Category: Trading Articles

Sell when targets are met

Scaling in and out

Any market observer, unless their head is stuck in the sand, has to agree that this is a very bullish market. Almost all technicians accept that the trend is your friend. Given those comments, this should be a very simple situation - right? Just buy any and all dips (assuming there will be some) and ride it higher. 

Of course when you say buy any and all dips you are assuming one or both of the following:

  • You are not fully invested when the dip occurrs
  • You are buying the dips on margin

Now if you are doing the latter, I would have to disagree with that strategy because a cardinal rule of mine is that you do your best to never put yourself in a position where someone else dictates when you have to liquidate positions.

If you are doing the former, then how did you know when/where to sell and are you in a better off in doing so then buying back?

Nobody has perfect timing. I'm no exception. What I always try to do when I sell is to first ask myself where I would buy it back it

  • It continues higher
  • It retraces when or shortly after I sell

Now the latter case is the ideal but we all know that trading is not made up of mostly ideals. So you have to sell at that point where, at some future time, that would/will be the place to buy. If it continues higher, then you simply buy the retrace around where you got out. If it does retrace, then you are better off and you buy lower which was the whole point. Here are two example in the past few days of both cases on stocks that have been featured on the trading ideas section of the site. The first is VRX, a stock we have traded in the past for nice profits but then left as it couldn't hold higher price points back in early 2017.

This is the case where the sell works. Sold into the push to the lower bullish ABCD target on Friday at 24+ and now set to buy back in the 22-23 range (close at 23.11 yesterday).

If it had pushed to the higher target, then the buy would have been the $24 area - where we initially sold. 

These buys and sells are around some larger position being held and can be viewed as performance enhancers. Getting back to the original idea, that's how a dip is bought. You have to sell the rip first.

Here's the case that hasn't worked so far - I sold too early. The stock is BHP and again, one highlighted here. Both of these stocks are viewed as longer term positions that can be traded around. The original buy was way back in late October.

Original Purchase

Now here's the current chart. I sold some on that first extension being met at the end of last year but it has just continued straight up from there. The plan was to buy back around the 44 level but that's likely a pipe dream now. The buy now is more like 45 at best when looking at the weekly chart and in order to buy larger, I still plan to probably sell a bit more around 50.

BHP

Scaling in and out is what the big fellas do. It's how they add alpha. They hold larger positions and they trade around them at significant areas as seen on the charts. You can do the same. If you trade with an outfit like Interactive Brokers where your costs is a penny a share, you too can employ the same methods.

  • Written by LA Little

Category: Trading Articles

rollovers most everywhere

Temperature is Rising

Recap and Current Outlook 

When I was a kid, we used to fix gumbo or what is many times referred to as Creole. It's a spicy dish full of various seafood if you had money and for those of us that didn't we had crawdads - those poor little creatures we would catch and use for gumbo. The cooking process was simple - you basically lulled the poor crustaceans into a false sense of security and within a few minutes they were cooked alive. Start with warm water, put over a nice little blaze and bingo - meat for your gumbo.

The market is reflection of life's stories if you pause to consider it from time-to-time. Similarities and opposites abound most of the time and I cannot help but wonder if we are in that warm pot of water, all comfy and cozy and feeling good about things while the temperature is slowly turned up. I mean, why not? It's the most bullish time of the year and it's been a great one. In fact, you don't get many like this. But lately I'm noticing that waters are a bit more murky than they have been. Have you noticed, for example, that so many charts that look like this anymore?

It's not your imagination that it's harder to make money right now cause it is. For every winner you most likely have a loser. That's because the breadth - however you want to measure it, is thinner.

A week or two ago I said if you see more and more break downs on the lower time frames, then you will eventually see them on the higher ones. Here's a picture of the hourly chart of the S&P 500 futures from September 27 to October 26 of this year. Notice almost no bearish ABCD structures until the end of the period.

Hourly S&P Futures - Sept 27-Oct 26 2017

Here's what it looks like from October 24 through yesterday

Hourly S&P Futures - Oct 24 thru Nov 20 2017

Ugh ... looks very different doesn't it. These shorter term failures have started to cloud the picture a lot - even on the S&P which is the last to give in. There, we recently saw the first bearish ABCD complete off the highs. That hasn't happened more than a couple times all year.

S&P daily and weekly

 

Ideas and Final Thoughts 

So where does this leave us? Where we have been actually - leaning long but hopefully aware that we may be sitting in a slow heating pot of water. If you are going to jump eventually, you first must have some idea that the temperature is rising so to speak. With an ear to the ground, we should hear some pounding of the hoofs before all hell breaks lose - if it does.

  • Written by LA Little

Category: Trading Articles

Trading Ranges and the Bell Curve

Each morning, LA marks up the S&P 500 E-mini futures chart based on neoclassical principles. The desire is to define - each day - the expected range of the S&P 500 for that day and trade-to-targets if those range are exceeded. 

Read more ...

  • Written by LA Little

Category: Trading Articles

Dollar Is a range trade for now

The US dollar had recently shown signs of take off with the promise of not only new highs but much higher highs relative to almost all currencies. But the new political tone grounded that notion near term and despite the US economy still being the primary driver of growth in the developed economies, the Federal Reserve has taken a pass on moving faster on higher rates despite their promises and instead are waiting to see more of the new administrations policies.

Read more ...

  • Written by LA Little

Category: Trading Articles

Turning on a Dime

One of the frustrations of those who monitor or follow the suggestions of a market commentator is when the market starts to change.

Read more ...

  • Written by LA Little

Category: Trading Articles

Bullish ABCD is almost done

Trump victory induced rally nearing exhaustion

A couple weeks ago I had thought that the odds that this Trump victory induced bull market run would immediately take another leg higher were not that great. I was leaning much more to the idea of us consolidating longer before taking off again.

Well, here we are, almost 2-weeks later after a smallish retrace and not only was it another leg higher, it was a powerful one that is now driving to the fulfill the daily and weekly targets.

Today is Fed day and again, we may see the culmination of the Fed meeting lead to yet another smallish retrace before we power on, or it may just provide the juice to go up and capture the larger targets which, not that long ago, seemed remote in such a short period of time. Right now we have no indications of a pullback other than anecdotal evidence and the fact that many sectors are extended and, in many case, have met their bullish ABCD targets.

What we do know is that regardless of the market reaction today, the odds are quite high that this run has more room to move.

 

Rotation

Strong bull markets moves, rather than consolidate for longer periods of time, instead run with huge force then eventually rest. That is what remains underway with this strong thrust higher. With the rotation back to technology stocks over the past week, this market has been able to continue to leg higher despite some resting by the early sector leaders like financials and industrials.

This rotation back to technology has enabled the lagging NDX 100 to finally breakout and join all the other major indexes at new record highs.

Bearish ABCD almost done

It's notable that the large cap technology stocks all chose to take off the past week or so - on the eve of a round table at Trump Tower. Always makes me a little nervous after a larger extension when the laggard finally gets rotated to in a larger way. Anecdotal but useful trading lore as I have seen it enough times to remember that this is when you are nearing a potential retrace again but realize it's not something you can time - you need the market behavior - the supply and demand you see on the charts to provide that evidence and that simply doesn't exist yet.

If we combine all of the above with the notion that the neoclassical mean-time-to-failure trend indicators MTTFs becoming extended on some sectors the end of this month but mostly the middle of next month across almost all sectors and indexes, you realize that we are indeed getting much closer now to the end of what has been a tremendous run.

MTTFs nearing exhaustion

(chart courtesy of TA Today Mentoring Member)

 

  • Written by LA Little

Category: Trading Articles

Looking to breakout on multiple time frames

Oil patch is starting to heat up for investors

With OPEC now perceived as serious about moving prices higher, it finally looks like a bottom is really in for the oil market. Here's the current neoclassical technical view (from a weekly perspective).

This sector of the market is a fertile area to be focused on. There are many stocks in the various oil related sectors that are set to break higher which is why TA Today mentors and I have been evaluating stocks in the sector for purchases. I'll share a couple of them with you today.

UNT is an oil and gas driller that possesses all the positive neoclassical markings one would like to see. Future price projections are huge and the stock broke out on all time frames last week which is the strongest neoclassical signal you can get.

Breaks out on all time frames

That was contribution from a neoclassical member. Here's another one that I had found, RES which is an oilfield services (oil and gas) and equipment provider. With production likely to ramp higher, they should see more business.

Breaks out on all time frames

Whether one legs into names like the above or picks of their own, one needs to have some longer term exposure to this sector in some form as many of these stocks remain heavily discounted from two years back and have a lot of topside potential still in front of them.

 

This article originally was published on MarketWatch on Oct 4, 2016 12:57 p.m. ET

  • Written by LA Little

Category: Trading Articles

Expect this market to find its footing sooner rather than later

Friday provided resets on the mean-time-to-failure (MTTF) statistics that we track in the neoclassical model, a model that I created and shared with the public here and here.

Read more ...

  • Written by LA Little

Category: Trading Articles

The charts have good things to say about Intel and the dollar

While Intel and the dollar aren’t directly related to each other right now, the two are currently building ABCD structures that suggest a bullish slant for both. 

Read more ...

  • Written by LA Little

Category: Trading Articles

Breaks out

These 3 stocks are set up for big breakouts

Last week we outlined how to identify potentially great trades using Alibaba as an example as it shined bright. This week there are over 75 trades that qualify for the same analysis. Finding potentially great trades using the neoclassical tool, Trading Signals, isn’t the problem – it’s sifting through all the potentials and picking out the best of the best.

This week I offer up a few more stocks that have broken out on multiple time frames as of last Friday. The first is in the biotechnology arena - Amphastar Pharmaceuticals Inc. (AMPH). 

The charts on this one are spectacular not just due to the breakout but due to the potential to carry farther which can be seen on the monthly time frame ... all-time highs now

Breaks out

Another stock is in the oil sector, Baker Hughes Incorporated (BHI). There were about 8 stocks in this sector and one could choose any of them including this one.

Breaks out

On a conservative basis, a 10-12% gains looks doable even if that's all there is. Like Alibaba last week, BHI has a similar setup with breakouts on the daily and weekly charts and the potential for even larger gains if crude oil does work higher.

The final name is in the transportation sector which has struggled for two years but you couldn't tell that by looking at this stock on the daily and weekly time frames - Kansas City Southern (KSU).

Breaks out

Both the daily and weekly time frames are just plain strong

Breaks out

As seen in the charts, the setup is the same – breaks of swing point highs on the daily and weekly charts simultaneously and sometimes the same on the monthly time frame. That is the setup that provides the best opportunity for a continued move higher without an immediate retrace and thus, the reason for calling them potentially great trades. In fact, the statistics show that a successful breakout with this common characteristic will likely carry higher for two to three bars on the greatest time frame witnessing the breakout – the weekly time frame in two of the three cases and the monthly on AMPH.

The problem with this market isn't getting good setups - it's figuring out which ones to take out of the plethora of opportunities.

 

 This article originally printed on Marketwatch Aug 23, 2016 9:04 a.m. ET

  • Written by LA Little

Category: Trading Articles

Mulitiple Swing Point Danger on S&P

Alibaba- Identifying potential great trades before they happen

Although it might not be immediately obvious, finding great trades and investments via the neoclassical technical analysis model is pretty much the opposite of avoiding potentially damaging losses using the same methodology. Let’s consider that for a moment.

If you have read articles I’ve written in the past, you know the one thing that all traders and investors must avoid at all costs is a breakdown on multiple swing points on multiple time frames. Borrowing from an article written many moons ago (August of 2015) here’s a portrait of what that looks like – before it happens.

If we were to look at the short term time frame as well, a similar set up was occurring there. Breaks of multiple swing points on multiple time frames is a necessary, though not sufficient, condition for significant losses and potential bear markets.

That was August of 2015 and now a year later the market is setting new highs on a regular basis and once more the potential doesn’t become the actual. So what about bullish setups that one can take advantage of?

Well, it just so turns out that great bullish trades have the exact same characteristic – multiple breaks of multiple swing points on multiple time frames only up rather than down. And like most technical analysis, the more the better.

Once such great trade began to setup recently, a trade relayed to TA Today members in our unique cradle-to-grave videos prior to the breakout and also as an addition to our members-only trading portfolio. The stock was Alibaba and the charts look like this now.

On the daily time frame, the stock broke out the day prior to earnings but the potential for that breakout across multiple time frames had us entering the position just prior to the breakout on August 8th. On the very next day it broke a swing point high and again the following four days. That possibility of a strong fast move higher is what got us involved.

BABA Daily Breakouts

But it isn’t just a breakout on the short term time frame that creates the setup for an exceptional bullish trade, it’s the breakout on multiple time frames. Here’s the weekly chart.

BABA Weekly Breakouts

As you can see here, the setup to break over not one, or two, but instead three swing point highs in one fatal swoop existed and that is exactly what took place this past week.

These are the highest probability trades that one can find and they work both ways – up and down. It is the recognition of such a trade and the execution of it with a higher percentage of ones funds that allows one to outpace the markets with a lot less risk. In this case, a 15% pop with very little risk in a single week. What’s better, it is unlikely to stop there. Take a look at the monthly chart.

BABA Monthly Breakouts

Finding and executing high probability trades that have the potential to be great is a huge part of successfully trading/investing in the markets. Finding and identifying multiple swing point breakouts before they break out is a key cog in that wheel of success and at TA Today we have to tools to do just that.


This article was originally published on Marketwatch on Aug 16, 2016 12:40 p.m. ET

  • Written by LA Little