by TheWife

This is a piece I wrote two years ago. Some of the details are dated but the points are still quite relevant. I hope you enjoy it. 

From the archives 12/27/2010

This post was originally going to be about oil and it will appear to be about oil, but I will get to my point eventually. I spent much time over the past two weeks researching oil as I had been hearing much bearish sentiment on the matter. There have been many write-ups on oil in recent months but I have not seen a recent, objective post. What I did see fascinated me. One trader's highlighting of seasonality in OIL in January; another colleague's account of abandoned rigs in Oklahoma; and yet another's first hand thoughts from someone who works in the industry and knows it well.

As I delved further, other colleagues sent me articles on the subject. One said that our reserves were so high that oil naturally had to come down; another said that the state of the economy would bring the price of oil down because of our lack of jobs and housing troubles; yet another said that the price of oil must go up which will then account for more joblessness and housing troubles; finally, another said that while there is plenty of oil in the ground, the cost of extracting it is going up and therefore would push the price of oil higher.

Many of these accounts contradict each other.

Which ones are true ?

The true oil bears were naturally shorting it two months ago as the price has soared upward from mid $70’s to it’s current price over $90 not unlike the stubborn bears who have been shorting the overall market since September invariably getting slapped in the face and defiant of the price action. Others say that the time to short will be January because seasonality dictates so but does it ? As it turns out, if you look at say the last 4 years, yes, oil does drop in January, but when you look at historical prices over a longer term, 27 years to be exact, I find that oil is up in January 51.85% of the time with an average return of $1.59 and down 48.15% of the time. Sorry seasonality traders, I don’t think the seasonality play works here.

What about the idea that rigs are being abandoned in Oklahoma. Are they ? According to Baker Hughes, rig count is actually up in Oklahoma. Of course these are more likely natural gas rigs but I questioned, are we abandoning rigs to build new ones ? Wouldn’t this drive costs and thereby price higher ? Not necessarily, as it turns out, some basins are more expensive nat gas shale plays to operate in and in this case, the rigs are more likely being moved to less costly basins. When the price of nat gas goes up, these basins can come back into use. On the other hand, areas that are more oil based are doing very well at the moment.

Then there is the argument regarding housing and unemployment, suggesting that oil will go up and also suggesting that it will go down, depending on who is doing the arguing, but I have a really difficult time believing that these are not improving as many of the perma bears intone. Everywhere around me, people are getting jobs, not the least of which was thehusband recently and housing is clearly making strides in the right direction.

Still there is the argument that we have tons of oil in reserves so it should go down ; then again, once we get through that oil, the oil in the ground will cost more to extract, so oil should go up.

As I look at the broader market, I hear many say that January will be a huge correction. There are the perma-bears of course, who are whining incessantly that it hasn’t already. There is the idea that that 2009 correlated with 2003, and 2010 correlated with 2004, so it is reasonable to consider that 2011 could correlate with 2005, though some traders are too smart to consider in absolutes. Certainly, we could use a healthy correction and so we hope for a reasonable one and likely we will get it, but will it hurt enough to incite fear ?

By now you are wondering what my point is, and I refer you to my title. Jack be nimble. My point is that as traders we must be nimble. Elasticity is key to banking coin because we can’t predict the market or the price of oil, no matter how good we are at research and analysis. We must wait and see. Price action will be our tell. As such, my intention is to reduce my short term holds extensively by week’s end on strength so that I can be ready for a correction or a buying opportunity in January.

BTW – the answer to which argument is true ? All of them.

And in case it is somehow not clear, I am bullish going into 2011.

by TheWife

The sequel to the "NOT oil" piece describes how I got into technical analysis. When this was written, I still used mostly fundamental analysis to trade. But have since moved to mostly technical analysis and only use fundamentals for long term holds. I will follow with the simplified fundamental posts I mention at the end of the article.

Churning The Noise

From the Archives: December 2010

You may have read my post entitled “Jack be Nimble”. If not you can see it here Jack Be Nimble 

At first the post seemed to be about analyzing the price of oil until I eventually stated that my point was to wait for price action. Some colleagues teased me for churning up the very noise I suggest that we ignore, but I feel there is a place for that noise. Some of you prefer to make only short term trades based on price action alone and feel overwhelmed by large amounts of data and I respect that completely.

Personally, I enjoy looking at both styles of stock trading in order to get a bigger picture. I have a value investor/fundamentals background and I have mentioned that as a fundy trader, I had noticed that even if my analysis for valuation for a stock was correct, I still didn’t feel I had a strong sense of where to get in or out of a stock; I would guess at a bottom, worse I would often sit on a stock and ride it down into a grotto of losses waiting for it to return because I was sure I had the value right.

Once I started getting the idea for getting on and riding a trend-line and looking for triangles, my trades became more efficient, but I was still strictly value investing, which has it’s limitations.

When I decided to add in shorter term trades based solely on technicals, my ability to bank coin grew exponentially. And so my current style is to do a combination of both.

by TheWife

I often talk about volume pockets on my stocks in the SharePlanner Pro chat room and have had many requests to explain them further.

Volume at/by price is an indicator that shows where traders are buying and selling; horizontal bars that show green for buying volume and red for selling volume. The longer the bar, the more volume a stock has in that price range. It is this price range where buyers and sellers come in, therefore, these areas provide strong support and resistance.

by TheWife

I have taken a few days off from active trading this week. I find this is sometimes necessary for my sanity as well as my brokerage accounts. 

Friday, I felt the rug being pulled out from under me as my $AAPL calls went into the dirt. I had that nagging feeling that I needed to make it back, which is about the most dangerous mentality any trader can have.

Pesky emotions!

As such, I took profits and went mostly to cash (save for my investment accounts) and decided to take a few days respite.

As I look at the market weakness that ensued among choppy conditions this week, it seems my timing could not have been better. It has given me a chance to focus objectively on the markets as well as take some time for my family. I often get so caught up in the day to day work that I do, that my family obligations get put on the back burner, so I got around to buying my daughter much needed shampoo and a new toothbrush as well as planning a Halloween party that I had promised. I am feeling much better and I have saved money to boot. 

As a trader, our emotions are our nemisis, but they also keep us safe. Feeling emotional on Friday led to adhering to a few rules that in the end kept me safe from losing money. I will be back to active trading next week but in the meantime I leave you with a few ideas to ponder for your own list of rules.

by TheWife

Yesterday through me for a loop. A power outage in my neighborhood that occurred while making my family breakfast left me stressed and struggling.

In all the years I lived and worked in New York as a trader, I never suffered a power outage. Fortunate, I know, as even when houses just a block or two away were dark due to stormy weather, our house always had electricity. As such, I have no rules to keep my emotions in check under these circumstances. I often talk about setting rules specifically to keep my emotions from triggering, but if I don't know about a trigger, it is hard to set a rule. Even now as I think about it, I don't know what rule to  set should this happen again. And apparently I should expect it to happen again as my neighbors have informed me it happens all the time. It seems I have actually moved to a third world country so I must brainstorm and come up with a plan for future black-outs.

Sigh.

After getting my family off with breakfast in their bellies and lunch in hand, I headed to Starbucks with my laptop. While I do trade from my laptop while traveling, it is always planned ahead of time. Trading is very light with only one or two strong positions. But yesterday, I had a full port; I was unfocused, had trouble viewing charts and really couldn't wrap my head around the positions I was in and what they were doing. Couple this with an appointment I had at noon and you can be sure that I made mistakes. 

by TheWife

The market changed its tone a bit today with a more than 1% move to the downside. Although I am still bullish overall, and have been calling for some correction by either time or price since the move that ensued after the Fed announcement of QE3 earlier this month, today's heavier distribution and close below the 8-ema belies caution. Today's drop brushed the first level I had marked which is the most recent break-out level on $SPX of around 1440. As such, we could easily see a continuation to the up-side after this healthy pull back, or we may need to pull back another level or two before resuming our up-trend. I note that I expect a slow day due to the Yom Kippur Holiday.

Below is my chart for $SPX with some of my levels marked off followed by a few ideas both long and short that can be watched in light of the possibility of either market direction. 

On the short side I will be watching $AYI which made a strong drop today below the 8-ema and down through 50 day moving average. It looks to be heading to the 200 day around 53.36 - a good $10 drop. 

$MLNX also moving to the down side, closing below the 8-ema and the 50-sma today; it has a big volume gap below starting at around $98 to around $73.

$MJN is sitting on the 50 day after losing its up-trend, with all other MA's above it. If it loses this level, it has a long way down.

I am a self declared $PWER bull, but I stopped out of it today. It dropped a bit below my stop where it kissed the rising 50 day and then bounced. I will be watching for inflexion to the upside to re-enter as a long. 

$BIDU has spent the last two days breaking up from its down-trend as it bounces off of rising support. While it gave up its early gains, it held up well making a higher high and a higher low as well as closing above the 8-ema. I think $BIDU may have found a true bottom.

$TSO has been on watch since earlier this week and held strong above the 8-ema. Watching for a break-out.

$CIM has a definite look here with this ascending triangle - above all MA's and was strong on a down day. Watching for a break-out.

Feedback is always welcome, so please feel free to leave a comment. I wish you all the best in your trading endeavors. 

by TheWife

When it comes to risk and trading, there are many aspects we could discuss. I was going to do a post that was a continuation of my last risk post but I have decided to put that on the back burner and instead write about something a bit more personal.

My schedule as a Mom and a trader is a busy one. It goes something like this :

6 :30 AM – Alarm, wake daughter, dress, make breakfast and lunch while daughter dresses for school, make sure homework is together in bookbag.

7 :15 AM Out the door, daughter and dog in hand, walking to the school bus stop.

7 :24 AM – daughter gets on the bus, continue with dog walk

8 :00 AM – back home, feed the dog, check and answer email and if time allows get in a trip to the gym or a run.

9 :00 AM – set up trading station, check futures, scan charts etc.

9 :30 AM  – 4 PM – all things market and trading related

4 :00 PM – out the door to pick up daughter at school and take to various activites, run errands (grocery etc) make phone calls during activities

6 :00 PM – home – make dinner, check homework

by TheWife

This piece is an updated rendition of one I have posted before and describes some of the lessons I have learned to manage my risk.

As traders, we all have to assume some level of risk. The only way to avoid it is to avoid trading altogether, but we trade to grow our wealth, so risk is par for the course. The question then becomes, how can I make the most profitable trades while taking the least amount of risk?

When I first started trading, I was working for a hedge fund whose philosophy was based on fundamentals or value investing. I looked for stocks that were undervalued (cheap), bought them, and waited for them to move to what I deemed to be their true value. The problem with this is that stocks don’t really care about their value and while they will usually find their way there eventually, they don’t always do so in a timely fashion. We could wait months for a stock to start moving in the right direction. As I quickly learned this to be an obstacle, I started looking at charts and drawing trend lines. I began jumping on trend lines of undervalued companies and sold them when they fell off those trend lines. I logically started looking at previous highs and lows to find bottoms and targets and this new combination of fundamentals and trend trading proved to be much more successful. I had begun learning technical analysis and didn’t even know it. I later spent more time studying charts and learning to read candlesticks and now consider myself fairly proficient in this skill. But reading charts is only part of the game.

When it comes to managing risk, emotions are a trader’s main downfall. Each trader must create personal rules that keeps him/her from triggering emotions. Following are a few I have set for myself over the years.

-Blind Trading
The first time I joined a subscription service, I was so impressed by the rate of success of many of the pros there that I felt intimidated. This was when the trouble began because I started making blind trades. That is, I followed successful traders into trades without knowing why I was buying them. I just figured they knew better than I did. This backfired in a big way and I quickly realized that I had better learn how to trade independently. I had to stop and learn WHY they were good trades and whether or not they would work for me and fit with my risk profile.  I made the decision to never make another blind trade again. And so my number one rule for managing risk for new traders – Don’t trade blindly. Know what you are trading and why.

-Cutting Losses

by TheWife

My goal with this blog will be to give market updates and share ideas and charts during the week and to write more thoughtful prose on the weekends about trader’s psychology, risk management and life as a full time trader, wife and Mother.

This is a piece I wrote a couple of years ago and I wish to archive here in my new blog.

When I was just a...