Click chart to enlargeThe chart above shows the past 4 years of the Dow's action. This chart shows that in addition to being near the short term support level created by this year's lows, the Dow is also near the support of its longer term trendline. This level (11,600-11,700) is critical for the market as a whole, not only from the perspective of whether or not the Dow will break near term support, but whether or not the multi-year bull is coming to an end. At approx 11,360, the Dow will have completed a 20% correction, and we will officially be in a bear market. This jives with the technicals in that if the Dow reaches 11,360, it will also have broken its multi-year uptrend.
It's incredible to think that despite all of the damage to date, the bull is by definition, still intact. Only in an election year, with massive Fed intervention, is such a phenomenon possible.
29 comments:
Hey Snot, I would just like some input from you and anyone else who would like to comment about.....Hmm....well I will call it selling strategies as I know you do not use stops. Being new to trading I find my biggest issues are when to protect my gains. Here's the question. If we look at the FSLR chart just as an example. Let's say you were lucky enough to buy right at the bottom of the last pull back. Now the sell is easy because if it slips out of the channel I just dump it. But in this case it rises for a number of days. One day your up 5% next 9% finally end up around 15% and now the thing starts a little pull back. Now there is tons of room overhead but maybe I should cash out? or maybe place a stop and accept 10% or 5% to the good. I hate to get out and miss another leg up. Tortures, Now you generally imply that you ride that channel confident that the long run will work out, layering in and out near tops and bottoms....but to just let 5,10,15 percent slip away thinking maybe it will come back seems to be asking for a beating. It is really a mind bender. I'd like to reach some "system" which would just make it easier mentally to deal with. Total mind twist. How would you and everyone else play it?
You know when you look at a chart and you say to yourself, "Look how easy this is, if I bought there and sold there, I'd have doubled my entire portfolio!"?
Odds are, when you're looking at a chart and saying that, you're looking at a long rally that took a few weeks or even a month or more to play out.
Then, for some odd reason, when it comes time to do it for real, people have trouble holding a stock, and wind up trading in and out of it several times on the way up, seriously limiting the amount of their total gain.
All you need to do is try to make your trading mimick the wavelength of the stock's chart. If it took it 7 weeks to rally 100% last time, then there is no reason to sell after holding for just one week this time.
Once you get in, and are in at a good price, it will benefit you (over the long run), to learn to just walk away and do something else for a few weeks. Mow the lawn or something. People feel the need to watch the market all day long because they want to feel like they are earning their money. All that happens when you watch it closely is that your broker gets rich because you overtrade. Fact is, if you just put your entire portfolio in at the bottom, and sell at the top, you'll only spend $20 in commissions for the year, and your bottom line will improve dramatically. And, as an added bonus, you'll have tons of extra time!
It sounds easier than it is. Actually being that nonchalant about it takes a lot of discipline. After you've traded the intermediate term trade (held on for a month), it will start to feel natural to do so, and your bottom line will improve. You'll see that buying 10% off the bottom and selling 5% off the top makes no difference as long as you catch the brunt of the move with the majority of your capital. It's the repitition (compounding) of this kind of trade that makes it profitable, not the surgical precision of your buys and sells.
For a stock like MOS, it's easy. If you look at the chart you can see in hindsight that 120, and 140 were good points to sell, with buy points being at the 80dma. So 160 looks like the logical price to sell this time around. It just so happens that with MOS, the steps have been almost exactly 2 months each. So the next step is to buy at about the 80dma and sell at 180 in mid-august.
With FSLR its not that simple because FSLR isnt as good a candidate for channel trading. It had a little june rally but it really looks weak atm. I believe it will fall over the next 6 trading sessions, and at that time it will test the 150dma. If FSLR falls to its 150dma in the next 5 or 6 days, it will generate 4 sell signals in the process, which tells me its not likely to bounce off the 150dma. However, if FSLR rises just 6 to 8 points tomorrow, it will generate 3 buy signals. I would not gamble with FSLR right now. If you have gains you should cash them in and wait for things to settle out. It is extremely rare to see so many potential buy and sell signal possibilities in the near future as is the case with FSLR right now. The last time this happened was on may 16/19. That didnt go so well for FSLR.
Snot, your advice is spot on. You have hit me right between the eyes in highlighting my trading impatience and flaws. Thanks a million.
The next poster makes some helpful additions in that some channels and trends are more difficult to pick one's way through.
JSW
Hi Snot,
I've been reading your posts with great appreciation since beginning of the year on the LDK board. After trying your channel trading technique for three months with some discipline I learned (in a hard way), I have to agree that this is a sound strategy, and probably the only one I can think of to be profitable in a bear market. My portfolio is way up in the past three months. My friend, who enjoys bottom-fishing in airlines and other "great potentials" is still scratching his head why he lost. Just want to say thank you and please keep up the good work.
-JD
JD,
Thanks for the kind words. You'll be happy to hear that this kind of trading works even better in bull markets than in bears!
Your friend is playing a very, very dangerous game.
"A stock going down continues going down until acted upon by an equal and opposite force, or bankruptcy." -Sir Issac Newtown
I warned him several times and recommended your strategy. Unfortunately he's kind of a guy always wants to buy "undervalued" cheap stocks and in dream of hitting a jackpot in the next trade. I can only wish him luck.
-JD
wow CHG just flashed across my radar. Can you do a chart on it Snot?
CHG is a downtrending chart trading below its downtrending moving average. Are you sure you have the right ticker symbol?
Snot thanks for the comment. Always appreciate your thoughts. I'm going to go cut some wood today instead of watching the market :)
Snot, do you think this is capitulation day (week) for the DOW that will establish a new bottom or are we just now falling off the cliff? If I remember correctly, last earnings season started off rough, but then it progressed better.
I wish there was a real ultrashort fertilizer ETF.
snot and everyone here, I have found another great AG play and this stock is more diversified.
"SQM"
It had a very short term impressive run. Can anyone comments.
Snot, can you please kindly run a chart for this SQM stock.
Thanks!
Snot,
Can you explain "channel trading"..
Snot, FXP is back in the mid-$80s. Can you believe that?
Channel trading link:
Link
Thank you for the link..
Werent you the guy that was telling everyone to buy FXP at 115 because the world was coming to an end? You manipulated people. Two posts from the Yahoo board
http://messages.finance.yahoo.com/Business_%26_Finance/Investments/Stocks_%28A_to_Z%29/Stocks_L/threadview?bn=51438&tid=221519&mid=221728
http://messages.finance.yahoo.com/Business_%26_Finance/Investments/Stocks_%28A_to_Z%29/Stocks_L/threadview?bn=51438&tid=223678&mid=223678
What kind of scumbag are you to keep posting your plagarized parrot dribble on a blogsite?
You lost alot of people money. You are currently under investigation and on the SEC wirefraud review list. We're going to make sure your entire group is prosecuted.
Oh IBCNU, you are a through and through d-bag. Keep your angry posts to the LDK board, the stock that you bet it all on, and are losing your @ss on. I hope you have to sit, watch and nurse your loss for years and years to come.
Hello: You sound a little too angry, and very stupid. If you lost money, it was your own decision and your own fault as everyone can just do their best and nobody is perfect. You have no right to come on this blog and vent your anger like this. I followed the link you provided and I did not know what Snot said wrong. Since I learned about Snot’s blog in April, I have been checking for his new posting every day and I found his posting very insightful. Please do not visit this site if you do not like Snot’s ideas. I do not want you anger Snot so much that he stops posting. Many people are relying on his guidance, me for instance.
After being 100% out of Ag for the past few days, we just put 5% of our portfolio into MOS below 147. It's a small purchase, but it gets us back into the game. Of course we're hoping the Ag names continue this correction. MON reports earnings this Wednesday, so that will be quite a catalyst one way or the other. Looking to put another 5% into MOS below 145, which is the midpoint of the channel. We have no particular preference for MOS over the others, other than that it has corrected further than its peers thusfar. POT, CF and AGU remain too close to the tops of their channels for our taste.
Hello Snot,
It has been long since I visited your blog or even traded. Just got a job and I don't usually get too much time for my trading hobby. I am surprised you are in the bears camp at least in the short term.
I think this market is going to bounce off from here at least for a few weeks. The market has fallen too quickly too fast. At least 12500 on the dow is possible in the following weeks. Lets see
--clarke
--clarke
Can anyone tell me what they think is going on with MT?
RIG is looking pretty good right now.
Snot,
RIO looks like it's back in play even though EWZ has yet to reach the bottom of its channel..what do you think?
-dk
LDK is on the move
The DOW just his 11,600 as you predicted. What is the chance that will activate computer "buy" orders and help establish a bottom?
We just breached 11,600 on the DOW, wonder what's next?
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