I'm taking a mulligan

I'm starting over with the record keeping starting Monday, and no, it has nothing to do with my horrible month of September. Speaking of which, I got totally crushed this month. I managed to lose a not insignificant percentage while the market was up over 1%. I don't have my records here with me, but suffice to say, it was ugly. It took me all the way down to an average loss/month of about 1/4 percent. Yuck!

The reasons for my mulligan are:

1) I now have my trading account up and running, and I want to integrate it into the mix on equal footing. This is the most important reason.

2) I purposefully spent the first few months making major shifts in strategy. That led to some major painful losses, but it was also done on purpose, as I admitted up front this was something new for me and would be a learning process for a while. It was to be sure. However, I believe I now have the major issues ironed out and I have a strategy I'm happy with. Also, the portfolio is almost fully on plan with only a handfull of leftovers from my directionless past few months, and all but a couple of those either accidentally conformed to my current plan from the beginning, or have managed to maneuver themselves into conformity over time. I don't want the taint from the "old days" going forward.

3) My accounts are both fully funded, with only one spot open in my IRA. This is a very good starting point. I hate starting from scratch with oodles of idle cash counting against me. Raising cash during play is part of the game, but starting from scratch is a handicap for sure.

4) Nobody reads or knows about my blog anyway:)

So, I'm starting from the beginning starting Monday. I'll be spending time over the weekend building the spreadsheets I'll need.

Going forward, I think I'll be able to start posting charts! I stumbled upon a damn nice utility that I've been playing with for the past couple days. I think it is going to be a real winner. I'll tell all about it once I know for sure that it works. Hint: I found it on boogster's blog. Check him out. He's a good read.

I'm also toying with the idea of starting my own site and including a blog. I have other interests I'd like to incorporate into a complete site, namely poker and flying. When I'm not scanning for stocks or chasing the kids around, I'm hopefully flying a Cessna up there somewhere or playing poker. Anyway, I just find blogger to be very difficult for me to organize. Hard to describe, but it just fits like somebody else's underwear. See?

Oh, one more thing. I described my morning activity in an entry before I left for work. Later in the day I shorted HMY at 13.75.

A flurry of activity

Well, at least I have done some stuff.

First, I do not know what is wrong with blogger, but my apostrophy is working as a "shift tab" function, but my quotes work fine. It was also not posting entries last night. Problems......

Yesterday I missed ENER. I really wanted that one, but it gapped up beyond what I'm willing to pay at this time. I'll keep watching it for a better entry point.

I did pick up some positions yesterday. I bought WIRE in both accounts and SMH in my IRA. Unfortunately, I also lost DGX. It had been struggling over the past month and barely reached down to hit my stop point. I'm not too upset about that. It lost 2%.

This morning I got up with the birds and entered a few positions. My first short since funding my trading account again is CNO. It is a mature downtrend, but looks like it has more work to do before turning around. I also bought LUM and LSI in both accounts and bought KLAC in my IRA.

I'm using margin in my trading account since the account is so small at this point. I want to get into several positions for a little diversification and that's the way I'm doing it. The positions are already pretty small in some cases. Once my account grows to the point I don't need the margin, I'll use it only for overflow. It just isn't as comfortable for me as using my own money.

Good luck!

A couple adds and a minus

Lost DGX today, just barely. It was struggling, so probably no big loss. It was a 2% loser.

Added WIRE to both accounts and SMH to my IRA.

Missed out of ENER. I really loved that one, but it gapped up above what I'm willing to pay right now. That's the problem with finding them when they're ready. I like to add stocks to my watch list when they look like they're headed down a good path so I can catch them. I didn't see this one until after the close yesterday. Oh well, I'll keep a watch on it for a good entry point.

Finally got my trading account up

Cash cleared this morning in my trading account, so I went right to work on it as I had mapped out some good trends to follow. Most are also in my IRA.

I bought ISIL and DRYS, both in my IRA, and ADI and SO, both of which are new.

For tomorrow morning, I've got an order in for ENER in both funds and orders for WIRE and SMH in my IRA.

Going forward, I'm hoping to get some diversity between the two accounts. Being able to short in my trading account will help in that regard. That said, I couldn't find anything to short today. I don't really plan to keep a certain long/short mix. I let the market decide for me.

Had one of my better days in my IRA today. I made over 1% on my IRA portfolio, but including cash only 89%. Everybody seems to be respecting their trend lines so far.

Scottrade

You know, they have low commissions at $7/trade, but I've found very little I like about them otherwise. I haven't used them for a while, but last I knew it was difficult to short anything, and the site was very slow and less intuitive than any others I've used.

Now it has been more than a week since I hand delivered a check to them. Still pending. It took them four days just to deliver the check to my bank. Pretty frustrating to watch trading opportunities come and go as they decide whether to actually start paying them or not.

Funny, when I handed the check over to the kid at the front desk, he said "you'll see it tomorrow", to which I was pretty surprised. I asked if he meant it would just show up pending, or cleared and available. He said it would be available to trade. I had my doubts, but I figured maybe they allowed a customer to trade on those funds before they were cleared in a margin account. Nope. It showed up right on time, but as pending funds and I could not use them. No different than today, 8 days later.

Added ISIL

Added ISIL this morning when it dipped down in the early going. Stop is around 4%. This is a young trend line that was just confirmed yesterday.

HET got a downgrade this morning. They're not supposed to be downgrading my bottom fishies!! I doubt this one will have any effect on my grand plan. HET began the day at the very top of its trend channel. Plenty of room for a bit of a shakeout.

That'll learn me

I meant to reduce my exposure to tobacco stocks once RAI got up just a bit. It turned out I had RAI and LTR, both tobacco stocks. I have known it for quite a while, but I just never did anything about it. Then RAI split 2:1 and I had my out. I was going to sell half when the stock reached just a little higher so I would have a full position left in the company. Well, it leaked and leaked and eventually, today, croaked when the latest lawsuit ruling went against them. RAI and LTR both stopped out for small wins.

That's the good news. ISIG and PWEI got stopped out for significant losses. Yuck! They both lost well more than I allow with my refined strategy. I just would not have bought them where I did if I'd had the strategy adjustments in place back on purchase day. Oh well, live and learn the hard way.

I also picked up an old stock again. NEU was a raging buy, and it did well after I bought it. It had a bottoming looking couple of days going right on its very aggressive trend line. I have a nice tight stop and if it makes it just a little while, I should pull a nice win out.

All in all, I got beat down today, taking a loss on a day the market flew. That said, the stocks I have remaining did very well. This was more of the clipping process to get things straightened out in the portfolio. The clipping now is really close to done. Not many remaining positions are horribly out of place. There are a couple of breakout plays that are a ways out from a trend break-even, but they are healthy at the moment.

Getting there

Well, the portfolio is getting there. I'm closing in on being caught up with all the trends. I have 18 positions that are trending up. Six of those are "trend gains", meaning the trend support line is above my purchase price. In the next month, I will add nine more to that list, assuming they don't get stopped out. That will put 15 of 18 positions in the money. The others are further out than a month with PWEI being the longest at 7 weeks. The other positions are not trending.

My stop risk is still pretty significant with a total 3% stop loss rist currently. However, that number will drop every week until I get caught up, at which point it will turn positive and, hopefully, grow to a very large number.

The trend following trading method really renders daily gain/loss numbers meaningless. Unless the stock stops out, nothing of any consequence has really happened. That makes me happy on days like today when I lost over 1% while the market lost less than half a percent. I just have a bunch of stocks at the top of their trend channels coming down into the middle. I counted earlier, and of the 18 trenders, something like half had come from the top to the bottom half recently. That explains my rough time of it against the market lately. All my positions were overbought! No biggie. I'm convinced that by the end of the year I'll have some good numbers to put up.

The other thing trend following does is it makes individual stock reports pretty useless. I mean, what am I supposed to say? Still following the trend. Yup. Lookit it go.

I'll still continue to report FMV and unrealized gain numbers at the end of the month, even though those numbers don't mean squat to me. I need to compare apples to apples, and unrealized gain is the best way to do that when comparing my results to the market. And to other bloggers, etc.

Speaking of bloggers, I've happened upon a few that are fun to read. As soon as I get things figured out on here I'll link them.

There are other things I'd like to do here, but I don't know how easy they'll be on the blogger format. Problem is, I'm not a computer guy, so I won't be able to create anything on my own.

DRYS added, LNT lost

LNT stopped out today a tiny loser. The portfolio is starting to feel like a complete unit with the cats and dogs departing. Another month and the house should be clean with trend lines catching up, etc.

I added DRYS today. I really like this one, but the trend I'm following is very aggressive. It is adding 13%/month, and that is not going to last. However, if it goes for just a short while, I'll harvest a decent winner. I have a little more trend risk than I'd like at just over 8%, but it put in a bottom-looking stick today and should stay away from the trend line long enough to make a good run at a profit. It is also hanging onto what should be a support level.

I beat the market for the second day in a row! Yea me! It has been a while.

Semi-new and improved

I think I'm closing in on a good overall strategy to put, or tweak, into play. I'm hell bent on making trading easy, in the sense that I can't take a lot of time during the day to dink around with the portfolio. I don't mind researching and scanning and studying at all at night or on the weekends, but my day job requires my attention. So, quick trades where I need to stay on top of things are out. Unfortunately, quick trades are pretty much what I've always focused on in the past, and with good results.

The new game in town is trend following. I have a simple and common definition of a trend, and that is a series of rising lows, three or more of which can be connected by a straight line. There are times where I've used two lows connected by the line instead of three if it looks right.

I want to jump on the trend as close to the trend line as possible. In no case should the buy price be more than a month away from intersecting the trend line. When the stock price breaks below the trend line, I sell the stock. There are other times I may sell the stock early, such as if the price rises significantly above an established trend channel, or if an unatractive takeover is pending. I'm sure I'll find other reasons.

There are several reasons I like this strategy. Of course, I may find that the theory works a whole lot better than the practice, but that's something I'll learn along the way.

First, this is easy to manage. I find a stock that fits my definition of "trending" and I watch for a good entry price. Once I buy, I set a stop below the trend line, and move it as needed - probably about once a week or so. Done.

Second, I know what to expect. The approximate trending rate can be calculated, so I know what sort of annualized return to expect. I call this the "Trend Return". The Trend Return is simply the amount by which the trend line increases over a given period of time. Since the position will generally not be exited until the trend line is breached, the Trend Return is the only return that carries any real "end of day" significance.

Third, the stop loss is crystal clear and constantly moves up. I don't have to guess where the support and resistance lines are. I follow the trend. the stops are set just below the trend line. If I buy close to the trend line, I can manage a low risk, unlimited reward scenario.

At this point, the majority of my stocks are in trends, if only by accident. However, many of them were purchased high in their trend channels away from the supporting trend line. So, I have a ways to go before I'm generating trend gains that would translate into realized gains in many of my positions. That's fine. I really view this first year of longer-term trading as school. Hopefully when I graduate I'll have learned something!

Nice win, thoughts on strategy tweaks

Boy meets stock
Boy loses stock
Boy realizes his mistake and wins stock back
Turns out stock really was crap

Such is the story of TXU. It stopped out today after plunging through its trend line. One day loss of 5%+. Laugh it up fuzballs!

Since I'm bad at learning lessons, I jumped back into PCAR today. It danced a couple days right on the trend line and moved up a bit today. Low risk play on a 3% trend.

Had a real nice day today with the portfolio rising .84%. Of course, ORCL was the star of the show, which I knew it would be today. I got up early so I could watch to make sure it didn't get too far out of hand. It didn't. I mean, 11.5% and jumping right out of the trend channel could be considered "out of hand" I suppose, but I only need 2.5 months or so for my trend line to catch up. I think it has legs from here.

Another stock that had a big day today was HET. It broke out of an ascending triangle today. I'm using the bottom of the triangle as a trend line. I'll know in the next few days if this is truly in a young trend, or if it is simply now a breakout play exiting a bottom pattern. I'd like for it to stay within itself and have a good long, stable run. We'll see.

Had a downgrade in the portfolio today. RAI was punked by one analyst. It seems they're having supplier issues and some store shelves are running out of RAI products. Apparently, smokers glob onto one brand of sweet smelling cotton shirt scents and don't move around. This analyst thinks the outages will cause some brand switching when they can't find their usual brand. Could be. Hey, if you gotta have it, you gotta have it. At any rate, the stock got pummelled pretty good and is now down around the trend line.

Yesterday, LNT flirted with a stop. It didn't do much today, so I could lose it any time now.

My concentration now is on finding nicely trending stocks, and then watching them until they reach within at most a month or so from their support line. No more spending capital and waiting two months for a break-even support line price.

The other thing I'm considering is whether to sell at the top of the trend channel or not. I mean, Why ride it down or watch it trade sideways? Why not sell at the top and buy it back again at the bottom? I could have a stable of trending stocks I trade in and out of as they bottom and top. Thinking..........

A little update on activity

Yesterday TRMB got stopped out. That eyesore will not be missed.

Picked up TXU again today fairly close to the trend line. I paid a bit more than I sold it for the other day. That's my time in the penalty box. Also picked up GLG today. It is a growing company and is close to it's almost year-long strong trend line.

I've funded one of my trading accounts again with a little start-up capital, so I may be shorting shares as opportunities come up. I don't have much to play with, so the shorts may be few and far between for a while. I've always been better at the long side.

Duh!

This is an official “Duh!” post.

Sometimes I wonder how I manage to get through an entire day without accidentally killing myself with a bottle of water or something. Many, many stocks form trends, clearly visible when bottoms are connected by a straight line. Very often, a parallel line can be drawn along many of the tops within the trend. These trend lines serve as terrific and reliable support and resistance lines. Duh? Duh!

Why in the freaking hell did I choose to ignore that bit of bargain basement common knowledge from June 1st through September 15th?

I started June 1st deciding I was going to catch trends and ride them as far as they’d take me. I decided to come up with my own definition of trend to be a series of higher highs and lower lows. Well, not my own definition by about as many years as stuff for sale has been charted, but I decided to make it my own by ignoring everything else. All that was to matter to me was the lows are getting higher. Nothing else. A low was only a low after another high was made. It seemed logical at the time. It was not.

Stocks trade in rising ranges when they are trending (dealing with long trades here). These rising ranges are called …..everybody now….. channels! I chose to ignore these. Not consciously, I just didn’t include them in my thought process when I decided what would make up a trend. Forget that almost all of my stocks are currently riding channels, I just didn’t care apparently! The problem is, within these channels, my definition of a trend breaks down very often. Little downtrends (lower lows/lower highs) within a very strong dominant uptrend happen all the time. That’s often how stocks trade down from the upper (resistance) line to the lower (support) line. Well, I was selling stocks that were making a very normal and healthy correcting move from the top line to the bottom line. See TXU for one example. I sold it a couple trading days ago because it broke my definition of a trend. What happened? It bounced hard off the REAL trend line today. I watched it just to see what would happen after I noticed what I had done late last week when I woke up from my alternate reality. Well, it performed beautifully! In fact, I’ll buy it later this week if it is still around its support line when I get enough cash cleared.

Anyway, now that I’ve come back to my senses, it is time to get to work. I’ve made a couple decisions about how I’d like to proceed, and I have one open item remaining. I stated up front that I haven’t spent a lot of time trading longer term like I’m trying now – that all of my trading to this point has been very short term in nature. I suppose it isn’t out of the realm of possibility that a major oversight like this can happen. Well, the work in process continues, although most of the pieces are now, hopefully, in place for a long-term run at the market.

The strategy is two-fold, really. The overall strategy is to jump on these trends as close to the support line as possible and ride them until they end. I’ll move stops up as often as necessary to keep up with the support line, probably once a week or so depending on the stock and how fast it moves. The second part of the strategy is what is somewhat open ended at this point. I plan to continue trading breakout patterns in stocks that have been consolidating and are not in organized trends. These are such good money makers and very explosive and quick. I don’t want to abandon them. The problem I have is how to work this strategy into the trend following umbrella. I don’t have time during the day to be monitoring positions to see if I need to switch from a stop loss to a limit sell order and vice versa. In a perfect world, I’ll come up with some sort of stop loss strategy for the breakout that lets a trend develop if it is going to. I believe many breakout stocks are strong stocks that will trend up. I want to allow that trend to develop. I just don’t know how well this part is going to work. It seems like it may be marrying two strategies that just won’t mate.

The good news is that most of my capital is tied up in trending stocks. I think what I’ll do is let the few positions that are in breakout patterns play themselves out by keeping the stops reasonable and taking the positions off the table only if I wouldn’t want to own the stock if it trades below a certain price. For instance, I won’t let a non-trending breakout trade below its support level. It is always possible I’ll decide to abandon non-trending stocks entirely if I can’t seem to get them to assimilate.

That’s enough beating myself up over this. Lesson learned (again!). I have some reasons to believe I’m going to love this trend business a whole lot that I’ll share tomorrow. Again, nothing that isn’t commonly known, but part of the reason for blogging this stuff is so I can go back in time and see what I was thinking “back then”.

Upon further review....Trend Notes: 9/15/06

Upon further review, I’ve been focusing way too much on short-term explosive chart formations, and not enough on the longer-term trending nature of the stocks I’ve been buying and, more importantly, selling.

Sure, for the short-term momentum trading I’ve done in the past, trading these explosive breakout patterns works great. And, they work well as an entry point for trending stocks, so long as they happen close to the bottom trend line. I have not, however, been paying attention to proximity to the trend line when I pull the buy lever. Often times, especially toward the top of a trend channel, these breakouts fail because the longer-term and stronger trend channel top overrides the move. Normal, stable stocks just will not stay “out of whack” for too long without correcting.

For my purposes, all that should matter is the entry point and where the stock trades in relation to the bottom trend line. Once the stock breaks below the trend line, it is a sell. Not before, no matter where the previous bottom is. So long as the trend line is steep enough to yield a generous return, there is no reason to sell above the line

The entry point is important. If a stock is trending along a line, and I buy too far above the line, it can take several weeks or even months before the trend line reaches my entry point. That means, until the line meets my entry point, I’ve got good capital sitting there doing nothing, regardless of the price action of the stock. Until the trend line gets above my entry price, I’ve made nothing. The sooner I can get the trend line above my entry price, the sooner I start making “real” gains versus fake paper gains.

So, what are these “real” gains? Well, a “real” gain is the difference between the trend line price and my entry price. Actually, it is the difference between my stop price and entry price, but the stop will always be set just below the trend line. What that means is if I have a trend that moves up at a 2% per month rate, my return is really 2% per month, regardless of the stock’s actual move during the month. If I buy on the trend line at 10 and the trend line moves to 12 while the stock moves to 20, I’ve really “made” 2, not 10. I will let the stock trade below 20, but not below 12. Of course, “real” is in quotes because it isn’t a real gain. I haven’t sold the stock, and it could certainly gap down below the trend line. In reality, it is a “trend gain”.

Now that I’ve woken up, this week’s stock report will focus on whether a stock is in a trend or not, the strength of the trend and future plans for the stock.

RAI: In a very strong trend channel about 15% wide. The trend is about 4.5%/month and is more than a year old. The price is right about in the middle of the trend now. The bottom of the trend is 60.

CXW: In a very strong trend channel almost 20% wide. The trend is about 6.25%/month and is more than a year old.. Price is in the middle of the trend. The bottom line is just under 40.

HCR: In a very strong trend channel close to 12% wide. The trend is about 3.7%/month and is about eight months old. Price is in the middle of the channel and the bottom line is 50.

LNT: In a strong trend channel about 10% wide. The trend is about 3.9%/month and is about ten months old. Price is towards the bottom of the channel and the bottom line is 36.

SBIB: In a short aggressive trend four months old. The channel is about 10% wide. The trend is 5%/month. The price is near the bottom of the channel and the bottom line is just over 20. There is a longer-term trend, but it is too shallow. I’ll sell out of this trend.

LTR: Short, aggressive trend channel closing in on four months old and about 8% wide. The trend is about 4.2% per month. The price is in the middle and the bottom line is under 38.

ORCL: I’ve badmouthed this one before for being too slow, too big, blah blah blah. However, in trend land, it is shaping up to be a very nice pick.. The three month old trend is quick and aggressive at 6.25%/month. The channel, such as it is after only three months, is around 15% wide. Price is in the mid-bottom of the channel and the lower support line is under 16.

DGX: Strong five month old trend gaining 2.4%/month. Channel is about 7% wide, so a tight one. Price is towards the middle and holding, the support line is just above 60.

SEIC: Nice looking trend at least six months old gaining 3.3%/month. The channel is about 13% wide. Price is way at the top of the channel. Support is around 49. This is a case where I wasn’t paying attention to the trend line when I bought. I have a solid month to go before the trend line will match my entry price. Only then will I be making any profits.

PWEI: My favorite stock at this time just because I’m very curious what will happen with all the short interest in this one. There is a mildly violated trend channel that started with a huge gap up ten months ago. It is a quick mover at 5.5%/month. The channel is a monster at about 35% - 40% wide. Indeed, this one moves in chunks. The price is towards the middle and support is just under 30.

TRMB: Horrible. No trend here. This was a breakout play where I elected to set the stop below the previous low instead of below support, which held about as well as the straw pig’s house. I’ve got a stop set below the previous low. I don’t know what the hell I’m still doing in this thing, but maybe I’ll get lucky and something will develop.

UDR: This guy had a short trend within a breakout pattern, but when it broke out of its pattern, it shot up through its trend. Now it looks like a continuation of the breakout is taking shape. This is a breakout play, hoping for trend development. Stop is set below 30.

ORB: Breakout play, pure and simple. Hoping for a trend to take shape. Stop is set at about 18.50. When explosiveness happens, I’m content to keep bumping up my stops until some sort of longer-term trend takes shape. When and if it does, I’ll adjust the strategy to follow the new trend.

HPOL: Little guy in a young 4+ month trend, making around 5%/month. I bought a breakout pattern within the trend. The break took it to the top of the trend (which I wasn’t focused on at the time) and it has since retraced back towards the upper middle of the pattern. I won’t make any trend profits for a very long time. In the meantime, I’ve set a more aggressive stop under the top of the consolidation pattern it broke out of.

HET: New trend exiting from a steep drop in price from May through the end of July. This young trend is making 4.5%/month and the channel is about 8% wide. Price is in the upper middle of the channel.

CVD: A wide year-old trend earning 2.7%/month. The channel is about 18% wide, price is in the middle, and support is just over 60.

MAR: The trend is very long – about three years at 2.1%/month. The channel is very wide at over 30%, but that is probably inflated by a period when the stock seems to have gotten a bit ahead of itself. Price is in the middle and support is at 35. My stop is below support of a breakout from earlier in the week. The trend won’t catch me for a very long time.

MGRM: Pure rolling play. No trend at all. Getting involved with these little guys is playing with fire, and I think I’m getting torched on Monday. The company announced after Friday’s close they are going to sell a bunch of shares to raise cash. Poop.

MS: A breakout play with no real reliable trend. That said, the way this stock behaves, I think a good trend could develop.

IGT: I bought in anticipation of a breakout, and got one the very next day. The trend is young and 3.7%/month. It should catch me in about a month. Until then, my stop is below support of the breakout.

ISIG: Tiny little guy, but it has somewhat of a trend. The breakout is what I’m playing here unless the trend proves itself reliable.

That’s it! I feel so much better about things now. I feel like I’m starting to formulate a workable, winning longer-term strategy. It will take some time for the trends to catch up to me so I can see it at work, but at least I feel less like I’m wondering around in the fog. I now know why I've been getting my ass handed to me by the market lately, and why it will happen for periods in the future. Nothing matters but the end result, and if I stick to stocks that trend faster than the market can, I'm looking good at the end of the day. And no more plans to abandon things for my old tried and true momentum trading. Not yet anyway!

Scaling back the nonsense

I've decided to drop the twice weekly updates on all stocks. #1, I'm still a little sick from a mild flu bug or something, and I don't feel like writing that much today, and #2, two per week is way overkill. I'll start doing it over the weekend.

I missed reporting a little activity yesterday, and there was more today. I'll go out of order:

TXU - lost it today. It's had a rough couple days. I had it up +8% or so at one point, but it never developed a stop that was going to mean anything. It was a minute loser in the end.

CMCSA - lost this one today as well. A welcome sale to free up cash. Minute winner.

Yesterday I picked up:

MGRM - a little tiny guy that has promised to make me stinking rich. It is a roller that I picked up at the bottom of its range.

MS - A big one that moves its ass. It broke out and volume has been very good.

Today I bought:

IGT - I grabbed this one just prior to the big breakout it is going to have out of its ascending triangle formation. Tuesday of next week is when I've scheduled it for its breakout.

ISIG - A little guy that broke out on gigantic volume today.

I've decided I need to add some rocket fuel to the portfolio. Hence, the small guys I've picked up lately. I also need to evaluate my strategy of letting a stock sit there doing nothing after they've made their move. TXU could have been harvested a significant winner. When it looks over, I may just have to pull the plug rather than wait for the next run. Corrections during trends are one thing, sideways nothingness is quite another.

Trend Notes: 9/12/2006

I picked up three new positions today. See them at the bottom of the list. I've decided to report on all positions on Tuesdays and Thursdays from now on, regardless of time held:

OKE (+6.86%): Caught in a month-long consolidation. Playing the waiting game.

RAI (+9.20%): Approaching a third attempt at a new high. Support has held twice at 64.

CXW (+21.86%): Broke out nicely yesterday and followed through today. History says we’ll trend sideways for a while now. The stop was moved up yesterday.

TXU (+2.72%): Not a good day today. A stop with a minimal closing gain is in play. Still, support held.

HCR (+7.99%): I was hoping for a sign this one hasn’t slipped into a downtrend, and I just may have gotten it today. It closed above the previous little move up in consolidation. Now we need to hold the bottom at 51. Of course, I’ll also gladly accept a move up to 54.

LNT (+1.03%): I really hope this one is building up for another leg up in the trend. Just holding the trend line started n late April will make this a nice trade in the end.

SBIB (+4.78%): Excellent job holding support the past few days and bouncing off today. More volume is needed to push it up above resistance at 21.

CMCSA (+2.40%): Should be starting a leg up to at least 36. Short leash on this one.

LTR (+2.82%): Has begun the next leg up in the trend. Each leg has added about 5% of value.

ORCL (+6.54%): Has traded to the top of the channel. It is difficult to see this one going crazy to the upside any time soon. Short leash, but a stop now yields only just over 1% gain.

DGX (+0.10%): I figured I’d find support about 62 – 63, and so far I’m right. Hopefully, volume will arrive to push it up above 65 soon.

SEIC (+5.03%): Clocked by an analyst downgrade a couple days ago, gapped lower, but recovered and brushed the downgrade aside. Today marks a new high, and volume has been fantastic.

PWEI (+2.91%): Stalling out a bit towards the bottom of its current range. I’m wishing horrible things for all those shorts!

TRMB (-6.07%): This dude needs to turn around right here. A further move down is bad news.

UDR (+4.07%): A little more mustard on the hotdog tomorrow and I can move the stop up into a profitable position.

ORB (+1.98%): Best move since I bought the breakout on the first of the month. I figure a rocket company has to be a good investment, right?

HPOL (+0.01): Bought yesterday on a huge breakout move on huge volume. It held the top today on even larger volume. Lots of churn going on here. It is small, so if it catches fire, it should be very much fun!

HET (+0.67): New to the portfolio today. HET arrested a nasty downtrend begun in May, and now appears to be forming an ascending triangle. I love these formations. I’m trying to work a little more bottom fishing into the portfolio.

CVD (-0.45%): New to the portfolio today. Nice breakout play on good volume. Stop is set below support.

MAR (-0.12%): New to the portfolio today. Nice breakout today on good volume. Stop is below support.


I'm trying to find some bottoms to stick in the portfolio. This has never been a focus of mine, having always been a momentum trader. However, with my focus now on longer trends, starting at the bottom seems like a good idea at least some of the time. I won't ignore breaks to new highs, as when they're good, they're very good.

One problem with holding for longer periods of time at the top is the downgrade issue. I lost two stocks with great charts after they fell hard on a downgrade. I managed to escape a third this week when SEIC flipped its downgrade the bird. There should be more upgrades than downgrades at the bottom.

The main reason I've never liked bottoms is all the resistance levels the stock has to punch through on the way up. But, over the longer haul, they do punch through if they're good.

The good, the bad and the ugly

Lost two today for large losses. EME lost 8.47% and NEU lost 12.12%. I knew going in that both had a lot of risk, but I liked the way they set up. The big mistake may have been setting the stops below the previous low instead of below support, like in the "old days".

Also bought HPOL today. It's a cheap one that looks really good. Nice breakout today.

As hoped, CXW put in a big breakout day. This is the biggest mover so far at just under 20% gain at today's close.

Trend Notes: 9/7/2006, and PWEI Special Report

Let's get straight to the position reports:

OKE: Has formed a resistance level just over 39. May be gathering energy for a breakout attempt.

RAI: We're stuck in a range. I'm hoping for a bounce off 64 and a breakout run towards 66.

CXW: It has been a while since this one showed signs of having a clear direction in mind, but that's sort of how this one operates. With any luck it will follow the pattern and we'll get a decisive move up soon.

TXU: Directionless for a month, but it has improved a bit over the past two bad market days.

HCR: I'm hopeful a foundation is being laid, but it is also possible a downtrend is forming. The leash is short.

LNT: The jury is out - way out. It is still within its uptrend.

SBIB: Either we'll get a double bottom and support at 20, or we'll get stopped out.

CMCSA: Slow mover, but the trend is up.

LTR: Looking for support at the trend line. Time for a leg up.

ORCL: Nice day today. Just managed to break off the trend line to a new high on very nice volume.

DGX: It sure looks like a round bottom is forming. A case could be made for support being established at this level in the middle of August.

SEIC: Volume is picking up on the upleg. The last upleg was very sharp exiting resistance, so we may need two or more attempts at a new high.

Special Report - PWEI:

I'm less than a month into this one, but it is a very interesting stock. I can't wait to see what happens with this one. It just looks for all the world to me like it should really go big.

First, it has a low float (8+ million shares), and it really moves nicely. Second, it recently broke from a long period of consolidation, so it should want to get someplace now. Third, the YOY quarterly growth is huge at 630%. Finally, the short interest is nothing short of amazing at 5.6 million shares. That's 46.5% of shares outstanding and over half the entire float! Either the shorts are right and I'm about to take a bath, or they're wrong and 5.6 million shares will have to be bought to cover. Average volume is only 500K/day! Something has to give. Stay tuned.......

There appear to be some stocks missing from the report. Well, there are some stocks missing from my portfolio!

LH: So much for silver linings, eh! I took a 9.25% gain over 66 days.

PLCM: Huge range today without much progress either direction, but it stopped me out in the process. -4.65% over 17 days.

DRIV: I may have goofed here. I bumped the stop way up based on a pretty iffy move a few days ago. Had I kept my original - and likely proper - stop, I'd still own it. Today was lower, but not a lot lower and it recovered from a deep retreat early in the day. That's not unusual for it. Lesson learned, but it may or may not cost me money.

That's it for today. I have a ton of capital to put to work. I should have cleared funds about Monday.

It's a Maaaad Houseeeee!

Has there ever been an actor better at over-acting than Charlton Heston? I think not.

Anyway, today's market was a mad house for me. I fell over backwards into cactus covered with fire ants. Ouch! The DJW5K lost 1.14% and still managed to beat me by .12%. That's a bad day. And I've had a rotten run the past few weeks. Well, it's times like these I start looking real hard for a silver lining. I think I may have found a few.

Let's take a gander at LH. I almost lost this one today. It's the old man of my current portfolio. It got downgraded to "market perform" by one analyst today, and the market sucked poopoo. That's a recipe for disaster. However, good ol' LH may have fooled 'em all today. It gapped down a bit and put in a deep hammer below the two-week old sideways consolidation, and did it on huge volume, closing four pennies from the open and high of the day. It may have blown out all the sellers and made ready for a continued trip. Hey, I'm searching for good news today!

Overall, the portfolio took a hit today. No doubt about it. That said, in looking through the stocks that survived the day, I don't see a whole lot wrong out there. Most stocks held up their end of the bargain and maintained their charts just fine. They mostly had down days, but within the framework.

One notable exception: LNT didn't come through today. Yesterday's breakout is busted. Volume was low, but not tiny. I'll need to see goodness from this pig soon. I've got a tight stop in here.

Today marked the end of the road for four different positions.

ECL: This is the one I'm disappointed with. That downgrade yesterday just killed a good thing. As expected, it traded lower in the morning, and I took a 6.2% gain away.

The other three were all on my "trim" list with very aggressive stops. None of these really quite fit my adjusted strategy.

XOM: After 31 days, I harvested a whopping 0.12% gain.
GIS: After 21 days I harvested a whopping 0.86% gain.
BUD: After 16 days I harvested a whopping 0.36% loss.

These just were not movers and shakers. I'll attempt to put the new capital to good use when it frees up next week.

Trend Notes: 9/5/2006

Today's action was pretty much killed by a downgrade of ECL from "buy" to "hold" by one analyst. That was enough to cause a big dump and some dancing on my stop price. I'm not sure the price recovered enough by the close to keep it in my portfolio tomorrow. I may get stopped out. It would be a shame - I was really liking how things were setting up with this one.

I picked up two new positions today: DRIV and NEU. Both are in solid uptrends and broke through resistance with volume today.

On to the stock reports:

LH: Sideways sliding consolidation continues

ECL: As stated, an analyst pooped in my Cheerios.

OKE: Upleg is continuing nicely.

RAI: An extended sideways move would not surprise me.

CXW: I keep hoping to start the next leg up. The bottom is officially flat.

TXU: The slope is generally up. I'm hoping not to see 63 again.

HCR: Not a good day today. This one may be falling apart.

LNT: Today is what I've been waiting for! The breakout pattern completed. Now we need to see some follow through.

SBIB: I sense a breakout coming. The volume/price action looks explosive to me.

XOM: The price confirmed a bottom, but volume needs to pick up.

CMCSA: I have a tight stop and would not hate to raise capital here. I'm just not sure there is much upside. I am almost positive it will be slow in arriving if there is.

LTR: Volume is decreasing on the sideways consolidation move. We're in good shape here.

GIS: Way more room down than up. The stop is very tight.

Activity Report - 9/1/06

Bought ORB today at 18.75. I'm not thrilled with the stick, but volume breakouts are always fun. I don't expect this to be an immediate "shoot to the moon", but I feel there is significant room for it to grow in the near future.

I really tightened up the stops on the big floaters that don't fit into my revamped model portfolio. They are: XOM, CMCSA, GIS, ORCL and BUD. It they hit my stops, I'll take the cash. If they don't, so much the better.

With ORB, I started investing a percentage of my fund value vs. an even number of shares with a cost cap. I'll be putting roughly 4% of total value into each position, or 25 equal cost positions. The percentage will shrink and the total positions will grow as the value of my account (hopefully!) grows.

Short week next week!