Trade to Retire

All Out

geocurt@gmail.com — Thu, 17 Dec 2009 22:11:00 +0000

Last Tuesday I bought (CYD) on a nice breakout that staged an ugly reversal and led to about the fastest 7% I've ever lost.

Not long after I stopped out on (GFA). That one just never acted right.

This took me back to even since August. Not what I was looking for - I didn't lose money but I didn't make any either.

I've gone ahead and put myself in the penalty box for three weeks. It's the holidays, the market has been tough, and it's an ideal time for me to back off and enjoy the time with my family. I have a strong watchlist of some great stocks setting up nice patterns, so I'll be ready to take another look next year.

Without question this has been my worst year trading - but I also think it's been my most educational. We shall see.

If anyone out there reads this, I wish you and yours a Happy New Year!

New Buy:(GFA), Sell Stop:(RINO)

geocurt@gmail.com — Mon, 07 Dec 2009 14:56:00 +0000

The current market continues to be very difficult to navigate, for me at least. There are opportunities, but a trader has to be quick, decisive, and CORRECT to profit. More experience would certainly pay off here.

Thursday my buy stop order for (GFA) triggered at $35.28. It's possible I interpreted this chart wrong and got in early, IBD had an article on the stock and called it a cup shaped base with a $37.72 buy point (if the stock does not form a handle). If (GFA) clears that point in high volume I'll add to my position.

Then there's (RINO). This stock had qualified as an eight week hold based on it's tremendous performance, then last week the company announced a secondary offering. Friday morning I stopped out at breakeven - had been up as much as 25% in this position.

I believe this was the third or fourth time I've had a high performing stock announce a secondary offering and fall apart. I've never had one succeed after announcing they would issue shares. Based on this I believe I will add this event to my sell rules - but I'll wait a couple of weeks first to make sure it's not a knee-jerk reaction.

My record is now:

1 - 2 - 6

Profitable since August.

Took Profits on (MELI)

geocurt@gmail.com — Tue, 01 Dec 2009 18:03:00 +0000

I'm very pleased to report that I booked a 17% profit on (MELI) today after selling it for $51.76. This stock took just over three weeks to meet the 20% profit threshold, so rather than hold it for eight weeks the correct move was to take profits.

This has my current win/loss/push record since my 'August reset' at:

1 - 2 - 5

More importantly, I'm profitable since that time. Not only am I up on closed positions, but I still own (RINO) with a 20% profit and that stock has qualified as a potential big winner, so I will attempt to hold it into January.

I missed (CAAS) yesterday as technical issues delayed me logging into my trading platform and it moved very quickly, but the good news is I'm still picking stocks successfully. This means if I stick to my rules, which have been working well for the past few months, I should continue to profit.

Next stock on my radar is (GFA). The future growth of this stock is huge. I'm eyeing an aggressive buy point of $35.28 reading the chart as a short, ugly cup with handle.

The market continues to see it's skeptics which is fine with me. For now the trend is up and I'll follow it.

Sell Stop:(HMIN), New Buy:(RINO)

geocurt@gmail.com — Mon, 16 Nov 2009 21:46:00 +0000

Last Thursday I stopped out of (HMIN) by just 3 cents for a 5% loss. The stock has since recovered nicely but that's all part of the deal. In fact, I'd rather see a stock move back up after I stop out because that's a sign of overall market health. The main thing that I still need to evaluate is my stop loss choices, I just don't have much tolerance for taking an 8% loss but I need to make sure this isn't costing me more in the long run.

Today I bought (RINO), a stock which I've watch make a monster run for the past few months. The company's latest earnings qualified it for my basic fundamental criteria and the technicals still look great so I went ahead and bought it at $27.40. This buy point is 10 cents above the previous high off a pullback to the 10 wk moving average. In this very brief correction we've just had, most of the buy points I've seen are leading stocks that pulled back to the 10 week line over a span of three to five weeks. Not an ideal setup but I'll try to take what the market gives me.

This rally has been a bit sketchy but today it finally saw a nice up day on higher volume than the day before. Having said that, volume was still well below average so a cautious approach continues to make sense. In fact, that's why I waited a couple of days before making another buy once I stopped out of (HMIN) - it's worth letting a couple winners go by to make sure I'm not over trading like I used to.

Some Catching up to do...

geocurt@gmail.com — Sun, 08 Nov 2009 23:19:00 +0000

Once again I've fallen behind here. Time is short these days so I'll keep it brief.

Towards the end of October when I saw the market heading to a correction I moved up my stops to protect my gains (small though they were). I knew there was an issue with my timing and that by the time I'd gotten my system on track the best days of the rally were over. Therefore I was happy to exit that foray into the market even, and that's exactly what I did. Not bad really for a tough whipsawing market.

Then late last week the market looked as though it may have a follow through day on Thursday, so I took a position in (MED) which I've been looking to get into for a couple of months. The stock did well but the market did not follow through, so I closed the position with a 1.5% gain at the end of the day. Hard to sell a good stock I've wanted to own, but I will not initiate new longs in a correction.

I was out of town for a long weekend and the market did stage a follow through day yesterday which has us once again in a rally. I took a look at my watchlist last night to prepare and found that (HMIN) had released earnings and was up considerably after hours.

I bought (HMIN) on the gap up to a new high at open - this is one of the setups I look for. Additionally, I bought (MELI) as it pulled back within a couple percent of the $42.55 buy point it took out last week. I'm not totally comfortable going in this fast to a new rally, so I kept my stop loss orders tight at 4% to reduce my capital exposure until I see how things shape up.

Sell Stop (HMIN), New Buy (PWRD)

geocurt@gmail.com — Mon, 19 Oct 2009 15:11:00 +0000

Volatility remains high and this rally hasn't gotten any easier. Trading is very tough. My recent 'success,' if I can call it that, is a result of a commitment to my rules - they are what's kept me in the game. What's encouraging is that the rules appear to work even in very challenging circumstances. There are numerous times over the past couple of months that I would've been shaken out of a position if I was actively managing my holdings - instead I've held on, and time will tell if I profit from this.

Friday the market opened hard and (HMIN) took out my break even stop loss order. This position was opened from a conventional canslim buy point well above the moving averages, and those have had trouble in this rally. Since I'd been up 10% the stop loss was at break even so that's fine with me.

My record since my 'reset' is now 0 - 1 - 2.

(EJ) has been really tough to watch. It's been up as much as 25% and come all the way back to within a few percent of my stop loss order. Turns out the company spun off a unit into an IPO of (CRIC) on Friday. That may have marked a bottom for EJ and it came off the 50 dma Friday morning and is up over 10% now from that point.

Friday I took the capital from the sale of (HMIN) and put it into (PWRD) which I've been looking to get into. It's been trading around the 50 dma for about a week. It remains to be seen if the stock is consolidating or if it will bounce off this area. I purchased close enough to the 50 dma that I was able to put my stop loss at 2% so I have very little capital at risk in this position. So far this morning it's up nicely on solid volume.

Backtesting the New Idea

geocurt@gmail.com — Sat, 10 Oct 2009 17:35:00 +0000

Here's my very quick study of the top stocks on my watchlist, trying to apply a simple and mostly mechanical purchasing method using the 10 wk ma. I attempted to be very conservative and didn't really throw too much logic in - for the most part I just looked at the charts and bought within 3% of the 10 wk - there are however some noted exceptions that I found to be no-brainers (like STEC on crash day, obviously would not have purchased that one).

Leaders from around 8/21
Rules - Buy limit 3% above 10 wk ma
Sell Stop 5%, breakeven after 10% advance
1 week hiatus after stock stops out
EJ - could've been purchased around $18.60 on 8/25 and survived 5% stop loss (now breakeven) - current price $23.58
HMIN - could've been purchased around $28.75 on 10/2 and survived 5% stop loss (now breakeven) - current price $33.30
PWRD - could've been purchased around $36.69 on 9/2 and survived 5% stop loss (now breakeven), high of $50.49, current price $43.82
FUQI - could've been purchased around $24.35 on 9/2 and would've stopped out same day for 5% loss
FUQI - could've been purchased around $27.44 on 9/18 and would've stopped out for breakeven on 10/1
FUQI - could've been purchased around $28.20 on 10/8 and still holding with 5% stop loss - current price $28.00
STEC - did not come near the 10 week until it gapped down and crashed through - easily avoided
GMCR - was below 50 dma and to be avoided at this time, basing
BIDU - could've been purchased around $337.21 on 8/27 and stopped out on 9/1 for 5% loss
ARST - broke the 50 dma several times and therefore would be avoided
MED - could've been purchased around $18.27 on 10/2 and survived 5% stop loss (now breakeven) - current price $22.38
VIT - 5% loss, then avoided (too wide and loose)

Scorecard:
4 - 3 - 1

4 winners up 26%, 15%, 19%, and 22% - each stock has been up at least 20% at their high since purchase
1 stock still held down less than a percent
3 stocks stopped out for 5% loss
1 stock sold for breakeven

Adaptation

geocurt@gmail.com — Sat, 10 Oct 2009 01:17:00 +0000

We've been having some interesting discussions on the Trade to Retire forums and I wrote a post there that I'd like to put here on my blog as well as it highlights my thoughts and approach to this currently rally.

Here's how I handle market analysis - it's one thing to have an opinion about the market (it's gone too far too fast, etc.) but it's another to act (trade or not trade) on that opinion. I try to separate the two. If the market is in an uptrend and I see a stock I like in a position I like then I will buy it - whether or not I think a rally is extended. This probably adds to my risk, but I'm just not good at picking market tops, so it's best for me to let the market posture and/or my three strikes rule handle that for me.

Now on the other hand, I do think it's important to adapt to the current environment. Standard CAN SLIM buy points have not worked for weeks. They just haven't. The stocks have closed below the buy point, shaken out holders, then turned and advanced. They advance 10 or 15% from traditional buy points and pull back to a moving average instead of the 20% one could historically count on. I saw this through the middle of the year (it was a very expensive lesson) and since I've adjusted my buying strategy I've managed to survive for a few weeks. I would NOT attempt any buys on breakouts/new highs at this time UNLESS the 50 dma/10 wk line were within about 8% of the buy point - that would allow me my standard stop order while giving me the cushion for the stock to pull back to support ((HMIN) did this).

Better yet, I'm looking to buy around the 10 wk line if I like a stock. I think (PWRD) is setting up perfectly for this, and I will look to purchase this if it dips under $42 (assuming nothing else changes). This position would allow for a tighter stop around 4 or 5% and let the stock work up the moving average or just stop out if it can't hold that area. This is how I bought (EJ) and it allowed me to ride out a lot of volatility.

I've decided to conduct the following exercise. I will go back to August 21st on my watchlist and pick my favorite five stocks, then look at the charts from that day and see what would've happened if I'd picked them up around the 10 wk line (within a percent or two - I bet most or all of them touched off this line since August 21st) with about a 5% stop loss order. I'll bet about 75% of these trades would've yielded a 20% gain, possibly before the stock even made a new high. Furthermore, I'll be I could still own the stock today and be in good shape - in fact I do still own (EJ) from that type of purchase around that time.

Short version is this - I think in the current market, traditional CAN SLIM thinking has had me buying when I should be selling (around the new highs) and selling when I should be buying (stopping out around the moving averages). I don't think it's ALWAYS going to be like this and I firmly believe in CAN SLIM, but I also believe in reviewing past trades and adapting as necessary.

Stay the Course

geocurt@gmail.com — Tue, 06 Oct 2009 16:56:00 +0000

I'm not posting to this blog much these days, and that's a pretty good thing.

In late August I drew a line in the sand and started over sticking to my rules. Since then I've gone 0-1-1, and I currently hold two positions. That's not tremendous results on the surface, but looking at it relatively shows some improvement.

Simply comparing my results over the last two months to the rest of the year shows progress. I've held one stock, (EJ) since 8/24, which embarrassingly is probably some kind of a record for me - my positions usually don't last that long! The stock is up close to 20% for me at this time, and is breaking out of a second stage cup with handle pattern today which allows me the opportunity to hold it for 20% more gain.

My other stock, (HMIN), is also beginning to work a bit.

What's really encouraging is that I've held these stocks through an extremely turbulent market. I've done so not through some great insight or market wisdom, but just from following my own rules. So far, these have worked. Buying close to the right time and giving these stocks the full 8% stop loss has kept me in the market through some violent shakeouts. Now, of course this could all turn tomorrow but for now it appears to be working.

Most importantly, I've had next to no stress about the market. I enjoying talking about it on the forums associated with this blog, but I don't have any emotional baggage directing my actions with regard to my positions. I buy them and I leave them alone. Sure, I have some fear that I'll fail again - but not nearly like I have in the past, and I'm quite certain I don't act on this feeling.

So I guess all this can be summed up as 'no news is good news.'

Sell Stop:(FUQI), New Buy:(HMIN)

geocurt@gmail.com — Sat, 26 Sep 2009 22:55:00 +0000

I never got much more than 5% in my position in (FUQI), and on 9/18 I stopped out for an 8% loss - the first since my 'new beginning' this year. I'm now 0-1-1.

I took that money and invested it in (HMIN), another small Chinese stock I've been watching that had actually broken out a few days earlier. It was back within a percent of the buy point so I picked it up there.

Having said that, I will hold (EJ), which now has the stop at breakeven, and (HMIN) until they profit or stop out, but after that I will not reload until I see the market acting differently. Right now I just don't see leading stocks leading, breakouts are having trouble, and it's just very, very hard to make a profit. That's not the time to have money in the market.

I don't want to get in the business of predictions, but I think it's reasonable that the market needs to correct before we'll have another nice opportunity. Until then I'll keep watching and do my best to be ready the next time there is a chance to profit.

What I'm Working On

geocurt@gmail.com — Sat, 12 Sep 2009 18:11:00 +0000

In addition to my daily homework on the market and my positions and watchlist I try to make some time to continue reading books that may help me improved. I've been a bit 'stuck' on Trade Your Way to Financial Freedom for some time. It's academic and a bit dry - though I think it's a worthwhile read.

To greatly oversimplify the content, the book is aimed at helping investors develop as mechanical a system for trading as possible. In fact, many of the topics are directed at program trading (automatic computer trading), though the principles of disciplined trading apply just the same to an individual trading manually.

While I do not necessarily intend to program trade, I would like to take what I can from this book and apply it to my trading with the goal of becoming more disciplined. Additionally, I may have found a nice convergence between a skill I need to develop for my career (I'm a developer for an Identity Management application) and my trading career. I need to learn a software language to further my career. I'm going to be learning JAVA as this is the language most commonly used in my area.

I can put this to use as well in my trading, as I recently had an idea spring out of a frustration I have with IBD's Custom Screen Wizard. What is lacking from this application is any method to gather or store (in a time efficient manner) the information from the screens. As important to me as the current data is, I find historical data equally important. I would like to graph and trend the information on stocks like the price when the enter my screen, how long they stay on it, and the price when they drop off of it. I could do this by exporting the data into spreadsheets every day, but that would take too much time.

What I plan to do is write an application that will automatically execute my screens each weeknight and load the data into a database. I'll then come up with ways to manage and display this data so that over time I should be able to draw some mathematical conclusions about the potential for a stock when it makes one of my screens. Eventually I would hope that I can translate this into a mechanical trading system. For now though I've got a lot of work to do learning a new programming language.

I also ordered another book I want to read - Jack Schwager's Market Wizards. I need some inspiration. I think I'm doing well now but I want to read about some people who've made it - sometimes it's hard not to get discouraged after a string of failures, and I find these stories help get my positive outlook back.

New Buy:(FUQI)

geocurt@gmail.com — Sat, 12 Sep 2009 13:16:00 +0000

Early this week I took a long look at (FUQI). I reflected on some of the lessons I've learned over the past two years: I tend to overtrade, I often look for the next big winner when I already have a proven winner right in front of me, I lack patience, I lack discipline.

With this in mind I decided to chart my watchlist of leading stocks in a comparison mode (my dailygraphsonline.com subscription has this feature), using a couple of different date ranges. First I compared the stocks (I have about eight on my watchlist) from the start of this rally in early March. I found that (FUQI) and (STEC) had outperformed the rest of the stocks by a significant margin. Then I ran the comparison from a starting date of August 21st, which is the first time IBD changed the outlook to 'Uptrend Resumes' after the rally had hit a rough patch.

The picture is slightly cloudier there - (ARST) has been the top performer since that time, mostly because of a nice breakout last week. (ARST) has had a habit of failed breakouts, but so far this one has held it's gains. After that (FUQI) and (STEC) were close second and third, and then came the rest of the pack.

The reason I ran both date ranges is that I wanted to see which stocks have been the best of the entire rally, and which are showing recent strength. The answer is that (FUQI) and (STEC) fall into both categories, so this is clearly where I should focus my attention. The stocks that have led will most likely (but not always) continue to lead absent some material change.

I already own (EJ) and it's acting well, but I had enough capital for a second stock so instead of watching (HMIN) - which I do think will do well - I decided to put that money to work in (FUQI) if it broke to a new high. It's rebounding from a trip to the 50 dma so this is a valid purchase, though I now try to buy rebounds close to the moving average, not at a new high. In a stock that has done as well as (FUQI), I'm willing to risk buying after it's already made some progress.

The breakout on Wednesday was actually a failure. The stock reversed and closed lower on above average volume. I had a number of thoughts about what to do during the day on Wednesday as the stock price dropped lower and lower. I thought about putting my stop loss below some key levels and cutting losses short. Then I recalled that all the meddling I've done with my stop losses this year has cost me a fair some of money. I followed my rules, left the stop loss order at 8% and just let it go.

Thursday (FUQI) close up a percent, and Friday up 4% after being up as much as 8% intraday. It's certainly not acting great, but I'm green on the position and that beats being red. This stock has outperformed every other stock I've seen in this rally, and I'm simply betting that it will continue to do so, and that if I'm patient with it I'll profit.

(EJ) has woken up a bit, and early morning Friday my position was up 10% so I've moved my stop loss to break-even according to my rules. That leaves only the 8% on (FUQI) currently at risk.

The market itself continues to act very strangely. It was up on good volume this week, but I didn't see leading stocks acting the same way as the indexes - the leaders tended to trade on average to below average volume. This is certainly something to watch, but the system should take care of me and get me out if the market begins to falter.

Sell Stop:(STEC)

geocurt@gmail.com — Fri, 04 Sep 2009 17:23:00 +0000

Monday (STEC) advanced to $41.74 intraday, meeting the 10% threshold from my purchase price. Therefore I moved my stop loss up to breakeven. Before the day was over I had stopped out as the stock staged a huge volume reversal from a new high to close down around 8% (if I remember correctly).

I don't know what the stock will do from here, but I'm very happy with this new rule. If a stock returns to a proper buy point after being up as much as 10%, I'm just not willing to let that trade turn into a loss. Sure, I'll miss some winners this way - but if I've learned anything this past year it's more important to focus on not losing than it is to focus on winning - this is contrary to almost everything else I've learned in life.

My other position, (EJ) came within 3 cents of my stop loss order, found support around the 50 dma twice this weekend, and is now knocking on the door around $20. Chart looks good to me, fundamentals look good to me, we'll see what happens.

As for the overall market, once again we're in a strange position. Distribution days have built up to the danger zone, leaders have seen some pressure, but the market has not given up and succumbed to a correction, yet.

It's a time for caution, not a time to be aggressive.

Back in the Saddle

geocurt@gmail.com — Tue, 25 Aug 2009 14:31:00 +0000

Yesterday I purchased two stocks - (EJ) and (STEC).

(EJ) made my High RS/EPS screen a couple of weeks ago so I've had my eye on it. I interpret the chart as a short, ugly cup that formed beginning the week of 6/12 and broke out on just average volume the week of 7/17. The stock advanced 40% and then corrected sharply last week with Monday's sell off, bringing it all the way back to the 50 dma.

What got my attention was the stock's action the rest of last week. While other leaders recovered in mostly below average volume, (EJ) was up on 150% average volume Tuesday and Wednesday and above average Thursday and Friday.

Based on this relative strength I purchased (EJ) about 15 minutes after the open yesterday at $19.30. Since then it has pulled back in average volume yesterday and above average volume today, so I'm in danger of stopping out. Per my rules I have the stop order at 8% below my purchase price and will target a 20% gain on this position.

(STEC) caught my attention with a massive volume move to the upside straight from the open. I missed the move and played it cautiously, holding off on any purchase throughout the day to see if the gains held. They did, and I purchased at $37.61, about 2.5% above the $36.69 pivot. So far the stock is following through to the upside again today. (STEC) is the clear leader of this rally, and should be bought at any reasonable opportunity. I intend to look for a 20% gain on this purchase but will evaluate the chart pattern further to see if this was a 10 wk pullback buy or a second high tight flag pattern. The concern still remains that (STEC) is trading at double it's 200 dma and should be due for a pause or a pullback.

Uptrend Resumes - What does that mean?

geocurt@gmail.com — Mon, 24 Aug 2009 01:00:00 +0000

IBD has changed the Market Outlook to Uptrend Resumes based on Friday's follow-through action.

It's important to take a moment and evaluate the past couple of weeks and the current market health.

The leading stocks that I follow are, for the most part, extremely extended. Many have more than doubled since their initial breakout, and are even further past their 200 day moving average. Most are trading at prices four times or greater their 52 week lows. The market could use a break to consolidate these gains.

However, I won't carry over this opinion to some speculation about the future action of the market. The current situation is factual - the market still has five distribution days but after last Monday's selloff the indices responded in nothing but strength.

Still, the quick turnaround has not presented many quality buying opportunities. On the contrary I'm left to consider some leaders that have found support at the 50dma - not the ideal setup but one can have some profitable trades here.

I'm going to do something I haven't done before and post here a quick evaluation of my watchlist:

(STEC) - This stock has found support near the 10wk moving average and could be on the way to forming a three weeks tight pattern. It's hard for me to ignore the selloff a couple weeks ago on the highest weekly volume ever, but equally hard to ignore the way this stock has led the market. Will continue watching.
(EJ) - In a position to purchase off the 50 dma - could be bought immediately as it's already had two high volume up days off this line. Lot's of overhead but the RS line looks great.
(FUQI) - Held the $22 buy point in Monday's big selloff and closed in the upper portion of the day's range. Since then volume has been quiet on up days. This stock looks like it has work to do yet, and could probably use a trip to the 50dma.
(PWRD) - Monday's selloff took it to the 10wma and since then the price has rebounded well, but no volume to confirm the move.
(BIDU) - Coming straight off the 50dma, but volume is absent.
(ARST) - Has formed a four weeks tight as volume dries up. This heartbreaker continues to tempt me. Earnings are 9/3 so I will watch but not buy.
(VIT) - Living on the 50day line - maybe lacking institutional sponsorship?
(UTA) - See (VIT)...
(GMCR) - Removed from the watchlist for now.

So that's it. I'll see how the market opens tomorrow and may take a position in EJ while keeping an eye on the rest.

Back to Cash

geocurt@gmail.com — Fri, 21 Aug 2009 13:41:00 +0000

A bit of a delayed post here. Monday's market wipeout took out all of my stops and put me 100% cash. After the day's action IBD called the Market in Correction.

I'm not going to do anymore 'self-flagellation' as my friend puts it. I've made every mistake you can make investing. I've analyzed it and talked about it here.

Actions speak louder than words and that's why I'm not posting any big promises here anymore. I've refined and documented my rules and they are sound. All that's left is to watch the market and follow the rules.

On a positive note, I'm amazed at the response I've gotten to the forums I set up. It turns out people actually read this blog, and almost everyone who contacts me expresses that they can relate to my situation and feels we have quite a bit in common. It certainly makes any serious undertaking easier when you meet others in a similar situation - and it's great to see that there are a number of us all trying to succeed in this venture.

I believe we can do a great deal to help each other along the way.

Not for the Faint of Heart

geocurt@gmail.com — Thu, 13 Aug 2009 23:46:00 +0000

(UTA)'s earnings news came out just fine last night, the stock opened higher and then it proceeded to tank, eventually closing down over 10%, right back to the $13 level. The eight week hold rule is either created specifically to ride out this kind of volatility, or it's just setting me up for disappointment. We'll see.

Aside from this stock there are a couple that could be setting up three weeks tight patterns - (BIDU) and (ARST) specifically. (BIDU) has been strong, (ARST) a bit hard to figure out this rally.

In fact, I have to admit I'm a little challenged overall in this rally. I've stopped out on (GMCR) which had the look of a big winner. I've bungled (FUQI) and (STEC) several times and continue to watch them lead the market while I don't own them. I feel at a bit of a crossroads and want to make any new purchases very carefully.

I have to admit investing is harder than I thought it would be.

I'm going to try something new and set up a private forum for investment discussion. There are a couple of readers of this blog who've contacted me and we enjoy sharing ideas and opinions on stocks. I find this very helpful and want to use a forum because once you get more than two people email isn't a great way to carry on a conversation. I'll post a link to the forum here, and see if there's any interest from other readers of this blog (if there are any besides my Mom).

Sell Stop:(GMCR)

geocurt@gmail.com — Wed, 12 Aug 2009 15:06:00 +0000

Following the new rules I stopped out of (GMCR) today at break-even - it had advanced 10% so that's where I had my stop at $65. It bounced off the $63 level and looks to be coming back, but that's fine - the rules are in place to keep me from losing money.

At this time I still own (UTA) and (ARST), the former comes out with earnings tomorrow before the market opens. As I've learned this year, the key is going to be finding one or two winning stocks and sticking with them. Maybe (UTA) could be this stock - if not I'll look for the next opportunity.

Been Some Time...

geocurt@gmail.com — Sat, 08 Aug 2009 13:23:00 +0000

I've taken just about a month away from posting here while I've tried to regroup. I started writing this blog to improve my trading results, and at a certain point it was doing the opposite - the idea of writing about my failed trades day after day began to lead to more failed trades. Trade review is very useful to an extent, but in a case like mine where I basically derailed, I don't think there was any purpose to beat myself up several dozen times. Instead I stepped back to look at the bigger picture, see the forest rather than the trees, so to speak.

The first thing I recognized, again, is that I'm extremely successful identifying winning stocks. The following is a list of the stocks I have owned at some time this year (some I've owned more than once):

(SNDA)
(TNDM)
(ARST)
(LFT)
(FUQI)
(TSRA)
(PWRD)
(GMCR)
(STEC)
(VIT)
(UTA)

There is no question this is an outstanding list of stocks, representing most of the top leaders of this rally. I'm not bragging, on the contrary I managed to filter down to a list of the best stocks in the market and still lose money! As bad as this is, there's a positive side. I know my problem is WHEN I'm buying stocks, not WHICH stocks I'm buying. That actually gives me a great deal of hope that I can improve my results.

So this is what I focused my review one. I wanted to know in general where my timing was wrong.

I found that my success rate on breakouts from bases was fine. If I'd only bought breakouts from bases I would've made only a few trades and I believe all of them would've been profitable - two of them massively so. Which brings me to my second realization.
On base breakouts I need to observe the 20% in three weeks rule. This rule states that if a stock advances 20% in less than three weeks it has the potential to be a big winner, and you should attempt to hold it for eight weeks. If I'd done this, I would've doubled my money on (SNDA) and (FUQI). Which brings me to point three.
Stick with the 7-8% stop loss rule in most situations. Early in the rally the market gave a very negative sign by logging a distribution day. I moved my stop loss orders up and stopped out of (SNDA) and (TNDM), both of which went on to be winners. In my fear of suffering a loss, I cost myself the kind of gains that make a year for a trader. By not allowing these purchases to work I forced myself to allocate the money elsewhere, often in less successful trades. Which brings me to point four.
Money is made in the market by sitting and waiting. I will not be successful from making a lot of small winning trades, but from finding big winners and letting them work until they show signs they are not working anymore. This is closely related to point 2, different side of the same coin you could say. The point is that by leaving my capital in a winner, I don't have to risk it in another stock which is an unknown quantity.
Buys when a stock bounces from the 50 dma are TOUGH. Buying even the best stocks at a new high after they've found support at the 50 dma has just not worked for me in this rally. They've tended to advance around 10% and then retreat. I suspect this is because the support lines are so far below the stocks, which have made rapid advances, that they are 'tired' by the time they make a new high. Whatever the reason, based on my experience I've changed my approach in two ways I'll outline below.
Once a stock has advanced 10% from the proper buy point, I'll move my stop order to the proper buy point. If a stock advances 10% I don't want it to turn into a loss. Obviously I must buy as close to the proper buy point as possible for full effect here.
I will buy a stock that has found support at the 50 dma if and when it closes above the 21 dma on 150% average volume or greater. I will buy at the end of the day if the close above the 21 dma is certain, or I'll buy the stock the next morning. I will only look for a 20% gain on bounce buys.
I will buy a stock that has a breakaway gap up opening to a new high on earnings news with massive volume no matter if there is a pattern or buy point. This setup is highly effective from what I've seen, and is therefore worth buying into. The stop will be 8% or 50 cents below the low of the breakaway gap day - whichever is higher.

To the best I was able to determine reviewing my activity this year, the simple changes above would've produced four 50 dma bounces stopped out at break even, one 50 dma bounce for an 8% loss, two 50 dma bounces for a 20% gain, and two base buys for 90% and 120% gains respectively. Obviously the last two are the trades that would easily have made my year, but what else is important to note is that I would've only had one trade for an 8% loss.

I don't want to overstate the results of a review because it's impossible to revise history. I can apply all these rules to past trades but in the moment it's never that easy. Nonetheless, I must continue to work toward a more mechanical and repeatable method, and I think this is another step toward that end.

I've already applied this to my current portfolio. At this time I own:

(GMCR), (UTA), (PWRD), and (ARST). The first three were bought from bases. (UTA) has qualified as a potential big winner and I have the stop in at $12.70 and otherwise will try to hold the stock until 9/22. (GMCR) and (PWRD) must advance further on Monday to qualify as potential big winners - (PWRD) may do this as it releases earnings on Monday. Otherwise I will target both for a 20% profit. (ARST) was a purchase off the 50 dma and I already have my order in for my 20% profit target. I did own (VIT) which had advanced 10% and then stopped out, no loss as per my new system - nice not to have a 10% gain turn into a 5% loss!!!

Well, that's it for tonight. we'll see what the market has in store for us tomorrow.

Trade Review:(SNDA)

geocurt@gmail.com — Sat, 18 Jul 2009 00:31:00 +0000

This one is pretty easy. I managed to string a couple of winners together and my ego crowded me out of the room. I got impatient and arrogant, and bought (SNDA) on 6/3 as they released earnings to ho-hum response from the market. It was nowhere near a sound buy point, and certainly not the kind of massive move on earnings that would forgive buying a stock without a sound buy point.

I stopped out of it for a loss a week later. This would turn out to be strike one.

Trade Review:(FUQI)

geocurt@gmail.com — Thu, 16 Jul 2009 01:04:00 +0000

(FUQI) might be the most difficult trade review I have to do, and it was a winner.

What makes it difficult is that strictly following CAN SLIM the stock didn't have a base and should not have been purchased - however, it's been one of the top performing stocks of this rally.

When I bought (FUQI) at the end of may, the chart really did look pretty ugly. The stock had formed a long cup that was far too deep, and it had formed this pattern under $10 making it effectively 'not count.'

What I saw, however, was massive volume on the right side of the chart as the stock climbed out of this deep base. Along with this the RS line was rocketing. I simply couldn't overlook these factors and bought the stock as it cleared a prior high point at $11.75.

I've seen some ugly charts turn in the best performances of this rally - (FUQI), (STEC), and (PWRD) are good examples - and I'd be willing to buy an ugly chart again IF it has the obvious signs of MASSIVE accumulation that these stocks demonstrated.

Of note also on (FUQI) is that I sold early. The stock was behaving very well and showing great strength, and I cashed in for a 20% gain. This stock had acted well enough that I should've allowed it more time to work, at least to let it test the 10 or 21 dma before selling.

Trade Review:(LFT)

geocurt@gmail.com — Wed, 15 Jul 2009 18:57:00 +0000

Looking at the chart of (LFT) today I can't find any reason why I shouldn't have bought it when I did. The stock found support at the 50 dma on 4/28 and bounced off of it immediately, closing at the upper end of the day's trading range on above average volume - pretty bullish behavior. The time leading up to the pullback showed (LFT) as a true leader under heavy accumulation. The relative strength line was leading. This was it's first pullback to the 50 dma which gave it good odds of succeeding, nonetheless the breakout failed.

Unless, of course, one bought the stock right at the 50 day line.

This is why I continue to examine this as a new strategy. LFT could've been purchased on 4/28 as low as $20.30 - the buy point above the prior high was around $26 - the stock had already advanced 30% before I purchased it! It went on to $28.74 before heading right back to the 50 dma and stopping me out for a loss.

The more I look at leading stocks the more it seems that I could do better trading the moving averages at the line rather than at the new high. Some stocks will certainly fail to hold and stop out, but the others should be good for a 30 to 40% gain rather than the standard 20%. In general 50 day bounces seem to be good for around 10% above the prior high before they run into trouble.

So to summarize this purchase I like the stock pick but think that I can improve my timing. I think I can trade more aggressively around the moving averages and get better results, though there will be a learning curve involved.

A reader made an interesting comment in my last post so I'd like to clarify - I don't intend to stop buying first and second stage breakouts of good stocks. I'm only looking to adjust the method I use to buy on the moving average support purchases.

Continuing Review:(ARST) and (TNDM)

geocurt@gmail.com — Tue, 07 Jul 2009 02:10:00 +0000

The next stock on my list for review this year was my first purchase of (ARST) on 4/15, followed by addon buys on 4/20.

One interesting note about this trade is that I did not buy the stock on the actual day it cleared a new high on a bounce off the 10 wma - I purchased it several days later after it consolidated gains from the big move. In fact, the stock traded down to $14 for about a week until the 10 dma caught up to it and it made it's next move to $16. Within another two weeks, I had my 20% gain and took profits. In this case that was exactly the right move, as (ARST) pulled all the way back to the mid-thirteens over the following couple of weeks.

So, what can I learn from a winning trade?

Well, for one thing on a closer look the stock never really touched the 10 wma line, I really bought it coming off the 21 dma. Because I bought at a new high instead of near this moving average, I'll look back on this purchase as lucky. In the future I would rather locate my purchases right around the moving average line with a tight stop. I would, in fact, not mind taking several runs at a stock with these tight stops around a moving average line. Three to four sell stops at 2% still keeps me within my 8% maximum loss threshold - it's not ideal but it shouldn't happen often.

Additionally, buying around the moving average should provide a better return if the stock can go on to new highs. I've seen good evidence that leading stocks can be purchased at the 21 dma and held until the stock dips back below this line. This method of gauging support would've allowed for healthy gains in most of this rally's leaders. In fact, as I've said before, I'm starting to view the moving averages as a better target for purchases than the pivot points outlined in the CAN SLIM system - they certainly seem to offer better support. The same is true for a 52 week high or all time high - I love to see a stock break above all prior resistance - this does not always occur with a cup with handle and other patterns.

So while I might've gotten a better price for (ARST), nonetheless it was a sound buy of a strong stock and I took profits at the correct time. This was a successful trade.

My purchase of (TNDM) on 4/17, on the other hand, ended up a 6% loss three days later.

This was a purchase from a bounce off the 50 dma. The stock never quite got to the 50 dma so I most likely could've purchased it crossing the 21 dma at about $23.25. If I'd purchased the stock this way and had my sell stop at 2% below the 21 dma, I would've stopped out with a slight profit. Obviously, if I can change my system so that my losers are profitable that is ideal.

Otherwise, (TNDM) is what I'd classify as a good loser. I bought it at the right time from a true buy point and it was a strong leader. I don't regret the buy as it was within my system.

As I'm thinking through this new method I'm remembering my intense need to be right. I think I need to cut myself off from the possibility of swinging at a stock several times around a moving average (even though I just said above that this could be acceptable). I'm too likely to flail about at some stock I am positive is the next (DELL).

Instead, I'm going to add another rule. If I stop out on a stock, I must take off five days before I can purchase that stock again. I should be able to remove this rule when I have more experience, but for now I think it's a good safety valve.

I also think that I should avoid buying off of a moving average once a stock has closed below it. At that point I'd like to watch for a base to form or for the stock to make a new high before I'll believe it's ready to move again.

I think that's all for now, I need to translate these thoughts into a list of buy rules that I can reference at any time - as I've shown I need to work off of a checklist to keep myself honest with my trading.

Sell Stop:Everything

geocurt@gmail.com — Mon, 06 Jul 2009 14:27:00 +0000

I've stopped out of everything, I'm 100% cash and I'm back in the penalty box for three weeks.

Might as well quote a friend here:

"you are talking the talk but not walking the walk..."

In short, I made two huge mistakes:

Ignored my penalty box rule - thought that I knew better than the system and didn't want to miss a move - this rule would've saved me my last 4 failed trades
Put far too much capital at risk. I've added a spreadsheet to make sure this number never exceeds 3%

Now the question is, will I keep developing a sound system and keep failing to follow it.

Sell Stop:(GMCR), Continued Review - Focus on Impulse and Risk Management

geocurt@gmail.com — Sun, 05 Jul 2009 18:06:00 +0000

Happy Independence Day to any proud American citizens out there!

Thursday my addon buy for (GMCR) stopped out for a loss. Rather than address this trade specifically, I'll include it from a philosophical standpoint in my continued review of this year's trading. I believe I've been able to filter down to some key points that will further force me to manage my risk better.

First of all, I believe I need to better manage my impulses. This is more difficult and not as obvious as it sounds when it comes to trading. Part of good trading is recognizing when a good stock is making the right move and being willing to buy it at that moment - likewise on the sell side. However, this is a very fine line to walk. I can easily be whipsawed by fluctuations if I misinterpret them as signs of a trend.

Secondly, when I'm buying off a support level like a moving average, I would rather buy close to the moving average with a tight stop than to wait for the high volume move up off the line. Maybe I'll change my mind about this after more time, but from what I've seen this will put the odds more in my favor.

Most importantly of all, I need to manage my risk better. I put too much capital at risk in the market at any given time. When I take several new positions within days of each other, none of them has time to move in the right direction and give me a profit cushion, allowing me to raise my stop loss order. This means I have 5% at risk in several positions, effectively putting 5% of my total portfolio at risk at one time. With margin, this number can get even larger. From this point on, I will have no more than 3% of my capital at risk at any given time. I may eventually lower this number. I will not be able to take new positions until the positions I hold are working - this alone should help me tremendously.

As far as the trade review goes, the next one on the list for me to discuss is just downright embarrassing. This was my attempt to short the S&P 500. Three times.

Once I saw the distribution day early in the new March rally and realized this meant there was a good chance the rally would fail, I stupidly attempted to short the S&P 500. There's not much worth discussing here, I've been investing for only two years and I have absolutely no business shorting the market. This group of trades comprises half of the money I'm negative on the year.

With my next post I'll begin to investigate some trades I might be able to learn more from than this simple and obvious mistake.