F.S.T. (FAZ Support Test)

Yeah- I want to be like Muddy, who traded FAZ profitably like 53 out of 54 trades last week. I've had 3 successful trades with FAZ so far, and am now looking for my fourth. Below is the 'have-to-see-it-to-believe-it' 3 month chart of FAZ:

I realize this may be catching a falling knife (I am certainly trying to here- bought 15 shares @ 45.75). This is a pretty relentless freefall from 100+. Here are 4 reasons (2 valid, 2 ridiculous) why I think FAZ will see 50+ in the next week (and possibly tomorrow).

1. This market's volatility

2. Support level in place around $40ish

3. Fridays make for great profit taking days- especially after a week like this one!

4. Second Friday the 13th month in a row? C'mon, that's gotta bring some selling to the table:)

Is there a method to your madness?

Evan

Trade That Trendline!

     I came to a landmark conclusion about this blog today: There's nothing set in stone that says I can't stray from my Sykes/Swing strategy if I spot another opportunity to profit from this market's recent volatility. If you've read my past couple of posts, you know I've been trading FAS and FAZ, two ETFs (Exchange traded funds) that mirror the ups and downs (respectively) of the financial sector. I profited from FAS, as shown in this post, and held FAZ short overnight (3/5). Below is the chart of my two recent FAZ trades- yes, TWO. The first short was not real disciplined, and planned to be a longer term hold if necessary. Even though I was only short 35 shares at $95, I was more than ready to cover when it closed just shy of $100. Since this isn't my primary strategy, I wasn't comfortable holding FAZ overnight. As the volatility in these two ETFs have shown over the past year, it's kind of like holding the tail of a dragon. When the market opened, I waited patiently (never easy) for an opportunity to cover. Once it broke $94, I sent my limit order of $94 to TOS to cover. Since this thing was tanking at the time, my order was actually filled at 92.85 (fine with me). My next trade was far more honorable. I've studied technicals over the past few years (books, DVDs), and trend lines are sometimes screamingly obvious to spot. Not sure if Muddy over at Darkside Trading was using trend lines the last couple of days when he traded FAZ profitably in 53 of 54 trades (ridiculous), but I sure did:

     Notice how FAZ stays within the trend lines I've drawn until it goes a bit too parabolic, giving me the opportunity to short above 110 (psychological round number). Also, as you can see at the bottom of the chart, the volume at that point had dried up (lunch time). I could have covered the first time it settled back down toward the lower trend line, but since one of my precious day trades was at stake (thank you PDT Rule), I rode it out a tad longer. Really wanted to short over $110 again later in the day, but wasn't thrilled about holding it over the weekend (which I happen to be taking off to visit my brother in Ft. Lauderdale). Looking at the after hours price (under $100), it probably would have been a good trade- but thanks to Charlie G.'s reminder, I need to be more disciplined.

Enjoy the weekend,

Evan

Mission Accomplished: PALM

So here's the deal- I've held PALM for a while now, and felt comfortable covering my last 100 shares today as the market was tanking. It may not have reached the levels I was hoping for, as evident in this post, but I'm not so sure we aren't on the verge of a major, market-wide rally. I'm sure you're all aware of the M2M and uptick rule discussions, and we've fallen pretty hard and fast lately (though I know technicals still aren't looking very pleasant). I could be dead wrong and we're headed much lower (I can't begin to guess at what the big guys are discussing in Washington and New York), but I have a gut feeling a correction's coming. Either way, I made two plays I feel confident about today. If PALM goes lower, so be it (missed money is better than lost money), but if the market rallies, I'm sure tech will rise with it (even a stock like PALM, who many, including the not-so-silent TIMMAY), feel is headed much lower. I can always re-short, should PALM get up around the $7.50-$8.50 range.

My other trade today was, well...patriotic (that's stretching it a bit). After my recent close call with FAS, I've become very interested in his ugly step brother, FAZ. Bryan and Muddy's comments on my last post were definitely pondered, and I decided to short 35 shares of FAZ at $95. FAZ is pretty much the opposite of FAS- it is a 3x bearish-on-financials etf- wait...is my shorting this kind of like a double negative? I had a chance to cover for a small gain when FAZ fell to 93ish, but really didn't want to use another day trade (Since I have off three mornings next week to watch the market- Woohoo!).

1. Not using scared money (only short 35 shares of FAZ- of course, if it goes to $350 like the hoopleheads over on the Yahoo! message boards are saying...) and 2. Monitoring the price action,

Evan

ps- I'm on Twitter now, and you can see my Covestor-verified trades during the day (if I make any) over on the right in the green box. Also, in case you didn't know, you can scroll through my posts on any of the stocks I'm trading by typing the symbol in the upper left search bar of Blogger.

That Old Feeling

     My Strategy's 2009 results (so far) would indicate that I may be on to something. That being said, I've been tempted lately to stray off course, and resort back to the types of ideas and trades that never used to pan out so well. Take for instance FAS. This etf (exchange traded fund) is pretty much at all time lows. Simply put, (from Yahoo! Finances) "it seeks to replicate, net of expenses, 300% of the daily performance of the Russell 1000 Financial Services". Here's the chart of FAS (or 'Forget Any Strategy') since it's inception:

     Looking at the last two years (and the wonderful debacle the financial world has found itself in), one may tend to think these 3 things about FAS:

1. It has to have either hit bottom, or come dangerously close. I mean really, how much farther could it drop- it's like $4 now, after being above $50 not too long ago.

2. Man, if I can buy a couple thousand shares Monday, it's sure to reach at least $6-$7 within the next few trading days with all it's violent swings- and I'll look like a cyborg on Covestor!

3. This is the easiest money I could ever make- I'll be able to pay off that credit card debt I got from purchasing every Timothy Sykes DVD!

     The catch is simple. FAS (and the market as a whole) could continue it's slide for the next 6 billion seconds (didn't do the math on that). No matter how 'Candy from a baby' this trade may appear, you'd be basing it on what? Gut feelings, the market 'owes you one', it's in play because Muddy's running a contest on it? (Btw, my guess for that contest, found here, is $7)

Fighting every urge to 'gamble',

Evan

Secret Agent vs. Trader

So my sister's wedding was this past weekend (she made the most beautiful bride ever!) and, being one of the groomsmen, I rented a tuxedo. One of the co-workers from my night job happens to be in design school for photography. Tuxedo...Photography. Was it even a question as to whether or not I do a James Bond photo shoot?



Yeah, I'm a pretty big fan. You know it's bad when I commited to 6am for the shoot- the morning after the bachelor party! The more I thought about what my next post would be (while waiting for MAXY to tank), the more clear my answer got- Compare the similarities of the world's best spies to the world's best stock traders:

1. TRAINING

In order to be the best at something, you have to be willing to make whatever sacrifices necessary- especially in the beginning. For undercover operatives, as well as all branches of the military, this starts with boot camp. Strict workout regimen, diet, and mental training begin to shape the individual into a soldier fit for battle (though the battle has not yet begun). With traders, this begins by watching the markets, reading as much material as your brain can handle (which isn't much at first when it comes to finance books), and paper trading.

2. DISCIPLINE

Without discipline, it is impossible to succeed long-term. As a spy, lack of discipline and focus could mean your life. As a trader, without discipline you may as well blend your money into a smoothie- jumping in and out of trades due to boredom or 'gut-feelings' is the quickest way to financial ruin.

3. STYLE

That's right- Style! James Bond has that certain 'something' that makes him unique. He's charming, British, likes his drinks a certain way, and loves to say his last name first. His style is evident within five seconds of coming across one of his 22 movies while channel surfing (Well 21 since Quantum of Solace isn't on t.v. yet). As a trader, you have to find that certain 'something' (most often referred to as a 'niche' trading style) that works for you (ie. is consistently profitable). Maybe your great at trading day-rangers like Muddy or shorting hyped penny stocks like Timmay. All I know from about a decade of trading (which spans countless profits and losses) is that your style is just that- yours. Simply following others' trades isn't going to cut it longterm.

Enjoy the weekend,

Dawson...Evan Dawson.

PALM Reading...

No, I don't personally condone or endorse palm reading as it relates to fortune telling, soothsaying, etc. I'm interested in the ticker symbol PALM as my next possible short. Darkside Trading, using Muddy's incredible scans, alerted me even before Timothy Sykes this time (probably because it wasn't up enough yet for his risk/reward ratio). I texted my Mom (who was way more available than my future brother-in-law Eric this morning considering he marries my sister Sunday) to short 200 shares of PALM if it surged over $9.

Let me just start a completely new paragraph here to comment on one of Timothy Sykes's posts (since it relates somewhat to me telling you that I texting my mom this morning). Tim is very transparent on his site about all his trades, most of his financial information, and even his extracurricular activities. I've been able to learn a great deal from him because of this. In this post of his (disclaimer: He can be eccentric at times and it shows in his writing:), he slams those who are less transparent. I don't blame him- he's had so many people (most of the time with anonymous or fictitious names) leave degrading comments on his site that the only way his business model works is by being an open book. I feel the same way, and want to set the (my) record straight:

1. I began this blog because I thought it would be really cool to detail my trades like Tim and many others. It would help me learn from my mistakes while I try new strategies while I slowly get the word out about the mission trips (which will definitely happen as time permits).

2. I am not claiming to be a stock guru. Trade at your own risk and learn from my mistakes with me. I view my trading as a supplemental income, and will probably never be able to live on the profits of day trading- that takes the kind of time/money/dedication very few are fortunate to have. My primary goal is to make enough to fund one mission trip/year (they usually run anywhere from $2000 - $5000 for a two week trip). My most recent was to the Amazon, where I took a picture of me reading Timothy Sykes's 'An American Hedge Fund' on the river- my two passions: Missions and the Market.

3. You'll see various ads on my page powered by Google's Adsense and hopefully some from Amazon (linking to books that have helped me learn to trade) and Tim's site in the future. I'm not suppose to urge you to click on them because that breaks the contract with Adsense, but it is the only way (and trust me, the revenue is extremely minimal at this point) I know how to make money from writing this blog- which isn't my goal but it's a nice 'extra'.

4. As I've said, I work two full time jobs (Target from 6am-2:30pm and Living Word Christian bookstore from 3pm-9:30pm five to six days a week). In order for me to have this blog, it takes sacrifice (usually posting on breaks at work or drafting half before I go to sleep and half when I wake up). The human body is simply amazing- and able to be pushed far beyond what we think possible. Unfortunately, like the stocks detailed on this blog, sometimes I crash.

5. I have opened a Covestor account under the name islandminister, and will be adding Think or Swim as the account's broker in order to let the world view every trade. I do have accounts with Raymond James and TD Ameritrade as well, but they only hold my IRAs and mutual funds (whose performance, needless to say, have been less than stellar over the past two years).

That's pretty much it- oh yeah, MAXY failed to crack $8 again, but is still downtrending nicely (lower highs and lower lows).

Have a restful weekend- I'm off to the bachelor party!

Evan

Happy New Year!

This year begins with two open short positions- HSNI and MAXY. If you've followed either of these stocks over the past few weeks, you know that being short hasn't been very profitable...yet. If there's one thing I've learned from following the technique of Timothy Sykes, it's that everyone of the stocks he deems worthy to eventually short always end up lower. I'm not kidding- virtually every single stock (exception being the ones he's recently spotted as short setups) would have made you money had you stayed short long enough. Even 2008's most notable 'supernovas' such as PDO, MXC, and NTI (and others that looked like freakish, moon-bound rockets) all stalled over time to trade at prices below Tim's initial spotting. So what's the point? Simple...

I will hold these positions until I cover at a lower price. I'm short 400 HSNI average price 6.95 and 300 MAXY 8.33. I've watched too many stocks falter just days after covering for a loss or reading how others kept getting squeezed. Now if the stocks were just chosen at random, this would be an extremely risky and foolish thing to do. Having first seen these ticker symbols on Darkside Trading and Tim's Site, I'm well aware that they are the product of manipulation. Now the way I see it, there are three scenarios that could unfold with each of these stocks. The first (and hopefully correct) theory is that both will tank this week passed my initial entries, funding my account instead of draining it should I cover prematurely. The second is that these two stocks are far from being manipulated, shorts will continue getting squeezed daily, and the culprits will climb to nose bleeding heights before meeting Mr. Newton and stalling out (along with their precious volume). This would be unfortunate, since I would have to tie up my capital and potentially miss other great setups. The third and final occurrence I've witnessed in these types of stocks, such as the previously mentioned NTI (a Superman pump now known as NTIC), is where an accumulation period transpires during what I call the 'calm' before the 'pop'. A stock 'everybody knows is doomed' seems to just hang in a narrow channel, not really giving any chance of escape to either longs or shorts (hence- MAXY, with the exception being the $1 drop on Tuesday). In all of these scenarios, the final outcome is clear- the stocks eventually go lower.

Since my schedule (two full-time jobs) prohibits me from trading most days, I've had to sit by the sidelines while others shorted the monsters. I was able to reserve and short CNEX on that beautiful fateful day last year when it dropped more than 50% because I happened to be off. Like countless others, I could have been early a few days and still made a decent profit. Heck, I could have shorted both PDO and MXC around 15, watched them go to 30 and 50 respectively, and covered tomorrow for decent gains. The only problem, for obvious reasons, would have been tying up capital.

Basically, since my emotions and psychological issues during the 'heat of the trade' sometimes hinder my profits, I'm taking both out of the equation. I will stick to basic rules I've learned from hanging around the 'Dark Gift' masters: find a stock with a decent, short-term jump- say from $2 to $6-$8, wait for the first down day (which HSNI and MAXY have had), and stick to my trading plan (which happens to be disable the 'cover switch' until a 'gain' unlocks it). Any thoughts?

Happy '09 trading,

Evan

Trading Week Ending 12/26/08

As mentioned in my previous/first post, my capital for trading has diminished greatly due to other investments and travel/missions. I am, however, trading extremely cautiously with an account I jointly oversee at Think or Swim. My future brother-in-law (also an experienced missionary) and I are using this account to both learn necessary skills needed to consistently trade profitably (a feat in which over 90% are said to have never achieved) and slowly add to it's bottom line.


Below, I've added charts and screenshots of the aforementioned Think or Swim account in order to illustrate this past week's trades (Sensitive account information has been intentionally left out). If you're unfamiliar with Think or Swim, I highly recommend checking out their website (I've always gotten great customer service from them, as well as reserves for hard to borrow stocks). This first screenshot details trade history (parameters set for 7 days). You'll notice the dates and times of the trades to the left, as well as the executed trade price on the right.



Below is a screenshot of a 5 minute chart for HSNI (a stock I was alerted to by both Timothy Sykes and Muddy over at Green on the Screen and Darkside Trading). My rationale for the initial short: HSNI had multiple up days in a row, and imo will inevitably fall back down to 'normal' price levels. The morning spike to 6.62ish had been the highest of the current run, so I was shorting with the prediction that, given the fading mid-day volume, HSNI would be unable to breakout passed that price. Did I short early and without confirmation? The simple answer is yes. I did have a mental stop-loss in place should my theory be proved wrong and the stock climb to make a new high. My prediction proved to be correct, and I decided to hold overnight as the stock failed to rise above my entry price late in the day (which would mark the 2nd retest of the day's/current run's high). HSNI had a nice drop most of the short trading day (which I would have covered into had I had more than 200 shares in play). I decided when the stock began to rally before close. Friday's volume was fairly unimpressive, and Tuesday's triple top gave a pretty firm ceiling for the stock to break through, so I decided to re-short after the morning spike had started to wane. I held over the weekend, wanting to see an identical drop as in the Tues.- Wed. price action. With the fading volume and failure of HSNI to make new highs after several attempts, this stock 'should' react accordingly. Knowing that stocks can pretty much do whatever they want, my mental stop-loss is in place. I'm already in the money at this point with HSNI, so barring a huge gap-up, I should be able to cover tomorrow. Again, I probably would have covered when the morning spike fell close to 6.20 if I was trading more shares.

This chart from Yahoo finance details the same time frame for HSNI as the one above, but shows the volume, clearly defined dates (both are also on the TOS chart but it would have made the image unnecessarily large) and is accessible by anyone with an internet connection. It would, however, be virtually impossible to trade using Yahoo charts because of the 10 minute or so time delay.

Below is the actual profit/loss information from the modest Think or Swim account. I've listed the top ten gainers of the last year to demonstrate the validity of shorting penny stocks that have run too far, too fast (a strategy I first learned from Timothy Sykes). It's no coincidence that 7 out of the top ten fit this description (the other three- MMM, FRE, and BBY aren't penny stocks and I probably shouldn't have been trading them in the first place). The bottom of my P/L list is made up of similar 'Big Board' stocks, and to my detriment carry larger losses than the top ten gainers- valuable lessons are all they gave me.