Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 02-29-08 (Friday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Dow trips, falls and begins to bleed.

Thursday’s turned negative and we anticipate further downward drift.    Negative technical clues hint tough sledding ahead. 

The daily StoRSI, our momentum oscillator, has turned down at its upper trigger level. Typically, the StoRSI draws large sine curves that trace from top to bottom of its range.  After reaching the upper trigger levels of the momentum osicllator, momentum has waned and now is gathering steam to the downside. This usually means the market will find it difficult to rally…as long as the StoRSI continues its downward travels.

The T8, our moving average that defines trend, continues to point in a slightly direction. Without a strong angle pointing up or down… identifying a trend can be a very tricky proposition. 

Thursday’s candlestick was not significant.  What is significant is the wicks, above the candle bodies, posted on Tuesday and Wednesday.  Markets tend to move against large wicks.  The wicks should now become a resistance area.

***Volatility Alert:

During the third week in July, volatility returned to the major stock indices. For approximately four years, the markets have had low to very low volatility. This significant change has ushered in swings of 100, 200 & 300+ points, sometimes on a day-to-day basis. Stock indices tend to be either volatile, or not, for three to five years at a time. Expect continued volatility. The current volatility cycle has just started its volatile period. We feel this is the early stages of volatility and we continue to believe it is here to stay.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

 

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For a while I have been saying it is time to “Ride the Bull in Agriculture” since I believe the bull market in food and agriculture is a virtual “sure-thing” over the coming decade and beyond.

I noted the impact that bio-fuels will have on the supply and demand equation in agriculture.  I was not supporting ethanol as a viable replacement for fossil fuels.  I try not to make the mistake of underestimating the stupidity of a government boondoggle.

Consider the energy equation.  It takes roughly 1.3 units of energy to produce one unit of energy from ethanol.  This is like trying to get rich by buying dollar bills for $1.30.  But if we’re even having the discussion, it tells me that it’s not the solution it has been hyped to be.

Think what will happen when these cars are produced in large quantities with a fuel source dependent on Mother Nature from year to year?  Ask a farmer if he can expect a bumper crop year after year.
I don’t support ethanol as a viable alternative.  I was noting the impact it may have on the agriculture supply and demand equation.  And that equation is showing that the world is beginning to demand more food than we are able to produce … even if we weren’t burning it up to produce energy. You might have seen or read recently that United States wheat inventories are at 60-year lows.  Imagine that.  The “world’s breadbasket” may have to begin importing wheat (if it’s available, that is!).  This is partly due to the ethanol rush, and the battle between food and fuel.
 
With farmers chasing the free millions from the government in corn subsidies. And by the say, that is your money they are giving away. The farmers are planting less of other crops.  When you combine these forces with the increasingly growing middle class in the developing world that are demanding more protein (it takes lots of grain to feed animals, to raise meat), it has created a massive squeeze play in the agricultural commodities. When I wrote about this two months ago, I recommended the DBA ( PowerShares DB Agricultural Fund ), which provides equally weighted exposure to corn, soybeans, sugar, and wheat.  Not surprisingly, this ETF has been rip roaring, up almost 30% year to date.

If you want to play the long-term boom in agricultural commodities, I would still think about DBA.  You should consider buying on pullbacks since it has had a strong run.

Traders love to talk about their trading.

It’s much more comfortable for most traders to talk about what COULD BE rather than WHAT IS.

They love to talk about some chart setting up, their view of the political situation surrounding the stock or market…. whatever.

We all know that talk is cheap.

Intellectually, we know that the chart says everything we need to know, but as emotional beings, we are always looking for the “insight” or the “intuition” to put us a step ahead of everybody else who are all looking at the same charts we are.

If we don’t have the “eye to the future”, maybe a trading friend has it.

Sometimes all you have to do is call up a trading buddy and say, “Hi, how are you today?” What you’ll get in return will be, “Boy, have you seen the ’so-and-so’ chart today?

If that breaks the XY level, it’s going to really take off!” He continues, “And with that unstable political situation, this could really be a big trade.”

Why should we care?

We shouldn’t.

I guess we could take a look at the suggested chart and apply our trading parameters to it….. and if it passes scrutiny, well, that would be alright to trade, right? Yeah, OK.

You have to watch yourself, though. You see, you can have a tendency to want to MAKE a trade fit.

After hearing all about the great fundamentals, you can (subconsciously) view the chart with “I wanna buy” eyes, meaning that you can tell yourself that an almost-confirmation is close enough (with all those fundamentals going for it!).

That’s the danger.

It’s always best, I think, to come across a trade yourself. You see a price falling….. and falling….. gosh, when will it bottom? Your system says, “Don’t guess, be patient”.

Here’s one of my favorite expressions:

“I’d rather be out of a market (or stock) wishing I was in, than in a market wishing I was out.”

So, the market has a nice reversal day…. new low during the day with a higher close. Getting close to a buy, but not yet. The price goes higher for a few days and then starts to come back down.

It’s looking good.

The low holds, the market breaks the rally high and BOOM, we pull the trigger and we are in.

The system rules.

THAT’S the way to take a trade.

Every trader (you, included) has his or her own agenda. Only you know what works for you, system-wise and emotion-wise.

Trust in your tested trading system. It will serve you if you stick to it.

People think I’m crazy when they hear me talking to myself.

My close friends know that I’m just getting good trading advice!

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Monday, 28-Jan-2008

Wednesday, 30-Jan-2008

Thursday, 31-Jan-2008

Friday, 01-Feb-2008

DOW Directions 12-31-07 (Monday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Happy New Year!

The DOW suddenly stopped its upward momentum on Thursday and on Friday chopped in a narrow range.  The market closed up six points on the day. After moving up four consecutive days, the DOW succumbed to its overbought conditions on Thursday and then did little or nothing on Friday.

The StoRSI, our momentum oscillator, reached overbought trigger levels on Wednesday and abruptly reacted on Thursday and Friday with a sweeping reaction to the downside.  We are now halfway down heading to the lower trigger level and the odds favor further downside to start this week and the new trading year.  Usually, the market will continue down until the oscillator hits its lower trigger. This could take a couple sessions to accomplish.

The T8 has flattened and the trend has become anything but a trend. The flat T8 gives us little hints as to the overall direction of the market. As soon as the T8, our preferred exponential moving average, decides to take on a positive or negative direction, we will have a much clearer undertanding of how to position ourselves in the coming new year.

The candlestick formation, posted over the last three or four days,  gives us very little clues as to what is currently happening.  We will wait until we see a significant candle posting to position ourselves in this market.

***Volatility Alert:

During the third week in July, volatility returned to the major stock indices. For approximately four years, the markets have had low to very low volatility. This significant change has ushered in swings of 100, 200 & 300+ points, sometimes on a day-to-day basis. Stock indices tend to be either volatile, or not, for three to five years at a time. Expect continued volatility. The current volatility cycle has just started its volatile period. We feel this is the early stages of volatility and we continue to believe it is here to stay.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

 

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Using Stop Loss Orders to prevent an Investing Disaster

Many investors fail to use a Stop Loss Order to protect themselves in case they end up buying a stock at the wrong time. In his book “How to Make Money in Stocks” William O’Neil states even the most successful investors maybe wrong about 50% of the time when choosing stocks to invest in. The key is to cut your losses early when a stock fails to follow through to the upside and minimize your losses. However many investors fail to do so and allow a small loss to turn into a much bigger one by not using a proper Stop Loss Order.

Many investors fail to use a Stop Loss Order to protect themselves in case they end up buying a stock at the wrong time. In his book “How to Make Money in Stocks” William O’Neil states even the most successful investors maybe wrong about 50% of the time when choosing stocks to invest in. The key is to cut your losses early when a stock fails to follow through to the upside and minimize your losses. However many investors fail to do so and allow a small loss to turn into a much bigger one by not using a proper Stop Loss Order.

A good rule of thumb is to never let a stock drop more than 8% below the Pivot Point when it reverses to the downside after initially trying to breakout. Thus this is where a Stop Loss Order would come into play.
Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

 Odds and Edge Probabilities in Day Trading

Online trading or trading in general is based upon probabilities.  Most amateur traders do not even consider this and avoid the subject.  They rather trade on the hot tip or someones system the do not fully understand.  I ams sure you get bombarded with advertisements via email, and regular mail with all these wonderful track records.  Well the next time you get one of those just realize that you do not understand the system, it may not fit with your trading style, it may not fit your risk tolerance, your money management need for your account size may not fit with the system and you may not have the tools needed to monitor the system. 
Teach Talk Trade helps you navigate through your trading plan.  We educate you in many areas and bring it all together for you.  We see the value of continual education and areas like risk management and money management are areas that need constant attention and updating.   The professional traders secret of success if I had to pick one is Risk Management.

The markets are about managing risk, there is no Holy Grail of Investing!  There is no system that is 100% accurate as a matter of fact a very good system may only produce 55%-65% wining trades.  You as an online trader need to determine the best probability trade or system for your style.  There may be a very good trading plan but the degree of risk may be something you can not handle emotionally or financially.  What is there was a great trading plan that, at times, produced drawdowns of $8k-$9K but and you only had a $10K account size?  My guess is that very few traders could trade this system with success as most would not have a risk tolerance for this kinda of drawdown even though if over the long term this system showed 15% gains over an long period of time.

The best a trader can do is to try to figure out the probability of the specific trade and the probability of the trading system that he uses.  If the trader can do this, figure out his edge and maintain it, he will do very well in the markets..

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call (we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues with analysis and suggested trades) & The Mechanical Monkey where we discuss our mechanical trades with entries and exits.

Daytrading 12-10-07 (Monday): Occasional thoughts on scalping the market.

XTXI (Crosstex Energy Inc.): “Trading the Pipe”

In the case of XTXI, our momentum oscillator, the Chande Momentum Oscillator means very little.  But much like Little Richard, we put it on the chart because it’s so beautiful.  Our daytrading setup consists of a number of moving averages.  First and foremost, we use the T8 (maroon line) to determine trend.  We will only take daytrades in the direction of the T8.  Our second and third set of moving averages are three-day T3 averages of the highs and lows.  The T8 is represented by the fat maroon line on the chart.  The highs and the lows of the T3’s are represented by the dotted red and blue lines on the chart. 

At the number “1″ on the chart, we can see that the T8 is pointed down.  Since we only take trades in the direction of the T8, our exponential moving average,we are looking for short positions.  The rules are simple:  a. take trades in the direction of the trend b. short any opening above a downsloping T8  c. short retracements to a down sloping T8  d. the opposite applies for all long trades. 

As one can see, there are even better parameters set by bracketing price with the average highs of the T3 and the average lows of the T3.  This envelop defines most days highs and lows and allows a trader a well-defined set of numbers to place limit orders to buy and sell.

The three large red arrows below the number “one” are days when the T8 was negative and the market opened above the T8.  These are three opportunities to short the opening.  The three smaller arrows below the number “two” are opportunities to short when price retraces to the T8.  The arrows above the number “three” are three opportunities to buy XTXI on retracements to the trend (T8).  Number “four” represents an opening below the T8 and an opportunity to buy the opening. 

 There are many days when the price touches both the T3 highs and the T3 lows.  These brackets can be great boundaries when trying to extract a few dollars from XTXI on a daily basis.  Set your own rules, but trade with the trend and allow the T8 and the T3’s to guide you in and out on a daily basis.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Monday, December 10, 2007                            

10:00 AM ET. Oct Pending Home Sales Index (previous +0.2%)

Tuesday, December 11, 2007                           

7:45 AM ET. Dec 8 ICSC-UBS Chain Store Sales (previous +2.0%)

8:55 AM ET. Dec 8 Redbook Retail Sales Index (previous +0.3%)

10:00 AM ET. Oct Wholesale Trade Inventories (expected +0.6%; previous +0.8%)

5:00 PM ET. Dec 9 ABC/Washington Post Consumer Confidence Index (previous b24)

N/A Dec FOMC meeting; interest rate decision expected around 2:15 p.m. EST

Wednesday, December 12, 2007                         

7:00 AM ET. Dec 7 MBA Mortgage Application Survey Refinancing Index (previous +31.9%)

8:30 AM ET. Oct Trade Balance, in dollars Deficit (expected -57.5B; previous -56.45B)

8:30 AM ET. Nov Import Prices

                      Import Prices (expected +2.4%; previous +1.8%)

10:30 AM ET. Dec 7 US Energy Dept Oil Inventories

                      Crude Oil Stocks (in barrels) (previous -7.9M)

                      Gasoline Stocks (in barrels) (previous +4M)

                      Distillate Stocks (in barrels) (previous +1.4M)

2:00 PM ET. Nov Federal Budget, in dollars

                     Budget, on year (expected -83.6B; previous -55.6B)

Thursday, December 13, 2007                          

8:30 AM ET. Nov PPI

                      PPI (expected +1.5%; previous +0.1%)

                      PPI Core (expected +0.2%; previous 0%)

8:30 AM ET. Nov Retail & Food Sales

                      Overall Sales (expected +0.6%; previous +0.2%)

                      Sales, Ex-Auto (expected +0.7%; previous +0.2%)

8:30 AM ET. Dec 8 Jobless Claims

                      Weekly Jobless Claims (expected 335K; previous 338K)

                      Weekly Jobless Claims Net Change (expected -3K; previous -15K)

                      Continuing Jobless Claims (previous 2,599,000)

                      Continuing Jobless Claims Net Change (previous -59K)

10:00 AM ET. Dec 1 DJ-BTMU Business Barometer (previous 0%)

10:00 AM ET. Oct Business Inventories

                      Total Inventories (expected +0.3%; previous +0.4%)

10:30 AM ET. Dec 1 US Energy Dept Natural Gas Inventory

                      Natural Gas Stocks (in billion cubic feet) (previous b88)

Friday, December 14, 2007                            

8:30 AM ET. Nov CPI

                      CPI (expected +0.6%; previous +0.3%)

                      CPI Core (expected +0.2%; previous +0.2%)

9:15 AM ET. Nov Industrial Production

                      Industrial Production (expected +0.2%; previous -0.5%)

                      Capacity Utilization (expected 81.75; previous 81.7)

Using and Understanding Trailing Stops

Once you get in a trade you hope the price immediately starts moving in your favor.  If so, you need to execute your plan, and if this includes trailing stops, then put your plan into action.  there are a couple of ways to do this.  With online trading it is easy to use a trailing stop that is continually modified according to the price action.  Lets say your trading plan calls for a $.50 trailing stop.  When you enter the order you will initiate the trailing stop which will be $0.50 below the entry price, As the price moves up your trailing stop will also move up.  In the purest sense, you would just leave this stop in until you get stopped out.

If your trading plan includes moving a stop up to a breakeven level after a certain profit level, then you would put in an initial stop and move it up manually following the price action.  You will never be hurt taking a profit or breaking even.  You have to be careful since taking small profits will not make up for the losing trades with larger stop losses.  If you place your stops too tight then you will be stopped out will very little profit.  The overall  game plan is to cut your losses and let your profits run.

If I am day trading in my online account, one of my plans is to lock in a breakeven level as quick as possible and then watch and trade off the candle formations in different short time frames like the five, ten, 30 and 69  minute time frames.  If I see that the trend is breaking down I will lock in a profit or smaller loss.
There are many ways to use trailing stops and there are ways to reduce risk with multiple contracts and using trailing stops.  Teach Talk Trade will educate you in these type of trading methods and philosophies.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call (we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues with analysis)  &  The Mechanical Monkey  where we discuss our mechanical trades & give you entries and exits.