 300 point swing from high to low in the DOW.

However, this must have been the pullback that the bulls were waiting for. The buyers stepped in and took us right back up to end the day in positive territory. My signals showed a buy in the SPY around 3:30 and would have caught a nice move from the lows.

Market overview for March 24

There was no clear direction early this morning as we had difficulty breaking through the opening 60 minute range, and we remained range-bound most of the day. We brieflywent into positive territory and you could feel the bulls pressing their case. After chopping around for a while the market finally closed at the lows of the day on lower volume. We need to hold above Friday's lows to maintain this rally and we'll see if the bulls can buy pullbacks this week.

Started the day real nice with a long in ERY and SDS, then a long in NEM as gold rebounded. This was followed by a long in X as steel came on strong around midday and POT. I then sold all my long positions around lunch time expecting choppy conditions.

Attempted to take a long in MON in the afternoon, but after going nowhere real fast, I decided to cut it loose for a small loss. Took a couple of longs in SRS and SDS later in the afternoon and ended up with a nice gain after again being knocked around all over the place.

I took more trades than I normally would like, which is an indication of the choppy conditions in the market. However, going forward, I will post 15 Minute chart of SPY to show my buy/sell signals for the day. I will usually go long/short SDS when I get these signals and then look for opportunities in individual stocks or ETFS (like FAZ, SRS) moving in the same direction.

On the SPY chart, the first signal to go long the market was a break above the 30 Minute Opening range. After stalling and reversing, I expected the low of the OR and daily PP to be breached so I took a short in anticipation. However a reversal bar quickly formed on the 5 minute chart and I scratched the trade and went long on a close below the VWAP (twice). After lunch, things got interesting and very choppy - we bounced right off yesterday's highs (and close) and moved back down to the lows of the day. These moves/bounces from support/resistance offer very good risk/reward trades almost on a daily basis.

Welcome to A Scalper's Blog

Hi

I have been contemplating creating a blog for a long time now and finally decided to make it happen.

A little bit of background. My name is Alex and I have been a 'day trader' for almost a year now. However, I have been trading/investing for over 10 years and I have accumulated enough wealth from Swing trading to finally take the plunge and make the switch to day trading. I'll make another post about the experience so far and differences from swing trading.

I come from an IT background (computer science) and have programmed on many platforms and languages (C++, VB, Java) etc since 1990. I made the switch to full time project management about 10 years ago and have not 'compiled' a program in a loooong time. Most of my coding today is creating/tweaking eSignal EFs files from my trading.

I worked in Michigan for Ford Motor Company and GM before that and decided I'd had enough of the office life. So, I gave it up to pursue 'my dream' of making millions in the market and moved to Florida (where I'll be able to better spend my millions). I'll be sure to let you know when I have reached my first million ;-)

After a few months of day trading full time, my first goal quickly became to make enough $$ to SURVIVE! This day trading business turned out tougher than I expected (more on this later). It did not help that I picked the WORST time in generations to become a day trader! But I figured, if I survive this period, I'll come out much stronger and be more prepared for the long term.

I'll begin posting many things I have learned on my journey (and continue to learn), as well as little things as favorite sites, software I use, books I read, etc.

Thanks for visiting and I hope to make this blog as interesting and educational as I can.

Alex