Tuesday, June 14, 2011

Now What...

Well, we finally got that big relief bounce so many (including me) have been waiting for today on Wall Street, as stocks gapped up, move nicely for the first hour and a half of trading, and then grinded their way through the rest of the session for further gains.   There was a late pullback that took a bit of the shine off the day and volume did come in lower, but overall the bulls showed nicely today.   Since this was certainly overdue and expected, however, we now have to look at where we head from here.

Technically, the markets are not that far from the short-term level I prefer to use both on the upside and downside (the 9 day EMA) and that is what I am going to be watching closely tomorrow.   For the Nasdaq, 2690 is a key level for me, and for the S&P, 1290 is the level to watch.   That being said, bear market bounces are usually very quick and sharp so I would not be surprised at all to see a bounce move further than the 9 day EMAs.

If we do get above those first levels of resistance, there is enough overhead resistance close by that I seriously doubt this market will be on the move for more than a few days.   Today was a nice move but is likely nothing more than that, so don't fall in love with anything on the long side here.   Playing a bounce is fine, but that's all we are likely looking at here - just a bounce.   Take your profits when you get them and honor your stops to the downside.  This is still a very dangerous and bearish market.  Today didn't change that.

Nasdaq
 S&P 500
 XLF
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Personally speaking, I have been in quite the groove over the past week or so, but it's not exactly the type of groove you want to be in as a trader.  Losing streaks happen to everyone in this business (although few will ever admit it or discuss it personally) but they suck nonetheless, especially the one I am having currently.  I say that because if you look at the stocks I have been in over the past few days, they are good stocks.   Many of them moved today.  I am just inevitably timing them a a day wrong, getting stopped out by a few cents, or just choosing the wrong one.  

Chart shows my actual trades along with the gains I would have had 
with better timing (and maybe a bit better luck too).

I am in one of those streaks that no matter what I do, it seems to be the wrong thing.   Today I had SWI and IRWD on my watchlist before the open, but I passed on both because volume was not very heavy early on and went with VHC and SQNS instead (which both had strong volume early).   It was a simple decision that had merit, but it was obviously the wrong one in both cases.   How about getting stopped at the lows on ORS last Friday (shared it here), then seeing it move up 78%!!  Not the easiest thing to take, but that's really all you can do.   Maybe some of you are having better luck with the ideas I've shared recently because many are working.

When you have a losing streak, you can do several things that can help a bit.   One is to trade less (although I haven't done a great job of that personally).   It also makes sense to trade in smaller size than normal (which is something I have done this week).  Analyze your methods and ask yourself if you are in tune with the market.   Most importantly I believe, you must have confidence in yourself and in your ability.  This is a very hard thing to do as the human ego is a fragile thing.  However, if you can make money consistently and have done it in the past, you don't just lose that ability overnight.  A rough patch is hopefully something you can learn from, grow from, and when it is over, you will come out of it as a better trader (at least that's what I hope for.)   Look no further than Dirk Nowitzki.  He was 1-12 in the first half of game six Sunday night, yet he came out and made clutch shots in the fourth quarter to win the title and MVP.   That's the type of attitude you need to have to be successful not only in trading or basketball, but life in general I guess. 

OK, enough of my pity party - overall you do need to be careful here.   Today was likely nothing more than a long overdue bounce that in the grand scheme of things wasn't even that strong.  If we get further strength from here with little to no heavy selling over the next week or so, then maybe we have something bigger.   All evidence points to this still being a bear-market type of environment, so trade accordingly.  Good luck Wednesday. 

9 comments:

MarshalN said...

I know what you mean -- been on a losing streak the past few days, and worse, some of them were complete freak accidents (like the internet going down just when I was about to lock in profits -- and the stock reversed during the downtime). Terrible.

Anonymous said...

probably, you wana trade smaller when hitting a skid

IVG said...

I think you are doing very well - may be you are just a little unlucky lately - there isn't any logic in the market intraday moves lately anyway.
I am not doing well too lately after 5 good months - but I am pretty confident that both me and you we'll get over it
take care

Mac said...

I think my luck has been bad since I made the inadvertent error when I shorted DECK around $90. I entered a market instead of a stop, got out of the position way too early obviously, and since then, I can't seem to catch a break.

Although some traders will disagree, luck is a part of trading. Sometimes you get lucky and sometimes you get a string of bad luck. Very similar to poker - you get some bad beats from time to time. Hopefully it just all evens out in the end.

Anonymous said...

marshalN

there was once i had a nice profit on something and then after i returned from washroom, my pc hanged up. i wanted to look at the chart if the price was still going up or consolidating or falling (if falling then i will take profit), while i was thinking and reboot pc, the whole mkt dropped by 0.5%... ...

when in doubt, get out (rule 4 of 19, Victor Sperandeo).


so i promised myself, whenever pc hanged up, kitchen explosion, stormrain, big thunder, stomach etc, i will square my position immediately. there is always chance to setups new position with preparation.
mini-me

Anonymous said...

Thanks for your daily analisys and sharing your trades Mac!

Anonymous said...

Thanks for showing your actual trades. Very cool. After reading Van Tharp's books on "R" I have come to the conclusion that daytrading is playing against the odds. Even swing trading is iffy. If the idea is to take a small risk for bigger gain, the only way to really get big gains is through time. That's how one gets 10R and 20R winners. It's almost impossible to do that through daytrading. Smaller sizes and wider stops.

Anonymous said...

you're not alone mac, lately can't do anything right

SPYderCrusher said...

Excellent post, and I suspect you'll make out fine in the end.

Like you said, you don't forget risk management, position sizing, the critical components of trading overnight, but losing streaks still really suck.