Is the year really half over?

2009 is flying by. I have received a few emails asking if the Trader-X blog is dead. I hope not, but there are many things going on in my life and while I would love to have Tom C. post more often, it is not a priority for him. I can't say I blame him, as he doesn't get paid much ($0), and it can be a thankless job.

In my defense, I did send him a nice birthday e-card!

I will try to bring everyone up to speed on what I have been doing, Tom C., and the future of Trader-X. My goal is to get a post up by week's end. In the meantime, I have faith that Tom C. will post a few charts before then!

But, I have been wrong before.

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Tom C. - present and accounted for...

Posted by Tom C.

No, I did not attend Michael Jackson's funeral. But I did enjoy a great vacation. I am back and will continue making a few posts a week. I have to leave early today, so most likely you will not see anything from me until late tonight or tomorrow. I know there are probably comments I need to address too, and I will try to get to them over the next few days.

One of my goals that has been on my list for several months was to write my "Five Rules for Life". Readers of this site have most likely visited that site, and many have contributed their rules. I found it a useful exercise, and it led me to do some reflection and "soul-searching". You can read mine here, and do a search on the five rules site to read Trader-X's.

Five Rules For Life

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Trader-X update

Tom C. is M.I.A. after his vacation week. Actually, rumor has it he is in LA for Michael Jackson's funeral.

A lot has happened over the past week - several celebrity deaths, Sarah Palin quits her job, fireworks. Madness.

I hope to return next week. Maybe Tom C. will post a chart or two this week. In the meantime, I ran across this article and thought I would share it:

HALL OF SHAME: 12 OF THE WORST FINANCIAL GURUS

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RunPee for the iPhone

No charts this week, but where can you find REALLY useful stuff like this besides the Trader-X blog?

RunPee solves the age-old problem of having a small bladder, drinking too much Coke, and sitting in a movie theater watching a really good movie. You need to know when there is a boring scene so you can go...pee.

Creator Dan Florio:

"Our iPhone app gives movie goers “immunity” from the effects of mega-sized sodas and flushes away those grueling post-movie restroom lines where you have to wait your turn in pain and avoid awkward eye contact with the 30 other people in the restroom with you….a bladder is a terrible thing to hold."

Here is Mashable's coverage and a link to the iTunes store.



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Happy 4th of July America

Tom C. should be back next week, and I will return sometime in July.

In the meantime, I ran across this video...hot women teaching technical analysis. This has to signal some kind of bottom. Or top. Or something.



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WR - 062509

Posted by Tom C.

I am fortunate that the first six months have been very profitable, so it allows me to take some time off. I took yesterday off, and because next week is a short trading week (due to the July 4th holiday), I will be taking a few extra days off.

Here is a trade that is a little different for the weekend. Trader-X often talks of my "u-turn" setup. One thing I look for is a gap above the previous day's high and a move back down to that high where price establishes support. It doesn't always happen, but when it does it is a great setup. As you can see from Chart 1, the 4th bar is a "hammer-type" candle and the 7th bar is a strong candle that rallies off the 8EMA (and both bars find support from the previous day's high - the black horizontal line).

I entered on a break of the 7th bar high and held the stock until late in the day. It rallied nicely, and made a run at the morning high but stalled out at the halfway point between the 50% level and that high (Fibonacci lines plotted from the morning high to low). I sold at $9.08 as price rolled over from the second attempt to break away from the halfway point (top yellow arrow, 2nd chart).





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Trader-X update

Many thanks to Tom C. for great posts, comments, and overall content! I plan to return sometimes in July, and I hope Tom C. sticks around as a regular contributor.

I wanted to drop in and point everyone to "Five Rules For Life" - Jon made a new compilation post and I think you will enjoy reading it and all of the other submissions on the site (scroll down to read the compilation post).

It is a great source for motivation and reflection, and many traders have contributed!

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A few short trades

Posted by Tom C.

I rarely go into the trading day with a bias - and I don't recommend it - but I admit I was looking for shorts from the open and was more aggressive on the short side today. So both of these setups were riskier than my usual trades.

I took BA after it formed multiple narrow-range bars, culminating with a NR5 and an inside bar. I entered on a break of the 5th bar low, and closed the position at the halfway point between the low and the FE (Fibonacci lines plotted in the traditional X style - the previous day's high to the ORL).



RMBS gapped down and printed two weak bars. It made a textbook pullback before resuming the downtrend. I entered on a break of the 6th bar low (the 6th bar was weak and left a long upper tail). I was holding for the halfway point between the low and the FE...price never reached that level and I closed the position at the end of the day.



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How do you determine the OR high?

Posted by Tom C.

We discussed this in "Comments" of the previous post, but I thought it deserved a post of its own. And even though we are talking about the opening range high (ORH), it also applies to the ORL.

There are two ways you can determine the ORH:

1.) A fixed timeframe - ie, the ORH is the high of the first 30-minutes regardless of any other factors.
2.) The first pivot high, regardless of the time.

The way I determine the ORH 99% of the time is the first pivot. But I don't use pivot the way most define a pivot; to me, a pivot can also be a pause as was the case on Friday's KMX chart. It made sense to me to draw the ORH at that level because there was a wide-range first bar, and then a pause with the second bar (a narrow-range, inside bar with no new high made).

The bottom line is you have to find the ORH that makes the most sense for the chart*.

A few more points to consider:

1.) In 10 and 15-minute charts - a majority of the time - the ORH works out to the first 30-minutes, as that is when a morning reversal tends to happen (not always, but usually). That is why you will hear some of us say "the high of the first 30-minutes" even though we are looking at a pivot for the ORH.
2.) When you are using faster timeframes, a reversal will (usually) occur faster - thus the ORH may happen in the first 15-20 minutes.

So unless you are using a set timeframe (ie, 30 minutes), your reversal is likely to vary.

As always, this is how I trade; my way is not necessarily the right way for everyone.

*Another thing I do sometimes is to draw horizontal lines across more than one possible ORH and watch them to see if they trigger a valid setup. In my experience, it pays to be flexible (within the parameters of your overall rules/strategy, of course).

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KMX - 061909

Posted by Tom C.

It has been a light week posting as I took yesterday off.

People often ask what setups I trade on a 5-minute chart. The answer is simple - the same ones I trade on a 10-minute chart.

Here is KMX from today. The setup is the same as I referenced a few weeks ago (my "bread and butter" setup).

1.) Gap up.
2.) Price breaks the opening range high (ORH).
3.) Price pulls back to the ORH with support from a rising moving average.
4.) Price rallies to the Fibonacci extension (FE).

KMX was not perfect, as I prefer setups that do not penetrate the ORH or the 8EMA. But it was compelling because it formed "offsetting bars" and closed below those levels but immediately reversed to close back above them. Note that I used the 1st bar high as the ORH because the 2nd bar was a narrow-range, inside bar that signaled a pause after the initial wide-range 1st bar. It would not have made sense to use the third or any other bar as the ORH. I sold at the FE.



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RIG - 061609

Posted by Tom C.

Following my prescient post on the general markets Monday, the markets sold off.

: )

You could throw a rock and find good shorts yesterday and today. One of my better trades was RIG. It gapped up and fell to the 50% retracement from the previous day's low to the OR high. It bounced and then rolled over and fell back below that level. Price formed a "hanging man" type candle, and I shorted on a break of that bar's low. I covered the short at the previous day's low.



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The Markets

Posted by Tom C.

I don't use the following data to make any trading decisions, I just like to look at where the markets are since we are approaching the halfway point in 2009.

I am framing the price action in terms of last year's high/low (as I do with my swing trades*). Here is a quick summary (note I am using QQQQ, SPY, and DIA as proxies for their respective indices):

QQQQ - approaching the 50% retracement of 2008's high to low. If I were a guessing man, I would say that level is going to be formidable resistance. It could set the tone for the rest of the year - ie, if price reverses we could retest the lows...which at this point seems a long way down as we have rallied substantially since March. If it breaks through the 50% retracement and finds support (resistance becomes support), it could set us up for a nice rally into 2010.

Of course, this is all just speculation. Again, I don't trade the broader markets.

SPY - it has not come as far as QQQQ; it recently crossed the halfway point between 2008's low and the 50% retracement of 2008's high to low.

DIA - the laggard; it is just approaching the halfway point between 2008's low and the 50% retracement of 2008's high to low.

The only thing this really tells us is that the markets are all close to solid resistance. Depending on whether you are a "glass half full" or "glass half empty" kind of person, it is a great opportunity or the return of our decline into Armageddon!







*credit to TRADEthemove.com

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MT - 061109

Posted by Tom C.

Here is another example of the type of setup I wrote about last week. It was not perfect, as I prefer price does not break the ORH when it pulls back to re-test. But it formed a compelling bullish pattern with "offsetting bars" at support from a rising 8EMA.

I entered on a break of the 11th bar high and closed the position at the FE.



I know there are comments I have missed over the past week - if I have not addressed a question you asked, feel free to do so again in "Comments" of this post. But please read "WELCOME AND LINKS TO KEY POSTS" before doing so (this link is at the top of every page).

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More from Cuban

Last month I pointed you to some posts on Success and Motivation by Mark Cuban. He made another great post which I am reprinting below; this is not necessarily trading related - it can be, but you can apply it to any aspect of life.

From Mark Cuban at Blog Maverick:

Success & Motivation – 2009
Jun 9th 2009 3:44PM

This is the year of WTF. Yep, What the F&&&.

It doesn’t matter what got you to the point of saying it. Maybe you got fired/layed off. Maybe your company went out of business. Maybe you quit because you couldn’t take it any longer. Maybe you are just graduating from school and the prospects of living at home are far worse than cramming in with 12 roommates in a beater house or apartment you call “The Hotel”. Whatever the reason, the question is how do you turn this time into the start of something good ?

I’m here to give you your WTF To Do List.

1. Recognize that its ok to live like a student.

It doesn’t matter where you live. It doesn’t matter how you live. It doesn’t matter what kind of car you drive. It doesn’t matter what kind of clothes you wear. It doesn’t matter. Your biggest enemies are your bills. The more you owe, the more you stress. The more you stress over bills, the more difficult it is to focus on your goals. More importantly, if you set your monthly income requirements too high, you eliminate a significant number of opportunities. The cheaper you can live, the greater your options. Remember that.

2. Take Lots of Chances

If you are living cheap, and ready to find out where your future lies, now is the time to try anything. WTF time means fighting through your fears to take a job in a new industry. It means trying different things to find out what it is you love to do. There will be no such thing as too many jobs. In this type of economy getting a job is tough if not often impossible. So you are going to have bust ass to create opportunities for yourself.

Creating opportunities means looking where others are not. Look outside where all your friends are looking. Make a list of jobs and businesses that are outside the norm. I know you want to follow your passions and get a job in sports, movies, tv, shooting video for Girls Gone Wild, and other things your friends would love. Why fight the crowds ? Go where people are not. Just like you never thought you would ever fall in love with someone else, you will find another industry or job that you will love as much as your first love. Move down your list to other things. Then get ready to work

In this kind of economy, it really is a numbers game. You are going to have to keep on applying for everything and anything that opens a door you want to walk through. You can never slow down. Its hard work finding a job. If you have bills you have to pay, and it means taking a night job in order to keep looking for the day job or to keep a job you want, do it. Be a waiter, a night janitor, wash clothes, sell vacuum cleaners door to door, whatever you need to do, all the while reminding yourself that it opens the door for your future.

Then when you do find a job, remind yourself again that you are winging it. Everyone always sees the bright side of the job they just took. You have to. The new job you just took that you thought would be amazing, will be amazing. Most probably it will be amazing for about 3 months. Then you will realize its not so amazing and you will need to find something else that is amazing. Thats ok. You don’t have to be right everytime. You just have to be right one time. Finding the right job is a lot like dating. Its hard until you start, then when you start, its great till its not. Then its frustrating as hell until you get it right. But when you do, it all comes together.

3. Figuring out if you are in the right job

Its really easy to know if you are in the right job. If it matters how much you get paid, you are not in a job you really really love. I’m not saying that you shouldn’t want to make more money. I’m not saying that you shouldn’t bust your ass to make as much money as possible. Thats not the issue. The issue is whether or not you truly love your job. If you love what you do so much that you are willing to continue to live like a student in order to be able to stay in the job, you have found your calling.

4. Figure out how to be the best

Once you have found out what you love to do, there is only one goal. How can you be the best in the world at it. It doesn’t matter if you are a filing clerk, an athlete, an accountant or a bartender. All that matters is that you do whatever you can to be the best. Of course “the best” is all relative. The one person who you should never believe when it comes to evaluating your abilities is you. The very worst judge of your abilities is you. Self Evaluation is never successful. When you are the best at something, the demand for your services will grow. People want to hire the best. They want to be associated with the best. In 2009, in this economy so many people switch jobs and industries and its so much easier to stay connected via social networks and other digital means, people who need you can and will find you. So rather than trying to convince people you are the best, let the quality of your work do your talking.

5. Start the day motivated with a positive attitude.

You are going to screw up. We all do. I cant tell you how many times I did and do. It happens too often. No matter what happens, every morning, the minute after you wipe away the crust from your eyes, remind yourself that you are going to enjoy every minute of the day. You are going to enjoy the 20 interviews you have. You are going to enjoy waiting in the heat for your roommate to pick you up afterwards. You are going to enjoy realizing how frayed your collar is becoming and how sick you are of your one tie. You are going to enjoy all the bullshit you have to deal with as you chase your goals and dreams because you want to remember them all. Each and every experience will serve as motivation and provide great memories when you finally make it all happen.

Its your choice. What are you going to do ?


Visit Blog Maverick

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RS - 060909

Posted by Tom C.

I jumped the gun a little on RS. I usually wait for a break of the ORH, but the hammer that formed the signal bar was too compelling. Since the entry was premature, the trade carried more risk than usual - but it worked out perfectly.

RS gapped up and made one attempt to break the OR high and failed (7th bar). It pulled back and formed a textbook hammer at support from a rising 8EMA. I entered on a break of that bar's high, and closed the position at the FE.



MOS was another good trade today.

On another note, I was reading StockBee's blog and he had a great post; it is a story I have heard before, but it is worth reading again. Check it out here.

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