Thursday, October 19, 2006

Party Hats

Well, 12k on the Dow has not only been pierced but "closed". For the first time in history, the DJIA closed safely above the 12,000 level. If you don't think there was a battle for this, just look at the intraday graph. Traders were shoving each other back and forth over this line the past couple of days.



I took a snapshot of this chart today and was going to post a "looks like a buy!" (really! honest!). Anyway, Google (GOOG) posted their results about three seconds after the market closed today, and they were fantastic. After-hours trading has the stock trading about 30 points higher than the close. Let's face it, Google is a money machine.


The Russell 2000, as represented by the ETF IWM below, is truly at a crossroads. Just look at those lines converging.


One of the four rules I have written on my laptop is "Never do an ad-hoc close." What I mean by this is that, once in a position with a stop in place, I don't change my mind about it later out of boredom or doubt. The position stays.

This rule came in handy with CTXS. I had bought puts on it, but the graph was looking sort of hum-drum. I wasn't sure it wouldn't pop up in price. But I stuck to my rule and let the stop order do its work. CTXS got nuked today, and I got out of the position with a profit. (My stop was never triggered, obviously). So let your stops do their job. Don't monkey around with the position once it's in place.


I mentioned this one before, but for those interested in shorting the world of real estate/REITs, try symbol IYR. There are puts on it (although fairly thinly traded), and this looks like a good long-term short play.


That's it for today.

20 comments:

Des said...

So let me be the first to ask.. what the other three rules?

Tim Knight said...

Never act in the first 30 minutes of the trading day.

Never lack a stop price.

Never open a trade prior to your target entry.

Prabz said...

Hi Tim,

I took your advise on GOOG.. and also on MEE... Thanks!!
How about your profit taking rule?

Thanks
Prab

Dougo said...

mmm, words to live by for sure, I really try to obey rule #1 if I'm thinking clearly. I like to wait an extra little bit after I make a decision to trade. Since were asking questions..... What was the 'Ken Brockman' reference to in the "I,For One, Welcome Our New Bull Overlords" post? There was a label for it, but nothing in the main text. Maybe something to do with the title?

Doug

PB said...

How about the James Bond rule?

- Never say never.


- o.k. I'll go away now!

Cyl said...

Master Tim,

Can you please share your stop loss rules on stock trades?

What about index option trades? Do the same rules apply?

What's the average % loss on your option trades?

I apologize if I'm getting too personal. I'm just trying to find a way to minimize my option losses while still giving the stock enough room to breathe.

I've recently started buying more intrinsic value for my short-term trades (2-5 days)and more time value for trades longer than a week.

Your insights are greatly appreciated.

Thanks


P.S. I welcome everyone's thoughts.

Sanjay Sola said...

any thoughts on shorting TEX? talk about a scary chart.

my thoughts are that this market does not have much room to go on the upside unless it corrects.

you can tell how tired it is. the robotraders are turned on in the afternoon to prop this market up. but the odds are that this market is going down very soon.

you can also see the transports and semis performing miserably. the financials aren't looking as good either.

I'll be shorting before the Fed meeting on Tuesday.

Tim Knight said...

To respond:

"What was the 'Ken Brockman' reference to in the "I,For One, Welcome Our New Bull Overlords" post?"

It's a nerdy reference. I got it wrong, actually - it's Kent (with a t) Brockman, from The Simpsons. See http://en.wikipedia.org/wiki/Slashdot_subculture

"Can you please share your stop loss rules on stock trades?"

It's not some arbitrary percentage-based rule. It totally depends on the chart. It varies from chart to chart, but there's definitely a point on the chart which indicates that I'm wrong, and I set my stop there.

Dougo said...

Damn, CAT was on my rader yesterday, maybe a bouce would allow for a grab of of a half decent position. I got the Simpsons ref, cheers to nerdiness!
Harf not to trade in the first half hour when you have to go to work early!

bsi87 said...

re:UB. Bottomed in the 6/12 month RSI at 30. Downgrade this morning. Long at 57.55.

Another buy order above the open at 58.55 stop/58.60 limit.

Note the HSY upgrade this AM. It bottomed in 2 of 3 RSI timeframes yesterday.

Sanjay Sola said...

I should have shorted TEX! down 10% today.

market is in a correction mode. it looks like it's going higher in the long term. i won't be shorting after the Fed meets now.

Sandisk looks like a buy once it goes green. a 20% haircut is overdone.

PB said...

CAT totally shit it's pants, and what does the market give us? A measley 30 points in the red! When will it sink in that the economy is slowing down?? Goddam effin' bulls! What a bunch of turds! If it was the other way around, I'm sure we'd see a 100+ point rally!

drtunio said...

Talk about missed opportunities.
I was just thinking of shorting SNDK. What a fall! NVDA and BRCM also fell hard.

This garden is full of fruit ready to fall, but the question is how to find which one will fall when you short it? All the charts look beautifully ripe - signs of reversal, MACD starting to turn down, RSI and Stochastics overbought. So many stocks, so little time.

PB said...

How predictable!! weakness in the morning to be followed by strenght in the afternoon! Will things ever change?? This is frustrating as hell!

PB said...

this is a fuking zombie market!

Is anyone alive out there???

trader said...

If this market is predictable... Whats the problem ?
Plenty of live bulls and lots of dead bears !

PB said...

it's fuking idiotic, that's the problem! The world would have to blow up for there to be a 100 point down day! And even then I'm not sure we would close at triple digit losses!

trader said...

Unfortunatly,I think "RIGHT NOW" you're probably right,and even then it would go up because of all the construction opportunities available as long as there were at least 2 people left alive.

EddieFl said...

Anyways Paulson is sticking it up OPEC rear-end. One day after they try to squeeze us again, and cut oil production. Paulson and Co. manage to get oil to go even shorter,,he is showing them they are a non-issue.

They got some Ass-clown Iranian as the Opec spokesman saying they want to change the market, the got Chavez from Venezuala agreeing with him. Oil is the only way they can actively screw with us and they know it.

And then Pualson steps in an bitch- slaps them, manipulating the price lower. WHO do they think they ARE manipulating price action on us, we invented that damm game, and Paulson is a master of price manipulation.

I for one am glad he is serving the United States and everybody in here should be also. The New War we are fighting is not only being fought in the battle field, to be sure about that there are many frontlines and the financial markets are one of them.

bsi87 said...

re:SNDK

It'll be hitting the 30 RSI on Monday. Buy limit at 45.35. Very small position based on volatility.

re:YHOO

Volume drops on each big sell off, MACD is diverging. If the big boys kick out Terry or someone gets a bug to make a run at 'em, this could be a very interesting speculation. I'll be putting a stop under today's low...finally.

Do your own HW.

BSI87

re: Paulson. Well all I know from Econ 101 is that there's no free lunch and supply meets demand eventually. Playing games with the mkts distorts price discovery and causes problems. Ask Carter about using grain as a political weapon. He tried to shoot the Russians and killed the American farmer instead. Countries around the world decided that they needed to be as self sufficient as possible even they weren't the low cost producer. Careful what you wish for. I still think Paulson will end up like James Baker and cause a mkt crash thru his Chinese jawboning.

JMO.