Wolf on Wall Street

Saturday, January 1, 2011

Happy New Year!

Friday, December 31, 2010

Financials Update

XLF decided to test resistance again today, thus far it's failed.

15 min XLF chart.

JPM also ran up a bit with financials and it also is showing signs of distribution on that run up.

USO update

USO shot up pretty god today as the dollar lost ground. Right now, it's looking like there's going to be some sell-side pressure into the close.

5 min negative divergence, seems to be starting a downside reversal.

WMT

Right now, WMT (as a short sale) is in a low risk, high probability area.

Here's the test of the neckline resistance from WMT's H&S top. You can see MACD is ticking down and the candlestick pattern is that of a downside reversal.

3C is also showing the test as failed with negative divergences building as the test proceeded, it's now leading negative so a trade in this area with a stop above yesterday's high is pretty low risk.

XING follow up

For those of you who may have traded XING recently, I thought you might find this chart interesting.

A big move like what we saw in XING often sees quick profit taking, I myself advocate taking profits on a big move like we saw in XING which was around 55%. right now the 5 min chart is showing some accumulation so we may see some more upside here soon.

PLM long

PLM is worth a look here as it attempts to breakout of a consolidation.

The volume is up on the breakout attempt

The daily 3C chart looks very constructive, there's been good accumulation and no sign of distribution through the consolidation.

URBN on the Move

This is a short sale trade I've been watching; it's already in a downtrend-see the small red arrows marking lower highs and lower lows. There's a zone of support at the bottom trendline, although it doesn't look especially strong. Once that support breaks, the down trend will have resumed from this short lateral consolidation. I think the trade can be taken here with a stop above the recent consolidation zone (above the top red trendline).

The DOW and S&P in Decline

It's a little bit rare for the averages not to move together, the NASDAQ has been weak all morning, now the SPY and DIA are joining the NAZ. This may be simple year end selling, but the macro environment that I showed is last night's wrap post isn't looking to good either.

DIA 10 minute

SPY 1 min

The Volatility Game

For the most part, that looks to be what's happening today with the exception of the NASDAQ 100 (QQQQ) which is severely underperforming the other averages. SMH is down, but I don't think that explains it in totality. AAPL carries the most weight on the NAZ 100 and it's struggling today. Semis, software and biotechs are struggling as well.

WG Set off an Alert

WG is just breaking out above some resistance. Take a look at the the long trade.

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.