A Bunch of Trending Trades

First, as I pointed out today on Trade-Guild, I believe the market is showing negative sentiment, selling off on good news and that we have begun to turn the corner as this rally wraps up, I think we'll see a move lower and a sustainable one at that. There are more then enough reasons to justify such a move.

Most commodities have an inverse relationship with the $USD, that mean many commodity based stocks should make for excellent short sale candidates. Even better, commodities tend to trend better then equities, we are still shorting equities, but tonight's list are commodity based equities. These are trades for the long haul.

If you have my Trend Channel for stops and my modified version for trending entries, these are the stocks you want to use it on. If you don't have my trend channel, which takes each individual stock's recent volatility or a form of an Average True Range and creates a channel around price using standard deviations, you should consider either StockFinder or TeleChart and I'll be able to give out the formula for all of my indicators including 3C.

Check out the links below and let them know Trade Guild sent you.

Second Verse Same as the First-The Ugliness continues

Today we got pretty decent news, the kind of news that has sent this market higher for quite a while now, but not today-nope! It's called a change in sentiment and the market is spooked by something, my guess is uncertainty as it relates to our auctions of debt, the healthcare bill, possible downgrades, the fact that the real unemployment number is close to 1 in 5 people are out of work or under-employed and it's on a rising trend-by the same measure, the Great Depression had a reading of 25%-we are at 20%.

Tonight's List- 

You'll find everything is at market and everything is short. If you are observant, you'll find that many ideas are in the same industry group-don't pick more then one unless you'll split them into half positions (avoid over-correlation). These are weak groups and stocks-I'll continue to add to them.

You can also get some short exposure on the market via FAZ or any of the UltraShort ETFs for the major averages. Again-watch the correlation-NOT GOOD RISK MANAGEMENT!

I'd suggest getting your toes wet in these and recent shorts I've posted (take a look at GOOG and AAPL as well), but let the market prove it's intentions before adding to the positions or making them full positions.

If anyone is enjoying any of the high-flyers that are trending up-email for the stop or use my Trend Channel if you have it.

CHANGE IN CHARACTER

Finally, we see a change in character follow through from last Friday, it may not have seemed like much, but the market internals give it away. Take a look at the short positions. The longs, especially the ones working like BEE, RNN, ACAD,CIGX, etc should be switched over to my trend channel, if you need the stops, email me.

Uncertainty has been reintroduced into the market in a big way and the dollar was proof positive of that, now for the market to catch up on the downside.

ENERGY

There are a lot of energy short trades-most limit orders on tonight's list. take a look and see what works for you. There are a few more 1-2-day high flyers. Basically this market is in overbought territory and that is why you are seeing a lot of limit orders-"show me" is my attitude. I still am quite certain that we will see a major downtrend, the February ascending wedge was broken Friday on high volume and what we are seeing now is typical of wedges-institutions and middle men are running limit orders and stops and setting long positions. We may see more volatility as I warned, but soon we should have a definitive break down.

CHAOS

The health care uncertainty rally was today, now we have states suing the Federal government and uncertainty introduced back into the picture. The move that started Friday I believe is the real deal and today was a relief rally.

Stick to your stops, but hang in there.

Tonight I listed a lot of high-flyers-very speculative trades, be sure to read whether or not they are limit trades.

We'll know more about where the market is at in the next 2 days. We are holding our shorts.

Gifts Are to Be Graciously Accepted

Today we received a gift from last night's long, RNN which is currently up 16.78% and as high as 25.8%. Trades like this, especially under $5.00 should be considered gifts. You want to either take your profits, or take partial profits, maybe your original investment or half, whatever suits you. They can disappear just as fast.

On the other hand, this may be the start of a new trend, this is why I say you might consider taking partial profits, but you never want to let a trade like this turn into a loss. It may consolidate for a month before another move up and that is opportunity cost. So make a choice that makes sense to you, but make a choice.

This is also an example of why we buy at the open and at market. A limit order would have missed this trade.

TRADES FOR MONDAY ARE UP

The market didn't just have a down day Friday it had something it hasn't had for weeks now, a truly DECISIVE day in which volume was huge and the chart patterns were altered significantly-could it be quadruple witching? The Health Care Debacle? Etc,etc,etc..... It doesn't matter.  Volume/Price relationships were Volume UP and Price down which indicates panics sellers. On Wednesday last week I posted an article about the market's coming reversal-there were so many signs and signals that I said, if we don't see a reversal, we'll need to re-think technical analysis. Here's the post:

The Forest Through the Trees

As for trades from last week, many are still viable so look at those as well, especially FCX and CAR, it's not too late for those shorts. I'd advise giving yourself some room on the stops, maybe more then what I suggested-turn-around tops can be volatile, but I think we are in for a trend down. If you have my Trend Channel Indicator-now's the time to use it for stops to lock in profits, if you are unsure of the correct settings for your position, email me.

Remember what I said last week because you can use it in the future, "The market's initial reaction to Fed statements is almost always the wrong reaction and it usually reverses within a few days" and that is exactly what we saw last week. It applies to major government announcements as well, but more so to Fed policy statements.

As usual, any questions, please email me. Remember, unless you are getting slaughtered, stops are on the close, not intraday and never post them with a limit order, keep them in your head.

If your portfolio is significant;y long, email me, there are a few positions you can jump into to hedge it out for a bit until you can clean it up.

Have a great week.

Latest Trades List

Remember to scroll down to the bottom of the list.

Going Into the Close

Forget the price, it's the % based move. GOOG and AAPL are both looking like good shorts here.

NEW TRADES ARE UP

THERE ARE A LOT OF SHORT TRADES, MANY ARE POSITION OR TREND TRADES. BE SURE TO CHECK FOR LIMIT ORDERS IN THE NOTES. ANY LONGS UNDER $5 THAT OFFER GIFTS, CONSIDER TAKING PARTIAL OR FULL PROFITS ON.

READ TRADE-GUILD FOR AN UPDATE ON THE MARKET, WE ARE AT UNPRECEDENTED LEVELS OF OVERBOUGHT IN MANY INDICATORS AND DISTRIBUTION IS HEAVY. THIS I BELIEVE IS THE FED EFFECT I'VE MENTIONED THIS WEEK.

Get The Most Out of Your Experience

Thank you for joining us here at Wolf on Wall Street. I want to share with you some ideas and concepts that have stood the test of time and proven to be a formula for success.

First about the Trade List at W.O.W.S., you can find it under "Trade Ideas/Stock Lists" on the right sidebar and usually the top link will say something like "latest trades" or "most recent list", click on that and in the article window a spread sheet will open, scroll down to the bottom, and those are the latest trade ideas color coded by date. If the Date is March 15th, these are trades for execution on the morning of March 16th. We execute all trades at market on the open, unless there is a limit order mentioned in the notes section for each trade to the right on the spreadsheet-it is important you read these notes.

The stops I put on the list are suggestions, but feel free to adjust them to your own needs. I try to offer you the most probable and timely trades that the market is offering. "That the market is offering" is important because there is no one particular tactic taken here, I adjust trading styles to meet market conditions. If we are near the end of a rally, then you'll see "the cats and dogs" trades which are cheap stocks under $5 that tend to see big 1-2 day moves. We see this occur just before a major bull move reverses. When the market is beginning to trend, you'll see trending trades, sometimes position or swing trades,long or short trades, stocks, ETFs or commodity based positions, it just depends on what is working in the market at that time. I try to make clear what that is in my posts and notes.

Now as to success and building wealth. I use a lot of custom indicators because I believe to make money in the market is to see what others have missed, however there is no indicator that will make you more money then a good risk management plan.

Here is what I suggest. You can take the aggressive approach and limit each trade to a target loss of 2% of portfolio if all goes wrong-this can not account for gaps and for this reason I suggest never putting more then 15% of portfolio equity into any one trade or any number of trades that are highly correlated.

The 2% Rule is simple, you have a $100,000 portfolio, 2% risk money =$2,000. That is the max. you will lose under this plan-not accounting for gaps. So if a trade is bought at $5.00 and the stop is $4, you have $1 of risk per share. Divide $2,000 (your 2%) by $1 (risk) and you can buy 2000 shares. 2000 x $5.00=$10,000 and is below our 15% maximum investment of portfolio-$15,000 and you are fine. This is an aggressive approach to risk management.

A less aggressive approach is to decide how many positions you are comfortable having open at any point in time. Lets assume it is 8, so you divide your $100,000 portfolio by 8 and get $15,000 (which works out perfect for our 15% rule). You then figure out 2% of $15,000 (risk per position) and you get $300 risk money.  Our same example trade, $5 entry and $4 stop with risk of $1 per share is used to divide the $300 and you get 300 shares or $1500 which is significantly less then our position limit of $15,000, unless you adjust your stop to say $.25 rather then a dollar, then you get 1200 x $5=$6,000 position size-still below. It would take a stop at $4.90 (which may or may not be a good stop level, depending on the trade) to take full advantage of the position size limit ($300 / $.10 risk=3000 shares x $5=$15,000). This method of deploying the 2% rule is less aggressive and better suited to those that like to diversify with more then a few positions.

On diversification, I DO NOT like to overly diversify. A $100,000 portfolio for me should have 8 positions. This allows you to get into enough long/shorts and different sectors. Higher limit portfolios I'd add a little more, but probably never much more then 12 "core positions" not including the crazy money trades that are very small. Over-diversification kills returns.

At the same time, I offer a lot of trades certain nights and people can't choose, they feel overwhelmed and wish I just put 1 or 2, but think of it like this-"look at the trades that your portfolio doesn't have industry exposure to only and chose from those". Having 6 positions and 3 of them closely correlated is not good risk management, you have half of your portfolio in basically one position.

Finally, pull the trigger. If you are practicing risk management and you are FOLLOWING THROUGH meaning stopping out (always on the close unless your position is melting down), then you have nothing to fear, get in there and trade, but do not falter on your risk management, if you have to stop out, then do it; you can always get back in.

Quickly on stops-chose them when you are objective and the time when you are most objective is before you enter the trade. Do not make them too tight for an initial position,  and never move them unless you are moving them in the direction of a successful trade.

If you have questions, email me any time. Thanks for joining us.

Brandt@Trade-Guild.net