Wolf on Wall Street

Monday, March 7, 2011

EDZ-a long time favorite (long) Trade

I've been bearish on emerging markets and on the long side they haven't done much for 4 months while EDZ seems to have been putting together a base during the same time. The gap that's left to be filled here is very small, it will be filled at $21.68-about $.20 away. These are the kinds of trades I've been hoping you are getting your toes wet on the market bounce/strength we have seen. These are longer term positions-(be aware of the drawbacks of ETFs for longer term trades-you can email me about the details).

Look at the dip in EDZ and the apparent strong accumulation in 3C during that time. I really like this one and if you are building a position, then even here it's a great price to add.

GLD Possible Head Fake (possible short trade)

This is the 2nd time GLD has done this in a week.

Two probable false breakouts....

Here's today's on a 1 min chart-negative right off the open...

On a 5 min chart, today's looks even worse then 3/1-3/2 breakout with a lower 3C reading suggesting this is another false breakout. The possible short trade would be triggered at a move below $139.35 with a stop just above resistance near $139.60. If this is a false break, then GLD should slip pretty fast down toward support around $135 and ultimately below $130

Market Update Bounce?

IWM 1 min

IWM consolidation

SPY 1 min positive

SPY Double Bottom consolidation.

Looking for upside here shortly, there may be a quick false move down right before.

SLV Update

slv 1 min negative off the open

5 min starting to turn a bit negative with a small leading negative divergence

USO 5 min

Still having lots of problems with the track pad, going where it wants to go and shutting down programs, like the divergence I tried to draw on USO, clearly the 1 min is negative here. The 5 min is also turning negative.

IWM Significant Divergence

IWM 5 min

IWM 5 min looking pretty bad here.

BIOF Triggered long at $1.07

Keep an eye on tis one for a move back above $1.07

SPY Update

OK, my mouse is working intermittently, which is frustrating. I apologize and will find a way to make it up to you all.

This looks like the positive divergence I have been expecting, watch for some intraday upside here soon.

SPY Update

Still having problems, but here's the SPY this a.m.

In white if Friday's positive divergence, this morning there was a brief negative divergence. I'd expect at some point the intraday move up will continue, but I have a lot of charts to look at

Murphy's Law

Updates will be up shortly, having a computer glitch. I'll try working from a backup.

I'll get to your emails ASAP-just wanted you to know I'm here and resolving the issue. Apparently a wet track pad on a macbook.

3C Quick Start

Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.

The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.

We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.

You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.

Welcome to Wolf on Wall Street.

The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.

Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.

Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.

I do use other scans and systems when market conditions warrant their use and may change strategy with market conditions.

The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.

Position Sizing

The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.