Stock Trading Predictions & Technical Analysis

MGM - Will It Pop or Drop After Earnings Report?

2011-02-13T22:56:00.003-05:00

MGM - WAIT

MGM will be reporting its earnings report before the bell this upcoming Monday, and the question is: how will the street react? Will MGM pop or drop? If we analyze the charts alone, MGM's trend and chance of popping up tomorrow are relatively good. Despite the recent pullback over the last month, MGM has remained strong above its 50 day MA for the past 5 months. MGM has jumped back above its slowly trending down 20 day MA which is about to coincide with its up trending 50 day MA. Based on the last 5 months, I expect MGM bounce upwards tomorrow after the earnings report as I expect the strength of the 50 day MA to prevail over the 20 day MA. We never know for sure what to expect from earnings report but these reports are critical point in every stock's trend. If MGM strongly beats expectations, we could finally see it trade north of $17.00 which would trigger a STRONG BUY SIGNAL, at which time MGM would coincidentally finally break out of its weekly ascending triangle pattern for which I wrote about on January 9th, for which I set an eventual price target of approximately $31.00. MGM could however also disappoint while having a positive outlook on the future for which we could see modest gains from MGM. If MGM fails to meet expectations, MGM would have the potential to break its 50 day MA and go as low as $13.00 to $12.30.

MGM - Trending Down or Healthy Pullack?

2011-01-22T00:09:00.004-05:00

MGM - SELL

Unfortunately for MGM, despite hitting a new 52 week high, the move was not strong enough to have a clear breakout over the resistance level. Some stocks will some time manage to move a little higher but the volume is not there to support the move and as a result it retreats. For bow MGM is still in an up trend but one that has slowed down since it has now broken its 20 day MA. Keep in mind that MGM has moved up nearly +90% in just 4 and a half month from around $9.00 to nearly $17.00, so a pullback is not necessarily a bad thing. MGM being a high beta stock can have sharp declines despite still trending up like now. MGM's next major support level is at $14.00 at the 50 day MA for which MGM has been trending over since the beginning of this up trend in September. For now MGM is a SELL until we hopefully see a bounce back at the next support level which would be around $14.00. For now I believe that the market is experiencing a short term healthy pullback. I think MGM will fly high only once we get a clear break out over $17.00 in one day with heavy volume with a major price move. MGM seems now to have too much resistance around the 52 week high to just manage to move slowly above it. If MGM does break its 50 day MA, it will have broken its up trend and could go as low as $12.00-$12.30 around the 200 day MA. The long term trend now seems to continue to indicate that MGM is in a long term sideways trend until it clearly breaks heavily above $17.00. MGM has been trending in a long term side ways trend since May 2009 between around $9.00 and $17.00, with the range tightening in the last year between more towards $12.00 and $17.00. Despite this trend, MGM being a high beta stock with a lot of volatility had a lot of opportunities arising to make heavy gains. My stop loss order of MGM got obviously triggered a couple days ago and I still manage to exit my position with a nearly +20% gain. For now I am waiting to see a bounce back hopefully at $14.00 with a short term target around $17.00 which could hopefully turn into something more if it breaks this heavy resistance level. Keep in mind that MGM has strong support at $13.75-14.00 and a bounce back around this level would be an interesting and potentially good new entry point. MGM does also have minor support at $14.50 and $15.00 which I don't think will hold. Keep in mind that when MGM does give us a sign of a bottom it will most likely touch or fall below one of its major support levels before it bounces back up on the same day; this is a sign to look for. However, it is usually best to wait until the next day to see if MGM does in fact close higher before entering into a new position. For now I still like MGM a lot as a trading stock rather than a long term investment. It is much more profitable to enter and exit those short term trends, that is until it breaks heavily above $17.00. My previous MGM analysis and prediction stands, it only seems that we will have to be more patient before the break out occurs. MGM is still a stock that trades heavily based on technical and therefore makes it easier to catch trends. But we have to accept that we will not always be right. But I don't mind being wrong while still cashing in gains. That is why setting stop losses is extremely important, because you never know when the stock will start pulling back, and you want to be able to cash in at least part of what you've earned. In my case, for now, I will not sacrifice more than -8%. Even if I might get whipsawed at times, I believe that in the long term this strategy is beneficial. Ideally you want to have your stop losses to be set below major resistance level by if possibly up to -3% to -5% while not losing more than -8%; however this is easier said than done.

The Trader's Evolution - 11 - The Unfeasible Dream

2011-01-14T22:53:00.001-05:00

11 – The Unfeasible Dream

When you start trading, probably dreaming of becoming an overnight millionaire you are often led to hunt for very speculative penny stocks you hope to one day see jump +1000% or more in one day. When you start out trading, be assured that you will be probably doing your first mistake on your first trade. Keep in mind that most traders don’t start making money after starting their 3^rd year. A lot of people will do the mistake of not looking for the right brokerage firm and pay very expensive commissions unnecessarily. Most new traders will start with very little capital as they can either not afford to invest more or are simply scared of losing too much money. Let’s set the record straight, you are most likely going to lose whatever money you decide to initially invest.

The Trader's Evolution - 10 - Accept the Fact that you were Wrong

2011-01-14T22:51:00.002-05:00

10 – Accept the Fact that you were Wrong

One of the hardest things to do during the first 2 years is to accept that you will be wrong sometimes, and you’ll be wrong more often than you’ll be right. Most successful traders have more losing trades than winning trades. However, winning trades usually come with heavy gains and losing trades with minor losses and thus as a result traders make profits. Some people tell themselves that as long as they don’t sell their stock they haven’t lost anything. If they do have the chance of seeing their stock actually bounce back up, they will usually sell at a point where they will be at par with their losses. Many times the stock will actually continue its increase and you will then start having regrets and tell yourself that you should have kept the stock as you could have end up with a profit. But more often than none you may just find yourself holding on to a losing stock that may never recuperate from its losses.

“Do not try to correct your mistakes. Accept the fact that you did a mistake, that you were wrong, and then move on.”

It is too late now to correct your mistakes; there will be other opportunities in the future that may lead you to better and bigger things. One strong advice is for you to stop feeling bad about your past mistakes and remove the words “should” and “could” from your vocabulary. People who buy stocks and hold on to them as they lose more and more money are doing what we call “Buy and Hope.” You may have heard of the famous investors’ phrase of “Buy and Hold”; but keep in mind that you should only “Buy and Hold” when your stocks are moving up. Think about it, if you buy a stock and it starts moving up and doing exactly what you want, why shouldn’t you “Buy and Hold”? There is no logic in “Buy and Hope” as you’re stock is doing exactly what you don’t want by making you lose money, and that is why you should cut it off the moment you incur a loss of ideally no more than -8.00%.

The Trader's Evolution - 9 - Discipline Eliminates Stress

2011-01-14T00:35:00.001-05:00

9 – Discipline Eliminates Stress

If you want to have success in the stock market you have to learn to invest while not being scared to trade, as well as not being afraid to invest rather than over trade. You have to find a balance between being an investor and a trader. An investor can be considered someone that does very few trades a year and may even hold on to a stock for many years before deciding to sell. A trader can be considered someone that does many trades a year and never hold on to any stock. So should you be a trader or an investor? The best would be to be both or what we call a swing-trader. If you trade too much you’re not giving your stock enough chances to move up, while if you invest and hold on too long to a stock you’re giving it all the chances to go down. A swing-trader is a trader who will follow trends. As long as its stock is moving up, you hold on to the stock. The moment the trend shifts down, you sell the stock and hopefully cash in a profit. The purpose is not to make many small profitable trades but rather to try to do a few a big profitable trades. Most successful traders have more losing trades then winning trades. The key is to cut your losses while holding on to your stocks as long as they move up without risking too much of what you’ve already earned. Basically you have to learn to be disciplined, and not let your emotions take control of your actions. Building discipline takes time and is the hardest thing to do for new traders, and this is why it usually takes about 3 years before a trader can start making profits, because we lack discipline. Unfortunately greed takes over our discipline and it’s only by consistently losing money initially that we learn to become discipline and not let our emotions of fear and greed take control. Fear and greed creates stress. Even when things are going your way, by having no set plan, you will always fear of losing what gains you have and become greedy in the hopes of making more. When you are making losses, you end up holding on to that stock which ends up making you lose even more money. You will have a hard time sleeping if you know that you can wake up at any moment and find yourself down heavily. Creating a disciplined strategy is what will allow you to remove your stress.

“The source of stress is everything that is uncertain and unknown to us; outcomes in which we can’t predict.”

That is why after experiencing those emotions and this stress, I decided to create a trading system in which I would be able to know and prepare myself for any possible foreseeable events.

“Trading is not about predicting the future; it’s about being prepared and foreseeing every possible future scenario by knowing how to react in the occurrence of any event.”

To trade successfully you must not find yourself in a situation where you will have to think in the moment to make a decision.

“The moment you have to start thinking is when you will start having problems and as a result cause you to have stress. Everything must be calculated and decisions have to be pre-determined, always.”

The beauty of stock trading is that you can place orders that will be triggered in any event you might foresee. You’re decisions on when to sell or buy more stocks have to be decided before you even open your position. When you start making heavy gains you must not be foolish enough to lose all you have gained. Trading in stocks comes initially with risk but if you know how to manage your trades they can become almost risk-free investments. You must not be greedy because if you hold on to a loss, you are driving yourself to a quick and fatal end.

The Trader's Evolution - 8 - Paying Low Commissions is the Key to Success

2011-01-12T22:06:00.000-05:00

8 - Paying Low Commissions is the Key to Success

Your number one need is to find a brokerage firm with the lowest possible commissions that can offer you the best service. Paying low commissions is the key to success; lowering your costs, increases your profit. During my first year of trading when I was paying $28.95 commissions per trade I had calculated at the end of that year that 70% of my losses came from commissions. This shows how critical it is to pay low commissions. Ideally your commissions per trade should be lower than 1.00% of your investment. Commissions between $5.00 and $10.00 should be considered fair. However, be careful that some brokerage firms may charge ECN (Exchange Commission Network) fees or SEC (Securities Exchange Fees). ECN fees may get charged on both Canadian & US markets. Basically this is a fee charged when you remove liquidity from the market. Market orders will often trigger ECN fees because you are going against the market’s purpose of functioning like an auction. When you place a market order whether to buy or sell, you simply accept to pay or sell at the best price available. Placing limit orders are best to avoid ECN fees. However, if you place a Limit order within the bid/ask spread or if your order is filled within a few minutes, you will most likely be charged ECN fees. ECN fees are usually around a quarter of a penny per share. This may seem meaningless to even bother to mention ECN fees when you hold only 100 shares of a $50 stock. However if you hold 10000 shares of $0.50 penny stock you can end up paying very hefty commissions. Assuming you pay $5.00 commissions per trade and ECN fees are $0.003 per share, you would get charged 10000x$0.003= $30.00 ECN fee+ $5.00 commission. You would end up paying much higher commissions than you would with a bank since bank usually only charge a high commission without ECN fees. ECN fees will usually be charged if orders are executed within the first few minutes of market opening (9:30 am – 9:35 am). ECN fees will always be charged on AON (All or None Orders), on illiquid stocks (penny stocks), and orders filled during extended hours (pre-market and after-hours). To avoid any ECN fees, your brokerage firm may allow you to place MGND (Managed) orders handled by a market maker rather than a direct access order. Please note than MGND orders are the only type of orders than can be placed with banks as your trade order may not always go directly into the market if the bank has shares in its inventory and it considers it more profitable for them to sell you their shares. Managed orders are slower to get filled and this may cause you to not always get the best price available that you would get with a direct access order that goes directly into the market. ECN fees are not that meaningful unless you trade thousands of shares. SEC fees can be charged on US exchanges only when you sell or short a stock. The SEC fee is charged based on the value of the trade rather than the amount of shares. For example, if SEC fees are $0.0000169 and you sell 100 shares of a US stock at $30.00 you will incur a $0.0507 fee (100x$30.00= $3000.00x$0.0000169). When selecting a brokerage firm you must be careful that they won’t charge you any type of fees, such as quarter fees for not maintaining a certain balance in your account. The next thing you’ll need to know how to figure out is how to transfer funds between your brokerage account and your bank account. If you are trading with the bank, your funds will usually be directly accessible at any time. If you trade with an independent brokerage account you will be able to do EFT (electronic fund transfers) which can take up to 5 business days to clear and arrive in your account. If you are Canadian, you can do EFTs in and out of your bank account easily in Canadian funds. However, if you are trading US stocks and want to send US funds from your US bank account (Canadian based) to your brokerage account you will have to set-up PAD (Pre-authorized deposit) agreement which will grant permission to your brokerage firm to transfer US funds to your brokerage account when you instruct them to do so. Some brokerage firm will set a limit on the minimum amount of funds you can transfer. Also it can take up to 10 business days for the funds to clear. Keep in mind that you can still do EFT from your brokerage account to your US account (Canadian Based). Up until recently banks use to force Canadian traders investing in US stocks to always exchange back their funds into Canadian dollars after they sold their stock. This made it practically impossible to make profits with US stocks because not only would you be paying commissions in the exchange rate, the Canadian dollar has historically been positively correlated with the US market. What this means is that when your US stocks are going up and you sell them at a profit, the Canadian dollar has more often than none gone up. This made it very hard to make a net gain in Canadian dollars after being always forced to exchange your funds the moment you sell your US stock. Thankfully, times have changed and now most brokerage firms (including banks) allow you to keep the US funds and exchange it when you want and when it is most profitable for you rather than for the bank.

The Trader's Evolution - 7 – Opening your Brokerage Account

2011-01-11T22:45:00.001-05:00

7 – Opening your Brokerage Account

Before you start trading you need to first open a brokerage account. When you trade stocks you can open a cash or margin account. When you start trading opening a cash account is the best option as it will force you to manage your trades with the amount of money you actually have. Basically as long as you are taking long positions you won’t be able to lose more money than you have. After you gain more experience and build a discipline, a margin account can be very convenient. Basically your brokerage firm will usually allow you to borrow up to three times the amount of funds you have. This allows you to invest more money than you have and thus allow buying some stocks for which you see a good opportunity even if you don’t currently have the funds available. Obviously you will pay a little interest, but if you end up making a good profit with the stock, the interest should just be considered as a small tax for the gains this allowed you to make. A new trader should completely stay away from a margin account as you can find yourself into debts if you end up making big losses with funds you borrowed.

The Trader's Evolution - 6 – The Danger of Penny Stocks

2011-01-10T23:07:00.002-05:00

6 – The Danger of Penny Stocks

When the time comes for you to finally pick your first stock is when most new traders make the mistake of picking penny stocks, which seem very attractive to them for some reason. Does a Tata Nano car (the cheapest car in the world) seem more attractive to you than a Ferrari? Just as cars the price of stocks are often an indicator of the quality of the stock. Basically you’ll get what you paid for. This doesn’t mean that some high priced cars or stocks are not overpriced, but you are much safer going with higher priced stocks. I am certainly not telling you to look for the most expensive stock, but what I am saying is not to buy a stock that is too cheap or too overpriced. Just like shopping for a car you want a fair price for the quality. The only difference with the stock market is that your intention is to buy a stock to re-sell it at a higher price later. So basically you have to look for a valuable stock that seems undervalued and also whose price is trending up. Penny stocks should be considered 100% gambling as very little is known about the company and it is most likely driven by rumors. Penny stocks have very low activity (sometimes only 2-3 trades in a day) and therefore are extremely volatile. Penny stocks can be easily manipulated and you may easily fall victim to unknown forum users who are either making promises that the stock is about to “rocket to the moon” or about to “fall from the sky”. Keep in mind that these types of posts can be found in every stock forum no matter what the price of the stock or the size of the company. The problem with penny stocks is that the moment you get in it’s hard to get out with a profit. A penny stock who’s last price was $0.50 can easily have an ask price of $0.65 and a bid of $0.35 if you don’t pay close attention. What this means is that if you place a market order to buy the stock you will be paying $0.65 per share while only being able to sell it at $0.35. That’s a -46% loss after just entering into your position. Although this example may seem extreme this type of scenario on a slightly lower scale is not that uncommon. Most people who know very little about trading or are just starting out will tell you or believe they have more chances of hitting the jackpot with 10000 shares at $0.50 than with 10 shares at $500.00. You are closer to going bankrupt with a $0.50 stock than with a $500.00 stock. By investing in 10000 shares at $0.50 or 10 shares at $500.00, you are just simply cutting one pie into different pieces. But 1 share at $500 is worth more than 1 share at $0.50. In the end whatever gains you make percentage wise is based on the amount you invest; which in this case is the same amount. However a higher price indicates better quality because it’s less accessible to the average Joe and will keep speculators away and provide more stability and as a result less volatility on a higher priced stock. E.g. you have 2 pair of shoes: one for $20 a pair and another for $200 a pair. More people may own or could afford the $20 pair but it is obviously of cheaper quality than the $200 pair that less people may hold. Typical beginners’ mistakes are to assume that they have the potential to make more money with 10000 shares than 10 shares. Let’s set the record straight:

“The amount of shares you have mean nothing, only the value of the shares matter.”

When buying a pair of shoes I’d rather invest $200 in a good pair of shoes than $200 in 10 pair of shoes that will quickly wear off. However the question now is that is the $200 pair worth 10 pair of shoes of $20; or is the pair of $200 overpriced or perhaps underpriced. How long will this $200 pair of shoes last versus the 10 pair of shoes?

The Trader's Evolution - 5 - Is it gambling?

2011-01-09T14:53:00.005-05:00

5 - Is it gambling?

Many people who decide to start out trading will quickly learn that to be successful in the stock market it will take time and hard work. If you are hoping to turn your dimes into millions overnight this is not the right place for you. If you want to gamble you may have more fun losing your money in the casino. Keep in mind that trading in the stock market can be whatever it is you want it to be. It may start out as gambling but as time goes by you should manage to have enough discipline to take less risks and lower the gambling portion of the stock market. You must accept the fact that the stock market will always have a gambling portion to it. Some people may try to convince you that it’s not, but these people are simply in denial. As you gain more experience and move away from very speculative stocks and become better disciplined, the gambling portion of the market may fall. When you play at the casino you will always be 100% gambling, whereas in the market you may have the hope to bring the gambling portion down to 50%. Why 50%? Because you will always have a 50% chance of seeing your stock move in the opposite direction and lose money on your position. The gambling portion will all depend on what strategy you decide to apply and how disciplined you are. Something that always makes me laugh is when I hear someone say they will make “placements” for you with stocks or any risk attributed assets. Keep in mind that any investments or placements with risk are considered gambling. The only assets that don’t fall in this category are risk-free investments such as GICs, because as its name claims it’s a Guaranteed Investment Certificate. This means there is no risk of losing any of your money, but on the flip side you gain much less money that you could potentially gain by investing. When I hear the word “placement” I always imagine someone taking your money at a game of Roulette and placing $20 on #36, $10 on #24, $15 on #9; let the games begin!

If you don’t know how to play the game, no problem, just let the professional gamblers (traders, portfolio managers, investors) play for you and invest in mutual funds, ETFs, stocks, options, futures…etc. There is a game for everyone and you can simply let the pros take care of it and play for you! Each and every one of them has their own strategy that will make you millions; something I cannot promise.

“I will not guarantee to make you the next millionaire, but I will guarantee that I’ll prevent you from becoming the next homeless guy in the streets”.

Let’s be serious, only a minority of gamblers manages to make it a living and be consistently profitable and be successful. Ironically enough or not, this is the case with the stock market also. If you are a gambler one advantage of losing money in the stock market rather than at the casino is that you’re realized losses in the stock market are tax deductible, whereas your casino losses are not. Although I have been comparing the stock market to the casino, what is actually going on all day is an auction where stocks get auctioned off. You have buyers on one side (Bulls) and sellers on the other side (Bears). Traders who believe a stock will go up are bullish while traders who believe the stock will go down are bearish.

MGM - Ready to Pop?

2011-01-09T00:58:00.007-05:00

MGM - WAIT

Since the beginning of September 2010, MGM has been in a strong up trend moving back over its daily 50 day MA, 200 day MA to finally currently trend above its 20 day MA. MGM has since moved from approximately $9.00 to $16.00; an almost +80% move. However, despite being in a strong up trend, MGM being a high beta stock did have its share of hard pullbacks. In October 2010, MGM broke down from $14.00 to $11.00; an over -21% loss. This is the risk that a trader trading high beta stocks has to lives with, and that is why I usually prefer to be in and out from these type of stocks when each minor trend breaks down. However, if you time your entry well when an up trend begins, the high risk taken can be very rewarding. That is why it is extremely important to get into this type of stock only when it has either bounced back up major support or broken over and held up above major resistance. Make sure also to get in when there is enough support very near your entry price level or you could easily get whipsawed in a matter of days and incur potentially a big loss if you don't set stop loss orders.

When we analyze the daily chart more closely we can see that an ascending triangle pattern had formed during the past 4-5 months which was confirmed when MGM broke above major resistance at $14.00 on a 4th try in about 3-4 months. You can sometimes anticipate a breakout but it is usually best and safest to wait for the breakout. In my case I had taken my long position in MGM just a couple days before after seeing MGM bounce back up its up trend around $13.25. Ascending triangle patterns typically break out on 4th attempts and did give a STRONG BUY SIGNAL around the 3rd week of December which was later confirmed when the price continued moving up. Although ascending triangle patterns will not always play out as expected or even succeed to break out; in this case we can observe a typical ascending triangle pattern. During this trend, MGM volume has trended down which is again a typical trait for this pattern. Something interesting is that despite the price break out occurring on the 3rd week of December, the volume has only broken up this past Friday and closed near its 52 week and 2 year high around just above $16.00. In the past 2 weeks MGM has had 3 break outs which is very positive and usually hints at potential higher price to be hit. (The break outs can be observed as the breaks in the chart in the last 2 weeks). After, MGM broke up over the $14.00 major resistance, this allowed us to set a short term price target of around $19.00-$20.00. This is calculated by measuring the dollar length of the pole ($14.00-$9.00= +$5.00) and then adding up the dollar length ($5.00) to the major resistance level that was broken ($14.00+$5.00=$19.00). (Please note that these numbers are approximate and I didn't bother to make the estimated to the very cent exactly).

The $19.00-$20.00 short term daily price target does coincide with the next major resistance level on the weekly chart above the current one of just above $16.00. What's very interesting now is the fact that when we look at the weekly chart we can observe another ascending triangle pattern that seems ready to break out. Since March 2009, after MGM bottomed around $1.50 it had managed to make a huge run up to roughly around the price level we are now around $16.00 at the 52 week and and 2 year high. At the time I had successfully predicted MGM would pop from around $6.00 to $12.00 about a day or two before, based on the short term daily pennant pattern. Little did I know that it would happen so fast, but in early 2009 when MGM along with the market that bottomed we were going through a tremendously volatile and crazy period. Since April 2009, MGM has failed to move above the $16.00 price level on 3 occasions, and guess what MGM is now about to test this price level for the 4th and possibly last time, possibly as early as this Monday. Like its daily trend, the weekly chart indicates that MGM has bounced back 4 times from its support levels of its ascending triangle pattern. Now what could potentially happen very soon? If MGM manages to finally break above $16.00 and close at least above $17.00, we may see a quick move towards daily pattern price target of $19.00-$20.00 which coincides with the next resistance level on the weekly chart. Now, if this breakout indeed occurs, this would set a weekly price target of approximately $31.00-$32.00 which coincides with the major resistance level at the weekly 200 day MA. (Calculations:$16.00-$1.00=+$15.00 pole length; $16.00 or $17.00+$15.00= $31.00-$32.00). Again just like the daily ascending triangle pattern, the weekly trend did have a period of down trending volume which was broken a couple months as the price continued moving up. To have a successful breakout, MGM should have a substantial amount of volume to sustain a higher price level above $16.00-$17.00. MGM volume has already surged on Friday, and we should expect an even higher increase in volume.

Now many of you may be very tempted to get into MGM, but keep in mind that I have a set a WAIT signal because MGM has not yet broken above $16.00-$17.00. Taking a long position at this level should be considered gambling more than anything. If MGM were to fail again to break out, MGM path would be opened to break back to as low as $11.00 around its weekly 50 day MA. In this situation, even though you may have to leave some potential profits on the table it would be best to wait for a break out above $16.00-$17.00 before taking any long position. An entry above these levels after a break out will turn this major resistance level into a major support level. I had taken, my long position around $13.25 at a safe level because MGM had just bounced back up above its up trending support level. If MGM breaks above this 52 week-2 year high, we will have a STRONG BUY SIGNAL which would be confirmed after a couple days of seeing the price maintain above it, and likely retesting it before moving higher. Whenever any stock breaks major resistance levels and moves very quickly higher, most stocks will typically pullback shortly after back but still above these resistance level which would then be confirmed as new support level. Please be careful before taking any long position, and do your own research and keep in mind that trends don't always necessarily play out the way we might expect. Myself personally, I will always have an -8.00% trailing stop loss order set to make sure to not lose most of what I have gained. I strongly suggest to use stop loss orders to protect your capital and prevent yourself from making major losses as these high beta stocks can be brutal and have very quick and sharp pullbacks. Even though I give MGM a long term target of $32.00, MGM will most likely go through a lot of volatility before reaching this price level. This is why I prefer riding short term up trends and getting out during short term down trend, to then eventually get back into new short term up trends. Keep in mind that these short term trends may occur during a long term up or down. Based on a 3 year horizon, MGM is basically still in a very long term down trend still trading below its 200 day MA. But obviously, because of the high beta and volatility a lot of gains can be made in short term up trends within long term down trends. The higher the beta, the shorter investment horizon you should have, since the stock will typically move much faster than the market and new trends may start and end quicker than lower beta stocks.

The Trader's Evolution - 4 - The Advantage of being Young

2011-01-08T23:09:00.001-05:00

4 – The Advantage of being Young

Traders who start out young when they have a low income is something I consider as an advantage as they will have fewer funds accessible. This will allow them to lose funds that will be less considerable in their near future as their income rises. A young trader will value $1000.00 more then someone who has been in the workforce for several years making a $75,000.00 annual income. The advantage of starting out young is that the losses you make at the beginning will not have much of an impact on your all-time performance as your income should rise in correlation with your experience. We could advise any new trader to start out trading with $1000.00 regardless of their age and income. However do you imagine a person with a $75,000.00 income to take their $1000.00 investment seriously, do their homework and follow their stocks on a regular basis? Unfortunately if you want to have the drive to learn, the money you invest must be valuable enough to you for you to follow your stocks on a regular basis. Putting enough money for you to care about to follow will create a commitment between yourself and your portfolio, and this is what will drive you to learn and succeed in the long term. As the years go by and you gain more experience and income, you will have to add more funds to your portfolio as $1000.00 next year will be worth less than it is today. The first 3 years of trading are critical years, because if you survive you should be able to start making profits in the stock market.

The Trader's Evolution - 3 - Learning to Lose Money

2011-01-07T20:39:00.000-05:00

3 – Learning to Lose Money

If you want to start trading in the stock market make sure you can afford to lose the money you’re trading with. You’re savings are meant to stay you’re savings in risk-free investments. I am not saying that you will lose all the money you invest in the stock market, what I am saying is that you will most likely lose all the money you decide to invest initially. Most traders start making profits on their 3^rd year of trading, so be prepared to be patient. The reason I am writing this is to help you survive those first 3 years.

“No matter what you learn by reading you will forget when you start trading.”

The first lesson you will learn when you start trading is that you only learn when you lose money. If you start out making money when you start trading, this is great, as you will have more money to lose and learn from. We only learn from our mistakes, not our successes. The more mistakes you do at the beginning the better you’ll do in the future. No baby learns how to walk before falling several times. You must consider your initial investment as your tuition fee to learn how to trade in the stock market.

The Trader's Evolution - 2 - Everything is Interconnected

2011-01-06T13:48:00.000-05:00

2 - Everything is Interconnected

The beauty about the stock market is that it has to do with everything that is going on around the world with a focus mostly on the US which is the leading indicator and driver of the economy worldwide. Whether there is just an increase or decrease in the Federal Reserve’s prime rate, or if there is a hurricane or a terrorist attack, it will be reflected in the market. Everything is interconnected and that is why you always have to stay informed about everything that is going on; information is very valuable. The market is about the past, present and future. In fact the market is always on looking towards the future and the present situation is based on future expectations. The market continually evolves with time and that is why the future is always impossible to predict, but always there to speculate. Even if you do manage to predict future outcomes, you will not be able to do so on a regular basis, in the long term. In the end, everyone is playing the same game. Why is predicting the future impossible? Simply because like the world, the stock market continually evolves. You will never know enough to stop learning and your strategy may continually evolve with time. However this doesn’t mean that looking back into history cannot be helpful. On the contrary looking back will help us understand the future and not repeat the mistakes of the past; this is evolution.

“Trading is not about predicting the future; it’s about being prepared and foreseeing every possible future scenario by knowing how to react in the occurrence of any event.”

AIG - Strong but Dangerous

2011-01-06T00:37:00.004-05:00

AIG - STRONG BUY SIGNAL

AIG is a stock that can make you a lot of money as quickly as it can make you lose a lot, and that is why I try to stay away from it. Nonetheless, this is probably one of the best performing stocks of the last month where it moved more than +45% in one month from $42 to as high as $62 just a couple days ago. AIG has been trading in a sideways trend since September 2009, until early last month when AIG made a strong move up to close at $48. Despite seeing this STRONG BUY signal since, I did not want to take the risk of going long AIG because of its extremely high volatility and Beta of 3.75. Today, I was tempted again to go long AIG after getting another STRONG BUY SIGNAL where a typical triangle pattern was broken up with AIG closing with gains of over 7% along with the Stochastic giving us a buy signal also. The STRONG BUY SIGNAL will be confirmed if AIG manages to continue higher and hit a new high above $62.

The long term trend is also looking very promising despite being still young, with AIG above major resistance levels and having the path clear to make a move near $180. Keep in mind that despite AIG's number looking very appealing with a potential to triple in value, the 3 year long term trend is still down and will remain so until the 200 day MA will be broken back up again. I may eventually fall to temptation and go long AIG, but at this time I personally do not want to because of its extreme volatility. AIG is what I consider a gambling stock, because despite being in an up trend you could see major pullbacks and find yourself in major losses despite its trend. I feel very bullish towards AIG, but prefer to remain cautious and not let greed take over. I could have taken a gamble when AIG was trading around $46, but after a quick move towards $62, I will stay away for now as I consider this to be a much bigger gamble and riskier move after such a quick move up. Some of you may be more willing to take higher risk, but you been warned of its high risks.

Dow Jones - Looking Strong & Steady

2011-01-05T23:58:00.007-05:00

Dow Jones - STRONG BUY

The Dow Jones current trend is looking promising as it is steadily moving upwards above its 20 and 50 day moving averages. The RSI however does indicate that it is overbought and we look to be heading soon towards a health pullback. For now as long as the Dow Jones continues to trade above the 20 day MA, I will remain bullish and maintain my STRONG BUY indicator. Keep in mind that despite my STRONG BUY indicator, this does not imply that you should jump at any stock, but simply that the current trend is strong. I actually expect to see a small pullback within a week or two. Also, despite being a STRONG BUY, you still have to be able to select the right stock as not all stocks are causing this move in the Dow Jones. A pullback towards the 50 day MA would lower my signal to a BUY (I do expect to see this happen at one point during the year, because I don't consider a long term move above the 20 MA to be healthy). The Dow Jones/Market finally seems like it is in a recovery, and ever since breaking the 200 day MA and above critical resistance around 10800, all fears of a double dip recession seem to be gone. The 200 day MA which was a major resistance level just about 4 months ago, is now a strong support level. Other promising factors that seem to indicate the market will continue higher, is that it seems like Gold is now giving signs of weakness and is starting to pullback as I expected and posted a couple days ago. In my opinion, a fall in Gold indicates that investors are now becoming more confident in the market's potential to continue to move higher and improve. As a result Gold is starting to sell off. However, keep in mind that Gold is not out yet and despite being close to giving us a SELL SIGNAL, this has not happened yet and may always be a good asset to hold for the long term; perhaps at a lower price in the near future. Another indicator that confidence is getting back into the market is the fact that we are starting to see stocks like FDO and DLTR trending strongly down. These are the type of stocks that were moving higher during the recession. Overall, I like the current correlations in the market. As the market moves up, Gold and Dollar Store stocks are falling. As the market moves higher, we can expect Crude Oil to continue its move higher as it could likely hit new highs. As the market moves up, we should continue to see however weakness in the US dollar. However if the economy is indeed recovering, the US dollar should move back up in the long term, but perhaps not very soon. Another positive sign is that bank stocks such as BAC and the famous insurance company AIG are moving higher. Basically stocks that were driving the Dow Jones in a downward spiral during the recession are moving the Dow Jones back up as they continue to recover. Overall my outlook for the Dow Jones for the year 2011 is positive based on the current trend. I do expect the Dow Jones to pullback shortly but most likely only towards its 20 day MA currently around 11530. Keep in mind that despite the positive outlook, trends can change very quickly but only a cross back below the 200 day MA would make me bearish. The weekly chart also shows us that the 50 day MA is about to cross above the 200 day MA which would also be very positive for the long term trend and give more strength to the Dow Jones.

The Trader's Evolution - 1 - The Future is Unpredictable

2011-01-05T15:31:00.009-05:00

Over the last few months for which I've stopped writing on my blog, I have been working on improving my "Y-Swing" trading strategy that I have developed over the years. I have also been writing a few texts where I share my perceptions about the stock market, and how you have to learn to evolve as a trader. I will be sharing one part with you every couple of days, starting today with part 1 of 11.

The Trader’s Evolution

1 – The Future is Unpredictable

People who decide to start trading in the stock market can come from all sorts of different backgrounds but they all have one common objective: making more money out of their hard earned income. The problem is that at the beginning many new investors have unrealistic expectations and end up taking too much risk by investing much more than they can afford to finally ending up in losses and away from the stock market forever. The reason this happens to so many people is because they are victims of their own greed.

“No matter how much you think you know; you never know enough.”

You have to accept the fact that no matter what strategy you use you will never be able to buy a stock at the bottom and sell at the high. Whether you do fundamental analysis, technical analysis or use a trading system, you will never be able to predict the future. When you start out trading you have very little knowledge and no matter how much you read about the market, the bottom line is that you have no actual trading experience. Also, no matter how much you know about a company, you never know enough. Even if you do know everything, you’ll quickly see that the market often reacts in ways no one would have expected. The market is irrational because people are irrational. What causes people to be irrational? Being uninformed. Surprises happen in the market when an unforeseen event occurred and this mostly when you’ll see the market or a stock trade in a hectic manner. When surprising news is given, whether good or bad, many individuals will often overreact. Being uninformed causes surprises which lead to irrationality, which finally causes individuals to overreact. The market is not about predicting how companies will perform financially but how will people react based on their expectations of those results.

Gold - Is the Endless Up Trend about to End?

2010-12-29T00:02:00.010-05:00

GOLD - WAIT (WARNING)

Although Gold seems to be on an endless up trend we are starting to see some signs of weakness which seem to hint at a potential top coming very soon. Gold's last high was around $1425 on both around November 8th and December 8th before it pulled back down. Gold seems poised to test this level again; most likely by the end of this week. The question is, will Gold manage to close strongly higher or pull back for the 3rd time? Although Gold is still trending up, the trend is certainly slowing down. We are now starting to observe a potential ascending triangle pattern, which would be confirmed if Gold pullbacks again around $1425 and falls below first the 50 day MA currently around $1372. If Gold then falls below $1340 and $1325, the pattern and beginning of a down trend will be confirmed. Something that gives strenght to this argument and possibility is the fact that we can observer a negative divergence between Gold's trend and the MACD's trend. Gold is currently still trending up but the MACD has been trending down against the trend since around October 18th. The Stochastic has also been trending down during the same period. Keep in mind that Gold has been trending strongly above its 50 day MA since the month of July where it briefly crossed below it before reversing back strongly back above it. Is Gold about to crash and burn? Not necessarily, it is still very early to call a high, even if Gold does indeed break the up trend. Such a statement could only be confirmed if Gold were to break other major support levels at much lower levels around the 200 day MA. If Gold were to break down, this may not mean that it will start a long term down trend. The first critical support level it could reach is around the 200 day MA around $1250. If Gold bounces back up at $1250, this may actually be a good entry point and perhaps a resumption of the up trend.

The most important chart to look at is the weekly long term pattern of Gold. By looking at this chart we can see that Gold has not broken its 50 day MA since the end of 2008 and has been trending above the 200 day MA for now over 3 years. A break below the 50 day MA could easily send Gold back to $1000. If $1000 and the 200 day MA is broken, then we would be in a major long term down trend. Until $1000 is broken, Gold's long term trend will remain up.

Something however is clear in terms of daily chart is that the up trend is weakening and something leads me to believe that Gold's down trend will likely coincide with the beginning of the new year in early January. The trend may not necessarily play out as I expect it to, but I do believe we are getting very close to a top with Gold. I would definitely not take any position with Gold right now as we at dangerous levels whether you choose to go long or short. The best decision to take right now is to WAIT and see if the pattern I expect to occur happens; we will have a better idea then of what to do. There might be a short term opportunity to short gold which could potentially turn into a long term opportunity. However, keep in mind than when anything starts trending down, a lot volatility comes with it. What if Gold breaks above $1425? If this occurs I don't necessarily believe that this potential pattern I'm observing will be null, but only that it might take a bit more time before Gold breaks down. Something that could likely occur in that event would be a tightening of the trend like it is already in right now. After this, Gold must break up or down. Basically we are near a very critical point in terms of the future direction of Gold.

Coming Back!

2010-12-20T22:04:00.002-05:00

Hi, everyone as you may have noticed I haven't updated my blog in quite some time (nearly 4 months) because I have been very busy. However, I did miss a lot writing on my blog and have now decided to make an effort and re-start writing on my blog on the first week of January. I will make my best to update my blog at least once a week (most likely Friday evenings). I will try my best to answer all your analysis requests. Over the past few months I've been working on an updated version of my trading strategy Y-Swing as well as updating my Excel based Trading Manager software. As things move forward my strategy is continually evolving and I am hoping to share this with you in the near future. I am planning on making my first post at the latest on Friday, January 7th.

Dow Jones - Time to get back in

2010-08-17T18:57:00.004-04:00

Hi, everyone I know I've been away for a long time and haven't written anything on my blog for 2 months as I am very busy, but I felt that I had to write an analysis of what I expect to see occur in the market in the upcoming weeks and months. I haven't had the time to monitor what has been going on in the market as of late, but I did start looking at the charts again since last week, particularly the Dow Jones. I am not sure at what frequency I will be writing on my blog, as I am very busy, and I cannot promise that I will be able to make timely updates. As you can see I no longer update my blog regularly, but may still do so from time to time. There may be periods where I write very little like recently or a little more if I find the time. I will try my best to write analysis when I see major developments or trends occur in the market.

Dow Jones - BUY SIGNAL

Obviously the Dow Jones had been in a minor down trend for the past week, but after seeing a sign of a possible rebound yesterday and a good move up today this was enough for me to convince myself that the Dow Jones is now looking to resume its major up trend. I do believe that today was the beginning of a move for the Dow Jones towards at least back up to 10900 or 11200. This may not move straight up towards those levels, but I do expect the tendency for potentially the next 2-3 months to be up. However, I strongly believe that if or when the Dow Jones does hit those levels that we will have a double top and the beginning of a major down trend that could likely send us back towards the lows of 2008, where we might probably find ourselves in a new crises. This may be a little too early to say, but as of right now this is what I expect to see happen. In the mean time, I am looking to get in on a few stocks tomorrow as I am currently all in cash. I think that there is some good money to be made on the long side for most stocks, with a few exceptions of course.

When we analyze the Dow Jones' daily chart, we can see that we got a doji bar yesterday which hinted that the current minor down trend had bottomed. What straightened this possibility is the fact that the doji that occurred yesterday traded below the 50 day MA before bouncing back up and regaining practically all its daily losses and thus closing above the 50 day MA support level. Today we had our first confirmation of the bottom by seeing the Dow Jones move strongly back up with a higher low and higher high. However, as I expected it struggled to close above the resistance levels at the 20 and 200 day MAs. I don't expect to see the Dow Jones have too much trouble closing back up this level, but if there were to be any it could be for only a day or two starting tomorrow. That's why I believe tomorrow should a good day to make an opening long position. As long as the Dow Jones stays above the 50 day MA, I consider to be safe to take a long position. What leads me to believe that the Dow Jones will continue its major up trend potentially quickly (2-3 months) towards its yearly highs is the fact that today's up move triggered a BUY SIGNAL by the Stochastic at a very oversold level around 15-20. Now when we look at the trend for the longer term, it seems like the Dow Jones is in the middle of a rising wedge pattern which may conclude near the yearly highs before reversing strongly back down. It is however too early to say, but as of right now this is what I expect to see occur.

NFLX - Moving in a Strong Up Trend

2010-06-11T22:28:00.003-04:00

NFLX - BUY

NFLX is one of the rare stocks that has been holding up well since the beginning of the market's major down trend in May. Since the month of February, NFLX has been trending above its 20 day MA and most of the time towards its upper Bollinger Band. Only twice and briefly during the month of May did NFLX break below the 20 day MA. However, it quickly rebounded at the end of the month to resume its trend. One sign of strength is seeing the Stochastic trend in the 80-100 level. Although it briefly broke that trend in May, NFLX is now back around these levels. I do expect a little pullback from NFLX sooner rather than later, but only a minor one bringing it towards the 20 day MA. NFLX is a BUY, but it would be perhaps wiser to wait for it to pullback a little towards its 20 day MA and seeing it bounce back up before taking a long position. Based on the current chart, NFLX is definitely not a stock I would short. Whenever you decide to take a long or short position, even for the short term, it is always best to go with the major trend, and NFLX major trend is currently up.

MGM - Bottom?

2010-06-11T22:06:00.003-04:00

MGM - WAIT

When we look at MGM's daily chart we can see that MGM has been moving down in a major down trend since the beginning of May below the 20 day MA. This past Monday, MGM traded
below its 200 day MA for the first time since August 2009. On Wednesday, MGM tried to recover its losses and move back above its 200 day MA but failed and closed lower. MGM is now again just below its 200 day MA around $11.60 and will likely attempt again to move back above its 200 day MA. Despite the very bearish signal of MGM trading below its 200 day MA for the entire week, it may have bottomed and we should get a definite answer next week. The fact is that MGM has higher lows for the past 4 trading sessions which gives MGM the potential to drive back up the 200 day MA. MGM is currently a WAIT for a break back above the 200 day MA which may coincide with the break of the 20 day MA as well. Until MGM manages to break back above these two critical MAs, I would stay on the sidelines. With that being said MGM does have relatively decent support around the $10.50 level. However, if MGM does fail again next week to move back above the 200 day MA, I will consider this as a resumption of the down trend and therefore issue a SELL SIGNAL. One important thing to note is that although MGM has not given us a clear signal yet, the Dow Jones did close above its 20 day MA for the first time since the beginning of this major down trend. If the Dow Jones can manage to hold up and move higher, MGM will most likely follow along and move higher. Taking a long position with MGM at this level is a gamble, but one that is relatively safe with a stop loss of around -8%. However, two clear signals of a resumption of the down trend would be first to see MGM fail to move above its 200 day MA and then to close below this week's lows and below the $10.50 support level. If this support level is broken, MGM could accelerate very quickly down towards $9.00.

Dow Jones - Still Waiting on the Sidelines

2010-06-02T16:22:00.003-04:00

Dow Jones - WAIT

Since the beginning of the month of May, the Dow Jones has been trading in a major down trend. However during past few trading sessions the Dow Jones has started to show support around the critical 10000 support level. In fact for the for the past 7-8 trading sessions, the Dow Jones has been trending sideways between 9900 and 10250. Despite showing some support around 10000, I still advise to WAIT on the sidelines as the market is still relatively volatile despite seeing a little more stability lately. Keep in mind that although the Dow Jones has jumped up over 200 points today that the Dow Jones has yet to have 2 consecutive positive trading sessions since the beginning of this major down trend at the start of May. I currently have only one long position which was taken after seeing the Dow Jones hold up above 10000. The next signs I will be looking for to confirm a reversal and a potential new major up trend, would be first to see the Dow Jones close up for 2 consecutive days and then to see it jump above 10250 and 10400, above its 20 day MA. The moment the Dow Jones manages to do these 2 things, I will consider this to be a confirmation of the reversal of the trend and potentially the beginning of a new major up trend. The MACD is starting to move up and getting close to breaking above the signal line, which is somewhat promising to see the Dow Jones' trend reverse back up. Based on the current conditions, I do believe we will have a relief rally sooner rather than later, however I doubt we will be hitting new highs for the year. The most likely and optimistic scenario would be to see the Dow Jones move back towards the peak of 11200 to only see it reverse back down. The current major monthly trend is down, while the major yearly trend is sideways and this will remain true until the Dow Jones either breaks down sharply below 9900-10000 or break up above 11200.

Dow Jones - Breaking Down

2010-05-20T16:10:00.007-04:00

Dow Jones - STRONG SELL SIGNAL

With the market continuing to sell off and moving down sharply, the Dow Jones has broken yet another critical support level; the daily 200 day MA.

The last time the 200 day MA was broken was at the beginning of the year 2008, and I don't need remind you what happened thereafter...

At this time the Dow Jones has some support at 10000 and 9900, but another sharp move down that causes the Dow Jones to close below these levels could send the Dow Jones back to 2008 and early 2009 levels. Obviously, this would be catastrophic but is now a feasible reality. The Dow Jones is also now trending below its 20 day daily MA and only when the Dow Jones will manage to move back up this MA can we expect a possible reversal in the trend. Right now we are standing near critical levels which could dictate where we might be heading for the rest of the year. If the Dow Jones manages to bounce back up 9900 and 10000 to eventually break back up above the 20 day MA, this could be just a simple correction. However, I do have to admit that the way the market is acting right now and with the volatility we are seeing, this is looking like the beginning of 2008 all over again. There is still hope for a reversal, but things are obviously looking very bearish. The 10000 support level at the 200 day daily MA coincides with the 50 day weekly MA, which means that a closing below this level would be even more significant and perhaps even more reliable.

Right now, I wouldn't jump in at taking short positions, given the fact that we have already moved so low in such a short time and also because we are now standing near critical support levels which a bounce back up from could be our last hope of seeing the market reverse back up. Keep in mind that until the Dow Jones moves back up over its daily 20 day MA, that the major down trend will remain intact. At this time and especially if the 9900-10000 level is broken, you should take short positions for the long term and only short term long positions (max 1-2 weeks holds) on throwbacks. I do expect the market to bounce back up sooner rather than later, but again seeing the trend reverse back up is not very likely, as I expect the major trend to stay down for a while.

MGM & Dow Jones - Wait & See

2010-05-11T14:52:00.004-04:00

MGM - WAIT

After breaking below its 20 day MA last week, MGM broke its major up trend and started a minor down trend. MGM finally managed to bounce back up its 50 day MA after trading below it and has since rebounded. At this time MGM is both trending up above its 50 day MA again but also trending down below its 20 day MA which gives us somewhat of a sideways trend despite the recent move up. The Stochastic is about to give us a BUY SIGNAL, however I wouldn't jump back in MGM before it breaks back above its 20 day MA (currently around $15.13). MGM's chart sort of portrays the market's current situation. At this point, after going through a big sell off last week, we don't know if the market will continue higher from here or fail to hit higher highs and trend back lower. What makes everything more risky is that the last peaks now represent significant resistance and we will only know if we reach again these levels if we are heading higher or back down. Despite the presence of short term opportunities on the long side, the market seems much risky and volatile than it was a couple weeks ago. I personally took a few long positions since Friday after seeing a little rebound, however I don't expect I'll be able to hold on to them for very long. What seems apparent now is that we are in a volatile environment which could make you win or lose a lot of money very quickly, and that is why setting stop losses are very important. My gut feeling is that the major trend for most stocks will be down while after every big sell offs there will be short term opportunities on the long side. At this time MGM seems riskier than some other stocks that offer a better risk/return opportunity. I do believe that one of the safest stocks to be in right now is Gold stocks, since whether the market moves up or down it should be some of the most outperforming stocks in the market on the long side. What leads me to believe the market will continue lower in the long run, is the fact that despite seeing the market moving back up right now, Gold continues to hit new all time highs which indicates that fear is still present in the market. I personally feel that we could see much more trading sessions in the triple digits both on the up and down side, with a stronger down pressure though. At this time, you want to be investing very carefully and you should be prepared to be more active as I think we will continue to see a lot of volatility.

Dow Jones - SELL

Looking at the Dow Jones' chart we can see that despite the big rebound yesterday, that the major down trend is still down and a long term SELL. However, as I am writing this the Dow Jones is sitting below a critical level, just below its 50 day MA around 10850. Another gap down tomorrow will reaffirm the fact that we are in a major down trend as the 50 day MA now represents resistance. If that happens, you should consider as I will exiting your long positions and move back towards taking short positions. As I said before, we are in a very volatile environment right now which is looking like 2008.

Dow Jones - Down After All...

2010-05-05T13:38:00.005-04:00

DOW JONES - STRONG SELL SIGNAL (Updated May 6th)

After getting a SELL SIGNAL from the Dow Jones last week, the market bounced back up with a BUY SIGNAL to only fall even lower again this week and thus giving us conflicting signals. What is clear now is that the market has gotten very volatile again, and the Dow Jones has now finally broken sharply down its 20 day MA and thus breaking its trend that had been intact since mid-February. However, one important thing to note right now is that after hitting its 50 day MA today around 10800 the Dow Jones bounced back up and potentially could move a little higher in the upcoming days. However, we are now clearly in a down trend and even if the Dow Jones trades back up in the upcoming sessions I think we will continue to experience a lot of volatility, and I don't think we'll see the Dow Jones hit a new high any time soon. We are not in a correction yet, but if the Dow Jones breaks down below its 50 day MA we will most likely be in a correction. With that being said, I don't think you even have to look at the charts to come to this conclusion. The truth of the matter is that fear is back and increasing, due to many factors one being the Greece crisis. However, there are also other events that have already had an impact on the market that could get worse in the near future. The Iceland volcano has re-erupted a couple days ago affecting some flights in the U.K. and Ireland and no one knows or can predict what another eruption could do. Also there is no way to predict what the Oil spill from the Gulf will continue to have on the economy. To conclude, it is clear that there are many risk factors in the economy that could send the market even lower than it already is and that is why I am now choosing to stay on the sidelines. Right now the market is good place for day traders to make a lot of money with the current volatility, but this is not an environment where swing traders and investors would want to be in. In the very short term, I think we could see a little bounce back up towards the Dow Jones' 20 day MA but in the long term things are looking down. At this time I am staying on the sidelines and issuing a WAIT signal for the short term and a SELL for the long term. Basically I think if you wait to see the market bounce a little back up, this could be a better opportunity to take short positions.