Trend Notes: 8/31/2006

It's recording day! August sucked! Woohoo!

I finished the month up 1.18%, which is not bad until........DJW5K and S&P500 both posted 2.13% gains. Booooooooooo! Actually, my results are a bit deflated because of the giant special dividend removed from the value of my account that will be returned next month, but even with that I was thumped fairly handily. One month does not a lifetime make, unless you're a housefly or something.

Going forward, I'm going to shake things up just a bit. First, I need to stick to my "sale plans" and not get impatient. I dumped CNST and FE before they stopped out, and I have a bad feeling it was the wrong move. CNST made a powerful move over the past two days - the first two days I was not a holder - out of a sideways consolidation pattern. That's a healthy pattern and I should have held. Granted, I got spooked by the huge spreads, and those will continue. But, having an explosive little guy around could be a portfolio maker. The book is open on FE. It may or may not turn out to be a good sale, although sticking with the rules would have been best no matter what. I should have pushed the stop up aggressively instead of just selling.

Second, I'm going to apply a few simple fundamental tests before pulling the trigger on new positions:

Rule #1: I want to avoid sluggish big old companies with huge floats. I think I'll skip companies with floats over 500 million shares unless they've proven they can really move when necessary. I need companies that can really run if I'm going to put a hurting on the market.

Rule #2: Profitability and growth. I need companies that make money and that are growing. I'll look for profitable companies with 20%+ quarterly year-over-year net income growth.

Rule #3: Institutional ownership. I want to see 70%+ of the shares owned by institutions.

Hopefully I can get mostly quality, explosive companies in the portfolio as some of the sluggos exit. This longer-term stuff is a work in progress, so I'll likely find ways to adjust in October, too.

Here's the report on individual stocks held:

LH: The run may be over. I'll set an aggressive stop. 68 is looking like it might be an area of support. Bulls make money. Bears make money. Pigs get slaughtered. I have almost 12% of gain built up in this one in less than three months.

ECL: The past two days haven't been wonderful from a price perspective, but the volume leads me to believe we may be setting up for another upleg.

OKE: Strong stick today. The stock is oversold and volume has been slowly picking up the past few days.

RAI: Volume is back on the upleg.

CXW: Another whose run may or may not be over. It tends, though, to trend sideways and then jump all at once.

TXU: Spent the entire month of August in a flat, narrow consolidation pattern. We'll need some volume poppage very soon.

HCR: If it bounces off 52 again, Ill call it support and move the stop up.

LNT: Nice price action lately, but volume is not encouraging. This one is getting long in the tooth. If it doesn't break out soon, I'll set an aggressive stop. 36 should be a decent support level.

SBIB: Winding up to pop again.

XOM: I fear we're 2/3 through a head and shoulders pattern. There is now a lot of red to fight through.

CMCSA: I'm hoping it is carving out a bottom and a nice steady uptrend will develop.

LTR: Slow, steady move up should be consolidated. It should not need long to turn ownership over enough to continue moving. A new stop around 38 would make me happy.

GIS: I'll start adding this one now. It is near the top of the channel. I'm expecting sideways/down action for a bit.

Stats @ August 31, 2006. My August was +1.18%, Monthly average since 6/1/06 +.46%. DJW%K August +2.13%, with monthly average of .71%.

Bleh.

Here's to a better September!

A little action today, and thought changes

I ended up punting FE late today, and ALJ did get stopped. FE was a small 1.6% gain and ALJ, net of the pending dividend, was a loss of almost 3%.

I believe I am in need of a "youth movement". In looking through my portfolio and paying special attention to the slower movers, it appears I have a large number of huge companies with slow growth and very large floats. There is not likely to be a huge, quick gain to be had with these. If I am going to beat the market, I need stocks that could potentially return 20%+ over a 12-month period. Some will do worse, some will do better, but I need to at least give myself the opportunity to average 20% annualized growth. I have a number of stocks that are unlikely to do that: XOM, CMCSA, GIS, ORCL, BUD are some that are on my watch list. I'll let them run their course so long as they don't get too comfortable. In the future, I'll try to take care to get into positions with smaller floats and more Quarterly YOY growth. 7% growth over at BUD probably isn't going to cut it.

ALJ - I wasn't paying attention

Yesterday I said I hoped the big volume selloff was a selling blowoff. Well, what I failed to remember was that today is ex-dividend day, and there is a huge special dividend being paid. That'll do it!

With the dividend, the stock price got down fairly close to my stop price. I don't move my stops down when a dividend is deducted (my broker moves it, but I put it back). The stock, so far this morning, is continuing on down and may reach my stop price.

One thing: This dividend essentially comes out of the value of my account this month, but gets returned to me in the form of cash next month. With the size of the special dividend (2.50/share), this makes a difference on a percentage basis.

Trend Notes: 8/29/2006

Days like today drive me crazy! I was up on the DJW5K all freaking day long by 20 points (100 pts makes 1%), and in the last half hour the market decided to back up the truck and wound up passing me by. Crap! I love finishing with a win when the market loses. Oh, well. Not that it matters in the great scheme, but still............

I sold one stock today - CNST. It didn't get stopped out, I just decided to sell it. This one was a gamble on a tiny little guy. Well, the volume dried up and the spreads were very large. Bid 4.88, ask 5.00 was not uncommon. If it had dropped and triggered my stop, I was likely to lose way more than I wanted. So, I took a nice 8.35% two-week gain off the table. I'll now have a little dry powder available about Friday.

Thursday marks the end of the month. I'll be looking at the portfolio to determine whether I have any stagnating positions that need to be harvested for additional capital. FE, are you listening???? Anything held longer than one month that is just not making it happen will be subject to termination.

Speaking of the end of the month, it has been a real good one for all concerned. Unfortunately, I am lagging the market by a bit as of right this very second.

So, how have the past couple days treated the portfolio? Well, here are the answers. Positions newer than three weeks old are mentioned as-needed. The others are all here:

LH: Consolidating gains, volume increasing on new upleg.

ECL: New closing high today. Stop moves up. Very nice volume pattern. Should be more upside here.

OKE: Upleg appears to have begun, but volume has not followed through.

RAI: More volume today may signal start of upleg.

CXW: More churn the past couple days. Hopefully pounding out a new low.

TXU: At the top of the consolidation pattern. Will it break through this time?

FE: If some sort of shape doesn't take form by Thursday late, I'm going to close this position. Stagnation does me no good. I'm just not confident of its direction.

HCR: New upleg is taking shape. Hoping for volume to pick up.

LNT: Not out of the woods with this one.

SBIB: If this moves any higher from here, I'm calling a new high and moving the stop up. There is upside room in its current channel.

XOM: In the midst of a downleg. Hammer stick today may signal a bottom. This would be a good stop mover if we do get a bottom here.

CMCSA: Possibly starting a down leg today. Fell on a good day for the market. There was not a ton of volume pushing the upleg. I'm not overly confident in this one.

ALJ: I really hope today was a selling blow-off day.

LTR: Volume is pushing the handle nicely.

PLCM: New high today, stop moves under the low at about 23.

Happy Trading!

Solid stuff today

The DJW5K was down most of the day. It poked its head up for a bit late, but ended up losing a bit at the close. I had a very good thing going the entire day and wound up with almost a 1/2% gain. I'm happy my stocks were able to do their thing today despite a market that just couldn't get going. It is an early sign that my portfolio just might be full of strength.

The past few days I had a bunch of positions that were pretty clearly either needing a correction, or were in the throws of the downslide from an earlier bullish move. So, the past few days, I've had very few, if any, stocks that looked like they wanted to - or should - go up. And I got killed by the market. But that was okay. I kept a positive outlook on the portfolio, despite getting beaten up, because it just looked like, regardless of what the market did, I had to go down. Consolidation and normal corrections are healthy, and my guys needed a break!

However, today was different. Last night I put up narratives on several stocks that looked like they were forming the bottom of their corrections. I needed to start seeing some signs of strength soon, or things could get ugly. I was cautiously optimistic that I'd get that strength given what I was seeing. Well, today they followed through. On a blah market day I saw strength, or at least a continuation of a bottom move, from several stocks, including LH, SBIB, PLCM, ECL, OKE and ORCL. The way the portfolio is positioned, I'm expecting a strong close to the month.

Three stops were moved up on new highs. They were CMCSA, GIS and BUD.

Good luck

Trend Notes: 8/24/2006

Trend Notes for Thursday, August 24, 2006

LH: I said on Tuesday this one was toppy, and it has done a bit about it. The move down, so far, isn't much, but it is enough to set a new stop if we make a new high. It looks to me like today may just mark the bottom of this very slight correction. very slight corrections have been the norm of late.

ECL: Just as I suspected, the bottom of the correction appears to be in place. a little volume build to push the next leg up will make me a happy camper.

OKE: I don't know what to think about this one right now. It formed an ugly looking shapeless top and has been sliding since. With any luck, it will arrest its correction. The stop price is only 1.4% from today's close, so it is teetering. Volume isn't giving away any secrets.

RAI: In the midst of a down leg, volume is drifting lower. The pattern looks terrific. I'm hopeful we're building a big one here.

CXW: Another down day on declining volume, the stock is just above the intermediate -low from a few days ago. If we can get this down leg turned around fairly soon, we'll have a stop mover.

TXU: Pretty big volume on a gap down day. Doji candle stick formed. Is this blowoff selling at the top? I sure hope so.

FE: I keep wanting to see signs of life. Or death. Something. Anything.

HCR: Not a lot of volume attached to the ugly black candlesticks of the past two days. I think we'll find enough support in here very soon to get the next bump started. The current stop should give it enough room to move.

LNT: The volume bounce off of the double bottom a couple days ago, as expected, seems to have meant something. That day was followed by some healthy churn on a bad market day yesterday, and a nice move on averageish volume today. We'll likely bump around for a bit before reaching a new high.

SBIB: Today's stick looks like a bottom signal. Time to fuel up for the next leg up.

XOM: Pushed up to a legit new high today. The chart is taking a readable form.

CMCSA: I get the feeling this guy wants to back up and take a fresh run at new territory. Consolidation it is stuck in is still quite young.

ALJ: The slow leak continues, but volume is steadily lower and the sticks are looking like a loaded spring. Which way? Doji hammer today leads me to believe we're around the bottom.

LTR: Churning at the top. It may be able to break through from the sideways pattern, or it may need to back up and take a run.

GIS: This one is pretty new to the portfolio, but support at the breakout has been successfully tested.

Trend Notes: 8/22/2006

Trend Notes for Tuesday, August 22, 2006

LH: Appears to have built a very heavy top. With today's neutral market, it had every reason to decline, but gained a bit instead. Stop is set at 60% consolidation. Looking for a base, but it just keeps going.

ECL: May have begun the third bottom of a trend started with the June breakout from consolidation, which I bought. Bottom appears to be forming at 43.50, just above an earlier set of common-bottom white candle sticks within the previous high move. This is shaping up to be a very nice trade.

OKE: Has been slowly churning and leaking away from the most recent high. Yesterday was the first semi-substantial selloff since the high, and today was a semi-substantial positive day. It appears this may be a new low. If it is, the stop should move 50 cents.

RAI: Second day of churn following a new high. This would not qualify as a new low yet, so this is more of a holding pattern than anything else at this point.

CXW: This one has been a monster. It is possible the stock is forming the base of a handle following a smallish, quick cup formation consolidating a huge day in early June. Volume is still strong.

TXU: Bumped up against recently-established resistance at the new high. May break out soon. If it does, it could be off to the races. The stop would not move if it does, so will need continuation of the trend for this one to result in a big win.

FE: Still churning in a pattern it has been in since I bought it. This one could go either way. Has been a boring trade so far.

HCR: Stop is set at 60% consolidation. Stock has been on a run since the beginning of the month. 60% stop is set at around 51, which is just below a level of good volume churning that may provide some support if needed.

LNT: Very exciting day for this one. Huge volume break off a double bottom formed at support at prior consolidation. I bought the break from that consolidation in late July. It broke up to, but not above the intermediate high between the two halves of the double bottom, so there is work left to do.

SBIB: Good day arresting a short, quick down leg off of the new high. Short, quick down legs have been the pattern, so hopefully it'll move to a new high. If it does, the stop will move to a gain position.

XOM: Just barely established a new high today. Stop is set at 66.50. I need to decide whether a new high has to be a certain amount above the previous high, or just above it at all.

CMCSA: Moved towards the top of consolidation pattern it has been stuck in since I bought the break from prior consolidation. If it breaks above, stop will move up a bit, but still below cost.

ALJ: Churning a bit on down leg. If it moves up to a new high from here, a very nice stop mover.

LTR: At the current high and churned today. May need to back up and take a fresh run at it. A breakout then should really mean something, although it would not move the stop.

Intro and Catching up to today

The DJW5K is my enemy. I hate it. I will crush it.



Now that there is a damn mission statement! I've been a stock trader off and on for as many years as I've been able to fund a trading account. I have always done well against the market, but for one reason or another have also always managed to stop trading for long stretches of time. I can't say why. But this time will be different. For the first time I'll be chronicaling my experience, and I'll be doing it right here. With any luck, writing out what I'm thinking and doing will teach me a thing or two about my strategies and techniques. Also, if anybody who reads this would like to discuss the topic, I'm very happy to do so.

My strategy at the moment is to trade the immediate trend for as long as it lasts. Primarilly, I like to buy volume breaks from consolidation patterns, hope for an organized trend to develop, and move stops up below correction bottoms along the way. This is somewhat of a longer holding strategy than I've had in the past, but I'm hoping reduced commissions will offset losing a few would-be winners here and there. My old tried and true strategy was to buy and sell at a target price. It worked, but the commissions were huge, and I never held a running winner.

I started this strategy on June 1st. I'm playing the long side only right now as I'm trading in a retirement account. At some point I'll probably fund a margin account and play the short side when appropriate as well. My one and only goal is to beat the market. My indicator of choice is the Dow Jones Wilshier 5000 (DJW5K). I realize the S&P500 is the more usual benchmark, but if I had to throw all my money in one fund, it would be a fund that closely tracks the entire market. The DJW5K comes pretty darn close. If I can't beat it, I might as well join it. Of course, I want to beat the S&P500 as well, but I expect my results vs. that indicator to be relatively lumpy due to it's more limited exposure.

My blog plan is to update regularly on Tuesday and Thursday nights with my thoughts on all positions that have been open for about three weeks to a month and more. Younger positions will be reported on only if something really interesting happens. I'll also pop in on a daily basis if any activity happens in the portfolio. I'll report monthly and to date percentage results and a comparison with the enemy at the end of each month. I'd love to be able to paste charts in here somehow, but I haven't figured out how, or even if I'm allowed to do that yet.

I'm almost a pure technical trader, although if it is a close call between two companies, I'm taking a dividend and a good PE ratio over something that has neither. I'll hopefully be holding winners long enough that dividends matter.

By way of catching up, here's what's happened since June 1st: For the month of June, I gained 0.71%, the DJW5K gained 0.47%. For the month of July, thanks in large part to Middle East crap, I lost 0.52% and the DJW5K lost 0.46%. I got stopped out on a crap load of positions July 13 - 17 after war broke out over there. My two-month average was 0.09% and DJW5K's was 0.00.

Positions that have opened and closed:
DDS 6/1/06 - 7/14/06 +4.28%
VFC 6/1/06 - 7/14/06 +1.35%
SNWL 6/1/06 - 6/14/06 -6.95%
BLS 6/15/06 - 7/13/06 -4.40%
DGX 6/27/06 - 7/14/06 -3.18%
CELG 6/27/06 - 7/17/06 -4.70%
PCAR 7/3/06 - 7/14/06 -6.38%
R 7/3/06 - 7/14/06 -6.25%
AVA 7/6/06 - 8/2/06 -1.65%
LVS 7/7/06 - 7/14/06 -8.48%
ZEUS 7/10/06 - 7/17/06 -9.07%
FBR 7/12/06 - 7/13/06 -6.18%
STI 7/14/06 - 7/19/06 -2.35%
AHS 7/17/06 - 8/7/06 -6.89%
WFC 7/19/06 - 8/9/06 -1.97%
N 7/19/06 - 8/16/06 +10.7%
DLLR 7/25/06 - 8/8/06 -5.5%
SJR 7/26/06 - 8/14/06 -2.04%
ABK 7/26/06 - 8/1/06 -3.42%
CHL 7/27/06 - 8/21/06 +0.25%

Existing portfolio:
LH 6/8/06
ECL 6/27/06
OKE 7/10/06
RAI 7/12/06
CXW 7/19/06
TXU 7/19/06
FE 7/19/06
HCR 7/25/06
LNT 7/25/06
SBIB 7/26/06
XOM 7/26/06
CMCSA 7/27/06
ALJ 7/31/06
LTR 7/31/06
GIS 8/9/06
CNST 8/14/06
ORCL 8/14/06
DGX 8/15/06
SEIC 8/15/06
PLCM 8/16/06
BUD 8/16/06
PWEI 8/17/06
TRMB 8/21/06
EME 8/21/06
UDR 8/24/06


So, closed trades so far are pretty crappy, but that's to be expected. I fully expect losers to rot quite a bit faster than the winners ripen. Just the nature of the beast. So far, I have closed 4 winners and 16 losers. Losers average -4.96% and 11 days held. Winners average +4.14% and 26 days held. My unrealized portfolio is currently +3.1%. Overall, I'm slightly positive.

I'm fully invested, so until something gets sold, nothing new will be added. 20 - 25 positions usually means I'm fully invested, or very close to it. I'll probably increase the number of positions and invest a smaller percentage of my capital in each at some point.

One last miscellaneous thing: An interesting fact that is sometimes a limitation, but at other times a benefit is that I raise cash when I sell stocks. I am measuring the growth of my entire account, including the idle cash. If that cash sits there uninvested, it hurts, on average, when the market is hot, but helps when the market is cold. If I have a bunch of cash on hand and the market is really running, but I can't find anything to buy, I get left behind. On the other hand, if the market takes a long dump, I get stopped out and quit losing as the market slips steadily behind.

Okay, enough of this. On to the fun stuff! I did my Tuesday writeup a couple days ago. I did another today. I'll put those up in a separate post.

Happy Trading


Note - I'm a horrible speller and the spell check isn't working. No complaining!