ES Trade review for 04/23/2013

ES opened well above today's "WHITE ZONE"  buyers 1565.50 TO 67.50. I mentioned out of the gate that I was looking for long opportunities only.   THIS IS KEY,  knowing when not to fade, even if you did not get one long off saves the mental pain and frustration, stops the trader from going into a mental spin that could wipe out days of good work.  Most traders have been there and done that.  By knowing  the bias,  you can avoid pain.  

(2) The market promptly moved up to and through the 1565.50-67.50 zone.  1567.50 offered 3 opportunities to get long each with 2 pts or more in potential profit.  Once a zone is trade through that was acting as resistance, it is now support.  We were in a clear trend day up characterized by very small counter rotations, low negative tick readings and no attempt for gap fill. 

The next rotation up brought us to the 1570.25 to 72.25 zone. (3)  Again, not looking for shorts, this offered a good point for a scale,  upon breaking the top side of the 1572.25 resistance, a good long ooppertunity was offered at 1572.25 for a 2point + trade. (4)  As we approached the 1575-1577 zone I mentioned that i was closing out the last of my longs.   I did so at 11am on the dot. Several reasons for this,  1) Heading into New York lunch and trading tends to be low odds affair. 2) I stated a few minutes after the open that: "Buyers in control out of the gate. So I am focused on looking for long set ups until we trade above the 1574 level."  If I am going to start looking for lunch I am certainly not going to press my longs.  As it turns out,  my exit was very timely.   The AP released the news that wasn't from a hacked twitter account. I am sorry for those that suffered losses on such bs.  I pretty much had no trades the rest of the day.   The market seemed off balance from the shock of the move.  I am certain small traders were blown up.  I did mention the the buy sell line at the end of the day was 1570 and we held above to close near the highs.  Last hour is very difficult time to trade.  Algos rule the roost and its hard to get an edge against them.   I think my biggest take away from today was one learned from Mark Douglass  "Anything can happen in the market"  & I dont need to know what will happen next in order to profit"  .  


I had no idea today would be a trend day up, but i did know how to handle the market relative to my game plan.   I did not feel like i missed anything nor did i feel like i needed to step in front of it. I traded my plan.  I took my $$ like I do every day.  The $$ come from consistently following a high odds strategy and game plan and sticking to it.   Anyone can do it.  If you need help,  ask-- I am happy to help.   Looking forward to more fun tomorrow.  

Please give feedback on how I can improve the blog to help others.  Thanks. 

ES TRADE REVIEW FOR 04/22/13

ES opened below the "WHITE ZONE"  (1) We are currently below the 1556-1558 WHITE ZONE -sellers in control.will start looking for signs of a long near the 1546-1544 S/R zone us know that sellers were in control.  he market was unable to reach the 1556-1558 & no trade was to be had using the most basic of strategies.  Important to note that even though no short trade was generated it is just a s big to not have a large loser right out of the gate!  Market rotated down to the 1549.50-1551.50 zone where the market paused.  Again,  sellers in control and I saw nothing that indicated reversal.  I simply passed on the long set up.  @ 8.50 am ES closed out of the 1549.50-51.50 zone and proceeded to trade back into the zone from below.  This generated a valid trade but it was in front of news.  A stop behind 1551.50 would have kept you in this trade for several very nice scales. (2)

I tweeted at 8.42 am  We are currently below the 1556-1558 WHITE ZONE -sellers in control.will start looking for signs of a long near the 1546-1544 S/R zone. ES rotated from the 1549.50-51.50 zone down to the 1544-1546 zone.  Tick divergence @ the back of the zone  (3)  ES rotated up out of the zone and choped around just above the 1546 and vwap.  You had to be careful here, the choppy action that took place chews up many traders. (4)

I tweeted @ 10.34am  ES trying to resolve here in a mini bull/bear fight. I don't see a real edge, Bulls need it back above 1552 & bears need blow 1544 ES finally resolved to the upside, this move up was the 2nd time up into the 1549.50-51.51 zone and per my trade plan, 2nd time up is a lower odds trades in all zones & particularly given the bull/bear fight that took place just below.  

ES traded above 1551.50 and this essentially became the new buy/sell line,  you had to be quick but there was a quick test down to the 1551.50 for a long which gave several nice scales. The market continued its rotation up now that it had bears trapped and they pushed all the way to 1560 going into the last hour.     I tweeted:  @1.53pm Heading into the last hour when trading above 1st hour high makes for a low odds short.  @1:54pm we have had a good move off the lows so a pullback would not surprise, just doesn't pay often enough to play.  @2pm what I try to ask myself here is what is the fuel that will run the market higher. ?? @2.01pmBulls were trapped this am and Bears were trapped mid morn. Both have had their puke time. Best guess is the best moves are done.    With that my day ended. There really was not much to do while using my highest odds strategy.  Would have been a great day if we traded into the WHITE ZONE off the open, but did not get it.  From the chats I had today this is my biggest takeaway,  sometimes even if you dont get your trade executed, but you avoid taking a losing trade because the plan was well thought out, then you still have a very strong plan.  The key is knowing you have an actual edge and consistently trading it.

It is incorrect to say its ok to take a trade and give it a shot to see if it will work because your using a tight stop.  Those small losses add up and I believe the most important thing a trader can do is to keep their equity curve heading north. Hope everyone traded well.  We get to do it all over again tomorrow.  Rest well.  

AAPL TO BUY OR NOT TO BUY

Have had several calls from friends in the past weeks about AAPL,  should I buy more, bail, hold, throw away my aapl products in disgust.  Short answer is I have no idea.  Friends that bought near the high feel stupid, those that bought well and were holding for  $1000 or whatever feel stupid for holding & then there is the friend who actually waits for stocks to correct before jumping in & wants to know if now is the time.  I personally own exactly 0 shares of AAPL.  I do own an IPAD, IPOD, &  IPHONES spread through my family.  Great products, great quality and I am generally happy to pay a premium for things that look cool & work well.

I make my money in day trading, its my bread & butter.  I simply have 0 edge in fundamental analysis and I can not compete with Warren Buffet and his ilk.  I know my limitations. So,  when I do buy something I buy it a a discount to hedge my disadvantage to those who do have the edge. I have 2 strategies in executing my long term portfolio.

Strategy 1:  When there is blood in the street,  the market has had the living day lights kicked out of it as in 07 or 01  or  97-98 (asian contagion) Or 94(tech meltdown) .  If its the market that has been killed,  I look to buy those stocks that have gone down the least while the market has gone down the most.  The idea is simple, when there are no sellers on the way down,  it will be easy to move up when the buyers come back.

Strategy 2:  If the market has not been killed,  but the stock has -like AAPL - then I want a 40-50 discount from the highs & a bis model I can somewhat understand. Examples:  IBM in 08,02-CSCO in 09 & 11, NOK in 08 (which did not work out), CAT in 2000 & 08, KO in 02 & 08,  SNY in 08, PFE in 02 & 08.  Point is,  if I think its a good company, I simply wait till its had the living crap kicked out of it and pick some up.  Usually it works out  I usually dont think i am picking the bottom.  2) I am not leveraging up as I do in day trading, again, no edge, so I am just putting cash to work.  It would take time and luck to ever get rich this way but it will  make my net worth grow nicely over time.

Thats it,  that has what has made me money over time.  I have had 1 total dud (NOK)  Everything else has shaken out nicely.  Its boring, the way long term investing should be. It even works for high flyers like DDD. I try to limit my picks to good, large companies and the occasional high flyer. I assume it could draw down against me more and I dont concentrate or leverage up.  I will usually sell puts on the positions I am entering  with the assumption that the stock will be put to me,  if not--"free money' (again-unleveraged-- I assume I will own the stock).

That brings us back to AAPL.  I went back and unscientifically looked at various corrections. It has rarely just turned and gone back up (it did once) but a quick glance reveals that it usually bases 4 to 6 months in a range before making any kind of significant move.   Gut tells me there is time to act.  I may start scaling into a  position via selling puts slowly over the next 6 months.  A little bit each month on down days. It wont be a concentrated position and I have no idea where the low will be.  Its down 40% and thats a good place to start nibbling.  I like the company's products so thats how I would handle it.

Here a a few charts of previous corrections.

Would appreciate any thoughts or feedback. 

Trading of securities, options and futures may not be suitable for everyone and involves the risk of losing part or all of your money. Commentaries are educational in nature and are designed to contribute to your general understanding of financial markets and technical analysis. Use it how you want and at your own risk. I am not a registered investment adviser. This information is a general publication that reflects my opinion and is not a specific recommendation to any one individual. You must consult your own broker or investment adviser for investment advice. Controlling risk through the use of protective stops is essential

TRADE REVIEW FOR 4/19/2013

(1) Friday market opened and traded up into the days 1540.50-1542.75 "WHITE ZONE".  There were 2 potential entries, 1 aggressive at the front of the zone and the higher odds trade at the back of this zone.  This trade offered excellent rotation of 2 to 4 points depending on trade entry.

AS POSTED PRIOR TO OPEN

SEE DETAILED REVIEW BELOW

(2) The market rotated out of the WHITE ZONE down to the 1536-1538 support zone offering excellent opportunity to scale out of shorts placed in the WHITE ZONE.  The market tried for gap close and failed.  I tweeted that the failure to close the gap was a sign of strength and was a very good clue.  That test of the back side of the zone turned out to be the low of the day.

With rotation back up to the WHITE ZONE I did not see a short opportunity because it was a) the second touch of the zone--each time it touches, odds lower that you will get a favorable counter rotation & b) we failed to close gap--again, a sign of strength.  My anticipation was we would trade up through the WHITE ZONE  & continue higher.  I would look for a long on first test back into the WHITE ZONE.

(3) Upon the upside break of the WHITE ZONE, indicating buyers were in control I was looking to get long the first dip back into the zone.  This provided an excellent trade with a rotation up to the 1447-1449.50 resistance zone above.  (4)

That is a potential 4-7 pt trade.  While there was a rotation lower out of the 1447-1449.50,  the strategy I am discussing would call on skipping the trade as it is a lower odds trade when buyers are in control.

The cash market closed at the high of the day & I tweeted that shorting a market going into the last hour when the market is trading above the first hours high is a low odds affair.  The key to growing your equity curve in day trading is having the discipline to wait for the highest odds trades and the willingness to accept that you may miss a larger because of that discipline.

The biggest take away here is this,  if you had 2 high quality trades a day that had very high odds of working how long would it take you to make the money you want to make.  It is simply a matter of having an edge and focusing on exploiting that edge over and over.  Thats how you make money.  

TRADE REVIEW 04-18-2013

This morning we opened just below the 1550-1552.25 WHITE ZONE.

 ES did not make it to the zone & I was unable to get a short off.  Again,  in this blog I am simply highlighting the highest odds setups using the most basic strategy I have.  Since sellers are in charge I am strictly looking for shorts at the first test of the zones below ONCE they have broken.  Broken means it has closed blow and moved back up as in the example below.

The move back into the 1544-1546 zone provided the 1st opportunity for a trade and this zone offered both back and front of the zone for entries and offered multiple opportunities for a scale.  ES quickly rotated to the 1538-1540 zone -the market had a quick rotation up just in front of the 1540 level.  In this strategy I am not looking for longs but it is not a bad idea to cover in front of a zone because even in a down market a rotation, even if small, is to be expected.  We then quickly flushed through 1538-40 zone & tested back up. Once again,  A short trade in either the front or the back of the zone offered excellent trade placement & a 2-4 pt trade opportunity.  Just after lunch the market rotated lower down to the 1533-35 zone where i noted in the pre-market post was initial support.  I expect buyers at initial support on first touch and the was a 2-3 point opportunity there.   

So that is it,  2 clean low stress trades.  Do the math.  Even with just one contract its a very solid strategy and it has been a consistent strategy for me.  By looking at the chart you will see that clearly there are more trade opportunities   I am simply highlighting the most direct and high odds trades on this blog.  Pease feel free to hit me with any questions you have.  tradenperform@gmail.com  

EXAMPLE OF TICK DIVERGENCE GENERATING A BUY EVEN AS SELLERS ARE IN CONTROLL

tick divergence at initial support

 Today's WHITE ZONE, which determines who has control  buyers or sellers was 1554.75-1557.  the market opened above and traded directly into 1557.  the first few minutes of the market can be very fast and difficult.  We did garner a pause and a small rotation from the front of the zone, but it stalled without even 5 ticks of rotation.  You had to be very quick to make this trade work.  With the selling pressure we experienced overnight, a bit of caution was warranted.  The ES quickly traded down through the white zone to 1552.  The bounce back into the WHITE ZONE offered excellent trade location, particularly the back of the zone.

The back of the zones offer the highest odds trade location; the most aggressive location is the front of the zone.   The test of 1557 was quickly sold and we traded down to the 1549-51 zone where the market paused.  There was a good rotation from the back of the zone for up to 3 points but it is very aggressive because we are below the buy/sell zone.  Sellers were clearly in charge with  no indication of significant reversal.   I did tweet that at 1549 I would start to looking at longs with supporting evidence; followed by 1544 and 1539.

Each of those areas provided good rotation, you just had to know from price action when to leave the trade on and when to stick it.  1539 turned out to be close to the low of the day and offered up a 10 point rotation.

I also warned via twitter that I had observed tick divergences and would be cautious on shorts after we hit 1539 and would not consider a short until VWAP or the 1550 area.  Both proved to be high odds entries to the short side.

Bottom line, while today looked easy in the rear view mirror you had to be really clear about where you wanted to execute.   Trade location made the difference between having a really good day and having a bunch of stops and losses.  Context makes a HUGE difference.

The easiest way to use this chart is to look for setups in the direction of the party that has control   does it give fewer set ups?  Yes.  Bad for guys who want alot of action,  but great for guys who want to build their equity curve.