Good Start

A lot of stocks I've been holding began breaking out today.



I'm glad I've been patient.  I sold a few stocks that ripped that I felt were extended.  I probably should have just held.  Now I'm out of them.  However, the ones I sold mostly finished lower.  It's okay to take profits.

 I bought a few new positions and I feel good in that I kept the positions small and I know exactly how much is at risk.  I won't let them spin out of control.   The market is extended but the action is strong in many individual names. 

 I made a few daytrades in TZA which were pointless.  Shorting is not my strength.  Or rather, the market was way too strong... and that ticker is very tricky -- so avoid because the swings are too volatile.  Make the easy trade always or do nothing.

four strategies for 2011

1. 20 day MA bowl:  This is an entry as the 20 day MA carves out a bowl pattern, often in a value play.  The bowl represents a basing/accumulation period that will lead to a long swing or a quick stop as the 20 day MA is broken.  These require a lot of patience.

2. Trendline entry.  When a clear trendline develops (3 touches), buy on the trendline, especially if volume is light.  Looking for candlestick confirmation.  Exit is top of the channel -- since chances are this stock is not ready to break out.  Trendline is often not connected with moving averages, usually below them).

3. Breakout of trendline. Simply entering on a breakout.  Must occur with HIGH VOLUME.  Good for daytrades.  Stock should have news/catalyst and/or be in strong sector.  Works best with high institutional participation. These stocks can and often will be 'expensive'.  Ignore valuation. Price action only.

 4. Intraday / short term swing 3 bump pattern.  Often a strong stock having a bad day - or taken down by shorts.  The entry will occur after 2 higher lows have formed.  Entry on the 3rd swing -- hopefully the 3rd higher low.  Stops will usually be no more than .20 from entry.  Position size can be large for daytrade, smaller if holding overnight.  Works best if pattern forms near previous support area.  

notes for 2011 strategies

when there is light volume -- find the support lines and buy those (i.e. buy on weakness near trendline)

when stock is strong, look for breakout and buy on strength. 
 Buy momo stocks on 3 bump pattern and breakout  (set tight stop)

on intraday weakness:  look for 3 tight higher lows to enter.

Your Edge:

My greatest edge, which I can use or not use, is my patience.  If I know a stock is worth more, I have no pressure to sell it until it reaches my price.

 And my second edge, my small size, allows me to exit my entire position for the top price.


 My edge crumbles when I lose patience and want to exit a temporarily losing position, or take profits too early.

thinking back:

First thing I want to remind myself of is this:

 Many trades I made that I eventually sold went on to become winners.  Many were based on value.  They just took longer.


 Many I bought too early and got trapped too long.  I didn't wait for a clear - 100% clear support line to enter on -- so that the position didn't drop too far. 

 Many the size was too big so the drawdown was too uncomfortable.

 When I look back -- I think I have more of this mistake -- selling too soon.  Always selling too soon.  Especially with winners. 

 My edge requires letting profits run.  Think about that for 2011

market breaks

after being up intraday -- market sinks to lows on heavy -$tick readings...

 key indicators:  terrible   adv/dec. ratio --  oil/oih sector decimated all day...

  lost money trying to fight an obvious trend.  

  would have done better to do nothing until afternoon when trend resolved to downside.  I shorted 3 times -- but did not hold on.  

  sellers swamped all buyers.  

    Trade in direction of general trend.  Brief green markets were opportunities to short all rallies now.   Leadership names AAPL and GS were all alone (GS faded to red) -- so market had nothing to support cascade.

  Poor job managing risk.   All losers hit stops, all winners -- sold too early 

RIG

fair value $125

 AT 57.77 --  this is a long term buy.  It will be very volatile with BP news but the market no longer looks out 5 or 10 years.  So it can trade down to 50 I'm sure.  Still worth $90 - $125 long term.  So the only winning strategy is to do nothing.  No stops... just hold -- for  a long time.


  Market conditions still bearish... Need to stay mostly cash unless buying super long term positions.