Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 03-11-08 (Tuesday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Retracement double bottom could spark rally.

Monday’s market extended its push to the downside.  The DOW has skidded over 500 points in the last three trading sessions and was off -153.54 on Monday.   The market has continued to slide and is testing the lows of the year (which occured on January 22nd).

The daily StoRSI, our momentum oscillator, penetrated its downside target early last week.   Every day that the StoRSI remains under its lower trigger level is another day closer to a recovery rally.  This market is set up to make a “dead cat bounce”.   Typically, the momentum oscillator moves quickly form top to bottom and then back to the top again.  Extended periods of time above or below the triggers signal periods of rally or decline.   The StoRSI has continued to skid along its lowest level  for the last week and we’ve seen an a week of extended downside activity.  Some type of rebound is now overdue.  Nothing goes straight up or down forever.

The T8 (maroon line), our moving average that defines trend, continues to gain a steeper angle to the downside.  This is a negative sign.  With that said, as price drifts away from the T8 and creates a large distance between the two (price and the T8), the tendency is for price to revert to the mean (T8).  We haven’t seen this type of distance between price and the T8 since the low of January 22nd.

Monday’s candlestick was another black candle that holds no significance.  Candles draw patterns of supply and demand.  These supply and demand patterns have a high degree of predictability.  Unfortunately, they do not draw patterns everyday and such was the case on Monday. 

***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.

 

 DIA: Play Now | Play in Popup | Download (452)

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.

DOW Directions 02-19-08 (Tuesday): A Daily Technical Analytical View of Stocks, Futures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Dow pauses during volatile period.

Friday’s market saw the DJIA close down only -28.77 points. This is a relatively small drop compared to the market action of the last six months.

The daily StoRSI, our momentum oscillator, turned flat on Thursday, then down on Friday.  This is a negative sign.  Sometimes markets do not move swiftly from top to bottom and the StoRSI chops in the middle of the move.  This is the current situation.  Many times choppiness in the momentum oscillator leads to volatile, but choppy movement, in the underlying market.  Although the market has traded in a narrow range for the past 3 1/2 weeks, volatility remains the key feature of the current indices.

The T8, moving average, has turned flat during the last two weeks.  This makes identifying a trend a very tricky proposition.  During the last week and a half the trend has gone from down to up to down again. This undefined direction has caused the  the indicators to go flat. Make no mistake about it: even though the market is chopping back and forth, this choppiness is very volatile.

Friday’s candle was a “doji”.  Doji’s are signs of market indecision.  Nothing smacks more of indecision than a market that closes approximately where it opens.  Most of the major indices did that on Friday 

***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.

 

 DIA: Play Now | Play in Popup | Download (552)

Monday, 28-Jan-2008

Wednesday, 30-Jan-2008

Thursday, 31-Jan-2008

Friday, 01-Feb-2008

The Blame Game–

“I have an friend. He’s an investor. He manages not only his own rather, but also those of some of his family, a responsibility which he takes very seriously. We share investment ideas, and some of the ideas he uses come from my recommendations, in The Morning Call and the Mechanical Monkey, among other sources. All in the family, right? Sometimes, one of those investment ideas goes south, and I feel compelled to send off an apology to my friend. Invariably, he responds in this manner – ‘Hey, don’t worry! I went into that one with my head up, did my own research and made my own choice. That makes it my responsibility, not yours…

‘ In this ‘victim society’ of ours, blaming someone else for our own mistakes teaches us! absolutely nothing. It’s a matter of personal choice and individual responsibility. Your recommendations offer value to me for one simple reason. They narrow the fields of my own research. I am not a professional, and I do not have enough time in a day to start from scratch. Your recommendations point me down roads which otherwise might not have been taken, and for that you have my gratitude. For what happens thereafter, or does not, I will take personal responsibility.”
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.

T8 Retracement Trading: A series on technical trading with moving averages in the futures markets. (Part 3)

For the next few weeks, we will examine opportunities in the futures markets that are dictated by price movement and an exponential moving average: the T8. In each example, we will be reviewing previous opportunities and speculating on how to become involved in the near future. All charts will be presented in the form of weekly candlesticks and will feature three moving averages and one momentum oscillator. As you will see, these simple tools can unlock the door to profits.

Part 3 features a chart of the US Dollar, using weekly time frames. We define “trend” as the direction of the T8 (the maroon, thick line on the chart). As we can see, the trend of the dollar is down. Our rules are simple. We only want to initiate trades in the direction of the trend. Therefore, in a downtrending market rule #1 states: Initiate trades in the direction of the trend. Secondly, we want to sell weeks that open above the T8 when it is in an downtrend (and buy weekly openings that are below the T8), providing the T8 is positive. Rule #2: Sell opening retracements to the moving average in the direction of a downtrending T8. That’s it. A simple approach to extracting profits from some high-stepping futures contracts. 

Using this strategy, you could have sold the opening price during the following weeks at the prices stated: 1/13/08: 84.43; 3/17/08: 84.22; 6/02/08: 82.30 and 8/25/08: 81.27; 12/15/08: 76.29. The most recent quote in the dollar is 75.66. Each whole number in the dollar is worth a thousand dollars.  Adding up the various opening week opportunities, we have a sum of 30.21, based on a close of 75.66.  30k is a nice profit in a single futures contract (one year to obtain…following the above scenario).

With this set up, traders are not forced to make swift decisions. If the market opens below a positive T8, in the weekly charts, traders have all week to position themselves at a better price (providing price cooperates). Multiple time frames are preached by many outstanding technicians. We are also big believers in examining weekly time frames and letting the larger time period dictate the direction of our trades. Once the weekly charts create a buying opportunity we can then drill down to daily time frames and try to catch a reasonable retracement to position ourselves long.

During the next three weeks, we sill see over two dozen examples of the same trading set up. THIS IS NOT A MAGIC TRICK. These specific circumstances happen again and again. We will examine precious metals, interest rates, grains, currencies and other interesting commodity futures for exactly the same set up.

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.

 

 DX: Play Now | Play in Popup | Download (610)

T8 Retracement Trading:  A series on technical trading with moving averages in the futures markets. (Part 1)

For the next few weeks, we will examine opportunities in the futures markets that are dictated by price movement and an exponential moving average: the T8.  In each example, we will be reviewing previous opportunities and speculating on how to become involved in the near future.   All charts will be presented in the form of weekly candlesticks and will feature three moving averages and one momentum oscillator.  As you will see, these simple tools can unlock the door to profits.

 Part 1 features a chart of Crude Oil, using weekly time frames.  We define “trend” as the direction of the T8.  As we can see, the trend of crude oil is definitely up.  Our rules are simple.  We only want to initiate trades in the direction of the trend.  Therefore, rule #1:  Initiate trades in the direction of the trend.  Secondly, we want to buy weeks that open below the T8 when it is in an uptrend and sell  weekly openings that are above the T8, providing the T8 is negative.  Rule #2:  Buy opening retracements to the moving average in the direction of the trend.  That’s it.  Is it too simple for intelligent traders to implement?  Could be!  Isn’t a complicated approach better?  Well, at least I don’t think so. 

Using this strategy, you could have bought the opening price during the following weeks at the prices stated:  2/24/08: $57.25; 5/12/08: $61.67; 8/18/08: $71.57 and 12/8/08: $88.28.  The price of crude oil hit $100/barrel a few days ago.  There are many investment strategies to take advantage of this type of movement.  Most importantly, we have simple rules that can time us in at an unemotional time.  We simply follow the rules. 

 During the next three weeks, we sill see over two dozen examples of the same trading set up.  THIS IS NOT A MAGIC TRICK.  These specific circumstances happen again and again.  We will examine precious metals, interest rates, grains, currencies and other interesting commodity futures for exactly the same set up.   

  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.

The ideal trading system would be one that trades without emotions.  This means that you have to develop a systems that gives you the odds, in the long run, to have a profitable trading system.  Online trading systems that take the emotion out are called mechanical trading systems.  I think that you still need some emotion in trading but  the great traders channel this emotion into competitiveness.  Most are very competitive in nature and these traders work on their systems, their risk management and work their online trading plan.  They keep their emotions out of the plan they have developed and follow the plan.  Teach Talk Trade has mechanical plans that help take the emotion out but many still try to second guess the plan.  These traders try to justify their reasoning once in the trade to take a smaller loss or lesser of a profit.  You can not and will not influence the market.  The market will do what it is going to do, you need to continually assess the markets and put the probabilities in you favor with your online trading plan.  You will have losing trades as part of you online trading plan, and if you don’t then  I will tell you that your online trading plan is pie in the sky.  Accept losses as part of the business, this is difficult to do, and learn from them.  You will not eliminate losses, so embrace them, learn from them, and know that the profitable trades are around the corner.

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.

Wednesday, 02-Jan-2008

Thursday, 03-Jan-2008

Friday, 04-Jan-2008

Monday, 07-Jan-2008

Tuesday, 08-Jan-2008

Online trading can be a lonely experience for the beginning trader. You will be searching for knowledge and will feel isolated. You will soon have the feeling that you just might have no ideas what you are doing. Online trading can be addictive also. You find yourself glued to the screen for 8 hours or more. Try this for a few weeks and you will see that it is draining. If you end up like most people, they will gravitate to an online community for companionship and education. In the future, the Teach Talk Trade Live Trading Room will let you interact with other experienced traders. We have the whole array of traders in our community, from beginner to advanced trader. We are all their to learn and to give support. You will find that being in a trading room like this one, you learn a great deal by watching and listening to experienced traders as well as asking questions and interacting. You will get to see the different styles of trading , thus being able to decide on which style may fit your personality. You should be exposed and explore the different methods of online trading - swing trading, position trading, day trading ect… Loneliness will rear its ugly head especially when you are experiencing losing trades. Boredom can also cause a lack of focus as well as overtrading. That is when many start to abandoned parts of their trading plan which begets more fear and losing trades. Your emotions start to take over your rational trading plan based upon probabilities and you start gambling trying to make up the losses. Teach Talk Trade can help you will all these issues.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.