Another Week of Lessons and Observations

by Ryan Mallory

Overall, it was a pretty quiet week until Friday hit. The jobs number showed that the job losses may be starting to slow a bit (but that doesn't necessarily mean that they are finding new jobs), and also exceeded analyst expectations - which allowed for the market to act in kind, and allow for the markets to push ahead about 1.3% on average. Early on in the week, I re-evaluated my 'edge' that I was using for day-trading in the market, and made some modifications to it, that I believe will allow me to be profitable going forward (notice the trade in BKE).

Here's a recap of my trading, the observations that were made and what may be expected in the week ahead...

• We picked up 3 new stocks on the week in our swing trade portfolio, 2 longs (JRCC and ESV) and 1 short (LSI) - all three of which we are profitable on currently. Our pick-up in (JRCC) yesterday was very quick and sudden as someone sold a lot of 250K shares on a market order that abnormally pushed the stock down about $1 for about 10-15 minutes - enough time for us to initiate a long position at $15.05. Our position in (LSI) is also doing well with un-realized gains of about 4% to-date, while (ESV) remains just ablove break-even.
  
• Buying on the dip is not working as well as it had been for most of July, whcih will make for us to consider more intra-day short positions going forward.
• I need to do better job on aggressively protecting gains, by moving up stop-losses, in order to avoid profitable positions turning into losing ones.
• Evening Star Candle patterns and shooting starts on my day-trades caused me some problems trading in the early going of the week, and need to be more cautious with them when they appear on the charts.
  

General Observations: . The White House and others in Congress are saying that the worst is behind us, but I would be careful about getting your market direction from bureaucrats and self-absorbed politicians. I'm a pure capitalist at heart, so I probably disagree with 99.9% of all the bailouts, reforms (i.e. healthcare), tax hikes, and Spendulus packages that have been passed or are being debated currently - but I'm not going down that alley right now...The market continues to defy odds, and find more and more reasons to go up higher and higher. We are no-doubt benefiting from it, but I continue to be a closet pessimist that what we are seeing is going to come to an end, at least temporarily in the near-term. The bit of weakness that we saw towards the end on Friday was interesting to me, and I'm curious to see whether the gains today was the final hurrah for this market or whether the market still has something left in the tank to propel it even higher.

Have a Great Weekend Everyone - I'll be updating the stock screens by tonight.