If history repeats itself, then we could expect a temporary bounce in the US Market Indices, and perhaps even a market bottom from here.

So far this month, the old saying “Sell in May, and go away” has proven to be a good strategy, with most stock markets down by almost 8% since their highs.

However, there are indications that the recent market rally could hold and there is a strong probability that the markets could form a bottom at this point.

Look at the chart below of the NYSE McClellan Oscillator (see chart):

The McClellan Oscillator is an indicator that measures momentum and compares the overbought and oversold conditions of the market across a broad range of stocks.

Now here’s the little weird trick to know about this indicator.

Whenever the McClellan dips below minus 300 this usually indicates an extreme oversold reading (and vice versa). Stock markets usually bounce at this point. The red circles show five times when this has occurred in the past year.

Here is how the S&Ps have acted each time this has happened:

On Friday the McClellan hit a minus 419 extreme reading, indicating a temporary bounce. Now I say temporary because it is by no means clear yet whether this is a hard bottom in the market.

However, the downside on the stock markets is for the time being limited with plenty of upside potential.

I am expecting the rally on stocks to continue for the time being until the S&Ps hit 1338 (at the 21 period moving average), and then if we see some follow through, eventually to 1350.

It is also worth remembering that despite all the fear and gloom reported in the media, the stock markets have only pulled back to support levels.

For example, take a look at this chart of Apple (AAPL) which some analysts are calling the “new index” – because it leads most markets:

As you will see from the chart, even though AAPL has declined sharply, all it really has done is retrace back to its 21 Moving Average (red line) on its weekly chart, a strong area of support.

I expect this level to hold for the moment on AAPL and any pullbacks are buying opportunities.

As the 800 pound gorilla of social media marketing, Facebook Inc. (FB), gets its launch today on the NASDAQ, we ask what are the biggest risks with investing in this stock.

With a valuation of over $100 billion and an initial price set at $38, the Facebook IPO has been eagerly awaited by fans and speculators everywhere. While many believe they are going to make a killing by buying the stock today, not everybody is convinced.

We also recommend you watch the video version of this article below:

1. “Muppet Bait”

According to the Wall Street Journal, Goldman Sachs and a whole bunch of other Wall Street “BS artists” are now prepared to sell fifty per cent of their holdings in Facebook – before the stock has even launched on the market!

These guys are pretty smart and they know what they are doing. You have to ask yourself why they are selling so much of their holdings now? I certainly wouldn’t want to be on the receiving end of those shares.

My suspicion is that much of the demand for Facebook right now is not institutional but actually retail. That in itself is a red flag – opening the likelihood that the Facebook IPO is in fact “muppet bait”.

**As a side note, Greg Smith, the ex-director of Goldman Sachs who resigned his position this year, claimed that the firm was treating their own clients like “muppets” – knowingly selling worthless assets to their clients.**

2. Not Another Google

Too much is made of the fact that Facebook could do what Google did in the first year of its launch and triple in value. Some even argue that it will do better than Google.

I am very sceptical of these claims. Google, at the time of its launch in 2004, was extremely undervalued. Let’s not forget that 2004 was just a few years after one of the major crashes in history – the dot com Technology crash of 2001.

The memory of that event was still fresh in people’s minds and many were simply not prepared to approach yet another Tech stock.

Contrast that with today and Facebook has a “cult status” surrounding it, to an extent that Google never had at the time of its launch.

As a follower of the Warren Buffett principle that “when others get greedy, you should be fearful”, I am going to approach the frenzy surrounding the Facebook IPO with extreme caution.

3. Fundamental Differences

Here is a question for you: When was the last time you clicked on one of the ads inside Facebook? Personally, I can’t remember if I ever have.

Facebook makes the majority of its revenue from advertising. So does Google. But there is a major difference here.

I go to Google to search for something in particular, and as part of my search I may click on an ad in the process. But I don’t go to Facebook to do that – I go to Facebook to interact and connect with other people.

Facebook may well have an advantage over Google in that it has far more information about you and me (our likes, dislikes, where we live, work and eat), but so far it is not clear how it is going to monetize that by marketing and advertising on its pages alone.

4. IPOs: Technical Risks

IPOs in general tend to be very risky and that is a major reason why I avoid them.

The first few weeks (let alone the first day) of an IPO can be extremely volatile and the stock can behave in unpredictable and erratic was (see the above video for examples).

The major risk is that the stock may tank from the get-go and like LinkedIn, lose a third of its value (if nor more) in its first month.

I have found that the safest option is to be patient, allow the honeymoon period to end and allow the stock to come back down to Earth.

There is no doubt that Facebook, upon its launch, is going to be very volatile. I am not worried if it “skyrockets” to $50. In the case of the Google IPO, you could have bought it at the same price it was launched at almost 2 weeks later.

The lesson is don’t go to the market – let it come to you…

5. The “Everybody Gets Rich” Paradox

When it comes to Facebook and the mania of millions of people hoping to make a killing from buying its stock on Friday – remember these four rules by Jeff deGraaf:

1. It is impossible for everyone to be rich.
2. It is impossible for everyone to get rich following a similar strategy.
3. Comfortable strategies tend to attract everybody.
4. See rule 1 to clarify the problem of rule 3.

Enough said.

What are your own views on the Faceook IPO? Do you see any other risks involved that were not mentioned here? Or do you disagree and believe that this could be a missed opportunity? Let us know and leave your comments below.

There seems to be an overwhelming consensus in the media that Greece could well be leaving the Euro. Even bookmakers are placing high odds on the prospect of a Greek exit.

I personally remain sceptical and I think it is far more likely that Germany will come up with yet another bailout plan to save Greece.

Matthew Lynn of Marketwatch has written a great article on this which I recommend you read on why Germany will not allow Greece to exit the Euro.

However, I do disagree with Lynn on one point.

I do not think Greece leaving the Euro will bring utter catastrophe for the entire Euro-zone as a whole. Let’s not forget that the economy of Greece is probably no bigger than that of the State of Virginia.

In fact, to some extent it is possible that the markets have already “priced in” the possibility that Greece could be leaving the Euro.

Even if Greece did leave the Euro, as tumultuous the result may be for the markets and Europe, we will be able to recoup and somehow move on.

What are your own views on this matter? Let me know by leaving me your comments below – even if you disagree.

Research In Motion (RIMM), the makers of Blackberry smartphones, arguably has not found much love with Wall Street. The Street’s favourite still remains to be Apple (AAPL).

While Apple’s stock price has almost doubled since April 2011, RIMM has been “bleeding like a pig” and is down by 72%. In fact, RIMM is down 90% from its peak in 2008.

But is there finally some signs that there may be light at the end of the tunnel for RIMM? Is it now a good time to load up on this hated tech stock?

Note: This article is discussed in greater detail in the video below. We highly recommend you watch it.

In 2007, RIMM had 44% share of the smartphone market. When Apple came out with the iPhone, it destroyed the sales of RIMM – i.e. the sales of Blackberry – and now its share of the smartphone market is 16%.

When RIMM was dominating the smartphone market its market capitalisation was $60 billion. Now RIMM is valued by the market at $7 billion.

However, as shown in the above video, RIMM still has $1.5 billion in cash, more than 20% of the market value, and has twice assets versus debts.

Now let’s examine RIMM from a technical perspective.

We can see from the weekly chart of RIMM, we are starting to form a double bottom pattern.

A double bottom is a bullish reversal pattern and is formed when a market that has been trending down forms one bottom, but then it fails to make a second bottom that is lower than its first one. This is an initial sign that the downward trend may be weakening, or about to come to an end.

Confirmation of the double bottom will come when RIMM closes above $18, which is the middle part of the “W” or double bottom pattern.

Momentum on the weekly chart is also gradually shifting from negative to positive.

We also have positive divergences on both the weekly and the daily charts of RIMM. A positive divergence is formed when a stock or market is making lower lows (as shown in the above video) but the indicator underneath (usually a momentum-based indicator such as the Relative Strength Index (RSI)) makes higher lows.

Divergences can be early useful signals that a trend in a particular direction is weakening.

In the case of a stock like RIMM that has been in a downward trend for quite a long period of time, this can be an early sign of gathering strength in the stock.

However, the volume behind the buying is still not particularly conclusive as yet.

On the daily charts of RIMM, we can see that it is inside a channel, and the price is currently hugging the top part of this channel – which is acting as resistance (see above video).

It is quite risky, in my view, to buy RIMM right now. If sellers take control they could push RIMM down to the bottom part of this channel – i.e. from its current price at $14 down to perhaps $11.

I would like to see RIMM closing above its resistance trendline (slightly above $14.80) and then for it to re-test the trendline, before I consider buying it. Markets tend to re-test their previous support or resistance levels (in this case known as “kissing the trendline goodbye”) before they continue to new price levels.

Once RIMM has shown some positive signs of strength above $14.80, its next targets are at its most recent previous highs at $18, then $20 which is a psychological round number, and then $24.

Research In Motion has some good upside potential, and it is worth keeping an eye on this stock for the coming weeks.

If you would like to know more about identifying opportunities in the stock market, you can attend our Free Live Trading Webinar this week.

This article is by our guest contributor and trader Goncalo Botelho.

When I usually mention to people I’m a trader, it doesn’t take long until they throw out the word “play” somewhere into the conversation and it hits me every single time. This notion that trading is somehow a casino game brings a lot of misconceptions about the activity itself.

Trading is a business, much like any other and it is crucial that you have a well thought plan, to be able to achieve success.

For those who like to refer to trading as gambling, we can compare trading to the most common decisions people take in our society, and by doing that we can clearly see that trading isn’t the biggest “gamble” they could be taking.

Take for instance, the average working man taking up a mortgage to pay his house, when the future of his job/company is unknown and workers within the company are being laid off. Or take the example of the graduate university student who took a loan of about 30k or more for his education, only to find himself having a job behind the counter of an average retail shop earning the minimum wage.

In that view, we can generalise and say that every decision you make in life is a “gamble” in the same way you are considering trading to be. Even the eggs you buy at the store pose a risk to your health if they are infected with salmonella, yet you always ignore that risk and end up buying the eggs in what could become the largest gamble of your life.

Trading is more a matter of risk management rather than gambling.

If you’re looking to be successful at trading then you need to take trading seriously, like a business. And this will require your effort to invest in what matters.

Invest in:

1. Education: The web has lots of resources regarding trading from the very basics to the advanced levels of mastery. Attend webinars and look for good minded experienced traders who are willing to mentor you on your way up. There is nothing better than anyone who has been in your shoes to provide you with some guidance and prevent you from making classic mistakes.
2. Observation: An active observer does not necessarily have less experience than the ones acting. You can learn a lot just by actively focusing and observing the markets.
3. Practice: There is something known as the “10,000 hour rule”, which is essentially a theory which claims that success can be achievable through repeating the same activity over a period of 10,000 hours. This can be obviously relative depending on your background and education. But the point of this rule is that you can achieve success by forcing yourself to focus and gather the experience you’ll need in order to thrive in whatever you’re doing.  You can’t win until you lose.
4. Developing a System: Once you feel comfortable with what you’ve learned, develop a system that will work out for you in order to meet your demands. There is no point for a busy doctor to have a short-term scalping system. Develop a system that matches you and your lifestyle. By that time you’ll gain a greater appreciation for trading and hopefully, you’ll know what you’re doing.
5. Planning: Always plan ahead before setting a trade. Know what your limits are and what to expect. Remember to manage your funds accordingly to match the risk of that particular trade and look to the big picture because after all, you’re a trader, so don’t get too attached to a single view. Markets change all the time, and so will your opinions to match the markets. The more scenarios you’re aware of, the better prepared you will be to trade them.

You can connect with Goncalo Botelho on Facebook.

Gold and Silver look like they could be a short sellers wet dream right now. Gold is struggling to get past resistance at the daily 21 Moving Average and the downward trend-line.

It is also worth noting the action on the US Dollar index which is looking increasingly bullish right now. If the Dollar manages to break higher out of its bullish flag, we could see fresh downward pressure on gold and silver. This is because traditionally gold is seen as a hedge against a falling dollar, so a rising dollar does not support gold.

The Retail Traders Open Position ratios, a key sentiment reading of what retail traders are thinking, reveals an extreme bullishness for the metals, a tell-tale contrarian warning signal.

For Silver, the path of least resistance still remains bearish (see above video). A short position can be established at the break of $31 mark, with targets at $30 and $28.50.

For positioning a short on gold (and if you are afraid of standing in front of a freight train in case gold runs up higher) you can wait for a break of the low of today’s bar at 1653. A stop can be placed at two times the average true range or at 1692.

In terms of targets for gold, I am looking for a test of 1600 and then a move to 1577 which is the S2 Monthly pivot. As shown on the above video, a 78.6% fibonacci retracement of December-February swing places support at 1586 which is a nice cluster around the S2 Monthly pivot.

Am I selling an ounce of my gold bullion because of this? Not at all. Long term, I am still bullish on gold. But in the short term, gold investors can look forward to buying the yellow metal hopefully at cheaper prices.

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Become part of our trading community if any of the following applies to you:

• You are a new trader and want to learn trading strategies to trade different markets;
• You are an experienced trader but want to take your trading to the next level;
• You want to know which trading opportunities are opening up in the markets during the week;
• You want to have a better understanding of the markets other than what is available in books and online sites;
• You are just curious and want to know more about how to get started…

Greg Smith, the former Goldman Sachs executive director, has said that he has fallen out of love with the Goldman Sachs’ culture – which has “disappeared” – and that Goldmans no longer put their clients’ interests first.

Greg – come on, give me a break! Tell me something we don’t already know!

Speaking as the trader who claimed “Goldman Sachs Rules The World”, I find myself strangely disappointed in Greg Smith.

Goldman Sachs – The Vampire Squid

Anybody who has any remote knowledge of Goldman Sachs knows that the people who work there are a bunch of crooks. Max Keiser could not have said it best when he said that Goldmans’ traders should be charged with financial terrorism charges.

The facts about Goldman Sachs being behind every major crash in history and how they literally conned people out of their money has already been documented by Matt Taibbi in his excellent article “The Great American Bubble Machine”.

In his article, Taibbi refers to Goldman Sachs as the “great vampire squid wrapped around the face of humanity” and how they have been manipulating the markets from the Great Depression of the 1930s, to the Technology Crash of 2000 and ultimately the housing crash of the last decade.

To add more fuel to the fire, in 2010 Goldman Sachs got a lot of heat when they were accused of trading against their own clients.

It is obvious that the recent media attention to Greg Smith’s remarks is that it comes from someone from a high level in Goldman Sachs. Otherwise, his remarks about their “money making culture” cannot possibly be new.

Why I am Disappointed in Greg Smith

Personally I am slightly disappointed in Smith. Not for his candour and being outspoken on his opinion. But rather for the fact that such remarks, no matter how truthful – are directed at his former employers.

I may be considered old fashioned for saying this, but I still believe in loyalty and faithfulness to one’s employers – no matter what kind of ugly human beings they may be. I have carried this sense of loyalty, perhaps through teachings of my own father.

In today’s blame-game and compensation culture, the virtue of loyalty and discretion towards our employers or former employers is often forgotten. Instead, people would rather prefer we trash our employers for the sake of selling a good story – even if those stories are true.

I know I am in a minority here.

But just consider the actions that Scott McClellan, the former Press Secretary to George W. Bush, took when he published his book “What Happened” – detailing the dirt on what happened during his term in office at the White House. The level of disgust by people and politicians alike against McClellan’s actions were, in my view, justified.

Everybody already knew how shady Goldman Sachs is. Greg Smith is not really adding anything here, is he? Perhaps I am missing something.

Conclusion

OK, so what lesson is anyone going to learn from Greg Smith’s “revelation here”? Don’t invest with Goldman Sachs because they don’t “care” about you?

Very unlikely.

If anything positive is going to come out of this story, it is that you should seriously wake up and re-think your assumption that somehow institutional traders and brokers are on your side.

If you want to know the full facts about the sneaky tricks brokers and City traders use on you to separate you from your cash and how to be better prepared, feel free to join me in a free webinar on Thursday 22nd March. Click Here for details.

Also feel free to let me know your own views by leaving me your comment below, even if you disagree with me.

Silver faces a wall of resistance at the $35.50, a confluence of key levels:

• Daily Downward trend-line resistance at the $35.60 level (see above video)
• Daily 200 Moving average
• Weekly 50 Moving Average
• Symmetrical projection of the September-October swing

The only thing helping Silver is the daily squeeze that is preparing to fire (see video) which could push silver past these key levels.  However, if this fails, we could see a pullback to the mean averages.

Also noteworthy is the action of Dollar Index.  The Dollar Index traditionally has moved in opposite direction to the precious metals, although not always.

A look at the Dollar Index shows that there may be some volatile moves ahead.  If the dollar declines (and heads towards its supporting trendline) then we could see some upward pressure on both Silver and Gold.

As a buyer of silver I would be cautious right now until the wall of resistance is breached.

It’s amazing to me how many traders I meet who have completely the wrong idea of what it means to trade successfully.

Let me make it clear. Trading success and profitabiliy have absolutely NOTHING to do with the following:

1. Owning or using the next “holy grail” fancy technical indicator;
2. Tweaking the settings of your fancy indicator;
3. Trying to predict the tops and bottoms of the market;
4. Grabbing as many points as you can from the market every single trading day;
5. Following the next best trading “strategy”.

None of the above points are going to make you successful. Sure, you may make the occasional money every now and then, but you’ll be lucky if you’ve made any profit after a year.

See also the video below for a visual presentation of this article

Using or Abusing Technical Indicators

I know a lot of traders who are fond of trashing the use of technical indicators. I am not one of them.

I do make use of technical indicators in my day-to-day trading and I find them very helpful in simplifying and identifying key information about the markets that would have otherwise have taken a very long time.

In the above video I show a real example of how I apply indicators and multi timeframe analysis to carry out my own trades, whether its spreadbetting or trading contracts.

It’s not the indicators that are the problem, but about how and when to use them.

Some traders seem to obsess too much about getting their indicator settings right – like whether they should use an 18 or 20 period moving average, or use a 14 or 12 period Stochastics.

You know what, it probably will not make a damn bit of difference! If this sounds like you, then the first step is stop focusing on tweeking indicators and learn how to trade instead.

Consistency

To achieve any degree of success in trading you need to first achieve consistency. Consistency involves in being able to carry out and execute your trading plan without hesitation time and time again.

Consistency is also a state of mind: to be able to execute your trading plan you need to have confidence in what you are doing.

If you lack confidence or you find yourself hesitating, then it is probable that you have not tested your trading plan sufficiently or that you do not have a solid or proven plan of action yet.

Conclusion

While Technical indicators, newsletters and tip-services have their uses and can be very beneficial – they do not replace sound trading skills and principles. These principles focus on: timing your entry and exit, risk control, trade management, money management and most importantly of all, your trading psychology.

If you focus on yourself and building your own trading skills, instead of messing around with the next best indicator or “strategy” you will achieve not only trading consistency but more profit in your P/L account.

Did you find this article and video useful or helpful? Do you have any related trading stories of your own you wish to share? Feel free to leave me a comment below.