Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 02-12-08 (Tuesday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Market crawls higher as momentum bottoms and turns up.

Monday’s market saw the DJIA close up +57.88 points. We seem to be entering a period of time that is confusing and contradictory from a technical viewpoint.  Some of our important indicators are telling us different things.  Momentum is indicating upside potential, while the trend has turned down.  Meanwhile the candlesticks offer no clues and continue to post spinning tops.

The daily StoRSI, our momentum oscillator,  turned up, from below its trigger level.  This is construed as a positve sign.  As we have recently stated: “Technical wisdom would dictate a bounce from these low StoRSI levels. Seldom do we stay down for any length of time when the momentum oscillator reaches these low levels. This oversold situation sets up buying opportunities…providing the trend remains positive.”  The biggest problem with the preceding statement is that during the last two trading days, the trend has turned negative. 

Now that the daily moving averages  have turned down, we need to relax and allow the market to decide on its real direction.  If the market begins to fall from this recent turn in trend, we can always sell retracements to the downtrending T8.   

As the market tries to decide on its direction, the last four candles have been spinning tops.  These spinning tops are signs of market indecision.  Many times when the market creates conflicting technical patterns, the market ends up going sideways. 

Please keep and mind and read the following thoughts on volatility. We have been preaching about volatility since August and we don’t believe that things will calm down for many, many months.

***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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Monday, 28-Jan-2008

Wednesday, 30-Jan-2008

Thursday, 31-Jan-2008

Friday, 01-Feb-2008

Wednesday, 02-Jan-2008

Thursday, 03-Jan-2008

Friday, 04-Jan-2008

Monday, 07-Jan-2008

Tuesday, 08-Jan-2008

Wednesday, 19-Dec-2007

If you have ever been to a casino, you will see that they do not go out of business. Why?, they have an edge. They have a system with probabilities in their favor. The casinos know that they will take in X number of cents per every dollar spent. They know the risk and they have the money management system, deep pockets, to handle any large losses. The casinos know that over the long run they will take in X cents per dollar spent. This is not gambling for them, it is playing the odds and probabilities. The Casinos know that the more money they can bring in the door, the more money they will take in as profits.

In trading, the trader is the casino owner. Lets suppose that you develop a system that fits your style and wins 60% of the time, making $150.00 on each of these trades. You also lose $75.00 40% of the time on those trades. On average your profit for every trade you put on is $60.00. As long as the trader can maintain these ratios, his edge, he will make, on average, $60.00 every time he executes a trade. Now if someone just said to you I have a system that produces winners 60% of the time, you probably would not be too excited about this systems. Now knowing the additional facts as seen above, you would be very excited I am guessing.

The process of developing a system like this is the key! Teach Talk Trade is here to educate you in all aspects of trading like this. If you are confident and know the probabilities, then you will be confident in making the trades and will eliminate the fear in trading. It will allow you to manage the trade according to your plan without fear creeping in and making you alter your trading plan. Fear will make you second guess yourself and your online trading plan and greed will make you feel invincible and alter your trading plan thinking you have some sort of control over 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 ) & The Mechanical Monkey where we discuss our mechanical trades.

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)

The Dollar may have well run into the Perfect Storm…..  The Central Bank in Europe is likely to raise interest rates just five days prior to the FED’s meeting where the FED is expected to lower interest rates.  Inflation in Europe has picked up and it seems likely that the European Central Bank will raise short term interest rates to 4.25% from 4%.

This would be a boost for the Euro and a negative for the Dollar.  This may result in higher prices for Gold and other precious metals as well as Oil.  The European Central Bank is facing an increase in inflation in October to 3.3% and economist have raised their estimates to 3% from an earlier 2.7%.  They will be looking at a trend  that may well be headed higher.

The big problem for the European Central Bank is that they publish inflation targets and they have pledged to keep inflation “below but close to 2%” so they will have a problem here.  With a reading of 3% at this time, this is the highest reading in inflation in six years.  At the same time the German inflation rate is at 13%.  The European banks have suffered huge losses because of the mortgage backed securities meltdown.

So the European Central Bank has alot on its plate, and the 19 member governing board has made statements that it is undecided on what it will do.  I see it this way….. I believe the European Central Bank will keep its eye on inflation and increase the interest rate .25% and infuse cash into the financial markets.  If the European Central Bank increases rates and the FED cuts rates, then the gap between both will be reduced to .25%.

And the likely outcomes are:

The Dollar will fall
The Euro will climb
Gold will climb
Oil will climb
US equities will rally but then fall off

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.

STOP! …….Don’t Overtrade!

When you put together a run of wins do not too euphoric.  Remember that a trading system with 60% percentage of wins is a good system so that means you will LOSE four trades.  It is all probabilities.You don’t want to give it all back with bad trade management an no trading plan.

Over trading is the biggest reason for losses in the markets for many people. So many online traders trade too often especailly when they have a few losing trades.  They want to get their money back and in todays online trading environment it is easy to push buttons.
 

Even an online daytrader trading a one, five or ten  minute chart pattern does not have to trade all day long.  They do ont evey have to trade every day.  Trade your plan and look for the best set ups, Believe me, if you miss one their will be plenty more.

Overtrading is a problem that most of us experience at some time.  Most overtrade because they do not have a plan.  They are trading and trying many systems haphazardly.  At Teach Talk Trade we educate you and help you develop a trading plan that fits your style.  Online trading can be fun and profitable.

Overtrading is a very serious and money depleting problem. In order to be a veteran trader you MUST learn to avoid this problem.  You will know if you have achieved a veteran trader status when you know if you have concuered this major problem.

It is difficult to realize you are overtrading because you don’t even know you’re doing it. There are many ways you can overtrade: to many trades, trading too many positions and trading too many contracts and/or a combonation of these.
 
Part of the solution to over trading is to develop a plan, use risk management and money management.
The risk/reward must considered on each trade.  At Teach Talk Trade we educate you on risk management as well as money management.

You must develop a plan you can adhere to and within that plan is risk management, money management, entry and exit points, stop loss placements, and contract size.  In developing your trading plan, you will identify set ups that give you the best probability of success.  When there is a loss, you must accept it as part of the trading plan and place the next trade.

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.

DOW Directions 11-29-07 (Thursday):  A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF):  Holy Portfolio, Batman!  The Dow Bounces off its retracement lows of Monday.

The Dow closed up +331 points on Wednesday.   The StoRSI, our momentum oscillator, has strung three positive days together and closed at +85.  If the momentum oscillator travels to +90, its trigger, and the T8 is still negative, a selling opportunity exists.   

The direction of the T8, our exponential moving average and trend definer, continues to point down and continued to act as resistance to price (both Monday and Tuesday).  Wednesday was different.  The trend has continued down for the past 30 trading days.   Any further strength could turn the trend positive again.  But we still favor the downside.  Rallies back to the T8, as we saw on Monday and Tuesday, are opportunities to sell the market.  Selling the opening this morning stopped us out quickly.  Remember, the steeper the decline of the T8, the further this market can fall.  We continue to doubt if the market can rally for any length of time above the T8.  The next few days will tell us if there is actually a trend change.  Continue to monitor the T8. 

“Tuesday’s white candle is a “harami”.  The body of Tuesday’s candle is inside the body of Monday’s candle.  This supply and demand pattern can suggest a change in direction.” And it did.   The classic battle of “trend vs. candle formation”…usually, trend wins…but, not on Wednesday.    

***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.  This volatility cycle is in its early stages 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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